April 18, 2005

> **Control Number**
>
> **ED-OIG/A09-E0027**

Juan Flores, Superintendent

Office of the Superintendent

Guam Department of Education

P.O. Box DE

Hagåtna, Guam 96932

Dear Superintendent Flores:

This Final Audit Report, entitled *Guam Department of Education's
Reported Costs for Consolidated Grants to Insular Areas and the Special
Education Grants to States-Part B*, presents the results of our audit.
The purpose of the audit was to confirm that selected personnel costs
and purchases that Guam Department of Education (GDOE) reported as
expenditures for the Consolidated Grants to Insular Areas (Consolidated
Grants) and Special Education Grants to States-Part B (Special Education
Grants) in its Special Conditions Compliance Reports for the Quarter
Ended March 31, 2004 were for services provided and purchases used for
the program purposes specified in the grant awards and the expenditures
complied with applicable Federal laws and regulations.

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| #                                                                     |
|                                                                       |
| # BACKGROUND                                                          |
+-----------------------------------------------------------------------+

On September 17, 2003, the U.S. Department of Education (Department)
designated GDOE as a high-risk grantee because GDOE had not submitted
timely and complete single audit reports. One of the special conditions
as a high-risk grantee was that GDOE provide detailed quarterly reports
of the expenditures for each Federally funded program and the progress
of significant aspects of each program.

The Special Conditions Compliance Reports for the Quarter Ended March
31, 2004 included reports for three Consolidated Grants (Grant Nos.
S922A010002, S922A020002, and S922A030002) and three Special Education
Grants (Grant Nos. H027A010069A, H027A020069A, and H027A030069A). The
table below shows the reported amounts for each of the grants:

+------------+---------------------+-----------------+-----------------+
| ## Ta      |                     |                 |                 |
| ble 1. Amo |                     |                 |                 |
| unts Repor |                     |                 |                 |
| ted for th |                     |                 |                 |
| e Quarter  |                     |                 |                 |
| Ended Marc |                     |                 |                 |
| h 31, 2004 |                     |                 |                 |
+------------+---------------------+-----------------+-----------------+
| **Award    | **Grant Award       | **Consolidated  | **Special       |
| Year**     | Period** (a)        | Grants**        | Education       |
|            |                     |                 | Grants**        |
+------------+---------------------+-----------------+-----------------+
| 2001       | 7/1/2001 to         | \$ 7,407 (b)    | \$ 4,622        |
|            | 9/30/2002           |                 |                 |
+------------+---------------------+-----------------+-----------------+
| 2002       | 7/1/2002 to         | 4,222,400       | 3,238,367       |
|            | 9/30/2003           |                 |                 |
+------------+---------------------+-----------------+-----------------+
| 2003       | 7/1/2003 to         | 512,657         | 917             |
|            | 9/30/2004           |                 |                 |
+------------+---------------------+-----------------+-----------------+
| Total      |                     | \$4,742,464     | \$3,243,906     |
+------------+---------------------+-----------------+-----------------+
| (a) The    |                     |                 |                 |
|            |                     |                 |                 |
|    Tydings |                     |                 |                 |
|            |                     |                 |                 |
|  Amendment |                     |                 |                 |
|     (20    |                     |                 |                 |
|     U.S.C. |                     |                 |                 |
|     §      |                     |                 |                 |
|            |                     |                 |                 |
|   1225(b)) |                     |                 |                 |
|            |                     |                 |                 |
|   extended |                     |                 |                 |
|     the    |                     |                 |                 |
|            |                     |                 |                 |
|  available |                     |                 |                 |
|     period |                     |                 |                 |
|     for    |                     |                 |                 |
|     use of |                     |                 |                 |
|     the    |                     |                 |                 |
|     funds  |                     |                 |                 |
|     for an |                     |                 |                 |
|            |                     |                 |                 |
| additional |                     |                 |                 |
|     year   |                     |                 |                 |
|     after  |                     |                 |                 |
|     the    |                     |                 |                 |
|     award  |                     |                 |                 |
|            |                     |                 |                 |
|    period. |                     |                 |                 |
|            |                     |                 |                 |
| (b) Amount |                     |                 |                 |
|            |                     |                 |                 |
|   reported |                     |                 |                 |
|     was    |                     |                 |                 |
|     net of |                     |                 |                 |
|     a      |                     |                 |                 |
|            |                     |                 |                 |
|    \$1,495 |                     |                 |                 |
|            |                     |                 |                 |
|  reduction |                     |                 |                 |
|     in     |                     |                 |                 |
|            |                     |                 |                 |
| previously |                     |                 |                 |
|            |                     |                 |                 |
|   reported |                     |                 |                 |
|     exp    |                     |                 |                 |
| enditures. |                     |                 |                 |
+------------+---------------------+-----------------+-----------------+

GDOE operates 26 elementary schools, 5 middle schools, 4 high schools,
and an alternative school. For award year 2003, GDOE received a
Consolidated Grant for \$20.6 million and a Special Education Grant for
\$12.9 million.

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| #                                                                     |
|                                                                       |
| # AUDIT RESULTS                                                       |
+-----------------------------------------------------------------------+

We concluded that GDOE included expenditures in its Special Conditions
Compliance Reports for the Quarter Ended March 31, 2004 that were
improperly charged to the Consolidated Grants and Special Education
Grants. We also found that GDOE did not have required documentation for
personnel costs charged to the grants and GDOE's inventory records did
not reflect the current location of some equipment purchases.
Attachments 1 and 2 provide summaries of our review of selected
transactions.

### GDOE did not agree with our finding that it improperly charged the Consolidated Grants and Special Education Grants for the entire costs of transactions when portions of the costs were allocable to other activities. GDOE generally concurred with the other findings and recommendations presented in this final report. GDOE's comments and the OIG's response, when applicable, are summarized at the end of each finding. The full text of GDOE's comments is included as Attachment 3.

### 

### FINDING NO. 1 -- GDOE Improperly Charged Costs to the Grants

GDOE improperly charged the Consolidated Grant awarded for the period
July 1, 2001 through September 30, 2002 for costs obligated and paid
after expiration of the available period for use of the funds. GDOE also
improperly charged a Special Education Grant for a purchase that was not
necessary to the operation of the grant and charged the total costs of
purchases for supplies and materials, capital outlay, equipment, and
contractual services to the grants when portions of the costs were
allocable to other activities.

### GDOE Charged \$8,902 to a Consolidated Grant 

### With an Expired Availability Period

The regulation at 34 C.F.R. § 80.23 states "\[w\]here a funding period
is specified, a grantee may charge to the award only costs resulting
from obligations of the funding period unless carryover of unobligated
balances is permitted, in which case the carryover balances may be
charged for costs resulting from obligations of the subsequent funding
period." GDOE charged the Consolidated Grant awarded for the period
July 1, 2001 through September 30, 2002 for \$8,902 of costs that were
obligated and paid after September 30, 2003, the last day that the funds
were available for use by GDOE. GDOE staff acknowledged that the costs
were improperly charged to the expired grants. Past single audit reports
disclosed similar improper charges to expired grants. In June 2004, GDOE
informed its auditors that, by December 31, 2004, GDOE would implement
revisions to its policies and procedures manual to ensure that available
appropriation balances in its accounts are adjusted timely so grant
funds are not used after expiration of the period of availability.

GDOE also reported expenditures for the Consolidated Grant and Special
Education Grant for the period July 1, 2001 through September 30, 2002
on the Special Conditions Compliance Reports for the Quarter Ended
December 31, 2003. (The December 31, 2003 quarterly report shows
\$15,359 of expenditures for the Consolidated Grant and \$92,830 of
expenditures for the Special Education Grant.) Given our finding and the
findings in past single audits, there is a significant risk that
expenditures included in the December 31, 2003 quarterly reports may
include costs obligated and paid after September 30, 2003.

### GDOE Charged \$6,380 for a Purchase That 

### Was Not Necessary to the Operation and 

### Performance of the Special Education Grant

The regulation at 34 C.F.R. § 80.20(b)(5) states "\[a\]pplicable OMB
\[Office of Management and Budget\] cost principles, agency program
regulations, and the terms of \[the\] grant . . . will be followed in
determining the reasonableness, allowability, and allocability of
costs." The cost principles applicable to the grants are contained in
OMB Circular A-87, *Cost Principles for State, Local, and Indian Tribal
Governments*. OMB Circular A-87, Attachment A, Paragraph C.1 lists the
factors affecting allowability of costs. These factors include that
costs must be "necessary and reasonable for proper and efficient
performance and administration of Federal awards."

Of the 19 selected non‑personnel transactions reviewed for the Special
Education Grants, we found that the purchase for one transaction,
reported as a capital outlay, was for purposes unrelated to the grant.
GDOE charged the grant \$6,380 for a transaction under Purchase Order
No. 200301894 for a 45-foot storage container for the Ordot Chalan Pago
Elementary School even though the school had notified GDOE's Special
Education Division that the container was not needed. We found that the
container was being used to store theater equipment at the Gifted and
Talented Education (GATE) Theater. This purchase was not a proper use of
the Special Education Grant.

# GDOE Charged the Entire Costs of 

# Transactions to the Grants When Portions of the 

# Costs Were Allocable to Other Activities

Another factor affecting the allowability of costs that is listed in OMB
Circular A-87, Attachment A, Paragraph C.1 is that costs must be
"allocable to Federal awards under the provisions of this Circular . . .
. " OMB Circular A-87, Attachment A, Paragraph C.3.a states that a cost
is allocable to a particular cost objective[^1] if the goods or services
involved are chargeable or assignable to such cost objective in
accordance with relative benefits received. OMB Circular A-87 also
states that government units need to have a process whereby costs that
were incurred for a common purpose benefiting more than one cost
objective, or not readily assignable to the cost objectives specifically
benefited, can be identified and assigned to benefited activities on a
reasonable and consistent basis. The Circular provides two methods: cost
allocation plans and indirect cost rates.

We found that GDOE did not have procedures that allowed the allocation
of vendor payments to two or more funding sources. Also, GDOE did not
have cost allocation plans or indirect cost rates. As a result,
purchases allocable to other programs or used for common purposes were
charged directly to Consolidated Grants and Special Education Grants
even though other programs or activities may have benefited directly or
indirectly from the purchases. Of the 13 non‑personnel transactions
reviewed for the Consolidated Grants and the 19 non‑personnel
transactions reviewed for the Special Education Grants, we found that
six transactions for the Consolidated Grants and two transactions for
the Special Education Grants were entirely charged to the grants when
portions of the costs were allocable to other activities. These eight
transactions are summarized below.

**[Consolidated Grants -- Supplies and Materials]{.underline}.** GDOE
charged a grant \$13,340 for a transaction under Purchase Order
No. 200400078 for SAT 9 test booklets. We identified another 13
transactions under the same purchase order that charged the grants for
additional test booklets. The 14 transactions totaled \$52,019.

GDOE may charge Consolidated Grants for the test booklets since GDOE\'s
Consolidated Grant Applications included use of the SAT 9 test for
standards and assessment in its plan to improve student skills in
reading, math, and language arts. However, the SAT 9 test booklets were
also used for local purposes. Guam Public Law 26-26 Section 3105(a)
states \"\[t\]he Superintendent shall collect data and produce annual
school performance reports containing information on student performance
. . . ." GDOE's Administrator for Research, Planning & Evaluation
informed us that the SAT 9 test accounts for 60 percent of the measure
for student performance. Thus, the \$52,019 cost of the test booklets
should be paid, in part, with local funds.

**[Consolidated Grants -- Capital Outlay]{.underline}.** GDOE charged
the grant for laptop computers and printers that were used by employees
providing services to other Federal programs and/or GDOE\'s general
student and employee populations.

-   GDOE charged a grant \$74,520 for a transaction under Purchase Order
    No. 200301474 for 30 laptop computers (\$2,484 each). GDOE's records
    showed that 27 computers were assigned to 12 schools, and according
    to GDOE's accounting staff, the principal in each school received
    one of the computers.[^2] The three remaining computers were
    assigned to the Property Control Manager for the Receiving
    Warehouse, the Personnel Administrator, and the Data Processing
    Manager for Financial Student Administration Information Services.
    The cost of the 15 computers used by the Reading Coordinators in the
    schools was properly charged to the Consolidated Grant. However,
    since the school principals and the other GDOE employees provide
    services to the general student and employee populations, the
    \$37,260 cost of the other 15 computers (12 for the principals and 3
    for other GDOE employees) should have been paid, in part, with local
    funds and, if applicable, other Federal program funds.

-   GDOE charged a grant \$27,580 for a transaction under Purchase Order
    No. 200301474 for 70 printers (\$394 each). GDOE's records showed
    that 60 printers were assigned to 26 schools and a reading center.
    The principal at each school received one of the printers.[^3] We
    located one of the printers in GDOE's Federal Programs Office and a
    total of seven printers in GDOE's Business Office, Internal Audit
    Office, Personnel Office, Curriculum and Instruction Office,[^4] and
    Receiving Warehouse. We were unable to locate three printers,
    including the printer assigned to the principal at Finegayan
    Elementary School.

The cost of the 35 printers used in the classrooms, reading
laboratories, and Federal Programs Office[^5] were properly charged to
the Consolidated Grants. However, the \$12,608 cost of 32 printers (25
for the principals[^6] and 7 for other GDOE employees) should have been
paid, in part, with local funds and, if applicable, other Federal
program funds since the school principals and the other GDOE employees
provided services to the general student and employee populations. (The
cost of the three printers that we were unable to locate is included in
Recommendation 3.1 under FINDING NO. 3.)

In total, \$49,868 (\$37,260 + \$12,608) was not properly allocated
among the activities that benefited from the equipment purchases
reported as capital outlays on the quarterly report.

**[Consolidated Grants -- Equipment]{.underline}.** GDOE charged grants
for software packages and printers being used by units that provided
services to the general student and employee populations and/or other
Federal programs.

-   GDOE charged a grant \$2,076 for a transaction under Purchase Order
    No. 200301464 for 12 copies of MS Publisher 2002 Software. Eight of
    the 12 copies (costing a total of \$1,384) were used by the
    Curriculum and Instruction Office, Chamorro Studies Office,[^7]
    Internal Audit Office, Receiving Warehouse, Personnel Office, and
    Business Office.

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-   GDOE charged a grant \$1,260 for a transaction under Purchase Order
    No. 200301470 for six copies of MS Office XP Software. One copy
    (costing \$210) was used by the Business Office.

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-   GDOE charged a grant \$1,899 for a transaction under Purchase Order
    No. 200301470 for six printers. One printer (costing \$317) was used
    by the Business Office.

In total, \$1,911 (\$1,384 + \$210 + \$317) was not properly allocated
among the activities that benefited from the software and printer
purchases reported under equipment on the quarterly reports. The
purchases should have been paid, in part, with local funds and, if
applicable, other Federal program funds.

**[Special Education Grants -- Contractual Services]{.underline}.** GDOE
charged a grant \$4,150 for a transaction under Purchase Order No.
200400211 for a trainer to provide instruction to GDOE staff at 16
schools on the use of Curriculum Director, (a test question database).
The database was used to monitor student progress and assist in aligning
curriculum with the standardized test. We identified additional
transactions charged to the grant under the same purchase order for
\$3,214 for travel and \$640 for training materials. The Administrator
for Research, Planning & Evaluation informed us that the test questions
were for special education students, English language learners, and
regular students. The purchases, totaling \$8,004, should have been
paid, in part, with local funds and, if applicable, other Federal
program funds.

**[Special Education Grants -- Equipment]{.underline}.** GDOE charged a
grant \$3,460 for a transaction under Purchase Order No. 200400212 for
10 Motorola handheld receivers (\$346 each). The receivers were assigned
to the school principal, four vice principals, school secretary,
custodian, and three aides at John F. Kennedy High School.[^8] Except
for the vice principal that oversaw the Special Education program, the
other high school personnel provided services to the general student
population. The \$3,114 cost of nine receivers should have been paid, in
part, with local funds and, if applicable, other Federal program funds.

###### Recommendations

We recommend that the Chief Financial Officer, in collaboration with the
Assistant Secretary for Elementary and Secondary Education and the
Assistant Secretary for Special Education and Rehabilitative Services,
require GDOE to---

1.  Return to the Department the \$8,902 for costs obligated and paid
    after September 30, 2003 that were charged to the Consolidated Grant
    awarded for the period July 1, 2001 through September 30, 2002.

2.  Review costs reported on the Special Conditions Compliance Reports
    for the Quarter Ended December 31, 2003 for the Consolidated Grant
    and Special Education Grant awarded for the period July 1, 2001
    through September 30, 2002 to identify any costs obligated and paid
    after September 30, 2003 and return those amounts to the Department.

3.  Submit its procedures that were implemented to ensure that available
    appropriation balances in its accounts are adjusted timely so that
    grant funds are not used after expiration of the period of
    availability.

4.  Reimburse the Special Education Grant account for the \$6,380 cost
    of the storage container.

5.  Identify the portions of the \$103,798 (\$52,019 + \$49,868 +
    \$1,911) charged to the Consolidated Grants and \$11,118 (\$8,004 +
    \$3,114) charged to the Special Education Grants for purchases that
    should have been paid, in part, with local funds and, if applicable,
    other Federal program funds, and return those amounts to the
    respective grants.

6.  Identify all transactions charged to the Consolidated Grants and the
    Special Education Grants since October 1, 2003 that should have been
    paid, in part, with local funds or other Federal program funds, and
    return those amounts to the respective grants.

7.  Implement procedures that allow the allocation of vendor payments to
    two or more funding sources.

8.  Develop, and submit to the Federal cognizant agency for approval,
    cost allocation plans or indirect cost rate proposals for October 1,
    2003 through September 30, 2004 and future periods.

**GDOE Comments**

**[Expired Availability Period]{.underline}.** GDOE concurred that
\$8,902 was charged to the Consolidated Grant after the expiration of
the period of availability and stated that GDOE had already begun to
institute procedures to prevent charges to expired grants.

GDOE's comments also addressed a finding in the draft report on the use
of funds after the period of availability of a Special Education Grant.
While the GDOE initially had charged payroll costs to the expired grant,
GDOE provided us with documents to show that a journal entry was
processed in April 2004, which properly transferred the costs to another
grant. We deleted the finding from the report since GDOE had identified
and corrected the improper charge prior to our review. In its comments
on the draft report, GDOE explained how the improper payroll charge
occurred and the steps it has taken to prevent payroll charges from
being charged to expired grants.

**[Unnecessary Purchase of \$6,380 for Special Education
Grant.]{.underline}** GDOE concurred that the storage container was not
necessary to the operation and performance of the Special Education
Grant. GDOE stated that journal entries will be processed to adjust the
Special Education Grant and charge the cost of the storage container to
the appropriate Consolidated Grant.

**[Charges That Were Allocable to Other Activities.]{.underline}** GDOE
disagreed that a portion of purchases for supplies and materials,
capital outlay, equipment, and contractual services should be paid, in
part, with local or other funds.

-   *[Consolidated Grants -- Supplies and Materials]{.underline}*. GDOE
    stated that costs associated with its Research, Planning &
    Evaluation Unit, which administers the SAT 9 tests and prepares
    annual school performance reports, were paid with local funds. Thus,
    local funds were expended to carry out the cited section of the Guam
    Public Law.

-   *[Consolidated Grants -- Capital Outlays and
    Equipment]{.underline}*. GDOE stated that computer and printer
    purchases for principals were allowed by the Consolidated Grant and
    that computer technology (computers, printers, software, and related
    accessories) was a necessary tool for principals to administer the
    grant and vital to the success of a school improvement program.

GDOE stated that the computer and printer purchases for the other
employees were allowed under the Consolidated Grant because the
employees expended time on activities related to the administration of
the grant (processing personnel actions and purchase orders, receiving
and disbursing materials, etc.). GDOE also stated that the efficiencies
provided by the computers ensured that human and material resources were
provided in a timely manner to schools and divisions responsible for
implementing the Consolidated Grant programs.

-   *[Special Education Grant -- Contractual Services]{.underline}*.
    GDOE acknowledged that other students, besides students with
    disabilities, benefited from the Curriculum Director training, but
    stated that the expenditure of Special Education Grant funds was
    justified. GDOE stated that students with disabilities, who attended
    the 16 public schools where staff received the training, benefited
    because school staff learned how to use disaggregated student
    performance data in developing school intervention plans. GDOE also
    noted that school staff, who attended the training and used the
    Curriculum Director software on a continuing basis, were paid with
    local funds.

-   S*[pecial Education Grants -- Equipment]{.underline}*. GDOE
    explained that John F. Kennedy High School provides services to
    students with disabilities residing within its boundaries and
    provides a regional program for students who are deaf or hard of
    hearing. GDOE stated that the Special Education Grant funds expended
    to provide Motorola hand-held receivers were provided to assist the
    high school in addressing the overall supervision responsibility for
    all students, including the students with disabilities. GDOE claimed
    that the placement of regional programs on regular school campuses
    resulted in increased administrative responsibilities for the
    schools and, if schools are not provided benefits, the regional
    programs would become unwelcome and eventually not allowed on the
    school campus.

> GDOE also stated that the cost of the hand-held receivers was just a
> portion of the total costs expended by GDOE to provide a safe and
> secure campus for all students and noted that the personnel assigned
> the receivers were paid with local funds.

### OIG Response

**[Unnecessary Purchase of \$6,380 for Special Education
Grant.]{.underline}** In the draft report, we stated that GDOE could
charge the storage container purchase to the Consolidated Grants since
the GATE program was administered under those grants. Prior to charging
the \$6,380 to the Consolidated Grant, GDOE will need to confirm that
the applicable GDOE Consolidated Grant Application included the purchase
of the storage container as part of its operation of the GATE program
and that funding is available under the applicable Consolidated Grant.
Thus, we have removed the statement from the final report and revised
Recommendation 1.4.

**[Charges That Were Allocable to Other Activities]{.underline}.** We
have not changed our conclusions and recommendations related to this
part of the finding. GDOE comments confirmed that the purchases for
supplies and materials, capital outlay, equipment, and contractual
services were for activities that benefited both the students targeted
by the Consolidated Grants and Special Education Grants and the general
student population. Given that GDOE did not have cost allocation plans
or indirect cost rates, it is reasonable to conclude that some
activities fully paid with local funds may have benefited the targeted
students. However, since our review was limited to reported grant
expenditures, we have no information available to confirm GDOE's
comments regarding its use of local funds.

Since it did not allocate the individual vendor payments based on
benefits received and did not have an approved cost allocation plan or
indirect cost rate, GDOE will need to review expenditures from
Consolidated Grant funds, Special Education Grant funds, local funds,
and other funding sources to assess whether the Consolidated Grants and
Special Education Grants were charged in accordance with the relative
benefits received. As an alternative, GDOE could implement
Recommendations 1.5 and 1.6 to ensure that the Consolidated Grants and
Special Education Grants were only charged in accordance with the
benefits received.

**FINDING NO. 2 -- GDOE Did Not Have Required Documentation for
Personnel Costs Charged to the Grants**

GDOE did not have required periodic certifications for employees
charging 100 percent of their time to the Consolidated Grants and
Special Education Grants. For employees working solely on a single
Federal award, OMB Circular A-87, Attachment B, paragraph 8.h (3)
states---

> \[C\]harges for their salaries and wages will be supported by periodic
> certifications that the employees worked solely on that program for
> the period covered by the certification. These certifications will be
> prepared at least semi-annually and will be signed by the employee or
> supervisory official having first hand knowledge of the work performed
> by the employee.

For employees working on multiple activities, OMB Circular A-87,
Attachment B, paragraph 8.h (4) states---

> \[A\] distribution of their salaries or wages will be supported by
> personnel activity reports or equivalent documentation which meets the
> standards in subsection (5) unless a statistical sampling system . . .
> or other substitute system has been approved by the cognizant Federal
> agency.

Paragraph (5) lists the required elements for personnel activity reports
and the provisions for using budget estimates for interim accounting.

During the period from January 1 to March 31, 2004, GDOE charged
personnel costs for 805 employees, totaling \$3,297,318, to the
Consolidated Grants and personnel costs for 478 employees, totaling
\$2,831,963, to the Special Education Grants.[^9] The personnel costs
for these employees were charged 100 percent to the respective grants.
GDOE accounting staff informed us that GDOE had not implemented the
required periodic certifications for employees charging 100 percent of
their time to Federal grants.

We selected 51 of the 805 employees whose personnel costs were charged
to the Consolidated Grants and 56 of the 478 employees whose personnel
costs were charged to the Special Education Grants to confirm whether
they performed services for the program purpose and to assess whether
the employees worked 100 percent on the grants. Other than the few
instances noted below, we concluded that the personnel costs charged 100
percent to the grants appeared reasonable. The interviewed employees
orally confirmed that they expended 100 percent of their time on
activities related to the respective grant. Also, the numbers of staff
working in the GDOE units were about the same as the numbers whose
personnel costs were charged to the grants during the audit period and
the employees were located in space or a building dedicated to grant
activities.

We noted the following instances where staff did not expend 100 percent
of their time on activities related to the grants:

-   A program coordinator, an administrative assistant, and three
    accounting technicians informed us that, in addition to performing
    work on the Consolidated Grants, they processed applications and
    awarded scholarships for the Robert C. Byrd Scholarship Program
    (another Federal program). The staff stated that they spent a
    minimal amount of time on the scholarship program. The personnel
    costs for the five employees totaled \$40,975.

-   Nine school aides at John F. Kennedy High School, who provided
    one-to-one support for students with disabilities, informed us that,
    after completing grant-related activities, they performed general
    school tasks, such as assisting in student supervision, answering
    phones, and light maintenance. They estimated that generally 7.5
    hours a day was spent on Special Education Grant activities and
    about thirty minutes a day on other school tasks. The personnel
    costs for the nine school aides totaled \$44,085.

-   The Administrator for Special Education informed us that school
    aides providing one‑to‑one support for students with disabilities
    did not work full-time on Special Education Grant activities during
    the summer. The March 31, 2004 quarterly reports did not include
    personnel costs for the summer period. However, if its procedures
    are not revised, GDOE may improperly charge the Special Education
    Grants for the entire personnel costs for school aides working
    during the summer when a portion of the costs may be allocable to
    activities unrelated to the grants.

Nothing else came to our attention to indicate that other GDOE employees
did not expend 100 percent of their time on the grants.

**Recommendations**

We recommend that the Chief Financial Officer, in collaboration with the
Assistant Secretary for Elementary and Secondary Education and the
Assistant Secretary for Special Education and Rehabilitative Services,
require GDOE to---

1.  Implement at least semi-annual certifications for employees who
    expend 100 percent of their time on a Federal grant and personnel
    activity reports or equivalent documentation for employees who
    expend their time on more than one Federal grant or other
    activities.

2.  Review initial certifications (prepared after implementation of
    Recommendation 2.1) for employees who were charged 100 percent to
    the Consolidated Grants or Special Education Grants to identify
    those employees, if any, who did not work 100 percent on the
    respective grant. For the identified employees, GDOE should
    determine if the employees' duties during the certification period
    were similar to their duties since October 2003 and return to the
    respective grant account those portions of the personnel costs for
    time worked on activities unrelated to the grant.

3.  Provide support for personnel costs charged to the Consolidated
    Grants for the five employees who also administered the Robert C.
    Byrd Scholarship Program and for personnel costs charged to the
    Special Education Grants for the nine school aides who also
    performed general school activities, and return to the respective
    grants those portions of the personnel costs for time worked on
    activities unrelated to grants.

# GDOE Comments

GDOE concurred with the finding and recommendations, but GDOE's Special
Education unit questioned whether the one-half hour per day expended by
the nine school aides on activities unrelated to the Special Education
Grants reached a threshold that warranted the return of funds.

GDOE stated that, effective April 1, 2005, quarterly certifications
would be implemented for employees who expend 100 percent of their time
on Federal grants or between Federal grant and other activities. GDOE
will review the certifications to determine if allocations were needed
for portions that are not related to the Federal grant activities.
GDOE's Special Education unit stated that procedures would be
implemented in Summer 2005 to ensure that local funding sources are
charged for the percentages of employees' time unrelated to Special
Education activities.

# OIG Response

The funds returned for the nine school aides are negligible in context
to the total funds provided under the Special Education Grant, but our
review covered only a small number of GDOE employees and only the
reported personnel costs for the quarter ended March 31, 2004. Since
GDOE did not have periodic certifications as required by OMB Circular
A‑87, there could be similar instances for other employees and time
periods not covered in our review.

> The corrective action proposed by GDOE does not comply with the
> requirements of OMB Circular A‑87. For employees working on multiple
> activities, paragraph 8.h (4) of Attachment B states---

## 

## \[A\] distribution of their salaries or wages will be supported by personnel activity reports or equivalent documentation which meets the standards in subsection (5) unless a statistical sampling system . . . or other substitute system has been approved by the cognizant Federal agency. 

## 

## Subsection (5)(c) states that personal activity reports or equivalent documentation "must be prepared at least monthly and must coincide with one or more pay periods . . . ." \[Emphasis added.\] 

## FINDING NO. 3 -- GDOE's Inventory Records Did Not Reflect the Current Location of Some Equipment

GDOE's inventory records did not reflect the current location of some
computers, monitors, and printers purchased with funds from the
Consolidated Grants. The regulation at 34 C.F.R. § 80.32(d)(1) states---

Property records must be maintained that include a description of the
property, a serial number or other identification number, the source of
property, who holds title, the acquisition date, and cost of the
property, percentage of Federal participation in the cost of the
property, the location, use and condition of the property, and any
ultimate disposition data including the date of disposal and sale price
of the property.

During our physical observation of equipment, we found that GDOE's
inventory records reflected the current location of all 74 items of
equipment selected from the transactions reviewed in our audit that were
purchased with funds from the Special Education Grants. However, we were
unable to locate 11 of the 149 items of equipment that we selected from
the transactions reviewed for the Consolidated Grants. The 11 items
consisted of seven computers, three printers, and one monitor, which
were purchased in the following three separate transactions.[^10]

-   GDOE purchased 130 computers and 130 monitors in a transaction under
    Purchase Order No. 200391606 with Consolidated Grant funds. GDOE's
    inventory records showed that the computers and monitors were
    assigned to various elementary schools. We conducted site visits to
    five schools to confirm the location and use of the 44 computers and
    38 monitors assigned to the schools.

We were unable to locate six of the computers that the inventory records
showed were located at D.L. Perez Elementary School, and we found one
computer at Finegayan Elementary School that was shown as assigned to
another school on the inventory record. GDOE\'s Fixed Assets Office
staff advised us that the location shown on the inventory record was
incorrect. At the end of our onsite visit, GDOE had not yet provided us
with the current location of the equipment. The six computers with their
associated monitors cost a total of \$9,978.[^11]

-   GDOE purchased 70 printers in a transaction under Purchase Order No.
    200301474 with Consolidated Grant funds. GDOE's inventory records
    showed that the printers were assigned to various elementary schools
    and GDOE offices. We visited five schools and six GDOE offices to
    physically observe the 24 printers assigned to those locations. We
    were unable to locate 3 of the 24 printers.

> We were unable to find one printer at Finegayan Elementary School. The
> principal at Finegayan Elementary School told us that the assigned
> printer was defective and had been replaced with another printer.
> GDOE's inventory records showed that three printers were at GDOE's
> Chamorro Studies Office. However, GDOE\'s Fixed Assets Office staff
> informed us that the inventory record had not been updated to reflect
> the transfer of two printers from the Chamorro Studies Office to the
> Federal Programs Office. We were unable to locate one of the two
> printers transferred to the Federal Programs Office and the remaining
> printer at the Chamorro Studies Office.[^12] The three printers cost a
> total of \$1,182.

-   GDOE purchased 10 computers and 10 monitors in another transaction
    under Purchase Order No. 200301464 with Consolidated Grant funds.
    GDOE's inventory records showed that the equipment was assigned to
    the Federal Programs Office. We were unable to locate one computer
    and one monitor during our physical inventory. The computer and
    monitor cost a total of \$1,684.

Since we were unable to locate the 11 items, we have no assurance that
the purchased equipment, costing a total of \$12,844 (\$9,978 +
\$1,182 + \$1,684), was used for the program purposes specified in the
Consolidated Grants. During a site visit in January 2005, an ED official
confirmed the location of the three printers purchased under Purchase
Order No. 200301474 and the computer and monitor purchased under
Purchase Order No. 200301464.

Past single audit reports disclosed that GDOE did not have a property
management system in place that met applicable requirements. In response
to the findings, GDOE developed a corrective action plan, which it was
in the progress of implementing. The action plan provided for the
implementation of an inventory system and the identification of all
equipment. We found that GDOE had made progress in its implementation of
the action plan.

###### Recommendations

We recommend that the Chief Financial Officer, in collaboration with the
Assistant Secretary for Elementary and Secondary Education, require GDOE
to---

1.  Locate the six missing items of equipment and confirm that the
    equipment is being used for the purposes of the Consolidated Grants.
    If the equipment cannot be located, or is being used for other
    purposes, GDOE should return the \$9,978 cost of the equipment to
    the grants.

2.  Report each quarter on the implementation of its corrective action
    plan.

3.  Implement periodic reviews of the accuracy of its inventory records.

# GDOE Comments

GDOE stated that an ED official confirmed the locations of all the
missing items during a site visit held in January 2005. GDOE stated that
its fixed asset records are being updated and periodic inventory reviews
will be conducted to confirm the locations of its fixed assets.

## OIG Response

While the ED official informed us that he was able to locate all the
missing items of equipment, he had, in fact, only confirmed the location
of 5 of the 11 items. For the other six items, GDOE's Assistant
Comptroller, Fixed Assets Office, had provided revised serial numbers to
the ED official and the ED official had confirmed the location of the
items with those serial numbers. During the audit, the Assistant
Comptroller had provided us with a list of serial numbers for the 130
items received for the reviewed transaction. The list included the
serial numbers for the computers that we could not locate during our
review and the revised serial numbers provided by the Assistant
Comptroller to the ED official. Thus, GDOE still needs to locate 6 items
to account for all 130 items received under this transaction.

+-----------------------------------------------------------------------+
| # OBJECTIVES, SCOPE, AND METHODOLOGY                                  |
+-----------------------------------------------------------------------+

Our audit objectives were to confirm that selected personnel costs and
purchases that GDOE reported as expenditures for the Consolidated Grants
and Special Education Grants in the Special Conditions Compliance
Reports for the Quarter Ended March 31, 2004 were for services provided
and purchases used for the program purposes specified in the grant
awards and that the expenditures complied with applicable Federal laws
and regulations. We reviewed amounts charged to the grants for salaries,
contractual services, supplies and materials, equipment, miscellaneous
costs, and capital outlays from January 1 to March 31, 2004.

To accomplish our objectives, we reviewed GDOE's audit report covering
the Schedule of Expenditures of Federal Awards and Federal Compliance
for the year ended September 30, 2001 and GDOE's single audit reports
for the years ended September 30, 2002 and 2003. We reviewed GDOE's
Consolidated Grant Applications for program years 2002-2003 and
2003‑2004 and related correspondence. We interviewed GDOE staff
responsible for the administration and accounting of grant funds and
GDOE staff at selected schools. We also held discussions with Department
staff at the Office of Elementary and Secondary Education and Office of
Special Education Programs who were responsible for providing oversight
of the grants.

For our review of GDOE's accounting and use of the grants' funds, we
relied on reports of expenditures for the Consolidated Grants and
Special Education Grants for the period January 1 to March 31, 2004,
which GDOE staff generated from GDOE's financial accounting system. We
verified the completeness of the data by comparing the expenditures on
GDOE generated reports to amounts on the Special Conditions Compliance
Reports for the Quarter Ended March 31, 2004. We also compared
information in the GDOE generated reports to source documents for
selected transactions. Based on these tests, we concluded that the data
was sufficiently reliable to be used in meeting the audit objectives.
Attachments 1 and 2 provide the number of transactions selected for
review and the selection methodology used for each cost category.

We performed on-site fieldwork between September 9 and September 28,
2004 at GDOE's administrative offices in Hagåtna, Guam and the
following eight schools: M.A. Ulloa Elementary School, Price Elementary
School, Upi Elementary School, D.L. Perez Elementary School, Finegayan
Elementary School, L.P. Untalan Middle School, John F. Kennedy High
School, and the Alternative School. Subsequent to our site visits, we
conducted additional reviews and analyses at our Sacramento office. An
exit conference was held with GDOE officials on December 20, 2004. We
performed our audit in accordance with generally accepted government
auditing standards appropriate to the scope of the audit described.

+-----------------------------------------------------------------------+
| #                                                                     |
|                                                                       |
| # STATEMENT ON INTERNAL CONTROLS                                      |
+-----------------------------------------------------------------------+

Our assessment of GDOE's internal control structure was limited to those
areas of control weaknesses identified while conducting substantive
tests of grant expenditures. Based on our review, we concluded that GDOE
needs to establish procedures that ensure costs are properly charged to
grants, personnel costs are documented in accordance with the
requirements of OMB Circular A-87, and accurate asset inventory records
are maintained. These weaknesses are identified in the AUDIT RESULTS
section of this report.

+-----------------------------------------------------------------------+
| #                                                                     |
|                                                                       |
| # ADMINISTRATIVE MATTERS                                              |
+-----------------------------------------------------------------------+

Statements that managerial practices need improvements, as well as other
conclusions and recommendations in this report, represent the opinions
of the Office of Inspector General. Determinations of corrective actions
to be taken will be made by the appropriate Department officials.

If you have any additional comments or information that you believe may
have a bearing on the resolution of this audit, you should send them
directly to the following Education Department officials who will
consider them before taking final Departmental action on this audit.

Jack Martin

Chief Financial Officer

Office of the Chief Financial Officer

U.S. Department of Education

Federal Building No. 6, Room 4E313

400 Maryland Avenue, SW

Washington, DC 20202

Raymond J. Simon

Assistant Secretary

Office of Elementary and Secondary Education

U.S. Department of Education

Federal Building No. 6, Room 3W315

400 Maryland Avenue, SW

Washington, D.C. 20202

John H. Hager

Assistant Secretary

Office of Special Education and Rehabilitative Services

U.S. Department of Education

Potomac Center Plaza

550 12^th^ Street SW, Room 5103

Washington, D.C. 20024

It is the policy of the U.S. Department of Education to expedite the
resolution of audits by initiating timely action on the findings and
recommendations contained therein. Therefore, receipt of your comments
within 30 days would be greatly appreciated.

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 under the Act.

> Sincerely,
>
> /s/
>
> Gloria Pilotti
>
> Regional Inspector General for Audit

**Attachment 1**

+--------+----------+----------+--------+---------+--------+---------+
| # Tab  |          |          |        |         |        |         |
| le 2.  |          |          |        |         |        |         |
| Consol |          |          |        |         |        |         |
| idated |          |          |        |         |        |         |
|  Grant |          |          |        |         |        |         |
| s to I |          |          |        |         |        |         |
| nsular |          |          |        |         |        |         |
|  Areas |          |          |        |         |        |         |
|        |          |          |        |         |        |         |
| **S    |          |          |        |         |        |         |
| ummary |          |          |        |         |        |         |
| of OIG |          |          |        |         |        |         |
| Review |          |          |        |         |        |         |
| of     |          |          |        |         |        |         |
| Se     |          |          |        |         |        |         |
| lected |          |          |        |         |        |         |
| Tr     |          |          |        |         |        |         |
| ansact |          |          |        |         |        |         |
| ions** |          |          |        |         |        |         |
+--------+----------+----------+--------+---------+--------+---------+
| **Cost | **Total  | **Items  | **F    |         | **F    | **      |
| Cate   | Items/** | in       | inding |         | inding | Finding |
| gory** |          | Sample/  | #1**   |         | #2**   | #3**    |
|        | **Total  | Amount   |        |         |        |         |
|        | Amount** | of       |        |         |        |         |
|        |          | Sample** |        |         |        |         |
+--------+----------+----------+--------+---------+--------+---------+
|        |          |          | **E    | **Al    | *      | **Unco  |
|        |          |          | xpired | locable | *Unsup | nfirmed |
|        |          |          | Availa | Costs** | ported | A       |
|        |          |          | bility |         | Per    | ssets** |
|        |          |          | Pe     |         | sonnel |         |
|        |          |          | riod** |         | C      |         |
|        |          |          |        |         | osts** |         |
+--------+----------+----------+--------+---------+--------+---------+
| Per    | 805      | 51       |        |         | 5      |         |
| sonnel | E        | E        |        |         | Emp    |         |
|        | mployees | mployees |        |         | loyees |         |
|        |          | (b)      |        |         |        |         |
|        | \$3      |          |        |         | \$     |         |
|        | ,297,318 | \        |        |         | 40,975 |         |
|        |          | $264,589 |        |         |        |         |
+--------+----------+----------+--------+---------+--------+---------+
| Contr  | 62       | 2        |        |         |        |         |
| actual | Tran     | Tran     |        |         |        |         |
| Se     | sactions | sactions |        |         |        |         |
| rvices |          | (c)      |        |         |        |         |
|        | \        |          |        |         |        |         |
|        | $444,122 | \        |        |         |        |         |
|        |          | $306,360 |        |         |        |         |
+--------+----------+----------+--------+---------+--------+---------+
| Su     | 1,212    | 2        | \$530  | 1       |        |         |
| pplies | Tran     | Tran     |        | Tran    |        |         |
| and    | sactions | sactions |        | saction |        |         |
| Mat    |          | (d)      |        |         |        |         |
| erials | \        |          |        | \       |        |         |
|        | $491,264 | \$54,998 |        | $52,019 |        |         |
|        |          |          |        | (h)     |        |         |
+--------+----------+----------+--------+---------+--------+---------+
| C      | 20       | 4        | \      | 2       |        | 1       |
| apital | Tran     | Tran     | $8,193 | Trans   |        | Tran    |
| O      | sactions | sactions |        | actions |        | saction |
| utlays |          | (e)      |        |         |        |         |
|        | \        |          |        | \       |        | \$9,978 |
|        | $360,168 | \        |        | $49,868 |        |         |
|        |          | $335,130 |        |         |        |         |
+--------+----------+----------+--------+---------+--------+---------+
| Equ    | 70       | 4        | \$179  | 3       |        |         |
| ipment | Tran     | Tran     |        | Trans   |        |         |
|        | sactions | sactions |        | actions |        |         |
|        |          | (f)      |        |         |        |         |
|        | \$13,413 |          |        | \$1,911 |        |         |
|        |          | \$6,435  |        |         |        |         |
+--------+----------+----------+--------+---------+--------+---------+
| M      | 945      | 1        |        |         |        |         |
| iscell | Tran     | Tra      |        |         |        |         |
| aneous | sactions | nsaction |        |         |        |         |
|        |          | (g)      |        |         |        |         |
|        | \        |          |        |         |        |         |
|        | $112,993 | \$2,168  |        |         |        |         |
+--------+----------+----------+--------+---------+--------+---------+
| Total  | \$4      | \        | \      | \$      | \$     | \$9,978 |
|        | ,719,278 | $969,680 | $8,902 | 103,798 | 40,975 |         |
| Amount | (a)      |          |        |         |        |         |
+--------+----------+----------+--------+---------+--------+---------+
| \(a\)  |          |          |        |         |        |         |
| Total  |          |          |        |         |        |         |
| ex     |          |          |        |         |        |         |
| cludes |          |          |        |         |        |         |
| transa |          |          |        |         |        |         |
| ctions |          |          |        |         |        |         |
| for    |          |          |        |         |        |         |
| travel |          |          |        |         |        |         |
| (\$2   |          |          |        |         |        |         |
| 1,777) |          |          |        |         |        |         |
| and    |          |          |        |         |        |         |
| uti    |          |          |        |         |        |         |
| lities |          |          |        |         |        |         |
| (\$    |          |          |        |         |        |         |
| 1,410) |          |          |        |         |        |         |
| that   |          |          |        |         |        |         |
| were   |          |          |        |         |        |         |
| not    |          |          |        |         |        |         |
| in     |          |          |        |         |        |         |
| cluded |          |          |        |         |        |         |
| in our |          |          |        |         |        |         |
| sa     |          |          |        |         |        |         |
| mpling |          |          |        |         |        |         |
| uni    |          |          |        |         |        |         |
| verse. |          |          |        |         |        |         |
|        |          |          |        |         |        |         |
| \(b\)  |          |          |        |         |        |         |
| All    |          |          |        |         |        |         |
| emp    |          |          |        |         |        |         |
| loyees |          |          |        |         |        |         |
| in the |          |          |        |         |        |         |
| F      |          |          |        |         |        |         |
| ederal |          |          |        |         |        |         |
| Pr     |          |          |        |         |        |         |
| ograms |          |          |        |         |        |         |
| Office |          |          |        |         |        |         |
| and    |          |          |        |         |        |         |
| emp    |          |          |        |         |        |         |
| loyees |          |          |        |         |        |         |
| at     |          |          |        |         |        |         |
| GDOE's |          |          |        |         |        |         |
| Alter  |          |          |        |         |        |         |
| native |          |          |        |         |        |         |
| School |          |          |        |         |        |         |
| and    |          |          |        |         |        |         |
| the    |          |          |        |         |        |         |
| eleme  |          |          |        |         |        |         |
| ntary, |          |          |        |         |        |         |
| m      |          |          |        |         |        |         |
| iddle, |          |          |        |         |        |         |
| and    |          |          |        |         |        |         |
| high   |          |          |        |         |        |         |
| s      |          |          |        |         |        |         |
| chools |          |          |        |         |        |         |
| with   |          |          |        |         |        |         |
| the    |          |          |        |         |        |         |
| h      |          |          |        |         |        |         |
| ighest |          |          |        |         |        |         |
| per    |          |          |        |         |        |         |
| sonnel |          |          |        |         |        |         |
| costs  |          |          |        |         |        |         |
| for    |          |          |        |         |        |         |
| the    |          |          |        |         |        |         |
| type   |          |          |        |         |        |         |
| of     |          |          |        |         |        |         |
| s      |          |          |        |         |        |         |
| chool. |          |          |        |         |        |         |
|        |          |          |        |         |        |         |
| \(c\)  |          |          |        |         |        |         |
| Transa |          |          |        |         |        |         |
| ctions |          |          |        |         |        |         |
| of     |          |          |        |         |        |         |
| \$1    |          |          |        |         |        |         |
| 50,000 |          |          |        |         |        |         |
| or     |          |          |        |         |        |         |
| more.  |          |          |        |         |        |         |
|        |          |          |        |         |        |         |
| \(d\)  |          |          |        |         |        |         |
| The    |          |          |        |         |        |         |
| h      |          |          |        |         |        |         |
| ighest |          |          |        |         |        |         |
| dollar |          |          |        |         |        |         |
| transa |          |          |        |         |        |         |
| ctions |          |          |        |         |        |         |
| that   |          |          |        |         |        |         |
| were   |          |          |        |         |        |         |
| with   |          |          |        |         |        |         |
| dif    |          |          |        |         |        |         |
| ferent |          |          |        |         |        |         |
| ve     |          |          |        |         |        |         |
| ndors. |          |          |        |         |        |         |
|        |          |          |        |         |        |         |
| \(e\)  |          |          |        |         |        |         |
| Transa |          |          |        |         |        |         |
| ctions |          |          |        |         |        |         |
| \$     |          |          |        |         |        |         |
| 16,000 |          |          |        |         |        |         |
| or     |          |          |        |         |        |         |
| more.  |          |          |        |         |        |         |
|        |          |          |        |         |        |         |
| \(f\)  |          |          |        |         |        |         |
| Transa |          |          |        |         |        |         |
| ctions |          |          |        |         |        |         |
| \      |          |          |        |         |        |         |
| $1,200 |          |          |        |         |        |         |
| or     |          |          |        |         |        |         |
| more.  |          |          |        |         |        |         |
|        |          |          |        |         |        |         |
| \(g\)  |          |          |        |         |        |         |
| Trans  |          |          |        |         |        |         |
| action |          |          |        |         |        |         |
| with   |          |          |        |         |        |         |
| the    |          |          |        |         |        |         |
| h      |          |          |        |         |        |         |
| ighest |          |          |        |         |        |         |
| dollar |          |          |        |         |        |         |
| a      |          |          |        |         |        |         |
| mount. |          |          |        |         |        |         |
|        |          |          |        |         |        |         |
| \(h\)  |          |          |        |         |        |         |
| Amount |          |          |        |         |        |         |
| shown  |          |          |        |         |        |         |
| in     |          |          |        |         |        |         |
| cludes |          |          |        |         |        |         |
| the    |          |          |        |         |        |         |
| pu     |          |          |        |         |        |         |
| rchase |          |          |        |         |        |         |
| cost   |          |          |        |         |        |         |
| for    |          |          |        |         |        |         |
| the    |          |          |        |         |        |         |
| se     |          |          |        |         |        |         |
| lected |          |          |        |         |        |         |
| trans  |          |          |        |         |        |         |
| action |          |          |        |         |        |         |
| (\$1   |          |          |        |         |        |         |
| 3,340) |          |          |        |         |        |         |
| and    |          |          |        |         |        |         |
| addi   |          |          |        |         |        |         |
| tional |          |          |        |         |        |         |
| transa |          |          |        |         |        |         |
| ctions |          |          |        |         |        |         |
| c      |          |          |        |         |        |         |
| harged |          |          |        |         |        |         |
| to the |          |          |        |         |        |         |
| grant  |          |          |        |         |        |         |
| under  |          |          |        |         |        |         |
| the    |          |          |        |         |        |         |
| same   |          |          |        |         |        |         |
| pu     |          |          |        |         |        |         |
| rchase |          |          |        |         |        |         |
| order  |          |          |        |         |        |         |
| for    |          |          |        |         |        |         |
| the    |          |          |        |         |        |         |
| same   |          |          |        |         |        |         |
| items. |          |          |        |         |        |         |
+--------+----------+----------+--------+---------+--------+---------+

######### Attachment 2

+----------+----------+-----------+----------+----------+------------+
| # Ta     |          |           |          |          |            |
| ble 3. S |          |           |          |          |            |
| pecial E |          |           |          |          |            |
| ducation |          |           |          |          |            |
|  Grants  |          |           |          |          |            |
| to State |          |           |          |          |            |
| s-Part B |          |           |          |          |            |
|          |          |           |          |          |            |
| *        |          |           |          |          |            |
| *Summary |          |           |          |          |            |
| of OIG   |          |           |          |          |            |
| Review   |          |           |          |          |            |
| of       |          |           |          |          |            |
| Selected |          |           |          |          |            |
| Transa   |          |           |          |          |            |
| ctions** |          |           |          |          |            |
+----------+----------+-----------+----------+----------+------------+
| **Cost   | **Total  | **Items   | *        |          | **Finding  |
| Ca       | Items/   | in        | *Finding |          | #2**       |
| tegory** | Total    | Sample/   | #1**     |          |            |
|          | Amount** | Amount of |          |          |            |
|          |          | Sample**  |          |          |            |
+----------+----------+-----------+----------+----------+------------+
|          |          |           | **Una    | **A      | **U        |
|          |          |           | llowable | llocable | nsupported |
|          |          |           | Costs**  | Costs**  | Personnel  |
|          |          |           |          |          | Costs**    |
+----------+----------+-----------+----------+----------+------------+
| P        | 478      | 56        |          |          | 9          |
| ersonnel | E        | Employees |          |          | Employees  |
|          | mployees | (b)       |          |          |            |
|          |          |           |          |          | \$44,085   |
|          | \$2      | \$290,455 |          |          |            |
|          | ,831,963 |           |          |          |            |
+----------+----------+-----------+----------+----------+------------+
| Con      | 211      | 3         |          | 1        |            |
| tractual | Tran     | Tra       |          | Tra      |            |
| Services | sactions | nsactions |          | nsaction |            |
|          |          | (c)       |          |          |            |
|          | \        |           |          | \$8,004  |            |
|          | $114,257 | \$35,504  |          | (h)      |            |
+----------+----------+-----------+----------+----------+------------+
| Supplies | 342      | 5         |          |          |            |
| and      | Tran     | Tra       |          |          |            |
| M        | sactions | nsactions |          |          |            |
| aterials |          | (d)       |          |          |            |
|          | \$61,952 |           |          |          |            |
|          |          | \$11,966  |          |          |            |
+----------+----------+-----------+----------+----------+------------+
| Capital  | 59       | 7         | 1        |          |            |
| Outlays  | Tran     | Tra       | Tra      |          |            |
|          | sactions | nsactions | nsaction |          |            |
|          |          | (e)       | \$6,380  |          |            |
|          | \        | \$66,144  |          |          |            |
|          | $107,594 |           |          |          |            |
+----------+----------+-----------+----------+----------+------------+
| E        | 46       | 3         |          | 1        |            |
| quipment | Tran     | Tra       |          | Tra      |            |
|          | sactions | nsactions |          | nsaction |            |
|          |          | (f)       |          |          |            |
|          | \$22,680 |           |          | \$3,114  |            |
|          |          | \$8,574   |          |          |            |
+----------+----------+-----------+----------+----------+------------+
| Misce    | 100      | 1         |          |          |            |
| llaneous | Tran     | Tr        |          |          |            |
|          | sactions | ansaction |          |          |            |
|          |          | (g)       |          |          |            |
|          | \$73,276 |           |          |          |            |
|          |          | \$8,401   |          |          |            |
+----------+----------+-----------+----------+----------+------------+
| Totals   | \$3      | \$421,044 | \$6,380  | \$11,118 | \$44,085   |
|          | ,211,722 |           |          |          |            |
|          | (a)      |           |          |          |            |
+----------+----------+-----------+----------+----------+------------+
| \(a\)    |          |           |          |          |            |
| Total    |          |           |          |          |            |
| excludes |          |           |          |          |            |
| tran     |          |           |          |          |            |
| sactions |          |           |          |          |            |
| for      |          |           |          |          |            |
| travel   |          |           |          |          |            |
| (\       |          |           |          |          |            |
| $32,183) |          |           |          |          |            |
| that     |          |           |          |          |            |
| were not |          |           |          |          |            |
| included |          |           |          |          |            |
| in our   |          |           |          |          |            |
| sampling |          |           |          |          |            |
| u        |          |           |          |          |            |
| niverse. |          |           |          |          |            |
|          |          |           |          |          |            |
| \(b\)    |          |           |          |          |            |
| All      |          |           |          |          |            |
| e        |          |           |          |          |            |
| mployees |          |           |          |          |            |
| who      |          |           |          |          |            |
| worked   |          |           |          |          |            |
| at the   |          |           |          |          |            |
| Division |          |           |          |          |            |
| Office   |          |           |          |          |            |
| for      |          |           |          |          |            |
| Special  |          |           |          |          |            |
| E        |          |           |          |          |            |
| ducation |          |           |          |          |            |
| and the  |          |           |          |          |            |
| four     |          |           |          |          |            |
| selected |          |           |          |          |            |
| schools. |          |           |          |          |            |
|          |          |           |          |          |            |
| \(c\)    |          |           |          |          |            |
| Tran     |          |           |          |          |            |
| sactions |          |           |          |          |            |
| with the |          |           |          |          |            |
| highest  |          |           |          |          |            |
| amounts  |          |           |          |          |            |
| paid to  |          |           |          |          |            |
| vendors  |          |           |          |          |            |
| for      |          |           |          |          |            |
| training |          |           |          |          |            |
| and      |          |           |          |          |            |
| database |          |           |          |          |            |
| deve     |          |           |          |          |            |
| lopment. |          |           |          |          |            |
|          |          |           |          |          |            |
| \(d\)    |          |           |          |          |            |
| Tran     |          |           |          |          |            |
| sactions |          |           |          |          |            |
| of       |          |           |          |          |            |
| \$2,000  |          |           |          |          |            |
| or more. |          |           |          |          |            |
|          |          |           |          |          |            |
| (e) Tran |          |           |          |          |            |
| sactions |          |           |          |          |            |
|          |          |           |          |          |            |
|  \$6,000 |          |           |          |          |            |
|     or   |          |           |          |          |            |
|          |          |           |          |          |            |
|    more. |          |           |          |          |            |
|          |          |           |          |          |            |
| (f) Tran |          |           |          |          |            |
| sactions |          |           |          |          |            |
|     of   |          |           |          |          |            |
|          |          |           |          |          |            |
|  \$2,000 |          |           |          |          |            |
|     or   |          |           |          |          |            |
|          |          |           |          |          |            |
|    more. |          |           |          |          |            |
|          |          |           |          |          |            |
| \(g\)    |          |           |          |          |            |
| Tra      |          |           |          |          |            |
| nsaction |          |           |          |          |            |
| with the |          |           |          |          |            |
| highest  |          |           |          |          |            |
| dollar   |          |           |          |          |            |
| amount.  |          |           |          |          |            |
|          |          |           |          |          |            |
| \(h\)    |          |           |          |          |            |
| Amount   |          |           |          |          |            |
| shown    |          |           |          |          |            |
| includes |          |           |          |          |            |
| the      |          |           |          |          |            |
| purchase |          |           |          |          |            |
| cost for |          |           |          |          |            |
| the      |          |           |          |          |            |
| selected |          |           |          |          |            |
| tra      |          |           |          |          |            |
| nsaction |          |           |          |          |            |
| (        |          |           |          |          |            |
| \$4,150) |          |           |          |          |            |
| and      |          |           |          |          |            |
| ad       |          |           |          |          |            |
| ditional |          |           |          |          |            |
| tran     |          |           |          |          |            |
| sactions |          |           |          |          |            |
| charged  |          |           |          |          |            |
| to the   |          |           |          |          |            |
| grant    |          |           |          |          |            |
| under    |          |           |          |          |            |
| the same |          |           |          |          |            |
| purchase |          |           |          |          |            |
| order    |          |           |          |          |            |
| for      |          |           |          |          |            |
| related  |          |           |          |          |            |
| travel   |          |           |          |          |            |
| and      |          |           |          |          |            |
| training |          |           |          |          |            |
| ma       |          |           |          |          |            |
| terials. |          |           |          |          |            |
+----------+----------+-----------+----------+----------+------------+

######### Attachment 3

**GDOE Comments on the Draft Report**

GDOE's cover letter for its comments are only available in pdf.

Responses to U.S. Department of Education

Office of Inspector General

ED-OIG/A09-E0027

Finding No. 1 -- GDOE Improperly Charged Costs to the Grants:

*GDOE charges \$13,524 to Grants with Expired availability periods.*

GDOE concurs with the \$8902. We have begun to institute procedures that
will no longer allow charges to be made to expired grants. However, for
the \$4622, a journal entry was already made to move the expenditures
related to salaries to the appropriate accounts. This was done prior to
the fiscal year end. The causes of these expenditures were from salary
charges in which the new accounts numbers were not completely changed in
the payroll system when the basic salary account was changed. This
process will be updated with the personnel division to ensure that all
salary related codes are updated when new accounts are assigned to
employees. Further, the accounting staff will monitor any such charges
and make the necessary adjustments, if necessary, on a continual basis.

GDOE charged \$6380 for a purchase that was not necessary to the
operation and performance of the Special Education Grant.

GDOE concurs with the recommendation and upon receipt of final audit, we
will make the necessary journal entries to reflect the adjustment to the
Special Education grant and charge it to the Consolidated grant that
should have been charged initially.

Consolidated Grants -- Supplies and Materials:

In-kind costs of RPE for administering the SAT 9 tests and preparing the
annual school performance reports are charged to local funds. Therefore,
local funds were expended to carry out the public law.

Consolidated Grants -- Capital Outlay: GDOE charged the grant for laptop
computers and printers that were used by employees providing services to
other Federal programs and/or GDOE\'s general student and employee
populations.

Consolidated grants -- Equipment:

GDOE charged grants for software packages and printers being used by
units that provided services to the general student and employee
populations and/or other Federal programs.

Consolidated Grants **[Disputes]{.underline}** the Finding.

The costs of computers used by the principals were properly charged
because the Consolidated Grant was implemented under the No Child Left
Behind Act Title V-A which allows funds to be used for:

-   Providing training to principals related to Title V- A programs.

-   Providing technology activities to school personnel related to the
    implementation of school-based reform efforts.

-   Giving principals the knowledge and skills to provide students with
    the opportunity to meet challenging State or local academic content
    standards and improve student academic achievement.

Throughout NCLB, e.g., Title I, Title II, and Title V, principals are
embraced as a distinct group critical to improving student academic
performance. Because of their immense influence on the general student
population, the benefits of NCLB are naturally extended to them. To
leave principals behind would leave students behind.

The Consolidated Grant Application Program Year 03-04 included the
following in the Reading Reform section:

> Objective: Establish data collection and reporting system for Direct
> Instruction student assessments at school and district levels.
>
> Activities:

a)  Provide schools with the necessary technology, training, and other
    resources to collect data and report assessment results.

b)  Establish student data management system to collect and report
    district-wide reading performance; contract with research
    consultants, if necessary.

c)  Set up schedule for regular collection and reporting of school data
    and district data.

Principals are vital to the success of any school improvement program.
In order to achieve the grant's stated objective, principals had to be
given the means and resources, i.e., computer technology to include
printers, software, and related accessories. The computers were provided
to them because they are ultimately responsible for managing and
implementing the new and comprehensive Direct Instruction reading
program at the school level. Principals are expected to supervise the
teachers and reading coordinators implementing the program, and to keep
track of student and school progress. It was imperative that they were
equipped with the tools and resources that would assist them in leading
and managing the program in the most efficient manner. They needed the
computers to:

-   Prepare reports and documents required by the Reading First Center
    and Federal Programs

-   Prepare communications to faculty, staff, and parents about DI

-   Prepare DI teacher schedules

-   Communicate electronically for quick transmission of information

-   Input and track student progress reports

-   Input needed instructional materials orders

-   Prepare graphs/tables for reporting

-   Review and maintain student groupings

-   Record classroom observations of teachers teaching DI

-   Review student and school performance

-   Keep updated on the use of technology for tracking student
    performance

-   Maintain other DI files

-   Maintain Consolidated Grant equipment inventories.

Principals also used the computers for implementing other Consolidated
Grant programs such as DEED, Summer School, and SAT 9 testing.

The cost of computers used by the employees were properly charged
because the employees spent a great deal of time processing Consolidated
Grant personnel actions and purchase orders, receiving and disbursing
materials, etc. Computers were provided to enhance their efficiency and
to ensure that the human and material resources were provided in a
timely manner to the Consolidated Grant programs being implemented in
the schools and divisions.

*Special Education Grants -- Contractual Services: GDOE charged a grant
\$4150 for a transaction under PO# 200400211 for a trainer to provide
instruction to GDOE staff at 16 schools on the use of a test question
database. The database was used to monitor student progress and assist
in aligning curriculum with the standardized test. We identified
additional transactions charged to the grant under the same purchase
order for \$3214 for travel and \$640 for training materials. The
Administer from Research, Planning, & Evaluation informed us that the
test questions were for special education students, English language
learners, and regular students. The purchases, totaling \$8004, should
have been paid, in part, with local funds and, if applicable, other
Federal program funds.*

Special Education **[Disputes]{.underline}** the Finding.

DOE has 37 public schools. Special Education was asked to use its funds
to pilot the use of the Curriculum Director in 16 schools, in order to
learn how to assist all schools to "drill down" the SAT 9 data, as
schools examined the individual student and school-wide student
performances on the SAT 9, in order to develop school improvement plans
that are data driven. These school improvement plans are designed to
improve student performance on the SAT 9, including students with
disabilities.

While other students, besides students with disabilities, benefited from
this pilot program, the fact that students with disabilities were
intended to benefit should

justify the expenditure of grant funds. All students with disabilities
at the 16 public schools that received the Curriculum Director training
benefited from the training, as their school staff became more
adequately prepared to develop appropriate school intervention plans
based on the performance of special education students (the special
education students performances can be disaggregated from all other
students).

Uncalculated in-kind local costs were incurred due to the salaries of
the school staff that were trained to use the Curriculum Director. In
addition, now that the software and hardware are in place, continuing
local costs are being expended each time the Curriculum Director is
used, with Special Education students deriving benefits each time.

*Special Education Grants -- Equipment: GDOE charges a grant \$3460 for
a transaction under PO# 200400212 for 10 Motorola handheld receivers
(\$346 each). The receivers were assigned to the school principals, four
vice principals, school secretary, custodian, and three aides at JFK
High School. Except for the vice principal that oversaw the Special
Education program, the other high school personnel provided services to
the general student population. The \$3114 cost of nine receivers should
have been paid, in part, with local funds and, if applicable, other
Federal program funds.*

Special Education **[Disputes]{.underline}** the Finding.

In addition to serving all students with disabilities who are in
district to attend this school, John F, Kennedy High School also serves
as the regional high school for any student who is placed into our
special program for students who are deaf and hard of hearing. In other
words, if you are a deaf and hard of hearing student at the high school
level, the only high school that can provide a free appropriate public
education is located at John F. Kennedy High school, and is not
available at the three other high schools.

The decision to develop regional programs for low-incidence students is
based in part on cost efficiencies to bring small numbers of students
together on one school campus in order to hire one certified teacher of
the deaf, instead of recruiting several teachers of the deaf to teach on
several school campuses. This also allows the district to concentrate
its professional development for the teachers in the regular classrooms
to one school instead of many schools. Our interpreters will also be
concentrated on one school campus, allowing the possibility of assisting
each other in times of interpreter absences.

Special Education federal funds are provided to states and territories
to assist states and territories to provide special education and
related services to eligible students with disabilities. The funds
expended to provide Motorola hand-held receivers were provided to assist
the high school in addressing the overall supervision responsibility for
all students, including the students with disabilities,

such as the students who are deaf and hard of hearing. The questioned
costs of the identified hand-held receivers are just a portion of the
total costs expended by the GDOE to provide for a safe and secure campus
for all students.

Placing regional programs on regular school campuses resulted in
increased administrative responsibility on the schools. If schools were
asked by the district to house regional special programs for
low-incidence programs, and were asked to take on the additional burden
of supervision, administration, and litigation that typically
accompanies such special programs, and there are no benefits to be
provided, these programs will become unwelcome and eventually not
allowed onto a school campus.

Thus, the district decision to provide "assistance" to John F. Kennedy
in purchasing 10 Motorola hand-held receivers so that the Principal,
Assistant Principals, and school aides who were campus safety monitors,
so that they can provide a safe environment for all students, including
students with disabilities, is an appropriate use of federal funds to
supplement our special education efforts at that particular school.

It is interesting to note that the OIG auditors identified the
Principal, plus 4 Assistant Principals, plus a school secretary, plus a
custodian, and 2-3 school aides as persons who used the federally funded
hand-held receivers. All of these personnel are all locally funded.
Therefore, of the total supervision costs required to ensure a safe and
secure school for all students, the salaries of the identified
individuals are many times more than the questioned cost of the
hand-held receivers.

*Finding No 2. GDOE did not have the required documentation for
Personnel costs charged to the grants.*

*GDOE did not have periodic certifications for employees charging 100
percent of their time to the Consolidated Grants and Special Education
Grants, and*

***Page 8** **-- Paragraph 1**: The personnel costs for these employees
were charged 100 percent to the respective grants. GDOE accounting staff
informed us that GDOE had not implemented the required periodic
certifications for employees charging 100 percent of their time to the
Federal grants.*

Special Education **[Concurs]{.underline}** with the Finding.

# Page 8 -- Paragraph 2: *Other than the few instances noted below, we concluded that the personnel costs charged 100 percent to the grants appeared reasonable*, and

# 

# Page 8 -- Paragraph 7: *Nothing else came to our attention to indicate that other GDOE employees did not expend 100 percent of their time on the grants.*

Special Education Response:

Special Education **[Concurs]{.underline}** with the Finding that
personnel costs charged to the grant appeared reasonable and that other
than the few instances noted, nothing else came to the attention of the
OIG auditors that employees did not expend 100 percent of their time on
Special Education grants.

# Page 8 -- Paragraph 3 & 5: *We noted the following instances where staff did not expend 100 percent of their time on activities related to the grants:*

-   *Nine school aides at John F. Kennedy High School, who provided
    one-to-one support for students with disabilities, informed us that
    after completing grant-related activities, they performed general
    school tasks, such as assisting in student supervision, answering
    phones, and light maintenance. They estimated that generally 7.5
    hours a day was spent on Special Education Grant activities and
    about thirty minutes a day on other school tasks. The personnel
    costs for the nine school aides totaled \$44,085.*

Special Education Response:

Special Education **[Concurs]{.underline}** with the Finding that
personnel were found to have spent 7.5 hours per day on Special
Education Grant activities. However, Special Education
**[Disputes]{.underline}** that because an inconsequential one-half hour
a day was spent on non-Special Education Grant activities, that this
constitutes a threshold that should result in questioned costs for the
amounts identified (\$44,085), which is 5 hours out of an 80-hour pay
period, which equals one-sixteenth, or 6.25 percent, of the entire pay
period. How this amount and percentage can be raised to a level of
questioned costs is not understood, when in the OIG auditors own
findings, "Other than the few instances noted below, we concluded that
the personnel costs charged 100 percent to the grants appeared
reasonable."

# Page 8 -- Paragraph 3 & 6: *We noted the following instances where staff did not expend 100 percent of their time on activities related to the grants:*

-   *The Administrator for Special Education informed us that school
    aides providing one-to-one support for students with disabilities
    did not work full-time on Special Education Grant activities during
    the summer. The March 31, 2004 quarterly reports did not include
    personnel costs for the summer. However, if its procedures are not
    revised, GDOE may improperly charge the Special Education Grants for
    the entire personnel costs for school aides working during the
    summer when a portion of the costs may be allocable to activities
    unrelated to the grants.*

Special Education Response:

Special Education **[Concurs]{.underline}** with the Finding. GDOE will
institute procedures effective this summer (2005) to ensure that
employees charged to the Special Education Grants will be charged to
local funding for the percentages of their time unrelated to Special
Education activities.

*Provide support for personnel costs charged to the Consolidated Grants
for the five employees who also administered the Robert C. Byrd
Scholarship Program and for personnel costs charged to the Special
Education Grants for the nine school aides who also performed general
school activities, and return to the respective grants those portions of
the personnel costs for time worked on activities unrelated to grants.*

GDOE concurs with this finding. Effective April 1^st^, GDOE will issue
quarterly certifications for employees who expend 100% of their time on
federal grants or between federal grant and other activities. Upon
review of these certifications, GDOE will determine if allocations need
to be made for portions that are not related to federal grant
activities.

*Finding No. 3 GDOE's inventory records did not reflect the current
location of some equipment.*

GDOE was able to confirm with USDOE officials during their visit in
January the location of the missing computers. Below is an excerpt of an
e-mail that was sent from USDOE Mark Robinson, regarding the location of
the missing computers:

> As requested, I followed up on this issue while in Guam last week. Ray
> Miranda from GDOE and I went out to two schools to locate the items in
> question on the \"Equipment Not Located\" list, as well as the GDOE
> offices noted on the list. I was able to locate all of the items
> listed, based on the correction to the serial numbers as indicated on
> the attachment below provided by Ray during my visit. The problem with
> locating the items appears to be the result of incorrect serial
> numbers on the initial inventory sheet from what is actually shown on
> the items

GDOE is in the process of updating its fixed asset records into the
computerized fixed asset module under the Financial Management System.
Upon initial input, GDOE will conduct periodic inventory reviews of the
locations of its fixed assets.

[^1]: A cost objective is a function, organizational subdivision,
    contract, grant, or other activity for which cost data are needed
    and for which costs are incurred.

[^2]: Site visits at three schools confirmed that principals were using
    the computers purchased by this transaction and that the other
    computers assigned to the schools were being used solely for program
    purposes.

[^3]: Site visits at five schools confirmed that principals were using
    the printers purchased by this transaction and that the other
    printers assigned to the schools were being used solely for program
    purposes.

[^4]: GDOE's Curriculum and Instruction Office coordinates curriculum
    development and provides support for program and staff development.

[^5]: GDOE's Federal Program Office administers the Consolidated Grants.

[^6]: The 25 printers assigned to the principals do not include the one
    printer that we could not locate which was assigned to the principal
    in Finegayan Elementary School.

[^7]: GDOE's Chamarro Studies Office administers educational programs on
    the language and culture of the indigenous people of Guam.

[^8]: The aides were campus safety monitors and their salaries were paid
    with local government funds.

[^9]: Personnel costs were comprised of \$2,736,635 for salaries and
    \$560,683 for fringe benefits for the Consolidated Grants and
    \$2,238,337 for salaries, \$3,021 for overtime, and \$590,604 for
    fringe benefits for the Special Education Grants.

[^10]: The three transactions encompassed 126 of the 149 items reviewed
    for the Consolidated Grants. We found that the inventory records
    were accurate for the items purchased in the other transactions that
    encompassed the remaining 23 items reviewed.

[^11]: The unit price of \$1,663 covered a workstation comprised of a
    computer and monitor.

[^12]: We also noted that the inventory records showed a printer for the
    Federal Programs Office and a printer for the Chamorro Studies
    Office with the same serial number.