Background

Title III and Title V of the Higher Education Act (HEA) authorize federal  funding for postsecondary institutions that provide large proportions of  low-income and minority students access to higher education. In 1965,  Congress authorized grant programs to strengthen and support  developing postsecondary institutions, leading to today’s Strengthening  Institutions Program. This program provides discretionary grants to help  institutions that serve large numbers of low-income students improve their  academic quality, institutional management, and fiscal stability. In  subsequent reauthorizations, Congress established several programs to  target grant funding to certain institutions that serve large numbers of  minority students. Specifically, in 1986, a program was created to  designate formula grant funding for historically black colleges and  universities. In 1998, further amendments to the HEA created new grant  programs specifically for tribally controlled colleges and universities,  Alaska Native and Native Hawaiian-serving institutions, and Hispanic- serving institutions. Prior to these amendments, these institutions  competed for funding under the Strengthening Institutions program.  Collectively, these institutions are referred to as minority serving  institutions.
Institutions that participate in the Historically Black Colleges and  Universities and Tribal programs receive mandatory grants based on two  distinct formulas. Institutions that participate in all other programs  receive grants based on a ranking of applications by a competitive peer- review evaluation. Such institutions may apply individually or as part of a  cooperative partnership for development grants to develop capacity in  specified areas on selected campuses. Institutions that receive cooperative  grants partner and share resources with another postsecondary  institution—which may or may not be eligible for Title III or V funding—to  achieve common goals without costly duplication of effort. In addition to  5-year individual development and cooperative grants, Title III, Part A and  Title V institutions may apply for a 1-year grant for the purposes of  planning an application for a 5-year grant, 1-year construction grant, or 1- year renovation grant. Table 1 briefly describes the characteristics and  eligibility criteria of Title III and V programs.
From fiscal year 1999 to fiscal year 2008, total appropriations for these  programs increased from $230 million to $667 million. In fiscal year 2008,  the range of new annual institutional awards was $172,560 for a 1-year  planning grant to $3 million for an individual development grant (see table  2).
The HEA outlines broad goals for Title III and V programs to strengthen  participating institutions but provides institutions flexibility in deciding  what approaches will best meet their needs. An institution can use the  grants to focus on one or more activities to address the challenges  articulated in its comprehensive development plan, which is required as  part of the grant application and must include the institution’s strategy for  achieving growth and self-sufficiency. Under Education’s program  guidance, institutions are allowed to address challenges in four broad  focus areas: academic quality, student support services, institutional  management, and fiscal stability. More specifically, funds can be used for  activities such as supporting faculty development; purchasing library  books, periodicals, and other educational materials; hiring tutors or  counselors for students; improving educational facilities; or building  endowments. Although each Title III and V program allows funds to be  used in the same broad areas, there are variations in the rules for  allowable activities across each of the Title III and V programs (see   table 3).
Title III and V programs are administered by the Institutional Development  and Undergraduate Education Service (IDUES) within Education’s Office  of Postsecondary Education (OPE). In addition to the Title III and V  programs we examine in this report, IDUES administers the Strengthening  Historically Black Graduate Institutions, Minority Science and Engineering  Improvement, and the Robert C. Byrd Honors Scholarships programs.  Additionally, in 2007, IDUES assumed responsibility for several new grant  programs for other categories of minority serving institutions, including  Native American-serving Nontribal Institutions and Asian American and  Native American Pacific Islander-serving Institutions. IDUES currently  has 32 program staff members to administer more than 1,000 grants across  its portfolio.
The Comptroller General’s Domestic Working Group highlights areas of  opportunity and promising practices in grants management—focused both  on ensuring grant funds are spent properly and on achieving their desired  results (see table 4). Effective grants management calls for establishing  adequate internal control systems, including efficient and effective  information systems, training, policies, and oversight procedures, to  ensure grant funds are properly used and achieve intended results.
Internal controls provide federal managers with reasonable assurance that  their program is (1) achieving its primary objectives of effective and  efficient operations, reliable financial reporting, and compliance with  applicable laws and regulations; (2) safeguarding assets; and (3)  preventing fraud, waste, abuse, and mismanagement. Like other federal  departments and agencies, Education is expected to implement internal  control systems consistent with the requirements established by the Office  of Management and Budget and GAO. Entities that receive federal funds,  such as institutions of higher education, are also expected to implement  effective internal control systems consistent with federal requirements.

	Eligible Institutions Had Fewer Resources to Serve Proportionately More Students at Academic Risk

		Lower Revenues May Make It Difficult for Eligible Institutions to Meet Needs of Current and Future Students

We estimate that 28 percent of 2-year and 4-year public and private not-for- profit postsecondary institutions are eligible to participate in the Title III  and V programs, and together these institutions enrolled just over 4 million  students. About one-half of all eligible institutions are 2-year colleges, such  as community colleges, compared to 31 percent of 2-year institutions that  are ineligible to participate in the programs (see table 5). The substantial  representation of 2-year public institutions that are eligible to participate  in the programs appears to amplify some of the overall differences in both  institutional and student characteristics between eligible and ineligible  populations discussed throughout this section.
Overall, eligible institutions had access to fewer revenue sources,  including endowment holdings and tuition and fees, to serve their  students. Endowments provide additional funds for activities, such as  providing scholarships and constructing facilities, which would be  unaffordable if institutions relied solely on tuition, private philanthropic  gifts, or government funding. The median per-student endowment holdings  at eligible institutions were lower than the holdings of their ineligible  peers. For example, the median per-student endowment for eligible 4-year  private, not-for-profit institutions was nearly three times less per student  ($7,297) than the median for ineligible 4-year private, not-for-profit  institutions ($20,391). Another major source of revenue for institutions is  the tuition and fees charged to students. For all eligible institutions, the  median tuition and fees reported were lower than what was reported at  ineligible institutions. Median tuition and fees at eligible institutions were  12 percent less than at ineligible institutions for 2-year private, not-for- profit institutions, and 38 percent less at 4-year private, not-for-profit  institutions.
Lower revenues may limit an institution’s ability to undertake activities  that build institutional capacity, such as improving campus facilities and  enhancing academic offerings. In 2006, per-student spending on  instructional equipment at eligible institutions was almost 47 percent less  than spending at ineligible institutions. Eligible institutions also spent  almost 60 percent less per student on expenses related to day-to-day  operations, such as financial aid and registration, and about two times less  per student on certain services, such as providing technology in  classrooms and activities related to student life and development.
While eligible institutions had lower revenues and per-student spending,  they more often had admissions policies associated with the enrollment of  students who need greater academic support. Research has shown that  students attending institutions that accept any student who applies for  admission—known as open-enrollment institutions—are less likely to be  prepared to successfully undertake college-level coursework. About 60  percent of eligible institutions had open enrollment, compared to 35  percent of ineligible institutions. Almost all 2-year public institutions— both eligible and ineligible—reported open enrollment policies, which is  consistent with the mission most community colleges have to work with  students of all ability levels. Open-enrollment policies were much less  common at eligible 4-year institutions. Less than 30 percent of these  schools had open enrollment, but it was still more prevalent than at  ineligible 4-year institutions, of which 10 percent or less had such policies.
Limited revenues may also impact the ability of eligible institutions to  meet the demand of future students based on population projections.  Specifically, about two-thirds of eligible institutions are located in  southern and western states, many of which are projected to experience  an increase in the number of college-age students in coming years (see fig.  1). Studies also project long-term growth in the number of minority and  low-income high school graduates in these two regions beginning in 2015  and extending through 2022, driven in part by accelerated growth in the  Hispanic population. Given the importance many students enrolled at  minority-serving institutions place on geographic proximity to home when  choosing a college, eligible institutions in high-growth states could  experience proportionately more growth in numbers of students and  changes in the demographics of the college-age population may result in  an expansion in the number of eligible institutions. For example, a 2008  Education study found that in some states including Texas, Arkansas, and  North Carolina, over 80 percent of entering freshmen are state residents.  Additionally, Education’s 2004 NPSAS survey found that 80 percent of  students enrolled at Hispanic-serving institutions and almost 73 percent of  students enrolled at Historically Black Colleges and Universities stated  that geographic location was a key reason for selecting their  postsecondary institution.

		Eligible Institutions Enrolled More Minority and Low-Income Students Than Ineligible Institutions

On average, eligible institutions enrolled more minority students than  ineligible institutions. In 2006, about one-half of all students enrolled at  eligible institutions were minority, compared to about one-quarter at  ineligible institutions (see fig. 2). While eligible institutions represent 28  percent of all postsecondary institutions, they enrolled over 43 percent of  all minority students. Eligible institutions were largely comprised of the  minority group associated with their program eligibility. For example, at  Historically Black Colleges and Universities the predominant student  population was African American, and at Hispanic-serving institutions, it  was Hispanic. Almost 60 percent of all students enrolled at eligible and  ineligible institutions were women.
Eligible institutions also served more low-income students, a central  requirement for participation in Title III and V programs. Specifically, 44  percent of students enrolled at eligible institutions received Pell grants  compared to 26 percent at ineligible institutions. In addition, eligible  institutions reported that half of all first-time, full-time students enrolled  received some form of federal student aid, compared to 25 percent of  students enrolled at ineligible institutions.
Students at eligible institutions also may have characteristics that put  them at academic risk, including attending part-time and delaying their  enrollment following high school. In 2006, 47 percent of students at  eligible institutions attended part-time compared with 34 percent of  students at ineligible institutions. This difference is largely driven by the  substantial proportion of 2-year public institutions in the eligible  population. At both eligible and ineligible 2-year public institutions, more  than 60 percent of students attended part-time. In particular, about two- thirds of students attending both eligible and ineligible 2-year public,  Hispanic-serving institutions attended part-time. At 4-year institutions,  rates of part-time attendance were much lower. However, eligible  institutions enrolled more part-time students than ineligible institutions: 29  percent of students at eligible 4-year public institutions attended part-time,  compared to 19 percent at ineligible 4-year public institutions. One  possible explanation for the difference in part-time enrollment may be  related to the extent to which a student works while enrolled. According  to Education’s 2004 NPSAS survey, almost 40 percent of students  attending minority serving institutions worked 35 hours or more per week  and considered themselves as employees enrolled in college instead of  students who work, when compared to students attending non-minority  serving institutions.
A greater percentage of students at eligible institutions delayed enrollment  in college than students at ineligible institutions. Research has shown,  however, that students who delay enrollment are at greater risk of not  completing a postsecondary credential, as compared to their peers who  enroll soon after completing high school. At 4-year private, not-for profit  institutions, for example, 34 percent of students at eligible institutions  compared to 21 percent at ineligible institutions enrolled in college for the  first time when 25 or older. Rates at 2-year public colleges were similar  with more than 40 percent of students at eligible and ineligible institutions  enrolling for the first time at age 25 or older. One exception to this trend  among eligible institutions was students at Historically Black Colleges and  Universities, where almost three-quarters of the students enroll right after  high school.
Eligible institutions had lower retention rates, on average, than ineligible  institutions. For example, in 2006, eligible institutions retained 60 percent  of their full-time students compared to 69 percent at other institutions.  Research has shown that a number of factors, including attending part- time, working full-time, and delaying enrollment in college for more than a  year after high-school, put students at a greater risk of leaving  postsecondary education without a credential. The retention rate for 2- year public institutions was lower, but similar, at eligible and ineligible  institutions. Graduation rates were lower as well. Specifically, 39 percent  of students at eligible 4-year institutions received a bachelor’s degree  within 6 years of enrolling, compared to 60 percent of students at ineligible  4-year institutions. According to a recent Education study, graduation  rates may decline as the percentage of an institution’s low-income student  population increases. This may be for a variety of reasons, including a  student’s academic preparation, working full-time while enrolled, parents’  educational attainment, as well as an institution’s selectivity in admissions.  However, the report also found that several highly selective minority  serving institutions enrolled a significant number of low-income students  and were high performers with respect to graduation. Another possible  explanation for the difference in graduation rates may also be tied to  institutional expenditures. One study reported that those institutions with  lower expenditures on student support services had lower graduation  rates. Graduation rates for both eligible and ineligible 2-year public  institutions were similar; however, the relevance of graduation rates at 2- year institutions has been widely debated since students may enroll in  these institutions for a variety of reasons other than completing a degree  or certificate program. See appendix II for more information on  institutional and student characteristics.

	Institutions Faced Challenges across the Grant Programs’ Four Focus Areas but Spent Most of Their Funds in Two Areas, Academic Quality and Student Support

In their grant applications, Title III and V grantees reported challenges  across all four grant focus areas: academic quality, student support,  institutional management, and fiscal stability. According to data collected  through Education’s annual performance reports, fiscal year 2006 grantees  reported spending almost $385 million in total grant funds on activities  across all four focus areas, with over three-quarters of the funds expended  in the areas of academic quality and student support services (see fig. 3).  See appendix III for additional information on Title III and V expenditures  of grant funds for fiscal years 2002 to 2006.

		Academic Quality

Based on our review of a representative sample of grant applications, we  estimate that all grantees reported challenges in improving academic  quality, such as recruiting and training highly qualified faculty, using the  latest technology in the classroom for instruction, improving academic  space, and tailoring courses to student needs. Fifty-seven percent of fiscal  year 2006 grantees dedicated at least one activity to improving academic  quality, and expenditures in this focus area represented about 43 percent  of total grant funds spent. Specific examples of how institutions used grant  funds to address academic quality challenges follow:    A 2-year Alaska Native institution seeking to provide access to students in  seven remote villages—covering roughly 88,000 square miles—began  offering classes online. However because access to computers and high- speed Internet in the villages was costly, unreliable, or nonexistent, most  lesson plans limited the use of multimedia. By leveraging its Title III grant  with funds from the Department of Housing and Urban Development’s  Assisting Communities program, the school obtained wireless capability  and now offers 8 to 12 online courses each semester.
A 4-year Native Hawaiian institution said that it has struggled to provide  science instruction to students due to outdated laboratory facilities. These  facilities were reportedly so antiquated that the television show “Lost”  used the facilities to replicate a 1950s laboratory. The institution leveraged  $2.3 million in Title III grant funds to renovate 12,000 square feet of un-air- conditioned, termite-damaged laboratory space that did not comply with  federal safety and health regulations (see fig. 4).

		Student Support Services

Nearly all grantees reported difficulty providing student support services,  including remedial courses, tutoring, and academic counseling. Many of  these grantees reported that the unique needs of their students underscore  the importance of providing student support services. Over three-quarters  of grantees cited difficulties associated with retaining and graduating their  students, which most attributed to incoming students arriving  underprepared for college-level course work. Two-thirds of fiscal year  2006 grantees reported dedicating at least one activity to improving  student support services, and expenditures in this area represented 34  percent of total Title III and V grant funds spent. Most of these  expenditures were for tutoring and counseling. Specific examples of how  institutions used grant funds to address student support challenges follow:    A 2-year strengthening institution in Illinois reported in 2005 that 75  percent of its first-year students were at risk of leaving college without a  degree because the institution could not provide adequate academic  support and advisement. To reduce the likelihood that students would fail  or drop out, the school reported spending $360,000 in grant funds to  provide training to 175 faculty members on the use of multimedia and  technology, active learning, and strategies to support various learning  styles. Additionally, all 46 of its academic advisors were provided training  in techniques for advising students with different learning styles.
A 2-year Hispanic-serving institution in Texas reported using almost  $350,000 in fiscal year 2006 grant funds to conduct an outreach program at  area high schools for students at risk of dropping out without earning a  diploma, as well as to provide bilingual financial aid services to better  serve its students. By providing support services to students while they are  in high school, the college aims to improve high school graduation and  college enrollment rates in Dallas County high schools where 63 percent of  Hispanic and 52 percent of African American students left high school in  2001 without a diploma. The outreach program provides students with  career exploration courses in math, science, and technology, as well as  peer mentors who are enrolled in 4-year colleges or universities. College  officials credit the 5-year Title V grant as contributing to a 12 percent  increase in students pursuing postsecondary education and a 45 percent  increase in the number of associate degrees awarded between 2004 and  2007.
A 2-year tribal college in South Dakota reported it relied on faculty and  staff to provide additional tutoring and counseling support to at-risk  students because it lacked resources to fully address student needs.  Because almost all of its students come from low-income families, or are  the first in their families to attend college, additional support could only be  provided for one-third of the students in need. According to school  officials, in fiscal year 2006, the school spent nearly $32,000 of its Title III  grant to hire additional staff and peer mentors to provide tutoring and  counseling services for 120 additional students, an increase of 169 percent.

		Institutional Management

Nearly all grantees reported institutional management challenges,  including recruiting and retaining qualified staff, updating technology on  campuses, addressing administrative challenges such as financial aid or  student registration, undertaking strategic planning, or tracking student  performance. Twenty-eight percent of all fiscal year 2006 grantees funded  at least one activity in this area, and expenditures on institutional  management represented about 17 percent of total grant funds spent.  Specific examples of how institutions used grant funds to address  institutional management challenges follow:    A 2-year Alaska Native-serving institution reported significant staffing  shortages due to its isolated location, and its staff had to perform a variety  of jobs. For example, the business office director also occasionally  performs building and grounds maintenance tasks, such as shoveling  sidewalks and handling computer problems. Additionally, a staff member  assigned to manage the bookstore was also responsible for providing  financial aid advice. While it is not possible to address all challenges with  Title III funds, the grant was a critical first step in establishing four full- time financial aid positions that have since become part of the college’s  budget.
A 4-year historically black university in North Carolina that ranks high  nationally in the production of computer science graduates reported it has  difficulty maintaining its ongoing investment in its technology  infrastructure. After spending $1.2 million of Title III funds in 2000, the  college used an additional $834,000 from subsequent Title III grants to  upgrade telecommunications, implement Web-enabled administrative  software, and increase classes with wireless capabilities by 34 percent.
A 4-year Hispanic-serving institution in Puerto Rico said its ability to  expand is limited by its location in an historic building that cannot be  altered, hindering service to the island’s growing college-age population.  While delays in obtaining construction permits have limited the college’s  progress, the college is completing renovations for a new academic  building. It has spent $740,000 in grant funds to renovate its library,  increasing the space dedicated to this building by 32,000 square feet.
A tribal college in South Dakota reported using more than $85,000 in grant  funds to develop a comprehensive training program for its grants  management staff to address internal control weaknesses identified by  federal auditors. According to school officials, auditors reported that prior  practices resulted in $2.3 million in federal grants at risk of fraud, waste,  and abuse. In 2006, the college used grant funds to create a Human  Resources Office, increase its administrative staff from four to six and  provide them with training, and post its internal control policies and  practices online. Officials reported that a federal agency that rescinded a  $50,000 grant award in 2005 later returned the grant upon completion of  these activities.
A 4-year historically black college in Tennessee reported spending  $101,795 in Title III funds to strengthen institutional management by  developing an operating manual and providing training for members of its  Board of Directors. A school official told us that most board members do  not have professional experience related to higher education  administration, and their staggered 3-year terms result in new members  joining the board periodically.

		Fiscal Stability

We estimate that nearly all grantees reported fiscal stability challenges,  including decreases in state and local government funding, an overreliance  on tuition-based revenue, and lack of donations from private sources.  Twenty-seven percent of fiscal year 2006 grantees funded at least one  activity in this focus area, and fiscal stability expenditures represented 6  percent of all grant funds spent. Specific examples of how institutions  used grant funds to address fiscal stability challenges follow:    A 2-year strengthening institution in Iowa cited declining state funding as a  challenge, reporting that in 2002, it fell below other Iowa community  colleges in per-credit hour funding from the state and was forced to raise  tuition and fees. Officials said many of its students are low-income and  cannot pay more. As a result, the college ranks last among Iowa  community colleges in general fund balance, threatening its long-term  viability. To address these challenges, the college established three new  academic programs—dental hygiene, biotechnology, and advanced  manufacturing—that are in high demand in the surrounding community.  The dental hygiene and biotechnology programs are anticipated to provide  the college with an additional $200,000 in revenues annually and $1 million  in federal and state appropriations.
Officials at a tribal college in South Dakota reported that despite having a  large, active donor list of 40,000, the college lacked staff with the requisite  skills to request major gifts from these donors. The college reported using  $170,000 in Title III grant funds to improve operations at its development  office by acquiring software to track such information as donor giving  history and by centralizing its direct mail operations for requesting gifts.  Additionally, nearly 20 percent of its $2.5 million grant was used to  increase its existing endowment of $13 million.

	Long-standing Deficiencies in Grant Monitoring and Technical Assistance Limit Education’s Ability to Ensure That Funds Are Used Properly and Grantees Are Supported

		Education Has Made Limited Progress in Improving Its Monitoring, and Still Lacks a Systematic Approach to Coordinate Its Efforts

Five times since 1996, GAO and Education’s Inspector General have  recommended that Education implement a systematic approach to  monitoring to better assess the fiscal and programmatic performance of  Title III and V grantees. Such an approach would include implementing  formal monitoring and technical assistance plans based on risk models  and developing written procedures for providing technical assistance.  When we previously reported on Education’s management of the programs  in 2004, the department had begun several initiatives to improve  monitoring, including the development of annual monitoring plans to  identify potential risk with grants and guide the work of program staff.  However, we found that the lack of progress it made in implementing  these initiatives had resulted in uneven monitoring of Title III and V  grantees. Accordingly, we recommended that Education take steps to  ensure its monitoring plans were carried out and targeted toward at-risk  grantees by completing its electronic monitoring system and training  programs. While Education has taken some steps to better target its  monitoring plans in response to our recommendation, many of its  initiatives have yet to be fully realized (see table 6).
In 2007, the Office of Postsecondary Education (OPE) reestablished an  office to oversee monitoring across all of its higher education grant  programs. The program oversight staff is responsible for overseeing OPE  monitoring policies, procedures, and standards, and training staff in these  areas. The establishment of the oversight staff was designed to increase  consistency in monitoring practices throughout more than 40 grant  programs administered by OPE, including Title III and V programs, and to  supplement the responsibilities of individual program offices with regard  to monitoring and technical assistance.

			Electronic Monitoring System

In 2007, Education redesigned its electronic monitoring system to provide  several key enhancements lacking in the system that was originally  introduced 4 years earlier. The original system was not designed to share  key information across grant programs administered by OPE. The  redesigned system brings together information about an institution’s  performance in managing its entire portfolio of higher education grants,  increasing Education’s ability to assess the risk of grantee noncompliance  with program rules. Program officers can also enter updates about a  grantee’s performance in the system, based on routine interactions with  the grantee. According to Education officials, this information can be used  to reflect real-time information about institutional behavior. Because the  system integrates financial and programmatic data, such as institutional  drawdown of grant funds and annual performance reports, staff will have  ready access to information needed to perform monitoring tasks. Given  that each program officer is responsible for managing around 50 grants,  electronic monitoring, if fully integrated into the oversight activities of  program staff, has the potential to improve the quality and consistency of  monitoring.
Another feature of the system is a monitoring index, implemented in 2008,  that determines an institution’s need for heightened monitoring or  technical assistance based on nine weighted criteria designed to assess  risk related to an institution’s ability to manage its grants (see fig. 5). For  example, an institution that has lost accreditation (30 percent of the  index) or has grants totaling more than $30 million (5 percent of the index)  is automatically prioritized for heightened monitoring, which may involve  site visits or other contacts with the school. Education has identified over  130 institutions across all higher education grant programs for heightened  monitoring, of which 43 percent participate in the Title III and V programs.  Education officials said they will review the criteria and make revisions, as  necessary, to better assess risk.
While Education has made recent progress in automating its monitoring  tools and developing risk-based criteria, it lacks a coordinated approach to  guide its monitoring efforts. Specifically, Education officials told us they  discontinued the development of annual monitoring and technical  assistance plans for Title III and V programs, one of the initiatives that we  reported on in 2004. In 2002, Education directed each program within the  agency to develop a monitoring plan to place greater emphasis on  performance monitoring for all grantees. In addition to asking whether  grantees were achieving results, program officials were also to consider  what assistance Education could provide to help grantees accomplish  program objectives and incorporate an increased departmental emphasis  on compliance with the law into their planning. Education developed a  plan for Title III and V programs that called for staff to (1) conduct risk  assessments, (2) perform a minimum number of site visits each year, and  (3) follow up with grantees regarding their performance reports. However,  in 2006, Education rescinded the requirement for each program office to  submit annual monitoring plans because the practice did not achieve its  intended purpose of better targeting its monitoring resources. Since then,  OPE has not developed any plans to guide its monitoring activities for  Title III and V programs, although such plans are in place for other OPE  grant programs.

			Site Visits

Since our 2004 report, site visits to Title III and V grantees, a critical  component of an effective grants management program, have declined  substantially. For example, Education conducted 26 site visits in fiscal  year 2003, but only visited 22 grantees over the 4-year period of fiscal year  2005 through fiscal year 2008 (see table 7). We were unable to fully  determine the nature or quality of these site visits because Education  could not account for most of the reports required to document site visit  findings. Additionally, since the issuance of our 2004 report, which found  that about three-quarters of the program staff were not meeting the  requirement to complete at least two site visits per year, Education has  discontinued the two site visit requirement. Instead Education officials  said they have changed the focus to improve the quality of monitoring by  relying on the risk criteria to target grantees most in need of site visits to  make the best use of the department’s limited resources.
One former senior Education official told us that site visits had declined  because the program office has limited staff and few have the requisite  skills to conduct financial site visits. According to Education, the OPE  office responsible for administering Title III and V grant programs  currently has 32 staff to monitor more than 1,000 grants across its assigned  programs, compared to 2003 when it had 38 staff responsible for  approximately 750 grants. To address concerns that program officers do  not have the right skill mix to conduct comprehensive site visits, OPE’s  program oversight staff assumed responsibility for conducting site visits  for Title III and V programs in 2008. However, because the office is  responsible for conducting site visits across more than 40 higher  education grant programs, the number of Title III and V grantees it can  visit will be limited. In fiscal year 2008, for example, five site visits that  program oversight staff conducted were to Title III grant recipients.
With the implementation of an electronic monitoring system and risk- based monitoring index, Education now has tools to enhance its ability to  select grantees for site visits. However, officials said that aside from  referrals from the Inspector General, the criteria they used in selecting  schools for fiscal year 2008 and 2009 site visits was the total amount of  higher education grants awarded (i.e., grantees receiving $30 million or  more), which represents only 5 percent of the monitoring index criteria. In  fiscal year 2008, this limited criteria resulted in a narrow subset of schools  being visited, with four of the five site visits being made to Historically  Black Colleges and Universities. Ideally, Education’s risk-based approach  would consider not only grant amounts, but also the full list of weighted  criteria on its monitoring index, along with other factors such as grant  program participation and institution type to ensure that risk is considered  across each of the grant programs and a mix of schools are visited.

			Staff Training

Education has made progress in developing grant monitoring courses to  enhance the skills of Title III and V program staff, but skill gaps remain  and limit the ability of program staff to fully carry out their monitoring and  technical assistance responsibilities. Since our 2004 report, Education has  developed courses on internal control and grants monitoring, but these  courses have been attended by less than half of the program staff. For  example, of 28 staff members only 2 have completed a new internal  control course and 13 have completed a course on grants monitoring.  Senior officials at Education we spoke to also identified critical areas  where additional training is needed. Specifically, one official told us that  the ability to conduct comprehensive reviews of grantees has been  hindered because program staff have not had training on how to review  the financial practices of grantees. A course on this topic was developed in  2007 but has yet to be offered. Another official said Education needs to  provide training for program staff on how to incorporate the results of the  external evaluations that grantees are required to complete into their  reviews.

		Education Lacks Assurance That Grant Funds Are Used Appropriately

Education has not fully implemented its planned monitoring initiatives and  lacks assurance that grantees appropriately manage federal funds,  increasing the potential for fraud, waste, or abuse. During the course of  this study, we reviewed financial and grant project records at seven  institutions participating in Title III and V programs in fiscal year 2006. We  identified $142,943 in questionable expenses at 4 of 7 institutions we  visited (see table 8).
At one institution, we identified significant internal control weaknesses  and $105,117 in questionable expenditures. Specifically, a review of grant  disbursement records for Grantee D revealed spending with no clear  linkage to the grant and instances in which accounting procedures were  bypassed by grant staff at the institution. Of the questionable expenditures  we identified, $88,195 was attributed to an activity designed to promote  character and leadership development. Of that amount, we found that the  institution used more than $79,975 to pay for numerous student trips to  locations such as resorts and amusement parks. According to the grant  agreement, the funds were to be used for student service learning projects.  Additionally, $4,578 in grant funds was used to purchase an airplane global  positioning system even though the school did not own an airplane. Over  $6,000 of grant funds was used to purchase a desk and chair (see fig. 6). In  purchasing the global positioning system and office furniture, a school  official split the payments on an institutionally issued purchase card to  circumvent limits established by the institution. Officials at the institution  ignored multiple warnings about mismanagement of this activity from  external evaluators hired to review the grant. Education visited the school  in 2006 but found no problems, and recommended we visit the institution  as an example of a model grantee. We referred the problems we noted at  this institution to Education’s Inspector General for further investigation.
Examples of the questionable expenditures we identified at three other  institutions we visited follow:    We were unable to complete testing for about $147,000 of grant fund  transactions at Grantee A due to a lack of readily available supporting  documentation. For one transaction that was fully documented, the  grantee improperly used $2,127 in grant funds to pay late fees assessed to  the college. Once we pointed out that grant funds cannot be used for this  purpose, the college took corrective action by writing a check to  reimburse the grant.
Grantee B used $27,530 to prepay subscription and contract services that  would be delivered after the grant expired.
Grantee F used more than $1,500 in grant funds to purchase fast food and  over $4,800 to purchase t-shirts for students.
We presented Education with the results of our analysis supporting each  of our findings related to our grantee visits, and senior officials expressed  commitment to follow up on each of the findings in coordination with  grantees.
The annual performance reports that grantees are required to submit to  receive continued funding provide a key tool for monitoring grantee  performance, but we found evidence that the program office is not  consistently reviewing these reports. In reviewing seven annual  performance reports that fiscal year 2006 grantees submitted late, we  found six that lacked detail, provided inaccurate information, or were  incomplete. For example, one grantee reported that 80 percent ($2.3  million) of total funds allotted for the year were committed to “other  unspecified activities” instead of clearly listing how the funds were spent,  as required. Another institution in the final year of its grant submitted a  report that was mostly blank, but it was counted as complete by program  staff until we pointed out the discrepancy. The lack of information  provided by the institution limits OPE’s ability to follow administrative  requirements for closing the grant, and it also significantly impairs its  ability to understand the impact federal funds had on this particular  campus or whether funds were used appropriately. Education  subsequently requested that the school finalize its performance report a  full year after it was originally due. While such reports will now be easily  accessible through the electronic monitoring system, program staff will  still have to take the initiative to review the information to determine  whether grantees have demonstrated adequate progress to justify  continued funding.

		Education’s Ability to Target Technical Assistance Remains Limited

While Education provides technical assistance for prospective and current  Title III and V grantees through preapplication workshops and routine  interaction between program officers and grant administrators at the  institutions, it has not made progress in developing a systematic approach  to target the needs of grantees. According to one senior Education official,  technical assistance is generally provided to Title III and V grantees on a  case-by-case basis at the discretion of program officers. There are no  particular criteria to determine when a program officer should provide  technical assistance. For example, officials at a few of the institutions we  spoke to told us that Education should provide technical assistance  whenever the grant administration staff at an institution changes. Another  senior Education official said that technical assistance should be provided  when annual performance reports show numerous grantees experiencing  similar problems, or if program officers receive numerous calls on a  particular issue. Since we found evidence that program staff may not  consistently review these reports, the extent to which this type of follow- up is occurring is unclear.
According to grantees we interviewed, the technical assistance Education  provides is not consistent throughout the grant cycle. Specifically, several  officials from schools at which we conducted interviews were  complimentary of the technical assistance Education provided when they  were applying for grants. Some of those officials, however, noted a  precipitous drop in assistance during the first year after grants were  awarded when grantees often need help with implementation challenges,  such as recruiting and retaining highly qualified staff, securing matching  funds for endowments, and overcoming construction delays. In the past,  grantees had an opportunity to address such challenges at annual  conferences sponsored by Education, but these conferences have not been  held since 2006. Nearly 40 percent of the 113 grantees that provided  comments in their annual performance reports requested that Education  resume providing the conferences on a regular basis. According to  Education officials, resource constraints have prevented them from  holding the conferences, but plans are under way to hold a conference in  fall 2009. Since Education stopped convening conferences, schools, and in  some cases higher education advocacy groups, have hosted conferences at  which Education staff participated. For example, five conferences or  workshops held for the Title V program in 2008 were hosted by schools or  advocacy groups. Officials from a few schools we interviewed said it is  important for Education to take the lead in planning conferences to ensure  that grantees receive information that is consistent with program rules.  They also noted that when conferences were held in locations such as  Washington D.C., participation could be expensive and suggested  Education consider holding regional conferences to make it more  affordable for grantees to attend.
Officials from about half of the schools and some officials from advocacy  groups we interviewed also reported that Education could strengthen  grantee performance by more broadly disseminating information about  successful projects. Education has included limited information on its  Web site about six current and past projects. However, the information for  each project is maintained on the specific Title III or V program pages,  rather than being presented in a centralized location for the benefit of all  grantees. For example, one of the projects that highlighted student  retention efforts at a Native Hawaiian institution, a topic that has wide  applicability across the grant programs, was only located at the  Strengthening Institutions Program Web site. Additionally, this Web  information did not consistently include contact information to allow  interested schools to contact the featured grantees. School officials said  such information sharing would provide lessons learned from similar  projects and better leverage the federal investment. For example, an  official at a 2-year Strengthening Institutions grantee in North Carolina  told us he independently identified a contact at a Title III grantee to  discuss the application process, but suggested that a clearinghouse of  successful projects would be helpful for connecting institutions with  similar challenges.
As we reported in 2004 and 2007, Education’s ability to target technical  assistance is also limited in that the annual performance reports used to  obtain feedback about program improvements may discourage candor  because the reports identify grantees and are used to make continued  funding decisions. The department also does not readily use the feedback  it obtains from grantees to improve the programs. In 2004, we  recommended that Education use appropriately collected feedback from  grantees to target its technical assistance. While Education agreed with  the recommendation and officials said they were considering ways to  obtain feedback separate from the annual performance reporting process,  Education continues to rely on these reports to obtain feedback.  Education has separate feedback mechanisms in place to measure  customer satisfaction and gauge the need for program improvement for  some of its other programs. One senior Education official said the  current process for obtaining feedback is adequate for assessing the needs  of Title III and V grantees. However, our review of the annual performance  ercent  reports that fiscal year 2006 grantees submitted found that only 22 p provided feedback. Additionally, a representative from the contractor  responsible for compiling information from the reports said that the  narrative data—where feedback from grantees can be found—is not  summarized for Education. The 113 grantees that provided feedback in  these reports made a number of suggestions for improving the program,  including requests for improved communications from Education,  consistency in timing of events and reporting requirements, re-establishing  annual conferences for grantees, and clarifying program regulations. For  instance, Education has posted program regulations on its Web site, but 61  of 113 grantees that provided feedback specifically requested that  Education clarify the regulations.

	Conclusions

Given the current challenges low-income and minority serving institutions  face, and the projected growth in the college-age population, Title III and V  funds will continue to play an integral role in helping these institutions  address some of their most critical needs. Because these institutions have  limited resources, they may need additional assistance to successfully  implement their grant projects. Education’s role in monitoring and  providing assistance to Title III and V grantees is critical to ensuring that  the substantial investment the federal government makes in these  programs leads to improvements in institutional capacity and student  outcomes. When we reviewed the management of these programs in 2004  and 2007, Education had begun several initiatives to improve its  monitoring and assistance. However, many of these initiatives never  achieved their intended purpose or remain unfinished. Education has  made progress in developing tools, such as an electronic monitoring  system and risk-based criteria, to assess potential risks associated with  Title III and V grants, but it lacks a comprehensive risk-based monitoring  and technical assistance approach to target its efforts. Previously, we  recommended that the Secretary of Education take steps to ensure that  monitoring and technical assistance plans are carried out and targeted to  at-risk grantees and the needs of grantees guide the technical assistance  offered. At the core of such an approach, which Education has not fully  implemented, would be plans to guide its monitoring and technical  assistance efforts following a thorough assessment of the risk and needs  of grantees. Such an approach would also ensure that more information is  shared among grantees about common implementation challenges and  successful projects to better leverage the considerable federal investment,  and ensure that grantees have an opportunity to provide feedback on areas  for program improvement. Additionally, Education has not adequately  addressed skill gaps that limit the ability of program staff to carry out  monitoring and technical assistance. Consequently, Title III and V funds  continue to be at risk for fraud, waste, or abuse. The internal control  weaknesses and questionable expenditures we identified at certain  grantees we reviewed demonstrate the importance of having a strong  monitoring and assistance program in place. In an environment where  Education is called on to administer additional programs with limited  resources, a coordinated approach to guide its efforts is critical to  ensuring that grant funds are appropriately spent and the needs of  grantees are met.

	Recommendations for Executive Action

We recommend that the Secretary of Education take the following five  actions:    Develop a comprehensive, risk-based approach to target grant monitoring  and technical assistance based on the needs of grantees. In doing so,  Education should take steps to ensure that all available tools, including its  electronic monitoring system, risk-based criteria, site visits, and grantee  annual performance reports, are fully integrated to better target its limited  resources.
Follow up on each of the improper uses of grant funds that were identified  in this report.
Provide program staff with the necessary training to fully carry out  monitoring and technical assistance responsibilities.
Disseminate information to grantees about common implementation  challenges and successful projects to leverage the investment that has  been made across the programs.
Develop appropriate mechanisms to collect and use feedback from  grantees.

	Agency Comments

We provided a draft of this report to officials at the Department of  Education for review and comment. In written comments, Education  agreed with our findings and recommendations. Officials indicated that  they have begun to undertake a number of corrective actions to respond to  these recommendations, such as convening a task force to better  coordinate program resources toward grantees most in need of monitoring  and/or technical assistance. Officials also agreed to provide additional  training to new and existing program staff, reinstitute the annual Title III  and V project director’s meeting in an effort to better disseminate  information about the program and successful grants, and implement an e- mail address that grantees can use to provide feedback.
Reinstituting the annual Title III and V project director’s meeting is an  important step in strengthening Education’s technical assistance for  grantees, but it will be important for Education to develop an approach for  disseminating key information to grantees on a more routine basis than  annual meetings. Additionally, Education’s plan to provide grantees with  an e-mail address that is monitored by staff outside the program office  may encourage grantees to provide more candid feedback. However,  unless Education develops an approach to systematically collect and use  the feedback, it may miss opportunities to further improve its oversight  efforts. Education also provided technical comments, which we  incorporated where appropriate. Education’s comments appear in  appendix IV.
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If you or your staff have questions about this report, please contact me at  (202) 512-7215 or scottg@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff who made key contributions to this report are  listed in appendix V.

Appendix I: Objectives, Scope, and Methodology

We reviewed Title III and V grants programs to determine (1) what are the  characteristics of institutions eligible to receive grants under Titles III and  V, including the characteristics of students served, (2) what challenges do  grantees face , and how have they spent Title III and V funds to address  these challenges, and (3) to what extent does the Department of Education  (Education) monitor the financial and programmatic performance of Title  III and V grantees, and use this information to target its technical  assistance.
To describe the characteristics of postsecondary institutions eligible to  receive grants under Titles III and V, we analyzed 2006 data on 2-year and  4-year public and private, not-for profit institutions from Education’s  Integrated Postsecondary Education Data System. Historically Black  Colleges and Universities and Tribal Colleges that receive formula grants  through Title III were automatically included in our eligible population. To  determine the number of institutions eligible for discretionary grant  programs under Title III and V, we identified postsecondary institutions  that had low educational and general expenditures and enrolled more Pell  grant recipients, as compared to comparable institutions. To determine  eligibility for specific types of grant programs, we also analyzed racial and  ethnic data for students enrolled at eligible institutions. Eligible  institutions reporting Hispanic student enrollment of 25 percent or more  were categorized as Title V eligible. The 2,283 institutions that did not  meet any of the criteria mentioned above were categorized as ineligible for  participation in the Title III and V grant programs.
We also analyzed data from Education’s 2004 National Postsecondary  Student Aid Study (NPSAS), the most recent year for which data were  available, to provide insight into student characteristics. Because NPSAS  data are based on a representative sample of students enrolled in  postsecondary education it does not include the universe of institutions as  reported in Integrated Postsecondary Education Data Systems (IPEDS).  As a result, it is not possible to discuss the NPSAS data in terms of eligible  and ineligible institutions as can be done with IPEDS data. Instead, when  discussing NPSAS data, we refer to minority serving and non-minority  serving institutions. While only Historically Black Colleges and  Universities, Hispanic-serving institutions, and Tribal Colleges are  classified as minority serving institutions for NPSAS, these data are the  most complete source of information on the characteristics of students  attending minority serving institutions. To determine the completeness  and reliability of this data, we reviewed the documentation from the  National Center for Education Statistics on how the data were collected,  interviewed Education officials responsible for handling the data, and  performed electronic tests to look for missing or out-of-range values.  Based on our reviews and tests, we found the data sufficiently reliable for  our purposes.
To describe the challenges that grantees face and how they used grant  funds to address their challenges, we reviewed a representative sample of  grant applications, all electronically submitted annual performance  reports, and interviewed officials from 27 Title III and V grantees.  Specifically, we conducted a content analysis of grant applications using a  representative sample of 78 of the 511 fiscal year 2006 grantees, allowing  us to generalize our findings to the entire population of grantees (see table  9.).
We stratified our sample by the six programs and, within these strata,  randomly selected grantees. Our sample was statistically drawn and  weighted so that we could generalize the results of our review across  programs. As with all samples, our review of grant files is subject to  sampling errors. The effects of sampling errors, due to the selection of a  sample from a larger population, can be expressed as confidence intervals  based on statistical theory. Sampling errors occur because we use a  sample to draw conclusions about a larger population. If a different  sample had been taken, the results might have been different. To recognize  the possibility that other samples might have yielded other results, we  express our confidence in the precision of our particular sample’s results  as a 95 percent confidence interval. Each sample element was  subsequently weighted in the analysis to account for all members of the  population, including those that were not selected.
In conducting our content analysis, we developed a code tree that  consisted of potential challenges identified through our review of the  literature and interviews with grantees and higher education advocacy  groups. Two analysts independently coded each application, and then  reconciled any differences in their analysis to ensure inter-rater reliability.
To describe how Title III and V grantees used grant funds to address their  challenges, we analyzed data from 503 of 511 fiscal year 2006 grantee  annual performance reports that were submitted electronically. To  determine the reliability of these data, we interviewed officials from  Education and its contractor about limitations with the data collected and  how its uses these data. We performed a number of data reliability checks,  such as establishing frequency tables for certain variables to check for  outliers and missing values. We also ran tests to check for out-of-range  values for specific variables. Based on information about outliers provided  by Education for a small percentage of these data (about 1 percent), we  decided to keep data for all variables supplied by the department. As a  result of our tests, we found these data to be sufficiently reliable for our  purposes.
To better understand the nature of grantee challenges and how Title III  and V grant funds were used to address them, we also interviewed officials  from 27 grantee institutions about the challenges they face and their  experiences with the grant programs. We selected a nonprobability sample  based on program participation, size of grant, and geographic location (see  table 10).
We also conducted a review of the literature to gain a better understanding  of the challenges that specific types of minority serving institutions face.  To determine how Education monitors and provides technical assistance,  we conducted interviews with officials at Education and reviewed  program requirements, policies, procedure manuals, and monitoring plans.  We also conducted additional site visits at seven Title III and V fiscal year  2006 grantees to evaluate their fiscal policies and internal control policies  and determine whether program funds were properly used. These  institutions were selected using a nonprobability sample based on factors  such as program participation, size of grant, and geographic location. The  grantees selected were located in California, Illinois, Maryland, North  Dakota, Puerto Rico, Tennessee and Texas. Our grantee site reviews were  limited in scope and were not sufficient for expressing an opinion on the  effectiveness of grantee internal controls or compliance.

Appendix II: Institutional and Student Characteristics, by Program Eligibility Status

Institutional resources (median $ per student)
Institutional expenditures (median $ per student)
Offers remedial services (% of institutions)
Financial aid (% of students receiving)
Federal grant aid reported in IPEDS captures data for first-time, full-time students only.

Appendix III: Fiscal Year 2002 to 2005 Grantee Expenditures by Focus Area

	Total expenditures, by focus area, fiscal year 2004 grantees

Appendix IV: Comments from the Department of Education

Appendix V: GAO Contact and Staff Acknowledgments

	Staff Acknowledgments

Debra Prescott (Assistant Director) and Carla Craddock (Analyst-in- Charge) managed this assignment. In addition, the following individuals  made important contributions to this report: Susan Aschoff, Jenna Aurand,  Carolyn Boyce, Muriel Brown, Sunny Chang, Alisha Chugh, Bonnie Derby,  Lauren Fassler, Doreen Feldman, Jeanette Franzel, Alice Feldesman, Lisa  Galvan, Jeremie Greer, Melissa Jaynes, Angela Leventis, Sheila McCoy,  John Mingus Jr., Lauren Mohlie, Mimi Ngyuen, Dae Park, Susan Ragland,  Glenn Spiegel, Sabrina Springfield, Nicholas Weeks, and Doris Yanger.

Summary:
Why GAO Did This Study

Institutions that serve large proportions of low-income and minority students may receive funding under Titles III and V of the Higher Education Act. In fiscal year 2008, $667 million in grants were awarded to over 500 institutions. GAO was asked to determine (1) the characteristics of institutions eligible to receive grants under Titles III and V and characteristics of students served; (2) any challenges grantees face, and how they spent Title III and V funds to address these challenges; and (3) the extent to which the Department of Education (Education) monitors the financial and programmatic performance of grantees, and uses this information to target its technical assistance. To address these objectives, GAO analyzed data from a representative sample of grant applications and annual performance reports for the entire population of fiscal year 2006 grantees. GAO also interviewed officials from Education and 27 grantee institutions, and conducted financial site visits at other 7 grantee institutions.

What GAO Found

Twenty-eight percent of all 2-year and 4-year public and private, not-for-profit institutions are eligible to receive Title III and V grants. Eligible institutions had fewer resources, including endowment holdings and revenue from tuition and fees, and lower per student spending on equipment than ineligible institutions. Eligible institutions also served more students who were minority, low-income, and attended part-time. In their grant applications, Title III and V grantees reported challenges in all four grant focus areas: academic quality, student support, institutional management, and fiscal stability. Grantees reported spending almost $385 million in fiscal year 2006 grant funds to address challenges in these areas, primarily to strengthen academic quality and student support services. Specifically, grantees reported using 43 percent of grant funds on efforts designed to improve academic quality, such as using the latest technology in the classroom and improving academic space. Efforts to improve student support services, including remedial courses, tutoring, and academic counseling represented about one-third of grantee expenditures. While nearly all grantees reported challenges related to strengthening institutional management and fiscal stability, expenditures in these areas represented less than one-quarter of all grant funds spent. Since GAO reported and made recommendations on the management of these programs in 2004 and 2007, Education has continued to take steps to improve monitoring, but many of its initiatives have not been completed. Education has made recent progress in developing an electronic monitoring system and risk-based criteria to improve monitoring, but it discontinued the use of annual plans to guide its efforts. Also, limited progress in addressing staff skill gaps and substantial declines in site visits to grantees has impeded Education's ability to adequately monitor grantees. Because Education lacks a comprehensive approach to target monitoring, it lacks assurance that grantees appropriately manage federal funds, increasing the potential for fraud, waste, or abuse. For example, GAO identified more than $100,000 in questionable expenditures at one grantee institution, including student trips to locations such as resorts and amusement parks, and an airplane global positioning system. Education provides limited technical assistance to grantees, but it has not developed a systematic approach that targets the needs of grantees. For example, some grantees told GAO that Education could strengthen grantee performance by sharing more information regarding common implementation challenges and successful projects. Additionally, GAO found that Education's ability to target technical assistance is limited because its current approach for obtaining feedback does not encourage candor, and it does not use the feedback it currently receives from grantees.