**DEPARTMENT OF EDUCATION**

**CROSS-CUTTING SECTION**

**INTRODUCTION**

This section contains compliance requirements that apply to more than
one Department of Education (ED) program either because the program was
authorized under the Elementary and Secondary Education Act (ESEA), or
the program is subject to the General Education Provisions Act (GEPA),
or both. The compliance requirements in this Cross-Cutting Section
reference the applicable programs in Part 4, Agency Compliance
Requirements. Similarly, the applicable programs in Part 4 reference
this Cross-Cutting Section.

**CFDA \# Program Name Listed as**

**ESEA Programs**

84.010 Title I Grants to Local Educational Agencies (LEAs) Title I, Part
A

84.011 Migrant Education\--Basic State Grant Program MEP

84.186 Safe and Drug-Free Schools and Communities\--State Grants SDFSCA

84.281 Eisenhower Professional Development State Grants Eisenhower

84.282 Charter Schools PCSP

84.287 Twenty-First Century Community Learning Centers 21st Century

84.288 Bilingual Education\--Program Development and Implementation
Grants

84.290 Bilingual Education\--Comprehensive School Grants Bilingual

84.291 Bilingual Education\--Systemwide Improvement Grants

84.298 Innovative Education Program Strategies Title VI

84.318 Technology Literacy Challenge Fund Grants TLCF

84.340 Class Size Reduction CSR

**Other Programs**

84.002 Adult Education\--State Grant Program Adult Education

84.027 Special Education\--Grants to States (IDEA, Part B) IDEA

84.173 Special Education\--Preschool Grants (IDEA Preschool)

84.048 Vocational Education\--Basic Grants to States Vocational
Education

84.181 Special Education\--Grants for Infants and Families with
Disabilities IDEA, Part C

84.276 Goals 2000\--State and Local Education Systemic Improvement
Grants Goals 2000

**Waivers**

Under Title XIV of the ESEA, States, Indian tribes, LEAs, and schools
through their LEA may request waivers from ED of many of the statutory
and regulatory requirements of programs authorized in ESEA. The Goals
2000: Educate America Act and the School to Work Opportunities Act also
provide waiver authority. In addition, under the educational flexibility
(Ed-Flex) demonstration program of Goals 2000, the Secretary has
delegated to twelve State Educational Agencies (SEAs) the authority to
waive certain Federal statutory or regulatory requirements affecting
districts and schools. These twelve state are Colorado, Illinois, Iowa,
Kansas, Maryland, Massachusetts, Michigan, New Mexico, Ohio, Oregon,
Texas, and Vermont. Additional States may receive ED Flex waiver
authority under the new Education Flexibility Partnership Act of 1999.
Auditors should ascertain from the audited SEA and LEAs whether the SEA
or the LEA or its schools are operating under any waivers.

**I. PROGRAM OBJECTIVES**

The ESEA of 1965, as amended by the Improving America\'s Schools Act
(IASA), provides for a comprehensive overhaul of programs providing more
than \$10 billion a year of Federal support for education, and
restructures how these programs provide services. ESEA programs in this
Supplement to which this section applies are shown above. These
requirements are applicable for fiscal years beginning after June 30,
1995. ESEA is scheduled to be reauthorized for fiscal years beginning
after September 30, 2000.

Under the IASA, Federal education programs authorized in the ESEA are
designed to work in concert with each other, rather than separately. By
emphasizing program coordination, planning, and service delivery among
Federal programs and enhancing integration with State and local
instructional programs, the ESEA reinforces comprehensive State and
local educational reform efforts geared toward ensuring that all
children can meet challenging State standards regardless of their
background or the school they attend.

Program objectives for non-ESEA programs covered by this cross-cutting
section and additional information on program objectives for the ESEA
programs are set forth in the individual program sections of this
Supplement.

**II. PROGRAM PROCEDURES**

**Plans for ESEA Programs**

A SEA must either develop and submit separate, program-specific
individual State plans to ED for approval as provided in individual
program requirements outlined in the ESEA or submit, in accordance with
section 14302 of the ESEA, a consolidated plan to ED for approval.
Consolidated plans will provide a general description of the activities
to be carried out with ESEA funds. Subgrants to LEAs and other
educational service agencies and amounts to be used for State activities
are often set by law for ESEA programs. However, SEAs have discretion in
using funds available for State activities.

LEAs also have the choice in many cases of submitting individual program
plans or a consolidated plan to the SEA to receive program funds. SEAs
with approved consolidated State plans may require LEAs to submit
consolidated plans.

**Unique Features of ESEA Programs That May Affect the Conduct of the
Audit**

*Consolidation of administrative funds*

SEAs and LEAs (with SEA approval) may consolidate funds received for
administration of many ESEA programs, thus eliminating the need to
account for these funds on a program-by-program basis. SEAs may also
include funds received for administration of Goals 2000 (CFDA 84.276) in
this consolidation. The amount from each applicable program set aside
for consolidation may not be more than the percentage, if any,
authorized for State administration under that program. Federal
expenditures may be charged to the programs on a first in/first out
method, in proportion to the funds provided by each program, or another
reasonable manner. The amount set aside under each covered program for
consolidation may not be more than the percentage, if any, authorized
for local administration under that program.

*Coordinated services projects*

An LEA, an individual school, or consortium of schools (if there is no
governing LEA), with the approval of the Secretary, may use not more
than five percent of its ESEA funds to implement a coordinated services
project under Title XI of the ESEA. Audit coverage for transferred funds
is described in the Activities Allowed or Unallowed compliance
requirement of Section III of these cross-cutting provisions.

**Schoolwide Programs**

Eligible schools are able to use their Title I, Part A funds, as well as
combine most of their Federal education funds, to upgrade the entire
educational program of the school and to raise academic achievement for
all students. Except for some of the specific requirements of the Title
1, Part A program, funds that are used in a schoolwide program are not
subject to the statutory or regulatory requirements of the programs
providing the funds as long as the intent and purpose of those programs
are met by the schoolwide program. *The Title I, Part A requirements
that apply to schoolwide programs are identified in the Title I, Part A
program specific section*.

**General and Program-Specific Cross-cutting Requirements**

The requirements in this cross-cutting section can be classified as
either general or program-specific. General cross-cutting requirements
are those that are the same for all applicable programs but are
implemented on an entity-level. These requirements need only be tested
once to cover all applicable major programs. The general cross-cutting
requirements that the auditor only need test once to cover all
applicable major programs are: III.G.2.1, Level of Effort-Maintenance of
Effort (SEAs/LEAs); III.L.3, Special Reporting; and, III.N, Special
Tests and Provisions (III.N.1, Participation of Private School Children;
III.N.2, Schoolwide Programs; and, III.N.3, Comparability).
Program-specific cross-cutting requirements are the same for all
applicable programs, but are implemented at the individual program
level. These types of requirements need to be tested separately for each
applicable major program.

Program procedures for non-ESEA programs covered by this cross-cutting
section and additional information on program procedures for the ESEA
programs are set forth in the individual program sections of this
Supplement. A copy of the Improving America=s Schools Act with a
hypertext index can be accessed on the Internet at
http://www.ed.gov/legislation/ESEA/toc.html.

**III. COMPLIANCE REQUIREMENTS**

**In developing the audit procedures to test compliance with the
requirements for a Federal program, the auditor should first look to
Part 2, Matrix of Compliance Requirements, to identify which of the 14
types of compliance requirements described in Part 3 are applicable and
then look to Parts 3 and 4 for the details of the requirements.**

**Further, if there has been a transfer of funds to a consolidated
administrative cost pool or a coordinated services project from a major
program, in developing audit procedures to test compliance with
Activities Allowed or Unallowed and Allowable Costs/Cost Principles, the
auditor should include the consolidated administrative cost pool or
coordinated services project expenditures in the universe to be
tested.**

**A. Activities Allowed or Unallowed**

**1. Consolidation of administrative funds** (SEAs/LEAs)

> *ESEA programs in this Supplement to which this section applies are:
> Title I, Part A (84.010); MEP (84.011); SDFSCA (except the Governor=s
> Program authorized under Section 4114 (84.186); Eisenhower (84.281);
> Title VI (84.298); TLCF (84.318); and CSR (84.340).*
>
> *This section also applies to Goals 2000 (for SEA=s only) (84.276)*
>
> An SEA must use consolidated administrative funds for authorized
> administrative activities of the consolidating programs and may use
> such funds for administrative activities designed to enhance the
> effective and coordinated use of funds under the programs included in
> the consolidation, such as coordination of ESEA programs with other
> Federal and non-Federal programs; the establishment and operation of
> peer review mechanisms; the dissemination of information regarding
> model programs and practices; and technical assistance.
>
> If an LEA consolidates administrative funds, the LEA may not use any
> other funds from the consolidating programs for administration.
>
> An SEA or LEA that consolidates administrative funds is not required
> to keep separate records of administrative costs for each individual
> program. Expenditures of consolidated administrative funds are
> allowable if they are for administrative costs that are allowable
> under any of the contributing programs (Sections 14201 and 14203 of
> ESEA (20 USC 8821 and 8823)).

**2. Use of unneeded program funds** (LEAs)

> *ESEA programs in this Supplement to which this section applies are:
> MEP (84.011); SDFSCA (except the Governor=s Program authorized under
> Section 4114) (84.186); Eisenhower (84.281); Title VI (84.298); TLCF
> (84.318); and CSR (84.340)*.
>
> With the approval of its SEA, an LEA that determines for any fiscal
> year that funds under an applicable program (MEP, Eisenhower, SDFSCA,
> Title VI, TLCF, and CSR) are not needed for the purpose of that
> applicable program may use five percent or less of the total amount of
> the funds received under that applicable program for the purpose of
> another applicable program. Title I, Part A may receive funds but
> Title I, Part A funds may not be transferred to other programs. This
> determination may be made at any time during the period of
> availability of the funds. This provision, however, does not extend
> the period for obligating unneeded program funds beyond the period of
> availability for the applicable program from which the funds were
> transferred. The expenditure of the funds transferred are subject to
> the requirements of the program to which transferred (Section 14206(a)
> of ESEA (20 USC 8826(a))).
>
> Compliance with the maximum transfer of five percent maximum is tested
> under III.G.3.b, Earmarking, *Use of unneeded program funds*.
>
> See IV, Other Information, for guidance on Type A program
> determination and Schedule of Expenditure of Federal awards.

**3. Coordinated services projects** (LEAs)

> *This section applies to all ESEA programs in this Supplement: Title
> I, Part A (84.010), MEP (84.011), SDFSCA (84.186), Eisenhower
> (84.281), PCSP (84.282), 21st Century (84.287), Bilingual (84.288,
> 84.290, 84.291), Title VI (84.298), TLCF (84.318), CSR (84.340).*
>
> In addition to using funds for specific purposes outlined in each
> program\'s statute and regulations, an LEA, school, or group of
> schools if there is no governing LEA, upon application to and approval
> by ED, may use a total of not more than five percent of its funds
> received under ESEA to develop, implement, or expand a coordinated
> services project. ED will notify an SEA of its approval of any
> coordinated services projects within the State.
>
> Funds transferred to a coordinated services project are subject to the
> compliance requirements applicable to the coordinated services
> project. Funds reserved for a coordinated services project may be used
> for any activity relevant to the project, except that those funds may
> not be used for the direct provision of health or health-related
> services. Acceptable uses of funds may include, but are not limited
> to, hiring a coordinator, making minor renovations to existing
> buildings, purchasing basic operating equipment, improving
> communications and information-sharing among participating entities,
> teacher and staff training, and conducting a statutorily required
> needs assessment. Funds used for this purpose must be obligated within
> the period of availability of funds for the program from which funds
> were transferred (Title XI and Section 14206(b) of ESEA (20 USC 8401
> et seq. and 8826(b))).
>
> Compliance with the maximum transfer of five percent to a coordinated
> services project is tested under III.G.3.c, Earmarking, *Coordinated
> services projects*.
>
> See IV, Other Information, for guidance on Type A program
> determination and Schedule of Expenditure of Federal awards.

**4. Schoolwide Programs** (LEAs)

> *ESEA programs in this Supplement to which this section applies are:
> Title I, Part A (84.010); MEP (84.011); SDFSCA (84.186); Eisenhower
> (84.281); 21st Century (84.287); Bilingual (84.288, 84.290 and
> 84.291); Title VI (84.298); TLCF (84.318); and CSR (84.340)*.
>
> *This section also applies to Goals 2000 (84.276); IDEA (84.027 and
> 84.173) and Vocational Education (84.048)*.
>
> A school participating under Title I, Part A may, in consultation with
> its LEA, use its Title I, Part A funds, along with funds provided from
> the above-identified programs, to upgrade the school\'s entire
> educational program in a schoolwide program. See III.N.2, Special
> Tests and Provisions - Schoolwide programs, in this cross-cutting
> section for testing related to schoolwide programs (Section 1114 of
> ESEA (20 USC 6314)).
>
> See IV, Other Information, for guidance on Type A program
> determination and Schedule of Expenditure of Federal awards.

**B. Allowable Costs/Cost Principles**

**1. Alternative Fiscal and Administrative Requirements** (SEAs/LEAs)

> *This section applies to all ESEA programs in this Supplement: Title
> I, Part A (84.010), MEP (84.011), SDFSCA (84.186), Eisenhower
> (84.281), PCSP (84.282), 21st Century (84.287), Bilingual (84.288,
> 84.290, 84.291), Title VI (84.298), TLCF (84.318), CSR (84.340).*

*This section also applies to Goals 2000 (84.276)*.

> A State may adopt its own written fiscal and administrative
> requirements, which are consistent with the provisions of OMB Circular
> A-87, for expending and accounting for all funds received by SEAs and
> LEAs under ESEA programs. The written fiscal and administrative
> requirements must: (1) be sufficiently specific to ensure that funds
> are used in compliance with all applicable statutory and regulatory
> provisions, including ensuring that costs are allocable to a
> particular cost objective; (2) ensure that funds received are spent
> only for reasonable and necessary costs of the program; and (3) ensure
> that funds are not used for general expenses required to carry out
> other responsibilities of State or local governments (34 CFR section
> 299.2).

**2. Indirect Costs** (All grantees/All subgrantees)

> *ESEA programs in this Supplement to which this section applies are:
> Title I, Part A (84.010); MEP (84.011); Eisenhower (84.281); PCSP
> (84.282); 21st Century (84.287); Bilingual (84.288, 84.290, and
> 84.291); Title VI (84.298); TLCF (84.318); and CSR (84.340).*
>
> *This section also applies to Adult Education (84.002); IDEA (84.027
> and 84.173); Vocational Education (84.048); IDEA, Part C (84.181); and
> Goals 2000 (84.276).*
>
> A \"Restricted\" Indirect Cost Rate (RICR) must be used for programs
> administered by State and local governments and their governmental
> subrecipients that have a statutory requirement prohibiting the use of
> Federal funds to supplant non-federal funds. Non-governmental grantees
> or subrecipients administering such programs have the option of using
> the RICR, or an indirect cost rate of 8 percent, unless ED determines
> that the RICR would be lower.
>
> The formula for the restricted indirect cost rate is as follows:
>
> RICR = (General management costs + Fixed costs) / (Other expenditures)
>
> General management costs are costs of activities that are for the
> direction and control of the grantee\'s affairs that are organization
> wide, such as central accounting services, payroll preparation and
> personnel management. It does not include expenditures limited to one
> component or operation of the grantee. Specifically excluded from
> general management costs are the following costs which are
> reclassified and included in the \"other expenditures\" denominator:
>
> 1\) divisional administration that is limited to one component of the
> grantee;
>
> 2\) the governing body of the grantee;
>
> 3\) compensation of the chief executive officer of the grantee;
>
> 4\) compensation of the chief executive officer of any component of
> the grantee; and
>
> 5\) operation of the immediate offices of these officers.
>
> Fixed costs are contributions to fringe benefits and similar costs
> associated with salaries and wages that are charged as indirect costs,
> including retirement, social security, pension, unemployment
> compensation and insurance costs.
>
> Other expenditures are the grantee\'s total expenditures for its
> federally and non-federally funded activities, including directly
> charged occupancy and space maintenance costs (as defined in 34 CFR
> section 76.568), and the costs related to the chief executive officer
> of the grantee or any component of the grantee and their offices.
> Excluded are general management costs, fixed costs, subgrants, capital
> outlays, debt service, fines and penalties contingencies and election
> expenses (except for elections required by Federal statute).
>
> Indirect costs charged to a grant are determined by applying the RICR
> to total direct costs of the grant minus capital outlays, subgrants
> and other distorting or unallowable items as specified in the grantees
> indirect cost rate agreement.
>
> The other ED programs (those not having a statutory non-supplant
> requirement) which allow indirect costs do not require a restricted
> rate and should follow the applicable OMB cost principles circular (34
> CFR sections 76.560 and 76.563-569).

**G. Matching, Level of Effort, Earmarking**

**1. Matching**

> See individual program compliance supplement for any matching
> requirements.

**2.1 Level of Effort** - *Maintenance of Effort* (SEAs/LEAs)

> *ESEA programs in this Supplement to which this section applies are:
> Title I, Part A (84.010); SDFSCA (except the Governor=s Program
> authorized under Section 4114) (84.186); Eisenhower (84.281); and TLCF
> (84.318)*.
>
> As described in II. Program Procedures under *General and
> Program-Specific Cross-cutting Requirements*, this requirement is a
> general cross-cutting requirement that need, only be tested once to
> cover all major programs to which it applies.
>
> An LEA may receive funds under an applicable program only if the SEA
> finds that the combined fiscal effort per student or the aggregate
> expenditures of the LEA from State and local funds for free public
> education for the preceding year was not less than 90 percent of the
> combined fiscal effort or aggregate expenditures for the second
> preceding year, unless specifically waived by ED.
>
> Beginning with the Federal fiscal year 1998, an LEA\'s expenditures
> from State and local funds for free public education include
> expenditures for administration, instruction, attendance and health
> services, pupil transportation services, operation and maintenance of
> plant, fixed charges, and net expenditures to cover deficits for food
> services and student body activities. They do not include the
> following expenditures: (1) any expenditures for community services,
> capital outlay, debt service and supplementary expenses as a result of
> a Presidentially declared disaster; and (2) any expenditures made from
> funds provided by the Federal government.
>
> For fiscal years prior to 1998, SEAs were allowed to define the types
> of expenditures that could be included in the calculation for programs
> other than Title I, Part A.
>
> If an LEA fails to maintain fiscal effort, the SEA must reduce the
> amount of the allocation of funds under an applicable program in any
> fiscal year in the exact proportion by which the LEA fails to maintain
> effort by falling below 90 percent of both the combined fiscal effort
> per student and aggregate expenditures (using the measure most
> favorable to the LEA) (Section 14501 of ESEA (20 USC 8891)).
>
> In some States, the SEA prepares the calculation from information
> provided by the LEA. In other States, the LEAs prepare their own
> calculation. The audit procedures contained in the Part 3, Section
> G.2.1, *Level of Effort - Maintenance of Effort* should be adapted to
> fit the circumstances. For example, if auditing the LEA and the LEA
> does the calculations, the auditor should perform steps a, b, and c.
> If auditing the LEA and the SEA does the calculation, the auditor
> should perform step c for the amounts reported to the SEA. If auditing
> the SEA and the SEA performs the calculation, the auditor should
> perform steps a and b and amend step c to trace amounts to the LEA
> reports. If auditing the SEA and the LEA performs the calculation, the
> auditor should perform step a and, if the requirement was not met,
> determine if the funding was reduced appropriately.
>
> **2.2 Level of Effort** - *Supplement Not Supplant* (SEAs/LEAs)
>
> *ESEA programs in this Supplement to which this section applies are:
> Title I, Part A (84.010); MEP (84.011); Bilingual (84.288, 84.290 and
> 84.291); Title VI (84.298); TLCF (84.318); and CSR (LEAs only)
> (84.340)*.
>
> An SEA and LEA may use program funds only to supplement and, to the
> extent practical, increase the level of funds that would, in the
> absence of the Federal funds, be made available from non-Federal
> sources for the education of participating students. In no case may an
> LEA use Federal program funds to supplant funds from non-Federal
> sources (Title I, Part A, Section 1120A(b) (20 USC 6322(b)); Title I,
> Part C Section 1304(c)(2) (20 USC 6394(c)(2)); Title VI of ESEA,
> Section 6401(b) (20 USC 7371(b)); and Title VII of ESEA, Section
> 7116(b)(4) (20 USC 7426(h)(4)).
>
> In the following instances, it is presumed that supplanting has
> occurred:
>
> \- The SEA or LEA used Federal funds (except Bilingual) to provide
> services that the SEA or LEA was required to make available under
> other Federal, State or local laws.
>
> \- The SEA or LEA used Federal funds to provide services that the SEA
> or LEA provided with non-Federal funds in the prior year.
>
> \- The SEA or LEA used Title I, Part A or MEP funds to provide
> services for participating children that the SEA or LEA provided with
> non-Federal funds for nonparticipating children.
>
> These presumptions are rebuttable if the SEA or LEA can demonstrate
> that it would not have provided the services in question with
> non-Federal funds had the Federal funds not been available.
>
> *Schoolwide Program* - In a Title I schoolwide program, a school is
> not required to provide supplemental services to identified children.
> A school operating a schoolwide program does not have to: (1) show
> that Federal funds used within the school are paying for additional
> services that would not otherwise be provided; (2) demonstrate that
> Federal funds are used only for specific target populations; or (3)
> separately track Federal program funds once they reach the school.
> Such a school, however, is required to use funds available under Title
> I and under any other Federal programs that are combined to support
> its schoolwide program to supplement the total amount of funds that
> would, in the absence of the Federal funds, be made available from
> non-Federal sources for that school, including funds needed to provide
> services that are required by law for children with disabilities and
> children with limited English proficiency (Title I, Part A, Section
> 1114 (20 USC 6314); MEP, Section 1306(b)(3) of ESEA (20 USC
> 6396(b)(3)); 34 CFR section 200.8; and 60 FR 49174).
>
> *Title I, Part A or MEP* - An SEA and LEA may exclude, from
> determinations of compliance with the supplement, not supplant
> requirement, supplemental State or local funds spent in any school
> attendance area or school for programs that meet the requirements of
> section 1114 (Schoolwide Programs) or section 1115 (Targeted Assisted
> Schools) of the ESEA (Title I, Part A of ESEA, Section 1120A(b) (20
> USC 6322(b))).
>
> *Bilingual* - This supplement not supplant requirement does not
> preclude an LEA from using Bilingual program funds for activities
> carried out under a Federal or State court order respecting services
> to be provided to limited English proficient (LEP) children, or to
> carry out a plan approved by the Secretary as adequate under Title VI
> of the Civil Rights Act of 1964 with respect to services to be
> provided to LEP children (Title VII, Section 7116(h)(4) of ESEA (20
> USC 7426(h)(4))).

**3. Earmarking**

a\. *Administration (SEAs)*

> *ESEA programs in this Supplement to which this section applies are:
> Title I, Part A (84.010) and MEP (84.011)*.
>
> An SEA may reserve for the administration of Title I programs up to
> one percent from each of the amounts allocated to the State under
> Title I, Part A (except Capital Expenses under section 1002(e) and
> School Improvement funds under section 1002(f)), and Part C (MEP) or
> \$400,000, whichever is greater. An SEA may reserve less than one
> percent from each of Parts A, C, and D (Subpart 1). Moreover, an SEA
> does not need to reserve the same percentage from each part. However,
> the amounts reserved from Part A Basic, Concentration, and, when
> funded, Targeted Grants must be proportionate. For any SEA reserving
> \$400,000, the amount taken from each of Title I, Parts A, C, and D
> (Subpart 1) must be proportionate. An SEA is not required to use the
> same proportion of funds reserved from Parts A, C, and D for
> administrative activities related to those Parts.
>
> As explained in Section III.A.1, *Consolidation of administrative
> funds*, the amounts reserved above may be consolidated with State
> administrative funds available under other applicable programs (Title
> I, Section 1603 of ESEA (20 USC 6513); See also 34 CFR sections
> 200.60(a) and 200.61).

b\. *Use of unneeded program funds (LEAs)*

> *ESEA programs in this Supplement to which this section applies are:
> MEP (84.011); SDFSCA (except the Governor=s Program authorized under
> Section 4114) (84.186); Eisenhower (84.281); Title VI (84.298); TLCF
> (84.318); and CSR (84.340).*
>
> With the approval of its SEA, an LEA that determines for any fiscal
> year that funds under an applicable program (MEP, Eisenhower, SDFSCA,
> Title VI; TLCF; and CSR) are not needed for the purpose of that
> applicable program may use five percent or less of the total amount of
> the funds received under that applicable program for the purpose of
> another applicable program (Section 14206(a) of ESEA (20 USC
> 8826(a))).

c\. *Coordinated services projects (LEAs)*

> *ESEA programs in this Supplement to which this section applies are:
> Title I, Part A (84.010), MEP (84.011), SDFSCA (84.186), Eisenhower
> (84.281), PCSP (84.282), 21st Century (84.287), Title VI (84.298),
> TLCF (84.318), CSR (84.340).*
>
> In addition to using funds for specific purposes outlined in each
> program\'s statute and regulations, an LEA, school, or group of
> schools if there is no governing LEA, upon application to and approval
> by ED, may use a total of not more than five percent of its funds
> received under ESEA to develop, implement, or expand a coordinated
> services project (Title XI and Section 14206(b) of ESEA (20 USC 8401
> and 8826(b))).

**H. Period of Availability of Federal Funds** (All grantees)

> *ESEA programs in this Supplement to which this section applies are:
> Title I, Part A (84.010); MEP (84.011); SDFSCA (including the
> Governor=s Program authorized under Section 4114) (84.186); Eisenhower
> (84.281); PCSP (84.282); 21st Century (84.287); Bilingual (84.288,
> 84.290 and 84.291); Title VI (84.298); and CSR (84.340)*.
>
> *This section also applies to Adult Education (84.002)*; *Goals 2000
> (84.276);* *IDEA (84.027 and 84.173); Vocational Education (84.048);
> and IDEA, Part C (84.181).*
>
> *All ESEA and other programs listed above except Bilingual, PCSP, and
> subrecipients under Vocational Education* - LEAs and SEAs must
> obligate funds during 27 months, extending from July 1 through
> September 30 of the second following fiscal year. (This maximum period
> includes a 15 month period of initial availability plus a 12 month
> period for carryover.) For example, funds from the fiscal year (FY)
> 1995 appropriation initially became available on July 1, 1995 and can
> be obligated by the grantee and subgrantee through September 30, 1997.
> (Section 421(b) of GEPA (20 USC 1225(b)); 34 CFR sections 76.704
> through 76.707).
>
> *Title I, Part A program* - An LEA that receives \$50,000 or more in
> Title I, Part A funds cannot carryover beyond the initial 15 months of
> availability more than 15 percent of the Title I, Part A funds. An SEA
> may grant a waiver for the percentage of limitation once every three
> years. An SEA may also grant a waiver in any fiscal year in which
> supplemental appropriations for Title I become available for
> obligation. (Section 1127 of ESEA (20 USC 6338)).
>
> *SDFSCA program* - An LEA that receives SDFSCA funding cannot
> carryover beyond the initial 15 months of availability more than 25
> percent of SDFSCA State Grant funds. An SEA may waive the percentage
> limitation for good cause for additional carryover by the LEA (Section
> 4113)(f)(2) of ESEA (20 USC 7113)).
>
> *Bilingual and PCSP programs* - The recipient must obligate funds from
> a grant during the period for which the funds are available for
> obligation as set forth in the grant award document. Recipients must
> maintain documentation to demonstrate that the obligation occurred
> during the period of availability and was charged to an appropriate
> year\'s grant funds. If obligations occur outside of the period of
> availability, the funds are not timely obligated and must be returned.
> Grantees, however, have the authority under certain circumstances to
> extend a project period, on a one-time basis, for a period of up to 12
> months (34 CFR section 75.261).
>
> *Vocational Education program* - In any academic year that a
> subrecipient does not obligate all of the amounts it is allocated
> under the Secondary, and Postsecondary and Adult Vocational Education
> programs for that year, it must return the unobligated amounts to the
> State to be reallocated under the Secondary, Postsecondary, and Adult
> Vocational Education Program, as applicable (Perkins III, section
> 133(b); 20 USC 2353(b)).
>
> *Consolidated administrative funds and coordinated services
> projects* - Consolidated administrative funds and funds used in
> coordinated services projects must be obligated within the period of
> availability of the program that the funds came from. Because
> expenditures in a consolidated administrative fund or a coordinated
> services project are not accounted for by specific Federal programs,
> an SEA or LEA may use a first-in, first-out method for determining
> when funds were obligated, may attribute costs in proportion to the
> dollars provided, or may use another reasonable method.
>
> *Definition of Obligation* - An obligation is not necessarily a
> liability in accordance with Generally Accepted Accounting Principles.
> When an obligation occurs (is made) depends on the type of property or
> services which the obligation is for:

  -----------------------------------------------------------------------
  **IF AN OBLIGATION IS FOR \--**     **THE OBLIGATION IS MADE \--**
  ----------------------------------- -----------------------------------
  \(a\) Acquisition of real or        On the date on which the State or
  personal property.                  subgrantee makes a binding written
                                      commitment to acquire the property.

  \(b\) Personal services by an       When the services are performed.
  employee of the State or            
  subgrantee.                         

  \(c\) Personal services by a        On the date on which the State or
  contractor who is not an employee   subgrantee makes a binding written
  of the State or subgrantee.         commitment to obtain the services.

  \(d\) Performance of work other     On the date on which the State or
  than personal services.             subgrantee makes a binding written
                                      commitment to obtain the work.

  \(e\) Public utility services.      When the State or subgrantee
                                      receives the services.

  \(f\) Travel.                       When the travel is taken.

  \(g\) Rental of real or personal    When the State or subgrantee uses
  property.                           the property.

  \(h\) A pre-agreement cost that was On the first day of the subgrant
  properly approved by the State      period.
  under the applicable cost           
  principles.                         
  -----------------------------------------------------------------------

> The act of an SEA or other grantee awarding Federal funds to an LEA or
> other eligible entity within a State does not constitute a final
> obligation. An SEA or other grantee may not reallocate grant funds
> from one subrecipient to another after the period of availability
> (GEPA Section 421(b) (20 USC 1225(b)); 34 CFR sections 76.704 through
> 76.707).
>
> If a grantee or subgrantee uses a different accounting system or
> accounting principles from one year to the next, it shall demonstrate
> that the system or principle was not improperly changed to avoid
> returning funds which were not timely obligated. A grantee or
> subgrantee may not make accounting adjustments after the period of
> availability in an attempt to offset audit disallowances. The
> disallowed costs must be refunded.

**L. Reporting**

**1. Financial Reporting**

> *ESEA programs in this Supplement to which this section applies are:
> Title I, Part A (84.010); MEP (84.011); SDFSCA (including the
> Governor=s Program authorized under Section 4114) (84.186); Eisenhower
> (84.281); PCSP (84.282); 21st Century (84.287); Bilingual (84.288,
> 84.290 and 84.291); Title VI (84.298); TLCF (84.318); and CSR
> (84.340)*.
>
> *This section also applies to Adult Education (84.002); Goals 2000
> (84.276); IDEA (84.027 and 84.173); and IDEA, PART C (84.181).*

a\. SF-269, *Financial Status Report* - Not Applicable

> b\. SF-270, *Request for Advance or Reimbursement* - Only grantees
> placed on reimbursement are required to complete this form to request
> payment of grant award funds. The requirement to use this form is
> imposed on an individual recipient basis.
>
> c\. SF-271, *Outlay Report and Request for Reimbursement for
> Construction Program* - Not Applicable
>
> d\. SF-272, *Federal Cash Transactions Report* - Not Applicable
>
> e\. *Grant Administration and Payment System (GAPS) (OMB No.
> 1875-0138)* - Grantees draw funds and account to ED using GAPS.
> Grantees request funds by: (1) creating a payment request using the
> GAPS External Access System through the Internet; (2) calling the GAPS
> Payee Hotline; or (3) if the grantee is placed on a reimbursement
> basis for an award, submitting an SF-270, *Request for Advance or
> Reimbursement* to an ED program or regional office. When creating a
> payment request in GAPS, the grantee enters the drawdown amounts, by
> award, directly into GAPS. When requesting funds using the other two
> methods, the grantee provides this information to the hotline
> operator, or on the SF-270, and ED staff enter the data into GAPS. ED
> also enters other award data into GAPS, including authorization
> amounts and payment status. The system maintains and provides
> cumulative data on net draws and the available balance for each award.
>
> ED considers drawn funds to have been expended by the grantee for the
> award(s) identified (notwithstanding that the grantee has up to three
> days to make disbursements). Cumulative drawdown amounts in GAPS
> should accurately reflect the grantee\'s actual disbursement of funds
> by award. Grantees can redistribute drawn amounts between grant awards
> by making adjustments in GAPS to reflect actual disbursements for each
> award. For example, if a grantee draws too much under one award, it
> can enter an adjustment in GAPS to reallocate the excess amount to
> other awards for which there were immediate cash needs, as long as the
> net amount of the adjustment is zero.
>
> To assist grantees in reconciling their internal accounting records
> with GAPS, grantees can use the GAPS External Access System
> (http://gapsweb.ed.gov) to obtain a GAPS Activity Report showing
> cumulative and detail information for each award. The GAPS Activity
> Report can be created and viewed on‑line and a hard copy may be
> printed as well.
>
> f\. LEAs and other subrecipients are generally required to report
> financial information to the pass-through entity. These reports should
> be tested during audits of LEAs.

**2. Performance Reporting** - Not Applicable

**3. Special Reporting**

> *State Per Pupil Expenditure (SPPE) Data* (*OMB No. 1850-0067*)
> (SEAs/LEAs)
>
> *ESEA programs in this Supplement to which this section applies are:
> Title I, Part A (84.010); and MEP (84.011).*
>
> As described in II. Program Procedures under *General and
> Program-Specific Cross-cutting Requirements*, this requirement is a
> general cross-cutting requirement that need only be tested once to
> cover all major programs to which it applies.
>
> Each year, an SEA must submit its average State per pupil expenditure
> (SPPE) data to the National Center for Education Statistics. These
> SPPE data are used by ED to make allocations under several ESEA
> programs, including Title I, Part A, and MEP. SPPE data are reported
> on the National Public Education Finance Survey. SPPE data comprise
> the State\'s annual current expenditures for free public education,
> less certain designated exclusions, divided by the State\'s average
> daily attendance.
>
> LEAs must submit data to the SEA for the SEA=s report. The SEA
> determines the format of the data submissions.
>
> Current expenditures to be included are those for free public
> education, including administration, instruction, attendance and
> health services, pupil transportation services, operation and
> maintenance of plant, fixed charges, and net expenditures to cover
> deficits for food services and student body activities. Current
> expenditures to be excluded are those for community services, capital
> outlay, debt service, and expenditures from funds received under Title
> I and Title VI of ESEA. To determine its expenditures under Title I
> and VI of ESEA in a schoolwide program, an LEA could calculate the
> percentage of funds that Title I and Title VI contributed to the
> schoolwide program and then apply those percentages to the total
> expenditures in the schoolwide program. Other reasonable methods may
> also be used (Section 14101(11) of ESEA (20 USC 8801)).
>
> Except when provided otherwise by State law, average daily attendance
> generally means the aggregate number of days of attendance of all
> students during a school year divided by the number of days school is
> in session during such school year. For purposes of ESEA, average
> daily membership (or similar data) can be used in place of average
> daily attendance in States that provide State aid to LEAs on the basis
> of average daily membership or such other data. When an LEA in which a
> child resides makes a tuition or other payment for the free public
> education of the child in a school of another LEA, the child is
> considered to be in attendance at the school of the LEA making the
> payment, and not at the school of the LEA receiving the payment.
> Similarly, when an LEA makes a tuition payment to a private school or
> to a public school of another LEA for a child with disabilities, the
> child is considered to be in attendance at the school of the LEA
> making the payment.

**N. Special Tests and Provisions**

> **1. Participation of Private School Children** (SEAs/LEAs)
>
> *ESEA programs in this Supplement to which this section applies are:
> Title I, Part A (84.010); MEP (84.011);SDFSCA (except the Governor=s
> Program authorized under Section 4114) (84.186); Eisenhower (84.281);
> Bilingual (84.288, 84.290 and 84.291); Title VI (84.298); and TLCF
> (84.318)*.
>
> Depending on how the SEA/LEA implements requirements for the provision
> of equitable participation of private school children, this
> requirement may be tested on a general or program-specific basis (as
> described in II. Program Procedures under General and Program-Specific
> Cross-cutting Requirements).
>
> **Compliance Requirement** - An SEA, LEA, or any other educational
> service agency (or consortium of such agencies) receiving financial
> assistance under an applicable program must provide eligible private
> school children and their teachers or other educational personnel with
> equitable services or other benefits under these programs. Before an
> agency or consortium makes any decision that affects the opportunity
> of eligible private school children, teachers, and other educational
> personnel to participate, the agency or consortium must engage in
> timely and meaningful consultation with private school officials
> (Section 14503 of ESEA (20 USC 8893); Title I, Section 1120 of ESEA
> (20 USC 6321); 34 CFR sections 200.10 through 200.13; and Title VI,
> Section 6402 (20 USC 7372)).
>
> If an LEA uses funds to concentrate services on a particular \"group,
> attendance area, or grade or age level,\" private school children in
> that \"group, attendance area, grade or age level\" are to be assured
> equitable participation in projects.
>
> **Audit Objective** - Determine whether (1) the LEA, SEA, or other
> agency receiving ESEA funds has conducted timely consultation with
> private school officials to determine the kind of educational services
> to provide to eligible private school children, (2) the required
> amount was set aside for private school children, and (3) the planned
> services were provided.

**Suggested Audit Procedures** (LEA/SEA)

> a\. Verify, by reviewing minutes of meetings and other appropriate
> documents, that the SEA or LEA conducted timely consultation with
> private school officials in making their determinations and set aside
> the required amount for private school children.
>
> b\. Review program expenditure and other records to ascertain if
> educational services that were planned were provided.

**2. Schoolwide Programs** (LEAs)

> *ESEA programs in this Supplement to which this section applies are:
> Title I, Part A (84.010); MEP (84.011); SDFSCA (including the
> Governor=s Program authorized under Section 4114) (84.186); Eisenhower
> (84.281); 21st Century (84.287); Bilingual (84.288, 84.290 and
> 84.291); Title VI (84.298); TLCF (84.318); and CSR (84.340)*.
>
> *This section also applies to Goals 2000 (84.276); IDEA (84.027 and
> 84.173) and Vocational Education (84.048)*.
>
> As described in II. Program Procedures under *General and
> Program-Specific Cross-cutting Requirements*, this requirement is a
> general cross-cutting requirement that only needs to be tested once to
> cover all major programs to which it applies.
>
> **Compliance Requirement** - A school participating under Title I,
> Part A may, in consultation with its LEA, use its Title I, Part A
> funds, along with funds provided from the above-identified programs
> and other Federal education funds, to upgrade the school\'s entire
> educational program in a schoolwide program. To qualify for fiscal
> year 1996-97 and subsequent years, at least 50 percent of the children
> enrolled in the school or residing in the school attendance area for
> the initial year of the schoolwide program must be from low-income
> families. The LEA is required to maintain records to demonstrate
> compliance with this requirement. To operate a schoolwide program, a
> school must develop, in consultation with the LEA and its school
> support team or other technical assistance provider, a comprehensive
> plan to upgrade its total instructional program.
>
> Each schoolwide program must include a number of specific components,
> which must be described in the comprehensive plan including: (1) a
> comprehensive needs assessment of the entire school; (2) schoolwide
> reform strategies; (3) instruction by highly qualified professional
> staff; (4) professional development for teachers and other staff; and,
> (5) strategies to increase parental involvement.
>
> In combining funds, a schoolwide program school must also ensure that
> its schoolwide program addresses the needs of children who are members
> of the target population of any Federal program that is included in
> the schoolwide program. When combining funds or services received
> under MEP, a schoolwide program must: (1) in consultation with parents
> of migratory children or organizations representing those parents,
> address the identified needs of migratory children that result from
> the effects of their migratory lifestyle or are needed to permit
> migratory children to participate effectively in schools and (2)
> document that services addressing those needs have been provided.
> Similarly, a schoolwide program must have the approval of the Indian
> parent advisory committee established in section 9114(c)(4) of ESEA
> (20 USC 7814(c)(4)) before funds received under the Title IX, Part A,
> Subpart 1 Indian Education program can be combined (Sections 1114 and
> 1306(b) of ESEA (20 USC 6314 and 6396(b)); 34 CFR sections 76.731,
> 200.8; 60 FR 49174).
>
> **Audit Objectives** (LEA) - Determine whether (1) the schools
> operating schoolwide programs were eligible to do so; and (2) the
> schoolwide programs were based on a comprehensive plan that included
> the required elements.

**Suggested Audit Procedures** (LEA)

> a\. For schools operating a schoolwide program, review records and
> ascertain if the schools met the poverty eligibility requirements.
>
> b\. Review the schoolwide plan and ascertain if it included the
> required components described above.
>
> c\. Review documentation to support:
>
> \(1\) Consultation with parents including, when MEP funds are
> included, the parents of migratory children or organizations
> representing those parents; and, when Title IX, Part A, Subpart 1
> (Indian Education) funds are included, approval by the Indian parent
> advisory committee.
>
> \(2\) If MEP funds are combined in the schoolwide program, that
> services addressing the identified needs of migratory children were
> provided by the schoolwide program.

**3. Comparability** (SEAs/LEAs)

> *ESEA programs in this Supplement to which this section applies are:
> Title I, Part A (84.010) and MEP (84.011)*.
>
> As described in II. Program Procedures under *General and
> Program-Specific Cross-cutting Requirements*, this requirement is a
> general cross-cutting requirement that need only be tested once to
> cover all major programs to which it applies.
>
> **Compliance Requirement** - An LEA may receive funds under Title I,
> Part A and the MEP (Title I, Part C) only if State and local funds
> will be used in participating schools to provide services that, taken
> as a whole, are at least comparable to services that the LEA is
> providing in schools not receiving Title I, Part A or MEP funds. An
> LEA is considered to have met the statutory comparability requirements
> if it has implemented (1) an LEA-wide salary schedule; (2) a policy to
> ensure equivalence among schools in teachers, administrators, and
> other staff; and (3) a policy to ensure equivalence among schools in
> the provision of curriculum materials and instructional supplies. An
> LEA may also use other measures to determine comparability such as
> comparing the average number of students per instructional staff or
> the average staff salary per student in each school receiving Title I,
> Part A or MEP funds with those in schools that do not receive Title I,
> Part A or MEP funds. If all schools are served by Title I, Part A or
> MEP, an LEA must use State and local funds to provide services that,
> taken as a whole, are substantially comparable in each school.
> Determinations may be made on either a district-wide or grade-span
> basis.
>
> An LEA may exclude schools with fewer than 100 students from its
> comparability determinations. The comparability requirement does not
> apply to an LEA that has only one school for each grade span. An LEA
> may exclude from determinations of compliance with this requirement
> State and local funds expended for (1) bilingual education for
> children with limited English proficiency (LEP); (2) excess costs of
> providing services to children with disabilities as determined by the
> LEA; and (3) supplemental State or local funds for programs that meet
> the intent and purposes of Title I, Part A or MEP (Title I, Section
> 1120A(c) of ESEA (20 USC 6322(c))).
>
> Each LEA must develop procedures for complying with the comparability
> requirements and must maintain records that are updated biennially
> documenting compliance with the comparability requirements.
>
> The SEA, however, is ultimately responsible for ensuring that LEAs
> remain in compliance with the comparability requirement (Title I,
> Section 1120A(c) of ESEA (20 USC 6322(c))).
>
> **Audit Objective** (SEA) - Determine whether the SEA is determining
> if LEAs are complying with the comparability requirements.

**Suggested Audit Procedure** (SEA)

> a\. For a sample of LEAs, review SEA records that document SEA review
> of LEA compliance with the comparability requirements.
>
> **Audit Objective** (LEA) - Determine whether the LEA has developed
> procedures for complying with the comparability requirements and
> maintained records that are updated at least biennially documenting
> compliance with the comparability requirements.

**Suggested Audit Procedures** (LEA)

> a\. Through inquiry and review, ascertain if the LEA has developed
> procedures and measures for complying with the comparability
> requirements.
>
> b\. Review LEA comparability documentation to ascertain (1) if it has
> been updated within two years of the end of the audit period and (2)
> that it documents compliance with the comparability requirements.
>
> c\. Test comparability data to supporting records.

**IV. OTHER INFORMATION**

**Guidance on Type A Program Determination and Schedule of Expenditure
of Federal Awards (LEA)**

**A. Use of Unneeded Program Funds**

> *ESEA programs in this Supplement to which this section applies are:
> MEP (84.011); SDFSCA (except the Governor=s Program authorized under
> Section 4114) (84.186); Eisenhower (84.281); Title VI (84.298); TLCF
> (84.318); and CSR (84.340)*.
>
> Expenditures of unneeded program funds transferred from another
> program should be included in the audit universe and total
> expenditures of the receiving program when determining Type A
> programs. They should not be included in the expenditures of the
> transferring program. On the Schedule of Expenditure of Federal
> Awards, the amount of unneeded program funds expended should be
> included in the total expenditures for the receiving program. A
> footnote showing the amount of funds transferred between programs is
> encouraged.

**B. Coordinated Services Projects**

> *This section applies to all ESEA programs in this Supplement: Title
> I, Part A (84.010), MEP (84.011), SDFSCA (84.186), Eisenhower
> (84.281), PCSP (84.282), 21st Century (84.287), Bilingual (84.288,
> 84.290, 84.291), Title VI (84.298), TLCF (84.318), CSR (84.340).*
>
> Since coordinated services projects are not a separate Federal program
> as defined by OMB Circular A-133, amounts expended for coordinated
> services projects would be included in total expenditures and the
> audit universe for the contributing programs when determining Type A
> programs and in the Schedule of Expenditure of Federal Awards. A
> footnote showing by program the amounts used in coordinated services
> projects is encouraged.

**C. Schoolwide Programs**

> *ESEA programs in this Supplement to which this section applies are:
> Title I, Part A (84.010); MEP (84.011); SDFSCA (including the
> Governor=s Program authorized under Section 4114) (84.186); Eisenhower
> (84.281); 21st Century (84.287); Bilingual (84.288, 84.290 and
> 84.291); Title VI (84.298); TLCF (84.318); and CSR (84.340)*.
>
> *This section also applies to Goals 2000 (84.276); IDEA (84.027 and
> 84.173) and Vocational Education (84.048)*.
>
> Since schoolwide programs are not a separate Federal program as
> defined in OMB Circular A-133, amounts used in schoolwide programs
> should be included in the total expenditures of the program
> contributing the funds when determining Type A Programs and in the
> Schedule of Expenditure of Federal Awards. A footnote showing by
> program amounts used in schoolwide programs is encouraged.

**DEPARTMENT OF EDUCATION**

**CFDA 84.002 ADULT EDUCATION\--STATE GRANT PROGRAM**

**I. PROGRAM OBJECTIVES**

The Adult Education and Family Literacy State Grant program provides
grants to eligible agencies to provide adult education and literacy
services. These grants help adults become literate and obtain the
knowledge and skills necessary for employment; obtain the educational
skills necessary to become full partners in the educational development
of their children; and complete a secondary school education.

**II. PROGRAM PROCEDURES**

Funds are provided to the State eligible agency each year in accordance
with a statutory formula. Eligible agencies develop a 5-year State plan
that is approved by the Secretary which may be revised when substantial
changes in conditions occur. Local activities include services or
instruction in one or more of the following categories: adult education
and literacy services, including workplace literacy services; family
literacy services; and English literacy programs.

Eligible providers include a local educational agency; a community-based
organization of demonstrated effectiveness; a volunteer literacy
organization of demonstrated effectiveness; an institution of higher
education; a public or private non-profit agency; a library; a public
housing authority; any other nonprofit institution that has the ability
to provide literacy services to adults and families; and a consortium of
the agencies, organizations, institutions, libraries, or authorities
described above.

**Source of Governing Requirements**

The program is authorized by the Adult Education and Family Literacy Act
( the Act), Title II of the Workforce Investment Act of 1998 (Pub. L.
No. 105-220) (20 USC 9201 *et seq*.).

**III. COMPLIANCE REQUIREMENTS**

**In developing the audit procedures to test compliance with the
requirements for a Federal program, the auditor should first look to
Part 2, Matrix of Compliance Requirements to identify which of the 14
types of compliance requirements described in Part 3 are applicable and
then look to Parts 3 and 4 for the details of the requirements.**

Certain compliance requirements which apply to multiple Department of
Education (ED) programs are discussed once in the ED Cross-Cutting
Section of this supplement (page 4-84.000-1) rather than repeating in
each individual program. Where applicable, this section references to
the Cross-Cutting Section for these requirements.

**A. Activities Allowed or Unallowed**

> The eligible agency shall require that each eligible provider
> receiving a grant or contract establish or operate one or more
> programs that provide services or instruction in one or more of the
> following categories: (1) Adult education and literacy services,
> including workplace literacy services, (2) Family literacy services;
> and (3) English literacy programs. Adults include individuals who are
> at least 16 years of age, who are not enrolled or required to be
> enrolled in secondary school under State law; and who lack sufficient
> mastery of basic educational skills, do not have a secondary school
> diploma or its recognized equivalent, or are unable to speak, read, or
> write the English language (Pub. L. No. 105-220 (sections 231 and 203
> of the Act) (20 USC 9241 and 9202(1))).
>
> 1\. *State-Level Activities* - State eligible agencies may use funds
> for the following: (also see G.3. Earmarking)
>
> a\. Subgrants to eligible providers
>
> b\. State administrative costs including the development, and
> implementation of the State plan; consultation with other appropriate
> agencies in the development and implementation of activities assisted
> under the Act; and coordination and nonduplication with related
> Federal and State programs (section 221 of the Act) (20 USC 9221).
>
> c\. State leadership activities such as professional development
> programs, technical assistance, support of State literacy resource
> centers, and monitoring and evaluation of adult education and literacy
> activities (section 223(a) of the Act (20 USC 9223(a)).

2\. *Subrecipient Activities*

> a\. Allowable activities are described in the eligible provider\'s
> approved application. Generally, eligible providers must establish or
> operate one or more programs that provide services or instruction in
> one or more of the following categories: (1) Adult education and
> literacy services, including workplace literacy services, (2) Family
> literacy services; and (3) English literacy programs. Adults include
> individuals who are at least 16 years of age, who are not enrolled or
> required to be enrolled in secondary school under State law; and who
> lack sufficient mastery of basic educational skills, do not have a
> secondary school diploma or its recognized equivalent, or are unable
> to speak, read, or write the English language. Funds can also be used
> for administrative costs. (See G.3. Earmarking for limitation) (Pub.
> L. No. 105-220 (sections 231, 232, 234 and 203 of the Act) (20 USC
> 9241, 9242, 9243 and 9202(1))).

**B. Allowable Costs/Cost Principles**

See ED Cross-Cutting Section

**G. Matching, Level of Effort, Earmarking**

**1. Matching**

> a\. Each State eligible agency providing adult education and literacy
> services shall provide a non-Federal contribution of at least 25
> percent of the total amount of funds expended for adult education and
> literacy activities in the State (section 222(b) of the Act) (20 USC
> 9222(b)).
>
> b\. An eligible agency serving an outlying area shall provide a
> non-Federal contribution equal to 12 percent of the total amount of
> funds for adult education and literacy activities in the outlying
> area, unless the Secretary allows a smaller non-Federal contribution
> (section 222 (b) of the Act) (20 USC 9222(b)).
>
> c\. An eligible agency=s non-Federal contribution may be provided in
> cash or in-kind, fairly evaluated, and shall include only non-Federal
> funds that are used for adult education and literacy activities in a
> manner that is consistent with the purpose of the Act (section 222(b)
> of the Act) (20 USC 9222(b)).

**2.1 Level of Effort** - *Maintenance of Effort*

> An eligible agency may receive funds for any fiscal year if the
> Secretary finds that the fiscal effort per student or the aggregate
> expenditures of such eligible agency for adult education and literacy
> activities, in the second preceding fiscal year, was not less than 90
> percent of the fiscal effort per student or the aggregate expenditures
> of the eligible agency for adult education and literacy activities, in
> the third preceding fiscal year (section 241(b) of the Act) (20 USC
> 9251(b)).

**2.2 Level of Effort** - *Supplement Not Supplant* - Not Applicable

**3. Earmarking**

> a\. *State Eligible Agency* - The following earmarking requirements
> are for each yearly grant award and must be met within the period of
> its availability (generally 27 months) (34 CFR sections 76.703 through
> 76.710):
>
> \(1\) Grants and contracts for eligible providers shall not be less
> than 82.5 percent of the eligible agency=s grant funds (section
> 222(a)(1) (20 USC 9222(a)(1)).
>
> \(2\) Correction education and education for other institutionalized
> individuals shall not be more than 10 percent of the 82.5 percent
> mentioned above (section 222(a)(1) of the Act) (20 USC 9222(a)(1)).
>
> \(3\) State leadership activities under section 223 of the Act shall
> not exceed 12.5 percent of the grant funds (section 222(a)(2) of the
> Act) (20 USC 9222(a)(2)).
>
> \(4\) Necessary and reasonable administrative expenses of the eligible
> agency shall not be more than five percent of the grant funds, or
> \$65,000, whichever is greater (section 222(a)(3) of the Act) (20 USC
> 9222(a)(3)).
>
> b\. *Subrecipients* - Generally, subrecipients may use up to five
> percent of their funds for noninstructional costs, such as
> administration of local programs. In cases where the five percent
> limit is too restrictive, the eligible provider shall negotiate with
> the eligible agency to determine the adequate level of funds for
> noninstructional purposes (section 233 of the Act) (20 USC 9243).

**H. Period of Availability of Federal Funds**

See ED Cross-Cutting Section

**L. Reporting**

**1. Financial Reporting**

See ED Cross-Cutting Section

**2. Performance Reporting** - Not Applicable

**3. Special Reporting** - Not Applicable

**DEPARTMENT OF EDUCATION**

**CFDA 84.010 TITLE I GRANTS TO LOCAL EDUCATIONAL AGENCIES (LEAs) (Title
I, Part A of ESEA)**

**I. PROGRAM OBJECTIVES**

The objective of Title I, Part A of the Elementary and Secondary
Education Act (ESEA), as amended by the Improving America=s Schools Act
(IASA), is to improve the teaching and learning of children who are at
risk of not meeting challenging academic standards and who reside in
areas with high concentrations of children from low-income families.

**II. PROGRAM PROCEDURES**

The Department of Education (ED) provides Title I, Part A funds to each
State Educational Agency (SEA) through a statutory formula based
primarily on the number of children ages 5 through 17 from low-income
families. This number is augmented by annually collected counts of
children ages 5 through 17 in foster homes, locally-operated
institutions for neglected or delinquent children, and families above
poverty that receive assistance under the Aid to Families with Dependent
Children (AFDC) program or the successor State programs under Temporary
Assistance to Needy Families (TANF) and adjusted to account for the cost
of education in each State. To receive funds, an SEA must submit to ED
for approval either: (1) an individual State plan as provided in Section
1111 of the ESEA (20 USC 6311), or (2) a consolidated plan that includes
Part A, in accordance with Section 14302 of the ESEA (20 USC 8852). The
individual or consolidated plan, after approval by ED, remains in effect
for the duration of the State\'s participation in Title I, Part A. The
plan must be updated to reflect substantive changes.

SEAs allocate funds to LEAs based on the best available data that
reflect the current distribution of children from low-income families.
To receive Title I funds, LEAs must have on file with the SEA an
approved plan that includes descriptions of the general nature of
services to be provided, how program services will be coordinated with
the LEA\'s regular program of instruction, additional LEA assessments,
if any, used to gauge program outcomes, and strategies to be used to
provide professional development. An LEA may also include Part A as part
of a consolidated application submitted to the SEA under Section 14305
of the ESEA (20 USC 8855).

LEAs allocate Title I funds to eligible school attendance areas based on
the number of children from low-income families residing within the
attendance area. A school at or above 50 percent poverty may use its
Part A funds, along with other Federal, State, and local funds, to
operate a schoolwide program to upgrade the instructional program in the
whole school. Otherwise, a school operates a targeted assistance program
in which the school identifies students who are failing, or most at risk
of failing, to meet the State=s challenging performance standards and
who have the greatest need. The school then designs, in consultation
with parents, staff, and the LEA, an instructional program to meet the
needs of those students.

**III. COMPLIANCE REQUIREMENTS**

**In developing the audit procedures to test compliance with the
requirements for a Federal program, the auditor should first look to
Part 2, Matrix of Compliance Requirements, to identify which of the 14
types of compliance requirements described in Part 3 are applicable and
then look to Parts 3 and 4 for the details of the requirements.**

Certain compliance requirements which apply to multiple ESEA programs
are discussed once in the ED Cross-Cutting Section of this Supplement
(page 4-84.000-1) rather than repeated in each individual program. Where
applicable, this section references the Cross-Cutting Section for these
requirements. Also, as discussed in the Cross-Cutting Section, SEAs and
LEAs may have been granted waivers from certain compliance requirements.

**A. Activities Allowed or Unallowed**

> Also, see ED Cross-Cutting Section.
>
> **1. LEAs** (Targeted assistance programs only. See special tests and
> provisions for schoolwide programs.)
>
> In a targeted assistance school, funds available under Part A may be
> used only for programs that are designed to help participating
> children meet the State=s student performance standards expected of
> all children. Allowable activities in these schools include, but are
> not limited to, instructional programs, counseling, mentoring, other
> pupil services, college and career awareness and preparation, services
> to prepare students for the transition from school to work, services
> to assist preschool children in the transition to elementary school
> programs, parental involvement activities, and professional staff
> development. If health, nutrition, and other social services are not
> otherwise available from other sources to participating children, Part
> A funds may be used as a last resort to provide such services. The
> LEA=s plan will provide a description of the general nature of the
> services to be provided with Part A funds. However, each Title I
> school determines the actual program it will provide (Title I, Section
> 1115 of ESEA (20 USC 6315)).
>
> **2. SEAs**
>
> SEAs can use funds to provide subgrants to LEAs, for State
> administration, and for program improvement activities in accordance
> with the State plan (Title I, Sections 1003, 1111, 1117 and 1603 of
> ESEA) (20 USC 6303, 6311, 6317, and 6513).

**B. Allowable Costs/Cost Principles**

> See ED Cross-Cutting Section.

**E. Eligibility**

**1. Eligibility for Individuals**

> *Eligible Children (LEA targeted assistance programs only)*
>
> Title I, Part A, funds are to be used to provide services and benefits
> to eligible children residing or enrolled in eligible school
> attendance areas. Once funds are allocated to eligible school
> attendance areas (see E.2.a and E.2.b. below), a school operating a
> targeted assistance program must use Title I funds only for programs
> that are designed to meet the needs of children identified by the
> school as failing, or most at risk of failing, to meet the State\'s
> challenging student performance standards. In general, eligible
> children are identified on the basis of multiple,
> educationally-related, objective criteria established by the LEA and
> supplemented by the school. Children who are economically
> disadvantaged, children with disabilities, migrant children, and
> limited English proficient (LEP) children are eligible for Part A
> services on the same basis as other children who are selected for
> services. In addition, certain categories of children are considered
> at risk of failing to meet the State\'s student performance standards
> and are thus eligible for Title I services because of their status.
> Such children include: children who are homeless; children who
> participated in a Head Start or Even Start program at any time in the
> two preceding years; children who received services under a program
> for youth who are neglected, delinquent, or at risk of dropping out
> under Title I, Part D (or its predecessor authority) at any time in
> the two preceding years; and children who are in a local institution
> for neglected or delinquent children or attending a community day
> program. From the pool of eligible children, a targeted assistance
> school selects those children who have the greatest need for special
> assistance to receive Part A services (Title I, Section 1115 of ESEA
> (20 USC 6315)).
>
> **2. Eligibility for Group of Individuals or Area of Service
> Delivery**
>
> a\. *School Attendance Areas or Schools (LEAs with either schoolwide
> programs or targeted assistance programs)*
>
> An LEA must determine which school attendance areas are eligible to
> participate in Part A. A school attendance area is generally eligible
> to participate if the percentage of children from low-income families
> is at least as high as the percentage of children from low-income
> families in the LEA as a whole or at least 35 percent poverty. An LEA
> may also designate and serve a school in an ineligible attendance area
> if the percentage of children from low-income families enrolled in
> that school is equal to or greater than the percentage of such
> children in a participating school attendance area. When determining
> eligibility, an LEA must select a poverty measure from among the
> following data sources: (1) the number of children ages 5-17 in
> poverty counted in the most recent census; (2) the number of children
> eligible for free and reduced priced lunches; (3) the number of
> children in families receiving AFDC or Temporary Assistance for Needy
> Families (TANF); (4) the number of children eligible to receive
> Medicaid assistance; or (5) a composite of these data sources. The LEA
> must use that measure consistently across the district to rank all its
> school attendance areas according to their percentage of poverty.
>
> An LEA must serve eligible schools or attendance areas in rank order
> according to their percentage of poverty. An LEA must serve those
> areas or schools above 75 percent poverty, including any middle or
> high schools, before it serves any with a poverty percentage below 75
> percent. After an LEA has served all areas and schools with a poverty
> rate above 75 percent, the LEA may serve lower-poverty areas and
> schools either by continuing with the district-wide ranking or by
> ranking its schools below 75 percent poverty according to grade-span
> grouping (e.g., K-6, 7-9, 10-12). If an LEA ranks by grade span, the
> LEA may use the district-wide poverty average or the poverty average
> for the respective grade span grouping.
>
> An LEA may elect not to serve an eligible area or school that has a
> higher percentage of children from low-income families if: (1) the
> school meets the Title I comparability requirements; (2) the school is
> receiving supplemental State or local funds that are spent according
> to the requirements in sections 1114 or 1115 of Title I; and (3) the
> supplemental State and local funds expended in the area or school
> equal or exceed the amount that would be provided under Part A. An LEA
> with an enrollment of less than 1000 students or with only one school
> per grade span is not required to rank its school attendance areas
> (Title I, Section 1113(a)-(b) of ESEA (20 USC 6313(a)-(b)); 34 CFR
> section 200.28(a) (3)).
>
> b\. *Allocating funds to eligible school attendance areas and
> schools:* (*LEAs with either schoolwide programs or targeted
> assistance programs)*
>
> An LEA must allocate Part A funds to each participating school
> attendance area or school, in rank order, on the basis of the
> **total** number of children from low-income families residing in the
> area or attending the school. In calculating the total number of
> children from low-income families, the LEA must include children from
> low-income families who reside in a participating area and attend
> private schools, using the same poverty data, if available, as the LEA
> uses to count public school children. If the same data are not
> available, the LEA may use comparable data. If complete actual poverty
> data are not available on private school children, an LEA may
> extrapolate, from actual data on a representative sample of private
> school children, the number of children from low-income families who
> attend private schools. An LEA may also correlate sources of data. If
> an LEA selects a public school to participate on the basis of
> enrollment, rather than because it serves an eligible school
> attendance area, the LEA must, in consultation with private school
> officials, determine an equitable way to count poor private school
> children in order to calculate the amount of Title I funds available
> to serve private school children.
>
> If an LEA serves any attendance area with less than a 35 percent
> poverty rate, the LEA must allocate to **all** its participating areas
> an amount per poor child that equals at least 125 percent of the
> LEA\'s Part A allocation per poor child. (An LEA\'s allocation per
> poor child is the total LEA allocation under subpart 2 of Part A
> divided by the number of poor children in the LEA according to the
> poverty measure selected by the LEA to identify eligible school
> attendance areas. The LEA then multiplies this per-child amount by 125
> percent.) If an LEA serves only areas with a poverty rate greater than
> 35 percent, the LEA must allocate funds, in rank order, on the basis
> of the total number of poor children in each area or school, but is
> not required to allocate a per-pupil amount of at least 125 percent.
> An LEA may not allocate a higher amount per poor child to areas or
> schools with lower percentages of poverty than to areas with higher
> percentages. If an LEA serves areas or schools below 75 percent
> poverty by grade span groupings, the LEA may allocate different
> amounts per poor child for different grade span groupings as long as
> those amounts do not exceed the amount per poor child allocated to any
> area or school above 75 percent poverty. Amounts per poor child within
> grade spans may also vary as long as the LEA allocates higher amounts
> per poor child to higher poverty areas or schools within the grade
> span than it allocates to lower poverty areas or schools.
>
> The LEA must reserve the amounts generated by poor private school
> children who reside in participating public school attendance areas to
> provide services to eligible private school children (Title I, Section
> 1113(c) of ESEA (20 USC 6313(c)); 34 CFR sections 200.27 and 200.28).

**3. Eligibility for Subrecipients** - Not Applicable

**G. Matching, Level of Effort, Earmarking**

**1. Matching** - Not Applicable

**2.1 Level of Effort -** *Maintenance of Effort*

See ED Cross-Cutting Section.

> **2.2 Level of Effort -** *Supplement not Supplant*

See ED Cross-Cutting Section.

> **3. Earmarking** (SEAs)

See ED Cross-Cutting Section.

**H. Period of Availability of Federal Funds**

See ED Cross-Cutting Section.

**L. Reporting**

> **1. Financial Reporting**

See ED Cross-Cutting Section.

> **2. Performance Reporting** - Not Applicable
>
> **3. Special Reporting**
>
> See ED Cross-Cutting Section.

**N. Special Tests And Provisions**

> **1. Participation of Private School Children**

See ED Cross-Cutting Section.

> **2. Schoolwide Programs** (LEAs)
>
> See ED Cross-Cutting Section.

**3. Comparability**

> See ED Cross-Cutting Section.

**DEPARTMENT OF EDUCATION**

**CFDA 84.011 MIGRANT EDUCATION - BASIC STATE GRANT PROGRAM (Title I,
Part C of ESEA)**

**I. PROGRAM OBJECTIVES**

The objectives of the Migrant Education - Basic State Grant Program
(Migrant Education Program or MEP) are to: (1) support high-quality and
comprehensive educational programs for migratory children to help reduce
the educational disruptions and other problems that result from repeated
moves; (2) provide appropriate educational services (including support
services) that address the special needs of migratory children in a
coordinated and efficient manner; (3) ensure that migratory children
have the opportunity to meet the same challenging State content
standards and challenging State student performance standards that all
children are expected to meet; (4) design programs to help migratory
children overcome educational disruption, cultural and language
barriers, social isolation, various health-related problems, and other
factors which inhibit the ability of migrant children to do well in
school, and to prepare such children to make a successful transition to
postsecondary education or employment; and, (5) ensure that migratory
children benefit from State and local systemic reforms.

**II. PROGRAM PROCEDURES**

MEP funds are allocated to a State educational agency (SEA), under
either an approved consolidated program plan or an approved individual
program application, in order for the SEA to provide MEP services and
activities either directly, or through subgrants to local operating
agencies. Local operating agencies can be either local educational
agencies (LEAs) or other public or nonprofit private agencies. Because
an SEA may choose to provide MEP services directly or through a local
operating agency, some of the suggested audit procedures will apply for
an SEA or local operating agency, depending on which agency provides the
services and where the records are maintained.

**III. COMPLIANCE REQUIREMENTS**

**In developing the audit procedures to test compliance with the
requirements for a Federal program, the auditor should first look to
Part 2, Matrix of Compliance Requirements, to identify which of the 14
types of compliance requirements described in Part 3 are applicable and
then look to Parts 3 and 4 for the details of the requirements.**

Certain compliance requirements which apply to multiple ESEA programs
are discussed once in the Department of Education (ED) Cross-Cutting
Section of this Supplement (page 4-84.000-1) rather than repeating in
each individual program. Where applicable, this section references to
the Cross-Cutting Section for these requirements. Also, as discussed in
the Cross-Cutting Section, SEAs and LEAs may have been granted waivers
from certain compliance requirements.

**A. Activities Allowed or Unallowed**

Also, see ED Cross-Cutting Section

> 1\. *SEAs* - SEAs may use funds to operate the program (directly or
> through contracts), make subgrants to LEA or other local operating
> agencies, and pay for State administration. In general, funds
> available under the MEP may be used only to: (1) identify eligible
> migratory children and their needs; and (2) provide educational and
> support services (including, but not limited to, preschool services,
> professional development, advocacy and outreach, parental involvement
> activities and the acquisition of equipment) that address the
> identified needs of the eligible children.
>
> An SEA may also use MEP funds to carry out administrative activities
> that are unique to the program. These activities include, but are not
> limited to, statewide identification and recruitment of migratory
> children, interstate and intrastate program coordination, transfer of
> student records, collecting and using information to make subgrants,
> and direct supervision of instructional or support staff (Title I,
> Part C, Sections 1301, 1304(c) and 1306(b) of ESEA (20 USC 6392,
> 6394(c) and 6396(b)); 34 CFR section 200.41).
>
> 2\. *LEA or Other Local Operating Agencies* - LEA or other local
> operating agencies use funds in accordance with the agreement with the
> SEA to (1) identify eligible migratory children and their needs; and
> (2) provide educational and support services that address the
> identified needs of the eligible children.

**B. Allowable Costs/Cost Principles**

> See ED Cross-Cutting Section

**G. Matching, Level of Effort, Earmarking**

**1. Matching** - Not Applicable

**2.1 Level of Effort** - *Maintenance of Effort* - Not Applicable

> **2.2 Level of Effort** - *Supplement Not Supplant*

See ED Cross-Cutting Section

**3. Earmarking** (SEAs)

See ED Cross-Cutting Section

**H. Period of Availability of Federal Funds**

See ED Cross-Cutting Section

**L. Reporting**

**1. Financial Reporting**

See ED Cross-Cutting Section

**2. Performance Reporting** - Not Applicable

**3. Special Reporting**

> a\. *State Per Pupil Expenditure (SPPE) Data* (OMB No 1850-0067)
> (SEAs/LEAs)

See ED Cross-Cutting Section

> b\. *Consolidated State Performance Report for State Formula Grant
> Programs Under the Elementary and Secondary Education Act and Goals
> 2000: Educate America Act (OMB No. 1810-0614)*
>
> \(1\) Table VII, Items A-1 and A-2 Reporting the number of eligible
> migrant children (SEAs)
>
> The SEA is required for allocation purposes to assist the ED in
> determining the number of eligible migratory children who reside in
> the state, using such procedures as ED requires. Each SEA annually
> provides an unduplicated count of eligible migratory children in each
> of two categories: (1) children ages three through 21 who resided in
> the State for one or more days during the preceding September 1 -
> August 31; and (2) such children who were served one or more days in a
> migrant funded project conducted during either the summer term or an
> intersession period (i.e., when a year-round school is not in
> session). The SEA\'s report is based upon data submitted to it by the
> LEAs or other local operating agencies in the State.
>
> \(2\) Reporting the number of eligible migrant children to the SEA
> (LEAs or other local operating agencies and SEAs providing direct
> services)
>
> The LEA or other local operating agencies and SEAs providing direct
> services must implement procedures, based on the eligibility
> documentation that they collect and maintain, to count and report
> eligible children in the two categories discussed in III.L.3.b.(1)
> above (Title I, Part C, Section 1304(c)(7) of ESEA (20 USC
> 6394(c)(7)); 34 CFR sections 76.730 and 76.731).

**N. Special Tests and Provisions**

**1. Participation of Private School Children** (SEAs/LEAs)

See ED Cross-Cutting Section

**2. Schoolwide Programs** (LEAs)

See ED Cross-Cutting Section

**3. Comparability** (SEAs/LEAs)

See ED Cross-Cutting Section

**4. Priority for services**

> **Compliance Requirement** - SEAs and LEAs or other local operating
> agencies must give priority for MEP services to migratory children who
> are failing, or most at risk of failing, to meet the State\'s
> challenging content and performance standards, and whose education has
> been interrupted in the school year (Title I, Part C, Section 1304(d)
> of ESEA (20 USC 6394(d)).
>
> **Audit Objective** (SEAs) - Determine whether the SEA has developed
> and communicated to LEA or other local operating agencies a policy
> regarding the need to identify and give priority for MEP services to
> migratory children who are failing, or most at risk of failing, to
> meet the State\'s challenging content and performance standards, and
> whose education has been interrupted in the school year.

**Suggested Audit Procedure** (SEAs)

> a\. Review documentation to verify that the SEA has established and
> communicated to the LEA or other local operating agencies a policy
> regarding the priority for MEP services.
>
> **Audit Objective** (SEAs providing services directly and LEA or other
> local operating agencies) - Determine whether the SEA or LEA or other
> local operating agency gave priority in the provision of MEP services
> to those migratory children identified as failing, or most at risk of
> failing, to meet the State\'s challenging content and performance
> standards, and whose education has been interrupted in the school year
> (priority children). (Note: The auditor is not expected to test the
> SEA\'s or local operating agency=s identification of a child as
> deserving priority.)
>
> **Suggested Audit Procedures** (SEAs providing services directly and
> LEA or other local operating agencies)
>
> a\. Review the SEA or LEA or other local operating agency=s process
> for selecting children to receive MEP services to ascertain if it
> includes an identification of priority children. Because of the time
> of year in which the MEP program may operate (e.g. in the summer),
> there may not be any priority children in which case suggested audit
> procedure b. below is not applicable.
>
> b\. Select a sample of migratory children who were identified as
> priority children. Review program records to determine if these
> children were provided MEP services.

**5. Targeting funds** (SEAs)

> **Compliance Requirement** - SEAs may provide MEP services either
> directly, or through subgrants to LEA or other local operating
> agencies, including LEAs. In either case, in order to target program
> funds appropriately, the SEA is required to take into account the
> needs of the State\'s identified population of migratory children, and
> the degree to which those needs are not being met through other
> programs. In targeting MEP funds, SEAs must take into account the
> needs of migratory children that result from the migratory lifestyle,
> such as educational disruption, failure or risk of failure to meet
> State content and performance standards, cultural or language
> barriers, social isolation, health-related problems, or other factors
> that stem from the migratory lifestyle or are needed to permit
> migratory children to participate effectively in school, as well as,
> the availability of other programs to address these needs (Title I,
> Part C, Sections 1301, 1304(b)(1), 1304(b)(6) and 1306(a) of ESEA (20
> USC 6391, 6394(b)(6), 6396(a))).
>
> **Audit Objective** (SEAs) - Determine whether the SEA\'s process to
> target MEP funds (whether or not through subgrants) takes into account
> current information on the needs of the identified population of
> eligible migratory children throughout the State and the locality, and
> the degree to which those needs are not being met through other
> programs.

**Suggested Audit Procedure**(SEAs)

> a\. Review the SEA=s process to target MEP funds to ascertain if the
> process:
>
> \(1\) Uses current information.
>
> \(2\) Takes into account the degree to which the needs of the
> identified population of migratory children are not being met through
> other programs.

**DEPARTMENT OF EDUCATION**

**CFDA 84.027 SPECIAL EDUCATION\--GRANTS TO STATES (IDEA, Part B)**

**CFDA 84.173 SPECIAL EDUCATION\--PRESCHOOL GRANTS (IDEA Preschool)**

**I. PROGRAM OBJECTIVES**

The purposes of the Individuals with Disabilities Education Act (IDEA)
are to: (1) ensure that all children with disabilities have available to
them a free appropriate public education which emphasizes special
education and related services designed to meet their unique needs; (2)
ensure that the rights of children with disabilities and their parents
or guardians are protected; (3) assist States, localities, educational
service agencies and Federal agencies to provide for the education of
all children with disabilities; and (4) assess and ensure the
effectiveness of efforts to educate children with disabilities (Section
601(d) of Pub. L. No. 105-17, Individuals with Disabilities Education
Act Amendments of 1997). The Assistance for Education of All Children
with Disabilities Program (IDEA, Part B) provides grants to States, and
through them to LEAs, to assist them in meeting these purposes (Sections
611-618 of Pub. L. No. 105-17).

IDEA\'s Special Education\--Preschool Grants Program, also known as the
\"619 Program,\" provides grants to States, and through them to LEAs, to
assist them in: (1) providing special education and related services to
children with disabilities ages three through five (and, at a State\'s
discretion, providing a free appropriate public education to
two-year-old children with disabilities who will reach age three during
the school year); (2) planning and developing a statewide comprehensive
delivery system for children with disabilities from birth through five
years; and, (3) providing direct and support services to children with
disabilities aged three through five (20 USC 1419).

**II. PROGRAM PROCEDURES**

A State applying through its State Education Agency (SEA) for assistance
under IDEA, Part B must, among other things, demonstrate to the
Department of Education (ED) that it has in effect policies and
procedures that ensure that all children with disabilities have the
right to a free appropriate public education. The amount of a State\'s
allocation under IDEA, Part B for a fiscal year is calculated based upon
the number of eligible children with disabilities receiving special
education and related services on the December 1 prior to when the funds
are available to the States. Similarly, the amount of funds that the SEA
distributes to each local educational agency (LEA) is based upon the
number of eligible children with disabilities in the LEA\'s jurisdiction
receiving special education and related services on the December 1 prior
to when the funds are available to the States (20 USC 1411; Pub. L. No.
105-17, section 611).

States that receive assistance under IDEA, Part B, may receive
additional assistance under the Preschool Grants for Children with
Disabilities Program. A State is eligible to receive a grant under the
Preschool Grants Program if: (1) the State is eligible under Section 612
of Part B and (2) the State has policies and procedures that ensure the
provision of a free appropriate public education for all children with
disabilities aged three through five years, and at the discretion of the
State, any two-year-old children provided services under the program (20
USC 1419, as in effect prior to the enactment of Pub. L. No. 105-17).

This Compliance Supplement reflects the Law as enacted on June 4, 1997.
Additional changes to this program will take effect July 1, 1998. These
additional changes are NOT reflected in this Supplement.

**III. COMPLIANCE REQUIREMENTS**

**In developing the audit procedures to test compliance with the
requirements for a Federal program, the auditor should first look to
Part 2, Matrix of Compliance Requirements, to identify which of the 14
types of compliance requirements described in Part 3 are applicable and
then look to Parts 3 and 4 for the details of the requirements.**

Certain compliance requirements which apply to multiple ESEA programs
are discussed once in the ED Cross-Cutting Section of this Supplement
(page 4-84.000-1) rather than repeating in each individual program.
Where applicable, this section references to the Cross-Cutting Section
for these requirements. Also, as discussed in the Cross-Cutting Section,
SEAs and LEAs may have been granted waivers from certain compliance
requirements.

**A. Activities Allowed or Unallowed**

> Also, see ED Cross-Cutting Section.
>
> 1\. *SEAs* - Allowable activities for SEAs are subgranting funds to
> LEAs and State administration, support services, and direct services
> (See III.G.3, Earmarking, for a further description of these
> activities).
>
> 2\. *LEAs*
>
> a\. *IDEA, Part B* - An LEA may use Federal funds under IDEA, Part B
> for the costs of providing special education and related services to
> children with disabilities (Section 613(a)(2) of Pub. L. No. 105-17).
> Special education includes specially designed instruction to meet the
> unique needs of a child with a disability, including classroom
> instruction, instruction in hospitals and institutions, instruction in
> physical education, home instruction and instruction in other
> settings. Related services include transportation, physical and
> occupational therapy, and such other supportive services as are
> required to assist a child with a disability to benefit from special
> education. A portion of these funds, under conditions specified in the
> law, may also be used by the LEA for services and aids that also
> benefit nondisabled children and for the development and
> implementation of integrated and coordinated services systems
> (Sections 602(22), 602(25) and 613(a)(2)(D)&(a)(4) of Pub. L. No.
> 105-17).
>
> b\. *IDEA Preschool* - A LEA may use Federal funds under the Preschool
> Grants Program only for the costs of providing special education and
> related services (as described above) to children with disabilities
> ages three through five (and, at a State\'s discretion, providing a
> free appropriate public education to two-year-old children with
> disabilities who will reach age three during the school year) (34 CFR
> section 301.3(a); Sections 602 (22) and (25) of Pub. L. No. 105-17).

**B. Allowable Costs/Cost Principles**

> See ED Cross-Cutting Section.

**G. Matching, Level of Effort, Earmarking**

**1. Matching** - Not Applicable

**2.1 Level of Effort -** *Maintenance of Effort* (LEAs)

> IDEA, Part B funds received by an LEA cannot be used, except under
> certain limited circumstances, to reduce the level of expenditures for
> the education of children with disabilities made by the LEA from local
> funds below the level of those expenditures for the preceding fiscal
> year. To meet this requirement, an LEA must expend, in any particular
> fiscal year, an amount of local funds for the education of children
> with disabilities that is at least equal to the amount of local funds
> expended for this purpose by the LEA in the prior fiscal year.
> Allowances may be made for: (a) the voluntary departure, by retirement
> or otherwise, or departure for just cause, of special education
> personnel; (b) a decrease in the enrollment of children with
> disabilities; (c) the termination of the obligation of the agency,
> consistent with this part, to provide a program of special education
> to a particular child with a disability that is an exceptionally
> costly program, as determined by the SEA, because the child has left
> the jurisdiction of the agency, has reached the age at which the
> obligation of the agency to provide a free appropriate public
> education has terminated or no longer needs such program of special
> education; or, (d) the termination of costly expenditures for
> long-term purchases, such as the acquisition of equipment and the
> construction of school facilities (Section 613(a)(2)(A)&(B) of Pub. L.
> No. 105-17).

**2.2 Level of Effort** - *Supplement Not Supplant* - Not Applicable

**3. Earmarking** (SEAs)

a\. *IDEA, Part B*

> \(1\) A SEA must distribute at least 75 percent of the funds that it
> receives under IDEA, Part B to LEAs, based on the proportional size of
> each LEA=s child count (20 USC 1411(c)(1), as in effect prior to the
> enactment of Pub. L. No. 105-17).
>
> \(2\) As specified below, a SEA may use up to 25 percent of the total
> funds that it receives under IDEA, Part B for administration, support
> services, and direct services.
>
> \- An SEA may use up to five percent of the total State allotment in
> any fiscal year, or \$450,000, whichever is greater (however, this
> amount may not exceed 25 percent of the State\'s total allotment), for
> administrative costs, including State-level planning and
> administration; approval, supervision, monitoring, and evaluation of
> local programs and projects and technical assistance to LEAs; and
> leadership services and management of special education of children
> with disabilities (34 CFR sections 300.620 and 300.621; 20 USC
> 1411(c)(2)(a)(i), as in effect prior to the enactment of Pub. L. No.
> 105-17).
>
> \- A SEA may use the remainder of the 25 percent that it does not use
> for administration as described above for support services and direct
> services; and the administrative costs of the State\'s monitoring
> activities and complaint investigations, to the extent that these
> costs exceed the administrative costs for monitoring and complaint
> investigations incurred during fiscal year 1985 (34 CFR sections
> 300.370(a) and 20 USC 1411(c)(2)(A)(ii), as in effect prior to the
> enactment of Pub. L. No. 105-17).
>
> \- \"Support services\" includes implementing the comprehensive system
> of personnel development of 34 CFR sections 300.380 through 300.383,
> recruitment and training of hearing officers and surrogate parents,
> and public information and parent training activities relating to free
> appropriate public education for children with disabilities. \"Direct
> services\" means services provided to a child with a disability by the
> State directly, by contract, or through other arrangements (34 CFR
> section 300.370(b)).

b\. *IDEA Preschool*

> \(1\) A SEA must distribute at least 75 percent of the funds that it
> receives under the Preschool Grants Program to LEAs and intermediate
> educational units, based on the proportional size of each LEA=s child
> count (34 CFR section 301.30-31).
>
> \(2\) A State may use not more than 20 percent of the grant for: (a)
> the planning and development of a statewide comprehensive service
> delivery system for children with disabilities from birth through five
> years; (b) the provision of direct and support services for children
> with disabilities aged three through five years; and (c) at the
> State\'s discretion, the provision of a free appropriate public
> education to two-year-old children with disabilities who will reach
> age three during the school year, whether or not those children are
> receiving, or have received, early intervention services under Part H
> of IDEA (34 CFR section 301.30).
>
> \(3\) A State may use not more than five percent of the grant for the
> costs of administering the grant (34 CFR section 301.30).

**H. Period of Availability of Federal Funds**

> See ED Cross-Cutting Section.

**L. Reporting**

**1. Financial Reporting**

See ED Cross-Cutting Section.

**2. Performance Reporting** - Not Applicable

**3. Special Reporting**

> a\. *Report of Children and Youth with Disabilities Receiving Special
> Education Under Part B of the Individuals With Disabilities Education
> Act, as amended (OMB No. 1820-0043)* - Each SEA is required to report
> to the Secretary no later than February 1 of each year the number of
> children with disabilities aged three through 21 residing in the State
> who are receiving special education and related services. This report
> of the State\'s \"child count\" is the basis of calculating the amount
> of the State\'s IDEA, Part B and 619 allocations for the following
> year (34 CFR section 300.750(a)).
>
> Each SEA must: (a) establish procedures to be used by LEAs and other
> educational institutions in counting the number of children with
> disabilities receiving special education and related services; (b)
> obtain certification from each agency and institution that an
> unduplicated and accurate count has been made; and, (c) ensure that
> documentation is maintained that enables the State and the Secretary
> to audit the accuracy of the count (34 CFR sections 300.754(a),(c),
> and (e)).
>
> LEAs must report to the SEA in accordance with the SEA-established
> procedure.
>
> The SEA may include in this count children with disabilities who are
> enrolled in a school or program that is operated or supported by a
> public agency, and that either (1) provides them with both special
> education and related services or (2) provides them only with special
> education if they do not need related services to assist them in
> benefitting from that special education. The SEA may not, however,
> include in this count children with disabilities who: (1) are not
> enrolled in a school or program operated or supported by a public
> agency; (2) are not provided special education that meets State
> standards; (3) are not provided with a related service that they need
> to assist them in benefitting from special education; or, (4) are
> receiving special education funded solely by the Federal
> Government\--except that children in any of the age ranges three,
> four, five, eighteen, nineteen, twenty, or twenty-one, who fall into
> this category, may be counted if no local or State funds are available
> for non-disabled children in that same age range (34 CFR section
> 300.753).

**N. Special Tests and Provisions**

**1. Schoolwide Programs**

See ED Cross-Cutting Section.

**DEPARTMENT OF EDUCATION**

**CFDA 84.032 FEDERAL FAMILY EDUCATION LOANS (FFEL) - (Guaranty
Agencies)**

**I. PROGRAM OBJECTIVES**

Non-profit and State guaranty agencies are established to guarantee
student loans made by lenders and perform certain administrative and
oversight functions under the Federal Family Education Loans (FFEL)
program, which includes the Federal Stafford Loan, Federal PLUS, Federal
SLS and Federal Consolidation loan programs. The Department of Education
(ED) provides reinsurance to the guaranty agency.

**II. PROGRAM PROCEDURES**

To participate in the FFEL programs and to receive various payments and
benefits incident to that participation, a guaranty agency enters into
agreements with ED. As part of these agreements, guaranty agencies
establish and maintain a Federal Student Loan Reserve Fund (Federal
Fund) and the Agency Operating Fund; service defaulted loans that have
been submitted to them; make timely claim payments to lenders on
defaulted loans; make timely reinsurance filings with ED; provide
accurate and reliable reports to ED; apply proper charges to defaulted
borrowers; and, take proper enforcement measures with respect to
lenders, lender servicers, and defaulted borrowers.

**Source of Governing Requirements**

The primary regulations relating to Guaranty Agency requirements are
located in 34 CFR 682, Subparts C, D, F, and G. The FFEL program is
authorized by the Higher Education Act (HEA) of 1965, as amended. The
HEA was amended by the Higher Education Amendments of 1998, enacted in
October of 1998 (Pub. L. No. 105-244). Citations to the HEA and United
States Code reflect this recent revision. Program regulations are
located at 34 CFR part 682. In the October 29, 1999, *Federal Register*
(64 FR 58621) revised regulations were issued which are effective July
1, 2000.

**III. COMPLIANCE REQUIREMENTS**

**In developing the audit procedures to test compliance with the
requirements for a Federal program, the auditor should first look to
Part 2, Matrix of Compliance Requirements, to identify which of the 14
types of compliance requirements described in Part 3 are applicable and
then look to Parts 3 and 4 for the details of the requirements.**

**A. Activities Allowed or Unallowed**

> The compliance requirements and suggested audit procedures for allowed
> and unallowed services are presented separately in Special Test number
> 10, Federal Fund and Agency Operating Fund, in Section N.

**L. Reporting**

**1. Financial Reporting** - Not Applicable

**2. Performance Reporting** - Not Applicable

**3. Special Reporting**

> a\. ED Form 1189, *Guaranty Agency Monthly Claims and Collections
> Report (OMB No. 1840-0582)*
>
> b\. ED Form 1130, *Guaranty Agency Quarterly/Annual Report (OMB No.
> 1845-0027)*
>
> In determining which amounts to test, particular attention should be
> given to the September 30 amounts for current year defaults, current
> year collections, loans receivable and the sources and uses of funds
> for the reserve account (or equivalent line item(s) pertaining to the
> Federal/Operating Funds for the September 30, 1999 report). Also,
> guaranty agencies are required to submit loan level detail information
> to the National Student Loan Data System (NSLDS) (*OMB No.
> 1840-0689*). When reviewing support for the above reports, the auditor
> should consider whether the relevant amounts in these reports
> reconcile with the NSLDS Extract submitted by the guaranty agency.
> (NOTE: There may be some differences between ED Form 1130, Quarter End
> Reporting, and NSLDS Extracts due to timing factors (e.g., pulling of
> NSLDS Extract in third week vs. month end). Finally, ED may send edits
> back to the agency to be entered.
>
> The guaranty agency is required to submit loan level detail data to
> the NSLDS. The following are identified as key data elements: social
> security number (SSN); last name (some agencies may use first name
> combined with the SSN since last names are subject to change);
> original school code; academic level; current school code; enrollment
> status code; enrollment status date; originating lender code; loan
> guarantee date; amount of guarantee; current holder lender code; date
> entered repayment; loan status code; loan status date; outstanding
> principal; amount of claim paid to lenders (principal and interest)
> and for loans with a defaulted status; interest and fee amounts. ED
> sends edits back to the guaranty agency for disposition. Samples
> should be selected from the guaranty agency=s NSLDS Extracts (Note:
> Guaranty Agencies may have changed to automated exchanges of data with
> schools and lenders, thus, hard copy documents may not exist. In this
> instance, auditors may only be able to trace to system information and
> not to supporting records.) (34 CFR section 682.414).
>
> In addition to providing ED with information it needs to maintain its
> accounting and loan database records, data in the ED Form 1130 reports
> are used for various purposes by ED. The use of this data is the
> subject of several other compliance requirements cited in Section N.,
> Special Tests and Provisions, which identify the need to test specific
> items in these reports. For audit efficiency, the auditor may want to
> test those requirements at the same time as this compliance
> requirement. The other compliance requirements are 3. Federal
> Reinsurance Rate, 4. Conditions of Reinsurance, 5. Death, Disability,
> and Bankruptcy, and 10. Federal Fund and Operating Fund.

**N. Special Tests and Provisions**

**1. Current Records**

> **Compliance Requirement** - The guaranty agency shall maintain
> current complete records for each loan that it holds. The records must
> be maintained in a system that allows ready identification of each
> loan\'s current status, updated at least once every 10 business days
> (34 CFR section 682.414).
>
> **Audit Objective** - Determine whether the agency=s records are
> updated for information received from lenders, schools, borrowers,
> others, and NSLDS on a timely basis.

**Suggested Audit Procedures**

> a\. For a sample of loans, compare dates transactions or information
> were posted to the guaranty agency=s system to the date the source
> information was received.
>
> b\. Identify whether any backlog exists that is over 10 days old.

**2. Federal Reinsurance Rate**

> **Compliance Requirement** - The applicable Federal reinsurance rate
> for a loan depends on the amount of reinsurance claims paid to the
> guaranty agency during the year and the date the loan was made (34 CFR
> sections 682.404(b) & (c)).
>
> For loans made prior to October 1, 1993 or transferred under a plan to
> transfer guarantees from an insolvent guaranty agency approved by ED,
> when the total amount of reinsurance claims paid to the guaranty
> agency during a fiscal year is less than five percent of the amount of
> loans in repayment at the end of the preceding fiscal year,
> reinsurance is paid for 100 percent of the agency=s losses. When the
> total amount of reinsurance claims paid to the guaranty agency during
> a fiscal year reaches five percent of the amount of loans in repayment
> at the end of the preceding fiscal year, the reinsurance subsequently
> paid to the guaranty agency during that fiscal year, drops to 90
> percent. When the amount of claims reaches nine percent, the
> reinsurance drops to 80 percent.
>
> For loans made from October 1, 1993 to September 30, 1998, the above
> rates drop to 98/88/78 percent, respectively. For loans made on or
> after October 1, 1998 the rates are 95/85/75 percent (Section
> 428(c)(1) of HEA (20 USC 1078(c)(1))).
>
> The Secretary uses the ED Form 1130 quarterly report for the previous
> September 30 to calculate the amount of loans in repayment at the end
> of the preceding fiscal year (34 CFR sections 682.404(b) & (c)).
>
> Past problem areas have been:

Agencies have:

> \- not established systems to verify a student\'s loan status with
> lender and school data through a reliable audit trail.
>
> \- established systems to determine loan status that rely on loan
> characteristic analysis or assumptions that are not adequately tested
> or verified.
>
> \- not established adequate procedures to ensure that lenders report
> and that agencies properly record loans paid in full.
>
> \- not established adequate procedures to ensure that there is a
> system to reconcile the agency\'s repayment conversion dates to the
> lender\'s repayment conversion dates.
>
> **Audit Objective** - Determine whether the data submitted to ED in
> the September 30 Form 1130 used to calculate loans in repayment is
> materially correct and supported by the books and records.

**Suggested Audit Procedures**

> a\. Compare the amounts of loans in repayment in the guaranty agency
> system at September 30 to the amount of loans in repayment derived
> from the September 30 ED Form 1130. Determine the propriety of any
> difference.
>
> b\. Select a sample of loans in in-school and repayment status from
> the guaranty agency\'s system. Verify the loan amount and loan status
> by contacting the current holder of the loan or schools to confirm the
> authenticity and status of the loans.

**3. Conditions of Reinsurance Coverage**

> **Compliance Requirement** - A guaranty agency is entitled to
> reinsurance payments on a loan only if the requirements cited in 34
> CFR section 682.406 are met. The lender must provide the guaranty
> agency with documentation, as described in 34 CFR sections 682.406 and
> 414. The Secretary requires a guaranty agency to repay reinsurance
> payments received on a loan if the lender or the agency failed to meet
> these requirements (34 CFR section 682.406).
>
> Past problem areas have been:

The lender:

> \- Did not exercise due diligence in servicing the loan in accordance
> with 34 CFR section 682.411.
>
> \- Did not include adequate documentation, including a collection and
> payment history, to adequately verify claim eligibility and claim
> amount.
>
> \- Did not file a default claim with the guaranty agency within 90
> days of default. (Note: The guaranty agency shall reject the claim
> based on due diligence or timely filing violations, unless it was
> cured by the lender in accordance with Cure Bulletin 88-G-138.)
>
> \- Was paid interest beyond 30 days after a claim was returned for
> inadequate documentation for claims returned on or after July 1, 1996.

The guaranty agency:

> \- Filed a request for payment of reinsurance later than 45 days
> following payments of a default claim to the lender.
>
> \- Did not pay the lender within 90 days of the date the lender filed
> the claim.
>
> \- Did not pay the lender prior to filing a request for payment from
> ED.
>
> **Audit Objective** - Determine whether loans for which reinsurance
> was paid met the requirements for reinsurance.

**Suggested Audit Procedures**

> Select a sample of defaulted loans from the guaranty agency\'s ED Form
> 1189 reports. Review documentation supporting that the loans met the
> conditions of reinsurance.
>
> **4. Death, Disability, and Bankruptcy Claims**
>
> **Compliance Requirement** - If an individual borrower dies, the
> obligation of the borrower and any endorser to make any further
> payments on the loan is canceled, in accordance with 34 CFR sections
> 682.402(b)(2-5). If the lender determines that an individual borrower
> is totally and permanently disabled, the obligation of any further
> payments on the loan is canceled in accordance with 34 CFR sections
> 682.402(c)(1-4). If a borrower files a petition of relief under the
> Bankruptcy Code, the Secretary reimburses the holder of the loan for
> unpaid principal and interest on the loan, in accordance with 34 CFR
> sections 682.402(f), (g), and (h). Exceptions to these regulations are
> identified in 34 CFR sections 682.402(a)(2) and (3).
>
> A lender must file a death, disability or bankruptcy claim within the
> period prescribed in 34 CFR section 682.402(g)(2). The guaranty agency
> shall review a death, disability, or bankruptcy claim promptly and
> shall pay the lender in accordance with 34 CFR section 682.402(h).
> Guaranty agencies are required to take specific actions in bankruptcy
> proceedings in accordance with 34 CFR section 682.402(i). In
> accordance with 34 CFR section 682.402(k)(1)(i), the guaranty agency
> shall not request payment from ED until the lender\'s claim has been
> paid (34 CFR section 682.402).
>
> **Audit Objective** - Determine whether death, disability and
> bankruptcy claims met the requirements for the payment of such claims.

**Suggested Audit Procedures**

> a\. Select a sample of death, disability, and bankruptcy claims from
> the guaranty agency\'s ED Form 1189 reports.
>
> b\. Review claim documentation that supports the eligibility of the
> claims for payment.

**5. Default Aversion Assistance**

> **Compliance Requirement** - Upon receipt of a complete request from a
> lender received not earlier than the day 60 (and, *effective July 1,
> 2000*, no later than day 120 of delinquency) a guaranty agency shall
> engage in default aversion activities designed to prevent the default
> by a borrower. Default aversion activities are activities of a
> guaranty agency that are directly related to providing collection
> assistance to the lender on a delinquent loan, including due diligence
> activities required pursuant to regulations of the Secretary, prior to
> the loan being legally in a default status.
>
> A default aversion fee shall be paid for any loan on which a claim for
> default has not been paid as a result of the loan being brought into
> current repayment status by the guaranty agency on or before the day
> 300 after the loan becomes 60 days delinquent. The default aversion
> fee shall be equal to 1 percent of the total unpaid principal and
> accrued interest on the loan at the time the request is submitted by
> the lender. This fee shall not be paid more than once on any loan for
> which the guaranty agency averts the default unless (1) at least 18
> months has elapsed between the date the borrower entered current
> repayment status and the date the lender filed a subsequent default
> aversion assistance request, and (2) during the period between such
> dates, the borrower was not more than 30 days past due on any payment
> of principal and interest on the loan.
>
> Default aversion fees are paid via a transfer from the Federal Student
> Loan Reserve Fund to the Agency Operating Fund. A guaranty agency may
> transfer such fees not more frequently than monthly (Section 428(l) of
> HEA (20 USC 1078(l))).

*Requirements Effective July 1, 2000:*

> *Calculating the Fee* - In general, a guaranty agency may transfer a
> default aversion fee from its Federal Fund to its Operating Fund based
> on 1 percent of the total unpaid principal and accrued interest owed
> on loans on which the lender requests default aversion assistance.
> However, if a loan on which the agency has received the default
> aversion fee is subsequently paid as a default claim, the agency must
> rebate funds to the Federal Fund. The fees may be transferred from the
> Federal Fund to the Operating Fund no more frequently than monthly and
> may not be paid more than once on any loan (34 CFR 682.404(k); 64 FR
> 58629).
>
> *Prohibition Against Possible Conflicts* - If a guaranty agency
> contracts with another party to perform default aversion assistance
> and collect defaulted loans, the party that provides default aversion
> assistance on a loan may not collect on that loan within three years
> of the date the default claim is paid (34 CFR 682.404(k); 64 FR
> 58629).
>
> **Audit Objective** - Determine whether the guaranty agency performed
> default aversion activities in accordance with the requirements and
> determine whether loans on which the default aversion fee was received
> were qualified.

**Suggested Audit Procedures**

*For Pre July 1, 2000 Requirements:*

> a\. For a sample of loans, review documentation supporting that the
> agency performed the necessary default aversion activities.
>
> b\. For a sample of loans on which the default aversion activities
> were performed and the default aversion fee was paid, review loan
> records to ensure the loan was brought into current repayment status
> by the guaranty agency on or before the 300th day after the loan
> became 60 days delinquent.

*For Post July 1, 2000 Requirements:*

> a\. For a sample of loans, review documentation supporting that the
> agency performed the necessary default aversion activities.
>
> b\. Verify that the collection of the default aversion fee was
> performed accurately.
>
> c\. Verify that if a contractor is used to perform default aversion
> assistance, the same contractor does not perform default collection
> activity on the same loans within the three-year period.
>
> **6. Standard Collection Efforts**
>
> **Compliance Requirement** - Unless the agency uses alternative
> collection procedures (see next section for alternative collection
> procedures), the guaranty agency must engage in certain collection
> activities within certain time frames as prescribed by 34 CFR section
> 682.410(b)(6) on a loan for which it pays a default claim filed by a
> lender. These collection activities include written notices, contacts
> with borrowers, and wage garnishments, etc (34 CFR section 682.410
> (b)(6)).
>
> **Audit Objective** - Determine whether the agency performed required
> collection procedures on defaulted loans.

**Suggested Audit Procedures**

> a\. If the guaranty agency uses a collection contractor, review the
> contract to ascertain if the contract specified the required
> collection procedures to be followed for defaulted loans.
>
> b\. For a sample of defaulted loan accounts, review documentation that
> supports that prescribed collection activities were followed.

**7. Alternative Collection Efforts**

> **Compliance Requirement** - A guaranty agency may engage in the
> following collection activities in lieu of the activities described
> above in the Standard Collection Efforts section. The regulations at
> 34 CFR sections 682.410 (b)(6)(ii)(A) and (B) apply to the periods of
> time set forth in this Alternative Collection Efforts section. Upon
> receipt of a payment from a borrower, the agency is not required to
> follow the specific collection efforts described below, but shall
> diligently attempt to collect the loan for 60 days following receipt
> of the payment. If the agency receives no payments during the 60‑day
> period, the agency shall resume its use of the collection efforts
> described below, treating the first day after the end of the 60‑day
> period as the first day of the period described in the 31-180 day
> period below (34 CFR section 682.410 (b)(7)).

*1 - 30 days*:

> During this period the agency shall send to the borrower the written
> notice described in 34 CFR section 682.410 (b)(5)(ii).

*31 - 180 days*:

> During this period the guaranty agency shall attempt diligently to
> collect the loan using such collection tools and activities as it
> deems appropriate, provided, however, that the agency must make at
> least one diligent effort to contact the borrower by telephone, as
> defined in 34 CFR section 682.411(l) (with references to \"the
> lender\" understood to mean \"the agency\"), and send at least two
> forceful collection letters to the borrower. By the end of this
> period, the agency shall refer the loan to a collection contractor in
> accordance with 34 CFR section 682.410(b)(7)(iv)(C). The collection
> contractor to whom the agency refers a loan under 34 CFR section
> 682.410 (b)(7)(iv)(B) must: (1) be compensated for its services on all
> FFEL loans referred by the agency solely on a contingency fee basis;
> (2) be one of at least two collection contractors simultaneously
> providing collection services to the agency on FFEL loans under a
> competitive system that the agency has established and that includes
> the periodic assessment by the agency of the performance of the
> competing contractors and periodic adjustments in the volume of loans
> referred by the agency to each competing contractor based on those
> assessments; and, (3) not receive referral of more than 70 percent of
> the agency\'s referred loans in any calendar year.

*After 180 days*:

> Notwithstanding the deadline for instituting a civil suit set forth in
> 34 CFR section 682.410 (b)(6)(vii), an agency that uses the procedures
> in 34 CFR section 682.410 (b)(7)(i)‑(iv) shall institute a civil suit
> required by that paragraph prior to the earliest of the 90th day
> following the collection contractor\'s return of the loan to the
> agency or the 365th day following the later of the agency\'s referral
> of the loan to the collection contractor, or the contractor\'s receipt
> of a payment on the loan.
>
> **Audit Objective** - Determine whether the agency that chose to
> follow alternative collection procedures complied with the applicable
> requirements.

**Suggested Audit Procedures**

> a\. For a sample of defaulted loan accounts, review documentation that
> supports that the agency performed the prescribed collection
> activities before referring the loans to the collection contractors.
>
> b\. Review collection agency contracts and loan referral records to
> ascertain if the agency (1) did not refer more than 70 percent of its
> referred loans to a single collection contractor, and (2) compensated
> the contractors only on a contingency fee basis.
>
> c\. Review records demonstrating that the guaranty agency periodically
> assessed the performance of the competing contractors, and if
> necessary, made adjustments in the volume of loans referred to each
> competing contractor.

**8. Federal Share of Borrower Payments**

> **Compliance Requirement** - If the borrower makes payments on a loan
> after the guaranty agency has paid a claim on that loan, the agency
> must pay the Secretary an equitable share of those payments.
>
> *For payments received before October 1, 1998* - the Secretary\'s
> equitable share is the portion of payments that remains after
> deducting:
>
> \(1\) The complement of the reinsurance percentage in effect when
> reinsurance was paid on the loan (See 2. Federal Reinsurance Rate
> above for the applicable reinsurance rate. The complement of the
> reinsurance percentage equals 100 minus the Federal reinsurance rate),
> and
>
> \(2\) 27 percent of borrower payments.
>
> *For borrower payments received on or after October 1, 1998* - the
> Secretary\'s equitable share is the portion of payments that remain
> after deducting the complement of the reinsurance percentage and 24
> percent of borrower payments.
>
> *For borrower payments received on or after October 1, 2003* - the
> Secretary\'s equitable share is the portion of payment that remain
> after deducting the complement of the reinsurance percentage and 23
> percent of borrower payments (Section 428(c)(6) of HEA (20 USC
> 1078(c)(6))).
>
> Loans that have been rehabilitated or paid by FFEL program
> consolidation loans are not covered by this requirement because the
> payoff amounts are not considered Apayments made by the borrower.@ For
> these loans, under separate authority, agencies are allowed to retain
> collection costs added to the borrower=s balance, not to exceed 18.5
> percent of the payoff.
>
> Unless the Secretary approves otherwise, the guaranty agency must
> submit the Secretary\'s equitable share of borrower payments within 45
> days of the receipt of the payments by the agency or its servicer (34
> CFR section 682.404 (g)) (NOTE: For payments received prior to
> February 1, 1993, the agency shall submit payments within 60 days of
> receipt. However, see Dear Colleague Letter 95-G-286.) (Section
> 428(c)(2)(D) (20 USC 1078(c)(2)(D)) and Section 428(c)(6) (20 USC
> 1078(c)(6)) of the HEA, March 19, 1994 Dear Guaranty Agency Director
> Letter).
>
> **Audit Objective** - Determine whether the Secretary=s equitable
> share of borrower payments on defaulted loans is properly computed and
> remitted to the Secretary in a timely manner.

**Suggested Audit Procedures**

> Test a sample of borrower payments on defaulted loans to ascertain if
> the equitable share due ED was remitted to ED in a timely manner.

**9. Assignment of Defaulted Loans to ED**

> **Compliance Requirement** - Unless the Secretary notifies an agency
> in writing that other loans must be assigned to the Secretary, an
> agency must assign any loan that meets all of the following criteria
> as of April 15 of each year: (1) the unpaid principal balance is at
> least \$100; (2) the loan, and any other loans held by the agency for
> that borrower, have been held by the agency for at least four years
> (five years for fiscal years beginning July 1, 1997); (3) a payment
> has not been received on the loan in the last year; and (4) a
> judgement has not been entered on the loan against the borrower. The
> Secretary may also direct a guaranty agency to assign to ED certain
> categories of defaulted loans held by the agency as described in 34
> CFR section 682.409. In determining whether mandatory assignment from
> a guaranty agency is required, the Secretary will review the adequacy
> of collection efforts. ED considers the agency\'s record of success in
> collecting its defaulted loans, the age of the loans, and the amount
> of any recent payments on the loans (Section 428(c)(8) of the HEA (20
> USC 1078(c)(8));34 CFR section 682.409).
>
> **Audit Objective** - Determine whether the agency assigned to ED all
> loans that meet the criteria.

**Suggested Audit Procedures**

> a\. Review aging of loans to ascertain if the guaranty agency is
> holding loans that should be assigned to ED.

**10. Federal Fund and Agency Operating Fund**

> **Compliance Requirement** - Each guaranty agency shall establish a
> Federal Fund and an Agency Operating Fund by December 6, 1998.

*Federal Fund*

> All funds, securities, and other liquid assets contained in the
> pre-existing reserve fund established pursuant to Section 422 of the
> HEA shall be deposited in this fund. After the Federal Fund is
> established, an agency shall deposit the following:
>
> \- All amounts received as payment of reinsurance on loans.
>
> \- From amounts collected on behalf of obligation of a defaulted
> borrower, a percentage amount equal to the complement of reinsurance
> (and, *effective July 1, 2000*, the Secretary\'s equitable share of
> the collections).
>
> \- Insurance premiums collected.
>
> \- Amounts received for SPA activity performed prior to date of
> enactment.
>
> \- 70 percent of amounts received after enactment for Administrative
> Cost Allowance (ACA) for loans upon which insurance was issued prior
> to date of enactment.
>
> \- Other receipts as specified in regulations.

The Federal Fund may only be used for the following purposes:

> \- To pay lender claims pursuant to sections 428(b)(1)(G), 428(j),
> 437, and 439(q) of HEA.
>
> \- To pay default aversion fees into the Agency Operating Fund.
>
> \- To establish the Operating Fund, each guaranty agency may transfer
> not more than 180 days\' cash expenses for normal operating expenses
> (not including claim payments) as a working capital reserve as defined
> in Office of Management and Budget Circular A-87 from the Federal Fund
> for deposit into the Operating Fund for use in the performance of the
> guaranty agency\'s duties. Such transfers may occur during the first
> three years following the establishment of the Operating Fund. No
> agency may transfer in excess of 45 percent of the balance, as of
> September 30, 1998 of the agency=s Federal Fund to the agency\'s
> Operating Fund during such three-year period. The agency shall ensure
> that sufficient funds remain in the Federal Fund to pay lender claims
> within the required time periods and to meet the reserve recall
> requirements. *Effective July 1, 2000*, permission of the Secretary is
> required to transfer these funds, and this request must specify the
> agency\'s terms of repayment (Section 422A(a)-(f) of the HEA (20 USC
> 1072a(a)-(f)); 34 CFR sections 682.419 and 682.421; 64 FR
> 58634-58635).

*Agency Operating Fund*

> Each guaranty agency shall establish a fund designated as the
> Operating Fund. To establish the Operating Fund, each guaranty agency
> can transfer not more than 180 days cash expenses for operating
> expenses (not including claim payments) from the Federal Fund. Amounts
> deposited into the Operating Fund shall be invested at the discretion
> of the guaranty agency in accordance with prudent investor standards.
> *Effective July 1, 2000*, permission of the Secretary is required to
> transfer these funds.

The guaranty agency shall deposit into the Operating Fund:

> \- Loan processing and insurance fees.
>
> \- 30 percent of ACA amounts received after date of enactment for
> loans upon which insurance was issued prior to date of enactment.
>
> \- Account maintenance fees.
>
> \- Default aversion fees.
>
> \- Amounts remaining from collection on defaulted loans held by the
> agency, after payment of Secretary=s equitable share, excluding
> amounts deposited in the Federal Fund pursuant to section 422(c)(2).
>
> \- Other receipts as specified in regulations.
>
> Funds in the Operating Fund shall be used for application processing,
> loan disbursement, enrollment and repayment status management, default
> aversion activities, default collection activities, school and lender
> training, financial aid awareness and related outreach activities,
> compliance monitoring, and other SFA related activities. During any
> period in which the Operating Fund contains money transferred in from
> the Federal Fund, the entire Operating Fund is subject to the
> restrictions in 34 CFR sections 682.410 and 682.418. (Sections
> 422B(a)-(e) of the HEA (20 USC 1072b(a)-(e))).

Past problem areas concerning fund revenue and expense have included:

> \- Failure to credit funds received into the Federal Fund, including
> lock-box operations within the specified period.
>
> \- Unsupported expenses paid from reserve fund assets.
>
> \- ED Form 1130 did not include all credits to the reserve fund.
>
> \- Use of funds for other programs (e.g., SSIG and other State
> programs).
>
> \- Commingling of funds.
>
> \- Unreasonable allocation of indirect costs to FFEL program.
>
> **Audit Objective** - Determine whether the agency established the
> required funds by the due date and whether the amounts required to be
> credited to the Federal and Operating funds were so credited and were
> only used for authorized purposes.

**Suggested Audit Procedures**

> a\. Review accounts to ascertain that the required funds were
> established and that all liquid assets held by the pre-existing
> reserve fund were deposited in the new Federal fund by December 6,
> 1998.
>
> b\. Review revenue records to assure that amounts required to be
> credited to the Federal and Operating Funds were so credited. Review
> revenues and receipts that were not credited to the Federal or
> Operating Funds to assure that they were not inappropriately omitted.
>
> c\. Test expenditures to ascertain if they were made for allowable
> purposes.
>
> d\. Examine the general journal for unusual entries that impact the
> Federal or Operating funds.

**11. Investments - Federal Fund**

> **Compliance Requirement** - Funds transferred to the Federal Fund
> shall be invested in obligations issued or guaranteed by the United
> States or a State, or in other similarly low-risk securities selected
> by the guaranty agency, with the approval of the Secretary. Earnings
> from the Federal Fund shall be the sole property of the Federal
> government. (Section 422A(b) of the HEA (20 USC 1072A(b))).
>
> **Audit Objective** - Determine whether the agency invested Federal
> funds only in approved securities or other instruments.

**Suggested Audit Procedures**

> a\. Review investment activity during the period to ascertain that
> Federal Fund assets were invested in approved securities or other
> instruments.

**12. Collection Charges**

> **Compliance Requirement** - The guaranty agency must charge a
> defaulted borrower an amount equal to reasonable costs incurred by the
> agency in collecting a loan on which the agency has paid a default.
> The amount charged the borrower should equal the lesser of the amount
> that would be charged under the formula in 34 CFR section 30.60 or,
> the amount that would be charged if the loan was held by ED. Costs may
> include, but are not limited to, attorney=s fees, collection agency
> charges, and court costs (34 CFR section 682.410(b)(2)).
>
> **Audit Objective** - To determine whether the agency charged
> appropriate collection costs to borrowers of loans on which the agency
> has paid a default or bankruptcy claim.

**Suggested Audit Procedures**

> Test a sample of defaulted loan accounts to determine whether the
> agency charged for reasonable costs of collection. Determine whether
> the method used to calculate the amount was appropriate.

**13. Enforcement Action**

> **Compliance Requirement** - The guaranty agency shall take measures
> to ensure enforcement of all Federal, State and guaranty requirements
> and at a minimum, conduct biennial on-site program reviews of such
> lenders and schools that meet criteria specified in 34 CFR section
> 682.410(c)(1). The agency is required to use statistically valid
> techniques to calculate liabilities owed the Secretary that the review
> indicates may exist, demand prompt payment from the responsible party
> and refer to the Secretary any case in which the payment of funds is
> not made within 60 days. A guaranty agency is also required to adopt
> procedures for identifying fraudulent loan applications and
> undertaking or arranging for the prompt and thorough investigation of
> criminal or other programmatic misconduct by its program participants.
> It is responsible also for promptly reporting all of the allegations
> and indications having a substantial basis in fact and the scope,
> progress and results of the Agency=s investigations (34 CFR section
> 682.410(c)).
>
> **Audit Objective** - Determine whether the agency is carrying out
> program reviews and related enforcement activity in accordance with
> the above requirements.

**Suggested Audit Procedures**

> a\. Review the guaranty agency=s procedures for selecting lenders and
> schools to review to ascertain if they meet the regulatory criteria.
>
> b\. Review program review guidance to ascertain if that it is
> up-to-date and includes, when problems are found, a statistically
> valid method for determining liabilities due the Secretary.
>
> c\. Review program review reports to ascertain if amounts due the
> Secretary were identified and, if so, whether appropriate demand for
> payment and follow-up was conducted.
>
> d\. Through inquiry and review, determine whether the agency adopted
> procedures for identifying fraudulent loan applications and for
> reporting all allegations of misconduct having a substantial basis to
> ED. Review agency records on the follow-up of misconduct to determine
> whether ED was notified when appropriate.

**DEPARTMENT OF EDUCATION**

**CFDA 84.041** **IMPACT AID (Title VIII of ESEA)**

**I. PROGRAM OBJECTIVES**

The objective of the Impact Aid Program (IAP) under Title VIII of the
Elementary and Secondary Education Act (ESEA) is to provide financial
assistance to local educational agencies (LEAs) whose local revenues or
enrollments are adversely affected by Federal activities. These
activities include the Federal acquisition of real property or the
presence of children residing on tax-exempt Federal property or residing
with a parent employed on tax-exempt Federal property
(\"Federally-connected\" children).

**II. PROGRAM PROCEDURES**

Funds are provided on the basis of statutory criteria and data supplied
by LEAs in applications submitted to the Department of Education (ED).
ED requests the applicant to forward a complete copy of the application
to the state educational agency (SEA) at the same time it mails the
application to ED. Payments are made directly to the LEA by ED.
Generally, payments under Section 8003 of the ESEA are based on
membership and attendance counts of Federal-connected children, with
additional funds provided for certain Federally-connected children with
disabilities and children residing on Indian lands. Except for the
additional funds provided for Federally-connected children with
disabilities under Section 8003(d) of the ESEA, funds provided under
Section 8003 are considered general aid and have no restrictions on
their expenditure. Any funds that are provided under Section 8007 of the
ESEA to certain LEAs that received Section 8003 payments must be used
for construction, as defined in the statute.

**III. COMPLIANCE REQUIREMENTS**

**In developing the audit procedures to test compliance with the
requirements for a Federal program, the auditor should first look to
Part 2, Matrix of Compliance Requirements, to identify which of the 14
types of compliance requirements described in Part 3 are applicable and
then look to Parts 3 and 4 for the details of the requirements.**

**A. Activities Allowed or Unallowed**

**1. Section 8003(d) - Federally connected children with disabilities**

> LEAs must use the payments provided under Section 8003(d) of the ESEA
> to conduct programs or projects for the free, appropriate public
> education of the Federally-connected children with disabilities who
> generated those funds. Allowable costs include expenditures reasonably
> related to the conduct of programs or projects for the free,
> appropriate public education of children with disabilities, including
> program planning and evaluation and acquisition costs of equipment,
> except when the title to that equipment would not be held by the LEA.
> Costs for school construction are not allowable (Section 8003 of ESEA;
> 34 CFR section 222.53(c)).

**2. Section 8007 Construction**

> LEAs that receive payments under Section 8003 of the ESEA and that
> meet certain other statutory criteria may receive assistance under
> Section 8007 of the ESEA in any fiscal year that the Congress
> appropriates funds under that Section. LEAs must use the payments
> provided under Section 8007 for construction, as defined in Section
> 8013(3) of the ESEA. Under Section 8013(3), the term \>construction=
> includes: (1) the preparation of drawings and specifications for
> school facilities; (2) erecting, building, acquiring, altering,
> remodeling, repairing, or extending school facilities; (3) inspecting
> and supervising the construction of school facilities; and (4) debt
> service for such activities (Sections 8007 and 8013(3) of ESEA).

**3. Section 8003(b) Basic Support Payments**

> Funds under Section 8003(b) of the ESEA usually become part of the
> general operating fund of the LEAs. These funds are available as
> general aid for free public education and may be used for current
> operating expenditures or capital outlays in accordance with State
> laws. The auditor is not expected to perform any tests with respect to
> these funds.

**B. Allowable Costs/Cost Principles**

> Section 8003(b) Basic Support Payments are not subject to the A-102
> Common Rule or Circular A-87 (See Appendix I).

**G. Matching, Level of Effort, Earmarking**

**1. Matching** - Not Applicable

**2.1 Level of Effort -** *Maintenance of Effort* - Not Applicable

**2.2 Level of Effort -** *Supplement Not Supplant*

> Section 8003(d) funds of the ESEA may not supplant any State funds
> (either general or special education State aid) that were or would
> have been available to the LEA for the free, appropriate public
> education of children counted under Section 8003(d). Funds provided
> under Section 8003(d), Federally-connected children with disabilities,
> may not reduce either general State aid or specific State aid for
> Federally-connected children with disabilities. A reduction in the
> per-pupil amount of State aid for children with disabilities,
> including children counted under Section 8003(d), from that received
> in the previous year raises a presumption that supplanting has
> occurred. An LEA can rebut this presumption by demonstrating that the
> reduction was unrelated to the receipt of Section 8003(d) funds
> (Section 8003(d) of ESEA; 34 CFR section 222.54).

**3. Earmarking** - Not Applicable

**L. Reporting**

**1. Financial Reporting** - Not Applicable

**2. Performance Reporting** - Not Applicable

**3. Special Reporting**

> *Impact Aid Program* *(OMB No. 1810-0036)* - Each year an LEA must
> submit this application/report which provides counts of
> Federally-connected children in various categories, membership and
> average daily attendance data and information on expenditures for
> children with disabilities. Membership and average attendance data
> should be tested. The auditor should use professional judgment, taking
> into account the relative materiality of the number of children
> reported in other tables, in determining what tables to test.

**N. Special Tests and Provisions**

> **1. Required Level of Expenditure**
>
> **Compliance Requirement** - For each fiscal year, the amount of
> expenditures for special education and related services provided to
> Federally-connected children with disabilities must be at least equal
> to the amount of Section 8003(d) of the ESEA funds received or
> credited for that fiscal year. This is demonstrated by comparing the
> amount of Section 8003(d) funds received or credited with the result
> of the following calculation:
>
> a\. Divide total LEA expenditures for special education and related
> services for all children with disabilities by the average daily
> attendance (ADA) of all children with disabilities served during the
> year.
>
> b\. Multiply the amount determined in a. above by the ADA of the
> Federally-connected children with disabilities claimed by the LEA for
> the year.
>
> If the amount of section 8003(d) funds received or credited is greater
> than the amount calculated above, an overpayment equal to the excess
> section 8003(d) funds exists. This overpayment may be reduced or
> eliminated to the extent that the LEA can demonstrate that the average
> per pupil expenditure for special education and related services
> provided to Federally-connected children with disabilities exceeded
> its average per pupil expenditure for serving non-Federally connected
> children with disabilities (Section 8003(d) of ESEA; 34 CFR section
> 222.53(d)).
>
> **Audit Objective** - To determine whether the required level of
> expenditure for providing special education and related services to
> Federally connected children with disabilities was met.

**Suggested Audit Procedures**

> a\. Review the LEA=s calculation to ascertain if it shows that the
> required level of expenditure for Federally-connected children was
> met. Check accuracy of calculation.
>
> b\. Trace amounts used in the calculation to supporting records.
>
> c\. If the LEA\'s calculation shows that an overpayment was made,
> verify that the average per pupil expenditure for Federally-connected
> children with disabilities exceeded the average per pupil expenditure
> for non-Federally connected children to the extent of the overpayment.

**DEPARTMENT OF EDUCATION**

**CFDA 84.042 TRIO \-- STUDENT SUPPORT SERVICES**

**CFDA 84.044 TRIO \-- TALENT SEARCH**

**CFDA 84.047 TRIO \-- UPWARD BOUND**

**CFDA 84.066 TRIO \-- EDUCATIONAL OPPORTUNITY CENTERS**

**CFDA 84.217 MCNAIR POST-BACCALAUREATE ACHIEVEMENT**

**I. PROGRAM OBJECTIVES**

The Federal TRIO programs are authorized by Title IV of the Higher
Education Act of 1965, as amended, and now consist of seven programs.
These programs are designed to help first-generation college and
economically disadvantaged students achieve success at the postsecondary
level by facilitating high school completion and entry, retention, and
completion of postsecondary education. Based on funding levels, only
five of the programs are included in the TRIO single audit cluster.

*Student Support Services* program provides academic support services to
low-income, first-generation, and disabled college students to enable
them to be retained and graduate from institutions of higher education.
The program also assists participants in making the transition from one
level of higher education to the next.

*Talent Search* program identifies qualified youth with the potential
for education at the postsecondary level and encourages them to complete
or reenter secondary school and undertake a program of postsecondary
education. Talent Search program also publicizes the availability of
student financial assistance for persons who seek to pursue a
postsecondary education.

*Upward Bound* program targets low-income and potential first-generation
college students who are enrolled in high school, or veterans seeking to
prepare themselves for success in postsecondary education. The program
provides opportunities for participants to succeed in pre-college
performance and ultimately in higher education pursuits.

*Educational Opportunity Centers* (EOC) program provides counseling and
information on college admissions to qualified adults who want to enter
or continue a program of postsecondary education. EOC projects also
publicize the availability of student financial assistance for persons
who seek to pursue a postsecondary education and assist individuals in
applying for college admission and financial aid.

*Ronald E. McNair Post-Baccalaureate Achievement (McNair)*program
provides low-income, first-generation college students and student from
groups underrepresented in graduate education with effective preparation
for doctoral study through involvement in research and other scholarly
activities.

**II. PROGRAM PROCEDURES**

All TRIO grants are competitive discretionary grants.

*Student Support Services and McNair* grants are awarded for
four-to-five year cycles. Eligible applicants are institutions of higher
education or combinations of such institutions.

*Talent Search, Upward Bound, and Educational Opportunity Centers*
grants are awarded for four to five years. Eligible applicants are
institutions of higher education, public and private agencies and
organizations, combinations of institutions and agencies, and in
exceptional cases, secondary schools. The Upward Bound program has three
types of projects: regular, veterans, and math/science.

**Sources of Governing Requirements**

The Federal TRIO programs are authorized by the Higher Education Act of
1965, as amended (20 USC 1070a *et seq*.). The applicable regulations
are in 34 CFR sections 643 (Talent Search); 644 (Educational Opportunity
Centers); 645 (Upward Bound); 646 (Student Support Services); and 647
(McNair).

**III. COMPLIANCE REQUIREMENTS**

**In developing the audit procedures to test compliance with the
requirements of a Federal program, the auditor should first look at Part
2, Matrix of Compliance Requirements, to identify which of the 14 types
of compliance requirements described in Part 3 are applicable and then
look to Parts 3 and 4 for details of the requirements.**

**A. Activities Allowed or Unallowed**

> 1\. *Student Support Services and Upward Bound Programs* - Allowable
> services and activities for these programs include the following: (1)
> instruction; (2) personal counseling; (3) academic advice and
> assistance in course selection; (4) tutorial services; (5) exposure to
> cultural events; academic programs, and other educational activities;
> (6) activities to acquaint project participants with career options;
> (7) instruction to prepare youths in the project for careers (Upward
> Bound only); (8) mentoring; (9) activities specifically designed for
> individuals of limited English proficiency; and (10) activities to
> assist students in two-year institutions to secure financial
> assistance and admission to a four-year program and to assist students
> in a four-year program to secure financial assistance and admission to
> graduate and professional programs (Student Support Services only) (34
> CFR sections 645.11 and 646.4).
>
> For the Student Support Services program, these activities could
> include the following, if reasonably related to carrying out a
> project: (1) cost of remedial and special classes and courses in
> English language instruction for students of limited English
> proficiency, under certain circumstances; (2) in-service training of
> project staff; (3) activities of an academic or cultural nature; (4)
> transportation of participants and staff to and from approved
> educational and cultural activities sponsored by the project; (5)
> purchase of computer hardware, computer software, or other equipment
> to be used for student development, student records and project
> administration; (6) professional development travel for staff, and (7)
> project evaluation. Student Support Services funds cannot be used for
> activities involved in recruiting students for enrollment at the
> grantee institution or for tuition, fees, stipends, and other forms of
> direct financial support for project participants (34 CFR sections
> 646.30 and 31).
>
> For the Upward Bound program, examples of specific allowable
> activities are included in 34 CFR section 645.40. Also, stipends for
> project participants are allowed. Stipends for regular and
> math/science projects may not exceed \$40 per month from September to
> May of the academic year and \$60 for June, July, and August of the
> summer months. Youth participating in a work-study position may be
> paid a stipend of \$300 per month during June, July, and August.
> Stipends for participants in Veterans projects may not exceed \$40 per
> month. To be eligible for a stipend, participants must show evidence
> of satisfactory participation in project activities, including regular
> attendance and performance in accordance with standards. Grantees may
> prorate stipends in accordance with the number of sessions in which a
> student participated. Unallowable activities include room and board
> for administrative and instructional staff personnel who do not have
> responsibility for dormitory supervision of project participants and
> for participants in Veterans Upward Bound projects (34 CFR sections
> 645.40-645.42).
>
> 2\. *Talent Search and Educational Opportunity Centers Programs* -
> Allowable project services include: (1) academic advice and assistance
> in course selection; (2) completing college admission and financial
> aid applications; (3) preparing for college entrance examinations; (4)
> guidance on secondary school reentry or entry to other programs
> leading to a secondary school diploma or its equivalent; (5) personal
> and career counseling; (6) tutorial services; (7) mentoring; (8)
> activities specifically designed for students of limited English
> proficiency; and (for Talent Search only) (9) exposure to college
> campuses, cultural events, academic programs and other sites or
> activities not usually available to disadvantaged youth; (10)
> workshops and counseling for parents of students served; and (11)
> activities to meet specific educational needs of individuals in grades
> six through eight (34 CFR sections 643.4 and 644.4).
>
> Specific activities may include the following, if reasonably related
> to the objectives of the Talent Search or EOC project: (1)
> transportation, meals, and lodging with prior approval for visits to
> postsecondary educational institutions, participation in \"College
> Day\" activities, and career field trips; (2) purchase of testing
> materials; (3) fees for college admissions applications and entrance
> examinations with the exceptions noted in 34 CFR sections 643.30(c)
> and 644.30(c); (4) in-service staff training; (5) rental of space, if
> space is not owned by the grantee; and (6) purchase of computer
> hardware, computer software, or other equipment for student
> development, project administration, and recordkeeping (34 CFR
> sections 643.30 and 644.30). Talent Search and EOC funds cannot be
> used for tuition, fees, stipends, and other forms of direct financial
> support for project participants (34 CFR 643.31 and 644.31).
>
> 3\. *Ronald E. McNair Post-Baccalaureate Achievement Program
> (McNair)* - Allowable project services and activities include: (1)
> opportunities for research and other scholarly activities designed to
> provide participants with effective preparation for doctoral study;
> (2) summer internships; (3) seminars and other educational activities;
> (4) tutoring; (5) academic counseling; (6) assistance in securing
> admission to and financial aid for enrollment in graduate programs;
> (7) mentoring; and (8) exposure to cultural events and academic
> program not usually available to project participants (34 CFR section
> 647.4).
>
> Allowable project activities may include the following, if reasonably
> related to carrying out a project: (1) activities of an academic or
> scholarly nature, such as trips to institutions of higher education
> offering doctoral programs and special lectures, symposia, and
> professional conferences, which have as their purpose the
> encouragement and preparation for project participants for doctoral
> study; (2) stipends of up to \$2,800 per year for students engaged in
> approved research internships, provided that the student has completed
> the sophomore year of study at an eligible institution before the
> internship begins; (3) necessary tuition, room and board, and
> transportation for students engaged in research internships during the
> summer, and (4) purchase of computer hardware, computer software, or
> other equipment for student development, project administration, and
> recordkeeping (20 USC 1070a-15(e); 34 CFR section 647.30).
>
> 4\. *Unallowable Activities* - Unallowable activities for any TRIO
> program include: (1) tuition, fees, stipends, and other forms of
> direct financial support for employees; (2) research not directly
> related to the evaluation or improvement of the project (except for
> the research activities of McNair participants); and (3) construction,
> renovation, and remodeling of any facilities (34 CFR sections, 643.31,
> 644.31, 645.41, 646.31, and 647.31).

**L. Reporting**

**1. Financial Reporting**

> a\. SF-269, *Financial Status Report* - Applicable
>
> b\. SF-270, *Request for Advance or Reimbursement* - Only grantees
> placed on reimbursement are required to complete this form to request
> payment of grant award funds. The requirement to use this form is
> imposed on an individual basis.
>
> c\. SF-271, *Outlay Report and Request for Reimbursement for
> Construction Program* - Not Applicable
>
> d\. SF-272, *Federal Cash Transaction Report* - Not Applicable
>
> e\. *Grant Administration and Payment System (GAPS) (OMB No.
> 1875-0138) B* Grantees draw funds and account to ED using GAPS.
> Grantees request funds by: (1) creating a payment request using the
> GAPS External Access System through the Internet; (2) calling the GAPS
> Payee Hotline; or (3) if the grantee is placed on a reimbursement
> basis for an award, submitting an SF-270, *Request for Advance or
> Reimbursement* to an ED program or regional office. When creating a
> payment request in GAPS, the grantee enters the drawdown amounts, by
> award, directly in GAPS. When requesting funds using the other 2
> methods, the grantee provides this information to the hotline
> operator, or on the SF-270, and ED staff enter the data into GAPS. ED
> also enters other award data into GAPS, including authorization
> amounts and payment status. The system maintains and provides
> cumulative data on net draws and the available balance for each award.
>
> ED considers drawn funds to have been expended by the grantee for the
> award(s) identified (not withstanding that the grantee has up to three
> days to make disbursements). Cumulative drawdown amounts in GAPS
> should accurately reflect the grantee\'s actual disbursement of funds
> by award. Grantees can redistribute drawn amounts between grant awards
> by making adjustments in GAPS to reflect actual disbursement for each
> award. For example, if a grantee draws too much under one award, it
> can enter an adjustment in GAPS to reallocate the excess amount to
> other awards for which there were immediate cash needs, as long as the
> net amount of the adjustment is zero.
>
> To assist grantees in reconciling their internal accounting records
> with GAPS, grantees can use the GAPS External Access System
> (http://gapsweb.ed.gov) to obtain a GAPS Activity Report showing
> cumulative and detail information for each award. The GAPS Activity
> Report can be created and viewed on-line and a hard copy may be
> printed as well.

**2. Performance Reporting**

> a\. *Student Support Services Program Annual Performance Report (OMB
> No. 1840-0525)* - Grantees must submit an annual performance report to
> the Department each year of the project period.

*Key Line Items* - The following line items contain critical
information.

> \(1\) Section II, subsection A, *Number of Participants Assisted
> During the Report* Period, and subsection B, *Participant Distribution
> by Eligibility.*
>
> \(2\) Section V, *Record Structure for Participant List,* fields
>
> 9 Eligibility
>
> 10 Project Entry Date,
>
> 11 First School Enrollment Date
>
> 12 Participant Status
>
> 15 College Grade Level (Entry into project),
>
> 16 College Grade Level (Current \-- at the end of the project year)
>
> 19 Academic Standing
>
> 20 Enrollment Status at the End of the Project
>
> 24 Degree/Certificate Completed
>
> b\. *Talent Search and Educational Opportunity Centers Programs Annual
> Performance Report (OMB No. 1840-0561)* - Grantees must submit an
> annual performance report to the Department each year of the project
> periods.

*Key Line Items* - The following line items contain critical
information.

> \(1\) Section II, subsection A, *Number of Participants Assisted*
>
> \(2\) Section II, subsection B, *Participant Distribution by
> Eligibility*
>
> \(3\) Section II, subsection F, *Participant Distribution by Grade
> Level*
>
> \(4\) Section IV, *Project Performance Outcomes,* Participant Status
> (At the End of the Reporting Period), lines
>
> 1 Continued in middle school (TS only)
>
> 2 Promoted from middle school to high school (TS only)
>
> 3 Continued in high school (do not include those who graduated)
>
> 4 Re-entered middle school
>
> 5 Re-entered high school
>
> 6 Received high school diploma
>
> 7 Obtained GED/high school equivalency degree
>
> c\. *Robert E. McNair Postbaccalaureate Achievement Program
> Performance (OMB No. 1840-0640)*- Grantees must submit an annual
> performance report to the Department each year of the project periods.
>
> *Key Line Items -* The following items contain critical information.
>
> \(1\) Section II, *Record Structure for Information on Project
> Participants*, fields
>
> 9 Eligibility
>
> 10 First School Enrollment Date
>
> 11 Project Entry Date
>
> 12 Participant Status
>
> 14 College Grade Level (Current \-- at the end of the project year)
>
> 15 End of Year Enrollment Status
>
> 16 Degree

**3. Special Reporting** - Not Applicable

**DEPARTMENT OF EDUCATION**

**CFDA 84.048 VOCATIONAL EDUCATION - BASIC GRANTS TO STATES (Perkins
III)**

**I. PROGRAM OBJECTIVES**

Vocational Education - Basic Grants to States provides grants to States
and outlying areas to develop the technical, vocational, and academic
skills of secondary students and postsecondary students by:

\- Promoting the integration of vocational, academic, and technical
instruction;

> \- Developing challenging academic standards;
>
> \- Increasing State and local flexibility in providing services and
> activities designed to develop, implement and improve vocational and
> technical education, including tech-prep education.

**II. PROGRAM PROCEDURES**

Participating States must designate or establish a State board of
vocational education (referred to in Perkins III as the sole State
agency or eligible agency) to administer and supervise State vocational
education programs. In order to receive funds for fiscal year (FY) 1999,
the State must submit either a one-year transitional or a five-year
State plan for vocational education or a unified plan. Any State that
submitted a one-year transitional plan in FY 1999 must then submit a
four-year plan in FY 2000 to receive funds. The Department of Education
(ED) allocates funds to the sole State agency based on a statutory
formula. The State must allocate and use funds for the following
statutorily prescribed activities or programs (referred to as the
\"basic programs\"):

> \(a\) Secondary school vocational education programs, postsecondary,
> and adult vocational education programs (Perkins III, Title I-C);

\(b\) State programs and State leadership activities (Perkins III,
Section 124);

\(c\) State administration (Perkins III, Section 121).

The sole State agency may transfer funds to other State agencies to
administer one or more of these programs. A State makes grants to
subrecipients, operates programs directly, or contracts for services.
Subrecipients submit plans or applications to the State in order to
receive funds.

**Source of Governing Requirements**

This program is authorized by the Carl D. Perkins Vocational and
Technical Education Act of 1998 (Perkins III), as amended, Pub. L. No.
105-332, which is codified at 20 USC 2301 *et seq*. Certain requirements
applicable to the Perkins III grants are contained in the Workforce
Investment Act of 1998 (WIA), Pub. L. No. 105-220.

**III. COMPLIANCE REQUIREMENTS**

**In developing the audit procedures to test compliance with the
requirements for a Federal program, the auditor should first look to
Part 2, Matrix of Compliance Requirements, to identify which of the 14
types of compliance requirements described in Part 3 are applicable and
then look to Parts 3 and 4 for the details of the requirements.**

Certain compliance requirements which apply to multiple ED programs are
discussed once in the ED Cross-Cutting Section of this Supplement (page
4-84.000-1) rather than repeating in each individual program. Where
applicable, this section references the Cross-Cutting Section for these
requirements.

**A. Activities Allowed or Unallowed**

> See ED Cross-Cutting Section.
>
> 1\. *State-Level Activities* - The State plan describes the specific
> activities to be carried out. Generally allowable activities for a
> State include:
>
> a\. *Secondary School Vocational Educational Programs, and
> Postsecondary and Adult Vocational Education Programs* ‑ A State must
> distribute all funds to subrecipients to improve vocational education
> programs (Perkins III, section 112(a)(1); 20 USC 2322(a)(1)).
>
> b\. *State Programs and State Leadership Activities* - A State must
> use funds for: (1) assessing programs conducted with assistance under
> the Perkins Act; (2) developing, improving, or expanding the use of
> technology in vocational and technical education; (3) professional
> development activities; (4) support for strengthening the academic and
> vocational technical education programs; (5) providing preparation for
> nontraditional training and employment; (6) supporting partnerships
> among local educational agencies and other education and business
> entities assisting students to achieve state academic standards and
> vocational and technical skills; (7) serving students in state
> institutions; (8) support for programs for special populations that
> lead to high-skill, high-wage careers. A State may also use funds for
> the permissive uses of funds identified in section 124(c) of Perkins
> III (Perkins III, section 124(b) and (c); 20 USC 2344(b) and (c)).
>
> c\. *State Administration* - A State may use funds for: (1) developing
> the State plan; (2) reviewing local applications; (3) monitoring and
> evaluating program effectiveness; (4) assuring compliance with all
> applicable Federal laws; and (5) providing technical assistance
> (Perkins III, section 112(a)(3); 20 USC 2322(a)(3)).
>
> 2\. *Subrecipient Activities* - *Secondary School Vocational
> Educational Program and Postsecondary and Adult Vocational Education
> Programs* - Funds must be used to improve vocational education
> programs. The subrecipient plan or approved application describes the
> specific activities to be carried out. Required uses of funds are
> identified in Perkins III, section 135(b), and with respect to
> required use of funds for one-stop centers by postsecondary
> subrecipients, in section 134(d)(1)(B) of the Workforce Investment Act
> of 1998. Examples of other allowable activities are identified in
> Perkins III, section 135(c) (Perkins III, section 135 (20 USC 2355)).

**B. Allowable Costs/Cost Principles**

See ED Cross-Cutting Section.

**E. Eligibility**

**1. Eligibility for Individuals** - Not Applicable

> **2. Eligibility for Group of Individuals or Area of Service
> Delivery** - Not Applicable

**3. Eligibility for Subrecipients**

> a\. *Secondary School Vocational Education Programs* - A subrecipient
> must be: (1) a local educational agency (LEA) that is eligible to
> receive \$15,000 or more; (2) a consortium of LEAs; or (3) an area
> vocational education school or an educational service agency that
> meets the requirements in section 131(f) of Perkins III (20 USC
> 2351(f)). The State must treat a secondary school funded by the Bureau
> of Indian Affairs within the State as if such school were an LEA
> within the State for the purpose of receiving a distribution under
> this paragraph (20 USC 2351(i); Perkins III, section 131(i)). The
> State must provide funds to charter schools offering vocational
> education programs in the same manner as it provides those funds to
> other schools; vocational education programs within a charter school
> must be of sufficient size, scope, and quality to be effective (20 USC
> 2353(d); Perkins III, section 133(d)). For the definition of \"charter
> school\" applicable to Perkins III, see section 10306 of the ESEA of
> 1965 at http://www4.law.cornell.edu/uscode/20/8066.text.html.
>
> For the program year beginning July 1, 1999, and previous program
> years, unless a State has an approved alternative formula, a State
> must distribute the amount reserved for the secondary school
> vocational education programs as follows: (1) 70 percent to each LEA
> in proportion to the percentage each LEA received of the total funds
> awarded to LEAs in the State under Title 1, Part A of the ESEA in the
> preceding fiscal year; (2) 20 percent to each LEA in proportion to the
> number of students with disabilities who have individualized education
> programs under section 614(a)(5) of IDEA served by such LEA in the
> preceding fiscal year compared to the total number of such students
> served by all LEAs in the State in the preceding fiscal year; and (3)
> 10 percent to each LEA based on the number of students enrolled in
> schools plus adults enrolled in vocational educational programs under
> the jurisdiction of the LEA compared to total student enrollment in K
> through 12 plus total adult enrollment in vocational educational
> programs under the jurisdiction of LEAs in the State for the preceding
> fiscal year (Perkins III, section 131(a); 20 USC 2351(a)).
>
> For the program year beginning July 1, 2000, and subsequent program
> years, unless a State has an approved alternative formula, a State
> must distribute the amount reserved for the secondary school
> vocational education programs as follows: (1) 30 percent to each LEA
> in proportion to the number of individuals aged 15 through 19,
> inclusive, who reside in the school district served by such LEA for
> the preceding fiscal year compared to the total number of such
> individuals who reside in the school districts served by all LEAs in
> the State for such preceding fiscal year; and (2) 70 percent to each
> LEA in proportion to the number of individuals aged 15 through 19,
> inclusive, who reside in the school district served by such LEA from
> families with incomes below the poverty line applicable to a family of
> the size involved for the fiscal year for which the determination is
> made compared to the number of such individuals who reside in the
> school districts served by all the LEAs in the State for such
> preceding fiscal year (Perkins III, section 131(b); 20 USC 2351(b)).
>
> LEAs that do not meet the minimum grant requirement of \$15,000 can
> form consortia with one or more LEAs to meet the minimum grant
> requirement. The State can also waive the minimum grant requirement
> for LEAs in rural sparsely populated areas or for public charter
> schools operating secondary vocational education programs under
> certain circumstances (Perkins III, section 131(d)(2); 20 USC
> 2351(d)(2)).
>
> If the State reserves 15 percent or less for this program (including
> any funds reserved for secondary education under paragraph G.3.a.(1)
> below), it may distribute funds on a competitive basis or through any
> alternative method (Perkins III, section 133(a); 20 USC 2353(a)).
>
> b\. *Postsecondary and Adult Vocational Education Programs* - A
> subrecipient must be an eligible institution, including an institution
> of higher education; an LEA serving adults; an area vocational
> educational school providing education at the postsecondary level; a
> postsecondary education institution controlled by the Bureau of Indian
> Affairs or operated by or on behalf of any Indian Tribe; an
> educational service agency; or a consortium of 2 or more of these
> entities (Perkins III, section 132(a)(1); 20 USC 2352(a)(1)).
>
> Unless a State has an approved alternative formula, the State must
> distribute the amounts reserved for the postsecondary and adult
> vocational education programs to each eligible institution in
> proportion to the number of Pell grant recipients and recipients of
> assistance from the Bureau of Indian Affairs that participated in
> vocational education programs at that institution in the preceding
> year compared to the total of such recipients enrolled in those
> programs in the State in the preceding year. The minimum grant is
> \$50,000. Amounts allocated to recipients that are less than \$50,000
> are to be reallocated to other eligible recipients (Perkins III,
> section 132(a)-(c); 20 USC 2352(a)-(c)).
>
> Eligible institutions that do not meet the minimum grant requirement
> of \$50,000 can form consortia with one or more eligible institutions
> to meet the minimum grant requirement. The State can also waive the
> minimum grant requirement for eligible institutions in rural sparsely
> populated areas under certain circumstances (Perkins III, section
> 132(a)(3) and (4); 20 USC 2352(a)(3) and (4)).
>
> If the State reserves 15 percent or less for this program (including
> any funds reserved for postsecondary education under paragraph
> G.3.a(1) below), it may distribute funds on a competitive basis or
> through any alternative method (Perkins III, section 133(a); 20 USC
> 2353(a)).

**G. MATCHING, LEVEL OF EFFORT, EARMARKING**

**1. Matching**

> *State Administration* - A State must match, from non-Federal sources
> and on a dollar-for-dollar basis, the funds reserved for
> administration of the State plan. The matching requirement may be
> applied overall, rather than line-by-line, to State administrative
> expenditures (Perkins III, section 112(b); 20 USC 2322).

**2.1 Level of Effort** - *Maintenance of Effort*

> a\. *General* - A State must maintain its fiscal effort in the
> preceding year from State sources for vocational and technical
> education on **either** an aggregate **or** a per-student basis when
> compared with such effort in the second preceding year, unless this
> requirement is specifically waived by the Secretary of Education. For
> example, to receive its fiscal year 1999 grant award, a State must
> maintain its level of fiscal effort on either an aggregate or
> per-student basis in program year (PY) 1998 (July 1, 1997 - June 30,
> 1998) at the level of its fiscal effort in PY 1997 (July 1, 1996 -
> June 30, 1997). An example of how a State may maintain effort on a
> per-student basis, but not in the aggregate, is as follows:
>
> In PY 1997, a State spends \$50 million from State funds to provide
> vocational education to 300,000 students. In PY 1998, the State spends
> only \$49 million to provide vocational education to 290,000 students.
> Even though the State\'s aggregate effort decreased by \$10 million,
> the State\'s per-student effort increased from \$166.67 per student to
> \$168.97 per student. Thus, the State met the maintenance of effort
> requirement for its fiscal year 1999 grant (Perkins III, section
> 311(b)(1)(A); 20 USC 2391).
>
> If a State has been granted a waiver of the maintenance of effort
> requirement that allows it to receive a grant for a fiscal year, the
> maintenance of effort requirement for the year after the year of the
> waiver is determined comparing the amount spent for vocational
> education from non-Federal sources in the first preceding fiscal year
> (or program year) with the amount spent in the third preceding fiscal
> year (or program year) (Perkins III, section 311(b)(2); 20 USC 2391).
>
> In computing the fiscal effort or aggregate expenditures, a State must
> exclude capital expenditures, special one-time project costs, and the
> cost of pilot programs (Perkins III, section 311(b)(1)(B); 20 USC
> 2391(b)(1)(B)).
>
> *Decrease in Federal Support -* If the amount made available for
> vocational and technical education programs under the Act for a fiscal
> year is less than the amount made available for vocational and
> technical education programs under this Act for the preceding fiscal
> year, then the fiscal effort per student or the aggregate expenditures
> of a State for such preceding fiscal year shall be decreased by the
> same percentage as the percentage decrease in the amount so made
> available (20 USC 2391(b)(1)(C); Perkins III, section 311(b)(1)(C)).
>
> b\. *Administration* - A State must provide from non-Federal sources
> for State administration under the Perkins Act an amount that is not
> less than the amount provided by the State from non-Federal sources
> for State administrative costs for the preceding fiscal or program
> year (Perkins III, section 323(a); 20 USC 2391(a)).
>
> *Decrease in Federal Support* - If the amount made available for
> administration of programs under the Act for a fiscal year is less
> than the amount made available for administration of programs under
> this Act for the preceding fiscal year, the amount the eligible agency
> is required to provide from non-Federal sources for costs the eligible
> agency incurs for administration of programs shall be decreased by the
> same percentage (Perkins III, section 311(b)(1)(C); 20 USC
> 2391(b)(1)(C)).

**2.2 Level of Effort** *- Supplement Not Supplant*

> The State and its subgrantee may use funds for vocational and
> technical education activities that shall supplement, and shall not
> supplant, non-Federal funds expended to carry out vocational and
> technical education activities and tech-prep activities (Perkins III,
> section 311(a); USC 2391(a)). The examples of instances where
> supplanting is presumed to have occurred that are described in section
> III.G.2.2. of the ED Cross-Cutting Section (84.000) also apply to the
> vocational education program.
>
> Notwithstanding the above paragraph, funds made available under
> Perkins III may be used to pay for the costs of vocational and
> technical education services required in an individualized education
> plan (IEP) developed pursuant to section 614(d) of the Individuals
> with Disabilities Education Act (IDEA) and services necessary to meet
> the requirements of section 504 of the Rehabilitation Act of 1973 with
> respect to ensuring equal access to vocational and technical education
> (Perkins III, section 325(c); 20 USC 2415(c)).

**3. Earmarking**

> a\. *States* - Subject to the requirements discussed below regarding
> the minimum amount for State administration, a State must reserve the
> following percentages:
>
> \(1\) Secondary school programs, together with postsecondary and adult
> vocational education programs - not less than 85 percent. A State must
> distribute all of these funds to its subrecipients. A State may
> reserve no more than 10 percent of the 85 percent of funds to make
> grants to serve eligible subrecipients in at least two of the
> following four areas: (1) rural areas; (2) areas with high percentages
> of vocational education students; (3) areas with high numbers of
> vocational education students; or (4) communities negatively impacted
> by the amendment made to the secondary distribution formula (Perkins
> III, section 112(a) and (c), sections 131(a) and (b) and section
> 132(a); 20 USC 2322(a) and (c), 2351(a) and (b), and 2352(a)).
>
> \(2\) State leadership activities - not more than 10 percent. Within
> the State leadership activities not more than 1 percent of the amount
> allocated to each State in section 111 (20 USC 2321) shall be allotted
> to activities that serve individuals in State Institutions. Also, not
> less than \$60,000 and not more than \$150,000 of the amount allocated
> to each State in section 111 shall be made available for services that
> prepare individuals for nontraditional training and employment.
>
> \(3\) State administration - not more than 5 percent or \$250,000,
> whichever is greater, for administration of the State plan (20 USC
> 2322 (a); Perkins III, section 112(a)).
>
> b\. *Subrecipients* - Subrecipients under the secondary school
> vocational education programs and postsecondary and adult vocational
> education programs may use no more than 5 percent of those funds for
> administrative costs (Perkins III, section 135(d); 20 USC 2355(d)).

**H. Period of Availability of Federal Funds**

See ED Cross-Cutting Section.

**L. Reporting**

> **1. Financial Reporting**

a\. SF‑269 - *Financial Status Report* ‑ Applicable

> b\. SF‑270 - *Request for Advance or Reimbursement* ‑ Only grantees
> placed on reimbursement are required to complete this form to request
> payment of grant award funds. The requirement to use this form is
> imposed on an individual recipient basis.
>
> c\. SF‑271 - *Outlay Report and Request for Reimbursement for
> Construction Program* ‑ Not Applicable

d\. SF‑272 - *Federal Cash Transactions Report* ‑ Not Applicable

> e\. *Grant Administration and Payment System (GAPS) (OMB No.
> 1875-0138)* - Grantees draw funds and account to ED using GAPS.
> Grantees request funds by: (1) creating a payment request using the
> GAPS External Access System through the Internet; (2) calling the GAPS
> Payee Hotline; or (3) if the grantee is placed on a reimbursement
> basis for an award, submitting an SF-270, *Request for Advance or
> Reimbursement* to an ED program or regional office. When creating a
> payment request in GAPS, the grantee enters the drawdown amounts, by
> award, directly into GAPS. When requesting funds using the other 2
> methods, the grantee provides this information to the hotline
> operator, or on the SF-270, and ED staff enter the data into GAPS. ED
> also enters other award data into GAPS, including authorization
> amounts and payment status. The system maintains and provides
> cumulative data on net draws and the available balance for each award.
>
> When a grantee draws down funds, ED considers those funds to have been
> expended by the grantee for the awards identified and cumulative
> drawdown amounts in GAPS should accurately reflect the grantee\'s
> actual disbursement of funds by award. Grantees can redistribute drawn
> amounts between grant awards by making adjustments in GAPS to reflect
> actual disbursements for each award. For example, if a grantee draws
> too much under one award, it can enter an adjustment in GAPS to
> reallocate the excess amount to other awards for which there were
> immediate cash needs, as long as the net amount of the adjustment is
> zero.
>
> To assist grantees in reconciling their internal accounting records
> with GAPS, grantees can use the GAPS External Access System
> (http://gapsweb.ed.gov) to obtain a GAPS Activity Report showing
> cumulative and detail information for each award. The GAPS Activity
> Report can be created and viewed on‑line and a hard copy may be
> printed as well.
>
> f\. LEAs and other subrecipients are generally required to report
> financial information to the pass-through entity. These reports should
> be tested during audits of LEAs.

**2. Performance Reporting** - Not Applicable

**3. Special Reporting** - Not Applicable

**N. Special Tests and Provisions**

**1. Schoolwide Programs**

See ED Cross-Cutting Section

**DEPARTMENT OF EDUCATION**

**CFDA 84.126 REHABILITATION SERVICES - VOCATIONAL REHABILITATION GRANTS
TO STATES**

**I. PROGRAM OBJECTIVES**

The purpose of Title I of the Rehabilitation Act of 1973, as amended,
(Act) which authorizes the Vocational Rehabilitation (VR) program, is to
assist States in operating a comprehensive, coordinated, effective,
efficient, and accountable program that is designed to assess, plan,
develop, and provide VR services for individuals with disabilities,
consistent with their strengths, resources, priorities, concerns,
abilities, and capabilities, so such individuals may prepare for and
engage in gainful employment (Section 100(a)(2) of the Act).

**II. PROGRAM PROCEDURES**

Federal funds are distributed to the States on a formula basis with the
States required to provide a 21.3 percent match. The program is
administered by an agency designated by the State as having overall
administrative responsibility for the VR program. If the designated
State agency is not an agency primarily concerned with VR or other
rehabilitation of individuals with disabilities, it must include a
designated State unit within the agency that is responsible for the
designated State agency=s VR program (State VR Agency).

The States must submit to the Rehabilitation Services Administration
(RSA) a State Plan that provides both assurances and descriptions that
are required by Title I of the Act and the implementing regulations (34
CFR part 361). The State Plan forms the basis of RSA=s monitoring of the
State=s administration of the VR program.

Services are provided either directly by State VR Agency staff or
purchased from community-based vendors. Services, except those of an
assessment nature, are provided under the Individualized Written
Rehabilitation Program (IWRP) which is jointly developed by the
individual with a disability and the VR counselor to achieve an
employment outcome that is consistent with the individual=s strengths,
resources, priorities, concerns, abilities, capabilities and informed
choice.

**III. COMPLIANCE REQUIREMENTS**

**In developing the audit procedures to test compliance with the
requirements for a Federal program, the auditor should first look to
Part 2, Matrix of Compliance Requirements, to identify which of the 14
types of compliance requirements described in Part 3 are applicable and
then look to Parts 3 and 4 for the details of the requirements.**

**A. Activities Allowed Or Unallowed**

**1. Services To Individuals**

> VR services to individuals provided under a IWRP include: (1)
> assessment to determine eligibility and priority for services; (2)
> assessment to determine VR needs; (3) VR counseling and guidance; (4)
> referral and other services necessary to help applicants and eligible
> individuals secure needed services from other agencies and to advise
> those individuals about client assistance programs; (5) physical and
> mental restoration services necessary to correct or substantially
> modify a physical or mental condition that is stable or slowly
> progressive; (6) vocational and other training services, including
> personal and vocational adjustment training, books, tools, and other
> training materials; except no training or training services in an
> institution of higher education (universities, colleges, community or
> junior colleges, vocational schools, technical institutes or hospital
> schools of nursing) may be paid for with funds under this program
> unless maximum efforts have been made by the State unit and the
> individual to secure grant assistance in whole or in part from other
> sources to pay for that training; (7) maintenance or additional cost
> incurred while participating in rehabilitation; (8) transportation;
> (9) VR services to family members of an applicant or eligible
> individual if necessary to enable the applicant or eligible individual
> to achieve an employment outcome; (10) interpreter services for
> individuals who are deaf and tactile interpreting services for
> individuals who are deaf-blind; (11) reader services, rehabilitation
> teaching services, and orientation and mobility services for
> individuals who are blind; (12) recruitment and training services to
> provide new employment opportunities in the fields of rehabilitation,
> health, welfare, public safety, law enforcement and other appropriate
> public service employment; (13) job search and placement assistance
> and job retention services; (14) supported employment services; (15)
> personal assistance services; (16) post-employment services; (17)
> occupational licenses, tools, equipment, initial stocks, and supplies;
> (18) rehabilitation technology, including vehicular modification,
> telecommunications, sensory and other technological aids and devices;
> (19) transition services; and (20) other goods and services determined
> necessary for the individual with a disability to achieve an
> employment outcome (34 CFR section 361.48).
>
> **2. Services to Groups**
>
> If included in the State Plan, the State VR Agency may provide other
> services to groups of individuals with disabilities (34 CFR section
> 361.49).
>
> a\. Community Rehabilitation Programs - The establishment,
> development, or improvement of a public or other nonprofit community
> rehabilitation program that is used to provide services that promote
> integration and competitive employment, including, under special
> circumstances, the construction of a facility for a public or
> nonprofit community rehabilitation program.
>
> b\. Telecommunications systems that have the potential for
> substantially improving vocational rehabilitation service delivery
> methods and developing appropriate programming to meet the particular
> needs of individuals with disabilities.
>
> c\. Special services to provide recorded material or video description
> services for individuals who are blind, captioned television, films,
> or video cassettes for individuals who are deaf, tactile materials for
> individuals who are deaf‑blind, and other special services that
> provide information through tactile, vibratory, auditory, and visual
> media.
>
> d\. Technical assistance and support services, such as job site
> modification and other reasonable accommodations, to businesses that
> are not subject to Title I of the Americans with Disabilities Act of
> 1990, and that are seeking to employ individuals with disabilities.
>
> e\. Management services and supervision, acquisition of equipment,
> initial stocks and supplies, and initial operating expenses for small
> business enterprises operated by individuals with the most severe
> disabilities under the supervision of the State unit.
>
> f\. Other services to groups of individuals with disabilities not
> directly related to the IWRP of any one individual.

**E. Eligibility**

> **1. Eligibility of Individuals**
>
> In order to be eligible, the State must determine that: (1) the
> applicant has a physical or mental impairment; (2) the applicant\'s
> physical or mental impairment constitutes or results in a substantial
> impediment to employment; and (3) the applicant requires vocational
> rehabilitation services to prepare for, enter into, engage in, or
> retain gainful employment consistent with the applicant\'s strengths,
> resources, priorities, concerns, abilities, capabilities, and informed
> choice.
>
> The State must presume that an applicant who meets the above
> eligibility requirements can benefit in terms of an employment
> outcome, unless it demonstrates, based on clear and convincing
> evidence, that the applicant is incapable of benefitting in terms of
> an employment outcome from vocational rehabilitation services (29 USC
> 722(a)(1); 34 CFR section 361.42(a)(1)).
>
> An eligibility determination shall be made within 60 days after the
> individual has submitted an application to receive services, unless
> the individual and the State VR Agency agree to a specific extension
> of time or an extended evaluation is necessary in accordance with 34
> CFR section 361.42 (d) (29 USC 722(a)(6); 34 CFR section
> 361.41(b)(1)).
>
> The State may chose to consider the financial need of eligible
> individuals or individuals who are receiving services during an
> extended evaluation for the purposes of determining the extent of
> their participation in the cost of VR services other than assessment;
> VR counseling, guidance, and referral services; and, placement
> services. If the State indicates in its State Plan that it will use
> financial need tests for one or more types of VR services, it must
> apply such tests in accordance with its written policies uniformly to
> all individuals under similar circumstances. The policies may require
> different levels of need for different geographic regions in the
> State, but must be applied uniformly to all individuals within each
> geographic region (34 CFR section 361.54).
>
> **2. Eligibility for Group of Individuals or Area of Service
> Delivery** - Not Applicable
>
> **3. Eligibility for Subrecipients** - Not Applicable

**G. Matching, Level of Effort, Earmarking**

> **1. Matching**
>
> a\. The State share of expenditures made by the State VR Agency under
> the State Plan, including expenditures for the provision of VR
> services, administration of the State Plan, and the development and
> implementation of the strategic plan is 21.3 percent (34 CFR section
> 361.60(a)(1)).
>
> b\. The Federal share of expenditures made for the construction of a
> facility for community rehabilitation program purposes may not be more
> than 50 percent of the total cost of the project (34 CFR section
> 361.60(a)(2)).
>
> **2.1 Level Of Effort -** *Maintenance of Effort*
>
> a\. The amount otherwise payable to a State for a fiscal year under
> this section shall be reduced by the amount by which expenditures from
> non-Federal sources under the State Plan for the previous fiscal year
> are less than the total of such expenditures for the fiscal year two
> years prior to the previous fiscal year. For example, for fiscal year
> 1996, a State=s maintenance of effort level is based on the amount of
> its expenditures from non-Federal sources for fiscal year 1994. Thus
> if the State=s non-Federal expenditures in fiscal year 1996 are less
> than they were in fiscal year 1994, the State has a maintenance of
> effort deficit, and the Secretary reduces the State=s allotment for
> fiscal year 1997 by the amount of that deficit (29 USC 731(a)(2),
> Section 111(a)(2)(B)(ii) of the Act and 34 CFR section 361.62).
>
> b\. If the State Plan provides for the construction of a facility for
> community rehabilitation program purposes, the amount of the State=s
> share of expenditures for a fiscal year for VR services under the
> Plan, other than for the construction of a facility for community
> rehabilitation program purposes or the establishment of a facility for
> community rehabilitation purposes, must be at least equal to the
> State=s share of those expenditures for the second prior fiscal year
> (34 CFR section 361.62).
>
> **2.2 Level of Effort -** *Supplement Not Supplant* - Not Applicable
>
> **3. Earmarking** - Not applicable

**H. Period of Availability of Federal Funds**

> Federal funds appropriated for a fiscal year remain available for
> obligation in the succeeding fiscal year only to the extent that the
> State VR Agency met the matching requirement for those Federal funds
> by obligating, in accordance with 34 CFR section 76.707, the
> non-Federal share in the fiscal year for which the funds were
> appropriated. Any program income received during a fiscal year that is
> not obligated by the State VR Agency by the end of that fiscal year,
> will remain available for obligation by the State VR Agency during the
> succeeding fiscal year (29 USC 716; 34 CFR section 361.64).

**J. Program Income**

> Sources of program income include, but are not limited to, payments
> from the Social Security Administration for rehabilitating Social
> Security beneficiaries, payments received from workers= compensation
> funds, fees for services to defray part or all of the costs of
> services provided to particular individuals, and income generated by a
> State-operated community rehabilitation program.
>
> Except as indicated below, program income, whenever earned, must be
> used for the provision of VR services, the administration of the State
> Plan, and developing and implementing the strategic plan under the
> State Vocational Rehabilitation Services Program. Program income is
> considered earned when it is received.
>
> The State VR Agency is authorized to treat program income as a
> deduction from total allowable costs or as an addition to the grant
> funds to be used for additional allowable program expenditures, in
> accordance with 34 CFR sections 80.25(g)(1) or (2), (34 CFR section
> 361.63).

**L. Reporting**

> **1. Financial Reporting**
>
> a\. SF‑269, *Financial Status Report* ‑ Applicable
>
> b\. SF‑270, *Request for Advance or Reimbursement* ‑ Only grantees
> placed on reimbursement are required to complete this form to request
> payment of grant award funds. The requirement to use this form is
> imposed on an individual recipient basis.
>
> c\. SF‑271, *Outlay Report and Request for Reimbursement for
> Construction Program* ‑ Not Applicable
>
> d\. SF‑272, *Federal Cash Transactions Report* ‑ Not Applicable
>
> e\. *Grant Administration and Payment System (GAPS) (OMB No.
> 1875-0138)* - Grantees draw funds and account to the Department of
> Education (ED) using GAPS. Grantees request funds by: (1) creating a
> payment request using the GAPS External Access System through the
> Internet; (2) calling the GAPS Payee Hotline; or (3) if the grantee is
> placed on a reimbursement basis for an award, submitting an SF-270,
> *Request for Advance or Reimbursement* to an ED program or regional
> office. When creating a payment request in GAPS, the grantee enters
> the drawdown amounts, by award, directly into GAPS. When requesting
> funds using the other 2 methods, the grantee provides this information
> to the hotline operator, or on the SF-270, and ED staff enter the data
> into GAPS. ED also enters other award data into GAPS, including
> authorization amounts and payment status. The system maintains and
> provides cumulative data on net draws and the available balance for
> each award.
>
> ED considers drawn funds to have been expended by the grantee for the
> award(s) identified (notwithstanding that the grantee has up to three
> days to make disbursements). Cumulative drawdown amounts in GAPS
> should accurately reflect the grantee\'s actual disbursement of funds
> by award. Grantees can redistribute drawn amounts between grant awards
> by making adjustments in GAPS to reflect actual disbursements for each
> award. For example, if a grantee draws too much under one award, it
> can enter an adjustment in GAPS to reallocate the excess amount to
> other awards for which there were immediate cash needs, as long as the
> net amount of the adjustment is zero.
>
> To assist grantees in reconciling their internal accounting records
> with GAPS, grantees can use the GAPS External Access System
> (http://gapsweb.ed.gov) to obtain a GAPS Activity Report showing
> cumulative and detail information for each award. The GAPS Activity
> Report can be created and viewed on‑line and a hard copy may be
> printed as well.
>
> f\. RSA-2, *Program Cost Report* *(OMB No. 1820-0617)*. State VR
> agencies submit the RSA-2 annually.
>
> **2. Performance Reporting** - Not Applicable
>
> **3. Special Reporting** - Not Applicable

**N. Special Tests and Provisions**

> **1. Individualized Written Rehabilitation Program (IWRP)**
>
> **Compliance Requirement** - An IWRP must be developed jointly by the
> VR counselor and the eligible individual (or the individual=s
> representative). The IWRP is the plan of action that: identifies the
> planned employment outcome (vocational goal) of the individual;
> intermediate objectives that the individual must achieve in order to
> achieve the identified vocational goal; objective criteria and an
> evaluation procedure to determine if the objectives and goals are
> being achieved; services that are determined to be necessary to assist
> the individual to achieve the objectives and ultimately the planned
> employment goal; the projected start date and anticipated duration of
> each service; providers of the services; and, the terms and conditions
> connected with the provision of the services, including among other
> things, the responsibilities of the individual and the extent to which
> the individual participates in the cost of services (34 CFR sections
> 361.45-46).
>
> **Audit Objective** - Determine whether an IWRP was developed jointly
> by the vocational counselor and the individual that included the
> required content and whether the services provided where included in
> the IWRP.

**Suggested Audit Procedures**

> a\. Select a sample of individuals served and ascertain if a IWRP was
> developed.
>
> b\. Review the selected IWRPs for evidence that the individuals
> participated in their development and to ascertain if IWRP included
> the required content.
>
> c\. For each selected individual, trace services provided per the case
> service record to the IWRP to ascertain if the services provided were
> included in the IWRP.
>
> **2. Comparable Services And Benefits**
>
> **Compliance Requirement** - The State is required to seek comparable
> services and benefits from other programs before providing VR services
> to an eligible individual or to members of the individual=s family
> unless: (1) the search for comparable benefits and services under any
> other program would delay the provision of VR services to an
> individual determined to be at extreme medical risk based on medical
> evidence provided by a qualified medical professional; or (2) an
> immediate job placement would be lost due to a delay in the provision
> of the comparable services or benefits. The following services are
> exempt from this requirement: (1) assessment for determining
> eligibility and priority for services; (2) assessment for determining
> VR needs; (3) VR counseling, guidance, and referral services; (4)
> vocational and other training services, such as personal and
> vocational adjustment training, books, tools, and other training
> materials; (5) placement services; (6) rehabilitation technology; and
> (7) post-employment services for services \"1\" through \"6\" above
> (29 USC 721(a)(8); Section 101(a)(8) of the Act; 34 CFR section
> 361.53).
>
> **Audit Objective** - Determine whether comparable services were
> sought before providing VR benefits to eligible individuals.
>
> **Suggested Audit Procedures**
>
> Select a sample of case records and review to ascertain whether
> comparable services were sought from other sources before providing VR
> services to the individual, or that a valid exception existed and was
> properly documented in the case record.

**DEPARTMENT OF EDUCATION**

**CFDA 84.181 SPECIAL EDUCATION \-- GRANTS FOR INFANTS AND FAMILIES WITH
DISABILITIES**

**I. PROGRAM OBJECTIVES**

The purposes of the Individuals with Disabilities Education Act (IDEA),
Part C (Part C) are: (a) to develop and implement a statewide,
comprehensive, coordinated, multi disciplinary interagency system that
provides early intervention services for infants and toddlers with
disabilities and their families; (b) to facilitate the coordination of
payment for early intervention services from Federal, State, local and
private sources (including public and private insurance coverage); (c)
to enhance the State\'s capacity to provide quality early intervention
services and expand and improve existing early intervention services
being provided to infants and toddlers with disabilities and their
families; (d) to encourage States to expand opportunities for children
under the age of three years who would be at risk of having substantial
developmental delay if they did not receive early intervention services;
and (e) to enhance the capacity of State and local agencies and service
providers to identify, evaluate, and meet the needs of historically
under represented populations, particularly minority, low-income,
inner-city, and rural populations (20 USC 1431(b); 34 CFR section
303.1).

**II. PROGRAM PROCEDURES**

Generally, the State is responsible for maintaining and implementing a
statewide system to identify, evaluate and provide early intervention
services to eligible children and their families. Such a system includes
a public awareness and child find system, development and implementation
of an individualized family service plan for eligible children,
maintenance of a central directory of information about early
intervention services, personnel development and contracting for or
otherwise providing services to eligible children and their families.

A State must have an approved application that provides required
assurances and describes the statewide system and related policies. The
State designates a lead agency that is responsible for administering,
and supervising activities funded by this program. Program services may
be carried out by the lead agency, other State agencies, or by public or
private organizations either under contract to the State or through
other arrangements with such agencies. The lead agency also monitors
activities that are covered by the program, whether or not they are
funded by this program. The State also must establish a State
Interagency Coordinating Council that, among other things, advises and
assists the lead agency in the development and implementation of
policies and achieving participation, cooperation, and coordination of
all appropriate public agencies in the State.

The amount of a State=s allocation under Part C for a fiscal year is
based on its proportion of the general population of infants and
toddlers, from birth through two years, in the State (i.e., the ratio of
the number of infants and toddlers in the State compared to the number
of infants and toddlers in all the States).

**Source of Governing Requirements**

This program is authorized under 20 USC 1431 through 1445. Implementing
regulations specific to this program are 34 CFR part 303.

**III. COMPLIANCE REQUIREMENTS**

**In developing the audit procedures to test compliance with the
requirements for a Federal program, the auditor should first look to
Part 2, Matrix of Compliance Requirements, to identify which of the 14
types of compliance requirements described in Part 3 are applicable and
then look to Parts 3 and 4 for details of the requirements.**

Certain compliance requirements which apply to multiple Department of
Education (ED) programs are discussed once in the ED Cross-Cutting
Section of this Supplement (page 4-84.000-1) rather than repeating in
each individual program. Where applicable, this section references to
the Cross-Cutting Section for these requirements.

**A. Activities Allowed or Unallowed**

> The approved application describes the activities to be carried out.
> Generally, allowable activities for a State, include (20 USC 1438; 34
> CFR section 303.3):
>
> 1\. Maintaining a statewide, comprehensive, coordinated,
> multi-disciplinary, interagency system to provide early intervention
> services for infants and toddlers with disabilities and their
> families.
>
> 2\. Providing direct early intervention services for infants and
> toddlers with disabilities and their families, that are otherwise not
> funded through other public or private sources.
>
> 3\. Expanding and improving on services under Part C that are
> otherwise available for infants and toddlers and their families.
>
> 4\. Providing a free appropriate public education, in accordance with
> Part B of the IDEA, to children with disabilities from their third
> birthday to the beginning of the following school year.
>
> 5\. In any State that does not provide services for at risk infants
> and toddlers, to strengthen the statewide system by initiating,
> expanding, or improving collaborative efforts related to at-risk
> infants and toddlers including establishing linkages with appropriate
> public or private community-based organizations, services, and
> personnel for the purpose of: (a) identifying and evaluating at-risk
> infants and toddlers; (b) making referrals of the infants and toddlers
> identified and evaluated; and (c) conducting periodic follow-up on
> each such referral to determine if the status of the infant or toddler
> involved has changed with respect to the eligibility of the infant and
> toddler for services.

**B. Allowable Costs/Cost Principles**

See ED Cross-Cutting Section.

**G. Matching, Level of Effort, Earmarking**

**1. Matching -** Not Applicable

**2.1 Level of Effort -** *Maintenance of Effort*

> The total amount of State and local funds budgeted for expenditure in
> the current fiscal year for early intervention services for children
> eligible under Part C and their families must be at least equal to the
> total amount of State and local funds actually expended for early
> intervention services for these children and their families in the
> most recent preceding fiscal year for which the information is
> available. Allowances may be made for: (1) decreases in the number of
> children who are eligible to receive Part C early intervention
> services; and (2) unusually large amounts of funds expended for such
> long-term purposes such as the acquisition of equipment and the
> construction of facilities (20 USC 1437(b)(5); 34 CFR section
> 303.124).
>
> Although this requirement is identified as a supplement not supplant
> requirement in the law and regulation, this Supplement classifies this
> type of requirement as maintenance of effort.

**2.2 Level of Effort** - *Supplement Not Supplant* - Not Applicable

**3. Earmarking** - Not Applicable

**H. Period of Availability of Funds**

See ED Cross-Cutting Section.

**L. Reporting**

**1. Financial Reporting**

See ED Cross-Cutting Section.

**2. Performance Reporting** - Not Applicable

**3. Special Reporting**

> a\. *Report of Infants and Toddlers Receiving Early Intervention
> Services In Accordance With Part C (OMB Form 1820 -0557)* - The Lead
> Agency in each State is required to report to the Secretary no later
> than February 1 of each year the number of infants and toddlers from
> birth through age two (children who have not reached their third
> birthday) receiving early intervention services according to an
> individualized family service plan on December 1 of the prior year (20
> USC 1418 and 1435(a)(14)).

*Key Line Items* - The following line items contain critical
information.

Table 1 - Total row

Table 2 - Total column

Table 3 - Total column

**DEPARTMENT OF EDUCATION**

**CFDA 84.186 SAFE AND DRUG-FREE SCHOOLS AND COMMUNITIES\--STATE GRANTS
(Title IV, Part A, Subpart 1 of ESEA)**

**I. PROGRAM OBJECTIVES**

The objective of the Safe and Drug-Free School program authorized by the
Safe and Drug-Free Schools and Communities Act (SDFSCA), contained in
Title IV of ESEA, is to support programs to meet the seventh National
Education Goal by preventing violence in and around schools and by
strengthening programs that prevent the illegal use of alcohol, tobacco,
and drugs, involve parents, and are coordinated with related Federal,
State, and community efforts and resources.

**II. PROGRAM PROCEDURES**

In general, SDFSCA funds are allocated to States based on their relative
share of school-aged population and Title I funds. Of each State\'s
annual allocation amount, 80 percent is awarded to the State Educational
Agency (SEA) for programs described in Section 4113 of the SDFSCA and 20
percent is awarded to the Governor for programs described in Section
4114 of the SDFSCA. On the grant documents the Department of Education
(ED) codes these programs with an AA@ following the CFDA number to
indicate a grant to the SEA program and a AB@ following the CFDA number
to indicate a grant to the Governor=s program. However, these are
treated as one program under OMB Circular A-133.

SEAs may use a portion of the funds they receive for administrative
activities and to carry out State-level program activities. The majority
of the funds received by an SEA must be distributed to local educational
agencies (LEAs) for drug and violence prevention activities. A portion
of the amount required to be distributed to LEAs is required to be
distributed to the LEAs that the SEA determines have the Agreatest
need.@ LEAs must submit an application which would include, among other
things, how it will use the funds.

Governors also may use a portion of the funds they receive for
administration. Excluding the percentage of funds reserved for
administration, Governors must make grants to, or enter into contracts
with eligible entities for drug and violence prevention activities. In
addition, a portion of the Governor\'s funds must be used for law
enforcement education partnerships. Governors may have another state
agency, including an SEA, administer the program on their behalf. No
matter who administers the program, the program remains the
responsibility of the Governor=s office (Sections 4113 and 4114 of the
SDFSCA; 20 USC 7113 and 7114).

**III. COMPLIANCE REQUIREMENTS**

**In developing the audit procedures to test compliance with the
requirements for a Federal program, the auditor should first look to
Part 2, Matrix of Compliance Requirements, to identify which of the 14
types of compliance requirements described in Part 3 are applicable and
then look to Parts 3 and 4 for the details of the requirements.**

Certain compliance requirements which apply to multiple ESEA programs
are discussed once in the Department of Education (ED) Cross-Cutting
Section of this Supplement (page 4-84.000-1) rather than repeating in
each individual program. Where applicable, this section references to
the Cross-Cutting Section for these requirements. Also, as discussed in
the Cross-Cutting Section, SEAs and LEAs may have been granted waivers
from certain compliance requirements.

**A. Activities Allowed or Unallowed**

> Also, see ED Cross-Cutting Section.

1\. **Use of Funds by SEAs**

> An SEA may use funds for State-level programs and for making subgrants
> to LEAs. An SEA may use the funds reserved for State-level programs
> for activities including providing training and technical assistance,
> conducting demonstration projects, making available cost-effective
> prevention programs to LEAs, providing financial assistance to enhance
> resources in some areas, and meeting other special needs consistent
> with the purposes of SDFSCA. The list (see below) of authorized
> State-level program activities found in Section 4113(b)(1) of the
> SDFSCA does not exclude other activities that may be carried out by
> the SEA, consistent with the purposes of SDFSCA. An SEA may carry out
> activities in Section 4113(b)(1) directly, or through grants or
> contracts.
>
> An SEA may not use SDFSCA funds for construction, or to provide
> medical services, drug treatment, or rehabilitation. As stated in
> Section 4133 of the SDFSCA, pupil services or referral to treatment
> for students who are victims of or witnesses to crime or who use
> alcohol, tobacco, or drugs are not included in the prohibition
> (Section 4133 of the SDFSCA (20 USC 7143)).
>
> List of authorized State Level program activities found in Section
> 4113(b)(1) of the SDFSCA:
>
> a\. Training and technical assistance concerning drug and violence
> prevention for LEAs and educational service agencies, including
> teachers, administrators, coaches and athletic directors, other staff,
> parents, students, community leaders, health service providers, local
> law enforcement officials, and judicial officials;
>
> b\. The development, identification, dissemination, and evaluation of
> the most readily available, accurate, and up-to-date curriculum
> materials (including videotapes, software, and other technology-based
> learning resources), for consideration by LEAs;
>
> c\. Making available to LEAs cost-effective programs for youth
> violence and drug abuse prevention;
>
> d\. Demonstration projects in drug and violence prevention;
>
> e\. Training, technical assistance, and demonstration projects to
> address violence associated with prejudice and intolerance;
>
> f\. Financial assistance to enhance resources available for drug and
> violence prevention in areas serving large numbers of economically
> disadvantaged children or sparsely populated areas, or to meet other
> special needs consistent with the purposes of this subpart; and
>
> g\. The evaluation of activities carried out within the State under
> this part.

**2. Uses of Funds by LEAs**

> An LEA may use SDFSCA funds to carry out a broad range of drug and
> violence prevention programs. SDFSCA provides a general framework for
> LEA prevention efforts by requiring that SDFSCA funds be used to
> support comprehensive drug and violence prevention programs that: (1)
> are designed for all students and employees to prevent the use,
> possession, and distribution of tobacco, alcohol, and illegal drugs by
> students; prevent the illegal use, possession, and distribution of
> tobacco, alcohol, and illegal drugs by employees; prevent violence and
> promote school safety; create a disciplined environment conducive to
> learning; and (2) include activities to promote the involvement of
> parents and coordination with community groups and agencies.
>
> Authorized activities found in Section 4116(b) of the SDFSCA are
> listed below. Other activities may be carried out by the LEA,
> consistent with the purposes of SDFSCA. Such activities specifically
> include mentoring, before- and after-school instructional,
> recreational, cultural, and artistic programs. Note that comprehensive
> school health education activities may be implemented only to the
> extent that such activities are part of an LEA\'s comprehensive drug
> and violence prevention program (Section 4116(b) of the SDFSCA (20 USC
> 7116(b)).
>
> An LEA may not use SDFSCA funds for construction, or to provide
> medical services, drug treatment, or rehabilitation. As stated in
> Section 4133 of the SDFSCA, pupil services or referral to treatment
> for students who are victims of or witnesses to crime or who use
> alcohol, tobacco, or drugs are not included in the prohibition
> (Section 4133 of the SDFSCA (20 USC 7133)).
>
> List of authorized activities found in Section 4116(b):
>
> a\. Age-appropriate, developmentally based drug prevention and
> education programs for all students, from the pre-school level through
> grade 12, that address the legal, social, personal and health
> consequences of the use of illegal drugs, promote a sense of
> individual responsibility, and provide information about effective
> techniques for resisting peer pressure to use illegal drugs;
>
> b\. Programs of drug prevention, comprehensive health education, early
> intervention, pupil services, mentoring, or rehabilitation referral,
> which emphasize students\' sense of individual responsibility and
> which may include -the dissemination of information about drug
> prevention; -the professional development of school personnel,
> parents, students, law enforcement officials, judicial officials,
> health service providers and community leaders in prevention,
> education, early intervention, pupil services or rehabilitation
> referral; -the implementation of strategies, including strategies to
> integrate the delivery of services from a variety of providers, to
> combat illegal alcohol, tobacco and drug use, such as family
> counseling; early intervention activities that prevent family
> dysfunction, enhance school performance, and boost attachment to
> school and family; and activities, such as community service and
> service-learning projects, that are designed to increase students\'
> sense of community;
>
> c\. Age-appropriate, developmentally based violence prevention and
> education programs for all students, from the pre-school level through
> grade 12, that address the legal, health, personal, and social
> consequences of violent and disruptive behavior, including sexual
> harassment and abuse, and victimization, associated with prejudice and
> intolerance, and that include activities designed to help students
> develop a sense of individual responsibility and respect for the
> rights of others, and to resolve conflicts without violence;
>
> d\. Violence prevention programs for school-aged youth, which
> emphasize students\' sense of individual responsibility and may
> include: -the dissemination of information about school safety and
> discipline; -the professional development of school personnel,
> parents, students, law enforcement officials, judicial officials, and
> community leaders in designing and implementing strategies to prevent
> school violence; -the implementation of strategies, such as conflict
> resolution and peer mediation, student outreach efforts against
> violence, anti-crime youth councils (which work with school and
> community-based organizations to discuss and develop crime prevention
> strategies), and the use of mentoring programs, to combat school
> violence and other forms of disruptive behavior, such as sexual
> harassment and abuse; -the development and implementation of character
> education programs, as a component of a comprehensive drug or violence
> prevention program, that are tailored by communities, parents and
> schools; and -comprehensive, community-wide strategies to prevent or
> reduce illegal gang activities;
>
> e\. Supporting \"safe zones of passage\" for students between home and
> school through such measures as Drug- and Weapon-Free School Zones,
> enhanced law enforcement, and neighborhood patrols;
>
> f\. Acquiring and installing metal detectors and hiring security
> personnel;
>
> g\. Professional development for teachers and other staff and
> curricula that promote the awareness of and sensitivity to
> alternatives to violence through courses of study that include related
> issues of intolerance and hatred in history;
>
> h\. The promotion of before- and after-school recreational,
> instructional, cultural, and artistic programs in supervised community
> settings;
>
> i\. Drug abuse resistance education programs, designed to teach
> students to recognize and resist pressures to use alcohol and other
> drugs, which may include activities such as classroom instruction by
> uniformed law enforcement officers, resistance techniques, resistance
> to peer pressure and gang pressure, and provision for parental
> involvement; and
>
> j\. The evaluation of any of the activities authorized for LEAs.

**3. Uses of Funds by Governor\'s Program**

> A Governor may use SDFSCA funds for a broad range of drug and violence
> prevention programs that may be carried out by parent groups,
> community action and job training agencies, community-based
> organizations, and other public and private nonprofit entities and
> organizations. The list (see below) of authorized activities found in
> Section 4114(c) does not exclude other activities that may be carried
> out by such organizations, consistent with the purposes of Subpart 1.
> Specifically included are mentoring, before- and after-school
> instructional, recreational, cultural, and artistic programs (Section
> 4114(c) of the SDFSCA (20 USC 7114(c)).
>
> A Governor\'s grantee or contractor may not use SDFSCA funds for
> construction, or to provide medical services, drug treatment, or
> rehabilitation. As stated in Section 4133 of the SDFSCA, pupil
> services or referral to treatment for students who are victims of or
> witnesses to crime or who use alcohol, tobacco, or drugs are not
> included in the prohibition (Section 4133 of the SDFSCA (20 USC
> 7133)).
>
> List of authorized activities found in Section 4114 (c):
>
> a\. Disseminating information about drug and violence prevention;
>
> b\. Training parents, law enforcement officials, judicial officials,
>
> social service providers, health service providers and community
> leaders about drug and violence prevention, comprehensive health
> education, early intervention, pupil services or rehabilitation
> referral;
>
> c\. Developing and implementing comprehensive, community-based drug
> and violence prevention programs that link community resources with
> schools and integrate services involving education, vocational and job
> skills training and placement, law enforcement, health, mental health,
> community service, mentoring, and other appropriate services;
>
> d\. Planning and implementing drug and violence prevention activities
> that coordinate the efforts of State agencies with efforts of the
> State educational agency and its local educational agencies;
>
> e\. Activities to protect students traveling to and from school;
>
> f\. Before-and-after school recreational, instructional, cultural, and
> artistic programs that encourage drug- and violence- free lifestyles;
>
> g\. Activities that promote the awareness of and sensitivity to
> alternatives to violence through courses of study that include related
> issues of intolerance and hatred in history;
>
> h Developing and implementing activities to prevent and reduce
> violence associated with prejudice and intolerance;
>
> i\. Coordinating and conducting community-wide violence and safety
> assessments and surveys;
>
> j\. Service-learning projects that encourage drug- and violence-free
> lifestyles; and
>
> k\. Evaluating programs and activities assisted under Section 4114.

**B. Allowable Costs/Cost Principles**

> See ED Cross-Cutting Section.

**E. Eligibility**

> **1. Eligibility for Individuals** - Not Applicable
>
> **2. Eligibility for Groups of Individuals or Areas of Service
> Delivery** - Not Applicable
>
> **3. Eligibility for Subrecipients**
>
> As discussed in III.G.3.(a), Earmarking, State-level programs,
> administrative costs, initial allocations to LEAs, of the minimum 91
> percent of an SEA\'s total allocation that must be distributed to its
> LEAs, 30 percent of funds must be awarded to LEAs with \"greatest
> need.\" In determining LEAs with the \"greatest need\" for additional
> funds for drug and violence prevention programs, an SEA must have
> selected objective criteria to assess which LEAs in their State have
> the greatest need for additional funding (Section 4113(d) of the
> SDFSCA (20 USC 7113(d))).

**G. Matching, Level of Effort, Earmarking**

**1. Matching** - Not Applicable

**2.1 Level of Effort** *- Maintenance of Effort* (SEAs/LEAs)

See ED Cross-Cutting Section.

**2.2 Level of Effort** - *Supplement not Supplant* - Not Applicable

**3. Earmarking**

Also, see ED Cross-Cutting Section.

> \(a\) *State-level programs, administrative costs, initial allocations
> to LEAs* (SEAs)
>
> An SEA may reserve not more than five percent of its total allocation
> for State level programs, to be carried out directly, or through
> grants and contracts. Not more than four percent of an SEA\'s total
> allocation may be used for administrative costs. Funds not used for
> administration or State-level programs must flow to LEAs (Sections
> 4113(b)(1) and (c) of the SDFSCA).
>
> A minimum of 91 percent of an SEA\'s total allocation must be
> distributed to its LEAs. Of the 91 percent available for distribution
> to LEAs, an SEA must initially allocate 70 percent to LEAs based on
> their relative share of enrolled students in public and private
> nonprofit elementary and secondary schools.
>
> \(b\) *Allocation of \"greatest need\" funds (SEAs)*
>
> The remaining 30 percent (of the minimum 91 percent) of funds must be
> awarded to LEAs with \"greatest need,\" as determined by the SEA.
> Where appropriate and consistent with a State\'s needs assessment, not
> less than one-quarter of the \"greatest need\" funds must be
> distributed to LEAs in rural and urban areas (Section 4113(d) of the
> SDFSCA (20 USC 7113(d))).
>
> If an LEA does not apply for its allocation of the 70 percent, of the
> minimum 91 percent of SDFSCA funds that are to be distributed based on
> relative enrollments, or if the SEA disapproves an LEA\'s application
> for those funds, the SEA must reallocate that LEA\'s funds to one or
> more of the LEAs that received \"greatest need\" funds (Section 4113
> (e) of the SDFSCA (20 USC 7113(e))).
>
> \(c\) *Distribution of \"greatest need\" funds to LEAs*
>
> An SEA may distribute the Agreatest need@ funds to no more than 10
> percent of its LEAs, or five LEAs, whichever is greater (the cap). An
> SEA may award funds to individual LEAs or to a consortia of LEAs or
> educational service agencies. Each individual LEA that receives funds
> or services from the Agreatest need@ pool of funds must be counted
> against the cap on the number of LEAs receiving funds from the pool.
> If an award is made to a consortia, the SEA may select from two
> options to determine how the cap is calculated and how LEAs in
> consortia are counted against the cap.
>
> In the first method, the SEA includes the total number of LEAs in the
> State in the calculation of the cap, and must count every LEA
> receiving funds or services supported with SDFSCA Agreatest need@
> funds (whether in consortia or not) as an individual LEA against the
> cap. For example, a consortium providing services to seven LEAs would
> be counted against the cap as seven LEAs, not one LEA.
>
> Alternatively, if the consortium is the same entity that receives
> SDFSCA State Grant funds distributed under Section 4113(d)(2)(i), the
> SEA could count the consortium as a single LEA in calculating the cap
> and the consortium would count as one LEA against the cap. (Section
> 4113(d) of the SDFSCA (20 USC 7113(d))).

\(d\) *Cap on security devices and security personnel (LEAs)*

> An LEA may acquire and install metal detectors and hire security
> personnel as authorized activities under SDFSCA. However, (1) LEAs may
> not use more than 20 percent of their SDFSCA funds to acquire or
> install metal detectors, to hire security personnel, or to support
> \"safe zones of passage\" for students between home and school; and
> (2) LEAs may use funding for these purposes only if funding for such
> activities is not received from other Federal agencies (Section
> 4116(c) of the SDFSCA (20 USC 7116(c))).
>
> \(e\) *Administrative costs and law enforcement education partnerships
> (Governor=s Programs)*
>
> A Governor may use no more than five percent of the total allocation
> for administrative activities. At least 10 percent of the Governor\'s
> funds must be awarded for law enforcement education partnerships
> (Section 4114(a)(2) and (3) of the SDFSCA (20 USC 7114(a)(2) and
> (3))).

**H. Period of Availability of Federal Funds** (SEAs/LEAs/Governor=s
Programs)

Also, see ED Cross-Cutting Section.

> An LEA may retain up to 25 percent of its fiscal year allocation for
> obligation in the next Federal fiscal year. If an LEA wishes to retain
> an amount greater than 25 percent of its fiscal year allocation for
> use in a succeeding year, it must demonstrate good cause for such a
> carryover to its SEA, and the SEA must approve the request for
> additional carryover (Section 4113(f) of the SDFSCA (20 USC 7113(f))).

**L. Reporting**

**1. Financial Reporting** (SEAs/LEAs/Governor=s Programs)

See ED Cross-Cutting Section.

**2. Performance Reporting** - Not Applicable

**3. Special Reporting** - Not Applicable

**N. Special Tests and Provisions**

> **1. Participation of Private School Children** (SEAs/LEAs)

See ED Cross-Cutting Section.

**2. Schoolwide Programs** (LEAs)

> See ED Cross-Cutting Section.

**DEPARTMENT OF EDUCATION**

**CFDA 84.276 GOALS 2000 \-- STATE AND LOCAL EDUCATION SYSTEMIC
IMPROVEMENT GRANTS**

**I. PROGRAM OBJECTIVES**

The objective of the Goals 2000: Educate America Act is to help States
and districts reform their education systems through the development and
implementation of comprehensive school improvement plans based on high
standards and expectations for all students.

**II. PROGRAM PROCEDURES**

State educational agencies (SEAs) in the 50 States, the District of
Columbia, Puerto Rico, the Bureau of Indian Affairs, and the Outlying
Areas are eligible to apply for funds under this program. Grants are
awarded to States on a formula basis; 50 percent according to each
State=s relative share of funds under Title I of the Elementary and
Secondary Education Act (ESEA) for the preceding fiscal year; and the
remaining 50 percent according to the State=s relative share of funds
under Title VI of the ESEA (with minor adjustments to exclude Title I
and Title VI funds allocated to the outlying areas). The Bureau of
Indian Affairs (BIA) and the Outlying Areas receive their allotments
from a one-percent set-aside of the funds appropriated for the program.

The SEA retains a portion of its allotments for State-level activities
to develop, revise, expand or implement its State improvement plan. The
SEA awards the remaining funds on a competitive basis to LEAs or
consortia of LEAs in the following three categories: (1) local reform
activities (section 309(a) subgrants), (2) preservice teacher training
and (3) professional development (both (2) and (3) are awarded under
section 309(b)). Subgrant funds must be awarded in each of the three
categories, but the SEA determines the amount of funds to be awarded in
each category. All subgrants must be of sufficient size, scope, duration
and quality to carry out the purposes of the Act. The SEA may conduct
individual competitions for each category of subgrants, or combined
competitions in which subgrant recipients receive awards in more than
one category. (LEAs in Oklahoma and Montana apply directly to the U.S.
Department of Education for Goals 2000 funding because their SEAs do not
participate in Goals 2000.)

An LEA seeking first year funding for development or implementation of a
local improvement plan must submit to its SEA an application with
assurances that it will develop a plan that meets the requirements of
Section 309(a) of the Act. An LEA seeking subsequent year funding must
include in its application a comprehensive local improvement plan for
district wide education improvement. An LEA may receive only one
subgrant to develop a local improvement plan, but may receive additional
subgrants to implement it.

**Source of Governing Requirements**

This program is authorized by Goals 2000: Educate America Act, Pub. L.
No. 103-227, as amended by Improving America\'s School Act of 1994 (Pub.
L. No. 103-382) and the Omnibus Consolidated Rescissions and
Appropriations Act of 1996 (Pub. L. No. 104-134), codified at 20 USC
5881, *et seq.* This program is subject to the Education Department
General Administrative Requirements in 34 CFR parts 76, 77, 79, 81, 82,
85 and 86. There are no program regulations.

**III. COMPLIANCE REQUIREMENTS**

**In developing the audit procedures to test compliance with the
requirements for a Federal program, the auditor should first look to
Part 2, Matrix of Compliance Requirements, to identify which of the 14
types of compliance requirements described in Part 3 are applicable and
then look to Parts 3 and 4 for the details of the requirements.**

Certain compliance requirements which apply to multiple ED programs are
discussed once in the ED Cross-Cutting Section of this Supplement (page
4-84.000-1) rather than repeating in each individual program. Where
applicable, this section references the Cross-Cutting Section for these
requirements.

**A. Activities Allowed or Unallowed**

Also, see ED Cross-Cutting Section

1\. *SEAs* - The following are allowable costs:

> a\. In the first year a State participates in Goals 2000, the SEA may
> use funds to develop, revise, expand or implement its State
> improvement plan. During succeeding years, the SEA may use funds to
> implement the State improvement plan (20 USC 5888).
>
> b\. Administrative costs which include costs of conducting subgrant
> competitions, as well as the costs of monitoring. (20 USC 5888)
>
> c\. Subgrants to LEAs or consortia of LEAs as follows:
>
> \(1\) To develop or implement local improvement plans (section 309(a)
> of the Act (20 USC 5889(a));
>
> \(2\) To improve preservice teacher education programs in cooperation
> with institutions of higher education or nonprofit institutions,
> (section 309(b) of the Act (20 USC 5889(b)); and
>
> \(3\) To support continuing professional development of educators,
> school administrators, or related services personnel in cooperation
> with institutions of higher education or nonprofit institutions,
> (section 309(b) of the Act (20 USC 5889(b)).

2\. *LEAs*

> a.. *Section 309(a) Subgrants* - Funds may be used to support
> individual school improvement initiatives, including developing and
> implementing school improvement plans. Also funds are to be used to
> develop a local improvement plan or for any LEA activities approved by
> the SEA that are reasonably related to carrying out the State or local
> improvement plans (20 USC 5889(a)(6)).
>
> b\. *Section 309(b) Subgrants* - An LEA must use funds awarded under
> section 309(b) for activities described in its approved application,
> supporting the improvement of preservice teacher education and school
> administrator programs and the development and implementation of new
> and improved forms of continuing and sustained professional
> development (20 USC 5889(b)).
>
> c\. In addition to the above, an LEA may use funds under both Sections
> 309(a) and (b) for administrative expenses (20 USC 5889(a)(6)(C)).

**B. Allowable Costs/Cost Principles**

See ED Cross-Cutting Section

**G. Matching, Level of Effort, Earmarking**

**1. Matching** - Not Applicable

**2.1 Level of Effort** -*Maintenance of Effort*

> Each recipient of funds under Title III of Goals 2000, in utilizing
> the proceeds of an allotment received under Title III, must maintain
> its expenditures for the activities assisted under Title III at a
> level equal to or not less than the level of expenditures maintained
> by the recipient for the fiscal year preceding the fiscal year for
> which the allotment was received (20 USC 5884(d)).

**2.2 Level of Effort** - *Supplement Not Supplant* - Not Applicable

**3. Earmarking**

> a\. *SEAs*
>
> \(1\) *Subgrants* - At least 90 percent must be awarded competitively
> to LEAs. Up to 10 percent may be retained by the SEA for state
> activities. (In the first year, at least 60 percent must be awarded
> competitively to LEAs and up to 40 percent may be retained by the SEA
> for state activities) (20 USC 5888(a)).
>
> If there are a sufficient number of applications for development or
> implementation of local improvement plans, at least 50 percent of the
> funds awarded under section 309(a) of the Act must be granted to LEAs
> that have a greater percentage or number of disadvantaged children
> than the statewide average percentage or number for all LEAs in the
> State. In addition, each year at least one urban LEA and one rural LEA
> must be awarded a grant for local plan development or implementation
> (20 USC 5889(a)(1)(B) and 5889(c)).
>
> \(2\) *Administrative Costs* - No more than 4 percent or \$100,000,
> whichever is greater, can be used for administrative costs (20 USC
> 5888(c)).

b\. *LEAs*

> \(1\) *Section 309(a) Subgrants* - During the first year an LEA
> receives a local improvement subgrant, it must use at least 75 percent
> of its subgrant funds to support individual school improvement
> initiatives. The remaining funds are to be used to develop a local
> improvement plan or for any LEA activities approved by the SEA that
> are reasonably related to carrying out the State or local improvement
> plans (20 USC 5889(a)(6)).
>
> In subsequent years that an LEA receives a grant, at least 85 percent
> of the funds must be made available to individual schools to develop
> and implement comprehensive school improvement plans designed to help
> all children reach high academic standards. The remaining funds are to
> be used for any activities approved by the SEA that are reasonably
> related to carrying out the State or local improvement plans (20 USC
> 5889 (a)(6)).
>
> At least 50 percent of the funds made available by the LEA to
> individual schools must be for schools with a special need for the
> assistance in accordance with criteria developed by the LEA (20 USC
> 5889(a)(6)(B)).
>
> \(2\) *Administrative Expenses* - No more than 5 percent of the funds
> may be spent on administrative expenses (20 USC 5889(a)(6)(C)).

**H. Period of Availability of Federal Funds**

See ED Cross-Cutting Section

**L. Reporting**

**1. Financial Reporting**

See ED Cross-Cutting Section

**2. Performance Reporting** - Not Applicable

**3. Special Reporting -** Not Applicable

**N. Special Tests and Provisions**

**1. Participation of Private Schools**

> **Compliance Requirement** - Proportionate to the number of children
> in a State or in a local educational agency who are enrolled in
> private elementary and secondary schools an SEA or LEA using Title III
> funds for teacher and administrator training must provide for the
> training of teachers and administrators in private schools (20 USC
> 5890(a)(2)).
>
> **Audit Objective** - Determine whether the SEA or LEA provided for
> the training of teachers and administrators in private schools when
> required.

**Suggested Audit Procedures**

> a\. Review the State or local plan and expenditure records to
> ascertain if Title III funds were used for teacher and administrator
> training. If not, no further work is needed
>
> b\. Review documentation demonstrating that training of teachers and
> administrators in private schools was provided and was in the proper
> proportion.

**2. Schoolwide Programs**

See ED Cross-Cutting Section

> **3. Priority of Preservice Teacher Education and Professional
> Development Subgrants (SEA)**
>
> **Compliance Requirement** - In awarding subgrants for preservice
> teacher education and professional development, an SEA must give
> priority to: (1) LEAs or consortia of LEAs that serve a greater number
> or percentage of disadvantaged students than the statewide average
> number or percentage; (2) to LEAs or consortia of LEAs that form
> partnerships with collegiate educators to establish professional
> development sites; and (3) to LEAs or consortia of LEAs that focus on
> upgrading teachers= knowledge of content areas or target teachers of
> students with limited-English proficiency and students with
> disabilities (20 USC 5889(b)(1)(B)).
>
> **Audit Objective** - Determine whether the SEA gave priority when
> awarding subgrants for preservice teacher education and professional
> development.

**Suggested Audit Procedures**

> a\. Review the SEA\'s procedures for identifying LEAs or consortia
> that meet the statutory criteria. Also, review procedures for awarding
> subgrants for preservice teacher education and professional
> development to ascertain if they address giving priority to LEAs or
> consortia that meet the statutory criteria.
>
> b\. Review a sample of subgrant awards to ascertain if the SEA\'s
> procedures for giving priority to these LEAs/consortia were followed.

**DEPARTMENT OF EDUCATION**

**DEPARTMENT OF LABOR**

**None SCHOOL-TO-WORK OPPORTUNITIES ACT OF 1994**

**I. PROGRAM OBJECTIVES**

The purpose of the School-to-Work (STW) Opportunities Act of 1994, Pub.
L. No. 103-239, is to provide seed capital to States and localities for
developing and implementing comprehensive STW Opportunities systems that
will provide all students with the academic and occupational skills
necessary to prepare them for first jobs in high-skill, high-wage
careers, and to increase their opportunities for further education and
training. The Secretary of Labor and the Secretary of Education jointly
administer the STW Act in a flexible manner to promote State and local
discretion in establishing and implementing statewide STW Opportunities
systems. The authority provided by the STW Act will terminate October 1,
2001.

**II. PROGRAM PROCEDURES**

No program regulations have been issued for grants awarded under this
legislation. However, grantees are bound by the STW Act, and grant
agreements. Grants are awarded by either the Department of Education
(ED) or the Department of Labor (DOL). However, this is treated as one
program under OMB Circular A-133. The six different types of grants
funded under the STW Act are described below.

> [State Development Grants]{.underline} (Title II, Subtitle A (20 USC
> 6121 *et. seq*.)): These non-competitive grants assist States in
> planning and developing comprehensive Statewide STW Opportunities
> systems.
>
> [State Implementation Grants]{.underline} (Title II, Subtitle B (20
> USC 6141 *et. seq*.)): These competitive grants assist States in the
> implementation of comprehensive Statewide STW Opportunities systems.
> These grants are renewable for up to five years. States are required
> to subgrant most of the funding to local partnerships. Local
> partnerships submit applications to the State (ED CFDA 84.278B).
>
> [Local Partnership Grants]{.underline} (Title III, Section 302(a) (20
> USC 6172(a)): These one year competitive grants provide funds directly
> to local partnerships in order to fund communities that are ready to
> begin implementing a local STW Opportunities system (ED CFDA 84.278C).
>
> [Urban/Rural Opportunities Grants]{.underline} (Title III, Section
> 302(b) (20 USC 6172(b)): These competitive grants provide funds to
> local partnerships to implement STW Opportunities programs in high
> poverty areas of urban and rural communities (ED CFDA 84.278A or D).
>
> [Grants to Indian Youth]{.underline} (Title II, Section 221): These
> competitively funded grants establish and implement STW Opportunities
> systems that involve schools funded by the Bureau of Indian Affairs.
>
> [Grants to Territories]{.underline} (Title II, Section 202(b) (20 USC
> 6122(b)): These grants develop and implement STW Opportunities systems
> in the Territories.

A \"local partnership\" is the grantee or subgrantee that is responsible
for implementing and operating local STW Opportunities programs. A local
partnership must meet the statutory definition in Section 4(11) of the
STW Act and must include: (a) employers; (b) representatives of local
educational agencies and local postsecondary educational institutions;
(c) local educators; (d) representatives of labor organizations or
nonmanagerial employee representatives; and (e) students. A local
partnership may include other entities.

Additional information on this program is available through the Internet
on the STW home page (http://www.stw.ed.gov).

**III. COMPLIANCE REQUIREMENTS**

**In developing the audit procedures to test compliance with the
requirements for a Federal program, the auditor should first look at
Part 2, Matrix of Compliance Requirements, to identify which of the 14
types of compliance requirements described in Part 3 are applicable and
then look to Parts 3 and 4 for the details of the requirements.**

**A. Activities Allowed or Unallowed**

**1. State Agencies**

> a\. *State Development Grants -* States are authorized to use State
> Development Grants only for activities to develop a statewide STW
> Opportunities system. Allowable activities include identifying
> resources, analyzing data, developing approach, and promoting
> involvement. Section 205 of the STW Act (20 USC 6125) contains
> specific examples of the types of activities that develop a statewide
> system (Section 205 of the STW Act (20 USC 6125)).
>
> b\. *State Implementation Grants* - States subgrant the majority of
> State Implementation Grant funds. States may use the remainder of
> State Implementation Grants for activities to implement the Statewide
> STW Opportunities System. Allowable activities include outreach,
> training, technical assistance and designing model curricula or
> programs. Section 215 (c) of the STW Act (20 USC 6145) contains
> specific examples of the types of activities that implement a
> Statewide system (Section 215(c) of the STW Act (20 USC 6145)).

**2. Local Partnerships**

> *State Implementation Grants or Local Partnership Grants:* Local
> partnerships are authorized to use funds provided through subgrants
> from a State Implementation Grant or a Local Partnership Grant only
> for activities undertaken to implement STW Opportunities systems.
> Allowable activities include outreach, training, technical assistance,
> and designing models or programs. Local partnerships can provide for
> supplementary and support services, such as child care and
> transportation, when such services are necessary for participation.
> Section 215 of the STW Act (20 USC 6145(b)(4)) contains specific
> examples of the types of activities that local partnerships can
> undertake (Section 215 of the STW Act (20 USC 6145)).
>
> **3. Unallowable activities** (States and Local Partnerships)
>
> STW Act grant funds cannot be expended for wages of students or
> workplace mentors participating in such programs (Section 601 of the
> STW Act) (20 USC 6231).

**E. Eligibility**

**1. Eligibility for Individuals** - Not Applicable

**2. Eligibility for Area of Service Delivery** - Not Applicable

**3. Eligibility for Subrecipients**

> *State Implementation Grants* - A local partnership that received a
> Local Partnership Grant directly from either DOL or ED cannot receive
> a State Implementation subgrant for that same grant year. The local
> partnership may receive a State Implementation subgrant in later
> years. This provision does not apply retroactively. If the local
> partnership received a subgrant from a State Implementation grant
> prior to receiving the Local Partnership Grant, the local partnership
> may keep both the local grant and the subgrant. A local partnership
> that received a Urban/Rural Opportunities Grant directly from DOL or
> ED may receive a State Implementation subgrant for the same grant year
> (Section 215(b)(1)(B) of the STW Act (20 USC 6145(b)(1)(B))).

**G. Matching, Level of Effort, Earmarking**

**1. Matching** - Not Applicable

**2.1 Level of Effort -** *Maintenance of Effort*

> *State Development Grants* - The amount of State funds expended per
> student, or in the aggregate, by the State for STW activities, for the
> preceding fiscal year can not be less than 90 percent of the amount so
> expended for the second preceding fiscal year. For example, level of
> effort for FY 1996 is determined by comparing the funds expended
> either per student or in the aggregate in FY 1995 to those expended in
> FY 1994. This requirement can be waived by the Secretary of Education
> and the Secretary of Labor under the terms of Section 206(b) of the
> STW Act (Section 206 of the STW Act (20 USC 6126(b))).

**2.2 Level of Effort -** *Supplement Not Supplant* - Not Applicable

**3. Earmarking**

> a\. *State Implementation Grants (States)*
>
> \(1\) In the first fiscal year in which a State receives a State
> Implementation Grant, the State must use 70 percent or more of the
> first year funds to provide subgrants to local partnerships. In the
> second fiscal year, the State must use 80 percent or more of second
> year funds to provide subgrants to local partnerships. In the third
> fiscal year and in each succeeding fiscal year in which the State
> receives a State Implementation Grant, the State must use 90 percent
> or more of third and succeeding year funds to provide subgrants to
> local partnerships (Section 215(b)(7) of the STW Act (20 USC
> 6145(b)(7))).
>
> \(2\) No more than 10 percent of the amounts received through the
> grant for a fiscal year may be used for State administrative costs.
> Administrative costs means the activities of a State or local
> partnership that are necessary for the proper and efficient
> performance of its duties under the STW Act and that are not directly
> related to the provision of services to participants or otherwise
> among the system\'s allowable activities listed in section 215(b)(4)
> and section 215(c) of the STW Act (Section 217 of the STW Act (20 USC
> 6147); May 18, 1995 *Federal Register* (Vol. 60, Number 96), page
> 26813).
>
> b\. *State Implementation Grants - Local Partnerships*
>
> A 10 percent limit on administrative costs applies. Administrative
> costs may be either personnel costs or non-personnel costs, and direct
> or indirect (Section 215 of the STW Act (20 USC 6145 (b)(6))).

**L. Reporting**

**1. Financial Reporting**

> a\. SF‑269, *Financial Status Report* ‑ Applicable
>
> b\. SF‑270, *Request for Advance or Reimbursement* ‑ Only grantees
> placed on reimbursement are required to complete this form to request
> payment of grant award funds. The requirement to use this form is
> imposed on an individual recipient basis.
>
> c\. SF‑271, *Outlay Report and Request for Reimbursement for
> Construction Program* ‑ Not Applicable
>
> d\. SF‑272, *Federal Cash Transactions Report* ‑ Not Applicable
>
> e\. *Grant Administration and Payment System (GAPS) (OMB No.
> 1875-0138)* - Grantees draw funds and account to ED using GAPS.
> Grantees request funds by: (1) creating a payment request using the
> GAPS External Access System through the Internet; (2) calling the GAPS
> Payee Hotline; or (3) if the grantee is placed on a reimbursement
> basis for an award, submitting an SF-270, *Request for Advance or
> Reimbursement* to an ED program or regional office. When creating a
> payment request in GAPS, the grantee enters the drawdown amounts, by
> award, directly into GAPS. When requesting funds using the other two
> methods, the grantee provides this information to the hotline
> operator, or on the SF-270, and ED staff enter the data into GAPS. ED
> also enters other award data into GAPS, including authorization
> amounts and payment status. The system maintains and provides
> cumulative data on net draws and the available balance for each award.
>
> ED considers drawn funds to have been expended by the grantee for the
> award(s) identified (notwithstanding that the grantee has up to three
> days to make disbursements). Cumulative drawdown amounts in GAPS
> should accurately reflect the grantee\'s actual disbursement of funds
> by award. Grantees can redistribute drawn amounts between grant awards
> by making adjustments in GAPS to reflect actual disbursements for each
> award. For example, if a grantee draws too much under one award, it
> can enter an adjustment in GAPS to reallocate the excess amount to
> other awards for which there were immediate cash needs, as long as the
> net amount of the adjustment is zero.
>
> To assist grantees in reconciling their internal accounting records
> with GAPS, grantees can use the GAPS External Access System
> (http://gapsweb.ed.gov) to obtain a GAPS Activity Report showing
> cumulative and detail information for each award. The GAPS Activity
> Report can be created and viewed on‑line and a hard copy may be
> printed as well.
>
> f\. Local Education Agencies (LEAs) and other subrecipients are
> generally required to report financial information to the pass-through
> entity. These reports should be tested during audits of LEAs.

**2. Performance Reporting** - Not Applicable

**3. Special Reporting** - Not Applicable

**N. Special Tests and Provisions**

> **1. Core Components** *(Local Partnerships Grants)*
>
> **Compliance Requirement** - As provided in the STW Act, a STW
> Opportunities system must incorporate three components: school-based
> learning (Section 102 of the STW Act (20 USC 6112)), work-based
> learning (Section 103 of the STW Act (20 USC 6113)), and connecting
> activities (Section 104 of the STW Act (20 USC 6114)). The specific
> activities selected by a State or local partnership to implement these
> components are described in the approved application (Sections 101,
> 215(b)(2), and 303(c) of the STW Act (20 USC 6111, 6145(b)(2) and
> 6173(c)).
>
> **Audit Objective** - Determine whether the non-Federal entity
> implemented a school-based learning component, a work-based learning
> component, and connecting activities component, as described in its
> approved application.

**Suggested Audit Procedures**

> a\. Review the approved application to identify the activities
> supporting each of the required components.
>
> b\. Review records documenting that the activities described in the
> approved application were implemented.

**DEPARTMENT OF EDUCATION**

**CFDA 84.281 EISENHOWER PROFESSIONAL DEVELOPMENT STATE GRANTS (Title
II, Part B of ESEA)**

**I. PROGRAM OBJECTIVES**

The objective of Eisenhower Professional Development State Grants
(Eisenhower Program), Title II of the Elementary and Secondary Education
Act (ESEA) of 1965, as amended by the Improving America\'s Schools Act
of 1994 (Pub. L. No. 103-382), is to provide funds to State educational
agencies (SEAs), local educational agencies (LEAs), State agencies for
higher education (SAHEs), institutions of higher education (IHEs), and
qualified nonprofit organizations (NPOs) to support sustained and
intensive high-quality professional development for educators in the
core academic subjects.

**II. PROGRAM PROCEDURES**

Eisenhower Program funds are obtained by a State on the basis of the
Department\'s approval of either (1) an individual State plan as
provided in Section 2205 of the ESEA, or (2) a consolidated plan that
includes Eisenhower Program, in accordance with Section 14302 of the
ESEA. Separate grants are provided to SEAs and SAHEs. Of the total State
allocation, the SEA receives 84 percent and the SAHE 16 percent.

LEAs apply to the SEAs for program funds. The SEAs allocate funds to
LEAs based on the relative enrollment in public and private nonprofit
elementary and secondary schools and the relative amounts the LEAs
received under Part A of Title I for the previous year.

The SAHE makes grants to, or enters into contracts or cooperative
agreements with, IHEs and NPOs of demonstrated effectiveness in order to
provide professional development activities that contribute to the State
plan.

**III. COMPLIANCE REQUIREMENTS**

**In developing the audit procedures to test compliance with the
requirements for a Federal program, the auditor should first look to
Part 2, Matrix of Compliance Requirements, to identify which of the 14
types of compliance requirements described in Part 3 are applicable and
then look to Parts 3 and 4 for the details of the requirements.**

Certain compliance requirements which apply to multiple ESEA programs
are discussed once in the Department of Education (ED) Cross-Cutting
Section of this Supplement (page 4-84.000-1) rather than repeating in
each individual program. Where applicable, this section references to
the Cross-Cutting Section for these requirements. Also, as discussed in
the Cross-Cutting Section, SEAs and LEAs may have been granted waivers
from certain compliance requirements.

**A. Activities Allowed or Unallowed**

> Also, see ED Cross-Cutting Section.

**1. SEAs**

> SEAs can use funds to provide subgrants to LEAs, for State
> administration, and for program improvement projects. Examples of
> allowable program improvement projects are listed in Section 2207 of
> the ESEA. The SEA must have records that provide a description of the
> general nature of the uses of Title II funds in support of program
> purposes (Sections 2203(1)(a) and 2207 of the ESEA (20 USC 6643(1)(a)
> and 6647); 34 CFR section 76.730).

**2. LEAs**

> Funds are to be used for professional development activities of
> teachers, and where appropriate administrators, pupil support
> personnel and parents in a manner that is consistent with the LEA=s
> application, any school plan under Title 1, Part A and any other plan
> for professional development activities. Examples of allowable
> activities are shown in Section 2210(b)(3) of the ESEA. The LEA must
> have records that provide a description of the general nature of the
> services to be provided with Title II funds in support of the program
> purpose (Section 2210 of the ESEA (20 USC 6650); 34 CFR section
> 76.730).
>
> **3. SAHEs and their Subrecipients**
>
> SAHEs can use funds for State administration (five percent) and to
> make subgrants to, or enter into contracts or cooperative agreements
> with IHEs and NPOs for professional development activities. Allowable
> activities of subrecipients include provision of professional
> development to teachers and, where appropriate, others; other
> professional development activities related to the achievement of the
> State plan for professional development; and preservice training
> activities (Sections 2203 and 2211 of the ESEA (20 USC 6643 and
> 6651)).

**B. Allowable Costs/Cost Principles** (All grantees)

> See ED Cross-Cutting Section.

**E. Eligibility**

**1. Eligibility for Individuals** - Not Applicable

> **2. Eligibility for Groups of Individuals or Areas of Service
> Delivery** - Not Applicable

**3. Eligibility for Subrecipients**

a\. SEAs

> Any LEA receiving a grant of less than \$10,000 must form a consortium
> with another LEA or an educational service agency serving another LEA
> to be eligible to receive Eisenhower Program funds. SEAs may waive the
> consortium requirement for LEAs that can demonstrate that the amount
> of their allocation is sufficient to provide a program of sufficient
> size, scope, and quality to be effective (Section 2204 of the ESEA (20
> USC 6644)).

b\. SAHEs

> Subrecipients must be either IHEs or NPOs. (Section 2211 of the ESEA
> (20 USC 6651)).

**G. Matching, Level of Effort, Earmarking**

**1. Matching** (LEAs)

> Each LEA must provide not less than 33 percent of the cost of the
> activities assisted under the Eisenhower Program, excluding the cost
> of services provided to private school teachers. In other words, each
> participating LEA must match every two dollars in Federal funding with
> one dollar of its own resources, which can come from other Federal
> programs, such as Title I of the ESEA, or from non-Federal sources
> (Section 2209 of the ESEA (20 USC 6649)).

**2.1 Level of Effort** - *Maintenance of Effort* (SEAs/LEAs)

> See ED Cross-Cutting Section.

**2.2 Level of Effort** - *Supplement not Supplant* - Not Applicable

**3. Earmarking**

> Also, see ED Cross-Cutting Section.
>
> a\. *Within-State allocations* (SEAs)
>
> The SEA distributes, by a formula similar to the initial Federal
> allocation, at least 90 percent of its allocation to the LEAs within
> the State. States must ensure that their share of the first \$250
> million of the total program appropriation in a given fiscal year is
> used for professional development in mathematics and science. ED
> provides States with allocation tables that outline the specific
> breakouts for the use of funds to support professional development
> activities in mathematics and science.

b\. *Within State allocations* (SAHEs)

> The SAHE distributes at least 95 percent of its allocation in the form
> of competitive subgrants to IHEs and NPOs of demonstrated
> effectiveness.

c\. *Administration* (SEAs and SAHEs)

> Both the SEA and SAHE may reserve up to five percent of their
> allocations for administration. The SEA may reserve up to an
> additional five percent of its allocation to carry out State-level
> professional development activities in support of the State\'s
> professional development plan. If the State includes the Eisenhower
> Program in a consolidated plan submitted under section 14302 of the
> ESEA, the professional development plan may not be included in the
> consolidated plan and may instead be in other documents. (Sections
> 2203, 2205, 2206, 2207 and 2211 of the ESEA (20 USC 6643, 6645, 6646,
> 6647 and 6651))

**H. Period of Availability of Federal Funds** (All grantees)

> See ED Cross-Cutting Section.

**L. Reporting**

**1. Financial Reporting**

> See ED Cross-Cutting Section.

**2. Performance Reporting** - Not Applicable

**3. Special Reporting** - Not Applicable

**N. Special Tests and Provisions**

> **1. Participation of Private School Children** (SEAs/LEAs)
>
> See ED Cross-Cutting Section.

**2. Schoolwide Programs** (LEAs)

> See ED Cross-Cutting Section.

**DEPARTMENT OF EDUCATION**

**CFDA 84.282 CHARTER SCHOOLS**

**I. PROGRAM OBJECTIVES**

The objective of the Public Charter Schools Program (PCSP), authorized
under Title X, Part C of the ESEA, is to increase national understanding
of the charter schools model by (1) providing financial assistance for
the planning, program design, and initial implementation of public
charter schools; (2) expanding the number of high-quality charter
schools available to students across the Nation; (3) evaluating the
effects of charter schools; and (4) disseminating information about
charter schools and successful practices in charter schools.

**II. PROGRAM PROCEDURES**

Generally, PCSP funds are awarded on a competitive basis to State
educational agencies (SEAs) in States with specific statutes authorizing
charter schools. SEAs use their PCSP funds to award subgrants to
eligible applicants (authorized public chartering agencies in
partnership with charter school developers) for planning, program
design, and initial implementation of charter schools; and to support
the dissemination of information about, and successful practices in,
charter schools. If an eligible SEA elects not to participate in this
program, or its application is not approved, eligible applicants that
serve the State may apply directly to the Secretary.

Grants awarded to SEAs are for a period not to exceed three years. Once
a three-year grant is over, an SEA may apply for a subsequent three-year
grant. Planning and initial implementation grants awarded to eligible
applicants by the Secretary and subgrants awarded by SEAs are awarded
for a period not to exceed three years, of which not more than 18 months
may be used for planning and not more than two years may be used for
implementation. Grants or subgrants to charter schools for dissemination
activities are made for a period not to exceed two years.

A charter school is limited to receiving not more than one grant or
subgrant for planning and initial implementation activities and not more
than one grant or subgrant for dissemination activities. A charter
school may apply to the SEA for funds to carry out dissemination
activities if the charter school has been in operation for at least 3
consecutive years and has demonstrated overall success, including
substantial progress in improving student achievement; high levels of
parent satisfaction; and the management and leadership necessary to
overcome initial start-up problems and establish a thriving, financially
viable charter school. A charter school may receive a dissemination
grant, whether or not the charter school has applied for or received
funds under the PCSP for planning or implementation.

**Source of Governing Requirements**

This program is authorized by Title X, Part C of the Elementary and
Secondary Education Act of 1965 (ESEA), as amended by the Charter School
Expansion Act of 1998 (20 USC 8061, *et seq.*). This program is subject
to the Department of Education\'s General Administrative Requirements in
34 CFR parts 75, 77, 79, 80, 81, 82, 85, 86, and 99. There are no
program specific regulations.

**III. COMPLIANCE REQUIREMENTS**

**In developing the audit procedures to test compliance with the
requirements for a Federal program, the auditor should first look to
Part 2, Matrix of Compliance Requirements, to identify which of the 14
types of compliance requirements described in Part 3 are applicable and
then look to Parts 3 and 4 for the details of the requirements.**

Certain compliance requirements which apply to multiple ESEA programs
are discussed once in the ED Cross-Cutting Section of this Supplement
(page 4-84.000-1) rather than repeated in each individual program. Where
applicable, this section references the Cross-Cutting Section for these
requirements. Also, as discussed in the Cross-Cutting Section, SEAs and
LEAs may have been granted waivers from certain compliance requirements.

**A. Activities Allowed or Unallowed**

Also, see ED Cross-Cutting Section

**1.** *Use of Funds by SEAs*

> Funds must be used for State administration expenses and subgrants to
> eligible applicants. Funds may also be use to establish a revolving
> loan fund for eligible applicants that have received grants, State
> dissemination activities and administrative costs of the program. See
> III. G.3. Earmarking for limitations on amounts that can be used for
> these activities (20 USC 8064(f)(1), (4), and (5)).

**2.** *Use of Funds by Eligible Applicants*

> Each eligible applicant may use these funds in accordance with its
> approved application to plan and implement a charter school, or to
> disseminate information about the charter school and successful
> practices in charter schools (20 USC 8064(f)).
>
> An eligible applicant receiving a PCSP grant or subgrant may use funds
> for (a) post-award planning and design of the educational program,
> which may include\-- (i) refinement of the desired educational results
> and of the methods for measuring progress toward achieving those
> results; and (ii) professional development of teachers and other staff
> who will work in the charter school; and (b) initial implementation of
> the charter school, which may include\-- (i) informing the community
> about the school; (ii) acquiring necessary equipment and educational
> materials and supplies; (iii) acquiring or developing curriculum
> materials; and (iv) other initial operational costs that cannot be met
> from State or local sources (20 USC 8064(f)(3)).
>
> A charter school receiving funds for dissemination activities may use
> funds to assist other schools in adapting the charter school\'s
> program (or certain aspects of the charter school\'s program), or to
> disseminate information about the charter school, through such
> activities as\-- (a) assisting other individuals with the planning and
> start-up of one or more new public schools, including charter schools,
> that are independent of the assisting charter school and the assisting
> charter school\'s developers, and that agree to be held to at least as
> high a level of accountability as the assisting charter school; (b)
> developing partnerships with other public schools, including charter
> schools, designed to improve student performance in each of the
> schools participating in the partnership; (c) developing curriculum
> materials, assessments, and other materials that promote increased
> student achievement and are based on successful practices within the
> assisting charter school; and (d) conducting evaluations and
> developing materials that document the successful practices of the
> assisting charter school and that are designed to improve student
> performance in other schools (20 USC 8064(f)(6)).

**B. Allowable Costs/Cost Principles**

See ED Cross-Cutting Section.

**E. Eligibility**

**1. Eligibility for Individuals** - Not applicable

> **2. Eligibility for Groups of Individuals or Areas of Service
> Delivery** - Not Applicable

**3. Eligibility for Subrecipients**

> A non-SEA eligible applicant for planning and initial implementation
> funds is an authorized public chartering agency participating in a
> partnership with a developer to establish a public charter school.
> Such a public charter school is a public school that provides a
> program of elementary or secondary education, or both; is nonsectarian
> and does not charge tuition; complies with federal and State Civil
> Rights laws; and is a school to which parents choose to send their
> children, and that admits students on the basis of a lottery, if more
> students apply than can be accommodated. The term \"developer\" means
> an individual or group of individuals (including a public or private
> nonprofit organization), which may include teachers, administrators,
> and other school staff, parents, or other members of the local
> community in which a charter school project will be carried out. A
> for-profit entity does not qualify as an eligible applicant for the
> purposes of the PCSP. However, a PCSP grant recipient may enter into a
> contract with a for-profit entity for the day-to-day management of the
> charter school (20 USC 8066(2) and (3)).

**G. Matching, Level of Effort, Earmarking**

**1. Matching** - Not Applicable

**2. Level of Effort** - Not Applicable

**3. Earmarking**

Also, see ED Cross-Cutting Section

> Each SEA receiving a grant may reserve not more than 5 percent of
> these funds for administrative expenses associated with the charter
> school grant program (20 USC 8064(f)(4)).
>
> The SEA must provide 95 percent of the grant funds to eligible
> applicants in the State for planning and initial implementation
> activities or for State dissemination activities. Not more than 10
> percent of the grant amount may be used to establish a revolving loan
> fund for eligible applicants that have received a PCSP grant and not
> more than 10 percent of the grant amount may be reserved for
> dissemination activities (20 USC 8064(f)(1) and (5)).

**H. Period of Availability of Federal Funds**

See ED Cross-Cutting Section

**L. Reporting**

**1. Financial Reporting**

See ED Cross-Cutting Section

**2. Performance Reporting** - Not Applicable

**3. Special Reporting** - Not Applicable

**DEPARTMENT OF EDUCATION**

**CFDA 84.287 TWENTY-FIRST CENTURY COMMUNITY LEARNING CENTERS**

**I. PROGRAM OBJECTIVES**

The objective of this program is to provide expanded learning
opportunities for participating children in a safe, drug-free and
supervised environment. The 21st Century Community Learning Centers
program provides grants to local educational agencies (LEAs) which
enable schools to stay open longer, providing a safe place for services
such as homework centers, intensive mentoring in basic skills, drug and
violence prevention counseling. The 21st Century Community Learning
Centers help middle school students to prepare to take college prep
courses in high school, enrichment in the core academic subjects as well
as opportunities to participate in recreational activities, chorus, band
and the arts, technology education programs, and services for children
and youth with disabilities.

**II. PROGRAM PROCEDURES**

The Secretary of Education awards 21st Century Community Learning Center
Grants through a competitive grant process to rural and inner-city
public elementary or secondary schools, consortia of such schools, or
LEAs on their behalf. If more than one entity is party to the grant, one
of the entities will be designated as the fiscal agent. For purposes of
audits under OMB Circular A-133, the fiscal agent is treated as the
recipient of the grant.

**Source of Governing Requirements**

This program is authorized under Title X, Part I, of the Elementary and
Secondary Education Act (ESEA) (20 USC 8241-8247) and is subject to the
Education General Administrative Regulations in 34 CFR parts 74, 75, 77,
79, 80, 81, 82, 85, and 86.

**III. COMPLIANCE REQUIREMENTS**

**In developing the audit procedures to test compliance with the
requirements for a Federal program, the auditor should first look to
Part 2, Matrix of Compliance Requirements, to identify which of the 14
types of compliance requirements described in Part 3 are applicable and
then look to Parts 3 and 4 for the details of the requirements.**

Certain compliance requirements which apply to multiple ED programs are
discussed once in the ED Cross-Cutting Section of this Supplement (page
4-84.000-1) rather than repeating in each individual program. Where
applicable, this section references the Cross-Cutting Section for these
requirements.

**A. Activities Allowed or Unallowed**

Also, see ED Cross-Cutting Section.

> A grantee under this program must do the following in carrying out a
> grant award in order to provide allowable services: (1) implement the
> project described in its approved application; and (2) expend the
> funds in accordance with the terms of the approved budget (34 CFR
> sections 75.234, 80.20, and 80.22).
>
> LEAs must provide 4 of the following 13 activities, but may also
> provide other services to the community (20 USC 8245).
>
> \- Literacy education programs;
>
> \- Senior citizen programs;
>
> \- Children\'s day care services;
>
> \- Integrated education, health, social service, recreational, or
> cultural programs;
>
> \- Summer and weekend school programs in conjunction with recreation
> programs;
>
> \- Nutrition and health programs;
>
> \- Expanded library service hours to serve community needs;
>
> \- Telecommunications and technology education programs for
> individuals of all ages;
>
> \- Parenting skills education programs;
>
> \- Support and training for child day care providers;
>
> \- Employment counseling, training, and placement;
>
> \- Services for individuals who leave school before graduating from
> secondary school, regardless of the age of such individual; and
>
> \- Services for individuals with disabilities.

**B. Allowable Costs/Cost Principles**

See ED Cross-Cutting Section.

**G. Matching, Level of Effort, Earmarking**

> **1. Matching** - Not Applicable
>
> **2. Level of Effort** - Not Applicable
>
> **3. Earmarking**

See ED Cross-Cutting Section

**H.** **Period of Availability of Federal Funds**

See ED Cross-Cutting Section.

**L. Reporting**

**1. Financial Reporting**

> See ED Cross-Cutting Section.
>
> **2. Performance Reporting** - Not Applicable
>
> **3. Special Reporting -** Not Applicable

**N. Special Tests and Provisions**

**1. Schoolwide Programs**

See ED Cross-Cutting Section.

**DEPARTMENT OF EDUCATION**

**CFDA 84.288 BILINGUAL EDUCATION\--PROGRAM DEVELOPMENT AND
IMPLEMENTATION GRANTS**

**CFDA 84.290 BILINGUAL EDUCATION\--COMPREHENSIVE SCHOOL GRANTS**

**CFDA 84.291 BILINGUAL EDUCATION\--SYSTEMWIDE IMPROVEMENT GRANTS**

**I. PROGRAM OBJECTIVES**

**Program Development and Implementation Grants** (CFDA 84.288)

Develop and implement new comprehensive, coherent, and successful
bilingual education or special alternative instructional programs for
limited English proficient (LEP) students, including programs of early
childhood education, kindergarten through twelfth grade education,
gifted and talented education, and vocational and applied technology
education (Title VII, Section 7112 of the ESEA (20 USC 7422)).

**Comprehensive School Grants** (CFDA 84.290)

Implement schoolwide bilingual education programs or special alternative
instruction programs for reforming, restructuring, and upgrading all
relevant programs and operations, within an individual school, that
serve all (or virtually all) children and youth of limited English
proficiency in schools with significant concentrations of such children
and youth (Title VII, Section 7114 of the ESEA (20 USC 7424)).

**Systemwide Improvement Grants** (CFDA 84.291)

Implement districtwide bilingual education programs or special
alternative instruction programs to improve, reform, and upgrade
relevant programs and operations, within an entire local educational
agency (LEA), that serve a significant number of children and youth of
limited English proficiency in local educational agencies with
significant concentrations of such children and youth (Title VII,
Section 7115 of the ESEA (20 USC 7425)).

**II. PROGRAM PROCEDURES**

The Secretary of Education awards Bilingual Education grants through a
competitive grant process to the following eligible entities: one or
more LEAs; one or more LEAs in collaboration with an institution of
higher education, community-based organization, or State educational
agency (SEA); and, in some circumstances, a community-based organization
or an institution of higher education that has received approval from an
LEA. If more than one entity is party to the grant, one of the entities
will be designated as the fiscal agency. For purposes of audits under
OMB Circular A-133, the fiscal agency is treated as the recipient of the
grant.

**III. COMPLIANCE REQUIREMENTS**

**In developing the audit procedures to test compliance with the
requirements for a Federal program, the auditor should first look to
Part 2, Matrix of Compliance Requirements, to identify which of the 14
types of compliance requirements described in Part 3 are applicable and
then look to Parts 3 and 4 for the details of the requirements.**

Certain compliance requirements which apply to multiple ESEA programs
are discussed once in the Department of Education (ED) Cross-Cutting
Section of this Supplement (page 4-84.000-1) rather than repeating in
each individual program. Where applicable, this section references to
the Cross-Cutting Section for these requirements. Also, as discussed in
the Cross-Cutting Section, SEAs and LEAs may have been granted waivers
from certain compliance requirements.

**A. Activities Allowed or Unallowed**

Also, see ED Cross-Cutting Section.

> A grantee under these programs must do the following in carrying out a
> grant award in order to provide allowable services: (1) implement the
> project described in its approved application; and (2) expend the
> funds in accordance with the terms of the approved budget (34 CFR
> sections 75.234, 80.20 and 80.22).

**B. Allowable Costs/Cost Principles**

> See ED Cross-Cutting Section.

**G. Matching, Level of Effort, Earmarking**

> **1. Matching** - Not Applicable
>
> **2.1 Level of Effort** - *Maintenance of Effort* - Not Applicable
>
> **2.2 Level of Effort** - *Supplement not Supplant*
>
> See ED Cross-Cutting Section.
>
> **3. Earmarking -** Not Applicable

**H. Period of Availability of Federal Funds**

> See ED Cross-Cutting Section.

**L. Reporting**

**1. Financial Reporting**

> See ED Cross-Cutting Section.

**2. Performance Reporting** - Not Applicable

**3. Special Reporting** - Not Applicable

**N. Special Tests and Provisions**

> **1. Participation of Private School Children** (SEAs/LEAs)
>
> See ED Cross-Cutting Section.

**2. Schoolwide Programs** (LEAs)

> See ED Cross-Cutting Section.

**DEPARTMENT OF EDUCATION**

**CFDA 84.298 INNOVATIVE EDUCATION PROGRAM STRATEGIES (Title VI of
ESEA)**

**I. PROGRAM OBJECTIVES**

The objectives of Title VI of the Elementary and Secondary Education Act
(ESEA) of 1965, as amended by the Improving America\'s Schools Act of
1994, are to: (1) assist local educational reform efforts which are
consistent with and support statewide reform efforts under Goals 2000:
Educate America Act; (2) support State and local efforts to accomplish
the National Education Goals; (3) provide funding to enable State
Educational Agencies (SEAs) and Local Educational Agencies (LEAs) to
implement promising educational reform programs; (4) provide a
continuing source of innovation, and educational improvement, including
support for library services and instructional and media materials; and
(5) meet the special educational needs of at-risk and high cost students
(Title VI, Section 6001(b) of the ESEA (20 USC 7301(b))).

**II. PROGRAM PROCEDURES**

Title VI funds are obtained by a State following submission of an
application or consolidated plan to the Secretary of Education that
satisfies the application requirements as stipulated in the statute. The
SEA distributes at least 85 percent of the funds to its LEAs that have
filed an application that meets certain requirements. These funds are
distributed to LEAs according to the relative enrollments in public and
private, nonprofit schools within the school districts of the LEAs,
adjusted to provide higher per pupil allocations to those LEAs with
children whose education imposes a higher than average cost per child.
The criteria for making these adjustments must be approved by the
Secretary of Education. LEAs have complete discretion, subject only to
legal requirements, in determining the allocation of expenditures of
Title VI funds among the allowable program activities (Title VI,
Sections 6102 and 6303(c) of the ESEA (20 USC 7312 and 7353(c))).

**III. COMPLIANCE REQUIREMENTS**

**In developing the audit procedures to test compliance with the
requirements for a Federal program, the auditor should first look to
Part 2, Matrix of Compliance Requirements, to identify which of the 14
types of compliance requirements described in Part 3 are applicable and
then look to Parts 3 and 4 for the details of the requirements.**

Certain compliance requirements which apply to multiple ESEA programs
are discussed once in the Department of Education (ED) Cross-Cutting
Section of this Supplement (page 4-84.000-1) rather than repeating in
each individual program. Where applicable, this section references to
the Cross-Cutting Section for these requirements. Also, as discussed in
the Cross-Cutting Section, SEAs and LEAs may have been granted waivers
from certain compliance requirements.

**A. Activities Allowed or Unallowed**

> Also, see ED Cross-Cutting Section.

**1. SEAs**

> SEAs may reserve for State use not more than 15 percent of the Title
> VI funds allocated to the state. These funds may be used for technical
> assistance, direct grants, statewide education reform activities which
> assist LEAs in providing targeted assistance programs, and
> administration. Administration includes supervising of the allocation
> of funds to LEAs; planning, supervising and processing of State funds;
> and, monitoring and evaluating programs and activities (Title VI,
> Section 6201(a) of the ESEA (20 USC 7331(a)(2))).
>
> The remaining 85 percent must be distributed to LEAs (Section 6102(a)
> of the ESEA (20 USC 7312(a))).
>
> (See III.G.3, for testing of Earmarking requirement.)

**2. LEAs**

> LEAs must use Title VI funds only for one or more of the innovative
> assistance program areas described in Title VI, Section 6301(b) of the
> ESEA (20 USC 7351(b)). The innovative assistance program areas are:
>
> \(i\) Technology related to the implementation of school-based reform
> programs, including professional development to assist teachers and
> other school officials regarding how to use effectively such equipment
> and software;
>
> \(ii\) Programs for the acquisition and use of instructional and
> educational materials, including library services and materials
> (including media materials), assessments, reference materials,
> computer software and hardware for instructional use, and other
> curricular materials which are tied to high academic standards and
> which will be used to improve student achievement and which are part
> of an overall education reform program;
>
> \(iii\) Promising education reform projects, including effective
> schools and magnet schools;
>
> \(iv\) Programs to improve the higher order thinking skills of
> disadvantaged elementary and secondary school students and to prevent
> students from dropping out of school;
>
> \(v\) Programs to combat illiteracy in the student and adult
> population, including parent illiteracy;
>
> \(vi\) Programs to provide for the educational needs of gifted and
> talented children;
>
> \(vii\) School reform activities that are consistent with the Goals
> 2000: Educate America Act; and
>
> \(viii\) School improvement programs or activities under sections 1116
> and 1117 of the ESEA.

**B. Allowable Costs/Cost Principles**

> See ED Cross-Cutting Section.

**G. Matching, Level of Effort, Earmarking**

**1. Matching** - Not Applicable

**2.1 Level of Effort -** *Maintenance of Effort* (SEAs)

> The combined fiscal effort per child or the aggregate expenditures
> within the State for free public education for the preceding fiscal
> year must be at least 90 percent of the combined fiscal effort per
> child or aggregate expenditures for the second preceding fiscal year,
> unless specifically waived by the Secretary of Education for one
> fiscal year only.
>
> Expenditures to be considered are State and local expenditures for
> free public education. These expenditures include expenditures for
> administration, instruction, attendance, health services, pupil
> transportation, plant operation and maintenance, fixed charges, and
> net expenditures to cover deficits for food services and student
> activities. States may include in the maintenance of effort
> calculation expenditures of Federal funds for which no accountability
> to the Federal Government is required. Certain Impact Aid funds are an
> example of such funds. (However, Impact Aid funds for which there is a
> requirement of accountability to the Federal Government, such as those
> received for children with disabilities, can not be included in the
> calculation.) States must be consistent in the manner in which they
> calculate maintenance of effort from year-to-year in order to ensure
> that the annual comparisons are on the same basis (i.e., calculations
> must consistently, from year-to-year, either include or exclude
> expenditures of Federal funds for which accountability to the Federal
> Government is not required). Expenditures not to be considered are any
> expenditures for community services, capital outlay, or debt service,
> and any expenditures of Federal funds for which accountability to the
> Federal Government is required. (Title VI, Section 6401(a) of the ESEA
> (20 USC 7371(a)).

**2.2 Level of Effort -** *Supplement not Supplant* (SEAs/LEAs)

> See ED Cross-Cutting Section.

**3. Earmarking** (SEAs)

Also, see ED Cross-Cutting Section.

> a\. *Minimum 85 Percent Distribution to LEAs*
>
> An SEA shall distribute at least 85 percent of the funds to its LEAs
> (Title VI, Section 6102(a) of the ESEA (20 USC 7312(a))).
>
> b\. *Remaining Reserved for State Use (Maximum of 15 Percent)*
>
> Of the amount reserved for State use, no more than 25 percent may be
> used for State administration of Title VI or transferred to a
> Consolidated Administration pool. See III.A.1, Activities Allowed or
> Unallowed - SEAs, for what is considered \"administration.\" (Title
> VI, Section 6201(b) of the ESEA (20 USC 7331(b))).

**H. Period of Availability of Federal Funds**

> See ED Cross-Cutting Section.

**L. Reporting**

**1. Financial Reporting**

> See ED Cross-Cutting Section.

**2. Performance Reporting** - Not Applicable

**3. Special Reporting** - Not Applicable

**N. Special Tests and Provisions**

> **1. Participation of Private School Children**
>
> See ED Cross-Cutting Section.

**2. Schoolwide Programs** (LEAs)

> See ED Cross-Cutting Section.

**DEPARTMENT OF EDUCATION**

**CFDA 84.318 TECHNOLOGY LITERACY CHALLENGE FUND GRANTS (TLCF)**

**I. PROGRAM OBJECTIVES**

The purpose of Title III of the Elementary and Secondary Education Act
is to support a comprehensive system for the acquisition and use of
technology and technology-enhanced curricula, instruction, and
administrative support services and resources for the nation=s
elementary and secondary schools. The TLCF program provides resources to
speed the implementation of State-wide strategies designed to enable all
schools to integrate technology fully into school curricula so that all
students become technologically literate, with the academic skills
essential for their success in the 21st Century. A key purpose of the
program is to enable the State to assist school systems that have the
highest numbers or percentages of children in poverty and demonstrate
the greatest need for technology.

**II. PROGRAM PROCEDURES**

State educational agencies (SEAs) in the 50 States, the District of
Columbia, Puerto Rico, and the Outlying Areas as well as the Bureau of
Indian Affairs (BIA) are eligible and participate in the program. Funds
are allocated to States on a formula basis proportionate to their share
under Part A of Title I of the ESEA.

States may retain up to 5 percent of their allotment for technical
assistance and administration. The remaining 95 percent is awarded
competitively to local education agencies (LEAs) or to LEAs that are
part of consortia, in such a manner that assistance is provided to LEAs
with the greatest numbers or percentages of children in poverty and the
greatest need for educational technology. Multiple-year awards are
permitted and continuation grants may be made in the second and
subsequent years.) Awards must be of sufficient size, scope, quality and
duration to carry out the purposes of the program effectively.

States have broad discretion in designing subgrant competitions. For
example, they may: establish maximum and minimum award amounts; allocate
funds to geographic regions within the State (with competitions within
each region); establish priorities to target resources to LEAs with high
percentages or numbers of children in poverty and the greatest need for
technology; and limit the uses of funds to activities such as
professional development or equipment purchases.

**Source of Governing Requirements**

This program is authorized by Title III, Part A, Subpart 2 of the
Elementary and Secondary Education Act of 1965, as amended (ESEA) (20
USC 6841-6847). The Education Department General Administrative
Regulations in 34 CFR parts 76, 77, 80, 82, 85, and 86 apply to this
program. Other requirements in 34 CFR part 299 also apply.

**III. COMPLIANCE REQUIREMENTS**

**In developing the audit procedures to test compliance with the
requirements for a Federal program, the auditor should first look to
Part 2, Matrix of Compliance Requirements, to identify which of the 14
types of compliance requirements described in Part 3 are applicable and
then look to Parts 3 and 4 for the details of the requirements.**

Certain compliance requirements which apply to multiple ED programs are
discussed once in the ED Cross-Cutting Section of this Supplement (page
4-84.000-1) rather than repeating in each individual program. Where
applicable, this section references the Cross-Cutting Section for these
requirements.

**A. Activities Allowed or Unallowed**

Also, see ED Cross-Cutting Section

**1.** *SEAs*

> An SEA must, in accordance with its approved State plan, make
> competitively awarded subgrants to LEAs, or to LEAs that are part of
> consortia with other LEAs, institutions of higher education,
> intermediate educational units, libraries, or other educational
> entities appropriate to provide local programs. Funds may be used for
> administration and technical assistance (Sections 3115 and 3132(a)(2)
> of ESEA (20 USC 6815 and 6842(a)(2)).

**2.** *LEAs*

> Funds must be used for activities consistent with its SEA approved
> strategic, long-term technology plan. In general, funds may be used
> for the following (Sections 3134 and 3135 of ESEA (20 USC 6844 and
> 6845)):
>
> a\. Developing, adapting, or expanding existing and new applications
> of technology to support the school reform effort;
>
> b\. Funding projects of sufficient size and scope to improve student
> learning and, as appropriate, support professional development, and
> provide administrative support;
>
> c\. Acquiring connectivity linkages, resources, and services,
> including the acquisition of hardware and software, for use by
> teachers, students and school library media personnel in the classroom
> or in school library media centers, in order to improve student
> learning by supporting the instructional program offered by such
> agency to ensure that students in schools will have meaningful access
> on a regular basis to such linkages, resources and services;
>
> d\. Providing ongoing professional development in the integration of
> quality educational technologies into school curriculum and long‑term
> planning for implementing educational technologies;
>
> e\. Acquiring connectivity with wide area networks for purposes of
> accessing information and educational programming sources,
> particularly with institutions of higher education and public
> libraries; and
>
> f\. Providing educational services for adults and families.

**B. Allowable Costs/Cost Principles**

See ED Cross-Cutting Section

**G. Matching, Level of Effort, Earmarking**

**1. Matching** - Not Applicable

**2.1 Level of Effort** - *Maintenance of Effort*

See ED Cross-Cutting Section

**2.2 Level of Effort** - *Supplement Not Supplant* (LEA)

See ED Cross-Cutting Section.

**3. Earmarking**

Also, see ED Cross-Cutting Section

> No more than 5 percent of the annual allocation may be retained by the
> SEA for administration and technical assistance. The remaining 95
> percent (or more) must be used for competitive sub-grants (Sections
> 3115 and 3132 of ESEA (20 USC 6815 and 6842)).

**H. Period of Availability of Federal Funds**

> Funds are available for the Federal fiscal year for which they are
> appropriated and for an additional 12 months. For example, fiscal year
> 2000 funds are available from October 1, 1999 (the beginning of
> Federal fiscal year 2000) until September 30, 2001 (20 USC 1225(b); 34
> CFR section 76.709).

**L. Reporting**

> **1. Financial Reporting**
>
> See ED Cross-Cutting Section

**2. Performance Reporting** - Not applicable

**3. Special Reporting -** Not Applicable

**N. Special Tests and Provisions**

> **1. Participation of Private Schools**

See ED Cross-Cutting Section

> **2. Schoolwide Programs**

See ED Cross-Cutting Section

**DEPARTMENT OF EDUCATION**

**CFDA 84.340 CLASS SIZE REDUCTION**

**I. PROGRAM OBJECTIVES**

The objective of the Class Size Reduction (CSR) Program under the 1999
Appropriations Act is to help schools improve student learning by hiring
additional, highly qualified teachers so that children, especially those
in the early elementary grades, can attend smaller classes. Over seven
years, the addition of these new teachers should result in the reduction
of class size in the early grades to a national average of 18 children
per class. The CSR Program also includes a strong emphasis teacher
quality and professional development, and local education agencies
(LEAs) may use up to 15 percent of their grants on activities in this
area.

**II. PROGRAM PROCEDURES**

All 50 States, the District of Columbia, Puerto Rico, the Bureau of
Indian Affairs, and the Outlying Areas are eligible to apply for funds
under this program. Grants are made to the States via a formula based on
either the Title I allocation formula or the Eisenhower Professional
Development State Grants (Title II) formula, whichever results in the
larger amount for the State.

LEAs apply to the State education agencies (SEAs) for CSR funds as part
of their State Title VI application. States then disburse 100 percent of
the CSR funds to eligible LEAs, based 80 percent on census poverty data
and 20 percent on school enrollment data. A State may not make an award
to an LEA whose allocation will be less than the amount of a new
teacher=s starting salary in that LEA, unless the LEA agrees to form a
consortium with one or more other LEAs for the purpose of reducing class
size.

**Source of Governing Requirements**

This program is authorized by Title III of the Omnibus Consolidated and
Emergency Supplemental Appropriations Act of 1999 (the Department of
Education Appropriations Act of 1999), Pub. L. No. 105-277. Certain
provisions of Title VI of the Elementary and Secondary Education Act
(ESEA) 20 USC 7301 *et seq.* also apply.

**Availability of Other Program Information**

Other program information is available on the Internet at
www.ed.gov/offices/OESE/ program.html.

**III. COMPLIANCE REQUIREMENTS**

**In developing the audit procedures to test compliance with the
requirements for a Federal program, the auditor should first look to
Part 2, Matrix of Compliance Requirements, to identify which of the 14
types of compliance requirements described in Part 3 are applicable and
then look to Parts 3 and 4 for the details of the requirements.**

Certain compliance requirements which apply to multiple ED programs are
discussed once in the ED Cross-Cutting Section of this Supplement (page
4-84.000-1) rather than repeating in each individual program. Where
applicable, this section references the Cross-Cutting Section for these
requirements. Also, as discussed in the Cross-Cutting Section, SEAs and
LEAs may have been granted waivers from certain compliance requirements.

**A. Activities Allowed or Unallowed**

Also, see ED Cross-Cutting Section.

> 1\. *SEAs* - SEAs must distribute 100 percent of the CSR funds to all
> eligible LEAs. No funds may be retained by the SEA for administrative
> expenses (Pub. L. No. 105-277, Section 307(b)(1)).
>
> 2\. *LEAs* - Funds must be used in accordance with the LEA\'s approved
> application, to recruit, hire (including payment of salaries and
> benefits), and train certified classroom teachers in order to reduce
> the class size in the targeted grades or subjects (generally grades
> one through three). Funds may also be used for teacher testing
> activities, meet State certification requirements, provide
> professional development to teachers, and for administrative costs
> (Pub. L. No. 105-277, Section 307(c)(1)).
>
> After funding these efforts, or if class size in grades one through
> three (or in other grades or subjects for LEAs that do not serve
> grades one through three) is already reduced to 18 or fewer with
> highly qualified teachers, it may use the funds to: (1) make further
> class size reductions in grades one through three (or in other grades
> or subjects for LEAs that do not serve grades one through three); (2)
> reduce class size in kindergarten or other grades; or (3) carry out
> activities to improve teacher quality, including professional
> development (Pub. L. No. 105-277, Section 307(c)(2)(C)).
>
> LEAs may not use funds to increase the salaries or provide benefits
> (other than participation in professional development and enrichment)
> for teachers who are, or have been, employed by the LEA. Funds also
> may not be used to recruit, hire, train or test new teachers in
> private schools (Pub. L. No. 105-277, Sections 307(c)(4) and 307(e)).

**B. Allowable Costs/Cost Principles**

See ED Cross-Cutting Section

**G. Matching, Level of Effort, Earmarking**

**1. Matching** - Not Applicable

**2.1 Level of Effort** - *Maintenance of Effort* (SEAs)

> The combined fiscal effort per child or the aggregate expenditures
> within the State for free public education for the preceding fiscal
> year must be at least 90 percent of the combined fiscal effort per
> child or aggregate expenditures for the second preceding fiscal year,
> unless specifically waived by the Secretary of Education for one
> fiscal year only (20 USC 7371).
>
> Expenditures to be considered are State and local expenditures for
> free public education. These expenditures include expenditures for
> administration, instruction, attendance, health services, pupil
> transportation, plant operation and maintenance, fixed charges, and
> net expenditures to cover deficits for food services and student
> activities. States may include in the maintenance of effort
> calculation expenditures of Federal funds for which no accountability
> to the Federal Government is required. Certain Impact Aid funds are an
> example of such funds. (However, Impact Aid funds for which there is a
> requirement of accountability to the Federal Government, such as those
> received for children with disabilities, can not be included in the
> calculation.) States must be consistent in the manner in which they
> calculate maintenance of effort from year-to-year in order to ensure
> that the annual comparisons are on the same basis (i.e., calculations
> must consistently, from year-to-year, either include or exclude
> expenditures of Federal funds for which accountability to the Federal
> Government is not required). Expenditures not to be considered are any
> expenditures for community services, capital outlay, or debt service,
> and any expenditures of Federal funds for which accountability to the
> Federal Government is required (Title VI, Section 6401(a) of the ESEA
> (20 USC 7371(a)).

**2.2 Level of Effort** - *Supplement Not Supplant* (LEAs)

See ED Cross-Cutting Section

**3. Earmarking**

Also, see ED Cross-Cutting Section

> a\. LEAs must use a minimum of 82 percent of their CSR allocation to
> recruit, hire (including payment of salaries and benefits), and train
> certified classroom teachers in order to reduce the class size in the
> targeted grades or subjects, generally grades one through three.
>
> b\. An LEA may use a maximum of 15 percent of the CSR funds for
> professional development and teacher testing activities.
>
> c\. A LEA may reserve no more than 3 percent of the funds for
> administrative costs (Pub. L. No. 105-277, Section 307(c) through
> (f)).

**H. Period of Availability of Federal Funds**

See ED Cross-Cutting Section

**L. Reporting**

**1. Financial Reporting**

See ED Cross-Cutting Section.

**2. Performance Reporting** - Not applicable

**3. Special Reporting** - Not applicable

**N. Special Tests and Provisions**

> **1. Participation of Private Schools** (LEAs)
>
> The ED Cross-Cutting Section applies to the equitable participation of
> teachers from private, nonprofit elementary and secondary schools in
> any professional development activities paid for with CSR funds. It
> does not apply to any other activities paid for with CSR funds. (Pub.
> L. No. 105-277, section 307(e))

**2. Schoolwide Programs**

See ED Cross-Cutting Section