ELEMENTARY AND SECONDARY EDUCATION ACT (ESEA)
                     COMPLIANCE SUPPLEMENT
                        TABLE OF CONTENTS
                                                                       Page #
Guidance for Audits of SEAs or LEAs                                       i
Recent Changes to ESEA                                                   vi
Cross-cutting Provisions                                                  1
Program Specific Sections
     Program Name                             Section of ESEA  CFDA #
Title I Grants to Local Education Agencies     Title I,Part A  84.010    18
Migrant Education - Basic State Grant Program  Title I,Part C  84.011    25
Eisenhower Prof. Development State Grants      Title II,Part B 84.281    31
Safe and Drug-Free Schools - State Grants      Title IV,Part A,
                                               Subpart 1       84.186A   35
Innovative Education Program Strategies        Title VI        84.298    46
Bilingual Education                            Title VII       84.288S   52
                                                               84.290U
                                                               84.291R
Impact Aid                                     Title VIII      84.041    55
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               Guidance for Audits of SEAs or LEAs
The attached compliance supplement for ESEA programs supersedes the
program specific compliance supplements for those programs found in
the 1990 Office of Management and Budget (OMB) "Compliance
Supplement for Single Audits of State and Local Governments" (1990
Supplement) ."  Other sections of the 1990 Supplement (e.g. the
general requirements) are still applicable to audits of State
education agencies (SEAs) and local education agencies (LEAs).
This Compliance Supplement is intended to direct an auditor's
attention to those issues that are most suited to review by an
auditor.  Therefore it does not deal with every significant
provision of ESEA. A number of very important provisions in ESEA,
such as those on standards and assessments, school improvement,
parent involvement, and evaluations, are not dealt with in this
document because the Department of Education (ED) believes that
those provisions are better addressed through means other than
annual audits.
(1) Learning about recent changes.
Because of recent legislation, many requirements of ESEA programs
have changed.  There is much greater flexibility provided to
grantees.  We encourage  you to read the "Recent Changes to ESEA"
section included with this compliance supplement.  One significant
change is that SEAs and LEAs may, under certain circumstances,  be
granted waivers from certain requirements.  Another significant
change is that LEAs may combine ESEA funds in a schoolwide program.
These and other major changes are explained in this section.
(2) Determining major programs and preparing the schedule of
    federal financial assistance.
In some cases, SEAs and LEAs are permitted to transfer amounts
between ESEA programs.  In addition, SEAs and LEAs are allowed to
consolidate administrative funds of ESEA programs or combine ESEA
funds in a schoolwide program.  To determine major programs and to
prepare the schedule of federal financial assistance, the transfers
and consolidations of funds should be handled as follows:
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     Fund transfers between ESEA programs.  These funds should be
     included and reported (and audited, if major) in the program
     ultimately expending the funds.  A footnote to the schedule of
     federal financial assistance should indicate by program the
     amount of funds transferred between ESEA programs.
     Consolidation of administrative funds of ESEA programs.  When
     administrative funds of ESEA programs are consolidated, Federal
     expenditures of the consolidated administrative funds are not
     required to be tracked by the ESEA program that provided the
     funds.  Therefore, Federal expenditures should be allocated to
     the ESEA programs in proportion to the funds provided by each
     program.
     Combining funds in a schoolwide program.  When ESEA program
     funds are combined in schoolwide programs, they lose their
     Federal identity. Therefore, when determining whether a program
     that provides funding for one or more schoolwide programs is
     major, amounts transferred to schoolwide programs should be
     considered expenditures at the point in time the transfer is
     made.  On the schedule of federal financial assistance, the
     amount transferred can either be shown separately or included in
     the total expenditures for the program.  If included in the
     total expenditures, the amount transferred should be disclosed
     in a footnote.
(3) Evaluating and testing internal controls under Single Audit
    Standards.
The auditor's responsibilities for evaluating and testing internal
controls are not covered in the Compliance Supplement.  The auditor
should refer to Circular A-128 and other applicable guidance.
(4) Determining allowable costs.
OMB Circular A-87 "Cost Principles for State, Local and Indian
Tribal Governments," revised on May 17, 1995, is the set of cost
principles that generally apply to grants and subgrants awarded to
governments on or after October 1, 1995.  However, because the
revised Circular contains areas of flexibility not contained in the
prior cost principles, ED permitted recipients for which ED has
cognizance to charge direct costs that are consistent with the
revised Circular for the period July 1, 1995 through the end of the
1996 fiscal year.
(5) Using the Cross-cutting Provisions.
Several statutory and regulatory provisions are applicable to most
ESEA programs.  The "Cross-cutting Provisions" section discusses
those requirements.  Therefore, applicable cross-cutting
requirements should be included as part of the compliance testing
for ESEA programs that are major programs. The applicable cross-cutting
requirements have been referenced in the program specific
sections.
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As mentioned earlier, SEAs and LEAs may have been granted waivers
from certain compliance requirements.  Thus, in conducting an
audit, first determine which, if any, waivers an SEA or LEA has
been granted.
(6) Auditing LEAs that have schoolwide programs.
Under Title I/ Part A (Grants to local education agencies, CFDA
#84.010), a certain participating schools may use Title I/ Part A
funds to upgrade the entire educational program in the school.  The
school may also combine funds from many other Federal education
programs, including the following major ESEA programs:
          Program Name                            CFDA #
          Migrant Education - Basic State Grant Program          84.011
          Eisenhower Professional Development State Grants       84.281
          Safe and Drug-Free Schools - State Grants              84.186A
          Innovative Education Program Strategies                84.298
          Bilingual Education                                    84.288S,
                                                                 84.290U,
                                                                 84.291R
When an LEA operates schoolwide programs and Title I/ Part A is a
major program, some of the program specific requirements do not
apply to the portion of funds used in the schoolwide programs. The
requirements that apply to schoolwide programs are labeled in the
Title I/ Part A program specific section.   If any other ESEA
programs are major, the auditor would not test the funds used in
schoolwide programs for the program specific requirements for those
major programs because those requirements are not applicable to
schoolwides.  In addition, because ESEA funds transferred to the
schoolwide program lose their Federal identity, individual
expenditures at the schoolwide program should not be tested for
compliance with Federal laws and regulations that are normally
applicable to expenditures of Federal funds.
(7) Auditing SEAs and LEAs that have transferred funds from one or
    more programs to consolidated administrative cost funds and
    coordinated service projects.
In planning the audit of major programs that have transferred funds
to a consolidated administrative costs fund/pool or a coordinated
services project, the auditor should include the consolidated
administrative cost pool or coordinated services project
expenditures in the universe to be tested for cost
allowability/services allowed or unallowed.  Any transactions
selected from the consolidated administrative cost pool or
coordinated services project would be tested against the compliance
requirements applicable to the consolidated administrative cost
pool or coordinated services project, rather than the individual
program.
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(8) Accessing information from ED.
ED encourages auditors to familiarize themselves with the
applicable statutory and regulatory citations for each compliance
requirement.  Copies of the relevant statutes, regulations, and
guidance issued by ED for each program covered in the compliance
supplement can be obtained via Internet or by contacting the
relevant ED offices:
Internet Access:
    ED's HomePage at (www.http://www.ed.gov/legislation/esea/toc.html)
    "Single Audit Bulletin Board System" (SABBA) located on the
     General Accounting Office's (GAO), Office of Policy Bulletin
     Board System.
         Option (1): Use your communication software package to dial
          the SABBS at (202) 512-4286.  Set your parity to "NONE," Date
          Bits to "8," and Stop Bit to "1" (N,8,1).  Set your terminal
          emulation to "ANSI" or "VT-100."
         Option (2): You can also reach the SABBS using the Internet
          via FedWorld's BBS.  Telnet to fedworld.gov (192.239.92.201).
          Select the gateway option on the menu.  SABBS is number 135.
    Single audit menu of the IGNet Gopher
     (gopher://www.sbaonline.sba.gov:70/11/ignet/single)
ED Office Contacts for program related questions:
    The Office of Elementary and Secondary Education at (202) 401-0113 for:
         Title I, Part A (Grants to LEAs, CFDA No. 84.010) and Part C
          (Migrant Education, CFDA No. 84.011)
         Title II (Professional Development, CFDA No. 84.281)
         Title IV (Safe and Drug-Free Schools and Communities, CFDA No.
          84.186A)
         Title VI (Innovative Education Strategies, CFDA No. 84.298)
         Title VIII (Impact Aid programs, CFDA 84.041)
    The Office of Bilingual Education and Minority Languages Affairs
     at (202) 205-5451 for Title VII (Bilingual Education programs,
     CFDA Nos. 84.288, 84.290, and 84.291).
ED OIG Contacts for audit related questions:
    Fax machine:  (202) 205-8238.
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(9) Commenting on this document.
OMB is scheduled to issue a new Governmentwide Compliance
Supplement in December 1996.  This document will be incorporated
into the new Compliance Supplement.  To improve this document
before it is incorporated, ED invites comments from all interested
parties.  ED is particularly interested in comments on the audits
of schoolwide programs.  To be considered for the December 1996
revision, comments must be received by August 31, 1996.  However,
we plan to continuously improve and provide OMB with suggestions
for updating the Compliance Supplement.  Therefore, your comments
are welcome anytime.  Comments may be sent by mail or fax.
     Mailing address:
          Office of Inspector General
          U.S. Department of Education
          600 Independence Avenue, SW
          Washington, DC 20202-1510
          ATT: ESEA Compliance Supplement Comments
     Fax machine:
          (202) 205-8238
          Please note on the document: ESEA Compliance Supplement Comments.
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                                                                           vi
                        RECENT CHANGES TO
          ELEMENTARY AND SECONDARY EDUCATION ACT (ESEA)
This portion of the Compliance Supplement is intended to direct the
auditor's attention to recent changes to the Elementary and
Secondary Education Act programs that may influence the conduct of
the audit.
Flexibility Provisions
The reauthorized ESEA, in combination with the Goals 2000: Educate
America Act and the School to Work Opportunities Act, emphasizes
greater flexibility in the use of Federal funds and the number of
Federal process requirements in order to improve teaching and
learning.  This flexibility is coupled with greater State and local
accountability for educational results.  New areas of flexibility
that the U.S. Department of Education (ED) is working to implement
include the following:
Schoolwide programs.  Title I, Part A of ESEA lowers the
eligibility threshold for schools that want to operate schoolwide
programs.  (For school year 1995-96, 60 percent or more of the
children enrolled in the school or residing in the school
attendance area must be from low income families for the school to
be a schoolwide program; for 1996-97 and beyond, the eligibility
threshold is 50 percent or higher.)  Eligible schools are able to
use their Title I 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.
Schoolwide programs are not required to track Federal funds
separately at the individual school level.
Submission of a consolidated plan to receive Federal funds.  ESEA
allows both States and local educational agencies (LEAs) to file
single, consolidated plans that include many Federal programs
supporting elementary and secondary education.  States have a
choice in determining which programs to include in a consolidated
plan.  The development of a single plan eliminates the need to
develop separate, often overlapping, plans for each Federal
program.  A consolidated plan is designed to reduce program
fragmentation and improve the use of Federal funds to support State
and local reform efforts.  Guidance developed by ED permits States
to submit a simplified plan that focuses on those efforts and omit
much of the program-specific information that otherwise would be
required in a plan for each of the programs included in the
consolidated plan.  Submission of a consolidated plan, however,
does not relieve States or LEAS of the programmatic
responsibilities described in the individual program statutes or
regulations nor does it authorize commingling of funds.  Except in
the case of a schoolwide program or consolidated administrative
funds, Federal program funds must be accounted for separately for
each Federal program.
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Consolidation of administrative funds.  State educational agencies
(SEAs) and LEAs may consolidate funds received for administration
of many ESEA programs and several non-ESEA programs, thus
eliminating the need to maintain separate time and effort records
for SEA and LEA personnel who work on more than one of those
Federal programs or otherwise account for these funds on a program-
by-program basis.
Availability of funds for other authorized purposes.  If an LEA
determines that, for any fiscal year, funds under one of several
ESEA programs (not including Title I, Part A) are not needed, it
may use up to five percent of the funds allocated to that program
for another covered ESEA program.  An LEA, an individual school, or
consortium of schools (if there is no governing LEA), with the
approval of the Secretary, may use up to five percent of its ESEA
funds (including Title I, Part A) to implement a coordinated
services project under Title XI of ESEA.
Waiver of certain program requirements.  Under Title XIV of ESEA,
States, LEAs, and schools may request waivers from the ED of many
of the statutory and regulatory requirements of programs authorized
in ESEA.  Similar waiver authority exists under the Goals 2000:
Educate America Act and the School to Work Opportunities Act.  Also
under the educational flexibility (Ed-Flex) demonstration program
of Goals 2000, the Secretary has delegated to some SEAs the
authority to waive certain Federal statutory or regulatory
requirements affecting the State and its districts and schools.  In
conducting an audit, auditors should ascertain from the audited SEA
and LEAs whether ED (or an SEA, if an Ed-Flex State) has granted
any written waivers to the State, the LEAs, and through LEAs
schools.
Prima Facie
Under statutory amendments included in IASA, determination letters
that resolve audit findings and seek the recovery of funds, must
"establish a prima facie case," and include an analysis of the
value of the program services actually obtained in determining harm
to the Federal interest and the amount to be recovered.  In other
words, if--despite a violation of program conditions--a grantee
uses $100,000 to deliver satisfactory program services to eligible
children, these services would have to be considered in determining
harm to the Federal interest.  "Establishing a prima facie case"
essentially means that a determination letter must contain or
attach enough evidence to enable a reasonable person to draw from
it the inferences sought to be established--in general, that the
violation cited occurred, and that funds in the amount in question
were misspent.  It is not sufficient for a determination merely to
state the facts and law that would support the recovery of funds.
Accordingly, audit reports must provide complete and convincing
information on all findings in accordance with Sections 7.51-53 and
7.60 of the Government Auditing Standards (1994 Revision).  In
addition, the workpapers must contain sufficient information on the
evidence that supports each finding in accordance with sections
4.34 - 4.38 of the Government Auditing Standards (1994 Revision).
Such audit reports also should provide any available information on
the value of the program services received.
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                     CROSS-CUTTING PROVISIONS
             Applicable to More than One ESEA Program
This section contains compliance requirements that apply to more
than one of the ESEA programs included in this compliance
supplement.  At the beginning of each compliance requirement, the
programs in this compliance supplement that the requirement applies
to are listed (applicable programs).  These requirements may also
apply to other U.S. Department of Education (ED) programs; however,
because these other programs are not included in this supplement,
these programs are not listed as "applicable programs."  The names
of the programs in this supplement have been shortened as follows:
  CFDA #   Program Name                                         Listed as
  84.010    Title I Grants to Local Educational Agencies       Title I/ Part A
  84.011    Migrant Education - Basic State Grant Program                  MEP
  84.281    Eisenhower Professional Development State Grants        Eisenhower
  84.186A   Safe and Drug-Free Schools- State Grants                    SDFSCA
  84.298    Innovative Education Program Strategies                   Title VI
  84.288S, 84.290U, 84.291R      Bilingual Education                 Bilingual
  84.041    Impact Aid                                              Impact Aid
                       I. ESEA OBJECTIVES
The Elementary and Secondary Education Act of 1965 (ESEA), 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.
Under IASA, Federal education programs authorized in 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, 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.
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                       II.  ESEA PROCEDURES
PLANS
Applicable programs:  Title I/ Part A; MEP; Eisenhower; SDFSCA
(except the Governor's Program authorized under Section 4114);
Title VI
A State education agency (SEA) must either (1) develop and submit
separate, program-specific individual State plans to ED for
approval as provided in individual program requirements outlined in
ESEA or (2) submit, in accordance with section 14302 of ESEA, a
consolidated plan to ED for approval.  Local education agencies
(LEAs) also have the choice 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.
WAIVERS
Applicable programs:  Title I/ Part A; MEP; Eisenhower; SDFSCA
(except the Governor's Program authorized under Section 4114);
Title VI; Bilingual
Under Title XIV of ESEA, States, LEAs, and schools through an 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 some SEAs the authority to waive certain
Federal statutory or regulatory requirements affecting the State
and its districts and schools.  In conducting an audit, auditors
should ascertain from the audited SEA and LEAs whether ED (or an
SEA, if an Ed-Flex State) has granted any written waivers to the
State or the LEAs.
         III.  COMPLIANCE REQUIREMENTS, AUDIT OBJECTIVES
                  AND SUGGESTED AUDIT PROCEDURES
A.  Types of Services Allowed or Unallowed
See specific compliance requirements for each ESEA program.  Also,
section C in this cross-cutting section describes options that SEAs
and LEAs have for earmarking funds to be pooled for certain
specified activities.
B.  Eligibility
See specific compliance requirements for each ESEA program.
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C.  Matching, Level of Effort, and/or Earmarking Requirements
C-1 Maintenance of effort
Applicable Programs:  Title I/ Part A; Eisenhower; SDFSCA (except
the Governor's Program authorized under Section 4114)  Note:  Title
VI has a separate maintenance of effort requirement which is
explained in the Title VI program specific section.
Compliance Requirement
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.
Except for Title 1/ Part A, the SEA can define the type of
expenditures that can be included in the calculation.  For purposes
of Title I/ Part A, 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 which the LEA is
required to account to the Federal Government directly or through
the SEA.
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))
Audit Objective (SEA)
To determine whether the SEA is properly determining whether LEAs
are complying with the maintenance of effort requirements and, if
not, whether the SEA is reducing the allocation of funds
appropriately.
Audit Objective (LEA)
To determine whether the LEA's calculation or other data submitted
to the SEA for SEA calculation are consistent with the requirements
and supported by the books and records of the LEA.
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Suggested Audit Procedures (SEA where LEA does calculation)
    Select a sample of LEAs and review determinations of
     compliance to determine whether determinations show that
     effort was maintained.
    If SEA records show that an LEA failed to maintain fiscal
     effort, review allocation records to ascertain whether the SEA
     reduced the amount allocated to the LEA under the program in
     the exact proportion by which the LEA failed to maintain
     effort below the 90 percent threshold.
Suggested Audit Procedures (SEA where SEA does calculation)
    Review a sample of maintenance of effort calculations for LEAs
     to ensure that the SEA included only allowable categories of
     expenditures and that the categories were consistent in both
     years.
    If SEA records show that an LEA failed to maintain fiscal
     effort, ascertain whether the SEA reduced the amount of the
     allocation of funds under the program in any fiscal year in
     the exact proportion by which the LEA failed to maintain
     effort below the 90 percent threshold.
Suggested Audit Procedures (LEA where LEA does calculation)
    Review the maintenance of effort calculations to ensure that
     the LEA included only allowable categories of expenditures and
     that the categories were consistent in both years.
    Trace amounts used in the calculation to the books and records
     from which audited financial statements were prepared and to
     student enrollment records.
Suggested Audit Procedure (LEA where SEA does calculation)
    Trace amounts sent to the SEA to use in the calculation of
     maintenance of effort to the books and records from which
     audited financial statements were prepared and to student
     enrollment records.
C-2 Supplement not supplant
Applicable Programs:  Title I/ Part A; MEP; Title VI; Bilingual
Compliance Requirement
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
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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 funds under an applicable program (except
     Bilingual) to provide services that the SEA or LEA was
     required to make available under Federal, State, or local law.
    The SEA or LEA used funds under an applicable program to
     provide services that the SEA or LEA provided with non-Federal
     funds in the prior year(s).
    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.
When auditing a schoolwide program:  In a Title I schoolwide
program, a school is not required to provide supplemental services
to identified children.  However, the school may only use Federal
funds to supplement the amount of funds that would in the absence
of the Federal funds, be made available to the school from non-Federal
sources, including funds needed to provide services required by law for
children with disabilities and children with limited English proficiency.
(Title I/ Part A, Section 1114(a)(3) (20 USC 6314(a)(3)))
When auditing 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 intent and
purposes of Title I/ Part A or MEP.  (Title I/ Part A of ESEA,
Section 1120A(d) (20 USC 6322(d))
Additional explanation for 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)))
Audit Objective (LEA and SEA)
To determine whether the SEA and its LEAs used funds of an
applicable program only to supplement, and not supplant, non-Federal funds.
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Suggested Audit Procedures (LEA and SEA)
    Determine the procedures used by the SEA or LEA to ensure that
     funds under an applicable program supplement and do not
     supplant State and/or local funding.
    Identify the activities funded with funds under an applicable
     program during the current fiscal year.  Determine whether any
     of the presumptions described above occurred.  If so,
     determine whether the SEA or LEA can rebut the presumption by
     demonstrating that it would not have provided the services in
     question with non-Federal funds had the Federal funds not been
     available.
C-3 Comparability
Applicable Programs:  Title I/ Part A; MEP
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(d) (20 USC 6322(d))
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)))
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Audit Objective  (SEA)
To determine whether the SEA is determining whether LEA are
complying with the comparability requirements.
Audit Objective (LEA)
To determine that 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 Procedure (SEA)
    For a sample of LEAs, review SEA records that document SEA
     review of LEA compliance with the comparability requirements.
Suggested Audit Procedures (LEA)
    Through inquiry and review, determine if the LEA has developed
     procedures and measures for complying with the comparability
     requirements.
    Review LEA comparability documentation to determine (1)whether
     it has been updated within two years of the end of the audit
     period  and (2) that it shows that the LEA is providing
     services with State and local funds to Title 1/ Part A or MEP
     schools that are comparable to services provided to non-Title
     1/ Part A or MEP schools.
    On a test basis, trace comparability data to supporting
     records.
C-4 Consolidation of administrative funds
Applicable Programs:  Title I/ Part A; MEP; Eisenhower; SDFSCA
(except the Governor's Program authorized under Section 4114);
Title VI
Compliance Requirement
An SEA may consolidate funds received for State administration
under applicable programs provided the SEA can demonstrate that the
majority of its operating resources comes from non-Federal sources.
An SEA must use consolidated administrative funds for authorized
administrative activities of the programs whose funds are
consolidated and may use them 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. The amount from
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each applicable program set aside for consolidation may not be more
than the percentage, if any, authorized for State administration
under that program.
An LEA may, with the approval of the SEA, also consolidate local
administrative funds under applicable programs.  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. In addition, an LEA may not use any other funds
under the programs included in the consolidation for
administration.  Each SEA shall, in collaboration with the LEAs in
the State, establish procedures for responding to requests from
LEAs to consolidate administrative funds.
An SEA or LEA that consolidates administrative funds is not
required to keep separate records by individual programs to account
for costs relating to the administration of programs included in
the consolidation.  (Sections 14201 and 14203 of ESEA (20 USC 8821
and 8823))
Audit Objective (SEA)
To determine that the amount taken from any program for State
administration does not exceed any statutory or regulatory limits
and that the SEA has established procedures for responding to
requests from LEAs to consolidate administrative funds.
Audit Objective (LEA)
To determine that the LEA received prior approval from the SEA and
that amounts consolidated for local administration do not exceed
any statutory or regulatory limits.
Suggested Audit Procedures
    Through inquiry and review, determine whether the SEA has
     developed and followed procedures for responding to requests
     from LEAs to consolidate administrative funds. (SEA only)
    Determine that the LEA received prior approval from the SEA.
     (LEA only)
    Review budgetary/accounting records to determine whether the
     amount transferred from the program for consolidated
     administration did not exceed the amount allowed by the
     statute or regulation.  (Note: See C-5 for statutory limits
     pertaining to Title I/ Part A and MEP and the program specific
     sections for the other programs.)
    Scan general ledger or other records that accumulate other
     program cost classifications to determine that there are not
     significant (in amount or in number) administrative costs that
     are misclassified.
(NOTE: When auditing as a major program any program for which
administration was consolidated, the auditor should include the
administrative cost pool in the universe to be tested for cost
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                                                                      Page 9
allowability.  Any transactions selected from the administration
costs pool would be tested against the compliance requirements
applicable to the cost pool, rather than the individual program.)
C-5 Reservation of Title I funds for State administration
Applicable Programs:  Title I/ Part A; MEP
Compliance Requirement
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)), MEP (Title I, Part
C), and Title I, Part D, Subpart 1 (State Agency Neglected or
Delinquent Program).  The one percent reservation is a maximum.  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 Targeted Grants must be proportionate.
If the amount reserved through this process totals less than
$400,000, an SEA may reserve up to $400,000 for State
administration.  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 above, under section 14201 of ESEA, an SEA may
consolidate administrative funds reserved from Title I, Parts A, C,
and D (Subpart 1) with State administrative funds available under
other applicable programs, provided the SEA can demonstrate that
the majority of its operating resources come from non-Federal
sources.
(Title I, Section 1603 of ESEA (20 USC 6513); 34 CFR 200.60(a)
and 200.61)
Audit Objective and Procedures
See Audit Objective and Procedures under C-4.
C-6 Use of unneeded program funds
Applicable Programs:  MEP; Eisenhower; SDFSCA (except the
Governor's Program authorized under Section 4114); Title VI
Compliance Requirement
With the approval of its SEA, an LEA that determines for any fiscal
year that funds under an applicable program (other than Title I/
Part A) 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
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                                                                      Page 10
applicable program.  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 taken. (Section 14206(a) of ESEA (20 USC
8826(a)))
Audit Objective
To determine that the amount of unneeded funds transferred to
another applicable program does not exceed the amount identified in
the SEA-approved application.
Suggested Audit Procedure (LEA)
    Identify the amounts of unneeded funds actually reallocated to
     other applicable programs and compare to the amount authorized
     by the SEA.
(NOTE: Unneeded funds transferred to other applicable programs
should be included in the universe to be tested for allowable
services and allowable costs of the program to which they are
transferred.)
C-7 Coordinated services projects
Applicable Programs:  Title I; MEP; Eisenhower; SDFSCA (including
the Governor's Program authorized under Section 4114); Title VI;
Bilingual, Impact Aid
Compliance Requirement
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 (including Impact Aid funds under
Title VIII) 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 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 taken.  (Title XI and Section
14206(b) of ESEA (20 USC 8401 et seq. and 8826(b)))
Audit Objective
To determine whether the amount of Federal funds used in the
coordinated services project does not exceed the amount identified
in the ED-approved application.
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                                                                      Page 11
Suggested Audit Procedure (LEA or school level)
    Review budgetary/accounting records to determine amount of
     funds transferred to the coordinated services project.
     Compare with the amount approved by ED.
(Note: When auditing a major program that transferred funds to a
coordinated services project,  the coordinated services project
should be included in the sampling universe to be tested for
allowability of costs.  Any transactions selected from the
coordinated services project would be tested against the
compliance requirements applicable to coordinated services
projects, rather than the program the funds came from.)
D.  Special Reporting Requirements
D-1 Collection of State Per Pupil Expenditure (SPPE) data
Applicable Programs:  Title I/ Part A; MEP
Compliance Requirement
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.
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.
(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.
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                                                                      Page 12
Audit Objective
To determine that the most recent annual SPPE survey was prepared
properly from supporting records.
Suggested Audit Procedure (SEA)
    Review the most recent annual SPPE survey and trace
     expenditure data to LEA input to determine that it included
     only appropriate types of current expenditures.
    Trace attendance data from a sample of LEA input to the survey
     to assure it was appropriately included.
Suggested Audit Procedure (LEA)
    Review the most recent input to the SEA for the annual SPPE
     survey.  Trace expenditure data to audited books and records
     and test to ensure that only allowable expenditures are
     reported.  Trace attendance data to supporting records.
E.  Special Tests and Provisions
E-1 Obligation of federal funds
Applicable Programs:  Title I/ Part A; MEP; Eisenhower; SDFSCA
(including the Governor's Program authorized under Section 4114);
Title VI; Bilingual
Compliance Requirement Title I/ Part A, MEP, Eisenhower, SDFSCA
(including the Governor's Program authorized under Section 4114),
Title VI
An LEA, SEA, or any other grantee and subgrantee must obligate
Federal program funds during the period for which the funds were
available for obligation.  (Note that the act of an SEA awarding
Federal funds to an LEA or other eligible entity within a State
does not constitute a final obligation.)
Under the applicable programs, funds are generally available for
obligation for a maximum period of 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.   Funds set aside for coordinated
services projects under Title XI of ESEA and unneeded program funds
used for other applicable ESEA programs under section 14206(a) of
ESEA are not available for obligation beyond the period described
above for the applicable program from which the funds were taken.
As noted in the Title I, Part A program section of this document,
Title I, Part A funds are subject to a 15 percent limitation on
carryover after the initial 15 months of availability. (Section
421(b) of GEPA (20 USC 1225(b) 34 CFR 76.704-76.707)
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                                                                      Page 13
Compliance Requirement - Bilingual
Recipients must obligate Bilingual program funds 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.  (34 CFR 
80.23, 75.251, and 75.707)
Consolidated Administrative Funds and Coordinated Service Projects:
Funds used in consolidated administrative funds and 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 tracked by the Federal program, an SEA or
LEA may use a first-in, first-out method for determining when funds
were obligated.
Definition of Obligation:  When an obligation occurs (is made)
depends on the type of property or services that the which the
obligation is for:
IF AN OBLIGATION IS FOR --               THE OBLIGATION IS MADE --
(a)  Acquisition of real or personal    On the date on which the State
     property.                          or 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
     subgrantees.
(c)  Personal services by a             On the date on which the State
     contractor who is not              or subgrantee makes a binding
     an employee of the State           written commitment to obtain
     or subgrantees.                    the services.
(d)  Performance of work other          On the date on which the State
     than                               or subgrantee makes a binding
     personal services.                 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                  When the State or subgrantee
     personal property.                 uses the property.
(h)  A preagreement cost that           On the first day of the
     was properly approved by           subgrant period.
     the State under the applicable
     cost principles.
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                                                                      Page 14
Audit Objective (SEA, LEA, or any other grantee or subgrantee)
To determine that obligations occurred during the period of
availability and are charged to the appropriate year's grant funds.
Suggested Audit Procedures (SEA, LEA, or any other grantee or
subgrantee)
    Test transactions recorded after the end of the audit period
     to determine if the underlying obligations were recorded in
     the proper period of availability.
    Test transactions that were recorded during the audit period
     to determine if the underlying obligations were recorded in
     the proper period of availability.
    If the grantee or subgrantee used a different accounting
     system in the current audit period from that of the previous
     audit period, review a sample of Federal expenditures during
     the cross-over period and trace to their source.  Verify that
     the system was not changed improperly to avoid lapsing funds.
    Review accounting records for any reallocation of Federal
     funds from one subgrantee to another.  Trace these
     reallocations to their source.
    Review accounting records for adjustments to the Federal funds
     made by the grantee or subgrantee.  Trace these adjustments to
     their source.  Verify that these adjustments were not made to
     Federal funds after the period of their availability to offset
     audit disallowances.
    Review accounting records for consolidated administrative
     funds, coordinated service project, and unneeded funds to
     determine that federal funds were spent within the period of
     availablity.
E-2 Schoolwide programs
Applicable Programs:  Title I/ Part A; MEP; Eisenhower; SDFSCA
(except the Governor's Program authorized under Section 4114);
Title VI; Bilingual
Compliance Requirement
A school participating under Title I/ Part A may, in consultation
with its LEA, use Title I/ Part A funds to upgrade the school's
entire educational program in a schoolwide program.  To qualify, 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.  (For fiscal
year 1995-96, the eligibility poverty threshold was 60 percent.)
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.
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Each schoolwide program must include a number of specific
components that are provided in the statute and regulations.  The
major components include a comprehensive needs assessment of the
entire school to determine the performance of its children in
relation to the State's challenging content and performance
standards; schoolwide reform strategies that are based on effective
means of improving the achievement of children and that address the
needs of all children in the school;  instruction by highly
qualified professional staff; professional development for teachers
and other staff; and strategies to increase parental involvement.
In addition to funds and services available under Title I, Part A,
a schoolwide program school may use funds it receives under any
Federal education program administered by the Secretary (other than
programs under the Individuals with Disabilities Education Act
(IDEA) and a few other programs listed in the Federal Register
notice published on September 21, 1995 (60 FR 49174)) to support
its schoolwide program.  If funds from other Federal education
programs are combined, a schoolwide program does not need to meet
most of the statutory and regulatory requirements of those
programs, as long as the intent and purposes of those programs are
met.  A schoolwide program school and its LEA, however, must still
comply with requirements applicable to those programs relating to
health and safety; civil rights; gender equity; parental
involvement; equitable participation of private school children,
teachers, and other educational personnel; maintenance of effort;
and comparability.
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 the Title I, Part C, Migrant Education
program, 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 before funds received under the Title IX, Part
A, Subpart 1 Indian Education program can be combined.
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 reached 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 200.8; and
60 FR 49174)
Audit Objective (LEA)
To determine that:  (1) the schools operating schoolwide programs
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                                                                      Page 16
were eligible to do so; (2) the schoolwide programs were based on
a comprehensive plan that included the required elements; and (3)
funds from Federal programs supplemented the total amount of funds
that, in the absence of the Federal funds, would be made available
from non-Federal sources for that school.
Suggested Audit Procedures (LEA)
    For schools operating a schoolwide program, review records and
     verify that the school met the poverty eligibility
     requirements.
    Review the procedures and documentation used by the LEA to
     distribute State and local funded resources to each schoolwide
     program school. Determine whether there was any evidence that
     the amount of non-Federal funds allocated to schoolwide
     schools was reduced or was less than non-schoolwide schools,
     due to the receipt of Federal funds for the schoolwide
     program.
    Review the schoolwide plan and determine the following:
     - Whether it was based on a comprehensive needs assessment of
       the entire school,
     - Whether it was developed in consultation with parents
       including, when MEP funds are combined, the parents of
       migratory children or organization representing those
       parents; and, when Title IX, Part A, Subpart 1(Indian
       Education) are combined, approval by the Indian parent
       advisory committee,
     - Whether it identifies schoolwide reform strategies for
       improving the achievement of children and addresses how the
       program will meet the needs of all children in the school,
       particularly the needs of children who are members of the
       target population of any program included in the schoolwide
       program.
    If MEP funds are combined in the schoolwide program, review
     documentation that services addressing the identified needs of
     migratory children were provided by the schoolwide program.
E-3 Participation of private school children
Applicable Programs:  Title I/ Part A; MEP; Eisenhower; SDFSCA
(except the Governor's Program authorized under Section 4114);
Title VI; Bilingual
Compliance Requirement
An SEA, LEA, or any other educational service agency (or consortium
of such agencies) receiving financial assistance under an
applicable programs must provide eligible private school children
and their teachers or other educational personnel, with equitable
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                                                                      Page 17
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 200.10-200.13; and Title VI, Section 6402
(20 USC 7372))
(See the program specific section for Title I/ Part A, Requirement
B-3, in this document for information on how private school
children from low-income families generate funds.)
Audit Objective
To determine that 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.
Suggested Audit Procedures (LEA, SEA, or other educational agency)
    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.
    Review program expenditure and other records to determine
     whether educational services that were planned actually were
     provided.
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                                                                      Page 18
           TITLE 1 GRANTS TO   LOCAL EDUCATIONAL AGENCIES
                     Title I, Part A of ESEA
                         CFDA No. 84.010
                      I. PROGRAM OBJECTIVES
Title I, Part A of ESEA, as amended, provides supplemental
financial assistance to local educational agencies (LEAs) through
State educational agencies (SEAs) 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
Department of Education (ED) provides Title I, Part A funds to each
SEA through a statutory formula based primarily on the number of
children ages 5 through 17 from low-income families, counted in the
most recent decennial census.  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 program 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 or (2) a consolidated plan
that includes Part A, in accordance with Section 14302 of the ESEA.
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 but 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, an LEA 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 14304 of the ESEA.
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 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 instruction
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.
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                                                                      Page 19
         III. COMPLIANCE REQUIREMENTS , AUDIT OBJECTIVES
                  AND SUGGESTED AUDIT PROCEDURES
See discussion of Waivers in Cross-cutting Provisions.
A. Types of Services Allowed or Unallowed
Part III, Section C of the Cross-cutting Provisions describes
options for transferring ESEA program funds to other ESEA programs,
to coordinated services projects, and to consolidated
administrative funds.
A-1 Use of funds for allowable activities
Compliance Requirement (Targeted assistance programs only)
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.
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.
If health, nutrition, and other social services are not otherwise
available from other sources to participating children, Part A
funds may be used to provide such services.
(Title I, Section 1114 of ESEA (20 USC 6315))
Audit Objective (LEAs)
To determine that Part A funds are used in targeted assistance
programs for services designed to help participating children meet
the State student performance standards.
Suggested Audit Procedures (LEAs)
    Review program records that describe the types of activities
     funded to determine if they meet the general description of
     services described in the plan.
    Select a sample of expenditure transactions and perform tests
     to determine if expenditures were for allowable activities.
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                                                                      Page 20
B. Eligibility
B-1 School attendance area eligibility and selection
Compliance Requirement (Schoolwide programs and 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 above 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
Aid to Families with Dependent Children; (4) the number of children
eligible to receive Medicaid assistance; and (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 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 1,000 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
200.28(a) (3))
Audit Objective (LEA)
To determine whether participating school attendance areas or
schools were eligible and were selected in the required order using
an appropriate poverty measure and methodology.
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                                                                      Page 21
Suggested Audit Procedures (LEA)
    Review the LEA's poverty ranking records (district-wide and,
     if applicable, by grade span) to determine (1) that the
     rankings were based on a poverty measure from an allowable
     data source and (2) that the same poverty measure was used to
     rank all school attendance areas and schools.
    From program records identify the participating schools or
     school attendance areas and compare to the poverty rankings to
     determine whether:
     - All schools/school attendance areas with over 75% poverty
       (without regard to grade span), including any middle and
       high schools, participated in the program before any
       schools under 75% participated.
     - The participating schools and school attendance areas are
       eligible and were correctly selected based upon their
       poverty ranking.
B-2 Allocating Part A funds to eligible school attendance areas and
schools
Compliance Requirement (Schoolwide programs and 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
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                                                                      Page 22
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 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
200.27-200.28)
Audit Objective (LEA)
To determine whether the LEA allocated Part A funds to
participating school attendance areas and schools and reserved
funds for private school children in accordance with program
requirements.
Suggested Audit Procedures (LEA)
    Review LEA documentation of Title 1 funding allocations to
     determine whether amounts were allocated to participating
     schools and school attendance areas in rank order based on the
     number of children from low-income families who reside in each
     area or attend each school.
    Review funding allocation records to determine whether an LEA
     allocated higher per pupil amounts to higher poverty areas or
     schools than to lower poverty areas or schools.  When
     selections are based on grade span grouping, per pupil amounts
     should be compared within each grade span.
    If the LEA is serving any areas or schools with a poverty rate
     below 35 percent, perform procedures to determine whether the
     LEA has allocated to each participating area and school an
     amount per poor child that equals at least 125 percent of the
     LEA's Title I, Part A allocation per poor child.
    For selected schools and/or school attendance areas, review
     funding allocation records to determine the amount that was
     allocated to the school/school attendance area based on poor
     private school children.  Review budget/accounting records to
     determine if amounts allocated to school attendance areas
     based on poor private school children were set aside to serve
     eligible private school children.
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                                                                      Page 23
B-3 Selection of eligible children in a targeted assisted program
Compliance Requirement (Targeted assistance programs only)
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 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))
Audit Objective (LEA)
To determine that Part A funds are used only for programs designed
to meet the needs of eligible children.
Suggested Audit Procedure (LEA)
    Select a random sample of children being served by Title I
     programs.  Verify by reviewing student files that the children
     being served met the eligibility requirements stated in this
     section.
C. Matching, Level of Effort, and/or Earmarking Requirements
The following compliance requirements in the Cross-cutting
Provisions are applicable to this program:  C-1 Maintenance of
effort, C-2 Supplement not supplant, C-3 Comparability, and C-5
Reservation of Title I funds for State administration.
The following compliance requirements in the Cross-cutting
Provisions may be applicable to this program:  C-4 Consolidation of
administrative funds and C-7 Coordinated services projects.
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                                                                      Page 24
D. Special Reporting Requirements
The following compliance requirements in the Cross-cutting
Provisions are applicable to this program:  D-1 Collection of state
per pupil expenditure (SPPE) data.
E. Special Tests and Provisions
The following compliance requirements in the Cross-cutting
Provisions are applicable to this program: E-1 Obligation of
federal funds and E-3 Participation of private school children.
The following compliance requirement in the Cross-cutting
Provisions may be applicable to this program: E-2 Schoolwide
programs.
E-1 Carryover
Compliance Requirement (Schoolwide programs and targeted assistance
programs)
An LEA may not carry over more than 15 percent of the funds awarded
under Part A, Subpart 2 "Allocations" for any fiscal year.  This
percentage limitation does not apply to an LEA that receives less
than $50,000 for any fiscal year.  For purposes of this
requirement, "fiscal year" is the Federal fiscal year ending on
September 30.
An SEA may grant a waiver of the percentage limitation once every
3 years if the SEA determines that the request is reasonable and
necessary.  An SEA may also grant a waiver in any fiscal year in
which supplemental appropriations for Title I become available for
obligation.  (Title I, Section 1127 of ESEA (20 USC 6338))
Audit Objective  (LEAs that receive over $50,000 in a fiscal year)
To determine  whether the LEA  carried over not more than 15
percent of the funds awarded under Title I, Part A, Subpart 2
"Allocations" for any fiscal year.
Suggested Audit Procedures (LEAs that receive over $50,000 in a
fiscal year)
    Review grant award document to identify the total amount of
     Part A, Subpart 2 funds awarded for the fiscal year audited.
    Review year end accounting adjustments to determine amount
     carried over to the next year and determine whether the amount
     was more than 15 percent of the amount awarded.
    Scan subsequent year transactions to determine whether there
     were budget increase adjustments that constitute additional
     carryover from initial year funds.
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                                                                      Page 25
          MIGRANT EDUCATION - Basic State Grant Program
                     Title I, Part C of ESEA
                         CFDA No. 84.011
                     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 education 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 (1) directly, or (2) through
subgrants to local operating agencies (LOAs).  LOAs can be either
local education agencies (LEAs) or other public or nonprofit
private agencies.  Because an SEA may choose to provide MEP
services directly or through an LOA, some of the suggested audit
procedures will apply for an SEA or LOA, depending on which agency
provides the services and where the records are maintained.
         III. COMPLIANCE REQUIREMENTS, AUDIT OBJECTIVES
                 AND SUGGESTED AUDIT PROCEDURES
See discussion of Waivers in Cross-cutting Provisions.
A.  Types of Services Allowed or Unallowed
Part III, Section C of the Cross-cutting Provisions describes
options for transferring ESEA program funds to other ESEA programs,
to coordinated services projects, and to consolidated
administrative funds.
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                                                                      Page 26
A-1 Allowable uses of program funds
Compliance Requirement
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 might
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)) and 34 CFR 200.41)
Audit Objective (SEA and LOAs)
To determine whether MEP funds were used only for allowable
purposes.
Suggested Audit Procedures (SEAs and LOAs)
    Select a sample of expenditure transactions and perform tests
     to determine if expenditures were for allowable activities.
B.  Eligibility
The auditor is not expected to test for compliance with MEP
eligibility requirements.
C.  Matching, Level of Effort, and/or Earmarking Requirements
The following compliance requirements in the Cross-cutting
Provisions are applicable to this program: C-2 Supplement not
supplant and C-3 Comparability.
The following compliance requirements in the Cross-cutting
Provisions may be applicable to this program: C-4 Consolidation of
administrative funds, C-5 Reservation of Title I funds for State
administration, C-6 Use of unneeded program funds, and C-7
Coordinated services projects.
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                                                                      Page 27
D.  Special Reporting Requirements
The following compliance requirement in the Cross-cutting
Provisions is applicable to this program: D-1 Collection of State
per pupil expenditure (SPPE) data.
D-1 Reporting the number of eligible children
Compliance Requirement
The SEA is required to assist the U.S. Department of Education (ED)
in determining the number of eligible migratory children for
allocation purposes, 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 3 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 and LOAs must
implement procedures, based on the eligibility documentation that
it and its subgrantees collect and maintain, to count eligible
children in these two categories.
(Title I, Part C, Section 1304(c)(7) of ESEA (20 USC 6394(c)(7)))
Audit Objective (SEAs and LOAs)
To determine whether the SEA's or LOA's count of the number of
migratory children in each category is supported and materially
correct.
Suggested Audit Procedures (SEAs when not providing direct
services)
    Trace the child counts in each category to summary records and
     LOA submissions of child counts.
    Review the SEA's process to ensure that it had a way of
     identifying children who were reported by more than one LOA
     and that appropriate adjustments were made to obtain the two
     unduplicated counts.
Suggested Audit Procedures (LOAs and SEAs direct services programs)
    Review the LOA's or SEA's process for counting children for
     conformity with the SEA established procedure.
    Trace child counts in each category to supporting
     documentation.
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                                                                      Page 28
E.  Special Tests and Provisions
The following compliance requirements in the Cross-cutting
Provisions are applicable to this program: E- 1 Obligation of
federal funds and E-3 Participation of private school children.
The following compliance requirement in the Cross-cutting
Provisions may be applicable to this program: E-2 Schoolwide
programs.
E-1 Priority for services
Compliance Requirement
SEAs and LOAs 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 disrupted in the school year.
(Title I, Part C, Section 1304(d) of ESEA (20 USC 6394(d)))
Audit Objective (SEAs)
To determine that the SEA has developed and communicated to LOAs 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 disrupted in the school
year.
Audit Objective (SEAs providing services directly and LOAs)
To determine if the SEA or LOA 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 disrupted
in the school year (priority children).  [Note: The auditor is not
expected to evaluate the adequacy of the process, i.e, whether the
identification of priority children is correct.]
Suggested Audit Procedure (SEAs)
    Review documentation to verify that the SEA has established
     and communicated to the LOAs a policy regarding the priority
     for MEP services.
Suggested Audit Procedures (SEAs providing services directly and
LOAs)
    Review the SEA or LOA's process for selecting children to
     receive MEP services to determine whether it includes an
     identification of priority children.
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                                                                      Page 29
    Select a sample of migratory children who were identified as
     priority children.  Review program records to determine if
     these children were provided MEP services.  [Note:  The
     auditor should be aware that because of the time of year in
     which the MEP program may operate (e.g. in the summer), an SEA
     or LOA may not have any priority children.]
E-2 Targeting funds
Compliance Requirement
SEAs may provide MEP services either directly, or through subgrants
to LOAs, 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)
To determine if the SEA's process to target MEP funds (whether or
not through subgrants) takes into account up-to-date 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)
    Review the SEA's process to target MEP funds to determine
     whether it  takes into account up-to-date 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.
E-3 Maintaining records on eligibility of children
Compliance Requirement
SEAs and  LOAs must develop and maintain records that document the
eligibility of each child identified for purposes of MEP funding in
accordance with SEA-established procedures.
(Title I, Part C, Section 1309(b) of ESEA (20 USC 6399(b)) and 34
CFR 76.730 and 76.731)
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                                                                      Page 30
Audit Objective (SEAs)
To determine that the SEA has established a procedure to collect
and maintain documentation regarding the eligibility of the
identified migratory children. [Note: The auditor should not
attempt to test for eligibility of individual children.]
Audit Objective (SEAs direct services program and LOAs)
To determine that the SEA or LOA uses the established SEA procedure
to collect and maintain documentation regarding the eligibility of
the identified migratory children. [Note: The auditor should not
attempt to test for eligibility of individual children.]
Suggested Audit Procedure (SEA)
    Review documentation to verify that the SEA has established
     and communicated to the LOAs a procedure to collect and
     maintain documentation on the eligibility of every identified
     migratory child.
Suggested Audit Procedure (SEAs direct services programs and LOAs)
    Review a sample of eligibility files to determine that they
     contain the documentation required by the SEA-established
     procedure.
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                                                                      Page 31
         EISENHOWER PROFESSIONAL DEVELOPMENT STATE GRANTS
                     Title II, Part B of ESEA
                         CFDA No.  84.281
                      I.  PROGRAM OBJECTIVES
The main 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, 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 non-profit 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.
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 or,
for fiscal year 1995, the relative amounts the LEAs received under
Title I, Part A's predecessor program.  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.
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.
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                                                                      Page 32
         III.  COMPLIANCE REQUIREMENTS, AUDIT OBJECTIVES
                  AND SUGGESTED AUDIT PROCEDURES
See discussion of Waivers in Cross-cutting Provisions.
A. Types of Services Allowed or Unallowed
Part III, Section C of the Cross-cutting Provisions describe
options for transferring ESEA program funds to other ESEA programs,
to coordinated services projects, and to consolidated
administrative funds.
A-1 Allowable activities
Compliance Requirement
Title II funds are used for the improvement of teaching and
learning through sustained and intensive high quality professional
activities in the core academic subjects.  (20 USC 6641 et seg.)
Audit Objective (SEA, LEA, and SAHE)
To determine whether Title II funds were used for allowable
purposes.
Suggested Audit Procedure
    Select a sample of expenditures and determine whether they
     were (1) for allowable activities and (2) were properly
     classified.
B. Eligibility
The auditor is not expected to test for compliance with eligibility
requirements.
C. Matching, Level of Effort, and/or Earmarking Requirements
The following compliance requirement in the Cross-cutting
Provisions is applicable to this program: C-1 Maintenance of
effort.
The following compliance requirements in the Cross-cutting
Provisions may be applicable to this program: C-4 Consolidation of
administrative funds, C-6 Use of unneeded program funds, and C-7
Coordinated services projects.
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                                                                      Page 33
C-1 Within-State allocations
Compliance Requirement
Of the total State allocation, the SEA receives 84 percent and the
SAHE 16 percent.  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.  The SAHE distributes at least 95
percent of its allocation in the form of competitive subgrants to
IHEs and NPOs of demonstrated effectiveness.
Both the SEA and SAHE may reserve up to 5 percent of their
allocations for administration.  The SEA may reserve up to an
additional 5 percent of its allocation to carry out State-level
professional development activities in support of the State's
professional development plan (which would not need to be formally
prepared if the State includes the Eisenhower Program in a
consolidated plan submitted under section 14302 of the ESEA).
(Title II, Part B, Sections 2203, 2205, 2207 and 2211 of ESEA (20
U.S.C. 6643, 6645, 6647 and 6651))
Audit Objective (SEA and SAHE)
To determine if the appropriate percentages have been allocated to
the educational agencies as stated in the compliance requirement.
Suggested Audit Procedure (SEA and SAHE)
    Review general ledger or other records that accumulated
     activity costs for administration and State-level programs to
     determine (1) required percentages were allocated to LEAs,
     IHEs, or other NPOs and (2) whether the amounts recorded for
     State level activities did not exceed maximum allowable
     amounts.  Test other program accounts to assure that
     administrative and State-level program costs were not
     misclassified.
C-2 Local cost-sharing
Compliance Requirement
Each LEA shall provide not less than 33 percent of the cost of the
activities assisted under 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.
(Title II, Part B, Section 2209 of ESEA (20 U.S.C. 6649))
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                                                                      Page 34
Audit Objective (LEA)
To determine that LEAs have met the required match of 33 percent of
the cost of  activities assisted under the Eisenhower Program.
Suggested Audit Procedures (LEA)
    Compute the amount of match required and determine if the
     amount of matching provided  was sufficient to meet the
     requirements.
    Test amounts used for matching to determine that they were
     eligible to be claimed as matching, i.e. used for the
     Eisenhower program in accordance with cost principles, etc.
D. Special Reporting Requirements
The auditor is not expected to test for compliance with special
reporting requirements.
E. Special Tests and Provisions
The following compliance requirements in the Cross-cutting
Provisions are applicable to this program: E- 1 Obligation of
federal funds and E-3 Participation of private school children.
The following compliance requirement in the Cross-cutting
Provisions may be applicable to this program: E-2 Schoolwide
programs.
E-1 Competitive basis
Compliance Requirement
In providing Eisenhower program funds to institutions of higher
education or nonprofit organizations of demonstrated effectiveness,
the SAHE must award its grant, contract or cooperative agreement on
a competitive basis.  The SAHE follows state law and procedures in
administering the competition and in making the awards.  (23 CFR
Section 80.37 (a))
Audit Objective (SAHE)
To determine whether the SAHE awarded funds in accordance with
requirements.
Audit Procedure (SAHE)
    Review documents on the award process to determine if it was
     conducted on a competitive basis in accordance with State law
     and procedures.
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                                                                      Page 35
           SAFE AND DRUG-FREE SCHOOLS - State Grants
              Title IV, Part A, Subpart 1 of ESEA
  (also known as State Grants for Drug and Violence Prevention Programs)
                        CFDA No. 84.186A
                     I.  PROGRAM OBJECTIVES
The purpose of the Safe and Drug-free School - State Grants
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.  Subpart 1 of the SDFSCA provides Federal assistance
to States for:
  1. Grants to local education agencies (LEAs) and educational
     service agencies and consortia to establish, operate and
     improve local programs of drug and violence prevention,
     early intervention, rehabilitation referral, and education
     in elementary and secondary schools (including intermediate
     and junior high schools);
  2. Grants to, and contracts with, community-based
     organizations and other public and private nonprofit
     agencies and organizations for programs of drug and
     violence prevention, early intervention, rehabilitation
     referral, and education; and
  3. Development, training, technical assistance and
     coordination activities.
                      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
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.
State education agencies (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 LEAs for drug and violence prevention
activities.
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
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                                                                      Page 36
on their behalf.  No matter who administers the program, the
program remains the responsibility of the Governor's office.
(Sections 4113 and 4114 of SDFSCA)
         III.  COMPLIANCE REQUIREMENTS, AUDIT OBJECTIVES
                  AND SUGGESTED AUDIT PROCEDURES
See discussion of Waivers in Cross-cutting Provisions.
A. Types of Services Allowed or Unallowed
Part III, Section C of the Cross-cutting Provisions describes
options for transferring ESEA program funds to other ESEA programs,
to coordinated services projects, and to consolidated
administrative funds.
A-1 Uses of funds for State-level programs
Compliance Requirement
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 grant or contracts.
An important change in the SDFSCA is that SEA evaluation costs are
specifically authorized as program costs.  Previously, under the
SDFSCA, costs for program evaluations generally were considered to
be administrative and had to be supported with funds reserved for
program administration.  (Section 4113(b)(1) of SDFSCA (20 USC
7113(b)(1))
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
4113(b):
  (1) 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;
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                                                                      Page 37
  (2) 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;
  (3) making available to LEAs cost-effective programs for youth
  violence and drug abuse prevention;
  (4) demonstration projects in drug and violence prevention;
  (5) training, technical assistance, and demonstration projects
  to address violence associated with prejudice and intolerance;
  (6) 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
  (7) the evaluation of activities carried out within the State
  under this part.
Audit Objective (SEA)
To determine if SDFSCA funds were used for authorized SEA activities.
Suggest Audit Procedure (SEA)
    Select a sample of expenditures and determine whether they
     were (1) for allowable activities and (2) were properly
     classified.
A-2 Uses of funds by LEAs
Compliance Requirement
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.
The list (see below) of authorized activities found in Section
4116(b) of the SDFSCA is broad and does not exclude other
activities that may be carried out by the LEA, consistent with the
purposes of SDFSCA.  Such activities specifically include
mentoring, before- and after-school instructional, recreational,
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                                                                      Page 38
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):
  (1) 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;
  (2) 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 (2a) the dissemination of
  information about drug prevention; (2b) 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; (2c)
  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;
  (3) 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;
  (4) violence prevention programs for school-aged youth, which
  emphasize students' sense of individual responsibility and may
  include: (4a) the dissemination of information about school
  safety and discipline; (4b) 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; (4c) 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
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                                                                      Page 39
  violence and other forms of disruptive behavior, such as sexual
  harassment and abuse; (4d) 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 (4e) comprehensive,
  community-wide strategies to prevent or reduce illegal gang
  activities;
  (5) 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;
  (6) acquiring and installing metal detectors and hiring security
  personnel;
  (7) 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;
  (8) the promotion of before- and after-school recreational,
  instructional, cultural, and artistic programs in supervised
  community settings;
  (9) 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
  (10) the evaluation of any of the activities authorized for LEAs.
Audit Objective (LEA)
To determine if SDFSCA funds were used for authorized LEA activities.
Suggested Audit Procedure (LEA)
    Select a sample of expenditures and determine whether they
     were (1) for allowable activities and (2) were properly
     classified.
A-3 Uses of funds by Governor's program
Compliance Requirement
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
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                                                                      Page 40
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 SDFSCA (20 USC 7133))
List of authorized activities found in Section 4114 (c):
  (1) disseminating information about drug and violence
  prevention;
  (2) 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;
  (3) 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;
  (4) 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;
  (5) activities to protect students traveling to and from school;
  (6) before-and-after school recreational, instructional,
  cultural, and artistic programs that encourage drug- and
  violence- free lifestyles;
  (7) 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;
  (8) developing and implementing activities to prevent and reduce
  violence associated with prejudice and intolerance;
  (9) coordinating and conducting community-wide violence and
  safety assessments and surveys;
  (10) service-learning projects that encourage drug- and
  violence-free lifestyles; and
  (11) evaluating programs and activities assisted under Section
  4114.
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                                                                      Page 41
Audit Objective (Governor's Program)
To determine if SDFSCA funds were used for authorized Governor's
activities.
Suggested Audit Procedure (Governor's Program)
    Select a sample of expenditures and determine whether they
     were (1) for allowable activities and (2) were properly
     classified.
B. Eligibility
B-1 Allocation of greatest need funds
Compliance Requirement
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.  An SEA may distribute the
"greatest need" funds to no more than 10 percent of its LEAs (or
five LEAs, whichever is greater).  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.
Although an SEA may award funds to individual LEAs, consortia of
LEAs or educational service agencies, each LEA that receives funds
or services from the "greatest need" pool of funds must be counted
against the cap on the number of LEAs receiving funds from that
pool.  For example, if an SEA makes an award of "greatest need"
funds to a consortium that will provide services to seven LEAs from
the "greatest need" funds received, that award would count against
the cap on the number of LEAs receiving funds as seven, not one.
If "greatest need" funds are awarded to a consortium or education
service agency, only those LEAs in the consortium or served by the
education service agency that meet the objective criteria selected
by the SEA for receipt of "greatest need" funds may receive
services supported with these funds.  (Section 4113(d) of SDFSCA
(20 USC 7113(d)))
Audit Objective (SEA)
To determine if the SEA distributed "greatest need" funds to not
more than 10% of its LEAs or 5 LEAs, whichever is greater in
accordance with its established criteria.
Suggested Audit Procedures (SEA)
    Calculate the maximum number of LEAs that can receive
     "greatest need" awards.  Review records of grant awards to
     determine actual number of "greatest need" awards made and
     compare that number to the established maximum number.
    Review records of grant awards to determine whether grantees
     meet established criteria.
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                                                                      Page 42
C. Matching, Level of Effort, and/or Earmarking Requirements
The following compliance requirement in the Cross-cutting
Provisions is applicable to this program: C-1 Maintenance of
effort.  Maintenance of effort is not applicable to the Governor's
Program.
The following compliance requirements in the Cross-cutting
Provisions may be applicable to this program: C-4 Consolidation of
administrative funds, C-6 Use of unneeded program funds, and C-7
Coordinated services projects.  Consolidation of administration
funds and use of unneeded program funds are not applicable to the
Governor's Program.  Coordinated service projects are applicable to
the Governor's Program.
C-1 State-level programs, administrative costs, initial allocations
to LEAs
Compliance Requirement
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 SDFSCA)
At least 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 distribute 70 percent to LEAs
based on their relative share of enrolled students in public and
private nonprofit elementary and secondary schools.  The remaining
30 percent of funds must be awarded to LEAs with greatest need, as
determined by the SEA.
Audit Objective (SEA)
To determine that the SEA has allocated and distributed SDFSCA
funds in accordance with the above requirements.
Suggested Audit Procedures (SEA)
    Review LEA grant award documents (or other documentation
     developed by the SEA) to determine if required (91%) total
     amount was awarded to LEAs, with 70% of the total awarded
     based on enrollment and 30% based on "greatest need".
    Review general ledger or other records that accumulate
     activity costs for administration and State-level programs to
     determine whether the amounts recorded did not exceed maximum
     allowable amounts.  Test other program accounts to assure that
     administrative and State-level program costs were not
     misclassified.
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                                                                      Page 43
C-2 Reallocation of funds to LEAs
Compliance Requirement
If any LEA does not apply for SDFSCA funds, or if the SEA
disapproves an LEA's application for 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 SDFSCA (20 USC 7113(e)))
Audit Objective (SEA)
To determine that SDFSCA funds available for reallocation were
reallocated to one or more of the LEAs that received "greatest
need" funds.
Suggested Audit Procedure (SEA)
    Ascertain which LEAs did not apply for SDFSCA funds and which
     LEA applications for SDFSCA funding were disapproved by the
     SEA.
    Review SEA allocation tables (or other SEA documents) to
     obtain amounts of funding originally allocated to those LEAs.
    Review SEA grant award documents (or other SEA records) and
     test whether funds originally allocated to LEAs that did not
     apply for funding or were denied funding were awarded to one
     or more LEAs that received "greatest need" funds.
C-3 Cap on security devices and security personnel
Compliance Requirement
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 SDFSCA (20 USC 7116(c)))
Audit Objective (LEA)
To determine that the LEA has used SDFSCA funds in accordance with
above requirements.
Suggested Audit Procedures (LEA)
    Review general ledger or other records that accumulate
     activity costs for the grant to determine whether the amounts
     recorded did not exceed maximum allowable amounts.
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                                                                      Page 44
C-4 Administrative costs and law enforcement education partnerships
Compliance Requirement
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 SDFSCA (20 USC
7114(a)(2) and (3)))
Audit Objectives (Governor's Program)
To determine that the Governor has not used more than 5% of the
Governor's total allocation for administrative activities and has
used at least 10% of the Governor's total allocation for law
enforcement education partnerships.
Suggested Audit Procedures (Governor's Program)
    Examine grant award documents (or other records) and calculate
     whether amounts awarded for law enforcement-education
     partnerships total at least 10% of Governor's total
     allocation.
    Review general ledger or other records that accumulate
     activity costs for the grant to determine whether the amounts
     recorded did not exceed maximum allowable amounts.
D.  Special Reporting Requirements
The auditor is not expected to test for compliance with special
reporting requirements.
E.  Special Tests and Provisions
The following compliance requirements in the Cross-cutting
Provisions are applicable to this program: E- 1 Obligation of
federal funds and E-3 Participation of private school children.
Obligation of federal funds is applicable to the Governor's
Program.  Participation of private school children is not
applicable to the Governor's Program.
The following compliance requirement in the Cross-cutting
Provisions may be applicable to this program: E-2 Schoolwide
programs.  Schoolwide programs are not applicable to the Governor's
Program.
E-1  Carryover of funds by LEAs
Compliance Requirement
An LEA may retain up to 25% of its fiscal year allocation for
obligation in the next Federal fiscal year.  If an LEA wishes to
retain an amount greater than 25% of its fiscal year allocation for
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                                                                      Page 45
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 SDFSCA (20 USC 7113(f)))
Audit Objective (SEA)
To determine if LEA requests include a justification of "good
cause."
Audit Objective (LEA)
To determine that the LEA carried over no more than 25% of its
fiscal year allocation unless approved by the SEA.
Suggested Audit Procedures (SEA)
    Review a sample of approved requests for carryovers in excess
     of 25% to determine whether the LEA provided a good cause
     justification.
Suggested Audit Procedures (LEA)
    Review expenditure records for a sample of LEAs and test
     whether no more than 25% of the previous fiscal year's
     allocation amounts were retained for obligation in the
     succeeding fiscal year, unless the LEA received SEA approval.
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                                                                      Page 46
             INNOVATIVE EDUCATION PROGRAM STRATEGIES
                         Title VI of ESEA
                         CFDA No. 84.298
                      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 education agencies (SEAs) and local
education 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 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 ESEA (20 USC 7312 and
7353(c)))
          III. COMPLIANCE REQUIREMENTS, AUDIT OBJECTIVES
                AND SUGGESTED AUDIT PROCEDURES
See discussion of Waivers in Cross-cutting Provisions.
A. Types of Services Allowed or Unallowed
Part III, Section C of the Cross-cutting Provisions describes
options for transferring ESEA program funds to other ESEA programs,
to coordinated services projects, and to consolidated
administrative funds.
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                                                                      Page 47
A-l  LEA applications
Unless an LEA has a consolidated plan, in order to receive Title VI
funds, an LEA must submit an application to the SEA that includes
the following information:
  (1) the amount of funds it intends to allocate among the various
  Title VI innovative assistance programs, along with a
  description of the programs, projects and activities it will
  carry out and its reasons for selecting these programs, projects
  and activities.
  (2) the allocation of funds required to provide equitable
  services to participating private school children.
  (3) a description of how assistance under Title VI will
  contribute to meeting the National Education Goals and improving
  student achievement or improving the quality of education for
  students.
  (4) an agreement that the LEA will keep such records and provide
  such information to the SEA as reasonably may be required for
  fiscal audit and program evaluation, consistent with the SEA's
  responsibilities under Title VI.
  (5) provision, in the allocation of funds, for the systematic
  consultation with parents of children attending schools within
  the LEA, with teachers and administrative personnel, and with
  other groups involved in implementation of Title VI as the LEA
  considers appropriate.
(Title VI, Section 6303(a) of ESEA (20 USC 7353(a))
Audit Objective (SEA)
To determine that the SEA distributed funds only to LEAs that
submitted applications that included  the information and
provisions outlined above.
Suggested Audit Procedure (SEA)
    Review a sample of applications from funded LEAs to determine
     whether they included the required information and provisions.
A-2 Use of funds for innovative assistance programs
LEAs must use Title VI funds only for one or more of the innovative
assistance program areas described in Section 6301(b).  The
innovative assistance program areas are:
  (1) 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;
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                                                                      Page 48
  (2) 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;
  (3) promising education reform projects, including effective
  schools and magnet schools;
  (4) programs to improve the higher order thinking skills of
  disadvantaged elementary and secondary school students and to
  prevent students from dropping out of school;
  (5) programs to combat illiteracy in the student and adult
  population, including parent illiteracy;
  (6) programs to provide for the educational needs of gifted and
  talented children;
  (7) school reform activities that are consistent with the Goals
  2000: Educate America Act; and
  (8) school improvement programs or activities under sections
  1116 and 1117 of the ESEA.
(Title VI, Section 6301(b) of ESEA (20 USC 7351(b)))
Audit Objective (LEA)
To determine whether program funds were used only for purposes
included in the approved application.
Suggested Audit Procedure (LEA)
    Test on a sample basis expenditure and related records to
     determine whether LEA used Title VI funds only for purposes
     included in the approved application.
A-3 State uses of funds
SEAs may only reserve for State use not more than 15 percent of the
Title VI  funds allocated to the state and may use these funds as
follows:
  Funds may be used for assistance to LEAs in the form of direct
  grants, statewide education reform activities, or technical
  assistance to provide targeted assistance programs.
  (Title VI, Section 6201(a)(2) of ESEA (20 USC 7331(a)(2)))
  Not more than 25 percent of the Title VI funds reserved for the
  State's use in any fiscal year may be used for State
  administration of Title VI programs.
  (Title VI, Section 6201(b) of ESEA (20 USC 7331(b)))
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                                                                      Page 49
Audit Objective (SEA)
To determine that the amount taken for State uses were used for
authorized purposes.
Suggested Audit Procedures (SEA)
    Review and test expenditure records to determine if
     expenditures were made only for allowable services.
B. Eligibility
The auditor is not expected to test for compliance with eligibility
requirements.
C. Matching, Level of Effort, and/or Earmarking Requirements
The following compliance requirement in the Cross-cutting
Provisions is applicable to this program:  C-2 Supplement not
supplant.
The following compliance requirements in the Cross-cutting
Provisions may be applicable to this program: C-4 Consolidation of
administrative funds, C-6 Use of unneeded program funds,  and C-7
Coordinated services projects.
C-1 Maintenance of effort
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.  Expenditures not to be considered are any expenditures
for community services, capital outlay, or debt service, and any
expenditures of Federal funds.
(Title VI, Section 6401(a) of ESEA (20 USC 7371(a)))
Audit Objective (SEA)
To determine whether the SEA's calculation or other data are in
accordance with the requirements and supported by the books and
records of the SEA.
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                                                                      Page 50
Suggested Audit Procedures (SEA)
    Review the maintenance of effort calculation to ensure that it
     (1) showed the required effort was maintained, (2) included
     only allowable categories of expenditure and (3) the
     categories were consistent in both years.   If the calculation
     performed by the SEA included unallowable expenditures or was
     performed improperly, recalculate maintenance of effort.
    Trace amounts used in the calculation to the books and records
     from which audited financial statements were prepared.
C-2 Distribution of funds
An SEA shall distribute at least 85 percent of the funds to its
LEAs, in accordance with the relative enrollments in public and
private nonprofit schools which desire that their children
participate in Title VI programs within the school districts of
LEAs, adjusted by criteria approved by the Secretary of Education
to provide higher per-child allocations only to those LEAs having
the greatest number or percentage of children whose education
imposes a higher than average cost per child. 15% may be reserved
for State use.
Of the 15% reserved for State use, 25% may be used for State
administration of Title VI or transferred to a Consolidated
Administration pool.
(Title VI, Section 6102(a) of ESEA (20 USC 7312(a)))
Audit Objective (SEA)
To determine that the above allocation requirements were met.
Suggested Audit Procedures (SEA)
    Review allocation and disbursement records to determine that
     at least 85% of the State's award was distributed to LEAs.
    Review the allocation of funds to LEAs to determine they were
     made based on the above criteria.
    If the SEA did not transfer funds to a consolidated
     administration pool, review general ledger or other records
     where administrative costs are accumulated to assure the total
     does not exceed the allowable amount.
    Scan ledger accounts or other records where other program
     activity costs are entered to assure that there are not
     significant (in number or amount) transactions that appear to
     be for administrative costs that are misclassified.
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D. Special Reporting Requirements
The auditor is not expected to test for compliance with special
reporting requirements
E. Special Tests and Provisions
The following compliance requirements in the Cross-cutting
Provisions are applicable to this program: E- 1 Obligation of
federal funds and E-3 Participation of private school children.
The following compliance requirement in the Cross-cutting
Provisions may be applicable to this program: E-2 Schoolwide
programs.
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                       BILINGUAL EDUCATION
                        Title VII of ESEA
             CFDA Nos. 84.288S, 84.290U, and 84.291R
                      I. PROGRAM OBJECTIVES
The objectives for the Program Development and Implementation
Grants, Comprehensive School Grants, and System wide Improvement
Grant programs are as follows:
Program Development and Implementation Grants (CFDA # 84.288S)
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 ESEA (20 USC 7422))
Comprehensive School Grants (CFDA # 84.290U)
Implement school wide 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 ESEA (20 USC 7424))
System wide Improvement Grants (CFDA # 84.291R)
Implement district wide 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 ESEA (20 USC 7425))
                      II. PROGRAM PROCEDURES
Following approval of applications, the Secretary of Education
awards grants 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 that has received approval from an LEA.
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         III. COMPLIANCE REQUIREMENTS, AUDIT OBJECTIVES,
                 AND SUGGESTED AUDIT PROCEDURES.
See discussion of Waivers in Cross-cutting Provisions.
A. Test of Services Allowed or Unallowed
Part III, Section C of the Cross-cutting Provisions describes
options for transferring ESEA program funds to other ESEA programs,
to coordinated services projects, and to consolidated
administrative funds.
A-1 Program requirements
Compliance Requirement
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 75.234 and 80.22)
Audit Objective
To determine whether activities and expenditures charged to the
grant award meet the terms of the approved application and the
approved budget and are supported by appropriate documentation.
Suggested Audit Procedures
    Review the approved application, grant award and budget to
     identify the allowable services this discretionary program has
     received approval to provide.
    Perform procedures to determine whether the activities charged
     to the program were allowable.  Such procedures could include
     inquiry of grantee officials and review of program
     documentation such as program plans and budgets, course
     curricula, class schedules and rosters, etc.
    Review the general ledger or other records where activity
     costs are accumulated and, and on a sample basis, perform
     tests to determine whether specific expenditures were for
     authorized activities and were properly classified and
     accumulated into the activity total.
B. Eligibility
The auditor is not expected to test for compliance with eligibility
requirements.
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C. Matching, Level of Effort, and/or Earmarking Requirements
The following compliance requirement in the Cross-cutting
Provisions is applicable to this program: C-2 Supplement not
supplant.  Note the additional explanation of the Supplement not
supplant requirement for Bilingual in the Cross-cutting Provisions.
The following compliance requirement in the Cross-cutting
Provisions may be applicable to this program: C-7 Coordinated
services projects.
D. Special Reporting Requirements
The auditor is not expected to test for compliance with special
reporting requirements.
E. Special Tests and Provisions
The following compliance requirements in the Cross-cutting
Provisions are applicable to this program: E- 1 Obligation of
federal funds and E-3 Participation of private school children.
The following compliance requirement in the Cross-cutting
Provisions may be applicable to this program: E-2 School wide
programs.
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                            IMPACT AID
                        Title VIII of ESEA
                           CFDA 84.041
                      I. PROGRAM OBJECTIVES
The objective of the Impact Aid Program (IAP) under Title VIII of
the Elementary and Secondary Education Act (ESEA) as amended by the
Improving America's Schools Act (IASA)  is to provide financial
assistance to LEAs whose local revenues or enrollments are
adversely affected by Federal activities.  These activities include
the Federal acquisition of real property or 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 SEA at the same time it mails the
application to ED.  Generally, payments under Section 8003 of the
ESEA are based on membership and attendance counts of federally
connected children, with additional funds provided for certain
federally connected children with disabilities and children
residing on Indian lands.  Most funds provided under Section 8003
are considered general aid and have no restrictions on their
expenditure.  Any funds that are provided under Section 8007 to
certain LEAs that received Section 8003 payments must be used for
construction, as defined in the statute.
ED, under the provisions of Section 7 of the predecessor version of
the Impact Aid law (Public Law 81-874) 20 U.S.C. 241-1(a) and (b)),
and Section 16 of Public law 81-815, received applications for
financial assistance submitted by school districts that were
located in areas that had been declared disaster areas by the
President.  In 1991, the program administered under the provisions
of Section 7(b) and Section l6 was transferred to the Federal
Emergency Management Agency.  In 1994, Section 7 and Section l6
were repealed by the Improving America's Schools Act.  In 1991, the
Impact Aid Program stopped accepting new applications for
assistance that had been provided under Section 7(b) or l6 and,
effective in 1994, the program no longer accepted new applications
for financial assistance under Section 7(a).  The program, however,
continues to administer any applications for assistance under the
provisions of Section 7(a) if the applications were funded prior to
1994, as well as applications for assistance under Section 7(b) or
l6 that were funded prior to 1991.
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                                                                      Page 56
          III. COMPLIANCE REQUIREMENTS, AUDIT OBJECTIVES
                  AND SUGGESTED AUDIT PROCEDURES
A. Types of Services Allowed or Unallowed
A-1  Allowable costs - Federally connected children with
disabilities
Compliance Requirement
LEAs shall use the payments provided under Section 8003(d) to
conduct programs or projects for the free appropriate public
education of the Federally connected children with disabilities who
generated those funds.  Section 8003(d) funds may not be paid to an
LEA whose general State aid or specific State aid for federally
connected children with disabilities would be reduced as a result
of the receipt of these 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 and 34 CFR 222.53(c))
Audit Objective (LEA)
To determine whether the services or programs provided with Section
8003(d) funds were allowable activities.
Suggested Audit Procedures (LEA)
    Select a sample of expenditures and determine whether they
     were (1) for allowable activities and (2) were properly
     classified.
A-2 Allowable costs - Construction
Compliance Requirement
LEAs that receive payments under Section 8003 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 shall use the payments provided under
Section 8007 for construction, as defined in Section 8013(3).
Under Section 8013(3), construction means: (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))
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                                                                      Page 57
Audit Objective (LEA)
To determine whether the activities funded with Section 8007 funds
were allowable.
Suggested Audit Procedures (LEA)
    Select a sample of expenditures and determine whether they
     were (1) for allowable activities and (2) were properly
     classified.
    Review the general ledger and other expenditure records to
     determine if costs were properly included in totals for
     program expenditures.
A-3  Allowable costs -Disaster assistance program
Compliance Requirement
Assistance under Section 7(a) of the Impact Aid law (20 U.S.C.
241-1(a)(1994) is authorized to enable an LEA located in a
Presidentially-declared disaster area to provide a free public
education equivalent to that provided prior to the disaster through
payments for increased operating expenses and replacement of lost
revenues. Such assistance, however, may not be used to provide a
level of instruction that exceeds the level provided before the
disaster, and may not be used to eliminate from the LEA's budget a
deficit balance preceding the disaster nor create for the LEA's
budget a carryover balance following the disaster.  Assistance
under Section 7(a) may be provided for a maximum period of five
fiscal years beginning with the Federal fiscal year in which the
disaster was declared.  ED considers other resources available to
the LEA in determining the amount of funding provided, and is
authorized to provide only a reasonable amount of financial
assistance to cover the eligible costs for damages directly related
to the disaster.  (20 U.S.C. 241-1(a)(1994)(See 34 CFR 219.41 and 42.))
Audit Objectives
To determine whether the financial assistance provided under
Section 7(a) was spent on allowable costs.
Suggested Audit Procedures
    Perform tests on a sample of the expenditures to determine if
     they were reasonable and necessary to carry out the purposes
     of Section 7(a) of the program.
B.  Eligibility
The auditor is not expected to test for compliance with eligibility
requirements.
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C.  Matching, Level of Effort, and / or Earmarking Requirements
The following compliance requirement in the Cross-cutting
Provisions may be applicable to this program: C-7 Coordinated
services projects.
C-1  Earmarking
Compliance Requirement
For each fiscal year, the total amount of expenditures for programs
or projects serving federally connected children with disabilities
must be at least equal to the amount of Section 8003(d) funds
received or credited for that fiscal year.
(Section 8003(d) and 34 CFR  222.53(d))
Audit Objective
To determine if the amount spent for programs or projects serving
federally connected children with disabilities met the minimum
statutory requirement.
Suggested Audit Procedures
    Review the general ledger or other records where activity
     costs are accumulated to determine whether the total exceeded
     the minimum required amount.
    Perform tests to determine whether specific expenditures were
     properly classified and accumulated into the activity total.
C-2 Supplement not supplant
Compliance Requirement
Funds provided under Section 8003(d) may not reduce either general
State aid or specific State aid for federally connected children
with disabilities.
Section 8003(d) funds 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).  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) and 34 CFR  222.54)
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Audit Objective
To determine whether the use of the funds for services awarded
under Section 8003(d) was supplementary to the services provided
with state and local funds.
Suggested Audit Procedures
    Compare LEA's prior year general State aid per pupil and State
     aid per pupil for children with disabilities with its current
     year State aid per pupil in those categories to determine if
     supplanting occurred.
    Review procedures and records as necessary to ensure that the
     Federal program did not supplant non-Federal funds and that
     non-Federal spending levels meet or exceed the Federal program
     requirements.
D.  Special Reporting Requirements
D-1 Section 8003 payments
Compliance Requirement
To be eligible for funds under Section 8003 (Basic Support
program), an LEA's federally connected children counted on a
specified survey date must equal at least 400 in average daily
attendance (ADA) or three percent of the total number of children
in ADA in the LEA.  In addition, to be eligible for funds for
children described in Sections 8003(a)(1)(F) or (G), an LEA's
federally connected children under those Sections (children of
civilian parents residing on Federal property or of parents
employed on Federal property) must equal or exceed 2,000 and 15
percent of the total number of students in ADA in the LEA.  Each
applicant LEA submits data on its membership of federally connected
children in its annual  application.
Each child claimed under Section 8003(a)(1)(A) - (C) must, while in
attendance in the schools of the LEA, either (1) reside on Federal
property and have a parent employed on Federal property within the
boundaries of the LEA or have a parent who is a foreign military
officer or on active duty in the uniformed services of the U.S. or
(2) reside on Indian lands (as defined in Section 8013(7)).
Each child claimed under Section 8003(a)(1)(D) - (G) must, while in
attendance in the schools of the LEA, (1) have a parent who is on
active duty in the uniformed services or who is a foreign military
officer, but not reside on Federal property, (2) reside on Federal
property, including low-rent housing, and (3) reside with a parent
employed on Federal property situated in the same State as the LEA.
Only children described in Sections 8003(a)(1)(A)(ii), (a)(1)(B),
(a)(1)(C), and (a)(1)(D)  (a child with parent who is on active
duty in the uniformed services of the U.S. or who is a foreign
military officer, or a child residing on Indian lands) who are
eligible for services under the Individuals with Disabilities
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                                                                      Page 60
Education Act may be counted for the purpose of computing a amount
of the payment under Section 8003(d).  Additionally, each child
must be enrolled in a program that conforms to State standards for
children with disabilities and the LEA must have in effect on the
survey date a written individualized education program (IEP) for
each child who was counted by the LEA for Section 8003(d) payment
purposes.
Audit Objective (LEA)
To determine whether the membership counts for each category
included in the LEA's application were supported and materially
correct.
Suggested Audit Procedures (LEA)
    Test documentation supporting the membership counts included
     in the application and determine whether children claimed as
     being federally connected met the requirements of the category
     for which they were claimed.
E.  Special Tests and Provisions
The auditor is not expected to test for compliance with special
tests and provisions.