U. S. Department of Education

Fiscal Year 2005 

Performance and 

Accountability Report 
U.S. Department of Education FY 2005 Performance and Accountability Report

U.S. Department of Education 

Margaret Spellings 

Secretary 

Office of the Deputy Secretary 

Ray Simon 

Deputy Secretary 

Office of the Under Secretary 

Ted McPherson 

Under Secretary 

Office of the Chief Financial Officer 

Jack Martin 

Chief Financial Officer 

Office of Planning, Evaluation, and Policy Development 

Thomas Luce 

Assistant Secretary 

Strategic Accountability Service 

Hugh Walkup 

Director 

 

November 15, 2005 

This report is in the public domain. Authorization to reproduce it in whole or in part is granted. While permission to reprint 

this publication is not necessary, the citation should be: U.S. Department of Education, U.S. Department of Education 

Fiscal Year 2005 Performance and Accountability Report, Washington D.C., 2005. 

About the Department of Education’s 

Fiscal Year 2005 Performance and Accountability Report 

The Department of Education’s publicly available Fiscal Year 2005 Performance and Accountability 

Report (PAR) will be a fully interactive Web site, which will be live by December 15, 2005, on the 

Department’s Web site at http://www.ed.gov/about/reports/annual/2005report/index.html. This 

print version, provided in limited distribution, contains the exact content and generally reflects the 

online layout. However, menus and navigational tools will be added to the online version. 

Additionally, a color print highlights document and interactive CD of the entire PAR will be available 

by January 2006. 

To request a copy of our Highlights Report in print, 

with CD of the full Performance and Accountability Report,

contact edpubs@inet.ed.gov. 

To provide comments and suggestions on both the content 

and presentation of the report, 

contact PARcomments@ed.gov. 

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U.S. Department of Education FY 2005 Performance and Accountability Report

What Is a Performance and Accountability Report? 

The Government Performance and Results Act of 1993 (GPRA) requires federal agencies to develop 

annual performance reports based on their strategic plans and annual performance budgets. The 

Government Management Reform Act of 1994 requires federal agencies to develop accountability 

reports of their financial information. As a result of the Reports Consolidation Act of 2000, the 

Office of Management and Budget requires that a number of federal agencies, including the 

Department of Education, combine these reports. This combined report is the annual performance 

and accountability report. 

The Department of 

Education won a 

second consecutive 

Certificate of Excellence in 

Accountability Reporting 

for our Fiscal Year 2004 

Performance and 

Accountability Report. 

In our tradition of quality 

reporting, 

 we proudly present this 

Fiscal Year 2005 

Performance and 

Accountability Report.
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U.S. Department of Education FY 2005 Performance and Accountability Report

Contents 

Message From the Secretary ...............................................................................................iii 

What Is a Performance and Accountability Report? .................................................................iv 

Introduction ...................................................................................................................... 1 

Management’s Discussion and Analysis 

Management’s Discussion and Analysis Overview ................................................................... 4 

Department at a Glance ...................................................................................................... 5 

Our Mission ............................................................................................................. 5 

Our Customers ...................................................................................................... 13 

Organization and History......................................................................................... 21 

Integration of Performance and Financial Information.................................................. 23 

Scorecard on the President’s Management Agenda...................................................... 26 

Performance Highlights ..................................................................................................... 27

Goal Overviews...................................................................................................... 28 

Financial Highlights .......................................................................................................... 42 

Lines of Business ................................................................................................... 43 

Financial Position ................................................................................................... 44 

Future Trends........................................................................................................ 46 

Management Challenges Overview............................................................................ 49 

Improper Payments Overview .................................................................................. 52 

Management Assurance .......................................................................................... 54 

Performance Details 

Performance Details Overview ........................................................................................... 58 

Goal 1: Create a Culture of Achievement ............................................................................. 61 

Goal 2: Improve Student Achievement................................................................................ 82 

Goal 3: Develop Safe and Drug-Free Schools ......................................................................120 

Goal 4: Transform Education Into an Evidence-Based Field ...................................................127 

Goal 5: Enhance the Quality of and Access to Postsecondary and Adult Education ....................136 

Goal 6: Establish Management Excellence...........................................................................177 

Data Quality and Timeliness .............................................................................................193 

Financial Details 

Financial Summary .........................................................................................................204 

Limitations of Financial Statements ...................................................................................204 

Message From the Chief Financial Officer............................................................................205 

Principal Financial Statements ..........................................................................................206 

Notes to Principal Financial Statements ..............................................................................212 

Required Supplementary Stewardship Information...............................................................245 

Required Supplementary Information ................................................................................255 

Report of Independent Auditors ........................................................................................263 
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U.S. Department of Education FY 2005 Performance and Accountability Report

Other Accompanying Information 

Other Accompanying Information Overview ........................................................................280 

Management Challenges ..................................................................................................281 

Improper Payments Information Act of 2002 Reporting Details ..............................................289 

Report to Congress on Audit Follow-up...............................................................................305 

Credit Management and Debt Collection Improvement Act ....................................................307 

Glossary 

Glossary of Acronyms and Abbreviations ............................................................................310 
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U.S. Department of Education FY 2005 Performance and Accountability Report

Introduction 

What does the Department of Education 

do for the American public?

As Gulf Coast states and school districts 

struggled to recover from the upheaval 

caused to education institutions by 

hurricanes Katrina and Rita, the 

Department affirmed that it exists for the 

benefit of the public. Business as usual 

was replaced by a focus on solutions for 

helping displaced students. In natural 

disasters, in protecting students’ civil 

rights, in improving student achievement, 

and in the everyday responsibility of 

running an accountable agency, the 

Department serves the public. See p. 5. 

How well has the Department 

performed?

As the Department looks back on FY 2005, 

we reflect on successes like the national 

sample of 9-year-olds whose reading 

scores are higher this year than in any 

previous assessment year and challenges 

like those we have with collecting reliable, 

valid, and timely data. This Performance 

and Accountability Report is our primary 

document for disclosing and 

communicating our FY 2005 results. See 

p. 27. 

What is the Department’s 

financial position?

For the fourth consecutive year, the 

Department's financial statements received 

an unqualified audit opinion. The Congress 

and the public can rely on the information 

we provide in our financial statements as 

accurate. Throughout 2005, we sustained 

a “green” for financial performance on the 

President’s Management Agenda 

Scorecard. This Performance and 

Accountability Report is our primary 

document for disclosing and 

communicating our FY 2005 financial 

information and data. See p. 42.

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Management’s Discussion and Analysis 

U.S. Department of Education FY 2005 Performance and Accountability Report

Management’s 

Discussion and 

Analysis 
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U.S. Department of Education FY 2005 Performance and Accountability Report

Management’s Discussion and Analysis 

Management’s Discussion and Analysis Overview 

Department at a Glance (See p. 5.)

Our mission, our customers, our work to ensure civil rights, our history and organization, our 

efforts in integrating performance and financial information, and our scorecard on the President’s 

Management Agenda. 

Performance Highlights (See p. 27.)

Overview of each of our six strategic goals with net cost, key FY 2005 results, and areas of focus. 

Financial Highlights (See p. 42.)

Overview of our financial position, future trends, challenges, and issues relating to improper 

payments, along with management assurances under the Federal Managers’ Financial Integrity Act. 
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Management’s Discussion and Analysis 

U.S. Department of Education FY 2005 Performance and Accountability Report

Department at a Glance 

Our Mission 

To ensure equal access to education and to promote educational excellence throughout the nation. 

No Child Left Behind Is Working to 

Close the Achievement Gap 

The progress of racial/ethnic minority 

students, students with disabilities, 

limited English proficient students, and 

low-income students on fourth-grade 

reading and eighth-grade mathematics 

state assessments between 2003 and 

2004 shows that No Child Left Behind is 

working to address the largest and most 

persistent achievement gaps. More, see 

p. 6.

Evidence-Based Research Focuses on 

Promoting Educational Excellence 

In 2005, the Department established new 

priorities for federal education research—

priorities that ensure that our research 

will provide teachers and policymakers 

with evidence of what works in the 

classroom. More, see p. 9. 

 

Federal Civil Rights Laws Protect 

 Equal Access 

The Department enforces civil rights laws 

that prohibit discrimination on the basis 

of race, color, national origin, sex, 

disability, and age in programs that 

receive federal financial assistance. 

More, see p. 10.

ESEA Celebrates 40 Years of 

Access and Excellence 

The Elementary and Secondary Education 

Act of 1965 marked its 40th anniversary 

in 2005. 

Eight reauthorizations of the act have 

continued to uphold its initial mission: 

equal access and educational excellence 

for all. More, see p. 12.
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U.S. Department of Education FY 2005 Performance and Accountability Report

Management’s Discussion and Analysis 

No Child Left Behind Is Working to Close the Achievement Gap 

By requiring states to conduct annual assessments in grades 3 through 8 by 2006, No Child Left 

Behind has pushed schools to measure the achievement of all students and to improve 

performance where gaps exist. The progress of targeted students on state fourth-grade reading 

and eighth-grade mathematics assessments between SY 2002–03 and SY 2003–04 shows that No 

Child Left Behind is working to address the largest and most persistent achievement gaps. 

A comparison of state-reported proficiency data for SY 2002–03 and SY 2003–04 for states testing 

fourth-grade reading and eighth-grade mathematics shows increases in the percentages of 

targeted students who are proficient in a majority of those states. Of these targeted groups, the 

largest increases in reading proficiency were reported for limited English proficient students, 

African-American students, and low-income students; the largest increases in mathematics 

proficiency were reported for low-income students and Hispanic students. The tables below reflect 

results from states that conducted assessments in SY 2002–03 and SY 2003–04; states are not 

required to assess each of grades 3 through 8 until SY 2005–06. 

Reading Results—Grade 4 

The Percentage of Reporting States That Showed an Increase in Proficiency on 

Fourth-Grade State Reading Assessments Between SY 2002–03 and SY 2003–04 

Disaggregated Category 

Percentage of Reporting 

States Showing an Increase in 

Proficiency 

Number of States 

Assessing and Reporting 

For Both Years 

African-American Students 75 32 

Hispanic Students 59 32 

Students with Disabilities 75 32 

Limited English Proficient Students 81 32 

Low-income Students 76 33 

Note. In Puerto Rico, Limited Spanish Proficient is used in lieu of Limited English Proficient. 

Source. U.S. Department of Education, Consolidated State Performance Report, official state submissions. 

Mathematics Results—Grade 8 

The Percentage of Reporting States That Showed an Increase in Proficiency on 

Eighth-Grade State Mathematics Assessments Between SY 2002–03 and SY 2003–04 

Disaggregated Category 

Percentage of Reporting 

States Showing an Increase in 

Proficiency 

Number of States 

Assessing and Reporting 

For Both Years 

African-American Students 68 40 

Hispanic Students 73 41 

Students with Disabilities 62 42 

Limited English Proficient Students 63 43 

Low-income Students 76 41 

Note. In Puerto Rico, Limited Spanish Proficient is used in lieu of Limited English Proficient. 

Source. U.S. Department of Education, Consolidated State Performance Report, official state submissions. 

The gains in proficiency for students with disabilities, low-income students, and minority students 

are shown because they demonstrate a narrowing of the gap at important learning milestones for 

reading and mathematics. The development of good reading skills in early grades provides a good 
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Management’s Discussion and Analysis 

U.S. Department of Education FY 2005 Performance and Accountability Report

foundation for later academic success in higher grades. In particular, the skills required for fourthgrade reading proficiency are necessary for understanding and applying concepts in other subjects 

such as mathematics and science. The measure of eighth-grade mathematics proficiency 

demonstrates the understanding of mathematical concepts, procedures, and problem-solving skills; 

such proficiency is necessary for students before they begin advanced mathematics courses such 

as calculus. 

The following chart reflects state-by-state performance at the grades for which the Department set 

performance measures for reading and mathematics (see pp. 85 and 89) and is not necessarily a 

reflection of each state’s overall assessment system. For SY 2002–03 and SY 2003–04, states 

were only required to assess one grade between grades 3 and 5, inclusive; one grade between 

grades 6 and 9, inclusive; and once in high school. States are not required to assess each of 

grades 3 through 8 until SY 2005–06. For more complete information on a state’s assessment 

system, visit the state educational agency’s Web site. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

Management’s Discussion and Analysis 

Comparison of Percentage of Students Proficient on State Assessments 

From SY 2002–03 to SY 2003–04 for Selected Grades, Subjects, and Student Groups 

Fourth-Grade Reading Eighth-Grade Mathematics ↑

means the state 

increased the 

percentage of 

proficient students 

All 

 Students 

AfricanAmerican 

Students 

Hispanic 

Students Students 

With 

Disabilities 

Limited 

English 

Proficient 

Students 

LowIncome 

Students 

All 

 Students 

AfricanAmerican 

Students 

Hispanic 

Students Students 

With 

Disabilities 

Limited 

English 

Proficient 

Students 

LowIncome 

Students 

Alabama ↑ ↑ ↑ ⎯ ↑ ↑ ⎯ ⎯ ⎯ ⎯ ⎯ ⎯

Alaska ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↑ ↓ ↓ ↑

Arizona ⎯ ⎯ ⎯ ⎯ ⎯ ⎯ ↑ ↑ ↑ ↑ ~ ⎯

Arkansas ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↓ ↓ ⎯ ↑ ↑

California ↑ ↑ ↑ ↑ ↑ ↑ ~ ↑ ↑ ↑ ↓ ~ 

Colorado ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑

Connecticut ⎯ ⎯ ⎯ ⎯ ⎯ ⎯ ~ ~ ~ ⎯ ↓ ~ 

Delaware ⎯ ⎯ ⎯ ⎯ ⎯ ⎯ ↑ ↑ ↓ ↑ ↓ ↑

District of Columbia ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↑ ↑ ↓ ↓

Florida ↑ ↑ ↑ ↑ ↑ ↑ ~ ↑ ↑ ↑ ↑ ↑

Georgia ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑

Hawaii ⎯ ⎯ ⎯ ⎯ ⎯ ⎯ ↑ ↑ ↑ ⎯ ↑ ↑

Idaho ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑

Illinois ⎯ ⎯ ⎯ ⎯ ⎯ ⎯ ↑ ↑ ↑ ↑ ↑ ↑

Indiana ⎯ ⎯ ⎯ ⎯ ⎯ ⎯ ~ ~ ~ ⎯ ~ ~ 

Iowa ↑ ↑ ↓ ↑ ↑ ↑ ↑ ↑ ↓ ↓ ↑ ↑

Kansas ⎯ ⎯ ⎯ ⎯ ⎯ ⎯ ⎯ ⎯ ⎯ ⎯ ⎯ ⎯

Kentucky ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↓ ↑ ↑ ↑

Louisiana ↑ ↑ ↑ ↑ ↑ ↓ ↑ ↑ ↑ ↑ ↑ ↑

Maine ↑ ↓ ↓ ↑ ↓ ↓ ↑ ↓ ↑ ⎯ ↓ ↑

Maryland ⎯ ⎯ ⎯ ⎯ ⎯ ⎯ ↑ ↑ ↑ ↑ ↑ ↑

Massachusetts ↑ ↑ ↑ ↓ ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑

Michigan ⎯ ⎯ ⎯ ⎯ ⎯ ⎯ ↑ ↑ ↑ ↑ ↑ ↑

Minnesota ⎯ ⎯ ⎯ ⎯ ⎯ ⎯ ⎯ ⎯ ⎯ ⎯ ⎯ ⎯

Mississippi ↑ ↑ ↓ ↓ ↓ ↑ ↑ ↑ ↑ ↓ ↑ ↑

Missouri ⎯ ⎯ ⎯ ⎯ ⎯ ⎯ ↓ ⎯ ⎯ ⎯ ↓ ⎯

Montana ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓

Nebraska ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑

Nevada ↓ ↓ ↑ ↑ ↑ ~ ⎯ ⎯ ⎯ ⎯ ⎯ ⎯

New Hampshire ⎯ ⎯ ⎯ ⎯ ⎯ ⎯ ⎯ ⎯ ⎯ ⎯ ⎯ ⎯

New Jersey ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑

New Mexico ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓

New York ↓ ↓ ↓ ↑ ↑ ↓ ↑ ↑ ↑ ↑ ↑ ↑

North Carolina ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑

North Dakota ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↓ ↑ ↑ ↑ ↑

Ohio ↑ ↑ ↓ ↑ ↑ ↑ ⎯ ⎯ ⎯ ⎯ ⎯ ⎯

Oklahoma ⎯ ⎯ ⎯ ⎯ ⎯ ⎯ ↑ ↓ ↓ ↑ ↑ ↓

Oregon ⎯ ⎯ ⎯ ⎯ ⎯ ⎯ ~ ↓ ↑ ↑ ↓ ↑

Pennsylvania ⎯ ⎯ ⎯ ⎯ ⎯ ⎯ ↑ ↑ ↑ ↑ ↑ ↑

Puerto Rico ⎯ ⎯ ⎯ ⎯ ⎯ ⎯ ~ ⎯ ↑ ↓ ~ ↓

Rhode Island ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑

South Carolina ↑ ↑ ↑ ↓ ↑ ↑ ↑ ↑ ↑ ⎯ ↑ ↑

South Dakota ↑ ↓ ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↓ ↑

Tennessee ⎯ ⎯ ⎯ ⎯ ⎯ ⎯ ⎯ ⎯ ⎯ ⎯ ↑ ⎯

Texas ↓ ↑ ~ ↓ ↑ ↑ ↓ ↓ ↓ ↓ ↓ ↓

Utah ↓ ↑ ↓ ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑

Vermont ⎯ ⎯ ⎯ ⎯ ⎯ ⎯ ⎯ ⎯ ⎯ ⎯ ⎯ ⎯

Virginia ⎯ ⎯ ⎯ ⎯ ⎯ ⎯ ↑ ↑ ↑ ↑ ↑ ↑

Washington ↑ ↑ ↑ ↑ ↑ ↑ ⎯ ⎯ ⎯ ⎯ ⎯ ⎯

West Virginia ⎯ ⎯ ⎯ ↑ ⎯ ↑ ⎯ ⎯ ⎯ ⎯ ⎯ ↑

Wisconsin ↑ ↑ ~ ↑ ↑ ↑ ↓ ↓ ↓ ↓ ↓ ↓

Wyoming ↑ ↑ ↓ ↑ ↑ ↑ ↑ ↑ ↑ ⎯ ↑ ↑

↑ Increase from SY 2002–03 to 2003–04 ↓ Decrease from SY 2002–03 to 2003–04 ~ No increase or decrease from SY 2002–03 to 2003–04 

⎯ State did not submit data for these grades for both years; assessments are not required in all grades 3 through 8 until SY 2005–06. 

Note. In Puerto Rico, Limited Spanish Proficient is used in lieu of Limited English Proficient. 

Source. U.S. Department of Education, Consolidated State Performance Report, official state submissions.
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Management’s Discussion and Analysis 

U.S. Department of Education FY 2005 Performance and Accountability Report

Evidence-Based Research Focuses on Promoting Educational Excellence 

To support educational excellence, the Department is committed to providing teachers and 

policymakers with useful information on effective educational practices. In 2005, the Department 

established the following priorities for federal education research: 

• To develop or identify a substantial number of programs, practices, policies, and approaches 

that enhance academic achievement and that can be widely deployed. 

• To identify what does not work and what is problematic or inefficient, and thereby encourage 

innovation and further research. 

• To gain fundamental understanding of the processes that underlie variations in the 

effectiveness of education programs, practices, policies, and approaches. 

• To develop delivery systems for the results of education research that will be routinely used 

by policymakers, educators, and the general public when making education decisions. 

The National Board for Education Sciences, an advisory board to the Department’s main research 

arm, approved these priorities as part of its responsibility to provide independent advice on the 

research funded and conducted by the Department. 

The Department grounds its expectations for education excellence in scientifically based research 

to ensure that practitioners have the tools needed to achieve the best teaching and learning in our 

nation’s schools. The recently approved research priorities ensure that the projects funded reflect 

the Department’s dedication to transforming education into an evidence-based field. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

Management’s Discussion and Analysis 

Federal Civil Rights Laws Protect Equal Access 

The Department is responsible for enforcing a series of laws to ensure civil rights in the following 

ways: 

• To prohibit discrimination based on race, color, and national origin—Title VI of the Civil Rights 

Act of 1964. (See “Race/national origin” wedge of graph.) 

• To prohibit sex discrimination in education programs—Title IX of the Education Amendments 

of 1972. (See “Sex” wedge of graph.) 

• To prohibit discrimination based on age—Age Discrimination Act of 1975. (See “Age” wedge 

of graph.) 

• To prohibit discrimination based on disability—Section 504 of the Rehabilitation Act of 1973. 

(Included in “Disability” wedge of graph.) 

• To prohibit discrimination based on disability by public entities, whether or not they receive 

federal financial assistance—Title II of the Americans with Disabilities Act of 1990. (Included 

in “Disability” wedge of graph.) 

In addition, we enforce the Boy Scouts of America Equal Access Act, enacted in 2002. This law 

addresses equal access for the Boy Scouts of America and other designated youth groups to meet 

in public schools receiving funds from the Department. 

These antidiscrimination laws protect more than 54 million students attending elementary and 

secondary schools and more than 16 million students attending colleges and universities (U.S. 

Department of Education, National Center for Education Statistics, Projections of Education 

Statistics to 2013 (NCES 2004-013), Washington, DC: 2003, Tables 1 and 10). 

The Office for Civil Rights (OCR), a law 

enforcement agency within the Department, 

executes the Department’s civil rights 

enforcement responsibilities through a variety of 

activities. The Department conducts complaint 

investigations with the dual objectives of 

promptly investigating complainants' allegations 

of discrimination and accurately determining 

whether the civil rights laws and regulations have 

been violated. In FY 2005, the Department 

received 5,531 complaints alleging discrimination 

and resolved 5,360. As reflected in the chart, the 

majority of complaints received by the 

Department allege discrimination on the basis of 

disability. 

In addition to complaint investigations, the Department initiates compliance reviews and other 

proactive initiatives to focus on specific civil rights compliance problems in education that are 

particularly acute or national in scope. Seventy-three compliance reviews were initiated in FY 2005 

on issues including access for students with physical disabilities to postsecondary schools and the 

overrepresentation of minority and national origin limited English proficient students in special 

FY 2005 Discrimination Complaints

Sex 

6%

Age 

2%

Multiple 

13% Other*

9%

Disability 

52%

Race/

National Origin 

18%

* Indicates no jurisdiction or jurisdiction not yet determined
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Management’s Discussion and Analysis 

U.S. Department of Education FY 2005 Performance and Accountability Report

education. The Department also conducted compliance reviews of universities and school districts 

to ensure that Title IX coordinators were designated and trained and that the Title IX nondiscrimination policy and other information were published in accordance with regulations. 

The Department also pursues compliance by federal funds recipients by promulgating regulations 

implementing the civil rights laws, developing clear policy guidance interpreting those laws, and 

broadly disseminating this information to educational institutions, parents, students, and others. 

This information is conveyed using a variety of media and by the direct provision of technical 

assistance. To assist the public, the Department provides civil rights information, including policy 

documents and technical assistance publications; tools that recipients can use to assess their own 

compliance with the civil rights laws; and information to help students and parents understand 

their rights. The Department provides an online complaint form through which it now receives over 

50 percent of its discrimination complaints. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

Management’s Discussion and Analysis 

ESEA Celebrates 40 Years of Access and Excellence 

For 40 years and through eight reauthorizations, the Elementary and Secondary Education Act of 

1965 (ESEA) has kept public school education focused on access and equity. The first act included 

these words: “In recognition of the special educational needs of low-income families and the impact 

that concentrations of low-income families have on the ability of local educational agencies to 

support adequate educational programs, the Congress hereby declares it to be the policy of the 

United States to provide financial assistance ... to local educational agencies serving areas with 

concentrations of children from low-income families ... ” (Section 201). 

The No Child Left Behind Act of 2001, the most recent reauthorization of the celebrated act of 

1965, continues to be guided by the same mission. No Child Left Behind maintains the original 

premise of access and equity and combines it with widespread accountability for achievement. No 

Child Left Behind requires states to have standards and assessments, including clear designations 

of student proficiency levels in reading and mathematics, and prescribes strong consequences for 

schools that do not make adequate yearly progress. Science assessment requirements begin in 

SY 2007–08. Schools designated as in need of improvement are mandated to offer parents the 

choice of sending their children to higher-performing schools or receiving supplemental educational 

services from state-approved providers for their children. The supplemental services provision 

applies for schools in the second year of improvement. No Child Left Behind also requires all public 

school teachers of core academic subjects to be highly qualified by the end of SY 2005–06. 

No Child Left Behind guides the Department’s operations relating to elementary and secondary 

public school education. Other major laws control the Department’s work in areas of special 

education, postsecondary education, adult education, and vocational education. 

• The Individuals with Disabilities Education Act, originally enacted in 1975 and reauthorized 

December 3, 2004, mandates that children with disabilities be provided with a free and 

appropriate public education. 

• The Higher Education Act, originally enacted in 1965 and currently in the process of 

reauthorization by the Congress, provides need-based grants and loans for undergraduates 

as well as a variety of programs to improve postsecondary education. 

• The Adult Education and Family Literacy Act, which is Title II of the Workforce Investment 

Act, authorized in 1998, provides grants to state agencies for family literacy services, English 

literacy programs, and adult education and literacy services, which may include workplace 

literacy services. 

• The Carl D. Perkins Vocational and Technical Education Act provides secondary and 

postsecondary vocational and technical education programs with federal assistance. 

• The Rehabilitation Act of 1973 authorizes programs to provide and improve vocational 

rehabilitation and independent living services for individuals with disabilities. 
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Management’s Discussion and Analysis 

U.S. Department of Education FY 2005 Performance and Accountability Report

Department at a Glance 

Our Customers 

Every American has a stake in the nation’s education success. 

Meeting the Needs of Katrina Evacuees 

Hurricane Katrina left Gulf Coast schools 

about to begin a new school year in 

disarray. Elementary, secondary, and 

postsecondary students and their 

teachers spread out across the nation to 

find new schools to attend. The 

Department commends the many 

communities that welcomed displaced 

students and their families. More, see 

p. 14.

Elementary/Secondary and 

Postsecondary Education Benefit 

From Public Revenues

As the graph below shows, significant 

numbers of U.S. residents aged 3 through 

34 are enrolled in our many public 

education institutions: prekindergarten, 

elementary, secondary, postsecondary, 

and adult education. More, see p. 15. 

Education Enrollment 

By Age Group From 1970–2002 

Source. U.S. Department of Education, National Center for 

Education Statistics, The Condition of Education 2004. 

Minority Students Increase 

Participation in Public Education 

As enrollment in schools and colleges 

increases, cohorts of students are more 

diverse: 

• The percentage of public school 

students who are racial/ethnic 

minorities increased from 22 percent in 

1972 to 42 percent in 2003. 

• The number of children aged 5 through 

17 who spoke a language other than 

English at home more than doubled 

between 1979 and 2003. 

• Twenty-nine percent of all students 

enrolled in degree-granting, 

postsecondary institutions in 2002 were 

racial/ethnic minorities. 

More, see p. 17.

Parental Information and Options 

No Child Left Behind requires schools to 

provide parents with information about 

the performance of schools against 

grade-level standards and provides 

options to parents whose children attend 

underperforming schools. Options include 

school choice, supplemental educational 

services (e.g. tutoring), and charter 

schools. More, see p. 20.
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U.S. Department of Education FY 2005 Performance and Accountability Report

Management’s Discussion and Analysis 

Meeting the Needs of Katrina Evacuees 

After Hurricane Katrina, disaster reports from the Gulf Coast education community estimated that 

372,000 students from Louisiana and Mississippi were not able to return to class in their local 

public or private school. The Department focused on every potential resource for relief to meet the 

needs of those students and proposed to Congress targeted funding to ensure states, districts, and 

parents had the resources they needed to educate the displaced students. 

• The Department proposed up to $1.9 billion in funding to school districts, including charter 

schools, that enrolled at least 10 displaced children. This targeted funding would reimburse 

districts at a maximum annual payment of $7,500 per child for the unexpected cost of educating 

these displaced children for the SY 2005-06. The Department offered charter schools the 

opportunity to request statutory and regulatory waivers of various requirements to assist them in 

serving displaced students. We also identified $20.9 million in FY 2005 Charter School funds and 

made these funds available to meet the immediate needs of states affected by Hurricanes 

Katrina and Rita. (See Key Policy Letters signed in September 2005.) 

• The Department proposed up to $488 million in funding for children enrolled in private 

schools, with a maximum annual payment of $7,500 per child. 

• Colleges and universities were encouraged to admit students from affected institutions in a 

manner that permits them to receive federal student aid. Under the Department’s proposal, 

postsecondary institutions enrolling displaced students would receive $1,000 for each displaced 

student. To help colleges and universities in severely damaged areas to resume operations, the 

Department proposed that these institutions be allowed to retain student aid already received for 

the new academic year. The Department proposed to forgive six months of interest on all student 

loans for borrowers in the severely impacted areas of Alabama, Louisiana and Mississippi. 

• Under the waiver authority in the Elementary and Secondary Education Act of 1965, the 

Department solicited and negotiated requests from affected areas for waivers of 

maintenance-of-effort and fiscal and administrative requirements. The Department provided 

help to states and school districts as they sought to manage the impacts of the hurricane on 

students, schools, and programs. 

• The Assistance for Individuals with Disabilities Affected by Hurricanes Katrina and Rita Act of 

2005 became law on September 30, granting the Department authority to permit hurricaneaffected Gulf Coast states access to $25.9 million in federal funds for vocational rehabilitation 

services without the states having to provide matching funds. These services may include 

education, training, assistive technology or various supports necessary for employment of 

individuals with disabilities affected by the hurricanes. Additional support for children and 

adults with disabilities who evacuated because of the hurricanes is described in the 

Department’s fact sheet. 

• The Department’s Office of Safe and Drug-Free Schools (OSDFS) committed $7 million for 

states affected by Hurricane Katrina: $2.75 million for Louisiana, $1.75 million for Mississippi, 

$1.75 million for Texas, and $750,000 for Alabama. Each state was contacted and provided 

with instructions on how to apply for funding and with an OSDFS contact to assist with the 

application process. On September 15, 2005, the Department sponsored a listening session 

on the health and welfare of children following Hurricane Katrina. The session included 

national experts in child trauma and mental health who provided input on children’s long- and 

short-term recovery issues. 
 15

Management’s Discussion and Analysis 

U.S. Department of Education FY 2005 Performance and Accountability Report

Elementary/Secondary and Postsecondary Education Benefit From Public 

Revenues 

Elementary and Secondary Education Financing. The public revenue that supports public 

school education can be assessed in two ways: by measuring the level of public investment per 

student and by measuring the level of public investment in relation to the total value of goods and 

services produced in the domestic economy. In the elementary and secondary graph below, local, 

state, and federal fiscal support are summed and equal the level of public investment. The first 

measure in the graph shows the average level of public resources devoted to the education of each 

public school student; the second measure represents public revenue for education as a percentage 

of the gross domestic product (GDP). 

Public revenue per student at the elementary and secondary levels generally increased between 

the SY 1969-70 and SY 2001-02 school years in constant dollars. The general increases in revenue 

per student over recent decades took place in both periods of declining enrollment and periods of 

rising enrollment. While public revenues per student increased substantially from SY 1969-70 to 

SY 2001-02 (109 percent), public revenue as a percentage of GDP did not. 

Indicators of Public Effort To Fund Elementary and Secondary Education 

By Source of Funds From 1970–2002 

Source. U.S. Department of Education, National Center for Education Statistics, The Condition of Education 2005, 

p.95. The source provides extensive notes and supplemental tables that support the data included in the graph. 

Postsecondary Education Financing. Public investment in postsecondary public two- and fouryear degree granting institutions equals the sum of federal, state and local government 

appropriations and the sum of tuition and fees, private gifts and endowments, and government 

contracts. The graph below plots these two groups of revenues, labeling them “government 

appropriations per student” and “total education and general revenue per student,” and shows the 

level of funding per student for each revenue source from SY 1969-70 to SY 2000-01. One 

observation that can be drawn from the graph is that revenues per student from sources other 

than government appropriations, sources such as student tuition and fees, increased substantially 

more than did government appropriations per student during the time period represented in the 

graph. 
 16

U.S. Department of Education FY 2005 Performance and Accountability Report

Management’s Discussion and Analysis 

The second indicator in the graph shows government appropriations for postsecondary public twoand four-year degree granting institutions as a percentage of gross domestic product (GDP). In 

SY 2000-01 government appropriations were 0.64 percent of GDP, approximately the same 

percentage as in SY 1969-70 when the index was 0.66 percent of GDP. (Revenues are in constant 

SY 2001-02 dollars, adjusted using the Consumer Price Index.) 

Indicators of Public Effort To Fund Public, Degree-Granting, 

Postsecondary Institutions 

By Source of Funds From 1970–2001 

Source. U.S. Department of Education, National Center for Education Statistics, The Condition of Education 2005, 

p. 95. The source provides extensive notes and supplemental tables that support the data included in the graph. 
 17

Management’s Discussion and Analysis 

U.S. Department of Education FY 2005 Performance and Accountability Report

Minority Students Increase Participation in Public Education 

Analyzing trends in enrollment helps educators and policymakers gain insight into the scope of 

public education. Rising immigration (the immigrant population nearly tripled from 1970 to 2000) 

is one of the trends that had a role in boosting school enrollment and in changing the face of our 

schools. Another trend involves limited English proficient students. Between 1979 and 2003, the 

number of school-aged children (aged 5–17) who spoke a language other than English at home

grew from 3.8 million to 9.9 million. Enrollment numbers for limited English proficient students in 

kindergarten through grade 12 grew 65 percent between SY 1993–94 and SY 2003–04. (See table 

below.) Larger numbers of students with disabilities participating in public education and increases 

in the size of racial/ethnic groups of students have also contributed to growing enrollment numbers 

and broader diversity in elementary and secondary schools across the United States. (See graph 

below.) 

The Growing Numbers of Limited English Proficient Students: 

SY 1993–94 Through SY 2003–04 

School 

Year Total K–12 Enrollment 1,2,4

K–12 Growth 

Since 1993–94

(Percent) 

ELL Enrollment 1,3,4

ELL Growth Since 

1993–94 

(Percent) 

1993–94 45,443,389 0 3,037,922 0 

1994–95 47,745,835 5.07 3,184,696 4.83 

1995–96 47,582,665 4.71 3,228,799 6.28 

1996–97 46,714,980 2.80 3,452,073 13.63 

1997–98 46,023,969 1.28 3,470,268 14.23 

1998–99 46,153,266 1.56 3,540,673 16.55 

1999–00 47,356,089 4.21 4,416,580 45.38 

2000–01 47,665,483 4.89 4,584,947 50.92 

2001–02 48,296,777 6.28 4,750,920 56.39 

2002–03 49,478,583 8.88 5,044,361 66.05 

2003–04 49,619,117 9.19 5,014,437 65.06 

ELL = English language learner K–12 = kindergarten through 12th grade 

Sources. 

1

 U.S. Department of Education’s Survey of the States, Limited English Proficient Students and Available Educational 

Programs and Services, 1993–1994 through 2003–2004. 

2

 National Center for Education Statistics, Common Core of Data, 1998–1999 through 2003–2004. 

3

 FY 2002 Consolidated State Applications for State Grants under Title IX, Part C, § 9302 of the Elementary and Secondary 

Education Act. 

4

 SY 2003–04 data reported by states.
 18

U.S. Department of Education FY 2005 Performance and Accountability Report

Management’s Discussion and Analysis 

Minority Enrollment for Public Elementary and Secondary School Students 

By Region and Race/Ethnicity in 1972 and 2003 

Notes. Percentages of minority enrollment may not add to 100 because of rounding. For several categories, the cell size is so

small that it does not appear in the bar. Instead its size is designated by a small numeral to the right. 

# In one category (“other” in 1972), the cell size is so small that it rounds to zero. 

Source. U.S. Department of Education, National Center for Education Statistics, The Condition of Education 2005, p. 33.

Diversity and enrollment have also been increasing in our nation’s postsecondary institutions. In 

1980, 26 percent of 18- to 24-year-olds enrolled in college; in 2002, the proportion increased to 

38 percent. In particular, the percentage of racial/ethnic minorities has increased during this time 

period in two telling ways, both in terms of the percentage of total students enrolled in 

postsecondary institutions and in terms of the percentage of 18- to 24-year olds. 

• As a percentage of total postsecondary enrollment figures in 2002, racial/ethnic minorities 

comprised 29 percent of all students enrolled in postsecondary education. Specifically, 

American Indian students comprised 1 percent of all students enrolled in postsecondary 

institutions, Asian/Pacific Islander students comprised 6 percent, black students comprised 

12 percent, and Hispanic students comprised 10 percent. 

• As a percentage of all 18- to 24-year-olds, minority enrollment has also increased. In 2003, 

42 percent of white, 32 percent of black, and 23 percent of Hispanic 18- to 24-year-olds were 

enrolled in degree-granting postsecondary institutions. (See the following graph.) 
 19

Management’s Discussion and Analysis 

U.S. Department of Education FY 2005 Performance and Accountability Report

Minority Enrollment of 18- to 24-Year-Olds for All Degree-Granting, 

 Postsecondary Institutions as a Percentage of All 18- to 24-Year-olds 

By Race/Ethnicity From 1970 to 2003

Note. Data in 1970 for White and Black enrollment include persons of Hispanic origin. Data are based upon sample surveys of the 

civilian noninstitutional population. Some data have been revised from previously published figures. 

Source. U.S. Department of Education, National Center for Education Statistics, Youth Indicators, 2005, p. 53.
 20

U.S. Department of Education FY 2005 Performance and Accountability Report

Management’s Discussion and Analysis 

Parental Information and Options 

Parents play an important role in supporting their child's educational needs, but they may 

encounter difficulties in finding school performance data and information on their child's 

educational progress. Recognizing this, Secretary of Education Margaret Spellings said, "I know it 

isn't always easy, especially with all the educational acronyms like AYP, HQT and SES flying 

around. We need to help families make sense of it all. That's why No Child Left Behind requires 

schools to regularly reach out to parents." 

The Department provides parents with easy-to-understand information. On our Department Web 

site, we feature information for parents to help them make the best decisions for their child's 

future. For parents with limited English proficient children, the OELA Summit III Parent 

Involvement Toolkit is available. We also provide information for parents who want to better 

understand the parental involvement and information provisions of No Child Left Behind, such as 

supplemental educational services, charter schools, and other school choice options. 

One key parental information requirement established by No Child Left Behind is the mandatory 

distribution of local school report cards to parents. No Child Left Behind requires schools that 

receive federal funds to disseminate to parents a local report card with annual information on 

school and district academic performance. The report cards must describe aggregate student 

performance data to inform parents which schools have been identified as needing improvement, 

corrective action, or restructuring. From this information, parents can tell if they are eligible to 

exercise the school choice and supplemental educational services options available under No Child 

Left Behind for parents of children in underperforming schools. 
 21

Management’s Discussion and Analysis 

U.S. Department of Education FY 2005 Performance and Accountability Report

Department at a Glance 

Organization and History 

The federal government has taken an active role in education since 1867, when its duties 

encompassed statistical collection and reporting, but the Cabinet-level Department of Education 

was created only 25 years ago, in May 1980. By that time, major legislation had been passed that 

channeled federal support to improve the quality of higher education and access thereto via 

student financial aid; to strengthen mathematics, science, and vocational education; to provide 

supplemental resources to improve learning for low-income students and students with disabilities 

in elementary and secondary schools; and to enforce a variety of laws that protect civil rights. 

During the Department’s quarter century, the Elementary and Secondary Education Act of 1965

has been transformed, such that the provision of federal funds to America’s poorest schools is 

coupled with an insistence on measurable improvement in student performance. The No Child Left 

Behind Act of 2001, which is the most recent amendment to the 1965 act, accounts for more than 

43 percent of the Department’s FY 2005 discretionary spending. This commitment requires our 

careful oversight to ensure that No Child Left Behind’s provisions result in educational 

achievement. Under No Child Left Behind and other education laws, we manage 154 programs that 

provide federal support for educational research and instructional support for students and 

teachers, and we are accountable for assessing and improving the performance of these programs. 

We strive to achieve these results with the smallest workforce of the 16 Cabinet-level departments, 

fewer than 4,400 full-time-equivalent staff who manage nearly $60 billion in annual discretionary 

funds and oversee a student financial loan portfolio exceeding $400 billion. To prepare for these 

challenges in the Department’s second quarter century, Secretary Spellings announced a new 

coordinating structure—one that better focuses our resources on assisting our educational partners 

and emphasizes tangible results as the paramount yardstick of our success. Among the major 

changes, the Deputy Secretary oversees all K–12 education policy and the Under Secretary directs 

all higher and adult education policy activities. To enhance external relations and coordinate policy 

initiatives across the agency, the Department has created the new Office of Communications and 

Outreach and the new Office of Planning, Evaluation, and Policy Development, each led by an 

assistant secretary reporting directly to the Secretary. These combined efforts will result in a 

Department of Education that is increasingly responsive to the needs of states, districts, schools, 

teachers, students, institutions of higher education, and other stakeholders in fostering academic 

achievement. 

The Department recognizes the primary role of states and school districts in providing a quality 

education, employing highly qualified teachers and administrators, and establishing challenging 

content and achievement standards. Our role is to supplement these state and local efforts with 

targeted resources, expertise, and leadership that optimize education opportunities for all 

Americans. 
 22

U.S. Department of Education FY 2005 Performance and Accountability Report

Management’s Discussion and Analysis 

Department of Education Coordinating Structure 

For FY 2005 
 23

Management’s Discussion and Analysis 

U.S. Department of Education FY 2005 Performance and Accountability Report

Department at a Glance 

Integration of Performance and Financial Information 

Focusing on results and accountability with performance monitoring and financial reporting is a 

sound practice for increasing the Department’s productivity. One critical gauge of how well 

taxpayer dollars are being used is for an agency to link the performance of its programs to 

subsequent budget determinations. Not long ago, we could discern such a linkage for only a few 

federal programs, but the absence of performance metrics at the program level is now clearly the 

exception rather than the rule. Furthermore, if the conventional wisdom that what gets measured 

gets done is proven true, the increasing use of rigorous performance measurement will help to 

bring about the positive results we seek. 

The Department constantly seeks to strengthen the linkage between financial investments and 

program quality. We do this not only through the development of program measures, but also 

through various reporting mechanisms and effective budget management. This report is one 

example of how we provide comprehensive, accurate information to the American public in a timely 

manner. The following are some other major activities related to budget and performance 

integration. 

Program Assessment Rating Tool. Since 2002, the Office of Management and Budget (OMB) 

has asked federal agencies to systematically assess the quality of government programs using the 

Program Assessment Rating Tool (PART). Using this consistent mechanism, OMB works with 

federal agencies to judge the effectiveness of programs with regard to their stated purpose, 

strategic planning, internal management, and results and accountability. Although primarily a 

diagnostic tool for programs, PART reviews provide critical information that can be used to 

establish funding priorities for budget planning and development. Following the PART process, 

programs take follow-up action based on the recommendations from the PART. 

By September 2005, the Department had completed PART reviews on 56 of our programs. This 

Performance and Accountability Report includes detailed information on the programs evaluated 

through PART in preparation for the Department’s FY 2005 budget submission. The Performance 

Details section shows ratings, recommendations, and the changes these programs have 

implemented during FY 2005 to improve their effectiveness. See the PART section under each goal 

chapter for this information. By 2007, most Department programs will have undergone PART 

evaluations. 

Integrating Performance Plan into Budget. Beginning with our FY 2005 budget, the 

Department has combined our annual performance plan and our annual budget to create an annual 

performance budget, consistent with OMB guidance for facilitating budget and performance 

integration. Additionally, effective FY 2005, the Department shifted from the use of strategic 

measures that reported the national status of education to a focus on program-related measures to 

more accurately reflect departmental objectives. We accomplished this by selecting key existing 

program measures as representative of our strategic goals and discontinuing most of the prior 

national status measures. We continue also to report on the full set of program measures as found 

in each program’s annual plan under the Government Performance and Results Act. 
 24

U.S. Department of Education FY 2005 Performance and Accountability Report

Management’s Discussion and Analysis 

Crosswalk of Appropriations and Net Cost to Strategic Plan Goals. This Fiscal Year 2005

Performance and Accountability Report continues to emphasize the alignment of financial data and 

performance priorities by again identifying in the Performance Details section both appropriations 

and net costs for the goals of the Strategic Plan. Each Department program is aligned with the 

same strategic goal as in the past two years, enabling both our appropriations and our estimated 

net costs to clearly reflect the discrete priorities of the Strategic Plan. The Department considers 

Goal 1, Creating a Culture of Achievement, to be a high-level synopsis of the four pillars on which 

educational excellence is established; as a result, we do not assign specific programs to that goal. 

Goals 2 through 5 are sharper directives that guide subdivisions of the Department to carry out the 

vision of the four pillars, and our programs are therefore assigned to one of these goals. Goal 6, 

Establishing Management Excellence, emphasizes the administrative and oversight responsibilities 

that support our programmatic mission. See the program summary section of each goal chapter 

for this information. 

The Department's Statement of Net Cost provides a crosswalk between accounting methods that 

predate No Child Left Behind and our Strategic Plan goals. In the Statement of Net Cost, 

Program A (Enhancement of Postsecondary and Adult Education) aligns with Goal 5. Program B 

(Student Achievement, Culture of Achievement, and Safe Schools) aligns with Goals 1, 2 and 3. 

Program C (Transformation of Education) represents Goal 4. Program D (Special Education and 

Program Execution) spans Goals 2 through 5. The Financial Details section of this Performance and 

Accountability Report analyzes this crosswalk. In the event that our Strategic Plan were to be 

significantly amended, the accounting crosswalk will provide continuity in linking program 

emphases to reliable financial reporting. 

Challenges Linking Performance to Funding. The Department’s challenges of linking 

performance results, expenditures, and budget are complicated by the fact that we accomplish our 

objectives indirectly, with more than 98 percent of our funding going out in grants and loans, and 

further complicated by the schedule of funding for these programs. 

In the Department, only a portion of a given fiscal year’s appropriations are actually available to 

state, school, organization, and student recipients during the fiscal year in which they are 

appropriated; the remainder become available at or near the end of the appropriation year or in 

the subsequent year and remain available to recipients for varying lengths of time, as long as 

27 months or more. Thus, linking appropriated funds and program results for a particular fiscal 

year is not only complex, but also different for different programs. 

For example, large formula programs, such as Title I of the Elementary and Secondary Education 

Act and Grants to States under the Individuals with Disabilities Education Act, may receive both 

“forward-funded” and “advance” appropriations. Forward-funded amounts made available under 

the FY 2005 appropriations for these programs were not available for award until July 2005, nine 

months after the beginning of FY 2005. Advance amounts made available under the FY 2005 

appropriations were not available until October 2005 (at the beginning of FY 2006). Both forwardfunded and advance amounts made available in the FY 2005 appropriations are intended for use 

primarily during SY 2005–06, and these funds can be carried over for obligation at the state and 

local levels through the end of September 2007. 

Funds for competitive grant programs are generally available when appropriations are passed by 

the Congress. However, the processes required for conducting the grant competitions often result 
 25

Management’s Discussion and Analysis 

U.S. Department of Education FY 2005 Performance and Accountability Report

in awarding grants near the end of the fiscal year, with funding available to grantees for additional 

years. 

Thus, the results we see during FY 2005, which are to be measured for this report, are not solely 

the results of actions taken with FY 2005 funds, but rather the combination of funds from FY 2003, 

FY 2004, and FY 2005. Furthermore, the actual results of education programs are often not 

apparent until long after the funds are expended. For example, a program to support middle 

school students in ways that will increase the likelihood that they go to college has approximately a 

six-year lag time for measuring initial results. 

Although we cannot isolate program results and link them directly to a fiscal year’s funding, 

performance during a single program year serves as a proxy, because most of our programs are 

ongoing. Along with performance results for each program, this report shows the amount of funds 

appropriated for FY 2005 and the amount of funds expended in FY 2005. See pp. 103, 126, 132, 

159, and 190 for these tables. 
 26

U.S. Department of Education FY 2005 Performance and Accountability Report

Management’s Discussion and Analysis 

Department at a Glance 

Scorecard on the President’s Management Agenda

Under the President’s Management Agenda, the Executive Branch Management Scorecard tracks how 

well the departments and major agencies are executing five governmentwide initiatives and other 

program-specific initiatives. The scorecard employs a simple grading system common today in wellrun businesses: green for success, yellow for mixed results, and red for unsatisfactory. 

Status. Scores for "status" are based on the scorecard standards for success, developed by the 

President's Management Council and discussed with experts throughout government and academe, 

including the National Academy of Public Administration. They have subsequently been refined with 

continued experience implementing the President’s Management Agenda. Under each of these 

standards, an agency is "green" or "yellow" if it meets all of the standards for success listed in the 

respective column; it is "red" if it has any one of a number of serious flaws listed in the red column. 

Progress. The Office of Management and Budget assesses agency "progress" on a case-by-case 

basis against the deliverables and time lines established for the five initiatives that are agreed upon 

with each agency as follows: green means implementation is proceeding according to plans agreed 

upon with the agencies; yellow means there is some slippage or other issues requiring adjustment 

by the agency in order to achieve the initiative objectives on a timely basis; and red means the 

initiative is in serious jeopardy and is unlikely to realize objectives absent significant management 

intervention. 

Department of Education Results. During FY 2005, the Department made significant 

improvements on the scorecard: 

• We achieved the goals of the initiative of elimination of fraud and error in the student aid 

programs and deficiencies in financial management. 

• We moved from yellow to green on status for competitive sourcing and faith-based and 

community initiatives and on progress for e-government and eliminating improper payments. 

President’s Management Agenda

FY 2005 Scorecard 

Target Area Q1 Q2 Q3 Q4 

Human Capital Status 

Progress 

Y 

G 

Y 

G 

Y 

G 

Y 

G 

Competitive Sourcing Status 

Progress 

Y 

G 

Y 

G 

Y 

G 

G 

G 

Financial Performance Status 

Progress 

G 

G 

G 

G 

G 

G 

G 

G 

E-government Status 

Progress 

Y 

Y 

Y 

G 

Y 

G 

Y 

Governmentwide 

G 

Initiatives 

Budget-Performance Integration Status 

Progress 

Y 

G 

Y 

G 

Y 

G 

Y 

G 

Faith-Based and Community Initiatives Status 

Progress 

Y 

G 

Y 

G 

Y 

G 

G 

G 

Eliminating Improper Payments Status 

Progress 

R 

NA 

R 

Y 

R 

G 

R 

G 

Program 

Initiatives 

Elimination of Fraud and Error in 

Student Aid Programs and Deficiencies 

in Financial Management 

Status 

Progress 

Y 

G 

G 

G 

Goals 

Achieved 

G = green Y = yellow R = red NA = not applicable 
 27

Management’s Discussion and Analysis 

U.S. Department of Education FY 2005 Performance and Accountability Report

Performance Highlights 

The Department’s 2002–2007 Strategic Plan built upon the foundation of the No Child Left Behind

Act to chart a course for fundamental improvement in American education and accountability in 

managing our own affairs. The six goals of our strategic plan formed the basis of our FY 2005 

annual performance plan, which was incorporated into our Department’s FY 2005 Performance 

Budget. These goals encapsulate the major tasks that we must accomplish to fulfill our mission. 

Every day, we focus on the following: 

• Goal 1: Create a culture of achievement. (See p. 28.) 

• Goal 2: Improve student achievement. (See p. 31.) 

• Goal 3: Develop safe and drug-free schools. (See p. 33.) 

• Goal 4: Transform education into an evidence-based field. (See p. 36.) 

• Goal 5: Enhance the quality of and access to postsecondary and adult education. (See p. 39.) 

• Goal 6: Establish management excellence. (See p. 41.) 
 28

U.S. Department of Education FY 2005 Performance and Accountability Report

Management’s Discussion and Analysis 

Goal Overviews 

Goal 1: Create a Culture of Achievement 

The 40th anniversary celebration of the Elementary and Secondary Education Act of 1965 (ESEA)

calls to mind the language of that act: “the Congress hereby declares it to be the policy of the 

United States to provide financial assistance ... to local educational agencies serving areas with 

concentrations of children from low-income families ... .” The congressional mandate of 1965 has 

guided the federal role in elementary and secondary education for 40 years. The No Child Left 

Behind Act of 2001, which amended the ESEA, preserves the equal access tradition and couples it 

with accountability for results. The focus of Goal 1, creating a culture of achievement, derives from 

No Child Left Behind’s emphasis on accountability. 

Key Results for Goal 1 

• As a follow-up to Secretary Spellings’s 2005 announcement of a “more workable, sensible” 

approach to implementing No Child Left Behind, during the SY 2004–05 amendment cycle, 

the Department processed and approved requests from 46 states for amendments to their 

accountability systems. 

• State-level education leaders responded to a customer satisfaction survey on the 

Department’s products and services. The Department’s score of 63 on the American 

Customer Satisfaction Index is consistent with other federal grant-making agencies. 

Areas of Focus 

To improve future results, the Department accepted a recommendation from the National Board for 

Education Sciences, a 14-member advisory group to the Institute of Education Sciences, which is 

the Department’s primary research arm, that in FY 2006 we set as a priority developing systems 

for delivering research that policy-makers, educators, and the public can rely on in their quest for 

education interventions that work. Improving delivery and dissemination of evidence-based 

approaches will become a priority of the Department’s research action plan for FY 2006. 

The Department was unable to collect data in FY 2005 for our measure on whether schools have 

adopted evidence-based approaches to instruction and integrated them into the classroom; we are 

committed to collecting such data when more information is available to schools about a range of 

evidence-based approaches. 
 29

Management’s Discussion and Analysis 

U.S. Department of Education FY 2005 Performance and Accountability Report

Goal 1: More About the First Key Result 

State Requests for Amendments to Accountability Systems 

Most Commonly Approved Amendments Number Approved 

Adjusting the AYP definition (on a short-term basis) to account for 

students with disabilities who may be assessed with a modified 

assessment (2 percent interim flexibility). 

31 

Changes in the additional academic indicator. 19 

Identifying districts for improvement only when they do not make AYP 

in the same subject for two consecutive years in all grade spans. 16 

Changes in the assessment system affecting AYP. 12 

Averaging proficiency results or participation rates across years. 9 

Raising the minimum subgroup size for students with limited English 

proficiency. 10 

Using a confidence interval of 75 percent under No Child Left Behind’s 

Safe Harbor provision. 7 

Use of an index to calculate AYP. 5 

Taking advantage of LEP flexibility. 7 

Revising annual AYP targets to increase in 10 equal increments 

through 2014. 3 

Revising system of rewards and sanctions. 3 

Use of a new data management system. 3 

Using a confidence interval of 99 percent in calculating AYP. 4 

AYP = Adequate yearly progress 

LEP = Limited English proficient 
 30

U.S. Department of Education FY 2005 Performance and Accountability Report

Management’s Discussion and Analysis 

Goal 1: More About the Second Key Result 

Department of Education American Customer Satisfaction Index (ACSI) Score: 63 

Satisfaction as measured by the ACSI was 63. This is the aggregate score for all 

respondents. For a point of reference, the CFI Group that conducted this survey has found 

satisfaction scores on other federal grantee satisfaction surveys typically to be in the low 60s. 

Grantee Disaggregated ACSI Scores 

 Results on Department of Education Grantee Satisfaction Survey 

By Grantee Group

Lead Agency Early Intervention Directors (OSERS/OSEP) 68.1 

Title III State Directors (OELA) 67.8 

State Title I Directors (OESE) 63.3 

State Directors of Adult Education and Literacy (OVAE) 63.0 

State Educational Technology Directors (OESE) 62.4 

State Directors of Special Education (OSERS/OSEP) 61.8 

Career and Technical Education State Directors (OVAE) 61.5 

EDEN/PBDMI State Coordinators (OUS) 59.7 

Chief State School Officers 57.3 

OSERS = Office of Special Education and Rehabilitative Services 

OSEP = Office of Special Education Programs 

OELA = Office of English Language Acquisition 

OVAE = Office of Vocational and Adult Education 

OUS = Office of the Under Secretary 

EDEN = Education Data Exchange Network 

PBDMI = Performance-Based Data Management Initiative 

ACSI Questions 

• How satisfied are you with ED’s products and services? 

• Rate the extent to which the products and services offered by ED have fallen short of 

or exceeded your expectations. 

• Now forget for a moment about the products and services offered by ED, and imagine 

the ideal products and services. How well do you think ED compares with that ideal? 

ACSI Methodology 

The ACSI survey measures satisfaction and the key drivers of satisfaction using the 

methodology of the American Customer Satisfaction Index. The ACSI is the national 

indicator of customer evaluations of the quality of goods and services available to U.S. 

residents. ACSI has measured more than 100 programs of federal government agencies 

since 1999. 
 31

Management’s Discussion and Analysis 

U.S. Department of Education FY 2005 Performance and Accountability Report

Goal Overviews 

Goal 2: Improve Student Achievement 

Along with local school teachers and parents, state education leaders, 

business leaders, everyday U.S. citizens, and students themselves, the 

Department’s goal is to improve educational achievement. The No 

Child Left Behind Act sets as a national goal that all students achieve 

proficiency in reading and mathematics by SY 2013–14. Goal 2 

focuses on improvements in early reading instruction, middle school mathematics instruction, high 

school proficiency, and teacher quality. 

Key Results for Goal 2 

• Nine-year-old students’ average reading scores on the 2004 National Assessment of 

Educational Progress Long-Term Trend Assessment were higher than in any previous 

assessment year; Hispanic, black, and white 9-year-old students’ average reading scores 

increased between 1999 and 2004 by 12, 15, and 5 points, respectively. 

• The Department has committed to making available to the public state high school graduation 

rates calculated by a standard measure with state-submitted graduation rates. Standardizing 

graduation rates is the first step in data-driven high school reform. 

Area of Focus 

In 2004 and 2005, the Department clearly stated that we are committed to high school reform. 

We held two national summits in as many years to support the Preparing America’s Future High 

School Initiative. But high school reform encounters seemingly intractable problems: high school 

students say they are unengaged and unchallenged in school; in some groups, as few as half of 

students graduate; and graduates sometimes find themselves unprepared when they go to college. 

High school reform remains an important area of focus for the Department in 2006 as President 

Bush requested $1.9 billion for high school reform in his FY 2006 budget proposal. 

Programmatically, the Department is proposing High School Intervention, a new formula grant 

program designed to help local educational agencies meet the needs of at-risk high school 

students. Additionally, the budget proposal would increase support for Striving Readers, support 

the development of assessments for all high school students in reading and mathematics, 

accelerate mathematics learning through competitive grants under the Mathematics and Science 

Partnerships program, increase student access to the Advanced Placement program, and increase 

the number of states implementing the State Scholars program. 

Other 

Goals, 

51.6%

Goal 2, 

48.4%
 32

U.S. Department of Education FY 2005 Performance and Accountability Report

Management’s Discussion and Analysis 

Goal 2: More About the First Key Result 

Trends in Average Reading Scale Scores on the 

NAEP Long-Term Trend Assessment 

By Age From 1971 to 2004 

Year 

* Significantly different from 2004. 

Source. U.S. Department of Education, National Center for Education Statistics, National Assessment of Educational Progress 

(NAEP), 1971–2004 Long-Term Trend Reading Assessments.
 33

Management’s Discussion and Analysis 

U.S. Department of Education FY 2005 Performance and Accountability Report

Goal Overviews 

Goal 3: Develop Safe and Drug-Free Schools 

To meet the universal student achievement goals of No Child Left 

Behind, schools must be safe and drug free. Without a safe and 

orderly learning environment, teachers cannot teach, and students 

have difficulty learning. Given the myriad causes of violence and drug 

prevalence in schools, educators must consider policies and 

approaches to ensure a supportive learning environment for every 

student. The Department administers programs that provide financial help and information to 

states, districts, and schools for implementing effective programs and strategies for the prevention 

of substance abuse and violence. 

Key Results for Goal 3 

• Recent data from two ongoing comprehensive surveys, the Youth Risk Surveillance System 

and Monitoring the Future, show overall decreases in reported marijuana use despite little 

change in the reported availability of the drug. The Monitoring the Future survey also 

reported increased perceived drug use risk and disapproval among 8th-, 10th-, and 12thgrade students from 2002 to 2004. See graph for disapproval of marijuana use. 

• Between 1993 and 2003, the percentage of students in grades 9–12 who reported being in a 

fight on school property declined from 16 percent to 13 percent. 

Areas of Focus 

Because drug use and violence in schools is often influenced by health-related behaviors and 

external societal risk factors, each school requires specific information to implement prevention 

programs that address the health and academic needs of students. The Department has made 

several long-term investments to provide detailed information on drug use and violence to inform 

the implementation of prevention programs. 

• Grantees under the Department's Grants to States to Improve Management of Drug and 

Violence Prevention Programs are expanding their capacity to collect, analyze, and use youth 

drug use and violence data to improve the quality of drug and violence prevention programs 

administered in the grantee's state. 

• The Department’s What Works Clearinghouse will conduct evidence-based reviews of violence 

prevention interventions in schools. Detailed information on the study topic, Interventions to 

Reduce Delinquent, Disorderly, and Violent Behavior in Middle and High Schools, is available 

on the What Works Clearinghouse Web site. 

Goal 3, 

1.2% Other 

Goals, 

98.8%
 34

U.S. Department of Education FY 2005 Performance and Accountability Report

Management’s Discussion and Analysis 

Goal 3: More About the First Key Result 

Trends in the Disapproval of Marijuana Use 

By Grade From 1994 to 2004 

70

76

82

88

94

100

1994 1996 1998 2000 2002 2004

Year

Percent

12th Graders

10th Graders

8th Graders

Source. National Institutes of Health, National Institute on Drug Abuse, Monitoring the Future: Overview of Key Findings 2004, 

tables 8-4, 8-5, 8-6.
 35

Management’s Discussion and Analysis 

U.S. Department of Education FY 2005 Performance and Accountability Report

Goal 3: More About the Second Key Result 

Trends in Physical Fights on School Property 

From 1993 to 2003 

0

5

10

15

20

1993 1995 1997 1999 2001 2003

Year

Percent

Note. Data on physical fights include percentage of students who were in a physical fight on school property one or more times

during the past 12 months. 

Source. U.S. Department of Health and Human Services, Centers for Disease Control and Prevention, National Center for Chronic 

Disease Prevention and Health Promotion, Youth Risk Behavior Surveillance System: Youth Online Comprehensive Results, 2003.
 36

U.S. Department of Education FY 2005 Performance and Accountability Report

Management’s Discussion and Analysis 

Goal Overviews 

Goal 4: Transform Education Into an Evidence-Based Field 

"Data is our best management tool,” said Secretary of Education Margaret 

Spellings. In highlighting the importance of relevant research to the 

Department of Education, she continued, “I often say that what gets 

measured, gets done. If we know the contours of the problem, and who is 

affected, we can put forward a solution. Teachers can adjust lesson plans. 

Administrators can evaluate curricula. Data can inform decisionmaking.” 

During the past year, the Department continued to ensure the highest quality and relevance of 

research funded and conducted by the Department, so that ultimately the development and 

dissemination of research results informs and improves teacher instruction and student 

achievement. 

Key Results for Goal 4 

• The National Center for Special Education Research was launched in 2005 with the President's 

signing of the reauthorization of the Individuals with Disabilities Education Act. The center 

supports a program of research that addresses a wide range of issues in special education. 

In 2005, the center initiated a national study on alternate assessments. In addition to this 

evaluation, the center announced 10 special education research competitions. 

• The Department’s What Works Clearinghouse published a review of the available research on 

the effectiveness of curriculum-based interventions for improving mathematics achievement 

for middle school students. From a systematic review of published and unpublished research, 

the What Works Clearinghouse identified 10 studies that met the clearinghouse's standards of 

evidence. These studies examined the effects of five middle school mathematics 

interventions. 

Areas of Focus 

• In providing information on the condition and progress of education in the United States, the 

Department is committed to increasing the timeliness and quality of data collection and 

reporting. With timely and relevant results, the Department will ensure that practitioners, 

policymakers, and the public can promptly translate research results into educational practice 

and improvement. 

• The What Works Clearinghouse topic reviews, which identify studies of the effectiveness of 

educational interventions will be expanded. The Department has begun reviewing studies in 

six new areas: beginning reading, character education, early childhood education, elementary 

school mathematics, English language learners, and dropout prevention. 

Other 

Goals, 

99.4%

Goal 4, 

0.6%
 37

Management’s Discussion and Analysis 

U.S. Department of Education FY 2005 Performance and Accountability Report

 Goal 4: More About the First Key Result 

The National Center for Special Education Research 

The National Center for Special Education Research, one of four centers within the 

Department’s Institute of Education Sciences, supports a comprehensive research program to 

promote the highest quality and rigor in research on special education and related services, and 

to address the full range of issues facing children with disabilities, parents of children with 

disabilities, school personnel, and others. 

The authorization for the National Center for Special Education Research occurred on 

December 3, 2004, with the President's signing of the reauthorization of the Individuals with 

Disabilities Education Act. The Individuals with Disabilities Education Improvement Act of 2004

transferred the responsibilities for research in special education within the Department from our 

Office of Special Education and Rehabilitative Services to our Institute of Education Sciences. 

Highlights of the center’s research initiatives include the following: 

• A national study on alternate assessments, initiated in 2005, that will accomplish the 

following: 

o Produce assessment profiles of all states and a national summary profile. 

o Describe the characteristics of alternate assessments, processes of student 

placement, alignment with content standards, and uses of data; the state and local 

processes that facilitate or impede the implementation of alternate assessments, 

alternate achievement standards, and modified academic achievement standards; 

and consequences for students with disabilities. 

o Conduct a quantitative analysis of the relationships between variables in alternate 

assessment systems and student outcomes. 

• Announcement of 10 special education research competitions for 2006, designed to 

address assessment, early intervention, teacher quality in reading and writing, teacher 

quality in mathematics and science, language and vocabulary development, individualized 

education programs, behavior problems, and secondary and postsecondary transitions. 
 38

U.S. Department of Education FY 2005 Performance and Accountability Report

Management’s Discussion and Analysis 

Goal 4: More About the Second Key Result 

What Works Clearinghouse Review of Research on Middle School Math Curricula

The What Works Clearinghouse review examined available evidence from research conducted since 1983 on the 

effectiveness of curriculum-based interventions for improving mathematics achievement for middle school 

students. From a systematic search of published and unpublished research, the clearinghouse identified 10 

studies of the effects of five middle school math interventions that met clearinghouse standards of evidence. 

4

6

66

33

3

Quasi-experimental 

design studies or 

randomized controlled 

trials with notable flaws 

Potentially relevant studies 

Randomized controlled trials,

well-designed and

implemented studies

Source. U.S. Department of Education, Institute of Education Sciences, What Works Clearinghouse, Middle School Math Curricula 

Topic Report, 2005. 
 39

Management’s Discussion and Analysis 

U.S. Department of Education FY 2005 Performance and Accountability Report

Goal Overviews 

Goal 5: Enhance the Quality of and Access to 

Postsecondary and Adult Education 

"We have a responsibility to make sure our higher education system 

continues to meet our nation's needs for an educated and competitive 

workforce in the 21st century. ... Throughout our history, we've 

answered the call to extend the promise of higher education to more 

Americans." Secretary Margaret Spellings’s remarks reinforce the 

Department’s focused efforts to enhance the quality of and access to postsecondary and adult 

education. Postsecondary and adult education continues to provide a means by which Americans 

can acquire literacy skills, prepare for jobs, and become better-informed citizens. 

A recent national survey commissioned by the Job Shadow Coalition shows that 70 percent of 

teenagers believe that they need higher education to achieve the American dream. Considering 

that more than two-thirds of new jobs require some postsecondary education, the Department’s 

achievements in improving postsecondary and adult education in America benefit students and 

encourage successful life outcomes. 

Key results for Goal 5 

• Postsecondary completion rates rose significantly from 1970 to 2004, indicating increased 

access to and persistence in pursuing a postsecondary education. While figures show that 

white adults aged 25–29 are more likely to have earned a bachelor’s degree or higher than 

minority adults, trends for black and Hispanic adults also show an increase in degree 

attainment. 

• Fiscal management has improved in the Department’s postsecondary aid programs. In 2005, 

our student financial aid programs were removed from the Government Accountability Office 

list of high-risk programs. 

Areas of Focus 

In 2005, we formed the Secretary of Education’s Commission on the Future of Higher Education to 

focus on the improvement of the nation’s postsecondary education system. The new commission is 

charged with developing a comprehensive national strategy for postsecondary education to meet 

the needs of America's diverse population and to address the economic and workforce needs of the 

country's future. 

The Department began the first phase of a pilot test of the use of efficiency measures to improve 

program performance in the TRIO Student Support Services program. The results of analyses are 

expected to provide project directors with information that will guide projects and the program 

toward adopting best practices and making other program improvements. Other changes in TRIO 

include better integration across TRIO programs to provide continued services to participants as 

they transition from high school to college and beyond. 

Goal 5, 

49.1%

Other 

Goals, 

50.9%
 40

U.S. Department of Education FY 2005 Performance and Accountability Report

Management’s Discussion and Analysis 

Goal 5: More About the First Key Result 

College Completion for 25- to 29-Year-Olds 

For 1970 and 2004 

16%

29%

0

5

10

15

20

25

30

1970 2004

Percent

Source. U.S. Department of Education, National Center for Education Statistics, Youth Indicators, 2005, p. 49. 
 41

Management’s Discussion and Analysis 

U.S. Department of Education FY 2005 Performance and Accountability Report

Goal Overviews 

Goal 6: Establish Management Excellence 

To make high-quality education a reality for as many Americans as 

possible, the Department must deploy our financial and intellectual 

resources for maximum impact. Achieving such an impact requires 

continued demonstration of superior fiscal management, commitment 

to developing highly skilled Department staff, and constant 

improvements in program performance. These are the keys to 

establishing management excellence. 

The Department has earned the public’s confidence with four consecutive clean financial statement 

opinions, strong customer satisfaction in student financial aid services, improved risk management 

to reduce improper payments in major programs, and the development of performance-oriented 

criteria to reward our employees. The Department has also made significant strides in improving 

program performance and has played a leading role in federal initiatives to improve electronic 

access to government services and grant opportunities. 

Key Results for Goal 6 

• The Department earned the prestigious President’s Quality Award for improved financial 

performance. 

• Department efforts to encourage repayment of Federal Direct Student Loans and Federal 

Family Education Loans helped the two loan programs realize the lowest cohort default rate in 

the Department’s history. 

Areas of Focus 

In 2006, we will increase the number of our programs that demonstrate proven effectiveness, 

encourage novice applicants to apply in larger numbers to our discretionary grant competitions, 

and sustain our previous accomplishments for another year. 

Goal 6, 

0.8% Other 

Goals, 

99.2%
 42

U.S. Department of Education FY 2005 Performance and Accountability Report

Management’s Discussion and Analysis 

Financial Highlights 

The Department’s strategic plan commits us to management excellence and overall financial 

improvement in concert with an increased focus on academic performance. The Department 

earned a fourth consecutive unqualified audit opinion from independent auditors. American 

taxpayers and other readers of our financial statements can rely on the information presented, 

accurately informed of the status of the Department’s financial position and the stewardship of our 

assets. 

Solid management controls sustain an unqualified audit opinion and ensure effective stewardship of 

assets. The Department recognizes the need for accountability, and management supports the 

framework necessary to derive superior results. 

The Department continues to review existing internal controls and implement changes where 

necessary. In accordance with Office of Management and Budget (OMB) Circular No. A-123, 

Management’s Responsibility for Internal Control, the Department will be enhancing the review, 

assessment, and testing of our internal controls in fiscal year 2006. 

• Lines of Business (See p. 43.) 

• Financial Position (See p. 44.) 

• Future Trends (See p. 46.) 

• Management Challenges Overview (See p. 49.) 

• Improper Payments Overview (See p. 52.) 

• Management Assurance (See p. 54.) 
 43

U.S. Department of Education FY 2005 Performance and Accountability Report

Management’s Discussion and Analysis 

Lines of Business 

The Department managed a budget of $73 billion in fiscal year (FY) 2005, of which 52 percent 

supported elementary and secondary programs and grants. Postsecondary grants and 

administration of student financial assistance accounted for 41 percent, including programs that 

helped nearly 9.4 million students and their parents to better afford higher education during FY 

2005. An additional 5 percent went toward other programs and grants encompassing research, 

development, and dissemination, as well as rehabilitation services. The remaining 2 percent of our 

appropriations was directed toward administrative expenditures. 

Nearly all our appropriations, 98 percent in FY 2005, support three primary lines of business—

grants, administration of guaranteed loans, and administration of direct loans. The original 

principal balances of the Federal Family Education Loans and Federal Direct Student loans, which 

comprise a large share of federal student financial assistance, are funded by commercial bank 

guarantees and treasury borrowings. 

Grants 

A significant part of the Department’s budget is used to support ongoing programs that were 

reauthorized or created by the implementation of No Child Left Behind. This support is provided to 

state and local governments, schools, individuals, and others that have an interest in educating the 

American public. 

The Department’s three largest grant programs, Title I grants for elementary and secondary 

education, Pell grants for postsecondary financial aid, and Special Education Grants to States under 

the Individuals with Disabilities Education Act, each exceeded $10 billion in appropriations for 

FY 2005. 

Guaranteed Loans 

The Federal Family Education Loan Program makes loan capital from more than 3,200 private 

lenders available to students and their families. Through 35 active state and private nonprofit 

Guaranty Agencies, the Department administers the federal loan guarantee program to protect 

lenders against losses related to borrower default. As of the end of September 2005, the total 

principal balance of outstanding guaranteed loans held by lenders was approximately $289 billion, 

with the government’s estimated maximum exposure being $288 billion. 

Direct Loans 

The Federal Direct Student Loan Program, created by the Student Loan Reform Act of 1993, 

provides an alternative method for delivering assistance to U.S. students that uses Treasury funds 

to provide loan capital directly to schools. The schools then disburse loan funds to students. As of 

September 30, 2005, the value of the Department’s direct loan portfolio is $95.7 billion. 
 44

U.S. Department of Education FY 2005 Performance and Accountability Report

Management’s Discussion and Analysis 

$49.8

$58.8 $63.6

$75.2

$0

$10

$20

$30

$40

$50

$60

$70

$80

Billions

FY02 FY03 FY04 FY05

Net Cost by Fiscal Year

$145.4

$110.1

$157.3

$117.8

$172.6

$128.3

$186.6

$143.7

$0

$50

$100

$150

$200

Billions

FY02 FY03 FY04 FY05

Total Assets vs Total Liabilities

Total Assets Total Liabilities

Financial Position 

The Department’s financial statements are prepared in accordance with established federal 

accounting standards and are audited by the independent accounting firm of Ernst & Young, LLP. 

FY 2005 financial statements and footnotes appear on pp. 207–244. 

Balance Sheet 

The Balance Sheet presents, as of a specific point in time, the economic value of assets and 

liabilities retained or managed by the Department. The difference between assets and liabilities 

represents the net position of the Department. 

The Balance Sheet displayed on p. 207 reflects total assets of 

$186.6 billion, an 8 percent increase over FY 2004. This 

increase is attributable to increased funding related to the 

continuing implementation of No Child Left Behind and the 

anticipated steady growth of student financial 

assistance programs. 

Intragovernmental liabilities constitute 77 percent of the 

Department’s total liabilities. Our intragovernmental 

liabilities consist mainly of Treasury debt, which is directly 

related to the Department’s focus on ensuring that funds are 

available for any student desiring a postsecondary education. 

Liabilities for Loan Guarantees increased by 31 percent, which is related to assumption changes for 

loan maturity term and consolidation loan volume. 

Several factors influenced the change in the Department’s Net Position in FY 2005. These include 

the timing of the execution of prior year subsidy re-estimates for federal student loan programs 

and the overall management of the Department’s capital structure. Net Position decreased by 

3 percent from FY 2004. 

Statement of Net Cost 

The Statement of Net Cost presents the components of the Department’s net cost, which is the 

gross cost incurred less any revenues earned from the Department’s activities. The Statement of 

Net Cost is presented to be consistent with the Department’s strategic goals, as directed by the 

President’s Management Agenda. The Department’s total program net costs, as reflected on the 

Statement of Net Cost, p. 208, are $75.2 billion, an 18 percent increase over FY 2004. 

The Enhancement of Postsecondary and Adult Education 

(Program A), which tracks with the Department’s funding 

for Strategic Goal 5, experienced a 26 percent increase in 

costs from FY 2004 largely due to assumption changes 

for loan maturity term and consolidation loan volume. 

Program B is representative of creating a culture of 

achievement, culture of student achievement and safe 

schools, tracking with Goals 1, 2, 3. Program C, the 

transformation of education aligns with Goal 4. Combined Programs B and C experienced a 
 45

U.S. Department of Education FY 2005 Performance and Accountability Report

Management’s Discussion and Analysis 

13 percent cost increase in FY 2005. This tracks with increased funding for these programs and 

related distribution of funds to grantees. 

Statement of Budgetary Resources 

This statement provides information about the provision of budgetary resources and their status as 

of the end of the reporting period. Information in this statement is consistent with budget 

execution information and the information reported in the Budget of the United States 

Government.

The statement displayed on p. 210 shows that the Department had $154.1 billion in budgetary 

resources for the year ended September 30, 2005. Of the $25.0 billion that remained unobligated 

at year end, $24.4 billion that represents funding provided in advance for activities in future 

periods was not available. The Department had $69.8 billion in Net Outlays for FY 2005. 

Statement of Financing 

This statement demonstrates the relationship between an entity’s proprietary and budgetary 

accounting information. It links the net cost of operations (proprietary) with net obligations 

(budgetary) by identifying key differences between the two statements. This statement is 

structured to identify total resources used during the fiscal year, with adjustments made based on 

whether the resource was used to finance the net obligations or net cost. 

This statement, displayed on p. 211 identifies $72.9 billion of resources used to finance activities, 

$2.1 billion of resources not part of the net cost of operations, and ($0.2) billion of components of 

net cost of operations that will not require or generate resources in the current period. 
 46

U.S. Department of Education FY 2005 Performance and Accountability Report

Management’s Discussion and Analysis 

Future Trends 

From a financial management perspective, the Department of Education is unique among federal 

government agencies. We must manage, consolidate, and account for more than 230 

appropriations. Among the 16 Cabinet-level departments, we maintain the smallest number of 

employees while managing the third-largest discretionary budget. 

A continuation of current downward trends in full-time equivalent staff will result in a critical 

reliance on a sound intellectual capital plan. The Department must increasingly coordinate 

strategic technology investments with human capital management. 

Technology Transformation 

Technology improvements will continue to empower organizations in the future by increasing the 

availability of a critical resource: time. These improvements will enable executive management to 

devote additional time to policy analysis and 

decisionmaking rather than the manual 

processing and compiling of key data. The 

Department benefits at an increasing rate from 

the maturing of investments in systems and egovernment. 

Major Department investments include a 

reimplementation of the existing financial 

accounting system and full participation in 

ongoing federal e-government initiatives. The 

adjacent chart depicts our vision of the egovernment operational model that highlights 

electronic information-sharing capabilities via 

data networks. 

This unified data network will create public value 

by optimizing government operations and 

providing effective oversight, coordinating strategic technology investment planning with human 

resource management and planning governmentwide. 

We are currently in the process of completing a study to determine the best approach to migrating 

to a center of excellence or becoming one. This analysis will be completed by the end of the first 

quarter of fiscal year 2006. 

Human Capital Transformation 

A results-oriented enterprise requires that an organization clearly identify and achieve viable 

results. The Department of Education’s Results Agenda clearly articulates this expectation, 

enabling Department personnel to understand how they will be held accountable for performance. 

Our employees also understand how their achievements align with and contribute to our mission. 

The Department continued the implementation of a human capital management plan that was 

launched in FY 2004. Our plan integrates human capital management, competitive sourcing, 

E-Government

Operations Model

State & Local

Government Private Sector

Federal

Government

Integrated

E-Networks

Federal

Agency A

Federal

Agency B

Federal

Agency C

Federal

Agency D

Department

Of

Education

General Public

E-Government

Operations Model

State & Local

Government Private Sector

Federal

Government

Integrated

E-Networks

Federal

Agency A

Federal

Agency B

Federal

Agency C

Federal

Agency D

Department

Of

Education

General Public
 47

U.S. Department of Education FY 2005 Performance and Accountability Report

Management’s Discussion and Analysis 

restructured business processes, and other Departmental strategic infrastructure investments. 

Future actions to meet challenges within our principal offices will include: 

• Improving clarity of results in employee’s performance standards (targeted to specific 

principal office goals and objectives). 

• Linking employee awards to performance. 

• Training supervisors/managers in assessment of employee performance and techniques for 

improving management practices. 

• Improving communication and techniques to foster a team culture. 

• Conducting appropriate forums to obtain employee perspectives on motivation, commitment, 

and productivity, implementing strategies based on information gathered. 

The Department’s continued commitment to human capital transformation will result in a more 

robust, cost-effective business environment and a better return on taxpayer investment. 

Economic Transformation 

Tuition costs and interest rates will continue to have significant effects on the Department. 

Increasing tuition costs for postsecondary education should compel a greater number of individuals 

to seek tuition assistance in the form of loans or grants. 

Rising interest rates have driven a surge in the refinancing and consolidation of student loans. 

Variable student loan interest rates were reset on July 1, 2005, increasing nearly two percentage 

points from 3.37 percent for academic year 2004-05 to 5.30 percent for academic year 2005-06. 

In anticipation of this increase, private lenders, schools, and others encouraged borrowers to 

consolidate their existing variable rate loans into fixed rate loans. This resulted in an 

unprecedented surge in loan consolidations, leading to substantially higher volume than the 

previous fiscal year. Based on preliminary data, projected cohort-year 2005 consolidations will 

approximate $68.5 billion, $24.8 billion above the fiscal year 2006 President’s Budget estimate. 

Fiscal year 2005 direct consolidation loan volume is estimated at $17.7 billion. These 

consolidations are comprised of underlying direct loans, guaranteed loans, and, to a much lesser 

extent, defaulted guaranteed loans in repayment. In disbursing a direct loan consolidation, the 

Department pays in full the holders of the underlying loans. 

Fiscal year 2005 FFEL consolidation loan volume is estimated at $50.8 billion. These consolidations 

are primarily from guaranteed loans in repayment and some direct loans (in most cases from 

borrowers with loans from both programs). Under current projections, the prepayment of the 

underlying FFEL loans produces significant savings through the elimination of future special 

allowance payments. 

The devastation of Hurricanes Katrina and Rita will impact the Department and the federal 

government for many years to come. These catastrophic storms have left the Gulf Coast area 

without many teachers, students, or functional schools or universities. The Department has 

provided immediate assistance to schools and displaced persons. During the recovery process, we 

will ensure that students, teachers, and educational institutions receive assistance as needed. Due 

to the uniqueness of this disaster, financial estimates cannot be made of the type or timing of 

assistance that will be required. However, the Department has financial management controls in 

place to ensure that federal funds are disbursed quickly and appropriately. 
 48

U.S. Department of Education FY 2005 Performance and Accountability Report

Management’s Discussion and Analysis 

Regulatory Transformation 

Governance, risk management, and compliance activities increasingly interact with one another, 

requiring sustained management commitment to achieve organizational excellence in all three 

areas. The Department’s future success is highly dependent on the successful convergence of 

these activities into a coherent strategic operating model. 

Focus on the regulatory environment requires the Department to identify and control compliance 

risk, which includes systemic, nonsystemic, and residual components. We mitigate the risk of 

impairment to our operations model, reputation, and financial condition by seeking to comply fully 

with laws and regulations, internal controls, and taxpayer expectations. 

The Department is taking a holistic approach to total risk management, the value of which far 

exceeds the costs of implementation. Senior management is making investments to comply with 

relevant regulations, to manage the costs associated with compliance, and to identify and address 

regulatory change. 

Operational effectiveness meetings were held twice during FY 2005 with each Department principal 

office that oversees federal education programs. Senior staff of the Offices of the Deputy 

Secretary, Under Secretary, Chief Financial Officer, and Chief Information Officer, along with the 

Office of Management, met with senior principal office leaders to review and evaluate management 

operations in the areas of customer service, quality and innovation. Principal office managers 

presented evidence of their offices’ performance from historical, current, and future perspectives. 

These meetings facilitated the sharing of best practices across the Department, and any necessary 

principal office corrective actions are tracked on a continuous basis. 

Our progressive focus will ensure that fewer resources are necessary for remediation activity. 
 49

U.S. Department of Education FY 2005 Performance and Accountability Report

Management’s Discussion and Analysis 

Management Challenges Overview 

The Office of Inspector General has identified the Department’s major challenges, which are 

included on pp. 282-288 of this document. Following is management’s discussion and analysis of 

those challenges. 

I. Program Accountability 

Student Financial Assistance. Continued developments in the modes of education delivery 

(e.g., nontraditional terms, distance education) and virtual paperless electronic delivery of program 

funds brings new challenges to ensure adequate oversight to identify and manage risks. The Office 

of Federal Student Aid must provide adequate program monitoring to reduce fraud and abuse in 

these programs. 

In December 2004, OIG and FSA representatives initiated the OIG/FSA Joint Fraud Initiative—a 

proactive approach to identify and reduce fraud and abuse in federal student financial assistance 

programs. 

Risk Management of Elementary and Secondary Education Programs. Identifying and 

taking corrective action to detect and prevent fraudulent activities in these programs, as well as 

addressing accountability and compliance issues by program participants, remains a challenge for 

the Department. 

The Department has made risk assessment a priority. Its interoffice Risk Management Team, 

under the leadership of the Under Secretary, is undertaking projects to address accountability and 

compliance issues, as identified by Office of Inspector General audits, referrals, and single audits 

conducted by nonfederal auditors. It works with program offices to designate grantees as “high 

risk” when the situation warrants and has dedicated a weekly meeting to risk management issues. 

In addition, the Department has sent multidisciplinary teams into key locations, as identified 

through Office of Inspector General audits, to review and assess the progress the “high-risk” entity 

is making in addressing its weaknesses.

Unsolicited Grants 

Unsolicited grants are awards made by the Department, in most cases, as a result of grantee 

initiative. Such awards do not result from formal Department solicitations for applications. 

Complications can arise with unsolicited grants, as many recipients of these funds tend to be firsttime participants in federal education programs. They are often unfamiliar with applicable 

regulations and require additional direction, guidance and support with the compliance processes. 

Like unsolicited grants, Congressional earmarks do not result from formal solicitations for 

applications. The Department is required to ensure that recipients of its funds use them in 

accordance with applicable laws and regulations. However, the Department has stated it does not 

have enough staff to administer and properly monitor the recipients of Congressional earmarks. It 

should be noted that some grant projects that begin as unsolicited grants receive Congressional 

earmarks in subsequent years. 

The Department plans to develop a toolkit to help new grantees properly administer their grant 

programs and to continue to re-engineer its grants monitoring process. 
 50

U.S. Department of Education FY 2005 Performance and Accountability Report

Management’s Discussion and Analysis 

Data Reliability. Data reliability is both a compliance issue and a performance issue. The Office 

of Inspector General has performed a number of audits of Title I, Part A, and the Carl D. Perkins 

Vocational and Technical Education Act education programs and concluded that management 

controls must be strengthened to ensure that data submitted to the Department are complete, 

accurate, and reliable. 

Recognizing the need to improve data quality and data reliability, the Department in FY 2003 

launched the Performance-Based Data Management Initiative to streamline existing data collection 

efforts and information management processes. The resulting Education Data Exchange Network 

database, anticipated for launch in fiscal year (FY) 2006, will provide state educational agencies 

and the federal government the capacity to transfer and analyze information about education 

programs. The new database should generate a more reliable, timely, and uniform set of state and 

local data elements to help the Department make better-informed program decisions. 

II. Operations Accountability 

Information Technology (IT) Capital Investment. The Department faces challenges in 

improving its capital planning and investment control oversight, and in using software designed to 

help agencies manage and control their initiatives. 

Many critical IT projects are pending, such as the Oracle 11i project. In 2004, the Office of the 

Chief Financial Officer and the Office of Federal Student Aid announced plans to consolidate their 

separate platforms into one functional financial management system, using version 11i of Oracle 

Federal Financials, by October 2006. However, in February 2005, they decided to forego this 

consolidation. Although this decision is bound to mitigate significant risks associated with the 

consolidation and changes in interfacing systems, the initiative is still quite complex and high risk. 

For its more complex and costly IT projects, the Department has contracted to have independent, 

professional consultants provide an assessment as a part of the capital investment process. The 

Department has made an effort to better articulate the relationship between IT projects and its line 

of business. 

IT Systems. The Department needs to adequately manage and safeguard IT assets and meet 

e-government requirements. Its 60 IT systems comprise a number of complex and costly 

investments that are essential to conducting ongoing business and meeting the agency’s core 

mission. The Department needs to complete the development of well-defined enterprise 

architecture, practice sound system analysis and design concepts, and ensure that a robust system 

acquisition and development life cycle methodologies are in place. 

The Department has embarked on several modernization efforts that have the potential to increase 

business efficiency and improve customer service. It is moving forward with its ongoing system 

development and consolidation efforts planned for FY 2006. It has also devoted time and 

resources to enhance security for its systems, including formally certifying all of its general support 

systems and major applications. 

Procurement. The Department must improve its procurement process to ensure that it is 

receiving quality goods and services in accordance with the contract terms. The Department needs 

to use pre-award audits, strengthen its ability to clearly and completely define contract 

requirements thereby ensuring effective communication between relevant contracting and program 
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U.S. Department of Education FY 2005 Performance and Accountability Report

Management’s Discussion and Analysis 

office personnel, and ensure that contractors are performing in accordance with contract terms and 

conditions to meet this challenge. 

In 2005, the Secretary directed the Chief Acquisition Officer and Contracts and Acquisition 

Management Director to develop a training program reinforcing the Department’s contracting 

processes and applicable laws and regulations. Senior managers, contracting personnel, and 

relevant program office personnel will be required to attend this training. The Secretary has also 

directed each principal officer leading a program office to take immediate steps and personal 

responsibility for ensuring contracts are awarded properly and effectively monitored, and has 

designated a senior advisor reporting directly to her to oversee transformation activities to ensure 

effective investing and risk management of contracts. 

Human Capital Management. Like most federal agencies, the Department will see a significant 

percentage of its work force eligible for retirement in 2006. The Department is also continuing to 

see a significant change in critical skill requirements for many of its staff. Identification of needed 

action steps and their prompt implementation to adequately address work force and succession 

planning issues are critically important. 

The Department has begun implementation of a new Human Capital plan that was released in 

2004. This fiscal year the Office of Federal Student Aid (FSA), with the aid of a consultant, also 

developed its own Human Capital plan. The FSA plan specifically focuses on the needs of FSA and 

is intended to help FSA attract and retain a highly skilled and motivated workforce. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

Management’s Discussion and Analysis 

Improper Payments Overview 

The Department has undertaken the following initiatives relating to the implementation of the 

Improper Payments Information Act of 2002. 

Student Financial Assistance Programs. The Department’s Office of Federal Student Aid (FSA) 

operates and administers the majority of the Title IV Student Assistance programs authorized by 

the Higher Education Act of 1965, as amended. Within these programs, we are identifying 

activities that are susceptible to significant improper payments. We are also reporting estimates of 

the annual amount of improper program payments and implementing plans to reduce improper 

payments. 

Eligibility for Title IV student aid is determined exclusively through applicant self-reported income, 

family size, number of dependents in college, and assets. These data are reported through the 

Free Application for Federal Student Aid (FAFSA), which applicants typically complete prior to the 

April 15 Internal Revenue Service (IRS) tax filing deadline. 

FSA has undertaken a statistical study in which financial data from a random sample of FAFSA 

submissions are compared to financial data reported to the IRS in annual income tax filings. 

Analysis of the study indicates that inaccurate reporting of income, family size, number of 

dependents in college, and assets may be the primary cause of improper payments within the Title 

IV programs. However, legislation does not currently permit FSA to verify 100 percent of the 

FAFSA income data with the IRS. 

In pursuit of the goals of the Improper Payments Information Act, the Department has been 

working closely with the Office of Management and Budget to consider other alternatives. We are 

developing an action plan designed to improve the accuracy of the improper payment estimates 

and reduce the level of risk and the amount of improper payments in the student financial 

assistance programs.

Title I Programs 

The Department performed a risk assessment of the Elementary and Secondary Education Act

Title I Program, parts A, B, and D, during FY 2005. The assessment documented that the risk of 

improper payments under current statutory requirements is very low. In order to refine the 

process for assessing risk in the program, the Department implemented a monitoring plan to 

review all states and territories receiving Title I funds within a three-year review cycle. The first 

three-year monitoring cycle began in FY 2005, and the Office of the Chief Financial Officer is 

participating with the Office of Elementary and Secondary Education in the monitoring process to 

provide technical support regarding fiduciary compliance. 

A major fiduciary monitoring element involves the wide use by local educational agencies of the 

number of children who qualify for free and reduced-price meals to determine an individual school’s 

Title I eligibility and allocation. The Title I statute authorizes a local educational agency to use 

these data, provided under the U.S. Department of Agriculture (USDA) National School Lunch 

Program, for this purpose. In many districts, these data are the only indicator of poverty available 

at the individual school level. 

USDA has raised concerns about the reliability of these data. USDA is working with states and 

localities to improve program integrity, within the existing statutory and regulatory framework, 
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U.S. Department of Education FY 2005 Performance and Accountability Report

Management’s Discussion and Analysis 

through enhanced monitoring and auditing. USDA is also working with the Department and other 

federal agencies that have programs that make use of these data to explore longer-term policy 

options. 

Remaining Grant Programs 

During FY 2005, the Department instituted a more detailed risk assessment of all other grant 

programs. We established a memorandum of understanding with the Department of Energy’s Oak 

Ridge National Laboratory which performed data-mining on information available in the Federal 

Audit Clearinghouse’s Single Audit Database, the Department’s Grant Administration and Payment 

System, and the Department’s Audit Accountability and Resolution Tracking System. Given scarce 

resources, we decided to use the results of the thousands of single audits already being performed 

by independent auditors on grant recipients. 

The Department sought to develop a methodology to produce statistically valid improper payment 

estimates that could be applied uniformly across non-FSA grant programs. This approach 

establishes a level of quality control for all programs while simultaneously producing a costeffective measure. 

The Department’s Office of Inspector General raised concerns following the Oak Ridge study on 

what constituted a “program.” The study’s original definition was at a program group level in order 

to effectively match anticipated outlays as defined in our budget submissions. However, 

calculating estimated improper payment error rates at that level can effectively mask the 

potentially higher rates that might exist if “program” is defined to mean the individual program 

level. For this reason, the Department is considering having Oak Ridge perform the next risk 

assessment at an individual program level. 

Recovery Auditing Progress 

To effectively address the risk of improper administrative payments, the Department executed a 

formal agreement for recovery auditing work on contract payments. All vendor payment 

transactions made from FY 1998 through FY 2004 were reviewed. Potential recoveries are 

minimal. FY 2005 payments will be reviewed during FY 2006. 

Our purchase and travel card programs remain subject to monthly data-mining to identify potential 

misuse or abuse. 

The Department plans to develop a manager’s internal control training program that will focus on 

controls to eliminate improper payments. This training will help managers use specific criteria to 

properly assess the risk of improper payments in our programs. 

The Department will record and maintain corrective action plans as required. We will configure 

corrective action plans based on the results of the initiatives outlined above. 

To comply with the Improper Payments Information Act of 2002 the Department is focused on 

identifying and managing the risks of improper payments and is mitigating risk with adequate 

control activities. By implementing our current and anticipated actions, we will effectively reduce 

improper payments throughout the Department. 

The Other Accompanying Information section of this report contains additional details of the 

Department’s activities related to the reduction of improper payments.
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U.S. Department of Education FY 2005 Performance and Accountability Report

Management’s Discussion and Analysis 

Statement on Management and 

Financial Controls 

For the programs, organizations, and functions 

covered by the Federal Managers’ Financial 

Integrity Act (FMFIA), I am pleased to report 

that the Department of Education accounting 

systems and management controls, taken as a 

whole, provide reasonable assurance that the 

objectives of FMFIA have been achieved.

—Margaret Spellings 

Secretary of Education

Management Assurance 

The Department of Education is committed to management excellence and recognizes the 

importance of strong financial systems and internal controls to ensure accountability, integrity, and 

reliability. Management, administrative, and financial system controls have been developed to 

ensure the following: 

• All programs and operations achieve their intended results efficiently and effectively. 

• Resources are used in accordance with the Department’s mission. 

• All programs and resources are protected from waste, fraud, and mismanagement. 

• Laws and regulations are followed. 

• Reliable, complete, and timely data are maintained and used for decisionmaking at all levels. 

We believe that the rapid implementation of audit recommendations is essential to improving the 

efficiency and effectiveness of our programs and operations and to achieving our integrity and 

accountability goals. 

Federal Managers’ Financial Integrity Act 

During fiscal year (FY) 2005, in accordance with the requirements of the Federal Managers’ 

Financial Integrity Act (FMFIA) and using the guidelines of the Department and the Office of 

Management and Budget, we reviewed our management control system. The objectives of our 

management control system are to provide reasonable 

assurance that the following occur: 

• Our obligations and costs are in compliance with 

applicable laws. 

• Our assets are safeguarded against waste, loss, 

unauthorized use, or misappropriation. 

• The revenues and expenditures applicable to 

agency operations are properly recorded and 

accounted for; to permit the preparation of 

accounts and reliable financial and statistical 

reports; and to maintain accountability over 

assets. 

• All programs are efficiently and effectively 

carried out in accordance with applicable laws 

and management policy. 

The efficiency of the Department’s operations is continually evaluated using information obtained 

from reviews conducted by the Government Accountability Office and the Office of Inspector 

General, specifically requested studies, or observations of daily operations. These reviews ensure 

that our systems and controls comply with the standards established by FMFIA. Managers 

throughout the Department are responsible for ensuring that effective controls are implemented in 

their areas of responsibility. Individual assurance statements from assistant secretaries serve as a 
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U.S. Department of Education FY 2005 Performance and Accountability Report

Management’s Discussion and Analysis 

primary basis for the Department’s assurance that management controls are adequate. The 

assurance statements are based upon each principal office’s evaluation of progress made in 

correcting any previously reported problems; new problems identified by the Office of Inspector 

General, the Government Accountability Office, and other management reports; and the 

management environment within each principal office. Department organizations that have 

material weaknesses identified are required to submit plans for correcting those weaknesses. The 

plans, combined with the individual assurance statements, provide the framework for continually 

monitoring and improving the Department’s management controls. 

FMFIA Section 2, Management Control. All of the 80 internal control material weaknesses 

identified since the inception of FMFIA have been corrected and closed. 

FMFIA Section 4, Financial Management Systems. All of the 95 financial management systems 

nonconformances identified since the inception of FMFIA have been corrected and closed. 

Federal Financial Management Improvement Act. The Secretary has determined that the 

Department is in compliance with the Federal Financial Management Improvement Act (FFMIA), 

although our auditor has identified instances of which the Department’s financial management 

systems did not substantially comply. 

We are cognizant of our auditors concerns relating to instances of non-compliance with FFMIA as 

noted in the Compliance with Laws and Regulations Report located on p. 275 of this report, we 

continue to strengthen and improve our financial management systems. 

However, since our last FFMIA report, the Department has continued to invest a considerable 

amount of time, effort and resources in assessing and strengthening the security controls 

protecting its information and information resources. As a result of these assessments, the 

Department has learned that certain vulnerabilities identified by OIG and our auditors in this year’s 

reports were previously accepted on an enterprise-wide basis by the Department’s Designated 

Approving Authorities, Certifier and Government Technical Expert, supported by the 

recommendation of the Department’s Independent Verification and Validation Management 

Committee (IV&V MC). 

The IV&V MC prescribes five basic tenets in the acceptance of any individual vulnerability: 

1. It is not technically feasible to correct the vulnerability. 

2. It is cost prohibitive to correct the vulnerability. 

3. Correcting the vulnerability will result in the loss of system or application functionality. 

4. In the context of the Common Vulnerabilities and Exposures definition, the vulnerability is 

more correctly identified as a security exposure. 

5. All accepted vulnerabilities or security exposures must demonstrate that compensating 

security controls are in place and are operating as intended. 

To this end, the Department has come to understand its risk management responsibilities. The 

Department has made a well-informed and documented risk-based business decision to operate its 

networks, systems and applications in the presence of certain vulnerabilities and security 

exposures. This acceptance of risk is in keeping with the rules and principles governing a risk 

management program. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

Management’s Discussion and Analysis 

Furthermore, the Department fully understands the risks inherent in operating information 

resources in the presence of common vulnerabilities and security exposures. To assist in the 

management of the potential risks, the Department has implemented proactive processes to 

identify research, manage, remediate and monitor for vulnerabilities and security exposures. This 

remediation cycle can be an extended process for any particular vulnerability and as a result, at 

any given time as they await remediation, vulnerabilities may be present in any networked 

environment, including the Department’s. 
DRAFT Key Measures Goal 2 

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U.S. Department of Education FY 2005 Performance and Accountability Report

Performance 

Details 
DRAFT Key Measures Goal 2 

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U.S. Department of Education FY 2005 Performance and Accountability Report

Performance Details Overview 

The Department organizes our performance results around our strategic goals: 

Goal 1: Create a Culture of Accountability (See p. 61.) 

Goal 2: Improve Student Achievement (See p. 82.) 

Goal 3: Develop Safe and Drug-Free Schools (See p. 120.) 

Goal 4: Transform Education Into an Evidence-Based Field (See p. 127.) 

Goal 5: Enhance the Quality of and Access to Postsecondary and Adult Education (See p. 136.) 

Goal 6: Establish Management Excellence (See p. 177.) 

For each strategic goal, we discuss key measures, program performance, PART, and 

evaluations or studies, as applicable. 

Performance Goals 

For each of the Department’s six strategic goals, we identified performance goals that represent 

major areas within the goal. Each goal chapter provides an overview of our results. 

Key Measures 

For each strategic goal, the Department selected key program measures as a focus. Each 

goal chapter provides specific detail about our progress on each key measure. 

Explanation of Documentation for Key Measures 

Table. Provides trend data as well as newly reported data. Boldface entries represent data 

not previously reported in an annual performance report. Status row shows relationship 

between new actual values and targets as follows: 

• Exceeded or did better than if our performance was better than the target 

• Met if our performance reached the target without exceeding it 

• Made progress if our performance was better than the prior reported data, but fell short 

of the target 

• Did not meet if our performance fell short of the target and did not show progress 

• Set baseline if we collected information on the measure for the first time. 

Source. Provides bibliographic information below the data table. 

Analysis of Progress. Provides insights into the Department’s progress, including 

explanations for unmet targets and actions being taken or planned to address the shortfall. 

Data Quality. Includes information such as the universe included in the measure; definitions; 

the way data were collected, calculated, and reviewed; data strengths and limitations; and 

plans for improvement of data quality. 

Target Context. Explains the rationale for targets, especially where anomalies exist. 

Related Information. Identifies supplementary information that is available on the Web. 

Additional Information. Provides relevant background about a measure. Where data are 

not yet available, this section provides the date by which data are expected. 

Throughout the text, FY means fiscal year and SY means school year. 
DRAFT Key Measures Goal 2 

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U.S. Department of Education FY 2005 Performance and Accountability Report

Programs 

The Department administers 154 programs. Each program supports one of our strategic 

goals. In applicable goal chapters, a table provides a summary of each program’s 

performance results for four years, a link to its Web site (if available), its FY 2005 budget, 

and its FY 2005 expenditures. 

Methodology for Program Performance Summary 

In keeping with the Government Performance and Results Act, the Department has 

established program-specific annual plans with measures and targets for the majority of our 

grant and loan programs and has provided the corresponding program performance reports in 

conjunction with the publication of the Performance and Accountability Report. Since 2002, 

these program performance plans and reports have been published on the Department’s Web 

site at http://www,ed,giv/about/reports/annual/index.html?src=pn. 

In the Program Performance Summary tables that are part of each goal chapter of this 

FY 2005 Performance and Accountability Report, we provide an overview of the performance 

results on the program measures for each of the past four years, from FY 2002 through 

FY 2005. For each year, we assess against the measures that were established for that year 

in the program’s published plan and provide the percentage of measures whose targets were 

met (including exceeded), the percentage whose targets were not met, and the percentage for 

which we have no data. The percentage with no data may include measures for which we 

were unable to collect data and measures with pending data. In some cases, our target was 

to establish a baseline; this was necessary particularly because No Child Left Behind created a 

new program environment and we had no trend data for many important concepts. In the 

case of these measures, if we collected data and established the baseline, then we counted 

that as a measure whose target was “met”; if we were unable to collect the data to establish 

the baseline, we counted that measure as “no data.” 

The tables also identify, by shading, those programs that did not have a performance plan for 

a particular year from FY 2002 through FY 2005. 

The full individual program performance reports for FY 2005 are available at 

http://www.ed.gov/about/reports/annual/2005report/program.html. The FY 2005 program 

performance reports also show the targets and actual values for prior years (except for 

measures that were discontinued prior to FY 2005). 

Throughout the text, FY means fiscal year and SY means school year. 
DRAFT Key Measures Goal 2 

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U.S. Department of Education FY 2005 Performance and Accountability Report

PART Analysis 

Using the Office of Management and Budget’s Program Assessment Rating Tool (PART), the 

Department has conducted PART reviews on 56 of our programs. As applicable, each goal 

chapter contains an overview of each PART review that was conducted in preparation for the 

FY 2005 budget. 

Program Evaluations, Studies, and Reports 

The Department conducts periodic evaluations, studies, and reports on major programs; 

and Government Accountability Office (GAO) or Inspector General (IG) studies often provide 

information on our programs. Each goal chapter contains short summaries and one-page 

overviews of key studies published in FY 2005. 

Methodology for PART Reviews 

The Program Assessment Rating Tool (PART) was developed and implemented by the Office of 

Management and Budget (OMB) as a standardized process for determining program 

effectiveness in a consistent way across agencies. Programs that are reviewed receive scores on 

a scale of 0 to 100 in each of four weighted sections: program purpose and design (weighted 

20 percent), strategic planning (10 percent), program management (20 percent), and program 

results/accountability (50 percent). Weighted scores are combined and translated into one of 

four ratings (effective, moderately effective, adequate, ineffective); or a rating of results not 

demonstrated is given if the program does not have agreed-upon performance measures or 

lacks baseline performance data. 

Over a five-year period, most government programs will be evaluated under this process. 

Results of PART reviews are used by agencies as one component of justifying their budget 

requests. OMB’s Web site provides one-page summaries and full detailed PART reviews for all 

agencies. 

Throughout the text, FY means fiscal year and SY means school year. 
DRAFT Key Measures Goal 2 

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U.S. Department of Education FY 2005 Performance and Accountability Report

Goal 1: Create a Culture of Achievement 

Performance Goals 

State Accountability Systems in Compliance

The No Child Left Behind Act of 2001 placed new requirements on state accountability 

systems, requirements designed to improve student achievement. After three years of 

working within the provisions of the law, Secretary Spellings announced a “more workable, 

sensible approach” that remains true to the law’s mission while taking into account each 

state’s unique situation. The new flexibility guidelines are captured in Raising Achievement: 

A New Path for No Child Left Behind. 

Local Flexibility for Targeting Federal Funds

A collection of federal programs gives states, school districts, and schools the authority to 

target identified federal program funds to unique local education needs. These programs 

include the following: 

• Funding Transferability for State and Local Educational Agencies.

• State-Flexibility Demonstration Program.

• Local-Flexibility Demonstration Program. 

• Rural Education Achievement Program.

Customer Satisfaction With Department

To measure how well our products and services meet the needs of the people we serve, the 

Department surveyed state-level education leaders who direct federal programs in their 

states. Results of the survey indicated an American Customer Satisfaction Index score of 

63, which we will benchmark against businesses and other federal agencies. 

Expansion of Choice Options for Parents

Parents of public school children who attend a Title I school designated by the state to be in 

need of improvement have choices under the provisions of No Child Left Behind. They may 

send their child to another public school, and, if the school’s status remains “in need of 

improvement” for more than one year, families whose children stay in the home school may 

enroll their children in supplemental educational services (tutoring). Parents’ options within 

the public school system have increased with the growing numbers of public charter schools

that create alternatives to the traditional public school. 

Evidence-Based Approaches to Instruction

The No Child Left Behind goal—all students proficient in reading and mathematics by 

SY 2013–14—has the best chance of being met if classroom instruction is built around what 

works. The Department’s What Works Clearinghouse just released research findings on 

what works in middle school mathematics interventions. 
DRAFT Key Measures Goal 2 

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U.S. Department of Education FY 2005 Performance and Accountability Report

Goal 1: Create a Culture of Achievement 

Key Measures 

The Department of Education’s first goal is to create a culture of achievement in education. 

Accountability for results is the foundation for our other five goals. We do not specify 

programs or funding streams as supporting Goal 1—this goal cuts across all our programs 

and activities. We have, however, identified nine key measures that inform our progress in 

meeting Goal 1. 

See p. 58 for an explanation of the documentation fields for the key measures. 

State Accountability Systems in Compliance 

The No Child Left Behind Act of 2001 placed new requirements on state accountability 

systems, requirements designed to improve student achievement. The basic components of 

a state accountability system, as outlined in the law, are standards and assessments, goals 

of adequate yearly progress for schools and districts to have all students meet state 

standards, public school choice, supplemental services, and teacher quality. In 2005, a 

staff of national experts knowledgeable in the fields of standards and assessments began to 

review state assessment systems through the Department’s standards and assessment 

external peer review process. Secretary Spellings, concurrent with the process of reviewing 

state assessment systems, announced a new “more workable, sensible approach” to 

implementing the accountability provisions of No Child Left Behind. To take into account 

each state’s unique situation, new guidelines appeared in Raising Achievement: A New Path 

for No Child Left Behind. 

The Department applied the Secretary’s common sense approach and provided additional 

flexibility as states continued to implement accountability systems. Areas where flexibility 

was granted during the course of the year are represented in the following provisions: 

• Interim policy regarding alternate assessments based on modified achievement 

standards for students with cognitive disabilities (May 2005). 

• Revised and expanded nonregulatory guidance in “Highly Qualified Teachers and 

Improving Teacher Quality State Grants” (August 2005). 

• Decision letters sent to 46 states approving requests for amendments to state 

accountability plans during the 2004-05-amendment cycle. See p. 29 for the most 

commonly approved amendments. 

• The Secretary’s announcement of flexibility in supplemental educational services

(Chicago Public Schools and four Virginia districts) (September 2005). 

The Department measured states’ progress on implementing state accountability systems 

by calculating the number of states with approved assessment systems in reading and 

mathematics and the number of states that are field testing reading and mathematics 

assessments. 
DRAFT Key Measures Goal 2 

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U.S. Department of Education FY 2005 Performance and Accountability Report

Analysis of Progress. The Department did not meet established targets for the numbers 

of states that have approved reading/language arts and mathematics assessments at the 

requisite grade levels. However, in FY 2005, we conducted peer reviews of 13 state 

assessment systems, a year in advance of the No Child Left Behind deadline for states to 

have full systems in place; and we expect to continue to make progress. When No Child 

Left Behind required that all states have mathematics and reading/language arts 

assessments in grades 3 through 8 and high school by the end of SY 2005–06, states began 

to add standards-based assessments at the required grades. States that do not have a full 

complement of assessments are currently working through the process of aligning tests to 

standards, developing and field testing assessments, and submitting systems for approval. 

To help states prepare for the peer review process, which examines evidence that the 

state’s assessment system meets No Child Left Behind requirements and leads to final 

approval, the Department issued guidance and a timeline for peer reviews of February 2005 

to September 2006. States are asked to initiate the review process when they have 

collected the necessary documents for review. At the end of FY 2005, 13 states had 

completed the review process. The Department expects all states will participate in the 

process within the 2005–06 time frame. 

Since the passage of No Child Left Behind, the Department has made more than $1.5 billion 

available under Section 6111 of the Elementary and Secondary Education Act to states to 

increase their capacity for rigorous assessments. In FY 2005, technical assistance providers 

under the Individuals With Disabilities Act received approximately $14 million to support 

states’ ability to administer alternate and modified assessments for students with 

disabilities. 

Data Quality. The universe for this measure is the 52 entities (50 states, the District of 

Columbia, and Puerto Rico) that are required by No Child Left Behind to administer 

reading/language arts and mathematics assessments in grades 3 through 8 and high school 

by SY 2005–06. 

Target Context. The target for this measure represents a relatively small number of the 

52 entities that are required to have their standards and assessments peer reviewed and 

1.1 State Assessments. The number of states that 

have reading/language arts assessments in grades 3 

through 8 and high school. 

1.2 State Assessments. The number of states that 

have mathematics assessments in grades 3 through 8 

and high school. 

Fiscal Year Actual Fiscal Year Actual 

2004 0 2004 0 

2005 0 with full approval 

0 with approval with recommendations

4 with deferred approval 

3 with final review pending 

(partial data) 

2005 0 with full approval 

0 with approval with recommendations

4 with deferred approval 

3 with final review pending 

(partial data)

We did not meet our 2005 target of 18. We did not meet our 2005 target of 18. 

U.S. Department of Education, Standards and Assessment External Peer Review Process, Title I review processes, staff 

recommendations, and decisions by the Secretary of Education. 

Note. These measures refer to states with assessment systems that have been approved by the Department as meeting the 

requirements of No Child Left Behind. Six additional states were reviewed in FY 2005 and decisions are pending. 
DRAFT Key Measures Goal 2 

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U.S. Department of Education FY 2005 Performance and Accountability Report

approved. States are not required by law to have reading and mathematics assessments in 

grades 3 through 8 and high school until the end of SY 2005–06; consequently, the 

Department did not expect all states to be ready to submit documentation at the beginning 

of 2005. Additionally, not all entities could be reviewed in one year since each state’s 

review takes several months. 

Related Information. Information on the Standards and Assessment Peer Review 

Guidance can be obtained at http://www.ed.gov/policy/elsec/guid/saaprguidance.pdf and 

http://www.ed.gov/admins/lead/account/saapr.doc. 

Additional Information. In 2004, the Department approved a standards and assessment 

peer review process to be used to review and approve the state assessment systems 

against No Child Left Behind requirements. No reviews were conducted that year. The 

Department established peer review dates for 2005 (February, May, September, and 

November) and for 2006 (February, May, and September). In February 2005, the 

Department conducted its first peer review of reading/language arts and mathematics 

assessment systems of five states (Maryland, North Carolina, South Carolina, Texas, and 

West Virginia). Reading/language arts and mathematics assessment systems of two 

additional states (Alabama and South Dakota) were reviewed in May. Six additional reviews 

(Idaho, Minnesota, Montana, Nebraska, Nevada, and Oregon) were conducted in September 

2005, and the results of this group are pending. After the review, a state receives one of 

five distinct ratings: full approval, full approval with recommendations, deferred approval, 

final review pending, or not approved system. Following the administration of the 

assessment, a state must still provide the Department with data on the technical quality of 

the assessment instruments (i.e., reliability coefficients, item statistics, and validity 

coefficients). 

Analysis of Progress. The Department exceeded established targets for the numbers of 

states completing the field testing of reading/language arts and mathematics assessments. 

All states must field test standards and assessment systems before the systems are peer 

reviewed. The fact that 47 states, 17 more than we targeted, have completed their field 

testing positions us well for meeting our FY 2006 target for the number of states that have 

peer-reviewed and approved standards and assessment systems. 

Data Quality. Fifty-two entities (50 states, the District of Columbia, and Puerto Rico) are 

required by No Child Left Behind to have reading/language arts and mathematics 

1.3 State Assessments. The number of states that 

have completed field testing of the required 

assessments in reading/language arts. 

1.4 State Assessments. The number of states that 

have completed field testing of the required 

assessments in mathematics. 

Fiscal Year Actual Fiscal Year Actual 

2003 16 2003 16 

2004 20 2004 20 

2005 47 2005 47 

We exceeded our 2005 target of 30. We exceeded our 2005 target of 30. 

U.S. Department of Education, Consolidated State Performance Report, grantee submissions; state Web sites. 
DRAFT Key Measures Goal 2 

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U.S. Department of Education FY 2005 Performance and Accountability Report

assessments in grades 3 through 8 and high school by SY 2005–06. Each state has 

developed a schedule by which its reading/language arts and mathematics assessments will 

be developed and field tested, and submitted to the Department for review and approval 

prior to implementation. 

Target Context. The target of 30 was set with the knowledge that states were not 

required by law to have standards and assessments for grades 3 through 8 and high school 

until the end of SY 2005–06. 

Related Information. Information about the standards and assessments peer-review 

process is available at www.ed.gov/admins/lead/account/peerreview/index.html. 

Information on state student assessment programs is available at 

www.ccsso.org/projects/Accountability_Systems/State_Profiles/. 

Additional Information. Field testing is one of the initial phases of establishing statewide 

reading/language arts and mathematics assessments prior to the actual administration of 

the assessment. Field testing helps ensure the validity and reliability of test items and 

permits states to omit those test items that it deems biased, too difficult, or too easy, thus 

affecting the rigor of the test. 

Local Flexibility for Targeting Federal Funds 

A collection of federal provisions gives states, school districts, and schools the authority to 

target identified federal program funds toward unique local education needs. These 

provisions include the following: 

• Funding Transferability for State and Local Educational Agencies. 

• State-Flexibility Demonstration Program. 

• Local-Flexibility Demonstration Program. 

• Rural Education Achievement Program. 

States reported that in FY 2003 (the most recent year for which the Department has data), 

some 1,600 districts transferred approximately $90 million. Districts transferred 

$47.5 million into State Grants for Innovative Programs and $22.7 million into Title I Grants 

to Local Educational Agencies. States reported that districts transferred $66.5 million out of 

the Improving Teacher Quality State Grants program. In FY 2005 no states participated in 

the State-Flexibility Demonstration Program and Seattle participated in the Local-Flexibility 

Demonstration Program. 

The Department measured the use of flexibility authorities by collecting data on the 

percentage of eligible local educational agencies that used the Rural Education Achievement 

Program flexibility authority. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

Analysis of Progress. The flexibility 

authority offered in the Rural Education 

Achievement Program has been 

available for four years. Approximately 

60 percent of the 4,000 districts 

eligible to use this authority have done 

so according to the two most recent 

reports from the states. The 

Department has provided extensive 

information about the availability of 

this authority over the past four years 

and considers that the 60 percent of users represents close to the percentage of districts 

that need this authority to allocate resources effectively. 

Data Quality. Department staff reviewed Consolidated State Performance Reports 

submitted by state educational agencies in spring 2005 for SY 2003–04. 

Target Context. After analyzing the FY 2004 data, the Department set more realistic 

targets for FY 2005. An expectation that 100 percent of eligible districts would use the 

authority is not a desired outcome because it would reflect that the normal allocation of 

federal resources did not meet most districts’ needs. 

Related Information. Information on the Rural Education Achievement Program is 

available at http://www.ed.gov/programs/reapsrsa/index.html.

Additional Information. Data for FY 2005 will be available in April 2006. 

The Alternative Uses of Funds Authority under the Rural Education Achievement Program 

allows eligible local educational agencies the authority to combine funding under certain 

federal programs to carry out activities under other specified federal programs. Eligible 

districts are those that serve relatively small numbers of students and are located in rural 

areas (ESEA Section 6221(b)(1)). 

Customer Satisfaction With the Department

To measure how well our products and services meet the needs of the people we serve, the 

Department conducted several customer satisfaction surveys. The Grantee Satisfaction 

Survey queried the chief state school officers and eight groups of state-level education 

leaders who direct federal programs in their states. The questionnaire included general 

questions about the Department’s performance in five areas: use of technology, online 

resources, documents, technical assistance provided by Department-funded providers, and 

technical assistance provided by Department staff. The questionnaire also included custom 

questions for each grantee group. In the final section of the survey, respondents were 

asked to answer three culminating questions that provided the American Customer 

Satisfaction Index score. The index score allows the Department to benchmark customer 

satisfaction against that of businesses and other federal agencies. 

1.5 Rural Education Program. The percentage of eligible 

school districts utilizing the Rural Education Achievement 

Program (REAP) flexibility authority. 

Fiscal Year Actual 

2003 61 

2004 59 

2005 Target is 65. 

We did not meet our 2004 target of 71. 

Data for 2005 are pending. 

U.S. Department of Education, Consolidated State Performance 

Report, grantee submissions. 
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Other major Department surveys include a biennial customer survey conducted by the 

National Center for Education Statistics and an annual survey conducted by the Office of 

Federal Student Aid. The results from the Federal Student Aid survey are reported in 

Goal 6, pp. 182-85, under Student Financial Assistance programs. 

Analysis of Progress. For 

perspective on how to interpret the 

Department’s American Customer 

Satisfaction Index score of 63, it is 

notable that the most recent average 

score for federal agencies was 72. It’s 

also important to note that federal agencies that serve grantees or interact in a regulatory 

role typically score in the low 60s. A score of 63, while below the federal agency average, is 

on a par with the typical scores of comparable agencies. In response to survey results, 

Department program offices that participated in the survey identified areas of greatest 

impact (information provided by the survey methodology), which will guide their direction 

for making improvements. 

Data Quality. The CFI Group, under contract to the Department, conducted the 2005 

survey using the methodology of the American Customer Satisfaction Index. The index was 

developed by the University of Michigan Business School, the CFI Group, and the American 

Society for Quality and meets their standards for data quality. The CFI Group reports 

business and federal agency customer satisfaction indices quarterly in major news outlets, 

which allows for standardization of customer satisfaction information. 

Grantee Satisfaction Survey respondents included the chief state school officers and the 

state-level directors and coordinators of the Early Intervention, Special Education, Education 

Data Exchange Network, Career and Technical Education, Adult Education and Literacy, 

English Language Acquisition (Title III), Improving the Academic Achievement for 

Disadvantaged Students Grants to Local Educational Agencies (Title I), and Educational 

Technology programs. The survey was e-mailed to 490 potential respondents; the response 

rate was 73 percent. 

The FY 2005 actual value of 63 is the American Customer Satisfaction Index score reported 

by our revised customer survey. It is not a percentage; rather, the score is best thought of 

as a weighted scale based on multiple responses to questions in the survey. Survey scores 

are indexed on a 100-point scale. Agencies that score in the 80s are ranked as world class. 

Target Context. The FY 2005 actual value provides baseline data for the new Grantee 

Satisfaction Survey. 

Additional Information. Prior to FY 2005, the Department conducted the Survey on 

Satisfaction with the U.S. Department of Education. Beginning in FY 2005, we revised our 

measure for customer satisfaction to reflect data we intended to collect from the new 

American Customer Satisfaction Index survey. To smooth the transition, in the 2005 survey 

we included the seminal question of the Survey on Satisfaction, the question on overall 

satisfaction with the Department’s products and services. The response to that question 

1.6 The overall American Customer Satisfaction Index 

(ACSI) as scored by Department grantees. 

Fiscal Year Actual 

2005 63 

We established a baseline in 2005. 

U.S. Department of Education, Grantee Satisfaction Survey. 
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indicated that 66 percent of respondents (a 1 percent decline from the previous year, 

considered not statistically significant) were satisfied with the Department’s products and 

services. We collected these data to meet our FY 2004 commitment for providing customer 

satisfaction data. Data will not be collected on this question in FY 2006. 

Expansion of Choice Options for Parents 

Parents of public school children who attend a Title I school that has been designated by the 

state to be in need of improvement have choices under the provisions of No Child Left 

Behind. They may send their child to another public school in the district, and, if the 

school’s status remains “in need of improvement” for more than one year, families whose 

children stay in the home school may enroll their children in supplemental educational 

services (tutoring). 

2005 data show that many more parents are eligible to secure supplemental educational 

services for their children than are currently doing so. To help inform parents of this 

opportunity, the Department created a listserv where interested parents automatically 

receive periodic notification of relevant information posted on ed.gov, the Department’s 

Web site. A similar service for charter school information is also available to parents. 

As of August 2005, state lists posted online include 2,796 approved supplemental service 

providers, compared to 2,535 in September 2004. In 2005, private providers continued to 

represent about 80 percent of all providers. States and districts continue to identify 

providers and encourage parents to use their services. 

Using data from SY 2003–04, the Government Accountability Office (GAO) reviewed the 

implementation of the school choice provision, which allows parents to transfer their child 

from a school in need of improvement to another public school within the district. GAO 

found that about 1 in 10 of the nation’s 50,000 Title I schools were identified for school 

improvement in each of the first two years of implementation (SY 2002–03 and 

SY 2003–04). And about 1 percent of eligible children, or 31,000 students, transferred 

under the No Child Left Behind choice option in SY 2003–04. GAO recommended that the 

Department monitor the extent to which classroom capacity constraints appear to limit 

school choice options. The Department responded to the GAO report by pointing to its 

initiatives for expanding classroom capacity through such means as technical assistance 

workshops; grants to support national-level choice activities; and discretionary grant 

competitions for the Charter Schools Grants program, Magnet Schools Assistance program, 

and Voluntary Public School Choice program. 

Since 1995, the Charter Schools Grants program has provided funds to increase the number 

of charter schools in operation. Charter schools are public schools that operate with 

freedom from many local and state regulations that apply to traditional public schools. 

Under No Child Left Behind, the charter school initiative has gained momentum as a way to 

offer parents public school options. Evaluation of the Public Charter Schools Program: Final 

Report (November 2004), the Department’s study on charter schools, reports that while the 

growth in the number of states with charter legislation has tapered off, the number of 

charter schools continues to grow. 
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The measures adopted by the Department to monitor the expansion of parental choice 

under No Child Left Behind are the number of charter schools in operation and the amount 

of funding raised by Credit Enhancement for Charter Schools Facilities grantees for charter 

school facilities in addition to the amount contributed to the financing from the grant. 

Analysis of Progress. Similar to 

recent years, the number of charter 

schools increased at a rate of 

approximately 10 percent, surpassing 

the expectations of the Department 

and allowing us to exceed our target. 

The Department's Charter Schools 

Grants program will continue to 

increase national awareness of the 

charter schools model by funding 

national leadership activities that result 

in the dissemination of successful 

charter schools practices and policies. 

Data Quality. Data are verified by 

Department program staff through 

monitoring and technical assistance 

activities and by a review of Government Accountability Office and Office of Inspector 

General reports. 

There are substantial differences in the definition of charter schools among states. Some 

states count a single charter with multiple sites as a single charter school, while other states 

count a single charter with multiple sites as multiple charter schools, causing variability in 

the counts reported by state educational agencies. Reported data are based on each 

state’s definition of charter schools. 

Target Context. Targets are based on previous growth trends, which have averaged 

10 percent per year over the last five years. 

Related Information. The Department’s charter school program Web site is 

http://www.ed.gov/programs/charter/index.html. 

The Education Commission of the States compiles statistics, policy reviews, and case studies 

on charter schools as part of its public education issues data collection. These data are 

available at 

http://www.ecs.org/ecsmain.asp?page=/html/educationalIssues/CharterSchools/CHDB_intr

o.asp. 

The National Association of Charter School Authorizers (NACSA) provides research and 

policy briefs for states and their chartering agencies at 

http://www.charterauthorizers.org/site/nacsa/. 

1.7 Charter Schools Grants. The number of charter 

schools in operation. 

Fiscal Year Actual 

1996 255 

1997 428 

1998 790 

1999 1,100 

2000 1,700 

2001 2,110 

2002 2,431 

2003 2,700 

2004 2,996 

2005 3,344 

We did not meet our 2004 target of 3,000. 

We exceeded our 2005 target of 3,300. 

Center for Education Reform, Annual Survey of America’s Charter 

Schools. 
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The National Association of State Directors of Special Education (NASDSE) provides 

research, studies, and policy for states and their charter schools enrolling students with 

disabilities, and it provides technical assistance for implementing the Individuals with 

Disabilities Education Act and other federal laws relevant to serving the needs of students 

with disabilities at http://www.edgateway.net/cs/spedp/print/usuc_docs/spedp/home.htm. 

The National Alliance for Public Charter Schools compiles policy reviews, issue briefs, and 

studies on charter schools. These data are available at 

http://www.charterschoolleadershipcouncil.org/. 

The Center for Education Reform compiles statistics on charter schools. These statistics are 

available at http://www.edreform.com. 

The Common Core of Data compiled by the National Center for Education Statistics collects 

information on charter schools as part of the NCES Public School Universe data collection. 

These data are available at http://nces.ed.gov/ccd/. 

The U.S. Department of Education published America's Charter Schools—Results From the 

NAEP 2003 Pilot Study. This study can be accessed electronically at 

http://nces.ed.gov/pubsearch. 

Additional Information. Growth in the number of charter schools is largely under the 

control of state legislatures, which maintain authority to pass laws authorizing the creation 

and regulation of charter schools. While some states have reached capacity in terms of the 

number of charter schools allowed by their laws, other states have successfully amended 

their statutes to allow for multiple authorizers and, therefore, greater flexibility. In addition, 

some states have used No Child Left Behind provisions that allow local educational agencies 

to convert low-performing Title I schools into charter schools. 

Analysis of Progress. The Credit 

Enhancement for Charter School 

Facilities program helps charter schools 

with their facility needs typically by 

guaranteeing debt and sometimes 

leases that are used to obtain their 

facilities. The program, which first 

issued grants in 2002, reported 

leveraging $140 million in debt and 

leases as of the end of FY 2004. The 

total amount leveraged will be much greater over the 5- to 20-year lifespan of the grants. 

Data Quality. Data are self-reported annually by grantees. Department program staff 

verify these data during site visits to grantees and to the schools that grantees serve. The 

number of dollars leveraged consists of the dollar amount raised as a direct result of the 

guarantee. 

Some grantees under the Credit Enhancement program have loan pools through which they 

work with a number of lenders to raise a given amount of funds for charter school facility 

1.8 Credit Enhancement for Charter School Facilities. 

The amount of funding grantees leverage for the acquisition, 

construction, or renovation of charter school facilities. 

Fiscal Year Actual 

2003 $66 million 

2004 $74 million 

2005 Target is $100 million. 

We did not meet our 2004 target of $100 million. 

Data for 2005 are pending. 

U.S. Department of Education, Credit Enhancement for Charter 

School Facilities Program Performance Reports. 
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loans. If the grantee received a non-Department of Education grant (such as a New 

Markets Tax Credit allocation1

) and is using it to provide additional leveraging for a school 

served by the federal grant, such leveraging may also be counted as funds leveraged by the 

federal grant. A grantee may count senior debt toward the total amount of funds leveraged 

if it uses grant funds to guarantee or insure subordinate debt. Likewise, grantees may 

count subordinate debt toward the total amount of funds leveraged if it only uses grant 

funds to credit-enhance senior debt. 

The Department originally computed the dollars pledged by lenders as the amount of dollars 

leveraged in the year the loan pool closed. After learning that these pledges have 

contingencies, we revised our methodology to reflect only the funds in loans that have 

closed. Trend data shown in the table reflect this revised approach. 

Target Context. We modified our FY 2005 target to be more realistic based on the 

updated methodology. 

Related Information. Additional information on the New Markets Tax Credits program is 

available at http://cdfifund.gov/programs/programs.asp?programID=5. 

More information on the Credit Enhancement for Charter Schools Facilities program is 

available at http://www.ed.gov/programs/charterfacilities/index.html. 

Additional Information. Data for FY 2005 will be available in January 2006. Grantees for 

this program receive multiyear funding at the beginning of the first project period. The 

federal funds and earnings on those funds remain available until they have been expended 

for the grant’s purposes or until financing facilitated by the grant has been retired, 

whichever is later. Most of the Department’s grantees are required to report midyear to 

qualify for continuation awards, but, because there are no continuation awards for this 

program, we allow these grantees to report after the end of each fiscal year to give them a 

full year of performance before reporting data. 

Evidence-Based Approaches to Instruction 

The No Child Left Behind goal—all students proficient in reading and mathematics by 

SY 2013–14—has the best chance of being met if classroom instruction is built around what 

works. 

The Department's What Works Clearinghouse released research findings on the 

effectiveness of curriculum-based interventions for improving mathematics achievement for 

middle school students ranging from 6th to 10th grade. The Clearinghouse collected more 

than 800 studies for the middle school mathematics curriculum review. Studies were rated 

according to the strength of their causal evidence. The Clearinghouse identified 10 studies 

of five middle school mathematics interventions that met the Clearinghouse's standards of 

 

1 The U.S. Treasury Department provides New Markets Tax Credits on a competitive basis. These tax credits are 

used to attract development in low-income communities. The credit provided to the investor totals 39 percent of 

the cost of the investment and is claimed over a seven-year credit allowance period. In each of the first three years, 

the investor receives a credit equal to 5 percent of the total amount paid for the stock or capital interest at the 

time of purchase. For the final four years, the value of the credit is 6 percent annually. Investors may not redeem 

their investments prior to the conclusion of the seven-year period.
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evidence. The middle school mathematics Intervention and Topic reports are posted on the 

What Works Clearinghouse Web site. The Department is currently working on the next six 

topic reviews on beginning reading, character education, early childhood education, 

elementary school mathematics, English language learners, and dropout prevention. 

Analysis of Progress. Data on the 

use of evidence-based interventions 

cannot be collected until the 

clearinghouse has released more 

information on such interventions. To 

date, information is available only on 

middle school mathematics programs. 

The Department intends to retain this 

measure and will collect data when more information is available to schools about a range of 

evidence-based approaches. 

Related Information. The What Works Clearinghouse collects, screens, and identifies 

studies of the effectiveness of education interventions (programs, products, practices, and 

policies). See http://www.whatworks.ed.gov. 

The Department also provides evidence-based information for the education of English 

language learners to the education community and to parents through the National 

Clearinghouse for English Language Acquisition. The Clearinghouse has adopted the 

guidelines of the National Board of Education Sciences for evaluating and incorporating 

documents into its resource library. More information is available at 

http://www.ncela.gwu.edu/oela/summit2004/cd/FILES/wwAppendixB.pdf. 

Discontinued Strategic Measures 

The following measures were discontinued after FY 2004 but were reported as pending in our 

FY 2004 Performance and Accountability Report. We report here our results on those for 

which we now have data. (See p. 23 for a discussion of why we discontinued measures.) 

Measure Fiscal 

Year Target Actual Status 

1.2.1a The percentage of school districts using 

Transferability 

2004 22.5 18.7 Target not met 

1.2.4 The percentage of Department grantees that express 

satisfaction with Department customer service 

2004 67 66 Target not met 

2003 Set 

baseline 

Pending Data expected 

10/2005 

1.3.3 Of eligible children, the percentage using 

supplemental educational services under the 

provisions of ESEA Title I 2004 Baseline 

+ 5 PP 

Pending Data expected 

12/2005 

PP = percentage point 

1.9 The proportion of school-adopted approaches that have 

strong evidence of effectiveness compared to programs and 

interventions without such evidence. 

Fiscal Year Actual 

2005 Not available 

Data for 2005 were not collected. 

U.S. Department of Education, Institute of Education Sciences, 

National Center for Education Research survey. 
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Sources 

1.2.1a U.S. Department of Education, Consolidated State Performance Report, grantee 

submissions. 

1.2.4 U.S. Department of Education, Grantee Satisfaction Survey, 2005. 

1.3.3 U.S. Department of Education, Evaluation of Title I Accountability and School 

Improvement Efforts (TASSIE): Findings From 2002–2003 and 2003–2004.
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U.S. Department of Education FY 2005 Performance and Accountability Report

Goal 1: Create a Culture of Achievement 

Findings and Recommendations From 

Program Evaluations, Studies, and Reports 

Information that the Department uses to inform management and program improvements 

comes from many sources, including evaluations, studies, and reports that are Departmentsponsored studies and those from the Government Accountability Office (GAO) and the 

Office of Inspector General (OIG). The following evaluations, studies, and reports were 

completed during FY 2005. 

America's Charter Schools: Results From the NAEP 2003 Pilot Study

This snapshot study by the National Center for Education Statistics (NCES) determined that 

charter schools have considerable variation in student and school characteristics and that 

their unique qualities require additional information to be collected by future surveys. One 

key finding concluded that in both reading and mathematics, the performance of charter 

school fourth-grade students with similar racial and ethnic backgrounds was not measurably 

different from those in other public schools. (See p. 76 for a summary of this report.) 

Charter Schools: To Enhance Education's Monitoring and Research, More Charter 

School-Level Data Are Needed (GAO-05-5)

Under No Child Left Behind, charter schools are subject to the same performance 

requirements as other public schools, but some flexibilities are permitted. This report 

examines the ways states allow flexibility for charter schools, the ways states promote 

accountability for performance and financial integrity, and the roles that No Child Left 

Behind and the Department play in holding charter schools accountable. Of the states that 

were surveyed, most provided flexibility by releasing charter schools from some traditional 

public school requirements. (See p. 77 for a summary of this report.) 

Evaluation of the D.C. Opportunity Scholarship Program: First Year Report on 

Participation

The D.C. Opportunity Scholarship Program is the first federal initiative to provide vouchers 

for grades K–12 to families who live in the District of Columbia and who are at or below 

185 percent of the federal poverty line. The vouchers enable families to send their children 

to private schools of their choice. In SY 2004–05, applications were received from 

1,848 students with about 53 percent of all private schools in the District participating in the 

program. (See p. 78 for a summary of this report.) 

Evaluation of the Public Charter Schools Program: Final Report

Since 1995, the Public Charter Schools program has provided funding to plan, develop, and 

implement charter schools and to assist successful charter schools in disseminating best 

practices. This report provides a descriptive examination of the Public Charter Schools 

program and looks at the growth of the charter schools movement in the United States. 

Charter schools tend to have greater autonomy over their curricula, budgets, and teaching 

staff than do traditional public schools. Charter schools, overall, tend to be smaller, more 
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U.S. Department of Education FY 2005 Performance and Accountability Report

likely to serve minority and low-income students, and more likely to have teachers from 

minority backgrounds. (See p. 79 for a summary of this report.) 

No Child Left Behind Act: Education Needs to Provide Additional Technical 

Assistance and Conduct Implementation Studies for School Choice Provision 

(GAO-05-7)

The school choice provisions of the No Child Left Behind Act apply to schools that receive 

Title I funds and that have not met state performance goals for two consecutive years. 

Students in such schools must be offered the choice to transfer to another school in their 

district. This report reviews the first two years of implementation of No Child Left Behind

school choice provisions. About 31,000 students transferred under choice options in 

SY 2003–04. (See p. 80 for a summary of this report.) 

Case Studies of Supplemental Services Under the No Child Left Behind Act: 

Findings from 2003–04. 

The No Child Left Behind Act provides that children from low-income families enrolled in 

Title I schools that have not made adequate yearly progress for three years or more receive 

supplemental services, including tutoring, remediation, and other academic instruction. 

This report presents findings from case studies conducted on a sample of six states and nine 

districts during SY 2003–04, the second year that the supplemental services provisions of 

No Child Left Behind had been in effect. The number of supplemental service providers 

approved for SY 2003–04 increased in all six states, in line with a nationwide increase of 

about 90 percent. In SY 2003–04, the amount of Title I, Part A, allocation districts set aside 

for choice-related transportation and supplemental services ranged from 2 to 21 percent. 

(See p. 81 for a summary of this report.) 
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U.S. Department of Education FY 2005 Performance and Accountability Report

Study of Charter Schools' NAEP Results 

Report Title 

America's Charter Schools: Results From the NAEP 2003 Pilot Study (U.S. Department of 

Education, National Center for Education Statistics) December 2004.

Overview 

The National Center for Education Statistics (NCES) conducted a pilot study of America's 

charter schools and their students as part of the 2003 NAEP reading and mathematics 

assessments of fourth-graders. The study included 150 charter schools. Charter schools 

have considerable variation in student and school characteristics. Because the study was a 

snapshot of the schools, it could not capture all of the unique characteristics of the 

individual charter schools. Additional information will be collected to supplement the NAEP 

survey information. 

Findings in Reading 

• There was no overall measurable difference between the reading scores of charter 

school students and other public school students. 

• Female students in charter schools scored lower, on average, in reading than female 

students in other public schools.

• Charter school students eligible for free or reduced-price school lunch scored lower in 

reading than eligible students in other public schools.

• The reading scores for white, black, and Hispanic students in charter schools were not 

measurably different from those for students with the same racial/ethnic background 

in other public schools.

Findings in Mathematics 

• Both male and female charter school students had a lower overall average score in 

mathematics than students in other public schools.

• The average score for charter school students who were eligible for free or reducedprice school lunch was lower than that of their peers in other public schools.

• Students who attended charter schools in central cities scored lower on average than 

students who attended other public schools in similar locations.

• The percentages of students at or above Basic and at or above Proficient were lower in 

charter schools than in other public schools.

Recommendations 

The report made no recommendations.
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U.S. Department of Education FY 2005 Performance and Accountability Report

Report on the Quality of Charter Schools’ School-Level Data 

Report Title 

Charter Schools: To Enhance Education's Monitoring and Research, More Charter SchoolLevel Data Are Needed (GAO-05-5) January 2005.

Overview 

Under the No Child Left Behind Act, charter schools are subject to the same performance 

requirements as other public schools, but the act allows some flexibilities where permitted 

by state law. This report examined how states allow flexibility in design and operation, how 

states promote accountability for school performance and financial integrity in their charter 

school systems, the implications of No Child Left Behind for charter schools, and the role the 

Department plays in charter school accountability for school performance and financial 

integrity. 

Findings 

• Of the 39 states surveyed, most provided flexibility by releasing charter schools from 

some traditional public school requirements. 

• About half of the 39 states reported having primary responsibility for enforcing school 

improvement actions for charter schools that did not achieve performance goals under 

No Child Left Behind, and a third reported having primary responsibility for monitoring 

charter schools' financial situations. 

• Though the Department must ensure that charter schools receive timely payment of 

federal grant funds, it focuses its monitoring and data collection efforts on states 

rather than on individual schools. 

Recommendations 

• The Department should support implementation of the Performance-Based Data 

Management Initiative's financial performance information component to assist states 

in developing automated financial information systems to measure and track the 

disbursement of funds to the charter schools. 

• The Department should require Charter School program grantees to include in their 

annual performance reports standard indicators of program accomplishment, 

especially the number of schools started through the use of grant funds. 

• The Department's planned charter school impact evaluation should include an analysis 

of the effects of accountability practices on charter schools' performance. 

Department's Response 

• The Department agrees to expand its impact evaluation design to include a review of 

authorizers' oversight and accountability practices. 

• The Department will look more closely at selected state financial information systems 

to assess the degree of burden in tracking financial information to the school level. 

• The Department will seek to include standard indicators of program accomplishments 

in its annual performance report. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

Evaluation of School Choice Option for the District of Columbia 

Report Title 

Evaluation of the D.C. Opportunity Scholarship Program: First Year Report on Participation 

(U.S. Department of Education, Institute of Education Sciences) April 2005. 

Overview 

The District of Columbia School Choice Incentive Act of 2003, passed by the Congress in 

January 2004, established the D.C. Opportunity Scholarship Program. This is the first 

federal initiative to provide K–12 education vouchers to families living in the District of 

Columbia and having an income at or below 185 percent of the federal poverty level to 

enable them to send their children to private schools of choice. In SY 2004–05, applications 

were received from 1,848 eligible students. 

Findings 

• Of the 109 private schools in the District of Columbia, 58 participated in the voucher 

program in its first year, representing 53 percent of all private schools in the District.

• All but four of the schools made new slots available for voucher recipients. 

• Four schools were willing to enroll voucher students only if they had been previously 

accepted to the school. 

• Seventy-two percent of the eligible applicants were attending public school in 

SY 2003–04, while 28 percent were already attending private schools but met the 

statutory eligibility requirement. 

• Fifty-one percent of the participating private schools were Roman Catholic, 21 percent 

were various non-Catholic religions, and 28 percent were independent. 

• Most participating private schools served a higher proportion of students of color than 

nonparticipating private schools. 

• About 70 percent of the participating schools charged tuitions that were under the 

$7,500 maximum provided by the federal scholarship program. 

Recommendations 

No recommendations are available at this time. This is the first in a series of reports on the 

D.C. Opportunity Scholarship Program and provides an important foundation for the future 

analysis of program impacts. 
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Evaluation of the Public Charter Schools Program 

Report Title 

Evaluation of the Public Charter Schools Program: Final Report (U.S. Department of 

Education, Policy and Program Studies Service) November 2004.

Overview 

Since 1995, the Public Charter Schools program has provided funding to plan, develop, and 

implement charter schools and to assist successful charter schools in disseminating best 

practices to other public schools. This evaluation, based on three years of data collected in 

SY 1999–2000, SY 2000–01, and SY 2001–02, provides a descriptive examination of the 

program and documents the evolution of the charter school movement. 

Findings 

• While growth in the number of states with charter legislation has tapered off, the 

amount of Public Charter Schools program awards to states has increased, and the 

number of charter schools continues to grow. 

• State charter school offices have responsibilities to monitor charter schools, but most 

states have limited staff to perform these functions. 

• Only one-third of charter schools automatically receive waivers from state policies and 

regulations, but many schools receive waivers on a case-by-case basis. 

• Compared with traditional public schools, charter schools are smaller and more likely 

to serve minority and low-income students but less likely to serve students in special 

education. 

• Charter schools, by design, have greater autonomy over their curricula, budgets, and 

teaching staff than do traditional public schools. 

• Teachers in charter schools are more likely to be African-American; more likely to 

participate in a variety of professional development activities; and less likely to meet 

state certification standards than traditional public school teachers. 

• While this study does not examine the effect of charter schools on student learning, in 

five case studies, charter schools were less likely to meet state student academic 

performance standards than traditional public schools. 

• Charter schools are more likely than traditional public schools to have high levels of 

parent involvement. 

Recommendations 

• Future studies should focus on the extent to which charter schools serving high 

proportions of educationally disadvantaged students exhibit improved academic 

performance over time. 

• States should develop an adequate infrastructure to provide administrative oversight, 

assistance in meeting state or federal regulations, and special education services to 

students with disabilities who attend charter schools. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

Report on the Implementation of School Choice Provisions 

Report Title 

No Child Left Behind Act: Education Needs to Provide Additional Technical Assistance and 

Conduct Implementation Studies for School Choice Provision (GAO-05-7) December 2004.

Overview 

The school choice provisions of the No Child Left Behind Act apply to schools that receive 

Title I funds and have not met state performance goals for two consecutive years. Students 

in such schools must be offered the choice to transfer to another school in the district. The 

Government Accountability Office reviewed the first two years of implementation of No Child 

Left Behind school choice options and reported to the Congress the number of Title I schools 

and students that have been affected nationally, the experiences of selected school districts 

in implementing choice, and the guidance and technical assistance provided by the 

Department. 

Findings 

• About 1 in 10 of the nation's 50,000 Title I schools were required to offer school 

choice in each of the first two years since enactment of the act. 

• About 1 percent of eligible children, or 31,000 students, transferred under choice 

options in SY 2003–04. 

• Proportionately lower percentages of transferring students were minority, and lower 

percentages were from low-income families. 

Recommendations 

• The Department should monitor issues related to limited classroom capacity and 

consider whether additional flexibility or guidance on capacity might be warranted. 

• The Department should collect and disseminate examples of successful strategies to 

address capacity limitations and information on the costs of these strategies and assist 

states in developing strategies for better informing parents about school choice 

options. The Department should identify, for its student outcome study, the 

methodology that has the greatest potential to identify the effects of school choice 

transfer on students' academic achievement. 

Department's Response 

• The Department is focusing on expanding capacity for public school choice through 

such large discretionary grant programs as the Charter Schools Grants program, the 

Magnet Schools Assistance program, and the Voluntary Public School Choice program, 

as well as through funding to organizations to provide information and resources on 

choice on a national level. 

• The Department assists states and districts in developing strategies for better 

informing parents about school choice options by collecting and disseminating best 

practices, and by posting tools and templates online. The Department is working to 

design a rigorous evaluation of student outcomes associated with the participation in 

the Title I school choice options.
DRAFT Key Measures Goal 2 

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U.S. Department of Education FY 2005 Performance and Accountability Report

Study of Supplemental Services 

Report Title 

Case Studies of Supplemental Services Under the No Child Left Behind Act: Findings from 

2003-04 (U.S. Department of Education, Policy and Program Studies Service) September 

2005.

Overview 

The No Child Left Behind Act provides that children from low-income families enrolled in 

Title I schools that have not made adequate yearly progress for three years or more receive 

supplemental services, including tutoring, remediation, and other academic instruction. 

Each state is required to develop criteria for selecting supplemental service providers and to 

publish a list of approved providers. School districts are responsible for notifying parents of 

their children's eligibility to receive supplemental services and for providing parents with 

information to select appropriate providers. This report presents findings from case studies 

conducted on a sample of six states and nine districts during SY 2003–04, the second year 

that the supplemental services provisions of No Child Left Behind had been in effect. 

Findings 

• The number of supplemental service providers approved for SY 2003–04 increased in 

all six states, in line with a nationwide increase of about 90 percent. 

• State supplemental services coordinators reported that small districts and rural 

districts continued to be underserved, compared with urban districts. 

• In SY 2003–04, the amount of Title I, Part A, allocations districts set aside for choicerelated transportation and supplemental services ranged from 2 to 21 percent. 

• The average district per pupil expenditure for supplemental services was $1,408 in 

SY 2003–04. 

• In SY 2003–04, the majority of providers interviewed for this study hired only certified 

teachers to staff their programs. 

• Many parents reported that they had received enough information to choose good 

providers for their children and were satisfied with the services, while nearly as many 

reported that they were confused about the services available to them. 

Recommendations 

• Districts need guidance on ways to increase participation rates in supplemental 

services. 

• Districts need guidance on monitoring and evaluating providers' performance and 

assessing provider quality and impact. 

• Districts need support in refining their outreach and communications efforts to 

parents. 

• Both districts and providers need guidance on improved payment policies that ensure 

providers are paid fairly when students do not attend regularly. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

Goal 2: Improve Student Achievement 

Performance Goals 

Reading Achievement

Reading is the keystone of learning. Reading First is the No Child Left Behind national 

initiative to improve kindergarten through third grade student reading by supporting state 

and local educational agencies in establishing reading programs that are grounded in 

scientifically based reading research. The National Assessment of Educational Progress 

reports an improvement in reading achievement: the average reading score at age nine was 

higher in 2004 than in any previous assessment year. 

Mathematics Achievement

To raise the number of highly qualified teachers in mathematics and science and the 

number of students reaching proficiency in those subjects, school districts use federal 

resources from the Mathematics and Science Partnership program. The program connects 

university professors, business leaders, and staff from nonprofit or for-profit organizations 

with educators from high-need school districts to improve science and mathematics 

learning. The results from a descriptive analysis of successful applications to the program 

indicate that this partnership program is on track in meeting its goals. 

High School Completion

“How can a nation that invented the light bulb, created vaccines to eradicate polio, put a 

man on the moon and conceived the Internet not have a good handle on how many of its 

students drop out of high school?” says Deputy Secretary Ray Simon. A consensus for high 

school reform exists among governors, business leaders, for-profit and nonprofit leaders, 

and the Department, and reform “must start with an honest calculation of graduation rates.” 

The Department has adopted an interim formula for calculating states’ high school 

graduation rates, and we will post these rates on our Web site along with state-reported 

graduation rates. 

Academic Proficiency

In a nationally representative sample of high school sophomores, 72 percent of teenagers 

expect to graduate from a four-year college program. Most students (87 percent) said 

getting good grades was important or very important to them, with blacks (62 percent) and 

Hispanics (53 percent) more likely than whites (47 percent) to affirm the importance of 

getting good grades. In response to this and additional evidence of high expectations 

reported in A Profile of the American High School Sophomore in 2002 by the National Center 

for Education Statistics, Secretary Spellings said, “This report shows that we as a society 

have done an excellent job selling the dream of attending college, but we have to make 

sure that we are preparing high school students to succeed once they get in the door.” The 

Department has begun a reform initiative that will extend the accountability provisions of No 

Child Left Behind to high schools. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

Advanced Placement Participation

Advanced Placement courses are typically considered among the most rigorous high school 

classes in the curriculum. In 2005, over 15,000 high schools offered Advanced Placement 

classes, a 36 percent increase in the last decade. Students took over 2 million Advanced 

Placement exams in May 2005, a 12 percent increase over last year and 66 percent more 

than five years ago. Growth of the program has been accelerated by a growing national 

interest in Advanced Placement classes and by provisions in No Child Left Behind that 

support state programs to increase Advanced Placement participation. 

Teacher Quality

No Child Left Behind defines “highly qualified teacher” and requires that all public school 

teachers of core academic subjects meet the qualifications outlined in the definition by 

SY 2005–06. For the first time, the Congress legislated that teachers in every core 

academic class have a bachelor’s degree, have a state license or a certificate, and be 

competent in the subjects they teach. The recently reauthorized Individuals with Disabilities 

Education Act also addresses teacher qualification and requires all special educators who 

teach core academic subjects to be highly qualified. 

Resources provided to states to meet the goal of a “highly qualified teacher” in every class 

include the $3 billion Improving Teacher Quality State Grants and the $68 million Teacher 

Quality Enhancement program. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

Goal 2: Improve Student Achievement 

Key Measures 

Improving student achievement and closing the achievement gap are the cornerstones of 

the Department’s work. In FY 2005, the Department administered 76 distinct programs 

that supported Goal 2, Improve Student Achievement. From the master set of measures 

that help determine these programs’ effectiveness, the Department identified 19 key 

measures to report our progress. Results on these key measures are shown below. 

See p. 58 for an explanation of the documentation fields for the key measures. 

Reading Achievement 

Reading is the keystone of learning. Reading First is the No Child Left Behind national 

initiative to improve kindergarten through third grade student reading achievement by 

supporting state and local educational agencies in establishing reading programs that are 

grounded in scientifically based reading research. During FY 2002 through FY 2005, 

$3.96 billion has been expended on this initiative. The National Assessment of Educational 

Progress Long-Term Trend Assessment reports improvement in reading achievement: the 

average reading score at age nine was higher in 2004 than in any previous assessment 

year. 

Local school implementation of Reading First programs began in SY 2002–03 with three 

states implementing the program. About half of the remaining states began programs in 

SY 2003–04 and the other half in SY 2004–05. Initial results from 29 states far enough 

along in implementation to report performance for SY 2003–04 show that 43 percent of 

first-grade students in Reading First schools met or exceeded proficiency on fluency 

measures. These early data will serve as a baseline for the ongoing measurement of 

program success. In addition to fluency data, collected at grades 1 through 3, reading 

comprehension data are also being gathered and will become available when Reading First 

grantees submit their first annual performance reports in 2005. Reading First program 

measures and preliminary data are available from the Reading First State Grants 

performance report. 

Additional federal support for reading instruction goes to states through the large formula 

grants for disadvantaged students (Title I Grants to Local Educational Agencies), for special 

education (Special Education Grants to States), and for vocational education (Vocational 

Education State Grants). 

To measure the overall effectiveness of the Department’s programs that support improving 

student achievement, we collected data on how well low-income fourth-grade students and 

fourth-grade students with disabilities performed on state reading assessments and on the 

biennial National Assessment of Educational Progress. A large number of states reported 

gains in their state reading assessment results. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

Analysis of Progress. Thirty-four states reported data for both SY 2002–03 and 

SY 2003–04 on the percentage of fourth-grade low-income students who reached 

proficiency or above on state reading assessments, and 32 states reported such data on 

fourth-grade students with disabilities. (States not reporting may have not yet 

implemented their fourth-grade assessments; states are not required to test all grades from 

3 through 8 until SY 2005–06.) Of the states reporting data for both years, 25 reported an 

increase in the percentage of fourth-grade low-income students achieving proficiency or 

above in reading in the second year, and 24 states reported an increase for students with 

disabilities. 

The implications of these statistics are encouraging. About three-quarters of states that 

have completed two years of assessments are seeing improvements in the numbers of 

students achieving proficient or better on reading assessments. As more states fully 

implement their assessment systems, the Department expects that the number of states 

reporting increases will grow. 

Data Quality. The universe for these measures is the 52 entities (50 states, the District of 

Columbia, and Puerto Rico) that are required by No Child Left Behind to administer 

reading/language arts assessments in grades 3 through 8 and high school by SY 2005–06. 

For each state reporting two sequential years of data, the Department compares the 

percentage of students at or above proficient in a particular disaggregated group to see if 

there was an increase from the first year to the second. Comparisons are done on statelevel percentages, with no attention to matching individual student records. The group of 

entities not reporting an increase in FY 2004 includes those that have not yet implemented 

their fourth-grade reading/language arts assessment as well as those showing a decrease or 

no change. 

Target Context. The FY 2005 targets of 25 were set prior to the receipt of any data. The 

full battery of state assessments in reading/language arts and mathematics required by No 

Child Left Behind is not due to be in place until the end of SY 2005–06. 

Related Information. State-level information on SY 2002–03 assessments is available at 

http://www.ed.gov/about/reports/annual/nclbrpts.html. Results for SY 2003–04 will be 

posted in the coming months. 

Information specific to state assessments for students with disabilities can be obtained at 

http://www.ed.gov/news/newsletters/extracredit/2005/05/0510.html. 

2.1 Title I Grants to Local Educational Agencies. 

The number of states reporting an increase in the 

percentage of fourth-grade low-income students 

meeting state performance standards by achieving 

proficiency or above in reading on state 

assessments. 

2.2 Special Education Grants to States. The 

number of states reporting an increase in the 

percentage of fourth-grade students with disabilities 

meeting state performance standards by achieving 

proficiency or above in reading on state 

assessments. 

Fiscal Year Actual Fiscal Year Actual 

2004 25 2004 24 

2005 Target is 25. 2005 Target is 25. 

Data for 2005 are pending. Data for 2005 are pending. 

U.S. Department of Education, Consolidated State Performance Report, official state submissions. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

Information from the Government Accountability Office’s No Child Left Behind: Most 

Students with Disabilities Participated in Statewide Assessments, but Inclusion Option Could 

Be Improved (2005, GAO-05–618) can be obtained at 

http://www.gao.gov/new.items/d05618.pdf. 

Additional Information. Under existing No Child Left Behind provisions, a state may 

provide alternate achievement standards and alternate assessments for up to 1 percent of 

its school-aged population with the most significant cognitive disabilities and may exclude 

them from adequate yearly progress calculations. Additionally, under a policy the 

Department released in May 2005, an additional 2 percent of students with disabilities are 

allowed to take modified assessments, geared toward their abilities, as long as the state is 

working to provide better instruction and improved assessments for those students. Until 

the new policy becomes regulation, states may participate by providing evidence that they 

meet the specific criteria and requesting a waiver. By the end of FY 2005, 42 states had 

requested such a waiver and 31 of those requests had been approved. Results of a recent 

Government Accountability Office study (GAO-05–618) indicate that in SY 2003–04, at least 

95 percent of students with disabilities participated in statewide reading assessments in 41 

of the 49 states that provided data. 

Data for FY 2005 will be available in September 2006. 

Analysis of Progress. Students classified as having a disability made the strongest gains 

on the 2005 National Assessment of Educational Progress (NAEP); these students 

2.3 Title I Grants to Local Educational Agencies. 

The percentage of low-income fourth-grade students 

scoring at or above Basic in reading on the National 

Assessment of Educational Progress (NAEP). 

2.4 Title I Grants to Local Educational Agencies. 

The percentage of low-income fourth-grade students 

scoring at or above Proficient in reading on the 

National Assessment of Educational Progress 

(NAEP). 

Fiscal Year Actual Fiscal Year Actual 

2000 38 2000 13 

2002 46 2002 16 

2003 44 2003 15 

2005 46 2005 15

We exceeded our 2005 target of 43. We did not meet our 2005 target of 17. 

2.5 Special Education Grants to States. The 

percentage of fourth-grade students with disabilities 

scoring at or above Basic in reading on the National 

Assessment of Educational Progress (NAEP). 

2.6 Reading First State Grants. The percentage of 

fourth-grade students scoring at or above Proficient

in reading on the National Assessment of 

Educational Progress (NAEP). 

Fiscal Year Actual Fiscal Year Actual 

2000 22 2000 28 

2002 29 2002 30 

2003 29 2003 30 

2005 33 2005 30

We made progress toward our 2005 target of 35. We did not meet our 2005 target of 32. 

U.S. Department of Education, National Assessment of Educational Progress (NAEP). 
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U.S. Department of Education FY 2005 Performance and Accountability Report

experienced a six-point gain (on a 0-500 point scale) over their 2003 assessment score. 

Gains in fourth-grade reading were also reported for racial/ethnic minority groups; on 

average blacks, Hispanics, American Indian, and Asian American/Pacific Islanders gained 

from one to three points from 2003 to 2005. Low-income students’ scores increased by two 

points in 2005. 

NAEP reports results as scores on a 0-500 point scale and as achievement levels: Basic, 

Proficient, and Advanced. The Department uses NAEP Basic and Proficient achievement 

levels for national public school students to report on its performance measures. In 2005, 

we exceeded our targets for the percentage of low-income fourth-grade students who 

scored at or above Basic, but we did not meet the targets we set for our additional three 

measures. We made progress in meeting our target for the percentage of students with 

disabilities scoring at or above Basic, but the percentage of all fourth-graders and of lowincome fourth graders scoring at or above Proficient remained flat. 

While we continue to see progress on overall NAEP scores, we also understand that it will 

take time for the real change promoted by No Child Left Behind’s emphasis on reading 

instruction grounded in scientifically based research to be fully realized. To press on toward 

stronger, long-lasting gains in early elementary reading success and to lay a foundation for 

better NAEP reading scores, the Department, in FY 2006, will continue to make early 

reading achievement its highest elementary school priority. 

Data Quality. In 2005, the National Center for Education Statistics (NCES) reported two 

national assessments of fourth-grade reading: the main, biennial National Assessment of 

Educational Progress assessment and the Long-Term Trend NAEP assessment. The main, 

biennial assessment reported aggregated scores from the sample of students tested in each 

state; the long-term trend assessment collected data from an independently selected 

national sample. In the 2005 main, biennial reading assessment, nationally representative 

samples that included approximately 2,500 to 3,000 students per state made up the more 

than 165,000 fourth-grade participants. The Department’s performance measures reflect 

the results of the main, biennial assessment. The key result for Goal 2, reported in the 

Management’s Discussion and Analysis of this document, references data from the Long 

Term Trend Assessment. Data from the main assessment and the Long-Term Trend 

Assessment are not comparable because the tests use different sampling strategies and 

different questions. 

No Child Left Behind requires that all states participate in the main, biennial NAEP 

mathematics and reading assessments. The 2005 NAEP reading assessment was 

administered in a sample of schools in every state from January to March 2005. 

The NAEP reading assessment examines four different aspects of reading: forming a 

general understanding, developing interpretations, making reader/text connections, and 

examining content and structure. It also assesses reading for literacy experience, for 

information, and for task performance. 

NAEP test results for students with disabilities are based on students who were assessed 

and cannot be generalized to the total population of such students. 

Related Information. Information on NAEP results can be obtained at 

http://nces.ed.gov/nationsreportcard/. To replicate the NAEP data reported in our 
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U.S. Department of Education FY 2005 Performance and Accountability Report

performance measures, go to http://nces.ed.gov/nationsreportcard/ and click on NAEP 

DATA, Go to Advanced, Grade 4, Reading, National, National Public, Major Reporting Groups 

(select the appropriate group from dropdown list), Choose Years, Format Table, 

achievement level (cumulative), Go to Results. 

Resources such as demonstration booklets, assessment procedures, frameworks, state 

profiles, and item maps can be obtained at 

http://nationsreportcard.gov/reading_math_2005/s0046.asp?printver=. 

Additional Information. Future administrations of the main NAEP fourth-grade reading 

assessments are scheduled for 2007 and 2009. 

Mathematics Achievement 

To raise the number of highly qualified teachers in mathematics and science and to increase 

the number of students reaching proficiency in these subjects, school districts use federal 

resources from the Mathematics and Science Partnership program. The program connects 

university professors, business leaders, and staff from nonprofit or for-profit organizations 

with educators from high-need school districts to improve science and mathematics 

learning. The results from a descriptive analysis of successful applications to the program 

indicate that this partnership program is on track in meeting its goals. 

Highlights of the descriptive analysis show 90 percent of the partnership projects link 

content to state mathematics and science standards. Ninety-two percent offer teachers 

summer institutes with an average of 64 hours of instruction and 48 hours of follow-up 

instruction. Two-thirds administer content knowledge tests to teachers, conduct 

observations, and make pretest and posttest comparisons, and 92.2 percent include 

partnerships with professors from mathematics or science departments in key planning or 

oversight roles. The preliminary evaluation pointed to one potential problem area for many 

of the projects: the quality of project evaluation plans. In response to this finding, the 

Department enlisted the Coalition for Evidence-Based Policy to produce “How to Solicit 

Rigorous Evaluations of Mathematics and Science Partnerships Projects” for state 

coordinators of the programs. 

The first Mathematics and Science Partnership program grantee performance reports, 

available January 2006, will contain information on outcomes. The program’s list of 

measures and actual data is available on the Mathematics and Science Partnerships Web 

site. 

The Department measures student progress in mathematics and science proficiency by 

collecting data on the progress of selected groups of eighth-grade students in reaching 

proficiency on state mathematics assessments and mathematics assessments administered 

by the National Assessment of Educational Progress. A large number of states reported 

gains in their state mathematics assessment results; results on the 2005 main, biennial 

National Assessment of Educational Progress (NAEP) also reflect student gains in 

mathematics achievement. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

Analysis of Progress. Thirty-eight states reported data for both SY 2002–03 and 

SY 2003–04 on the percentage of eighth-grade low-income students who reached 

proficiency or above on state mathematics assessments, and 30 states reported such data 

for eighth-grade students with disabilities. (States not reporting may have not yet 

implemented their fourth-grade assessments; states are not required to test all grades from 

three through eight until SY 2005–06.) Of the states reporting data for both years, 30 

reported an increase in the percentage of eighth-grade low-income students achieving 

proficiency or above in mathematics in the second year and 26 reported an increase for 

students with disabilities. 

The number of states reporting increases in proficiency for both groups of students indicates 

movement in the right direction. As states fully implement their assessment systems, the 

Department expects that the number of states reporting increases will grow. 

Data Quality. The universe for these measures is the 52 entities (50 states, the District of 

Columbia, and Puerto Rico) that are required by No Child Left Behind to administer 

mathematics assessments in grades 3 through 8 and high school by SY 2005–06. For each 

state reporting two sequential years of data, the Department compares the percentage of 

students at or above proficient in a particular disaggregated group to see if there was an 

increase from the first year to the second. Comparisons are done on state-level 

percentages, with no attention to matching individual student records. The group of entities 

not reporting an increase in FY 2004 includes those that have not yet implemented their 

eighth-grade mathematics assessment as well as those showing a decrease or no change. 

Target Context. The FY 2005 targets of 25 were set prior to the receipt of any data; 

consequently, the FY 2005 target is lower than the 2004 actual performance. The full 

battery of state assessments in reading/language arts and mathematics required by No 

Child Left Behind is not due to be in place until the end of SY 2005–06. 

Related Information. State-level information on SY 2002–03 assessments is available at 

http://www.ed.gov/about/reports/annual/nclbrpts.html. Results for SY 2003–04 will be 

posted in the coming months. 

Information specific to state assessments for students with disabilities can be obtained at 

http://www.ed.gov/news/newsletters/extracredit/2005/05/0510.html. 

Additional Information. Under existing No Child Left Behind provisions, a state may 

provide alternate achievement standards and alternate assessments for up to 1 percent of 

2.7 Title I Grants to Local Educational Agencies. 

The number of states reporting an increase in the 

percentage of eighth-grade low-income students 

meeting state performance standards by achieving 

proficiency or above in mathematics on state 

assessments. 

2.8 Special Education Grants to States. The 

number of states reporting an increase in the 

percentage of eighth-grade students with disabilities 

meeting state performance standards by achieving 

proficiency or above in mathematics on state 

assessments. 

Fiscal Year Actual Fiscal Year Actual 

2004 30 2004 26 

2005 Target is 25. 2005 Target is 25. 

Data for 2005 are pending. Data for 2005 are pending. 

U.S. Department of Education, Consolidated State Performance Report, official state submissions. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

its school-aged population with the most significant cognitive disabilities and may exclude 

them from adequate yearly progress calculations. Additionally, under a policy the 

Department released in May 2005, an additional 2 percent of students with disabilities are 

allowed to take modified assessments, geared toward their abilities, so long as the state is 

working to provide better instruction and improved assessments for those students. Until 

the new policy becomes regulation, states may participate by providing evidence that they 

meet the specific criteria and requesting a waiver. By the end of FY 2005, 42 states had 

requested such a waiver and 31 of those requests had been approved. Data for FY 2005 

will be available in September 2006. 

Analysis of Progress. Average scores of all eighth-grade student groups that took the 

2005 mathematics National Assessment of Educational Progress (NAEP) showed gains from 

the 2003 assessment. Trends over time on the eighth-grade mathematics assessment 

showed even stronger and more persistent gains. Average eighth-grade scores in 2005 

increased since the first assessment year, 1990, by 16 points on a 0 to 500 point scale. 

The white, black, Hispanic, American Indian, and Asian American/Pacific Islander 

racial/ethnic groups of students had higher average scores in 2005 than in any previous 

assessment year. Low-income students scored higher on average in 2005 than in any 

previous assessment year, as did students with disabilities. 

NAEP results are reported as scores on a 0-500 point scale and as achievement levels: 

Basic, Proficient, and Advanced. Achievement level results show that the percentage of 

eighth-graders performing at or above Basic increased 17 percentage points in 2005 

(69 percent) from 1990 (52 percent), and the percentage of eighth-graders performing at 

or above Proficient increased from 15 to 30 percent. 

The Department’s mathematics performance measures, which target increases in 

achievement levels for selected groups of public school eighth-grade students, record the 

progress these groups made on the 2005 assessment. We exceeded our target for lowincome students who achieved at the Basic level, met the target for low-income students 

2.9 Title I Grants to Local 

Educational Agencies. The 

percentage of low-income 

eighth-grade students scoring at 

or above Basic in mathematics 

on the National Assessment of 

Educational Progress (NAEP). 

2.10 Title I Grants to Local 

Educational Agencies. The 

percentage of low-income 

eighth-grade students scoring at 

or above Proficient in 

mathematics on the National 

Assessment of Educational 

Progress (NAEP). 

2.11 Special Education Grants 

to States. The percentage of 

eighth-grade students with 

disabilities scoring at or above 

Basic in mathematics on the 

National Assessment of 

Educational Progress (NAEP). 

Fiscal Year Actual Fiscal Year Actual Fiscal Year Actual 

2000 41 2000 10 2000 20 

2003 47 2003 11 2003 29 

2005 51 2005 13 2005 31

We exceeded our 

2005 target of 45. We met our 2005 target of 13. We made progress toward our 2005 target of 32. 

U.S. Department of Education, National Assessment of Educational Progress (NAEP). 
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U.S. Department of Education FY 2005 Performance and Accountability Report

who achieved at the Proficient level, and made progress on our target for students with 

disabilities who scored at the Basic level. 

To maintain the level of eighth-grade student progress in mathematics reported in shortterm trends on the biennial test between 2003 and 2005 and in long-term trends on the 

biennial test from 1990 to 2005 and to press forward toward greater gains, the Department 

intends to follow-up the 2005 release of its research findings on the effectiveness of 

curriculum-based interventions for improving mathematics achievement in middle schools 

with research reports on elementary curriculum-based interventions in mathematics. 

Data Quality. In 2005, the National Center for Education Statistics conducted two national 

assessments of eighth-grade mathematics: the main, biennial National Assessment of 

Educational Progress assessment and a Long-Term Trend assessment. The main, biennial 

assessment reported aggregated scores from the sample of students tested in each state; 

the Long-Term Trend Assessment collected data from an independently selected national 

sample. In 2005, nationally representative samples of about 162,000 eighth-grade 

students nationwide participated in the biennial mathematics assessment. The 

Department’s measures reflect results of the main, biennial assessment. Data from the 

main assessment and the Long-Term Assessment are not comparable because the tests use 

different sampling strategies and different questions. 

No Child Left Behind requires that all states participate in the main NAEP mathematics and 

reading assessments. The 2005 NAEP mathematics assessment was administered in a 

sample of schools in every state from January to March 2005. 

The NAEP mathematics assessment examines student knowledge of the following content: 

number sense, properties, and operations; measurement; geometry and spatial sense; data 

analysis, statistics, and probability; and algebra and functions. It includes knowledge of 

three types of mathematical abilities: conceptual understanding, procedural knowledge, and 

problem solving. 

NAEP test results for students with disabilities are based on students who were assessed 

and cannot be generalized to the total population of such students. 

Related Information. Information on NAEP results can be obtained at 

http://nces.ed.gov/nationsreportcard/. To replicate the NAEP data reported in our 

performance measures, go to http://nces.ed.gov/nationsreportcard/ and click on NAEP 

DATA, Go to Advanced, Grade 8, Mathematics, National, National Public, Major Reporting 

Groups (select the appropriate group from dropdown list), Choose Years, Format Table, 

achievement level (cumulative), Go to Results. 

Resources such as demonstration booklets, assessment procedures, frameworks, state 

profiles, and item maps can be obtained at 

http://nationsreportcard.gov/reading_math_2005/s0046.asp?printver=. 

Additional Information. Future eighth-grade NAEP mathematics assessments are 

scheduled for 2007 and 2009. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

High School Completion 

“How can a nation that invented the light bulb, created vaccines to eradicate polio, put a 

man on the moon, and conceived the Internet not have a good handle on how many of its 

students drop out of high school?” says Deputy Secretary Ray Simon. A consensus for high 

school reform exists among governors, business leaders, for-profit and nonprofit leaders, 

and the Department, and reform “must start with an honest calculation of graduation rates.” 

Accurate graduation rates are also crucial to meeting the regulations of No Child Left 

Behind; states are required to set high school graduation rate targets as one indicator for 

measuring a high school’s progress. 

One of the major complications for states in accurately calculating high school graduation 

rates is the lack of a comprehensive data collection system that can track students over 

time. Until states have the capacity to collect these data, the Department has committed to 

publishing two sets of state graduation rates: state-reported rates and standardized rates 

prepared by the Department. According to a Government Accountability Office report, as of 

July 2005, 12 states used a graduation rate definition referred to as the cohort definition, 

which tracks students from when they enter high school to when they leave. Thirty-two 

states used a definition based primarily on the number of dropouts over a four-year period 

and the number of graduates. For its calculation, the Department will use enrollment and 

other data that reside in the Common Core of Data at the National Center for Education 

Statistics. The Department’s formula, the averaged freshman graduation rate, calculates 

the number of high school graduates in a given year divided by the average of the number 

of students who entered the 8th grade five years earlier, the 9th grade four years earlier, 

and the 10th grade three years earlier. The Department’s calculations will provide a 

common measure, track very closely with true on-time graduation rates, and reveal where 

attention must be paid to ensure all students graduate from high school. The averaged 

freshman graduation rate is a transitional definition useful until all states have the capacity 

to collect individual student-level data. The Department’s formula is consistent with a 

formula devised by a high school reform task force created by the National Governors 

Association in 2005. The task force’s formula, which 45 governors have adopted, divides 

the number of graduates in a given year by the number of students entering the ninth grade 

for the first time four years before, plus the difference between the number of students who 

have transferred in and out over the same four years. 

For many policymakers, what comes next is a universal definition for dropout rates that 

would allow states to track missing and transferring students. Additionally, the GAO report 

recommends that the Department provide guidance on how to account for selected students 

in special programs and for students with disabilities. 

To help states remedy data collection difficulties, the Department has designed and is 

implementing the EDEN data system that will provide a common method of acquiring and 

exchanging data at the state, district, and school levels. 

To report on states’ success in moving high school students to graduation, the Department 

reports high school completion and dropout rates for students with disabilities. 

Data collected to report high school completion rates for students with disabilities reflects 

steady progress. A second set of data included in the National Longitudinal Transition 

Study-2, released in July 2005, provides an additional perspective on the scope of the 
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U.S. Department of Education FY 2005 Performance and Accountability Report

recent successes experienced by students with disabilities. The study reports that the 

incidence of students with disabilities completing high school rather than dropping out 

increased by 17 percentage points between 1987 and 2003. The experience of the cohort of 

students participating in the study also showed the following indicators of progress: core 

academics improved; grades were higher; age and grade-level match improved; and the 

students received more support services through their schools. 

Analysis of Progress. Trend data for 

this measure show that the nation is 

making steady progress in ensuring 

that students with disabilities graduate 

from high school and that their high 

school experience is within the 

mainstream curriculum. A 

Government Accountability Office 

report bolsters this sense of progress 

in its conclusion that of the states 

reporting, at least 95 percent of 

students with disabilities took 

statewide reading tests. 

Although high school completion rates 

for students with disabilities show 

improvement, similar gains may not 

have occurred in the total high school 

population. 

Data Quality. Prior to 2004, the number of students with disabilities exiting school 

excluded those who had moved but were not known to have continued in school. State data 

managers indicated that in most cases in which students moved and were not known to 

have continued in school, these students had actually dropped out of school. In 2004, the 

Department revised the method for computing graduation to include in the denominator 

students who had moved but were not known to have continued in school. The current 

calculation is the number of students with disabilities who graduate with a regular diploma 

divided by the number of students with disabilities who exit school for a given year, 

including students with disabilities who had moved but were not known to have continued in 

school. 

Target Context. Although this was a new measure for reporting in FY 2005, trend data 

were previously collected. The target for FY 2005 was set before the FY 2004 data were 

available. 

Related Information. Information about results for students with disabilities is included in 

the 25th Report to Congress on the implementation of the Individuals with Disabilities 

Education Act (IDEA) and is available at 

http://www.ed.gov/about/reports/annual/osep/2003/25th-exec-summ.pdf and 

http://www.ideadata.org/. 

Additional Information. Data for FY 2005 will be available in September 2006. 

2.12 Special Education Grants to States. The percentage 

of students with disabilities that graduate from high school 

with a regular high school diploma. 

Fiscal Year Actual 

1996 42 

1997 43 

1998 45 

1999 47 

2000 46 

2001 48 

2002 51 

2003 52 

2004 54 

2005 Target is 54. 

Data for 2005 are pending. 

U.S. Department of Education, Office of Special Education and 

Rehabilitative Services, Office of Special Education Programs, 

section 618 state-reported data. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

Recent state reports indicate that significantly fewer students are reported in the “moved 

but not known to have continued” category. Some of the improvement in graduation rates 

may be attributable to closer tracking by states, which has resulted in some students being 

reported as continuing in school who would formerly have been reported as exiting (i.e., 

reducing the denominator for the indicator and thereby increasing the percentage reported 

as graduating). 

Analysis of Progress. Dropout rates 

for students with disabilities are 

declining as graduation rates are 

increasing; the two statistics in 

conjunction with each other indicate 

the progress that is being made in 

improving education outcomes for 

students with disabilities. 

Data Quality. In 2004, the 

Department revised the method for 

computing the dropout rate to include 

in the numerator and the denominator 

students with disabilities who have 

dropped out and who have moved but 

are not known to have continued in 

school. The dropout rate for students 

with disabilities is calculated by dividing the number of students with disabilities (aged 14 

and older) who dropped out of school or moved (not known to have continued in education) 

by the total number of students with disabilities in the same age group who are known to 

have exited school, including those who graduated with a regular diploma, received a 

certificate, reached the maximum age for services, died, dropped out, or moved (not known 

to have continued in education). 

Target Context. While this was a new measure for reporting in FY 2005, trend data were 

previously collected. The target for FY 2005 was set before the FY 2004 data were 

available. 

Related Information. Information about results for students with disabilities is included in 

the 25th Report to Congress on the Implementation of the Individuals with Disabilities 

Education Act (IDEA) can be obtained at 

http://www.ed.gov/about/reports/annual/osep/2003/25th-exec-summ.pdf and 

http://www.ideadata.org/. 

Additional Information. Data for FY 2005 will be available in September 2006. 

Recent state reports indicate that significantly fewer students are reported in the “moved 

but not known to have continued” category. Some of the improvement in the dropout rate 

may be attributable to closer tracking by states, which has resulted in some students being 

reported as continuing in school who would formerly have been reported as exiting. 

2.13 Special Education Grants to States. The percentage 

of students with disabilities that drop out of school. 

Fiscal Year Actual 

1996 47 

1997 46 

1998 44 

1999 42 

2000 42 

2001 41 

2002 38 

2003 34 

2004 31 

2005 Target is 34. 

Data for 2005 are pending. 

U.S. Department of Education, Office of Special Education and 

Rehabilitative Services, Office of Special Education Programs, 

section 618 state-reported data. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

High School Academic Proficiency 

In a nationally representative sample of high school sophomores, 72 percent of teenagers 

said they expected to graduate from a four-year college program. On a scale of not 

important, somewhat important, important, and very important, most students (87 percent) 

said getting good grades was important or very important to them, with blacks (62 percent) 

and Hispanics (53 percent) more likely than whites (47 percent) to select very important as 

their response. This and additional evidence of high expectations reported in A Profile of the 

American High School Sophomore in 2002 evoked Secretary Spellings’ response: “This 

report shows that we as a society have done an excellent job selling the dream of attending 

college, but we have to make sure that we are preparing high school students to succeed 

once they get in the door.” 

The Department’s high school reform initiative began with national summits in 2004 and 

2005, which produced consensus goals for improving high school. President Bush, in his 

2006 budget request to the Congress, included more than $1.9 billion to fund a 

comprehensive strategy for high school reform. Programs slated to receive funding in the 

President’s proposed budget include the following: Striving Readers, Advanced Placement, 

State Scholars Capacity Building, Mathematics and Science Partnerships, High School 

Intervention, and High School Assessments. The presidential budget request would redirect 

funds from vocational education grants to the broader effort of comprehensive high school 

reform. 

The Department measured academic proficiency in high school by collecting data on the 

percentage of vocational concentrators meeting state-established academic standards. 

Analysis of Progress. Although we 

missed our 2004 target of 76, trend 

data show we are making progress in 

helping vocational students meet 

academic standards. 

Data Quality. While the definition of 

“vocational concentrator” varies from 

state to state, most states define a 

concentrator as a student who is 

enrolled in a threshold level of 

vocational education, which is usually 

represented as two or three vocational 

and technical education courses. 

As a third-tier recipient of these data, 

the Department relies on the states 

and local programs to collect and 

report data within published guidelines. The Department has hosted data and program 

quality workshops and held conference calls to help improve data measurement and data 

collection. We also established a Web site to foster discussion among states on 

accountability systems. During monitoring site visits in SY 2003–04, we increased our 

2.14 Vocational Education State Grants. The percentage 

of vocational concentrators meeting state-established 

academic standards. 

Fiscal Year Actual 

1998 33 

1999 45 

2000 44 

2001 70 

2002 71 

2003 75 

2004 75 

2005 Target is 77. 

We did not meet our 2004 target of 76. 

Data for 2005 are pending. 

U.S. Department of Education, Office of Vocational and Adult 

Education, Vocational Technical Education Annual Performance and 

Financial Report. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

emphasis on accountability and addressed issues on the policies and procedures used by the 

state to gather and verify data from local grantees and to ensure that the data received 

from local grantees are complete, accurate, and reliable. The Department also imposed 

conditions on the July 1, 2005, grants of numerous states that did not submit complete data 

and required them to submit detailed corrective action plans for obtaining complete data in 

the future before the states could receive their October 1, 2005, supplemental grants. 

Related Web Sites. Information about career and technical education can be obtained at 

http://www.ed.gov/about/offices/list/ovae/pi/cte/index.html and 

http://www.ed.gov/about/offices/list/ovae/resource/index.html. 

A Profile of the American High School Sophomore in 2002 is available at 

http://nces.ed.gov/pubsearch/pubsinfo.asp?pubid=2005338. 

Additional Information. Data for FY 2005 will be available in March 2006. 

Advanced Placement Participation 

Advanced Placement courses are typically considered among the most rigorous high school 

classes in the curriculum. Over 15,000 high schools offered Advanced Placement classes in 

2005, a 36 percent increase in the last decade. Students took over 2 million Advanced 

Placement exams in May 2005, a 12 percent increase over last year and 66 percent more 

than five years ago. Growth of the program has been accelerated by provisions in No Child 

Left Behind that support Advanced Placement programs as a way to raise academic 

standards and by states that are using Advanced Placement courses as an avenue to high 

school improvement. Approximately $30 million in Department funding was available in 

2005 to make pre-Advanced Placement and Advanced Placement courses more widely 

available to low-income students and to pay Advanced Placement test fees. Increasing 

numbers of low-income students used the test fee support offered in this program. 

Analysis of Progress. The number of 

Advanced Placement tests taken by 

low-income students increased by 

about 15 percent in FY 2005, allowing 

us to exceed our target. We report 

2004 data as new data because they 

were not reported in our FY 2004 

Performance and Accountability Report. 

We also exceeded our FY 2004 target. 

The President has asked for a 

40 percent increase in funding for this 

program, acknowledging its capacity to 

increase the number of low-income 

students who are provided access to a 

more rigorous high school curriculum through access to Advanced Placement classes and 

tests. 

2.15 Advanced Placement. The number of Advanced 

Placement tests taken by low-income students nationally. 

Fiscal Year Actual 

1999 92,570 

2000 102,474 

2001 112,891 

2002 140,572 

2003 166,649 

2004 190,350 

2005 220,542 

We exceeded our 2004 target of 170,092. 

We exceeded our 2005 target of 183,314. 

College Board, Advanced Placement Program Summary Reports,

2001, 2002, 2003, 2004, and 2005. 
97

U.S. Department of Education FY 2005 Performance and Accountability Report

Data Quality. The College Board does not report “low-income” student outcomes in its 

Summary Reports of Advanced Placement test results. It provides the Department with the 

number of tests taken by students eligible for fee reduction because of acute financial need. 

Each school has an official Advanced Placement coordinator (usually a teacher or counselor) 

who is required to identify which students’ tests are eligible for a test fee reduction on the 

student's registration form. The College Board’s fee reduction policy can be found on AP 

Central at http://www.apcentral.collegeboard.com/exam/fees/1,,152-170-0-0,00.html. 

The Department, for reporting purposes, relabels the group of students that the College 

Board has recorded as eligible for fee reduction as low-income students. 

Related Information. Information about the number of Advanced Placement tests taken 

between 1984 and 1997 can be obtained at Students Who Took Advanced Placement (AP) 

Examinations. Current reports on Advanced Placement program results are available at 

http://www.apcentral.collegeboard.com/program/research. 

Additional Information. Funding for International Baccalaureate test fees is also 

available to low-income students through the Advanced Placement Test Fee Program. Data 

collected by the Advanced Placement program in 2005 will provide baseline data for 

determining progress in the number of International Baccalaureate tests taken by lowincome students nationally. The Department began collecting baseline data in 2005 on the 

percentage of low-income students served by the Advanced Placement Incentives Program 

who receive a passing score on Advanced Placement tests and on International 

Baccalaureate tests. 

Teacher Quality 

No Child Left Behind defines “highly qualified teacher” and requires that all public school 

teachers of core academic subjects meet the qualifications outlined in the definition by the 

end of SY 2005–06. For the first time, the Congress legislated the goal that teachers in 

every core academic class have a bachelor’s degree, have a state license or a certificate, 

and be competent in the subjects they teach. The recently reauthorized Individuals with 

Disabilities Education Act also addresses teacher qualification and requires all special 

educators who teach core academic subjects to be highly qualified. Resources provided 

states to meet the goal of a “highly qualified teacher” in every core academic class include 

major funding from the $3 billion Improving Teacher Quality State Grants and the 

$68 million Teacher Quality Enhancement programs. 

The Department reported the 2005 progress of our teacher quality programs in The 

Secretary’s Fourth Annual Report on Teacher Quality. The report describes the federal 

contribution to teacher quality and offers the most current state information on teacher 

placement, traditional teacher preparation programs, quality standards and state 

certification requirements, and alternative pathways to teaching. 

The Department also assessed four teacher quality programs using the Program Assessment 

Rating Tool (PART). Using this consistent mechanism, the Department worked with the 

Office of Management and Budget to judge the effectiveness of these programs with regard 

to their stated purpose, strategic planning, internal management, and results and 

accountability. The Troops-to-Teachers program was rated “adequate”; the following 
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U.S. Department of Education FY 2005 Performance and Accountability Report

programs were rated “results not demonstrated”: Improving Teacher Quality State Grants, 

Teacher Quality Enhancement State Grants, and Special Education Personnel Preparation. 

PART review findings (see pp. 100-03) for the Department’s major teacher quality programs 

underscored the scarcity of data we have to make a judgment of program effectiveness. 

The Performance-Based Data Management Initiative has created the Education Data 

Exchange Network (EDEN), which began accepting data from states in November 2004. 

EDEN continues to be the Department’s long-term solution to improving data collection and 

data quality. When EDEN is fully populated, it will provide timely and appropriate data for 

the Improving Teacher Quality State Grants program. 

Department staff have taken steps to improve the Teacher Quality Enhancement program 

by collecting performance data electronically and by developing an efficiency measure for 

the program (the cost per highly qualified teacher candidate graduating from grantee 

postsecondary institutions) for which they have collected FY 2004 data. 

The Department measured progress in reaching the No Child Left Behind goal of a highly 

qualified teacher in every core academic classroom by the end of SY 2005–06 by 

determining the percentage of core academic classes taught by highly qualified teachers in 

elementary and secondary schools and in high-poverty schools. Based on a review of the 

results with state educational agencies, Secretary Spellings issued an October 21, 2005, 

letter outlining options for states who are unable to meet the SY 2005–06 deadline. 

Analysis of Progress. When the Department adopted a measure that would provide 

information on whether students in classrooms across the country are being taught by 

highly qualified teachers, we were aware of the difficulties we would initially encounter 

collecting these data. Some states did not have state-specific definitions of highly qualified 

teachers. The unit of analysis for whether students were taught by highly qualified teachers 

in some states was the teacher (the number of teachers who are highly qualified) rather 

than the classroom (the number of classrooms taught by a highly qualified teacher). In 

spite of these obstacles, we decided to collect available data, and we received 2004 

information from 47 states. The remaining states have since committed to providing data in 

response to the measure. When FY 2005 data become available, they will be more 

complete and accurate, as will data in succeeding years. 

2.16 Improving Teacher 

Quality State Grants. The 

percentage of core academic 

classes in high-poverty schools 

taught by highly qualified 

teachers. 

2.17 Improving Teacher 

Quality State Grants. The 

percentage of core academic 

classes in elementary schools 

taught by highly qualified 

teachers. 

2.18 Improving Teacher 

Quality State Grants. The 

percentage of core academic 

classes in secondary schools 

taught by highly qualified 

teachers. 

Fiscal Year Actual Fiscal Year Actual Fiscal Year Actual 

2003 74 2003 85 2003 80 

2004 81 2004 89 2004 84 

2005 Target is 90. 2005 Target is 90. 2005 Target is 85. 

Data for 2005 are pending. We met our 2004 target of 89. 

Data for 2005 are pending. Data for 2005 are pending. 

U.S. Department of Education, Consolidated State Performance Report, grantee submissions. 
99

U.S. Department of Education FY 2005 Performance and Accountability Report

Two-year trend data shows states are making progress in staffing core academic classes 

with highly qualified teachers. The trend holds for low-income students and for all 

elementary and secondary students. 

Data Quality. Forty-one states reported SY 2002–03 data, and 47 states reported 

SY 2003–04 data. The number of states reporting these data varies by year and depends 

on where a state is in its process of defining a highly qualified teacher and whether it has 

the capacity to collect these data. As states increase data collection capacity, the number 

of states reporting will increase. 

To calculate the percentage of core academic classes in high-poverty schools taught by 

highly qualified teachers, the Department relied on state identification of high-poverty 

schools. In most states, high-poverty schools are identified by the percentage of students 

who apply for the free and reduced-price lunch program. Elementary school students 

generally apply for the program when they are eligible, and a relatively accurate count of 

high-poverty students per elementary school is possible. The prevalence of high poverty in 

high school cannot be assessed with a similar level of accuracy because high school 

students are less likely to apply for the free and reduced-price lunch program and high 

poverty is underreported. Consequently, this measure more accurately reflects the total 

number of elementary schools that are high-poverty schools than it does the number of 

high-poverty high schools. 

Target Context. The three highly qualified teacher measures were new measures in 2005; 

therefore, no previous targets were set for these three measures. The Department reported 

2003 and 2004 data to begin establishing a trend. 

Related Information. Information about the Improving Teacher Quality State Grants 

program can be obtained at http://www.ed.gov/programs/teacherqual/index.html. 

Additional Information. Data for FY 2005 will be available in March 2006. 

The No Child Left Behind Act requires that each state educational agency have a plan to 

ensure that all teachers within the state teaching in core academic subjects are highly 

qualified no later than the end of SY 2005–06. The requirement that teachers be highly 

qualified applies to all public elementary or secondary school teachers employed by a local 

educational agency who teach a core academic subject. “Highly qualified” means that the 

teacher must meet all of the following: 

• Has obtained full state certification as a teacher or passed the state teacher licensing 

examination and holds a license to teach in the state, and does not have certification 

or licensure requirements waived on an emergency, temporary, or provisional basis. 

• Holds a minimum of a bachelor’s degree. 

• Has demonstrated subject matter competency in each of the academic subjects in 

which the teacher teaches, in a manner determined by the state and in compliance 

with section 9101(23) of the Elementary and Secondary Education Act. 

The statutory definition includes additional elements that apply somewhat differently to new 

and current teachers, and to elementary, middle, and secondary school teachers. The 

complete definition of a highly qualified teacher is in section 9101(23) of the Elementary 

and Secondary Education Act. The term “core academic subjects” means English, reading 
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U.S. Department of Education FY 2005 Performance and Accountability Report

or language arts, mathematics, science, foreign languages, civics and government, 

economics, arts, history, and geography. While the statute includes the arts in the core 

academic subjects, it does not specify which of the arts are core academic subjects; 

therefore, states must make this determination. 

The recently reauthorized Individuals with Disabilities Education Act also addressed the 

issue of highly qualified teachers; it requires all special educators who teach core academic 

subjects to be highly qualified. Starting in SY 2005–06, all veteran special education 

teachers who teach core academic subjects must be highly qualified. New special education 

teachers who teach core academic content must be highly qualified when they are hired. 

Assuming that such teachers are already highly qualified in at least mathematics, language 

arts, or science, new special education teachers who teach two or more core academic 

subjects exclusively to students with disabilities have two additional years from the date 

they are hired to demonstrate subject matter competency in the additional subjects they 

teach.

Further, the Department has provided flexibility for teachers in three areas (rural, science, 

and current multisubject teachers) to demonstrate that they are highly qualified. Additional 

information can be found at http://www.ed.gov/nclb/methods/teachers/hqtflexibility.html. 

Analysis of Progress. The newly 

reported FY 2004 baseline data 

(89 percent) indicate that the Teacher 

Quality Enhancement program is 

producing a high percentage of highly 

qualified teachers. Our 2005 data will 

allow us to measure progress. 

Data Quality. A program completer is a graduate of a teacher preparation program funded 

through the Teacher Quality Enhancement Partnership Grants program. A high-quality 

completer has a bachelor’s degree, subject area competence established through testing, 

and certification from state licensing authorities. The process of identifying high-quality 

completers gives graduates of the program a year to pass certification examinations. 

Target Context. The target for FY 2005 was established before FY 2004 data were collected. 

Related Information. Information on Teacher Enhancement Grants can be obtained at 

http://www.ed.gov/programs/heatqp/index.html. The National Center for Education 

Statistics prepared The Reference and Reporting Guide to assist postsecondary institutions 

and states in meeting reporting requirements for teacher preparation, certification, and 

licensing mandated by Title II of the Higher Education Act. Information on the guide can be 

obtained at http://www.title2.org/guide.htm. The Secretary’s Fourth Annual Report on 

Teacher Quality can be found at 

http://www.ed.gov/about/reports/annual/teachprep/2005Title2-Report.pdf. 

Additional Information. Data for FY 2005 will be available in August 2006. 

2.19 Teacher Quality Enhancement. The percentage of 

program completers who are highly qualified teachers. 

Fiscal Year Actual 

2004 89 

2005 Target is 80. 

Data for 2005 are pending. 

U.S. Department of Education, Office of Postsecondary Education, 

Teacher Quality Enhancement Program Performance Report. 
101

U.S. Department of Education FY 2005 Performance and Accountability Report

Discontinued Strategic Measures 

The following measures were discontinued after FY 2004 but were reported as pending in our 

FY 2004 Performance and Accountability Report. We report here our results on those for which 

we now have data. (See p. 23 for a discussion of why we discontinued measures.) 

Measure Fiscal 

Year Target Actual # States 

Reporting Status 

All Students 2004 100 87.5 32 

Low-Income Students 2004 100 67.7 31 

African-American 

Students 2004 100 61.3 31 

Hispanic Students 2004 100 62.5 32 

Students with 

Disabilities 2004 100 31.3 32 

2.1.1– 

2.1.6 

Of states with thirdgrade reading 

assessments, the 

percentage meeting 

their targets for thirdgrade reading 

achievement 

Limited English 

Proficient Students 2004 100 37.5 32 

Target not 

met 

All Students 2004 100 82.6 23 

Low-Income Students 2004 100 56.5 23 

African-American 

Students 2004 100 45.5 22 

Hispanic Students 2004 100 65.2 23 

Students with 

Disabilities 2004 100 9.1 22 

The percentage of 

states meeting their 

targets for middle 

school (sixth-grade) 

mathematics 

achievement 

Limited English 

Proficient Students 2004 100 36.4 22 

Target not 

met 

All Students 2004 100 80.0 20 

Low-Income Students 2004 100 45.0 20 

African-American 

Students 2004 100 31.6 19 

Hispanic Students 2004 100 45.0 20 

Students with 

Disabilities 2004 100 10.0 20 

The percentage of 

states meeting their 

targets for middle 

school (seventh-grade) 

mathematics 

achievement 

Limited English 

Proficient Students 2004 100 20.0 20 

Target not 

met 

All Students 2004 100 88.9 45 

Low-Income Students 2004 100 52.3 44 

African-American 

Students 2004 100 36.4 44 

Hispanic Students 2004 100 50.0 44 

Students with 

Disabilities 2004 100 2.3 44 

2.2.1– 

2.2.6 

The percentage of 

states meeting their 

targets for middle 

school (eighth-grade) 

mathematics 

achievement 

Limited English 

Proficient Students 2004 100 25.0 44 

Target not 

met 

All Students 2004 100 84.3 51 

Low-Income Students 2004 100 24.0 50 

African-American 

Students 2004 100 22.0 50 

Hispanic Students 2004 100 24.0 50 

Students with 

Disabilities 2004 100 5.9 51 

2.3.1–

2.3.6 

The percentage of 

states meeting their 

targets for high school 

reading achievement 

Limited English 

Proficient Students 2004 100 7.8 51 

Target not 

met 
102

U.S. Department of Education FY 2005 Performance and Accountability Report

Measure Fiscal 

Year Target Actual # States 

Reporting Status 

All Students 2004 100 82.4 51 

Low-Income Students 2004 100 37.3 51 

African-American 

Students 2004 100 20.0 50 

Hispanic Students 2004 100 44.0 50 

Students with 

Disabilities 2004 100 9.8 51 

2.3.7–

2.3.12 

The percentage of 

states meeting their 

targets for high school 

mathematics 

achievement 

Limited English 

Proficient Students 2004 100 21.6 51 

Target not 

met 

2003 86.5 87.1 Target met 

All Students 

2004 87.5 Pending Data expected 

05/2006 

2003 84.5 85.0 Target met African-American 

Students 2004 85.5 Pending Data expected 

05/2006 

2003 66.0 69.2 Target met 

2.3.20–

2.3.22 

The percentage of 18- 

to 24-year-olds who 

have completed high 

school 

Hispanic American 

Students 2004 69.0 Pending Data expected 

05/2006 

2.4.1 The percentage of classes taught by teachers of 

core academic subjects that are highly qualified 

as defined by No Child Left Behind

2004 75 elementary: 85 

secondary: 80 Target met 

2.5.2 The number of U.S. postsecondary students 

studying abroad 2004 164,000 174,629 Target met 

Sources and Notes 

2.1.1–2.3.12 U.S. Department of Education. Consolidated State Performance Report, grantee 

submissions. 

The ambitious target for this set of measures was that every state that had an 

assessment at the specified grade level would meet its state-determined target. 

2.3.20–2.3.22 Federal Interagency Forum on Child and Family Statistics. America’s Children: Key 

National Indicators of Well-Being, 2005. 

Previously reported FY 2002 data were estimated and preliminary. Final data were 

87.3 percent (all students), 84.8 percent (African-Americans), and 67.9 percent 

(Hispanic Americans).

2.4.1 U.S. Department of Education, Consolidated State Performance Report, grantee 

submissions. 

Data were not collected in the aggregate until FY 2005. 

2.5.2 Institute of International Education, Open Doors 2004: American Students Studying 

Abroad. 
 103 Goal 2: Improve Student Achievement Program Performance Summary Seventy-six of our grant programs most directly support Goal 2. These programs are listed below. In the 

overview of the results of each program on its program performance measures. (See p. 59 for our methodthe percentage of targets met, not met, and without data.) Individual program performance reports are avhttp://www.ed.gov/about/reports/annual/2005report/program.html. We also provide both FY 2005 approp

expenditures for each of these programs. (See pp. 24-25 for an explanation of why appropriations and expgiven year are not the same and the effect that difference has on the connection between funding and perf

Program Name Appro- pria- tions† Expen- ditures‡ Program Performance Results Percent of Targets Met, Not Met, Withou

FY 2005 FY 2004 FY 2003 

FY 2005 $ in millions FY 2005 $ in millions % Met % Not Met % No Data % Met % Not Met % No Data % Met % Not Met 

N

D

APEB: American Printing House for the Blind 17 17 60 0 40 100 0 0 100 0 CFAA: Supplemental Education Grants 18 0 /// (not funded) /// (not funded) CRA: Training and Advisory Services 7 7 0 0 100 0 0 100 0 0 1ESEA: 21st Century Community Learning Centers 991 787 0 0 100 38 62 0 38 62 ESEA: Advanced Credentialing 17 17 0 0 100 100 0 0 ESEA: Advanced Placement 30 24 25 0 75 100 0 0 100 0 ESEA: Alaska Native Education Equity 34 21 100 0 0 0 0 100 ESEA: Arts In Education 36 37 0 0 100 ESEA: Charter Schools Grants 217 175 50 50 0 0 100 0 0 100 ESEA: Civic Education: Cooperative Education 

Exchange 12 12 0 0 100 

ESEA: Comprehensive School Reform 205 270 0 0 100 0 0 100 0 0 1ESEA: Credit Enhancement for Charter School 

Facilities 37 35 0 0 100 50 50 0 /// 

ESEA: Dropout Prevention Programs 5 7 ESEA: Early Childhood Educator Professional 

Development 15 14 0 00 100 67 0 33 
 104 Program Name Appro- pria- tions† Expen- ditures‡ Program Performance Results Percent of Targets Met, Not Met, Withou

FY 2005 FY 2004 FY 2003 

FY 2005 $ in millions FY 2005 $ in millions % Met % Not Met % No Data % Met % Not Met % No Data % Met % Not Met 

N

D

ESEA: Early Reading First 104 63 0 0 100 100 0 0 /// ESEA: Education for Native Hawaiians 34 32 100 0 0 0 0 100 ESEA: Educational Technology State Grants 496 732 0 0 100 0 0 100 0 100 ESEA: English Language Acquisition 676 638 0 0 100 20 0 80 30 0 7ESEA: Even Start 225 257 0 0 100 33 33 33 50 0 5ESEA: Excellence in Economic Education 1 1 0 0 100 /// (not funded) ESEA: Foreign Language Assistance 18 16 0 0 100 ESEA: Fund for the Improvement of Education Programs of National Significance 257 291 ESEA: Impact Aid Basic Support Payments 1,075 1,102 ESEA: Impact Aid Payments for Children with 

Disabilities 50 50 

100 0 0 100 0 0 100 0 

ESEA: Impact Aid Construction 49 38 0 100 0 0 100 0 0 100 ESEA: Impact Aid Facilities Maintenance 8 13 ESEA: Impact Aid Payments for Federal Property 62 51 ESEA: Improving Teacher Quality State Grants 2,917 2,954 0 0 100 25 25 50 100 0 ESEA: Indian Education Grants to Local Educational 

Agencies 95 95 0 0 100 0 0 100 0 67 3

ESEA: Javits Gifted and Talented Education 11 10 0 0 100 ESEA: Literacy Through School Libraries 20 18 0 0 100 0 0 100 ESEA: Magnet Schools Assistance 108 102 0 0 100 0 0 100 0 0 1ESEA: Mathematics and Science Partnerships 179 91 0 0 100 0 0 100 /// (program reconfiguESEA: Migrant State Agency Program 390 383 0 0 100 0 0 100 88 13 ESEA: National Writing Project 20 18 0 0 100 0 0 100 ESEA: Neglected and Delinquent State Agency 

Program 50 48 0 0 100 0 0 100 75 0 2

ESEA: Parental Information and Resource Centers 42 43 0 0 100 0 0 100 0 0 1ESEA: Reading First State Grants 1,042 1,099 0 100 0 11 11 7
 105 Program Name Appro- pria- tions† Expen- ditures‡ Program Performance Results Percent of Targets Met, Not Met, Withou

FY 2005 FY 2004 FY 2003 

FY 2005 $ in millions FY 2005 $ in millions % Met % Not Met % No Data % Met % Not Met % No Data % Met % Not Met 

N

D

ESEA: Reading Is Fundamental/ Inexpensive Book Distribution 25 26 0 0 100 0 100 0 100 0 ESEA: Ready to Teach 14 15 0 0 100 0 0 100 ESEA: Ready-to-Learn Television 23 22 50 25 25 0 0 100 0 0 1ESEA: Rural Education 171 162 0 0 100 0 100 0 100 0 ESEA: School Leadership 15 12 0 0 100 100 0 0 ESEA: Smaller Learning Communities 94 104 0 0 100 50 50 0 0 100 ESEA: Special Programs for Indian Children 20 22 0 0 100 0 0 100 ESEA: Star Schools Program 21 17 0 0 100 50 50 0 0 50 5ESEA: State Assessments 412 451 40 60 0 0 100 0 0 0 1ESEA: State Grants for Innovative Programs 198 316 0 0 100 33 33 33 100 0 ESEA: Striving Readers 25 0 /// /// (not funded) /// (not funded) ESEA: Teaching American History 119 56 0 0 100 0 0 100 0 0 1ESEA: Title I Grants to Local Educational Agencies 12,740 12,520 43 14 43 25 0 75 100 0 ESEA: Transition to Teaching 45 40 0 0 100 75 25 0 50 0 5ESEA: Troops-to-Teachers 15 17 0 0 100 0 50 50 100 0 ESEA: Voluntary Public School Choice 27 28 0 0 100 0 0 100 100 0 ESEA: Women’s Educational Equity 3 3 0 0 100 ESRA: Comprehensive Centers 57 25 /// /// (not funded) /// (not funded) ESRA: National Assessment 89 97 0 0 100 (off year for collection) 0 100 ESRA: Regional Educational Laboratories 66 71 0 0 100 0 0 100 100 0 ESRA: Statewide Data Systems 25 0 /// /// (not funded) /// (not funded) HEA: High School Equivalency Program 19 20 0 0 100 0 0 100 100 0 HEA Amendments of 1998: State Grants for 

Incarcerated Youth Offenders 22 18 0 0 100 100 0 0 0 100 

HEA: Teacher Quality Enhancement 68 76 0 0 100 0 0 100 0 0 1IDEA: Special Education Grants for Infants and 

Families 441 437 0 50 50 25 50 25 67 0 3

IDEA: Special Education Grants to States 10,590 9,790 0 17 83 50 50 0 43 43 1
 106 Program Name Appro- pria- tions† Expen- ditures‡ Program Performance Results Percent of Targets Met, Not Met, Withou

FY 2005 FY 2004 FY 2003 

FY 2005 $ in millions FY 2005 $ in millions % Met % Not Met % No Data % Met % Not Met % No Data % Met % Not Met 

N

D

IDEA: Special Education Parent Information Centers 26 26 0 0 100 0 0 100 50 0 5IDEA: Special Education Personnel Preparation 91 81 25 25 50 0 0 100 0 33 6IDEA: Special Education Preschool Grants 385 401 0 50 50 0 100 0 0 100 IDEA: Special Education State Personnel Grants 51 46 /// /// (not funded) /// (not funded) IDEA: Special Education Technical Assistance and Dissemination 52 53 0 0 100 0 0 100 0 25 7IDEA: Special Education Technology and Media Services 39 38 0 0 100 0 0 100 0 40 6MVHAA: Education for Homeless Children and Youths 62 58 0 0 100 33 33 33 67 0 3VTEA: Occupational and Employment Information 9 10 50 50 50 50 0 VTEA: Tech-Prep Demonstration 5 4 0 0 100 VTEA: Vocational Education National Programs 12 15 0 0 100 67 17 17 VTEA: Tech-Prep Education State Grants 106 104 VTEA: Vocational Education State Grants 1,194 1,128 

0 0 100 25 50 25 14 86 

Administrative and Support Funding for Goal 2# 5 5 # # # TOTAL 36,951 * 35,882 † Budget for each program represents program budget authority. ‡ Expenditures occur when recipients draw down funds to cover actual outlays. FY 2005 expenditures may include funds from prior y

A shaded cell denotes that the program did not have targets for the specified year. 

/// Denotes programs not yet implemented. (Programs are often implemented near the end of the year they are first funded.) 

# The Department does not plan to develop performance measures for programs, activities, or budgetary line items that are administr

serve to support other programs and their performance measures. 

* Expenditures by program do not include outlays in the amount of $151 million for prior years’ obligations for Goal 2 programs that w

FY 2005 estimated accruals in the amount of $386 million, or net costs of -$4 million related to the Department’s administration of program. 

APEB: Act to Promote the Education of the Blind CFAA: Compact of Free Association Act CRA: Civil Rights Act ESEA: Elementary and Secondary Education Act ESRA: Education Sciences Reform Act 

HEA: Higher Education Act IDEA: Individuals with Disabilities Education Act MVHAA: McKinney-Vento Homeless Assistance AVTEA: Vocational and Technical Education Act
107

U.S. Department of Education FY 2005 Performance and Accountability Report

Goal 2: Improve Student Achievement 

PART Analysis 

In preparation for the FY 2005 budget, the Department conducted reviews on the programs 

listed below using the Office of Management and Budget’s Program Assessment Rating Tool 

(PART). (See p. 60 for a discussion of the PART methodology.) Short summaries of the 

PART results and follow-up actions are on the following pages. OMB’s Web site provides 

one-page summaries and full detailed PART reviews for all agencies. 

21st Century Community Learning Centers

Rating: Adequate 

Improving Teacher Quality State Grants

Rating: Results Not Demonstrated 

National Assessment

Rating: Effective 

Special Education Personnel Preparation

Rating: Results Not Demonstrated 

Teacher Quality Enhancement

Rating: Results Not Demonstrated 

Troops-to-Teachers

Rating: Adequate 
108

U.S. Department of Education FY 2005 Performance and Accountability Report

PART Analysis for Programs Reviewed for the FY 2005 Budget 

Program: 21st Century Community Learning 

Centers 

Year of Rating: For FY 2005 Budget 

Rating: Adequate 

Program Type: Block/Formula Grants 

Recommended Follow-up Actions 

• Ensure that the program has a data 

collection and evaluation system that will 

allow the Department to analyze whether state and school district performance goals 

are being met. 

• Hold states accountable for meeting program performance goals. 

• Implement a technical assistance strategy to identify and disseminate promising and 

proven instructional practices in academic areas. 

Update on Follow-up Actions 

Action steps the Department has taken to promote accountability include a monitoring 

system and an online data collection system. The Department developed an online 

evaluation/assessment system to collect data on academic achievement and behavioral 

outcomes. In September 2003, the Department began a rigorous four-year evaluation of 

two academic interventions for after-school programs, one for math and one for reading. 

The Department provides technical assistance on improving academic achievement through 

after-school programs, its annual summer institutes, and a project to identify and 

disseminate information on high-quality after-school programs in reading, mathematics, 

science, and the arts. 

 

Program: Improving Teacher Quality State 

Grants 

Year of Rating: For FY 2005 Budget 

Rating: Results Not Demonstrated 

Program Type: Block/Formula Grants 

Recommended Follow-up Actions 

• Continue to collect baseline information on 

program participants and set targets for its 

annual measures. 

• Develop a meaningful efficiency measure. 

Update on Follow-up Actions 

The Department has collected two years of performance information for this program after 

the initial PART assessment. Using these data, the Department has established baselines 

for its performance measures and established targets for the program's annual measures. 

75

100

 78

0

0 100

Results/Accountability

Management

Planning

Purpose

75

100

 89

13

0 100

Results/Accountability

Management

Planning

Purpose
109

U.S. Department of Education FY 2005 Performance and Accountability Report

The Department has drafted an efficiency measure for this program and will be working with 

the Office of Management and Budget to finalize it. 

 

Program: National Assessment of 

Educational Progress (NAEP) 

Year of Rating: For FY 2005 Budget 

Rating: Effective

Program Type: Research and Development 

Recommended Follow-up Actions 

• Focus on the timeliness of National Center 

for Education Statistics (NCES) products 

and services, which include National Assessment activities. 

Update on Follow-up Actions 

The 2005 PART assessment found a weakness in the timeliness of NCES products. The 

Department responded to this finding by articulating specific goals for the release of data. 

In 2006, the initial release of data for 90 percent of NCES products will occur (a) within 18 

months of the end of data collection, or (b) with an improvement of 2 months over the 

previous time for the initial release of data if the 18-month deadline is not attainable. NCES 

will reduce the deadline by 2 months each year from 2007 to 2010, until the final goal of 

12 months is reached. The Department continues to strive to meet its goal of releasing 

NAEP reading and mathematics assessments data in 6 months. In 2003, the actual time to 

release was 8 months. 

 

Program: Special Education Personnel 

Preparation 

Year of Rating: For FY 2005 Budget 

Rating: Results Not Demonstrated

Program Type: Competitive Grant 

Recommended Follow-up Actions 

• Develop a schedule for independent 

evaluations by 2004. 

• Institute a new performance system for grantees by 2004 and make the information 

available to the public in a transparent and meaningful manner. 

• Work with the Department of Education's other teacher programs to review and 

compare common performance indicators on an annual basis. 

• Develop performance measures and goals that appropriately reflect the impact of the 

federal government's investment in increasing the supply and/or quality of special 

education personnel. 

• Develop program efficiency measures. 

100

100

 70

100

0 100

Results/Accountability

Management

Planning

Purpose

0

100

0

 60

0 100

Results/Accountability

Management

Planning

Purpose
110

U.S. Department of Education FY 2005 Performance and Accountability Report

Update on Follow-up Actions 

The Department has developed new annual and long-term performance indicators for the 

Personnel Preparation program to assess its impact and effectiveness. These measures 

focus on use of research-based curriculum by institutions of higher education (program 

grantees) as well as the employment of special education teachers trained by grantees in 

schools. Data for these measures will be collected starting in FY 2006. In addition, the 

Department is working to develop efficiency measures for this program. The Department is 

also planning to undertake a rigorous evaluation of the Personnel Preparation program. 

 

Program: Teacher Quality Enhancement 

Year of Rating: For FY 2005 Budget 

Rating: Results Not Demonstrated

Program Type: Competitive Grant 

Recommended Follow-up Actions 

• Begin to collect baseline data to set targets 

for the program’s new measures. 

• Develop the necessary long-term, annual, 

and efficiency measures. 

• Implement its plan to ensure adequate grantee oversight. 

• Consider reforms that would enable the Department to use all available Teacher 

Quality Enhancement funding to support the highest-quality grant applications. 

Update on Follow-up Actions 

The Department has developed annual, long-term, and efficiency measures for this program 

and has collected baseline data for all of the measures. The Department has also developed 

a plan to ensure better oversight of grantees. Supported by its new e-monitoring system, 

the Office of Postsecondary Education plans to conduct annual project directors’ meetings, 

regular site visits, and increased scrutiny of performance data. The Department has also 

sought and obtained appropriations language overriding the statutory funding set-asides, 

which has allowed the Department to fund the highest quality grant applications. 

 

Program: Troops-to-Teachers 

Year of Rating: For FY 2005 Budget 

Rating: Adequate

Program Type: Competitive Grant 

Recommended Follow-up Actions 

• Strengthen program performance data 

collection and make it publicly accessible. 

• Begin to collect baseline information on program participants and set targets for its 

new measures. 

• Develop a meaningful efficiency measure.

29

80

13

 50

0 100

Results/Accountability

Management

Planning

Purpose

29

80

13

 50

0 100

Results/Accountability

Management

Planning

Purpose
111

U.S. Department of Education FY 2005 Performance and Accountability Report

Update on Follow-up Actions 

In collaboration with the Department of Defense, the agency that administers the Troopsto-Teachers program, the Department has made substantial progress in meeting the 

performance information requirements identified in its PART assessment. The Department 

created an efficiency measure for the program that will examine the recruitment cost per 

teacher of record. Baseline information for this measure will be available in fall 2005. 

Baseline data were collected in FY 2003 and targets were set for all program performance 

measures, and the Department has posted program performance information on our 

Troops-to-Teachers Web page. 
112

U.S. Department of Education FY 2005 Performance and Accountability Report

Goal 2: Improve Student Achievement 

Findings and Recommendations from 

Program Evaluations, Studies, and Reports 

Information that the Department uses to inform management and program improvements 

comes from many sources, including evaluations, studies, and reports that are Departmentsponsored studies and those from the Government Accountability Office (GAO) and the 

Office of Inspector General (OIG). The following evaluations, studies, and reports were 

completed during FY 2005. 

Analysis of State K–3 Reading Standards and Assessments: Final Report

This study of the Reading First program characterizes the relationship between state content 

standards and assessments and the five essential components of effective reading 

instruction as identified by the National Reading Panel. Its purpose was to evaluate the 

degree to which state reading content standards for students in grades K–3 reflected the 

five essential areas and the extent to which state assessments in grades K–3 measured 

Reading First outcomes. States that identified their statewide reading assessments as 

Reading First outcome measures tended to have more reading standards that represented 

the five essential elements of effective reading instruction. Future evaluations of Reading 

First will examine program implementation and impact on reading outcomes. (See p. 114 

for a summary of this report.) 

When Schools Stay Open Late: The National Evaluation of the 21st Century 

Community Learning Centers Program (Final Report and New Findings) 

These two comprehensive, rigorous evaluations of 21st Century Learning Centers addressed 

implementation and impact findings on student outcomes for behavior, social development, 

and academic achievement; characteristics of after-school programs; and types of students 

most likely to benefit. The most consistent objectives for both middle school and 

elementary school programs were to provide a safe environment after school and to help 

students improve academically. (See p. 115 for a summary of this report.) 

No Child Left Behind Act: Most Students With Disabilities Participated in Statewide 

Assessments, but Inclusion Options Could Be Improved (GAO-05-618) 

To improve the academic achievement of all students, the No Child Left Behind Act requires 

that all students, including students with disabilities, be included in statewide assessments, 

and that states, districts, and schools be held accountable for the academic progress of all 

students. The Individuals with Disabilities Education Act also requires assessments. This 

report determined the extent to which students with disabilities were included in statewide 

assessments, issues faced by states in implementing alternative assessments, and how the 

Department supported states in their efforts to assess students with disabilities. For 

SY 2003–04, at least 95 percent of students with disabilities participated in statewide 

reading assessments. (See p. 116 for a summary of this report.) 
113

U.S. Department of Education FY 2005 Performance and Accountability Report

Third National Even Start Evaluation: Follow-Up Findings From the Experimental 

Design Study

The Even Start Family Literacy program addresses the basic education needs of low-income 

families, including parents and their children from birth through age seven, by providing a 

unified program of family literacy services. This study provides follow up on a previously 

released study that assessed the effectiveness of the Even Start program. This report 

presents follow-up data collected approximately one year after the previous study. Even 

Start children and parents made gains on a variety of literacy assessments and other 

measures at follow up, but they did not gain more than children and parents who were not 

in the program. (See p. 117 for a summary of this report.) 

No Child Left Behind Act: Education Could Do More to Help States Better Define 

Graduation Rates and Improve Knowledge about Intervention Strategies 

The No Child Left Behind Act requires states to use graduation rates, along with test scores, 

to assess the progress of high schools in educating students. In this report, GAO examines 

the graduation rate definitions states use and how the Department helps states meet legal 

requirements; the factors affecting the accuracy of states' rates and the Department's role 

in ensuring accurate data; and how the Department identifies and disseminates intervention 

research on drop out prevention. To enhance the reliability of graduation rate data, the 

Department will calculate the averaged freshman graduation rate for each state and report 

this rate alongside the graduation rates reported by states, provide additional policy 

guidance to states on ways to account for different types of students in graduation rate 

calculations, and review and identify research on effective intervention strategies for 

dropout prevention for dissemination through its What Works Clearinghouse. (See p. 118 

for a summary of this report.) 

Biennial Evaluation Report to Congress on the Implementation of Title III, Part A 

of the ESEA

Title III, Part A of the Elementary and Secondary Education Act provides funds for English 

language instruction programs for limited English language proficient (LEP) students 

through the state formula grant program. The grants support programs that help LEP 

students attain English proficiency, develop a high level of academic attainment in English, 

and meet the same standards expected of all children. The program holds states, districts, 

and schools accountable for meeting state Title III annual measurable achievement 

objectives (AMAOs). The first biennial evaluation report covers SY 2002–03 and SY 2003–04 

and is a synthesis of data reported by the 50 states, the District of Columbia, and Puerto 

Rico. For SY 2003–04, 52 entities reported serving a total of 1,218,238 immigrant children 

and youth, 827,638 of whom were served under the Title III program. (See p. 119 for a 

summary of this report.) 
114

U.S. Department of Education FY 2005 Performance and Accountability Report

Report on State K–3 Reading Standards and Assessments 

in the Context of the Reading First Program 

Report Title 

Analysis of State K–3 Reading Standards and Assessments: Final Report (U.S. Department 

of Education, Policy and Program Studies Service) August 2005.

Overview 

This study addresses the degree to which state reading content standards for students in 

grades K–3 reflect expectations for learning in five essential components of reading skills as 

identified in FY 2000 by the National Reading Panel: phonemic awareness, phonics, fluency, 

vocabulary, and text comprehension. The study also determined the extent to which state 

assessments administered in the K–3 grade span play a role in the measurement of Reading 

First outcomes. The Department is currently funding two other evaluations—a Reading First 

implementation study and a Reading First impact study; the reports for these will be 

released in 2006 and 2008. 

Findings

• Reading comprehension is the most represented of the essential elements in state K–3 

reading content standards, with an average of 57 standards per state. 

• Most states have standards that adequately cover comprehension and phonics, while 

just over half of the states provide adequate coverage for vocabulary, phonemic 

awareness, and fluency. 

• Most standards representing each essential element were judged to be placed at the 

appropriate grade by most states. 

• All of the states make comprehension clearly visible in their organization of reading 

standards. 

• Most states administer statewide reading assessments in grade 3, and very few do so 

at grades below third. 

• Most states identify their grade 3 statewide reading assessments as measures of 

Reading First outcomes, primarily for vocabulary and comprehension. 

• None of the states identifies their statewide reading assessments as outcome 

measures in the area of fluency, as this area requires individual assessment of 

children. 

• States that identified their statewide reading assessments as Reading First outcome 

measures tended to have more reading standards that represented the five essential 

elements of effective reading instruction. 

Recommendations

No recommendations resulted from this report. 
115

U.S. Department of Education FY 2005 Performance and Accountability Report

The 21st Century Community Learning Centers National Evaluation 

Report Titles 

When Schools Stay Open Late: The National Evaluation of the 21st Century Community 

Learning Centers Program; Final Report (U.S. Department of Education, Institute of 

Education Sciences) April 2005. 

When Schools Stay Open Late: The National Evaluation of the 21st Century Community 

Learning Centers Program; New Findings (U.S. Department of Education, Institute of 

Education Sciences) October 2004. 

Overview

In 1999, the Department funded a comprehensive, rigorous national evaluation of the 21st 

Century Community Learning Centers program. The evaluation addressed three 

overarching questions. (1) Did the program improve student outcomes such as supervision 

after school, safety after school, academic achievement, behavior, and social and emotional 

development? (2) What types of students benefited most from the program? (3) What 

were the features and characteristics of Community Learning Centers after-school 

programs? 

Implementation Findings 

• The average center serves about 200 students, is open 10 or more hours a week, and 

employs 12–13 staff, many of whom are teachers. 

• The average center spends about $1,000 a year per enrolled student. 

• Sixty-six percent of middle schools operating Community Learning Centers are classified 

as high poverty, as opposed to 17 percent of middle schools nationwide. 

• Fifty-seven percent of students in middle schools operating Community Learning Centers 

are minority, as opposed to 37 percent of students in middle schools nationwide. 

• The most consistent objectives for both middle and elementary school centers are to 

provide a safe environment after school and to help students improve academically. 

Impact Findings 

• The program was shown to have had no overall impact on reading test scores or 

grades, but, for elementary students who had low grades at baseline, the program 

had a small positive impact on English grades. 

• Elementary school students participating in Community Learning Centers reported 

feeling safer than students in the control group. 

• While homework assistance was the most common activity provided by centers, the 

study reported no impact on the extent to which students completed homework or 

received help with it. 

• Elementary school students participating in the program were more likely to be 

disciplined by teachers and suspended as a result of negative behaviors during the 

school day. 

Recommendations

The report made no recommendations. 
116

U.S. Department of Education FY 2005 Performance and Accountability Report

Report on the Participation Levels of Students with Disabilities 

 in Statewide Assessments 

Report Title 

No Child Left Behind Act: Most Students with Disabilities Participated in Statewide 

Assessments, but Inclusion Options Could Be Improved (GAO-05-618) July 2005.

Overview 

The Government Accountability Office (GAO) issued a report on the participation of students 

with disabilities in statewide assessments that provided the following information: the 

extent to which students with disabilities were included in statewide assessments; the 

issues selected states faced in implementing alternate assessments; and how the 

Department supports states in their efforts to assess students with disabilities. Only 

reading assessments were reviewed, as data for assessments in mathematics were 

incomplete. 

Findings 

• For SY 2003–04, at least 95 percent of students with disabilities participated in 

statewide reading assessments in 41 of the 49 states that provided data. 

• Students with disabilities were most often included in regular reading assessments, 

and relatively few took alternate assessments. 

Recommendations 

• The Department should explore ways to make information on inclusion of students 

with disabilities in statewide assessments more accessible to users of its Web site. 

• Information on alternative assessment requirements located on the No Child Left 

Behind section of the Department's Web site should be linked to information on the 

research, development, and use of these assessments where it occurs on other parts 

of the Department's Web site. 

• The Department should work with states, particularly those with high exclusion rates, 

to explore strategies to reduce the number of students with disabilities who are 

excluded from the National Assessment of Educational Progress (NAEP) assessments. 

Department's Response 

• The Department will explore the use of "hot buttons" and links among the Web pages 

maintained by Department offices to increase access to information on the assessment 

of students with disabilities. 

• The Department is exploring strategies for enhancing the participation of students with 

disabilities in NAEP assessments. 
117

U.S. Department of Education FY 2005 Performance and Accountability Report

Evaluation of Even Start: One-Year Follow-Up 

Report Title 

Third National Even Start Evaluation: Follow-Up Findings From the Experimental Design 

Study (U.S. Department of Education, Institute of Education Sciences) December 2004. 

Overview 

The Even Start Family Literacy program addresses the basic education needs of low-income 

families, including parents and their children from birth through age seven, by providing a 

unified program of family literacy services. This study follows up a previously released 

study (Third National Even Start Evaluation: Program Impacts and Implications for 

Improvement—2003) that assessed the effectiveness of Even Start in a group of grantees 

around the country. This report presents impact analyses of follow-up data collected 

approximately one year after the previous study. The follow-up study examined whether 

giving the families the opportunity to participate in Even Start for a second year and having 

a longer exposure to the Even Start program would lead to larger literacy gains and to 

statistically significant program impacts. 

Findings 

• Even Start children and parents made gains on a variety of literacy assessments and 

other measures at follow-up, but they did not gain more than children and parents 

who were not in the program. 

Recommendations 

The report made no recommendations.
118

U.S. Department of Education FY 2005 Performance and Accountability Report

Report on State Definitions of Graduation Rates and 

Dissemination of Research on Dropout Interventions 

Report Title 

No Child Left Behind Act: Education Could Do More to Help States Better Define Graduation 

Rates and Improve Knowledge about Intervention Strategies (GAO-05-879) September 2005. 

Overview 

No Child Left Behind requires states to use graduation rates, along with test scores, to assess the 

progress of high schools in educating students. No Child Left Behind defines graduation rates as 

the percentage of students who graduate from high school with a regular diploma in the standard 

number of years. In this report, GAO examines the graduation rate definitions states use and how 

the Department helps states meet legal requirements, the factors affecting the accuracy of states' 

rates and the Department's role in ensuring accurate data, and how the Department identifies and 

disseminates intervention research on drop out prevention. 

Findings 

• While many states are moving to a cohort graduation rate definition, the Department 

has not provided guidance to all states on ways to account for select types of students 

impacting consistency among states in how graduation rates are calculated. 

• The primary factor affecting accuracy in calculating graduation rates is student 

mobility. 

• Fewer than half of states conducted audits of data used to calculate graduation rates 

resulting in data inaccuracies that may affect schools' ability to meet state graduation 

rate goals. 

• The Department has not acted on GAO's 2002 recommendation that it evaluate and 

disseminate intervention research. 

Recommendations 

• The Department should provide information to all states on ways to account for 

different types of students in graduation rate calculations. 

• The Department should assess the reliability of state data used to calculate interim 

graduation rates. 

• The Department should establish a timetable to implement GAO's 2002 

recommendation to evaluate and disseminate research on dropout interventions. 

Department's Response 

• To enhance the reliability of graduation rate data, the Department will calculate the 

“averaged freshman graduation rate” for each state and report this rate alongside the 

graduation rates reported by states. 

• The Department will work with its various offices to provide additional policy guidance 

to states on ways to account for different types of students in graduation rate 

calculations. 

• The Department is reviewing and identifying research on effective intervention 

strategies for dropout prevention for dissemination through its What Works 

Clearinghouse. 
119

U.S. Department of Education FY 2005 Performance and Accountability Report

Report on the Implementation of Title III, Part A, English Language 

Instruction Programs for Limited English Proficient Students 

Report Title 

Biennial Evaluation Report to Congress on the Implementation of Title III, Part A of the ESEA 

(U.S. Department of Education, Office of English Language Acquisition) March 2005.

Overview 

Title III, Part A, of the Elementary and Secondary Act provides funds for English language 

instruction programs for limited English proficient (LEP) students through the state formula grant 

program. The grants support programs that help LEP students attain English proficiency, develop a 

high level of academic attainment in English, and meet the same standards expected of all 

children. The program holds states, districts, and schools accountable for meeting the state Title 

III annual measurable achievement objectives (AMAOs). The first biennial evaluation report covers 

SY 2002–03 and SY 2003–04 and is a synthesis of data reported by the 50 states, the District of 

Columbia, and Puerto Rico. 

Findings 

• For SY 2003-04, 52 states and territories reported serving a total of 1,218,238 

immigrant children and youth, 827,638 who were served under the Title III program. 

• Fifty-one entities reported that 316,273 certified/licensed teachers were working in 

language instruction education programs in SY 2003–04. 

• Forty entities reported that their Title III subgrantees use both English as a second 

language instructional programs and bilingual instructional programs. 

• All 52 entities and territories require that all teachers who teach in language 

instruction education programs for LEP students meet the Title III language fluency 

requirements. 

• Of the 42 entities that provided performance data, 33 reported meeting their annual 

measurable achievement objectives targets for students making progress in learning 

English. 

• Of the 45 entities that provided proficiency targets and performance data, 41 met at 

least some of these targets for students' attainment of English language proficiency. 

• In SY 2003–04, 44 entities reported 444,451 students transitioned out or exited from 

language instruction education programs into mainstream classrooms, while 36 states 

reported that 378,903 transitioned out in SY 2002–03. 

Recommendations 

This report made no recommendations. 
DRAFT Key Measures Goal 2 

120

U.S. Department of Education FY 2005 Performance and Accountability Report

Goal 3: Develop Safe and Drug-Free Schools 

Performance Goals 

Drug Use

Drug-free schools are associated with healthy antidrug norms among students, and 

contribute to the healthy physical and social development of each student. The positive 

school climate of drug-free schools gives students the chance to focus on learning. Results 

from the 2003 survey of the Youth Risk Behavior Surveillance System show slight declines 

from 2001 with respect to drug use on school property. 

Violent Crime

Safe schools are essential for healthy student development and academic achievement. 

Secretary Spellings said, “In order for our children to learn well and excel, they need to feel 

safe.” When violent crime takes place on school property, it disrupts the learning 

environment and creates obstacles to student achievement and physical safety. 

Department programs address drug use and violence by helping districts and schools 

implement prevention programs and strategies that foster positive norms and behavior 

among students. Youth Risk Behavior Surveillance System data for fighting on school 

property and carrying weapons to school show significant reductions in these risky 

behaviors from 1993 to 2003, but reductions were not significant during the last two years 

of that period. 
DRAFT Key Measures Goal 2 

121

U.S. Department of Education FY 2005 Performance and Accountability Report

Goal 3: Develop Safe and Drug-Free Schools 

Key Measures 

In FY 2005, the Department identified five key measures to track the prevalence of 

substance abuse and violence in schools. The data for these key measures reflect longterm national and state-level trends in drug use and violence in schools, but progress 

cannot be directly attributed to the activities of grantees of Safe and Drug-Free Schools and 

Communities programs. The Department’s third strategic goal also addresses the 

development of strong character. We have not identified measures for this trait, but the 12 

programs identified as supporting Goal 3 include programs that support character 

development as well as programs that support the development of safe and drug-free 

schools. 

See p. 58 for an explanation of the documentation fields for the key measures. 

Drug Use 

Drug-free schools are associated with healthy antidrug norms among students and 

contribute to the healthy physical and social development of each student. The positive 

school climate of drug-free schools gives students the chance to focus on learning. To 

assist schools and districts with drug-use reduction efforts, the Department provides 

information and financial support for implementing effective drug-use prevention programs 

and strategies. Effective prevention programs address the health risk behaviors, mental 

health issues, and school environment problems that contribute to drug use and societal risk 

factors that may exist in each affected school's community. 

Results from the 2003 survey of the Youth Risk Behavior Surveillance System show slight 

declines from 2001 for the Department's measure of drug use on school property. Though 

the rate of decline has decelerated since 2001, the 2003 data mark the eighth year of 

decline for this indicator. Despite the encouraging eight-year trend, schools need to 

continue their efforts to prevent drug use by new cohorts of students. 
DRAFT Key Measures Goal 2 

122

U.S. Department of Education FY 2005 Performance and Accountability Report

Analysis of Progress. The most recent data from 2003 show no significant change for 

access to illegal drugs on school property, and declining marijuana and heavy alcohol use, 

compared to 2001 data. The data, which represent total responses from all surveyed 

students, are also reported for respondents by their grade level. These data provide 

insights into youth drug use. 

In both 2003 and 2001, the percentage of high school students who reported access to an 

illegal drug on school property was very similar among 9th-, 10th-, and 11th-graders. 

Numbers ranged from 29.1 to 29.9 percent for these grades in 2003, and from 28.7 to 

29.0 percent in 2001. During the same period high school seniors were less likely to have 

been offered, sold, or given an illegal drug on school property. In 2003, 24.9 percent of 

seniors reported access to an illegal drug on school property, down from 26.9 percent in 

2001. 

While 2003 current marijuana use and episodes of heavy drinking were down from overall 

rates reported for 2001, use patterns by grade reflect a pattern of drug use that reflect a 

relationship between rates of use and grade level. For both 2003 and 2001, the percentage 

of students reporting current marijuana use increases from grades 9 through 12. For 

example, in 2001, current marijuana use data range from 19.4 percent for ninth-graders to 

26.9 percent for high school seniors. The 2003 marijuana usage data range from 

18.5 percent for ninth-graders up to 25.8 percent for seniors. 

Similar patterns also emerge for heavy drinking. In 2001, 24.5 percent of ninth-graders 

report episodic heavy drinking, while 36.7 percent of high school seniors report engaging in 

that same behavior. In 2003, 19.8 percent of ninth-graders and 37.2 percent of seniors 

reported episodic heavy drinking. 

3.1 Safe and Drug-Free 

Schools and Communities 

State Grants. The percentage 

of students in grades 9 through 

12 who were offered, sold, or 

given an illegal drug on school 

property during the past 12 

months. 

3.2 Safe and Drug-Free 

Schools and Communities 

State Grants. The percentage 

of students in grades 9 through 

12 who used marijuana one or 

more times during the past 30 

days. 

3.3 Safe and Drug-Free 

Schools and Communities 

State Grants. The percentage 

of students in grades 9 through 

12 who had five or more drinks 

of alcohol in a row (that is, within 

a couple of hours) one or more 

times during the past 30 days. 

Fiscal Year Actual Fiscal Year Actual Fiscal Year Actual 

1993 24 1993 18 1993 30 

1995 32 1995 25 1995 33 

1997 32 1997 26 1997 33 

1999 30 1999 27 1999 32 

2001 29 2001 24 2001 30 

2003 29 2003 22 2003 28 

2005 Target is 28. 2005 Target is 21. 2005 Target is 27. 

Data for 2005 are pending. Data for 2005 are pending. Data for 2005 are pending. 

Department of Health and Human Services, Centers for Disease Control and Prevention, Youth Risk Behavior and Surveillance 

System (YRBSS). 
DRAFT Key Measures Goal 2 

123

U.S. Department of Education FY 2005 Performance and Accountability Report

Data Quality. Data are collected in alternate years from a nationally representative 

sample of students in grades 9 through 12 and are collected on a calendar-year, not a 

school-year, basis. The Youth Risk Behavior Surveillance System includes a national schoolbased survey conducted by the Centers for Disease Control and Prevention as well as state 

and local school-based surveys conducted by education and health agencies. The 2003 

report summarized results from the national survey, 32 state surveys, and 18 local surveys 

conducted among students in grades 9 through 12 during February through December 

2003. Data presented for these measures are rounded to the next whole number. 

Related Information. For information about the Youth Risk Behavior Surveillance System, 

see http://www.cdc.gov/healthyyouth/yrbs/. For detailed information about the 

methodology of the Youth Risk Behavior Surveillance System, see 

http://www.cdc.gov/mmwr/PDF/rr/rr5312.pdf. 

Additional Information. Data for FY 2005 will be available in December 2006. 

Violent Crime 

Safe schools are essential for healthy student development and academic achievement. 

Secretary Spellings said, “In order for our children to learn well and excel, they need to feel 

safe.” When violent crime takes place on school property, it disrupts the learning 

environment and creates obstacles to student achievement and physical safety. To help 

schools reduce the prevalence of violence and related health-risk behaviors, the Department 

provides financial assistance and information to states and school districts. Through this 

effort, the Department works to positively influence the reduction of violent crime in 

schools. 

Recent Youth Risk Behavior Surveillance System data for fighting on school property and 

carrying weapons to school show significant reductions in these risk behaviors from 1993 to 

2003, but reductions were not significant during the last two years of that period. 

3.4 Safe and Drug-Free Schools and 

Communities State Grants. The percentage of 

students in grades 9 through 12 who were in a 

physical fight on school property one or more times 

during the past 12 months. 

3.5 Safe and Drug-Free Schools and 

Communities State Grants. The percentage of 

students in grades 9 through 12 who carried a 

weapon such as a gun, knife, or club on school 

property one or more times during the past 30 days. 

Fiscal Year Actual Fiscal Year Actual 

1993 16 1993 12 

1995 16 1995 10 

1997 15 1997 9 

1999 14 1999 7 

2001 13 2001 6 

2003 13 2003 6 

2005 Target is 12. 2005 Target is 5. 

Data for 2005 are pending. Data for 2005 are pending. 

Department of Health and Human Services, Centers for Disease Control and Prevention, Youth Risk Behavior Surveillance 

System (YRBSS). 
DRAFT Key Measures Goal 2 

124

U.S. Department of Education FY 2005 Performance and Accountability Report

Analysis of Progress. Between 2001 and 2003, the data show no significant change in 

the total percentages of students fighting on school property or carrying a weapon on school 

property. In addition to the data for all respondents, the Youth Risk Behavior Surveillance 

System also makes data about these behaviors available by student grade level. This data 

provides some interesting insights that contrast with the patterns identified for measures 

3.2 and 3.3 about marijuana use and heavy drinking. 

In both 2003 and 2001, students in lower grades were more likely to engage in a physical 

fight on school property than those in higher grades. In 2003, 18.0 percent of 9th-graders 

reported participation in a fight, while 7.3 percent of 12th-graders reported participation in 

a fight. The data from 2001 reflect the same pattern—while 17.3 percent of ninth-graders 

reported fighting, only 7.5 percent of seniors reported that same behavior. 

The percentage of students that report carrying a weapon on school property is more 

consistent across grades 9 through 12, but patterns across grade levels varied between 

2001 and 2003. In 2001, 6.7 percent of 9th- and 10th-graders, 6.1 percent of 11thgraders, and 6.0 percent of 12th-graders carried a weapon on school property. By 2003, 

5.3 percent of 9th-graders, 6.0 percent of 10th-graders, 6.6 percent of 11th-graders, and 

6.4 percent of high school seniors reported carrying a weapon to school. 

Data Quality. Data are collected in alternate years from a nationally representative 

sample of students in grades 9 through 12 and are collected on a calendar-year, not a 

school-year, basis. The Youth Risk Behavior Surveillance System includes a national schoolbased survey conducted by the Centers for Disease Control and Prevention as well as state 

and local school-based surveys conducted by education and health agencies. The 2003 

report summarized results from the national survey, 32 state surveys, and 18 local surveys 

conducted among students in grades 9 through 12 during February through December 

2003.

Related Information. For information about the Youth Risk Behavior Surveillance System, 

see http://www.cdc.gov/healthyyouth/yrbs/. For detailed information about the 

methodology of the Youth Risk Behavior Surveillance System, see 

http://www.cdc.gov/mmwr/PDF/rr/rr5312.pdf. 

Additional Information. Data for FY 2005 will be available in December 2006. 

Discontinued Strategic Measures 

The following measures were discontinued after FY 2004 but were reported as pending in our 

FY 2004 Performance and Accountability Report. We report here our results on those for which 

we now have data. (See p. 23 for a discussion of why we discontinued measures.) 

Measure Fiscal 

Year Target Actual Status 

2003 24/1000 Pending Data expected 

12/2005 

3.1.1 The rate of violent crimes 

and serious violent crimes 

experienced at school by 

students aged 12 through 18 

Violent Crime 

2004 23/1000 Pending Data expected 

12/2006 
DRAFT Key Measures Goal 2 

125

U.S. Department of Education FY 2005 Performance and Accountability Report

Measure Fiscal 

Year Target Actual Status 

2003 4/1000 Pending Data expected 

12/2005 

3.1.2 The rate of violent crimes 

and serious violent crimes 

experienced at school by 

students aged 12 through 18 

(continued) 

Serious Violent Crime 

2004 4/1000 Pending Data expected 

12/2006 

Alcohol 

2004 14 Pending Data expected 

12/2005 

Tobacco (Cigarettes) 2004 11 Pending Data expected 

12/2005 

3.1.3–

3.1.5 

The percentage of youth 

aged 12 through 17 who 

reported using the following 

substances in the past 

30 days Marijuana 2004 7 Pending Data expected 

12/2005 

3.2.2 The percentage of students in grade 12 who think 

most of the students in their classes would dislike it or 

dislike it very much if a student intentionally did things 

to make his/her teachers angry 

2004 36 Pending Data expected 

12/2005 

3.2.3 The percentage of students in grade 12 who think that 

most students in their classes would dislike it or 

dislike it very much if a student cheated on a test 

2004 19 Pending Data expected 

12/2005 

3.2.4 The percentage of 14- to 18-year-olds who believe 

cheating occurs by half or most students 2004 40 Not 

available Not collected 

Sources 

3.1.1–3.1.2 U.S. Departments of Education and Justice, Indicators of School Crime and Safety.

3.1.3–3.1.5 U.S. Department of Health and Human Services, Substance Abuse and Mental Health 

Services Administration (SAMHSA), National Survey on Drug Use and Health (formerly 

called the National Household Survey on Drug Abuse). 

3.2.2–3.2.3 University of Michigan, Survey Research Center, Monitoring the Future. 
126

Goal 3: Develop Safe and Drug-Free Schools 

Program Performance Summary 

Twelve of our grant programs most directly support Goal 3. These programs are listed below. In the table

overview of the results of each program on its program performance measures. (See p. 59 for our methodthe percentage of targets met, not met, and without data.) Individual program performance reports are avhttp://www.ed.gov/about/reports/annual/2005report/program.html. We also provide both FY 2005 approp

expenditures for each of these programs. (See pp. 24-25 for an explanation of why appropriations and expgiven year are not the same and the effect that difference has on the connection between funding and perf

Program Name 

Appropriations† Expen- ditures‡ Program Performance Results Percent of Targets Met, Not Met, Withou

FY 2005 FY 2004 FY 2003 

FY 2005

$ in 

millions

FY 2005

$ in 

millions

% 

Met 

% 

Not 

Met 

% 

No 

Data

% 

Met 

% 

Not 

Met 

% 

No 

Data

% 

Met 

% 

Not 

Met 

% 

N

D

ESEA: Alcohol Abuse Reduction 33 28 0 0 100 0 0 1ESEA: Character Education 24 10 0 0 100 100 0 ESEA: Civic Education: We the People 17 17 0 0 100 ESEA: Close-Up Fellowships 1 1 0 0 100 0 0 100 ESEA: Elementary and Secondary School Counseling 35 32 0 0 100 0 0 1ESEA: Exchanges with Historic Whaling and Trading 

Partners

9 8 0 0 100 60 0 40 

ESEA: Foundations for Learning 1 1 /// (not funded) ESEA: Mental Health Integration in Schools 5 0 /// /// (not funded) /// (not funded) ESEA: Physical Education Program 73 64 0 0 100 0 0 1ESEA: Mentoring Program 49 41 0 0 100 ESEA: Safe and Drug-Free Schools and Communities 

Other National Programs

153 104 0 0 100 0 0 100 100 0 

ESEA: Safe and Drug-Free Schools and Communities 

State Grants

437 526 0 0 100 0 29 7

TOTAL 837 * 832 † Budget for each program represents program budget authority. ‡ Expenditures occur when recipients draw down funds to cover actual outlays. FY 2005 expenditures may include funds from prior y

A shaded cell denotes that the program did not have targets for the specified year. 

/// Denotes programs not yet implemented (Programs are often implemented near the end of the year they are first funded.) 

* Expenditures by program do not include outlays in the amount of $3 million for prior years’ obligations for Goal 3 programs that wer

or FY 2005 estimated accruals in the amount of $42 million. ESEA: Elementary and Secondary Education Act 
DRAFT Key Measures Goal 2 

127

U.S. Department of Education FY 2005 Performance and Accountability Report

Goal 4: Transform Education Into an Evidence-Based Field 

Performance Goals 

Quality of Education Research

The Department demonstrated a thorough commitment to research quality this year by 

expanding the use of scientifically based procedures for the evaluation of Department 

programs, training a new generation of education researchers in rigorous methodologies, 

and improving the quality of data collections. 

In FY 2005, 100 percent of newly funded research proposals were deemed to be of high 

quality by an independent review panel of qualified scientists. 

Relevance of Education Research

The Department prioritizes the needs of education practitioners and policymakers to ensure 

that we are providing germane information for the improvement of education. In FY 2005, 

we published relevant research on reliable practices that support learning, improve 

academic achievement and increase access to educational opportunities for all students; the 

condition and progress of education in the United States; and the effectiveness of federal 

and nonfederal education programs. 

In FY 2004, the most recent year for which we have data, half of the Department’s newly 

funded research projects were deemed to be of high relevance by an independent review 

panel of qualified practitioners. 
DRAFT Key Measures Goal 2 

128

U.S. Department of Education FY 2005 Performance and Accountability Report

Goal 4: Transform Education Into an Evidence-Based Field 

Key Measures 

In FY 2005, the Department administered five distinct programs supporting the objectives of 

Goal 4. Each program established measures and targets to assess its performance. From 

this master set of measures, the Department identified two key measures that focus on 

significant areas of performance related to Goal 4. 

See p. 58 for an explanation of the documentation fields for key measures. 

Quality of Education Research 

The Department has elevated the standards and methodologies for Department-sponsored 

education research. Funding of research proposals is based on clear criteria for research 

excellence. As in other scientifically based fields, rigorous research methods in education 

contribute to reliable and valid conclusions, in this case about the best ways to educate our 

nation’s children. 

The Department demonstrated a thorough commitment to research quality this year by 

expanding the use of scientifically based procedures for the evaluation of Department 

programs, training a new generation of education researchers in rigorous methodologies, 

and improving the quality of data collections. In 2005, the Department accomplished the 

following: 

• The Department set in place a procedure that would give competitive preference to 

grant applications that propose experimental or quasi-experimental research designs 

to evaluate the effectiveness of their programs. This action will expand the number 

of programs and projects funded by Department programs that are evaluated using 

the most rigorous research methods. 

• The Department created new pre- and postdoctoral research training grant programs 

in the education sciences to support the development of innovative interdisciplinary 

training programs for students interested in pursuing careers in applied education 

research. Together these programs will train a total of 266 fellows. 

• Focused projects on data quality contributed to the ongoing improvement of 

education data issued by the Department. By mapping the relationship of incentives 

and response rates, we will more effectively use incentives to increase response 

rates. Also, data on timeliness has resulted in Department-wide efforts to reduce the 

time frame from the end of data collection to the release of a report. 

To measure research quality, the Department requires all research proposals to be reviewed 

by an independent panel of qualified scientists. In FY 2004, 97 percent of newly funded 

research proposals were deemed to be of high quality. 
DRAFT Key Measures Goal 2 

129

U.S. Department of Education FY 2005 Performance and Accountability Report

Analysis of Progress. Since data on 

this measure were first collected in 

FY 2003, the Department has seen a 

steady increase in the percentage of 

proposals for newly funded education 

research that receive an average score 

of excellent or higher. In FY 2005, all 

research funded was deemed to be of 

high quality with a rating of excellent. 

Data Quality. The Department has 

established a system of peer review 

that is similar in many ways to the 

process of peer review at the National Institutes of Health. Independent review panels 

comprise 12 to 20 leading researchers. Panels evaluate the scientific and technical merit of 

research proposals. 

Target Context. The Department did not establish a target for this measure for FY 2004; 

the measure was newly established for FY 2005. The target of 100 percent for FY 2005 

signifies a continued commitment by the Department to ensure that all newly funded 

research meets high standards of research quality. 

Related Information. More information on the National Center for Education Research, its 

purpose, and study summaries is available at 

http://www.ed.gov/about/offices/list/om/fs_po/ies/ncer.html and 

http://www.ed.gov/about/offices/list/ies/programs.html. 

Relevance of Education Research 

In addition to a focus on sound methodology, education researchers need to address 

practical problems in powerful ways. The Department aligns its priorities with the needs of 

education practitioners and policymakers to ensure that we are providing information that is 

relevant to the improvement of education. In 2005, we provided parents, educators, 

students, researchers, policymakers, and the general public with reliable information about 

practices that support learning, the condition and progress of education in the United 

States, and the effectiveness of federal and nonfederal education programs. 

• The Department operates the What Works Clearinghouse, which collects, screens, 

and identifies studies of the effectiveness of education interventions. In 2005, the 

clearinghouse reviewed 76 studies on middle school mathematics curricula, 10 of 

which met its high standards for credible causal evidence of effectiveness. 

• During FY 2005, the Department published the Condition of Education 2005 and 

released other publications including the Digest of Education Statistics, Projections 

of Education Statistics, and the National Assessment of Educational Progress longterm trend report. By describing all aspects of education in the United States, 

these reports help inform Americans about the current status of education in the 

4.1 Research, Development, and Dissemination. The 

percentage of new research proposals funded by the 

Department’s National Center for Education Research that 

receive an average score of excellent or higher from an 

independent review panel of qualified scientists. 

Fiscal Year Actual 

2003 88 

2004 97 

2005 100

We met our 2005 target of 100. 

U.S. Department of Education, National Center for Education 

Research, independent external review panels. 
DRAFT Key Measures Goal 2 

130

U.S. Department of Education FY 2005 Performance and Accountability Report

United States, progress toward improvement, and anticipated trends into the 

future. 

• The Department launched three new program effectiveness studies in 2005. 

Covering the areas of mentoring, elementary school mathematics curricula, and 

professional development strategies for mathematics education, these studies will 

provide scientific evidence on the effectiveness of education programs and practices 

based on the most rigorous research designs. 

The Department ensures the production of relevant education research by having all newly 

funded research reviewed by an independent panel of qualified practitioners. As the results 

from Department research projects begin to affect state and federal decisions on 

discretionary grants and the flow of program funds to schools, we expect that practitioners 

will want to consider evidence on what works and program developers will produce it. In 

FY 2004, half of the newly funded research projects were deemed to be of high relevance. 

Analysis of Progress. While FY 2004 

results for relevance show a decrease 

from FY 2003, we met our target that 

half of all new research projects be 

deemed as highly relevant. 

Data Quality. To evaluate the 

relevance of newly funded research 

projects, a panel of experienced 

education practitioners and 

administrators reviews descriptions of 

a randomly selected sample of newly 

funded projects and rates the degree 

to which the projects are relevant to 

education practice. These panels are 

convened after the close of the fiscal year to review proposals of the prior year.

Target Context. The FY 2004 target of 50 percent was based on trend data prior to the 

availability of actual data for FY 2003 and does not represent an intended decrease in the 

percentage of new research projects deemed of high relevance. The FY 2005 target of 65 

indicates that with time, the Department aims for an increasing majority of funded research 

projects to be highly relevant to education practice. 

Related Information. More information on the National Center for Education Research, its 

purpose, and study summaries are available at 

http://www.ed.gov/about/offices/list/om/fs_po/ies/ncer.html and 

http://www.ed.gov/about/offices/list/ies/programs.html. 

Additional Information. Data for FY 2005 will be available in March 2006. 

4.2 Research, Development, and Dissemination. The 

percentage of new research projects funded by the 

Department’s National Center for Education Research that 

are deemed to be of high relevance to education practice as 

determined by an independent review panel of qualified 

practitioners. 

Fiscal Year Actual 

2001 21 

2002 25 

2003 60 

2004 50 

2005 Target is 65. 

We met our 2004 target of 50. 

Data for 2005 are pending. 

U.S. Department of Education, National Center for Education 

Research, independent external review panels. 
DRAFT Key Measures Goal 2 

131

U.S. Department of Education FY 2005 Performance and Accountability Report

Discontinued Strategic Measures 

The following measure was discontinued after FY 2004 but was reported as pending in our 

FY 2004 Performance and Accountability Report. (See p. 23 for a discussion of why we 

discontinued measures.) 

Measure Fiscal 

Year Target Actual Status 

4.2.1 Percentage of new research projects funded by the 

Department that are deemed to be of high relevance 

to educational practice as determined by an 

independent review panel of qualified practitioners 

2004 75 Not 

available 

Data not 

collected 

Source and Note 

4.2.1 U.S. Department of Education, Institute of Education Sciences, panel reviews. 

This measure was discontinued and replaced with measures that more precisely 

identify the universe of projects under consideration. 
132

Goal 4: Transform Education Into an Evidence-Based Fiel

Program Performance Summary 

Five of our grant programs most directly support Goal 4. These programs are listed below. In the table, woverview of the results of each program on its program performance measures. (See p. 59 for our methodthe percentage of targets met, not met, and without data.) Individual program performance reports are avhttp://www.ed.gov/about/reports/annual/2005report/program.html. We also provide both FY 2005 approp

expenditures for each of these programs. (See pp. 24-25 for an explanation of why appropriations and expgiven year are not the same and the effect that difference has on the connection between funding and perf

Program Name 

Appropriations† Expen- ditures‡ Program Performance Results Percent of Targets Met, Not Met, Withou

FY 2005 FY 2004 FY 2003 

FY 2005

$ in 

millions

FY 2005

$ in 

millions

% 

Met 

% 

Not 

Met 

% 

No 

Data

% 

Met 

% 

Not 

Met 

% 

No 

Data

% 

Met 

% 

Not 

Met 

% 

N

D

ESEA: Indian Education National Activities 5 6 ESRA: Research, Development and Dissemination 164 111 43 0 57 80 20 0 100 0 ESRA: Statistics 91 88 43 57 0 0 0 1ESRA: Research in Special Education 83 71 /// /// (not funded) /// (not funded) RA: National Institute on Disability and Rehabilitation 

Research 108 105 13 0 88 0 25 75 43 29 2

Administrative and Support Funding for Goal 4# 9 9 # # # TOTAL 460 * 390 † Budget for each program represents program budget authority. ‡ Expenditures occur when recipients draw down funds to cover actual outlays. FY 2005 expenditures may include funds from prior y

A shaded cell denotes that the program did not have targets for the specified year. 

/// Denotes programs not yet implemented (Programs are often implemented near the end of the year they are first funded.) 

# The Department does not plan to develop performance measures for programs, activities, or budgetary line items that are administr

serve to support other programs and their performance measures. 

* Expenditures by program do not include FY 2005 estimated accruals in the amount of $52 million. ESEA: Elementary and Secondary Education Act ESRA: Education Sciences Reform Act RA: Rehabilitation Act 
133

U.S. Department of Education FY 2005 Performance and Accountability Report

Goal 4: Transform Education Into an Evidence-Based Field 

PART Analysis 

In preparation for the FY 2005 budget, the Department conducted reviews on the programs 

listed below using the Office of Management and Budget’s Program Assessment Rating Tool 

(PART). (See p. 60 for a discussion of the PART methodology.) Short summaries of the 

PART results and follow-up actions are on the following pages. OMB’s Web site provides 

one-page summaries and full detailed PART reviews for all agencies. 

National Institute on Disability and Rehabilitation Research

Rating: Results Not Demonstrated 

Research in Special Education

Rating: Results Not Demonstrated 

National Center for Education Statistics

Rating: Effective 
134

U.S. Department of Education FY 2005 Performance and Accountability Report

PART Analysis for Programs Reviewed for the FY 2005 Budget 

Program: National Institute on Disability and 

Rehabilitation Research (NIDRR) 

Year of Rating: For FY 2005 Budget 

Rating: Results Not Demonstrated 

Program Type: Research and Development 

Recommended Follow-up Action 

• Develop strategies to have smaller grant 

portfolios, such as field-initiated research, 

reviewed by expert panels starting in 2004. 

• Examine its portfolio, using its Long-Range Plan as a guide, to determine whether 

targeting funds on a smaller number of research priorities would improve the 

institute’s ability to meet its long-term goals. 

• Implement a regular schedule for review by an independent organization to assess 

overall program quality, coordinated with reauthorizations and the Long-Range Plan 

cycle. 

• Articulate substantive long-term research goals that have measurable outcomes as 

part of its 2004 update of the 2004 to 2008 Long-Range Plan. 

Update on Follow-up Action 

NIDRR has established long-term goals, with associated performance measures and targets, 

in response to PART findings and has established procedures for obtaining data to measure 

progress towards the goals. NIDRR also plans to conduct reviews of additional grant 

portfolios so that it will have performance data on a larger portion of its grants; the first 

reviews were held in the fall of 2005. The draft Long-Range Plan for 2005–2009 was 

published in the Federal Register on July 27, 2005. NIDRR is working with other agencies to 

begin a new independent study by the Institute of Medicine. Another PART is being 

conducted on NIDRR in 2005 for the 2007 budget. 

 

Program: Research in Special Education 

Year of Rating: For FY 2005 Budget 

Rating: Results Not Demonstrated 

Program Type: Research and Development

Recommended Follow-up Action 

• Implement a regular schedule for review by 

an independent organization to assess 

overall program quality, coordinated with the 

reauthorization cycle. 

60

100

 90

34

0 100

Results/Accountability

Management

Planning

Purpose

60

100

 90

34

0 100

Results/Accountability

Management

Planning

Purpose
135

U.S. Department of Education FY 2005 Performance and Accountability Report

• Promote better coordination between the Office of Special Education and Rehabilitative 

Services and the Institute of Education Sciences in the development and 

implementation of education research priorities aimed at improving education results 

for children with disabilities, consistent with the proposed transfer of special education 

research to the institute in 2005. 

• Articulate substantive long-term research objectives that have measurable outcomes 

and goals by 2005. 

• Collect grantee performance data and make them available to the public in a 

transparent and meaningful manner. 

Update on Follow-up Action 

This program has been transferred to the newly established National Center for Special 

Education Research in the Institute of Education Sciences, pursuant to amendments made 

by the Individuals with Disabilities Education Improvement Act of 2004. The Department 

will consider the best way to conduct an independent evaluation of all education research 

supported by the Department. The Director of the Institute for Education Sciences recently 

published a notice in the Federal Register inviting public comments on proposed research 

priorities, and the institute is working to develop appropriate long-term measures for all of 

its research programs. New annual measures have been established for the National Center 

for Special Education Research, and data for these measures will be collected for the first 

time in 2006. 

 

Program: National Center for Education 

Statistics (NCES) 

Year of Rating: For FY 2005 Budget

Rating: Effective

Program Type: Research and Development 

Recommended Follow-up Action 

• The Department of Education will focus on 

improving the timeliness of NCES products 

and services. 

Update on Follow-up Action 

The 2005 PART assessment found a weakness in the timeliness of NCES products. In 2005, 

the Department responded by articulating specific goals for the release of data: in 2006, 

90 percent of initial releases of data will occur (a) within 18 months of the end of data 

collection or (b) with an improvement of two months over the previous time of initial release 

of data from that survey program if the 18-month deadline is not attainable in 2006. In 

2007 through 2010, NCES will reduce by two months each year the deadline for initial 

release, until the final goal of 12 months is reached. 

89

100

 60

100

0 100

Results/Accountability

Management

Planning

Purpose
 136

U.S. Department of Education FY 2005 Performance and Accountability Report

Goal 5: Enhance the Quality of and Access to 

Postsecondary and Adult Education 

Performance Goals 

Postsecondary Enrollment

The Department’s programs have contributed to significant improvements in postsecondary 

access. As of 2003, the overall college-going rate for high school graduates stood at 

63.9 percent, with more than 16 million students enrolled at degree-granting postsecondary 

institutions. Furthermore, college enrollment figures for TRIO Talent Search, a program 

designed to support the college enrollment of students from disadvantaged backgrounds, 

surpass the national average for all high school graduates. 

Postsecondary Persistence and Completion

The Department provides services to ensure that increasing numbers of Americans gain 

access to a postsecondary education, persist in school, and complete their college 

education. Successful completion of postsecondary education increases future employability 

and wages. The most recent data available for persistence and completion rates for 

students in the aggregate and for students from disadvantaged backgrounds show general 

trends of improvement. 

Student Financial Assistance Award Accuracy

One of the key determinants for ensuring access, persistence, and completion in 

postsecondary institutions has been the extensive support of financial aid to low- and 

middle-income students. The Department administers more than $400 billion in direct 

loans, guaranteed loans, and grants to postsecondary students and their families. Recent 

achievements include the removal of student financial assistance programs from the 

Government Accountability Office’s high-risk list in January 2005 and a declining Pell Grant 

overpayment rate. 

Strengthening Institutions That Serve Underrepresented Populations

The Department’s institutional aid programs strengthen and improve the quality of 

programs in hundreds of postsecondary education institutions that serve low-income and 

minority students, including Historically Black Colleges and Universities, Historically Black 

Graduate Institutions, Tribal Colleges and Universities, Alaska Native and Native HawaiianServing Institutions, and Hispanic-Serving Institutions. By expanding and enhancing 

academic quality, institutional management, and financial stability at these institutions, the 

Department reduces gaps in college access and completion among differing student 

populations, improves academic attainment, and strengthens accountability. 

Vocational Rehabilitation

Over the past year, the Department has made significant progress in improving the 

timeliness of its vocational rehabilitation data. The FY 2004 Case Service Report database 

was completed within five months of the close of the fiscal year, a 10-month improvement 

compared to FY 2002 and prior years. Reviews of state performance data to correct 
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U.S. Department of Education FY 2005 Performance and Accountability Report

problems and improve services to customers have also been completed more promptly in 

FY 2005 than in prior years. 

The Department measures state vocational rehabilitation agencies’ progress by monitoring 

the percentage of individuals receiving services who achieve employment. In FY 2004, 

about two-thirds of state vocational rehabilitation agencies achieved the outcome criteria 

set by regulatory indicators. 

Adult Learning

In an age of rapid economic and technological change, lifelong learning can provide benefits 

for individuals and for society as a whole. New data on adult learners this year show steady 

increases in the success rates of adults in meeting high school completion goals and in 

English literacy acquisition. 

Expanding Global Perspectives

The Department’s international education and graduate fellowship programs have helped 

thousands of students, particularly at the graduate level, prepare for careers in areas of 

national need, including foreign languages and area studies. Departmental support for 

foreign languages, area studies, and international studies at American colleges and 

universities ensures a steady supply of graduates with expertise in less-commonly taught 

languages, geographic areas, and international issues. The Department measures progress 

by the expansion of critical languages taught at National Resource Centers, employment of 

center Ph.D. graduates in targeted areas, and improved language competency. FY 2005 

was the first year in which targets were set for these measures.
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U.S. Department of Education FY 2005 Performance and Accountability Report

Goal 5: Enhance the Quality of and Access to 

Postsecondary and Adult Education 

Key Measures 

In FY 2005, the Department administered 44 distinct programs that supported the 

objectives of Goal 5. Each of these programs established measures and targets to 

determine its effectiveness. From this master set of measures, the Department identified 

20 key measures that focus on significant areas of performance related to Goal 5. 

See p. 58 for an explanation of the documentation fields for key measures. 

Postsecondary Enrollment 

In fall 1980, just over 12 million students were enrolled at degree-granting postsecondary 

education institutions and the college-going rate for recent high school completers was 

49 percent. That rate stood at 63.9 percent in 2003, and more than 16 million students are 

enrolled at degree-granting postsecondary institutions. The Department’s programs have 

contributed to these significant improvements in postsecondary access. 

Increases in the overall enrollment of students in postsecondary education have followed 

commensurately with the Department’s continued commitment to provide financial aid for 

low- and middle-income Americans. The percentage of full-time undergraduates receiving 

institutional aid and the average amount awarded increased at both public and private notfor-profit four-year institutions during the 1990s, with students receiving an increasing 

proportion of federal loans. As the largest source of student financial aid, the Department 

provides approximately $70 billion annually in grant, loan, and work-study assistance to 

some 10 million postsecondary students and their families. 

A particular focus for the Department is to support students from disadvantaged 

backgrounds in their enrollment, persistence, and completion of a postsecondary education. 

The federal TRIO programs, in particular, include discrete outreach and support programs 

targeted to serve and assist low-income, first-generation college students and students with 

disabilities to progress from middle school to postbaccalaureate programs. The TRIO name, 

which constitutes a group of grant programs authorized under the Higher Education Act, 

comes from the 1960s when TRIO consisted of three programs. In FY 2005, the 

Department continued our concerted effort to make the TRIO programs an integrated 

service delivery system, which is expected to result in a higher level of success for students 

who are served by these programs, and which also makes sound fiscal sense. 

The Department also promotes enrollment and success in postsecondary education for 

students from disadvantaged backgrounds through the Gaining Early Awareness and 

Readiness for Undergraduate Programs (GEAR-UP), which provides services at high-poverty 

middle and high schools. GEAR-UP grantees serve an entire cohort of students beginning 

no later than the seventh grade and continuing through high school. GEAR-UP funds are 

also used to provide college scholarships to low-income students. 

The Department measured immediate postsecondary enrollment for all high school 

graduates aged 16 through 24, as well as college enrollment for TRIO Talent Search, 
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U.S. Department of Education FY 2005 Performance and Accountability Report

Educational Opportunity Centers, and Upward Bound participants, to track postsecondary 

access trends. Recent data indicate that college enrollment for TRIO Talent Search 

participants surpasses the national average for all high school graduates, while enrollment 

for the predominantly low-income, first-generation potential college students using the 

services of the Educational Opportunity Centers fall below the national average. While no 

recent data are available for Upward Bound participants, data from 2000 show that these 

students slightly exceeded the national average for college enrollment. 

Analysis of Progress. The 

percentage of high school graduates 

aged 16 through 24 enrolling 

immediately in college has fluctuated 

since 1995, with data for 2002 and 

2003 indicating an increase in the 

percentage of high school graduates 

enrolled since 2001, which was the last 

year of data previously reported. In 

terms of meeting departmental 

targets, results were mixed in 2002 

and 2003, as we exceeded our target 

for 2002 but did not meet our target 

for 2003. 

This indicator is affected by economic 

conditions, and so the slight 

fluctuations can be explained in part by 

changing economic conditions. 

Generally, students tend to take jobs 

rather than go to college when the 

economy is strong. These economic 

conditions vary for groups aggregated within the measure—students enrolling in two-year 

versus four-year institutions, and minority students versus the overall student population. 

To support increasing access to postsecondary education, the Department continues to 

simplify and integrate financial aid systems so as to increase the growth in the use of 

electronic applications and correspondingly decrease the number of paper applications for 

federal financial aid, with the goal of making access to financial aid easier. In the long 

term, No Child Left Behind focuses on raising the achievement levels of elementary and 

secondary students so that all students will be better prepared for enrollment in 

postsecondary education. 

Three Government Accountability Office evaluations on various aspects of student financial 

assistance programs have led the Department to respond in several areas of focused 

improvements in the disbursement of financial aid in relation to tax preferences. See 

evaluation summaries, p. 170-71, for key findings, recommendations, and the Department’s 

response. 

5.1 Student Financial Assistance Programs. The 

percentage of high school graduates aged 16 through 24 

enrolling immediately in college. 

Fiscal Year Actual 

1995 61.9 

1996 65 

1997 67 

1998 65.6 

1999 62.9 

2000 63.3 

2001 61.7 

2002 65.2 

2003 63.9 

2004 Target is 67. 

2005 Target is 67. 

We exceeded our 2002 target of 63.8. 

We did not meet our 2003 target of 64.1. 

Data for 2004 and 2005 are pending. 

U.S. Department of Education, National Center for Education 

Statistics, Condition of Education 2005, Student Effort and 

Educational Progress, Table 20-1. 
 140

U.S. Department of Education FY 2005 Performance and Accountability Report

Data Quality. Postsecondary institutions supply data through the National Center for 

Education Statistics Integrated Postsecondary Education Data System. Institutions certify 

the accuracy of the data and the National Center for Education Statistics conducts checks 

for data quality.

Target Context. Each percentage point increase represents a significant increase in the 

number of students enrolling in college. The target of 67 percent for 2004 and 2005 is 

ambitious and represents the Department’s goal of increasing the percentage of high school 

graduates that enroll immediately in college. 

Related Information. See http://www.ed.gov/offices/OSFAP/Students/student.html for 

information about the student financial assistance programs. See 

http://nces.ed.gov/programs/coe/2005/section3/table.asp?tableID=268 for enrollment data 

from the Condition of Education 2005. 

Additional Information. Data for FY 2004 will be available in March 2006. Data for 

FY 2005 will be available in March 2007. 

Analysis of Progress. Between 

FY 2000 and FY 2003, about threefourths of Talent Search participants 

enrolled in college, above the national 

average (see measure 5.1). No targets 

were set for this measure until 

FY 2004. 

The number of Talent Search 

participants enrolling in college, despite 

their disadvantaged backgrounds, 

reflect lessons gained from earlier 

cohorts of program participants. 

Effective communications mechanisms and targeted technical assistance have led to sharing 

best practices and to achieving improvements in program outcomes. 

Data Quality. These data are self-reported by grantees. Program staff employ data quality 

checks to assess the completeness and reasonableness of the data submitted. 

Target Context. Targets for FY 2004 and FY 2005 were set before data for FY 2001 

through FY 2003 were available. 

Related Information. See http://www.ed.gov/programs/triotalent/index.html for 

information about the Talent Search program. See 

http://www.ed.gov/about/offices/list/ope/trio/index.html for information about the federal 

TRIO programs. 

Additional Information. Data for FY 2004 will be available in December 2005. Data for 

FY 2005 will be available in December 2006. 

5.2 TRIO Talent Search. The percentage of Talent Search 

participants enrolling in college. 

Fiscal Year Actual 

2000 73 

2001 77 

2002 78 

2003 73 

2004 Target is 73.5. 

2005 Target is 74. 

Data for 2004 and 2005 are pending. 

U.S. Department of Education, Office of Postsecondary Education, 

TRIO Annual Performance Report, grantee submissions. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

The Talent Search program identifies and assists individuals from disadvantaged 

backgrounds who have the potential to succeed in higher education. The program provides 

academic, career, and financial counseling to its participants and encourages them to 

graduate from high school and continue on to the postsecondary institution of their choice. 

Talent Search also serves high school dropouts by encouraging them to reenter the 

educational system and complete their education. 

Analysis of Progress. In FY 2003, 

more than half of all TRIO Educational 

Opportunity Centers program 

participants enrolled in college. The 

first target was set for FY 2004, and 

data are pending. 

Data Quality. These data are selfreported by grantees. Program staff 

employ data quality checks to assess 

the completeness and reasonableness 

of the data submitted. 

Target Context. Increasing targets reflect the aim of the TRIO Educational Opportunity 

Centers program to increase the percentage of adult participants enrolling in college. 

Related Information. See http://www.ed.gov/programs/trioeoc/index.html for 

information about the Educational Opportunity Centers program. See 

http://www.ed.gov/about/offices/list/ope/trio/index.html for information about the federal 

TRIO programs. 

Additional Information. Data for FY 2004 will be available in December 2005. Data for 

FY 2005 will be available in December 2006. 

The Educational Opportunity Centers program provides counseling and information on 

college admissions and financial aid options to qualified adults who want to enter a program 

of postsecondary education. 

5.3 TRIO Educational Opportunity Centers. The 

percentage of TRIO Educational Opportunity Centers 

participants enrolling in college. 

Fiscal Year Actual 

2000 57 

2003 57 

2004 Target is 57. 

2005 Target is 57.5. 

Data for 2004 and 2005 are pending. 

U.S. Department of Education, Office of Postsecondary Education, 

TRIO Annual Performance Report, grantee submissions. 

5.4 TRIO Upward Bound. The percentage of 

Upward Bound participants enrolling in college. 

5.5 TRIO Upward Bound. The percentage of 

higher-risk Upward Bound participants enrolling in 

college. 

Fiscal Year Actual Fiscal Year Actual 

2000 65 2000 34 

2004 Target is 65. 2004 Target is 35.5. 

2005 Target is 65. 2005 Target is 36. 

Data for 2004 and 2005 are pending. Data for 2004 and 2005 are pending. 

National Evaluation of the Upward Bound program. 
 142

U.S. Department of Education FY 2005 Performance and Accountability Report

Analysis of Progress. The 65 percent of Upward Bound participants enrolled in college in 

2000 represents a rate higher than the national average for the same year of 16- to 24-

year-old high school graduates enrolling immediately in college (see measure 5.1). 

However, the review under the Program Assessment Rating Tool found that Upward Bound 

has limited overall effects because it fails to target higher-risk students. The targets for 

2004 and 2005 reflect the Department’s efforts to target higher-risk students while 

maintaining the current level of overall college enrollment. Data for these measures, 

collected by cohort, should be available by 2006. 

FY 2004 is the first year for which grantees will be required to report on these measures. 

New annual performance reports were created to capture the data for this measure. Data 

for these measures were not collected for FY 2001 through FY 2003, but data for FY 2000 

are available from a national evaluation of the Upward Bound program. 

Data Quality. It takes roughly five years from the point of service for enrollment data to 

reflect the program’s impact because the program offers services to high school students 

beginning in their freshman year, and grantees frequently do not submit their final 

performance report until a year after the student enrolls in college. These data are selfreported by grantees. Program staff employ data quality checks to assess the completeness 

and reasonableness of the data submitted. 

Target Context. The program's effectiveness with higher-risk students is expected to 

increase by one-half of 1 percent for each year, from 2004 until 2010, as a result of 

improved program management and learning from earlier successes. 

Related Information. See http://www.ed.gov/programs/trioupbound/index.html for 

information about the Upward Bound program. See 

http://www.ed.gov/about/offices/list/ope/trio/index.html for information about the federal 

TRIO programs.

Additional Information. Data for FY 2004 will be available in December 2005. Data for 

FY 2005 will be available in December 2006. 

Upward Bound provides fundamental support to participants in their preparation for college 

entrance, with instruction in mathematics, laboratory science, composition, literature, and 

foreign language. Upward Bound serves high school students from low-income families, 

high school students from families in which neither parent holds a bachelor's degree, and 

low-income, first-generation military veterans who are preparing to enter postsecondary 

education. 

Postsecondary Persistence and Completion 

The Department provides services to ensure that increasing numbers of Americans gain 

access to a postsecondary education, persist in school, and complete their college 

education. Successful completion of postsecondary education increases future employability 

and wages. In fact, data from the Census Bureau for 2004 show that earnings for workers 

18 and over are considerably higher for those workers with a bachelor’s degree than those 

with a high school diploma; on average, earnings are $51,206 and $27,915 a year, 
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U.S. Department of Education FY 2005 Performance and Accountability Report

respectively. The most recent data available for persistence and completion rates for all 

students and targeted groups show general trends of improvement. 

TRIO Student Support Services and McNair Postbaccalaureate Achievement programs 

address the challenges that disadvantaged students, many of whom are minority, face in 

terms of achieving higher rates of postsecondary persistence and completion by providing 

them with support throughout the postsecondary experience. In FY 2005, performance data 

for the TRIO Student Support Services and the TRIO McNair Postbaccalaureate Achievement

programs showed significant progress in the outcomes of program participants: 

• The average cumulative grade point average of the 1998–99 Student Support Services 

cohort in four-year institutions improved from 2.3 in their freshman year to 2.6 in 

their senior year. 

• The graduation rate of Student Support Services students served in two-year 

institutions has increased, with about 7 percent of the 2000–01 freshman cohort 

completing associate’s degrees; over 5 percent of the 1998–99 freshman cohort 

received associate’s degrees. 

• The percentage of McNair graduates entering graduate school increased each year, 

from 13 percent in 1998–99 to 39 percent in 2000–01. 

• In 2000–01, 93 percent of McNair students who enrolled in graduate school 

immediately after graduation were still enrolled after one year. 

The Department measured completion rates for full-time, degree-seeking students and TRIO 

Student Support Services students’ persistence and completion rates at the same 

institution. Furthermore, the Department measured enrollment and persistence in graduate 

school for McNair participants. Completion rates for full-time students hover at 54 percent, 

and persistence rates for TRIO Student Support Services and McNair participants continue 

to increase. 
 144

U.S. Department of Education FY 2005 Performance and Accountability Report

Analysis of Progress. Previously 

published FY 2002 and FY 2003 data 

show a leveling off of completion rates, 

remaining relatively constant at 54.4 

and 54.3 percent, respectively. A little 

over half of all full-time, degreeseeking students completed a four-year 

degree within six years (150 percent of 

the normal time) in 2001. Trend data 

for this measure indicate small 

fluctuations but no increase in 

postsecondary completion from 1997. 

There were no targets prior to 2003. 

The Department received Graduation 

Rate Survey data for this measure for 

FY 2001 through FY 2003 as a single 

data set. The Department elected to 

process the most recent policy-relevant information first, so analysis and reporting began 

with FY 2003 and moved backwards to FY 2002 and then to FY 2001. FY 2001 data are the 

only previously unpublished data. 

Data Quality. Prior to the implementation of the Graduation Rate Survey in 2002, 

institutions representing 87 percent of four-year students voluntarily submitted data; 

effective with 2003–04, data submission was mandatory. 

Related Information. See http://nces.ed.gov/ipeds/form1997/grsguide.pdf for guidelines 

for survey respondents for the Graduation Rate Survey. See 

http://www.ed.gov/offices/OSFAP/Students/student.html for information about the student 

financial assistance programs. 

Additional Information. Data for FY 2004 will be available in March 2006. Data for 

FY 2005 will be available in March 2007. 

5.6 Student Financial Assistance Programs. The 

percentage of full-time, degree-seeking students completing 

a four-year degree within 150 percent of the normal time 

required. 

Fiscal Year Actual 

1997 52.5 

1998 52.6 

1999 53 

2000 52.4 

2001 54.4 

2002 54.4 

2003 54.3 

2004 Target is 55. 

2005 Target is 55. 

Data for 2004 and 2005 are pending. 

U.S. Department of Education, National Center for Education 

Statistics, Integrated Postsecondary Education Data System, 

Graduation Rate Survey. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

Analysis of Progress. There are no 

new data for this measure. Trend data 

indicate that persistence rates for TRIO 

Student Support Services participants 

have increased from FY 1999 through 

FY 2002. 

Data Quality. The persistence rate 

reflects the percentage of college 

freshmen that return as sophomores to 

the same institution. These data are 

self-reported by grantees. Program 

staff employ data quality checks to 

assess the completeness and 

reasonableness of the data submitted. 

Target Context. Targets for FY 2003 through FY 2005 were set before data for FY 2001 or 

FY 2002 were available. 

Related Information. See http://www.ed.gov/programs/triostudsupp/index.html for 

information about the Student Support Services program. See 

http://www.ed.gov/about/offices/list/ope/trio/index.html for information about the federal 

TRIO programs. 

Additional Information. Data for FY 2003 and FY 2004 will be available in December 

2005. Data for FY 2005 will be available in December 2006. 

The Student Support Services program provides opportunities for academic development, 

assists students with basic college requirements, and serves to motivate students toward 

the successful completion of their postsecondary education. The program also provides 

grant aid to current participants who are receiving Federal Pell Grants. 

Analysis of Progress. In FY 1999, 

data from the national evaluation of 

Student Support Services showed that 

29 percent of participants completed a 

degree at the same institution in which 

they originally enrolled. Data for these 

measures were not collected for 

FY 2001 through FY 2003. 

FY 2004 is the first year for which 

grantees will be required to report on the measure. New annual performance reports were 

created to capture the data for this measure. 

Data Quality. These data are self-reported by grantees. Program staff employ data 

quality checks to assess the completeness and reasonableness of the data submitted. 

Target Context. FY 2004 and FY 2005 targets were set based on FY 1999 actual data. 

5.7 TRIO Student Support Services. The percentage of 

TRIO Student Support Services participants persisting at the 

same institution. 

Fiscal Year Actual

1999 67 

2000 67 

2001 70 

2002 72 

2003 Target is 68. 

2004 Target is 68.5. 

2005 Target is 69. 

Data for 2003, 2004, and 2005 are pending. 

U.S. Department of Education, Office of Postsecondary Education, 

TRIO Annual Performance Report, grantee submissions. 

5.8 TRIO Student Support Services. The percentage of 

TRIO Student Support Services participants completing a 

degree at the same institution. 

Fiscal Year Actual 

1999 29 

2004 Target is 30. 

2005 Target is 30.5. 

Data for 2004 and 2005 are pending. 

National Evaluation of the Student Support Services program. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

Related Information. See http://www.ed.gov/programs/triostudsupp/index.html for 

information about the Student Support Services program. See 

http://www.ed.gov/about/offices/list/ope/trio/index.html for information about the federal 

TRIO programs. 

Additional Information. Data for FY 2004 will be available in December 2005. Data for 

FY 2005 will be available in December 2006. 

Analysis of Progress. In FY 2003, McNair 

postbaccalaureate enrollment reached our 

target of 36 percent. Graduate school 

enrollment is, in part, influenced by economic 

conditions, and so the slight fluctuations in 

trend data may be affected by changing 

economic conditions. 

Data Quality. Enrollment refers to 

immediate enrollment in graduate 

school of bachelor’s degree recipients. 

These data are self-reported by 

grantees. Program staff employ data 

quality checks to assess the 

completeness and reasonableness of 

the data submitted. 

Target Context. The targets for FY 2004 and FY 2005 were established based upon 

FY 1999 actual performance before actual values for FY 2001 through FY 2003 were 

available. 

Related Information. See http://www.ed.gov/programs/triomcnair/index.html for 

information on the Ronald E. McNair Postbaccalaureate Achievement program. See 

http://www.ed.gov/about/offices/list/ope/trio/index.html for information about the federal 

TRIO programs. 

Additional Information. Data for FY 2004 will be available in December 2005. Data for 

FY 2005 will be available in December 2006. 

The McNair Postbaccalaureate Achievement program awards grants to institutions of higher 

education for projects designed to prepare participants for doctoral studies through 

involvement in research and other scholarly activities. McNair participants are from 

disadvantaged backgrounds and have demonstrated strong academic potential. 

5.9 TRIO McNair Postbaccalaureate Achievement. The 

percentage of McNair participants enrolling in graduate 

school. 

Fiscal Year Actual

1999 35 

2000 35 

2001 40 

2002 39 

2003 36 

2004 Target is 36. 

2005 Target is 36. 

We met our 2003 target of 36. 

Data for 2004 and 2005 are pending. 

U.S. Department of Education, Office of Postsecondary Education, 

TRIO Annual Performance Report, grantee submissions. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

Analysis of Progress. In FY 2003, 

McNair postbaccalaureate persistence 

exceeded the target, with over threequarters of McNair participants 

persisting in graduate school. 

However, trend data are not available 

because the calculation of the measure 

of persistence was changed in FY 2003. 

Data Quality. These data are selfreported by grantees. Program staff 

employ data quality checks to assess the completeness and reasonableness of the data 

submitted. The 78 percent persistence rate for McNair in FY 2003 is not comparable to that 

of previous years. Beginning with 2003, the rate was changed to a one-year rate to bring 

the persistence calculation for McNair more in line with the persistence calculations of other 

Department programs. The rate for 2003 is a one-year rate that assesses the percentage of 

McNair recipients who were enrolled at the end of their first year in graduate school in 

2001–02, and who were still enrolled at the end of 2002–03. 

The previous years’ persistence rates measured persistence over the entire graduate school 

period. Persistence rates fluctuated in past years, from 48 percent in FY 1999 to 65 percent 

in FY 2002. 

Target Context. Targets for FY 2004 and FY 2005 were set before data for FY 2003 were 

available. Targets for FY 2006 and beyond are more ambitious. 

Related Information. See http://www.ed.gov/programs/triomcnair/index.html for 

information on the Ronald E. McNair Postbaccalaureate Achievement program. See 

http://www.ed.gov/about/offices/list/ope/trio/index.html for information about the federal 

TRIO programs. 

Additional Information. Data for FY 2004 will be available in December 2005. Data for 

FY 2005 will be available in December 2006. 

Student Financial Assistance Award Accuracy 

One of the key determinants for ensuring access, persistence, and completion in 

postsecondary institutions has been the availability of extensive financial aid to low- and 

middle-income students. The Department administers more than $400 billion in direct 

loans, guaranteed loans, and grants to postsecondary students and their families. Over the 

past decade, the Department’s Office of Federal Student Aid has endeavored to fully 

modernize the delivery of student aid and increase accountability for taxpayer dollars. 

The size and complexity of the Department’s student aid programs make them a key focus 

of the President’s Management Agenda, and these efforts are bearing fruit. Recent 

achievements include the removal of the Department’s student financial assistance 

programs from the Government Accountability Office’s High Risk List in January 2005. 

5.10 TRIO McNair Postbaccalaureate Achievement. The 

percentage of McNair participants persisting in graduate 

school. 

Fiscal Year Actual 

2003 78 

2004 Target is 75. 

2005 Target is 70. 

We exceeded our 2003 target of 75. 

Data for 2004 and 2005 are pending. 

U.S. Department of Education, Office of Postsecondary Education, 

TRIO Annual Performance Report, grantee submissions. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

"The Department's diligence in addressing these real financial integrity and management 

issues has resulted in sustained, meaningful improvements in our student aid programs—

improvements which have a direct and positive impact on the students and taxpayers we 

serve," said Secretary Margaret Spellings. (See link for full press release: 

http://www.ed.gov/news/pressreleases/2005/01/01252005a.html.) The declining Pell Grant 

overpayment rate, used to measure the integrity of Department’s student financial 

assistance award process, represents another improvement in the Department’s 

management of financial performance. 

Analysis of Progress. Trend data 

indicate that the percentage of Pell 

Grant overpayments has decreased 

from FY 2001 to FY 2004. This 

decrease in Pell Grant overpayments 

can be attributed in part to the 

increased use of electronic applications 

for student financial aid, with built-in 

online edits that decrease the 

opportunity for erroneous data. The 

financial aid community benefits from 

the Department’s extensive technical 

assistance and targeted training. There are no new data for this measure. 

Data Quality. The overpayment measure is calculated by dividing the estimated dollar 

amount of overpayments by the total dollar value of Pell Grants awarded. 

Target Context. The target for FY 2005 was set before data for FY 2004 were available. 

Related Information. See http://www.whitehouse.gov/omb/memoranda/m03-13-

attach.pdf for information on the Improper Payments Information Act of 2002. 

Additional Information. Data for FY 2005 will be available in July 2006. The capability to 

match tax return data to student applications for financial assistance would assist the 

Department in further reducing the percentage of Pell Grant overpayments by enabling us 

to verify self-reported data that we now use. However, current statutory authority does not 

allow matching of personal income information with Department data due to privacy 

restrictions associated with tax information. The Department is working with the Office of 

Management and Budget to develop alternatives to the matching of tax return data that 

effectively reduce the Pell Grant program's improper payment rate. Of particular note, the 

Department will be improving electronic monitoring of Free Applications for Federal Student 

Aid using a risk-based approach to catch more potential errors in the pre-award rather than 

the post-award stage. This enhanced monitoring is expected to take effect in 2007. 

Strengthening Institutions That Serve Underrepresented Populations 

The Department’s institutional aid programs strengthen and improve the quality of 

programs in hundreds of postsecondary education institutions that serve low-income and 

5.11 Student Aid Administration. The percentage of Pell 

Grant overpayments. 

Fiscal Year Actual 

2001 3.4 

2002 3.3 

2003 3.1 

2004 2.8 

2005 Target is 3.1. 

Data for 2005 are pending. 

Analysis of sampled Internal Revenue Service income data 

compared to data reported on the Department of Education’s Free 

Application for Federal Student Aid reported by the Office of Federal 

Student Aid and the Common Origination and Disbursement system. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

minority students, including Historically Black Colleges and Universities, Historically Black 

Graduate Institutions, Tribal Colleges and Universities, Alaska Native and Native HawaiianServing Institutions, and Hispanic-Serving Institutions. By expanding and enhancing 

academic quality, institutional management, and financial stability at these institutions, the 

Department reduces gaps in college access and completion among differing student 

populations, improves academic attainment, and strengthens accountability. 

This year, the Historically Black Colleges and Universities (HBCUs) celebrated the 25th 

anniversary of the signing of the first Presidential Executive Order on HBCUs. HBCUs make 

a strong and unique contribution to the United States by providing an education to many 

socioeconomically disadvantaged young people in the nation’s African-American and other 

minority populations. In FY 2005, these institutions benefited from a $1 million grant from 

the Fund for the Improvement of Postsecondary Education to a consortium of organizations 

headed by the United Negro College Fund to assist HBCUs with management improvement 

and leadership development activities. 

Analysis of Progress. In FY 2003 and FY 2004, we exceeded our targets for meeting 

grantee project goals relating to the improvement of student services, student outcomes, 

and academic quality. During the same time frame, we did not meet grantee targets for 

meeting project goals relating to the improvement of institutional management and fiscal 

stability. Goals relating to fiscal stability are among the most important and most difficult 

to achieve for all institutions. From FY 2002 to FY 2004, overall trends indicate a decrease 

in the percentage of project goals that were met or exceeded in all areas. Such trends may 

reflect grantee success in early years in making progress on a subset of more easily 

achieved goals, while more complex and difficult goals occur later in the project life cycle. 

5.12 Aid for Institutional 

Development, Titles III and V. 

The percentage of Title III and 

Title V project goals relating to 

the improvement of institutional 

management and fiscal stability 

that have been met or exceeded. 

5.13 Aid for Institutional 

Development, Titles III and V. 

The percentage of Title III and 

Title V project goals relating to the 

improvement of student services 

and student outcomes that have 

been met or exceeded. 

5.14 Aid for Institutional 

Development, Titles III and V. 

The percentage of Title III and 

Title V project goals relating to the 

improvement of academic quality 

that have been met or exceeded. 

Fiscal Year Actual Fiscal Year Actual Fiscal Year Actual 

2002 78 2002 86 2002 88 

2003 72 2003 81 2003 80 

2004 69 2004 77 2004 76 

2005 Target is 81. 2005 Target is 91. 2005 Target is 91. 

We did not meet our 2003 and 

2004 targets of 75. Data for 

2005 are pending. 

We exceeded our 2003 and 2004 

targets of 75. Data for 2005 are 

pending. 

We exceeded our 2003 and 2004 

targets of 75. Data for 2005 are 

pending. 

U.S. Department of Education, Higher Education Act, Titles III and V Annual Performance Report, grantee submissions. 

Note. Titles III and V of the Higher Education Act include the following programs: Strengthening Institutions, 

American Indian Tribally Controlled Colleges and Universities, Alaska Native and Native Hawaiian-Serving 

Institutions, Strengthening Historically Black Colleges and Universities, Strengthening Historically Black Graduate 

Institutions, Minority Science and Engineering Improvement, and Developing Hispanic-Serving Institutions. 
 150

U.S. Department of Education FY 2005 Performance and Accountability Report

Data Quality. These data are self-reported by grantees. Program staff employ data quality 

checks to assess the completeness and reasonableness of the data submitted. Project 

reports do not distinguish between the scope and/or effect of the project goals: small and 

large goals are both counted in the same manner, and institutions’ goals change from year 

to year. 

Target Context. The targets for FY 2005 were established before performance data for the 

prior years were available. 

Related Information. See http://www.ed.gov/about/offices/list/ope/idues/index.html for 

information on the Title III and Title V programs. 

Additional Information. FY 2005 data will be available in August 2006. The Department 

plans to replace these measures for FY 2006 with measures of enrollment, persistence, and 

completion, which have been developed to provide better accountability for each of the Aid 

for Institutional Development programs. 

Vocational Rehabilitation 

The Department’s vocational rehabilitation programs help individuals with physical or mental 

disabilities obtain employment and live more independently by providing grants that support 

job training and placement, medical and psychological services, and other individualized 

services. Annually, the Vocational Rehabilitation State Grants program helps over 200,000 

individuals with disabilities obtain employment. Over the past year, the Department has 

made significant progress in improving the timeliness of vocational rehabilitation data and in 

promoting data use for program improvement. 

• The FY 2004 Case Service Report database was completed within five months of the 

close of the fiscal year, a 10-month improvement compared to data for FY 2002 and 

prior years. The Department achieved this result by improving the data editing 

process, including use of an expanded user-friendly state vocational rehabilitation 

agency computerized edit program, and by dedicating additional staff to analyzing and 

validating the data early in the fiscal year. 

• Reviews of state performance data have also been achieved more promptly in FY 2005 

to correct problems faster and to improve customer service. More rapid availability of 

this data enhances program management and monitoring, particularly for state 

agencies that are failing or are in jeopardy of failing the program’s required standards 

and performance indicators. 

The Department measures state vocational rehabilitation agencies’ progress by monitoring 

the percentage of individuals receiving services that achieve employment. In FY 2004, 

about two-thirds of vocational rehabilitation agencies achieved the outcome criteria set by 

regulatory indicators. 
 151

U.S. Department of Education FY 2005 Performance and Accountability Report

Analysis of Progress. In FY 2001 

and FY 2002, 75 percent of agencies 

achieved at least the 55.8 percent 

employment rate set by regulatory 

indicators. The FY 2003 and FY 2004 

apparent declines can be attributed to 

three facts: (1) beginning in FY 2002, 

extended employment has not been 

considered an employment outcome in 

the Vocational Rehabilitation State 

Grants program; (2) there were 

challenging labor market conditions; 

and (3) the program is serving an 

increasing percentage of individuals 

with significant disabilities. 

The Department has set out to improve results on this measure by retooling the monitoring 

process, with an increased emphasis on state vocational rehabilitation agency performance 

leading to high-quality employment outcomes. 

Data Quality. This indicator is derived from state vocational rehabilitation agency 

performance expectations defined in the Rehabilitation Act. For each vocational 

rehabilitation agency, the Rehabilitation Services Administration examines the percentage of 

individuals who achieve employment compared to all individuals whose cases were closed 

after receiving services. To pass this indicator, a general/combined agency must achieve a 

rate of 55.8 percent, while an agency for the blind must achieve a rate of 68.9 percent. 

The accuracy and consistency of state rehabilitation staff report data cannot be guaranteed 

as counselors’ interpretations of the data reported may vary. Timeliness is dependent upon 

submittal of clean data from 80 grantees, and Rehabilitation Services Administration staff 

have worked with grantees to improve the accuracy and timeliness of performance report 

data. The FY 2004 database was available five months after the close of the fiscal year, a 

significant improvement over previous years. 

Related Information. See http://www.ed.gov/programs/rsabvrs/index.html for 

information on basic vocational rehabilitation services. See 

http://www.jan.wvu.edu/SBSES/VOCREHAB.HTM for a listing of state vocational 

rehabilitation offices. See http://www.ed.gov/rschstat/eval/rehab/standards.html for a 

complete listing of evaluation standards and performance indicators for the Vocational 

Rehabilitation State Grants program. 

Additional Information. Data for FY 2005 will be available in April 2006. 

Adult Learning 

In an age of rapid economic and technological change, lifelong learning can provide benefits 

for individuals and for society as a whole. New data on adult learners this year show steady 

increases in the following measures: 

5.15 Vocational Rehabilitation State Grants. The 

percentage of general and combined state vocational 

rehabilitation agencies that assist at least 55.8 percent of 

individuals receiving services to achieve employment. 

Fiscal Year Actual

2001 75 

2002 75 

2003 66 

2004 66 

2005 Target is 75. 

We did not meet our 2004 target of 83. 

Data for 2005 are pending. 

U.S. Department of Education, Office of Special Education and 

Rehabilitation Services, Rehabilitation Services Administration 

(RSA), state agency data from performance report RSA-911. 
 152

U.S. Department of Education FY 2005 Performance and Accountability Report

• The percentage of adults with a high school completion goal who earn a high school 

diploma or recognized equivalent. 

• The percentage of adults enrolled in English literacy programs who acquire the level of 

English language skills needed to complete the levels of instruction in which they are 

enrolled. 

Analysis of Progress. An increasing 

percentage of adults with a high school 

completion goal earned a high school 

diploma or its recognized equivalent 

between FY 2001 and FY 2004.The 

Department attributes this increase in 

the percentage of adults who earned a 

high school diploma or its recognized 

equivalent to technical assistance that 

focused on grantees setting higher 

targets for this performance measure. 

As a result, many states created 

initiatives to encourage adults to earn 

their GEDs (General Educational 

Development, a high school 

equivalency diploma). For example, 

some states offered GED recipients a 

scholarship for the first semester of postsecondary education. In addition, the Department 

sponsored “train the trainer” professional development activities that equipped teachers to 

prepare students for the newest GED test, provided technical assistance to states on options 

for providing distance learning, and encouraged states to offer GED courses online. 

Data Quality. As a third-tier recipient of these data, the Department must rely on the 

states and local programs to collect and report data within published guidelines. The 

Department has improved the data quality by using standardized data collection 

methodologies and standards for automated data reporting and data quality review. The 

Department also provides technical assistance to states to improve the data quality; as a 

result, in 2003, 38 states provided high-quality assessment data. In 2004, this figure 

increased to 44 states. 

Target Context. Increasing targets reflect the aim of the Adult Education State Grants 

program to increase the percentage of adults with a high school completion goal who earn a 

high school diploma or recognized equivalent. 

Related Information. Information about adult education and literacy can be obtained at 

http://www.ed.gov/about/offices/list/ovae/pi/AdultEd/index.html and 

http://www.ed.gov/about/offices/list/ovae/resource/index.html. 

Additional Information. Data for FY 2005 will be available in March 2006. 

5.16 Adult Education State Grants. The percentage of 

adults with a high school completion goal who earn a high 

school diploma or recognized equivalent. 

Fiscal Year Actual 

1996 36 

1997 37 

1998 33 

1999 34 

2000 34 

2001 33 

2002 42 

2003 44 

2004 45 

2005 Target is 46. 

We exceeded our 2004 target of 42. 

Data for 2005 are pending. 

U.S. Department of Education, Office of Vocational and Adult 

Education, National Reporting System for Adult Education. 
 153

U.S. Department of Education FY 2005 Performance and Accountability Report

Analysis of Progress. An increasing 

percentage of adults enrolled in English 

literacy programs acquired the level of 

English language they needed to 

advance between FY 2001 and 

FY 2004. While there is a trend of 

improvement, we did not meet our 

target for FY 2004. 

To improve grantee performance on 

this measure, the Department has 

funded a three-year project called the 

center for Adult English Language 

Acquisition, which has completed its 

first year. The center provides direct 

technical assistance to states through a 

series of training sessions for trainers 

in English as a second language from 

23 states. The center also publishes 

resources and maintains a Web collection of material relating to technical assistance on 

English language acquisition. 

Data Quality. See measure 5.16. 

Target Context. Out-year targets have been adjusted because trend data suggest that 

they were inappropriately projected. 

Related Information. Information about adult education and literacy can be obtained at: 

http://www.ed.gov/about/offices/list/ovae/pi/AdultEd/index.html and 

http://www.ed.gov/about/offices/list/ovae/resource/index.html. 

Additional Information. Data for FY 2005 will be available in March 2006. 

Expanding Global Perspectives 

The Department’s international education and graduate fellowship programs have helped 

thousands of students, particularly at the graduate level, prepare for careers in areas of 

national need, including foreign languages and area studies. A long-lasting, productive 

partnership between the federal government and the nation’s universities has created an 

unparalleled capacity to teach both foreign languages and area studies about societies 

around the world—covering all continents and more than 100 of the less-commonly taught 

languages. Departmental support for foreign languages and area and international studies 

at American colleges and universities ensures a steady supply of graduates with expertise in 

less-commonly taught languages, geographic areas, and international issues. 

In October 2004, Outreach World, a growing online community of educators dedicated to 

showcasing the achievements of its members and strengthening vital links across the 

5.17 Adult Education State Grants. The percentage of 

adults enrolled in English literacy programs who acquire the 

level of English language skills needed to complete the 

levels of instruction in which they enrolled. 

Fiscal Year Actual 

1996 30 

1997 28 

1998 28 

1999 49 

2000 20 

2001 31 

2002 34 

2003 36 

2004 36 

2005 Target is 45. 

We did not meet our 2004 target of 45. 

Data for 2005 are pending. 

U.S. Department of Education, Office of Vocational and Adult 

Education, National Reporting System for Adult Education. 
 154

U.S. Department of Education FY 2005 Performance and Accountability Report

education spectrum and between the United States and the world, launched its Web site. At 

the core of Outreach World are 120 federally funded National Resource Centers based at 56 

universities and focusing on areas involving Africa, Asia, Canada, Europe, Latin America, 

and the Middle East; Outreach World also comprises 42 Language Resource Centers and 

Centers for International Business and Education Research based at 45 universities and 

dedicated to promoting foreign language study and international business. 

The Department measures progress in International Education and Foreign Language 

Studies domestic programs by the expansion of critical languages taught at National 

Resource Centers, employment of centers Ph.D. graduates in targeted areas, and improved 

language competency. FY 2005 was the first year for which targets were set for these 

measures. 

Analysis of Progress. These measures were all new for FY 2005; consequently, no 

performance targets were set for prior years. 

The 56 percent of critical languages taught in FY 2003 and FY 2004 represents 95 languages 

from a list of 171 less-commonly taught languages. This is a clear increase from 1959, 

when the initial federally funded foreign language fellowships were awarded to study six 

languages deemed critical (Arabic, Chinese, Japanese, Hindi-Urdu, Portuguese, and 

Russian). 

Data for FY 2001 through FY 2004 reflect the percentages of National Resource Centers 

Ph.D. graduates who find employment in higher education, government service, and 

national security. As an employment indicator, the fluctuation in trend data for this 

measure may reflect changing economic conditions. Overall, however, the percentage of 

National Resource Centers graduates who find employment in the areas targeted by the 

 5.19 International Education 

and Foreign Language Studies 

Domestic Programs. The 

percentage of National Resource 

Centers Ph.D. graduates who 

find employment in higher 

education, government service, 

and national security. 

Fiscal Year Actual 

5.18 International Education 

and Foreign Language Studies 

Domestic Programs. The 

percentage of critical languages 

taught, as reflected by the list of 

critical languages referenced in 

the Higher Education Act Title VI 

program statute. 

2001 48.5 

5.20 International Education 

and Foreign Language Studies 

Domestic Programs. The 

average competency score of 

Foreign Language and Area 

Studies Fellowship recipients at 

the end of one full year of 

instruction (post-test) minus the 

average competency score at 

the beginning of the year (pretest). 

Fiscal Year Actual 2002 53.7 Fiscal Year Actual 

2003 56 2003 55 2003 1.3

2004 56 2004 72 2004 1.2 

2005 Target is 74. 2005 Target is 47.5. 2005 1.2

Data for 2005 are pending. Data for 2005 are pending. We met our 2005 target of 1.2. 

U.S. Department of Education, Office of Postsecondary Education, International Education and Foreign Language Studies 

Domestic Programs Annual Performance Report. 

Note. These measures report on the National Resource Centers under the International Education and Foreign Language 

Studies Domestic Programs, authorized by Title VI of the Higher Education Act. 
 155

U.S. Department of Education FY 2005 Performance and Accountability Report

program is increasing. In FY 2004, almost three-quarters of National Resource Centers’ 

employed Ph.D. graduates find employment in targeted fields. 

A target value of 1.20 for change over the year reflects an ambitious overall goal for the 

program, one that was met in FY 2005. Overall change in the language competency selfassessment reflects a mix of different levels of improvement at all stages (beginner, 

intermediate, advanced) of the three forms of language acquisition the assessment 

measures (reading, writing, speaking). Beginning language students may be expected to 

make larger advances over a given time period (and therefore have larger change scores) 

than more advanced students. 

Data Quality. Data are self-reported by institutions for measure 5.18 and by participating 

fellows for measures 5.19 and 5.20. Program staff employ data quality checks to assess the 

completeness and reasonableness of the data submitted. 

The FY 2003 actual values for these measures and the FY 2004 actual value for measure 

5.18 have been revised to correct previous errors in the measure calculations. 

The definition of measure 5.19 is the ratio of program graduates employed in the target 

areas to the number of program graduates employed in any area. 

Target Context. The Department set targets for FY 2005 on the basis of historical trends 

and program experience, before data for FY 2004 were available. 

Related Information. See http://www.ed.gov/about/offices/list/ope/iegps/index.html for 

information on these international programs. 

Additional Information. Data for measures 5.18 and 5.20 for FY 2005 will be available in 

December 2006. Data for measure 5.19 for FY 2005 will be available in October 2006. 

Discontinued Strategic Measures 

The following measures were discontinued after FY 2004 but were reported as pending in 

our FY 2004 Performance and Accountability Report. We report here our results on those 

for which we now have data. (See p. 23 for a discussion of why we discontinued 

measures.)
 156

U.S. Department of Education FY 2005 Performance and Accountability Report

Measure Fiscal 

Year Target Actual Status 

2002 66.9 68.9 Target met 

2003 67.0 66.2 Target not met 

White 

2004 69.4 Pending Data expected 

08/2006 

2002 59.6 59.4 Target not met 

2003 60.3 57.5 Target not met 

Black 

2004 60.8 Pending Data expected 

08/2006 

2002 7.3 9.5 Target not met 

2003 6.7 8.7 Target not met 

White-Black Gap 

2004 8.6 Pending Data expected 

08/2006 

2002 50.0 53.3 Target met 

2003 51.5 58.6 Target met 

Hispanic 

2004 57.5 Pending Data expected 

08/2006 

2002 16.9 15.6 Target met 

2003 15.5 7.6 Target met 

White-Hispanic Gap 

2004 11.9 Pending Data expected 

08/2006 

2002 51.5 56.4 Target met 

2003 53.5 52.8 Target not met 

5.1.2–

5.1.7 

The percentage of 16- to 

24-year-old high school 

graduates enrolled in 

college the October 

following graduation 

Low Income 

2004 51.0 Pending Data expected 

08/2006 

2002 76.9 78.2 Target met 

2003 77.0 80.1 Target met 

High Income 

2004 80.0 Pending Data expected 

08/2006 

2002 25.4 21.8 Target met 

2003 23.5 27.3 Target not met 

5.1.8 – 

5.1.9 

The percentage of 16- to 

24-year-old high school 

graduates enrolled in 

college the October 

following graduation 

(continued) Income Gap 

2004 29.0 Pending Data expected 

08/2006 

White 2004 56.8 Pending 

Black 2004 37.4 Pending 

White-Black Gap 2004 19.4 Pending 

Hispanic 2004 43.2 Pending 

5.1.11–

5.1.15 

The national percentage of 

full-time, bachelor’s degreeseeking students who 

graduate from four-year 

institutions within six years 

White-Hispanic Gap 2004 13.6 Pending 

Data expected 

12/2005 

Overall 2004 34.0 Pending 

White 2004 34.5 Pending 

Black 2004 27.3 Pending 

White-Black Gap 2004 7.2 Pending 

Hispanic 2004 31.1 Pending 

5.1.16–

5.1.21 

The percentage of full-time, 

degree- or certificateseeking students at twoyear institutions who 

graduate, earn a certificate, 

or transfer from two-year 

institutions within three 

years White-Hispanic Gap 2004 3.4 Pending 

Data expected 

12/2005 
 157

U.S. Department of Education FY 2005 Performance and Accountability Report

Measure Fiscal 

Year Target Actual Status 

5.2.1 The percentage of states and territories submitting 

Higher Education Act, Title II, reports with all data 

reported using federally required definitions 

2004 91 100 Target met 

5.3.1 The average national increases in college tuition, 

adjusted for inflation 2004 5.0% 6.9% Target not met 

5.4.1 The percentage of Historically Black Colleges and 

Universities, Hispanic-Serving Institutions, and Tribal 

Colleges and Universities with a positive fiscal 

balance 

2004 70 78 Target met 

5.4.2 The percentage of Historically Black Colleges and 

Universities, Hispanic-Serving Institutions, and Tribal 

Colleges and Universities with evidence of increased 

technological capacity 

2004 50 32 Target not met 

5.5.1 The percentage of employed persons served by 

state vocational rehabilitation agencies who obtain 

competitive employment 

2004 86.8 94.6 Target met 

5.6.1 The percentage of international postsecondary 

consortia projects that are institutionalized after the 

conclusion of the grant period 

2004 44 80 Target met 

5.6.3 The percentage of Title VI graduates who find 

employment in higher education, government 

service, and national security 

2004 Set 

baseline 72 Target met 

5.6.4 The number of comprehensive instructional 

resources (assessments, publications, curricular 

materials, etc.) produced at Title VI institutions of 

higher education 

2004 Set 

baseline 1,367 Target met 

5.6.5 The number of K–12 teachers trained through the 

Title VI and Fulbright–Hays programs 2004 Set 

baseline 528,543 Target met 

Sources and Notes 

5.1.2–5.1.9 U.S. Department of Education, National Center for Education Statistics (2003). The 

Condition of Education 2003 (NCES 2003–067), table 18-1 and previously unpublished 

tabulations for 2002–03 (January 2005). U.S. Department of Commerce, Bureau of 

the Census, Current Population Survey, October Supplement, 1972–2003. 

5.1.11–5.1.21 U.S. Department of Education, National Center for Education Statistics, Integrated 

Postsecondary Education Data System, Spring 2004. 

5.2.1 U.S. Department of Education, Office of Postsecondary Education, Title II Data 

System. 

5.3.1 U.S. Department of Education, National Center for Education Statistics, Integrated 

Postsecondary Education Data System, Fall Enrollment Survey and Institutional 

Characteristics Survey. 

5.4.1 U.S. Department of Education, National Center for Education Statistics , Integrated 

Postsecondary Education Data System. 

5.4.2 U.S. Department of Education, Institutional Development and Undergraduate 

Education Service, Annual Performance Report. 
 158

U.S. Department of Education FY 2005 Performance and Accountability Report

5.5.1 U.S. Department of Education, Office of Special Education and Rehabilitative Services, 

Rehabilitation Services Administration 911 Case Service Report. 

5.6.1 U.S. Department of Education, Office of Postsecondary Education, Fund for the 

Improvement of Postsecondary Education, internal data. 

5.6.3–5.6.5 U.S. Department of Education, International Education Programs Service, Evaluation of 

Exchange, Language, and International Area Studies, performance report program 

data. 

For 5.6.3, previously reported data for FY 2003 were incorrect; the correct actual 

value for FY 2003 is 55 percent. 
159

Goal 5: Enhance the Quality of and Access to 

Postsecondary and Adult Education 

Program Performance Summary 

Sixty-one of our grant programs most directly support Goal 5. These programs are listed below. In the tab

an overview of the results of each program on its program performance measures. (See p. 59 for our meth

calculating the percentage of targets met, not met, and without data.) Individual program performance repavailable at http://www.ed.gov/about/reports/annual/2005report/program.html. We also provide both FY 

appropriations and FY 2005 expenditures for each of these programs. (See pp. 24–25 for an explanation oappropriations and expenditures for a given year are not the same and the effect of that difference on the cbetween funding and performance.) 

Program Name 

Appropriations† Expen- ditures‡ Program Performance Results Percent of Targets Met, Not Met, Withou

FY 2005 FY 2004 FY 2003 

FY 2005

$ in 

millions

FY 2005

$ in 

millions

% 

Met 

% 

Not 

Met 

% 

No 

Data

% 

Met 

% 

Not 

Met 

% 

No 

Data

% 

Met 

% 

Not 

Met 

% 

N

D

AEFLA: Adult Education National Leadership 

Activities 9 7 0 0 100 0 50 50 50 50 

AEFLA: Adult Education State Grants 570 614 0 0 100 40 60 0 60 40 AEFLA: National Institute for Literacy 7 5 67 33 0 100 0 0 ATA: Assistive Technology Alternative Financing 4 6 0 0 100 0 100 0 /// (not funded) ATA: Assistive Technology Programs 26 29 0 0 100 0 100 0 0 100 EDA: Gallaudet University 105 105 43 57 0 43 57 0 42 58 EDA: National Technical Institute for the Deaf 55 54 40 50 10 30 70 0 60 40 ESEA: Community Technology Centers 5 30 0 0 100 100 0 0 0 0 1HEA: AID Developing Hispanic-Serving Institutions 95 88 HEA: AID Minority Science and Engineering 

Improvement 9 8 

HEA: AID Strengthening Alaska Native and Native 

Hawaiian Serving Institutions 12 9 

HEA: AID Strengthening Historically Black Colleges 

and Universities 239 208 

HEA: AID Strengthening Historically Black Graduate 

Institutions 58 51 

HEA: AID Strengthening Institutions 80 82 HEA: AID Strengthening Tribally Controlled Colleges 

and Universities 24 16 

0 0 100 67 33 0 67 33 
160

Program Name 

Appropriations† Expen- ditures‡ Program Performance Results Percent of Targets Met, Not Met, Withou

FY 2005 FY 2004 FY 2003 

FY 2005

$ in 

millions

FY 2005

$ in 

millions

% 

Met 

% 

Not 

Met 

% 

No 

Data

% 

Met 

% 

Not 

Met 

% 

No 

Data

% 

Met 

% 

Not 

Met 

% 

N

D

HEA: B.J. Stupak Olympic Scholarships 1 2 HEA: Byrd Honors Scholarships 41 45 0 0 100 100 0 0 100 0 HEA: Child Care Access Means Parents In School 16 16 0 0 100 0 25 75 0 100 HEA: College Assistance Migrant Program 16 16 0 0 100 0 0 100 HEA: Demonstration Projects to Ensure Quality 

Higher Education for Students with Disabilities 7 7 0 0 100 

HEA: Fund for the Improvement of Postsecondary 

Education 162 173 0 0 100 0 100 0 50 50 

HEA: Gaining Early Awareness and Readiness for 

Undergraduate Programs (GEAR UP) 306 306 0 0 100 71 29 0 86 14 

HEA: Graduate Assistance in Areas of National 

Need (GAANN) 30 29 0 0 100 83 0 17 100 0 

HEA: Interest Subsidy Grants 1 1 HEA: International Education and Foreign Language 

Studies Domestic Programs 92 86 0 0 100 60 40 

HEA: International Education and Foreign Language 

Studies Institute for International Public Policy 2 1 100 0 0 100 0 

MECEA: International Education and Foreign 

Language Studies Overseas Programs 13 13 

14 0 86 

HEA: Javits Fellowships 10 9 0 0 100 100 0 0 100 0 HEA: SFA Federal Direct Student Loans 1,543 4,853 HEA: SFA Federal Family Education Loan Program 

& Liquidating 11,532 10,369 

HEA: SFA Federal Pell Grants 12,365 12,519 HEA: SFA Federal Perkins Loans 66 137 HEA: SFA Federal Supplemental Educational 

Opportunity Grants 779 760 

HEA: SFA Federal Work-Study 990 971 HEA: SFA Leveraging Educational Assistance 

Partnerships 66 60 

0 0 100 20 13 67 33 13 5

HEA: Student Aid Administration 719 823 0 0 100 17 0 83 17 0 8HEA: Thurgood Marshall Legal Education 

Opportunity 3 3 /// (not funded) 

HEA: TRIO Educational Opportunity Centers 49 38 0 0 100 0 0 100 HEA: TRIO McNair Postbaccalaureate Achievement 42 32 0 0 100 0 0 100 100 0 HEA: TRIO Student Support Services 275 208 0 0 100 0 0 100 0 0 1HEA: TRIO Talent Search 145 113 0 0 100 0 0 100 
161

Program Name 

Appropriations† Expen- ditures‡ Program Performance Results Percent of Targets Met, Not Met, Withou

FY 2005 FY 2004 FY 2003 

FY 2005

$ in 

millions

FY 2005

$ in 

millions

% 

Met 

% 

Not 

Met 

% 

No 

Data

% 

Met 

% 

Not 

Met 

% 

No 

Data

% 

Met 

% 

Not 

Met 

% 

N

D

HEA: TRIO Upward Bound 313 179 0 0 100 0 0 100 0 0 1HEA: Underground Railroad Program 2 2 0 0 100 100 0 0 HKNCA: Helen Keller National Center for Deaf-Blind 

Youths and Adults 11 9 71 29 0 71 29 0 

NLA: Literacy Programs for Prisoners 5 5 0 0 100 RA: Client Assistance State Grants 12 12 0 0 100 50 50 0 100 0 RA: Independent Living Centers 98 76 RA: Independent Living State Grants 98 23 

0 50 50 33 67 0 33 67 

RA: Independent Living Services for Older Blind 

Individuals 33 32 0 0 100 0 100 0 100 0 

RA: Migrant and Seasonal Farmworkers 2 2 0 0 100 50 50 0 RA: Projects with Industry 22 20 0 0 100 67 33 0 33 67 RA: Protection and Advocacy of Individual Rights 17 17 0 0 100 100 0 0 RA: Supported Employment State Grants 37 42 0 0 100 100 0 0 100 0 RA: Vocational Rehabilitation Demonstration and 

Training Programs 26 22 0 0 100 20 80 0 60 40 

RA: Vocational Rehabilitation Grants for Indians 32 29 0 0 100 33 67 0 100 0 RA: Vocational Rehabilitation Program Improvement 1 1 RA: Vocational Rehabilitation Recreational 

Programs 3 3 0 0 100 100 0 0 

RA: Vocational Rehabilitation State Grants 2,604 2,352 0 0 100 75 25 0 50 50 RA: Vocational Rehabilitation Training 39 40 0 0 100 0 67 33 57 43 USC: Howard University 239 235 0 0 100 60 40 0 42 58 VTEA: Tribally Controlled Postsecondary Vocational 

and Technical Institutions 7 1 0 100 0 0 100 0 100 0 

Administrative and Support Funding for Goal 5# (59) 5 # # # TOTAL 34,111 * 36,009 

† Budget for each program represents program budget authority. ‡ Expenditures occur when recipients draw down funds to cover actual outlays. FY 2005 expenditures may include funds from prior y

A shaded cell denotes that the program did not have targets for the specified year. 

/// Denotes programs not yet implemented. (Programs are often implemented near the end of the year they are first funded.) 

# The Department does not plan to develop performance measures for programs, activities, or budgetary line items that are administr

 serve to support other programs and their performance measures. 

* Expenditures by program do not include outlays in the amount of $7 million for prior years’ obligations for Goal 5 programs that wer

or FY 2005 estimated accruals in the amount of $924 million. 
162

AEFLA: Adult Education and Family Literacy Act AID: Aid for Institutional Development ATA: Assistive Technology Act EDA: Education of the Deaf Act ESEA: Elementary and Secondary Education Act HEA: Higher Education Act HKNCA: Helen Keller National Center Act 

MECEA: Mutual Educational and Cultural ExchangNLA: National Literacy Act RA: Rehabilitation Act SFA: Student Financial Assistance programs USC: United States Code VTEA: Perkins Vocational and Technical Educatio
163

U.S. Department of Education FY 2005 Performance and Accountability Report

Goal 5: Enhance the Quality of and Access to 

Postsecondary and Adult Education 

PART Analysis 

In preparation for the FY 2005 budget, the Department conducted reviews on the programs 

listed below using the Office of Management and Budget’s Program Assessment Rating Tool 

(PART). (See p. 60 for a discussion of the PART methodology.) Short summaries of the 

PART results and follow-up actions are on the following pages. OMB’s Web site provides 

one-page summaries and full detailed PART reviews for all agencies. 

Federal Direct Student Loans

Rating: Adequate 

Federal Family Education Loan Program

Rating: Adequate 

Federal Pell Grants

Rating: Adequate 

Federal Perkins Loans Capital Contributions

Rating: Ineffective 

Federal Supplemental Educational Opportunity Grants

Rating: Results Not Demonstrated 

Federal Work-Study

Rating: Results Not Demonstrated 

Gaining Early Awareness and Readiness for Undergraduate Programs (GEAR-UP) 

Rating: Adequate 

Independent Living State Grants and Centers

Rating: Results Not Demonstrated 

TRIO Talent Search

Rating: Results Not Demonstrated 
164

U.S. Department of Education FY 2005 Performance and Accountability Report

PART Analysis for Programs Reviewed for the FY 2005 Budget 

Program: Federal Direct Student Loans 

Year of Rating: For FY 2005 Budget (Initial)

For FY 2006 (Revised) 

Rating: Adequate

Program Type: Credit

Recommended Follow-up Action 

• Seek legislation to direct a greater share of 

borrower benefits to students in school instead 

of those who have graduated. 

• Maintain variable interest rate structure for borrowers who later consolidate their 

loans, and provide for an increase in loan limits. 

Update on Follow-up Action 

The President’s FY 2006 Budget included a comprehensive set of loan reform proposals that 

address concerns raised through the PART process. The Administration is working with the 

Congress on these proposals as part of the Higher Education Act reauthorization process. 

 

Program: Federal Family Education Loan 

Program 

Year of Rating: For FY 2005 Budget (Initial) 

For FY 2006 (Revised) 

Rating: Adequate

Program Type: Credit 

Recommended Follow-up Action 

Seek legislation to accomplish the following: 

• Reduce unnecessary subsidies to lenders and 

other Federal Family Education Loan program participants. 

• Direct a greater share of borrower benefits to students in school instead of those who 

have graduated. Notably, the Administration proposes to maintain variable interest 

rates beyond 2006 for students in school, to adopt the same variable interest rate 

structure for borrowers who later consolidate their loans, and to provide for an 

increase in loan limits. Note: Due to the uncertainty that goes into predicting 

economic trends and student-borrower behavior, these 

re-estimates often produce significant annual fluctuations in subsidy costs and 

program funding levels. 

Update on Follow-up Action 

The President’s FY 2006 Budget included a comprehensive set of loan reform proposals that 

address concerns raised through the PART process. The Administration is working with the 

Congress on these proposals as part of the Higher Education Act reauthorization process. 

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Program: Federal Pell Grants 

Year of Rating: For FY 2004 Budget (Initial) 

For FY 2005 (Revised) 

Rating: Adequate

Program Type: Block/Formula Grant 

Recommended Follow-up Action 

• Develop legislative and administrative 

strategies to improve performance on the 

program’s annual and long-term measures. Work with the Congress on enacting the 

legislative strategies as part of the Higher Education Act reauthorization. 

• In the Higher Education Act reauthorization, work with the Congress on proposals to 

better target Pell funding to the neediest students. 

• Re-propose to amend the Internal Revenue Code to allow the Internal Revenue 

Service to match student aid data and tax data to prevent over-awards (and underawards) in Pell and other student aid programs. 

Update on Follow-up Action 

The PART findings for the Pell Grant program primarily required legislative action through 

the reauthorization of the Higher Education Act and amendments to the tax code. The 

President’s FY 2006 Budget reflects the Administration's Higher Education Act proposal, 

including changes to target Pell aid to the neediest students. The Administration proposes to 

increase the $4,050 Pell maximum award by $100 in FY 2006 and $500 over five years. 

The Administration also proposes to better target Pell funding by indexing future maximum 

award increases with corresponding minimum award increases. The Administration is 

working with the Congress on these proposals as part of the Higher Education Act

reauthorization process. 

 

Program: Federal Perkins Loan Capital 

Contributions 

Year of Rating: For FY 2005 Budget

Rating: Ineffective

Program Type: Credit 

Recommended Follow-up Action 

In response to these findings, the Administration 

will take the following actions: 

• Propose to eliminate the funding for this program and redirect funds to more effective 

student aid programs, such as the Pell Grants program. 

• As long as the program exists, implement a new performance measurement approach 

that tracks program success on student persistence (i.e., staying in school) and 

graduation. This includes collecting improved program and financial data and 

developing meaningful efficiency measures. 

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Update on Follow-up Action 

The President’s FY 2006 Budget proposed to eliminate the Perkins Loan program. The 

Administration is working with the Congress on this proposal as part of the Higher Education 

Act reauthorization process. Draft efficiency measures based on the efficiency of program 

administrative processes were submitted to the Office of Management and Budget in July 

2005. 

 

Program: Federal Supplemental Educational 

Opportunity Grants 

Year of Rating: For FY 2005 Budget 

Rating: Results Not Demonstrated

Program Type: Block/Formula Grant 

Recommended Follow-up Action 

• Correct the funding allocation formula as 

part of the reauthorization of the Higher 

Education Act by ensuring that funds reach postsecondary institutions with the highest 

proportion of needy students. 

• Begin to collect data for the Supplemental Educational Opportunity Grant program that 

are sufficient to measure program performance and reconcile financial data. These 

data should support the Department's new performance measurement approach that 

tracks program success by improving student persistence and graduation. 

• Develop meaningful efficiency measures for this program. 

Update on Follow-up Action 

The Congress has not yet acted on the reauthorization of the Higher Education Act. The 

President’s FY 2006 Budget reflects the Administration's Higher Education Act proposal, 

which includes the above action. In fall 2003, the Department began to examine whether 

National Student Clearinghouse data could be used to measure student persistence and 

graduation. Because the Department found problems with this approach, other options are 

being considered, including a single "unit record" reporting system. The Department has 

also begun to work on reconciling program financial data. Draft efficiency measures based 

on the efficiency of program administrative processes were submitted to the Office of 

Management and Budget in July 2005. 

 

Program: Federal Work-Study 

Year of Rating: For FY 2005 Budget 

Rating: Results Not Demonstrated

Program Type: Block/Formula Grant 

Recommended Follow-up Action 

• Begin to collect data for the Work-Study 

program that are sufficient to measure 

program performance and reconcile financial 

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data. These data should support the Department's new performance measurement 

approach that tracks program success by improving student persistence and 

graduation. 

• Develop meaningful efficiency measures for this program. 

• In the Higher Education Act reauthorization, propose to replace the 7 percent 

community service requirement with a separate set-aside for community service, 

equal to 20 percent of the Work-Study appropriation. Schools would apply for these 

community service funds separate from their regular allocation. 

• Propose to correct the funding allocation formula as part of the reauthorization of the 

Higher Education Act by ensuring that funds reach postsecondary institutions with the 

highest proportion of needy students. 

Update on Follow-up Action 

In fall 2003, the Department began to examine whether it could use National Student 

Clearinghouse data to measure student persistence and graduation. Because the 

Department found problems with this approach, it is exploring other options. The 

Department has also begun to work on reconciling program financial data. Draft efficiency 

measures based on the efficiency of program administrative processes were submitted to 

the Office of Management and Budget in July 2005. The Congress has not yet acted on the 

Higher Education Act reauthorization. The President’s FY 2006 Budget reflects the 

Administration's proposal for the reauthorization of the Higher Education Act, which includes 

the above follow-up actions. 

 

Program: Gaining Early Awareness and 

Readiness for Undergraduate 

Programs (GEAR-UP) 

Year of Rating: For FY 2005 Budget 

Rating: Adequate

Program Type: Competitive Grant 

Recommended Follow-up Action 

• Collect baseline data for annual measures 

and work to ensure that appropriate data collection strategies are in place for the 

program’s long-term measures. 

• Implement the program’s plan for responding to the Office of Inspector General 

concerns for monitoring program expenditures. 

• Develop a meaningful efficiency measure. 

Update on Follow-up Action 

Since 2003, the Department has made significant progress in measuring GEAR-UP 

performance. The Department has collected and reported at least two years of data for 

each annual performance measure, developed a final project performance report, developed 

an efficiency measure to track the average cost for each GEAR-UP student who successfully 

enrolls in college immediately after high school, and awarded a contract to assist with data 

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collection and increase the timeliness of data reporting. In response to audit findings, the 

Department implemented a strategic monitoring plan for GEAR-UP that included more site 

visits and staff training in project oversight. Additionally, the Department reprogrammed 

the Grants and Payments System so that important GEAR-UP budget information on project 

matching contributions can be appropriately monitored. 

 

Program: Independent Living State Grants 

and Centers 

Year of Rating: For FY 2005 Budget

Rating: Results Not Demonstrated

Program Type: Competitive Grant 

Recommended Follow-up Action 

• Devise and implement an improved audit 

and site visit system to ensure that the Department fulfills statutory oversight 

requirements. 

• Conduct periodic and high-quality evaluations of each of the Independent Living 

programs. 

• Develop at least one efficiency measure for each of the Independent Living programs. 

• Develop long-term performance goals and measures that reflect the four core areas of 

services and the standards and assurances for the Independent Living State Grants 

and Centers programs. 

• Reduce the time needed to collect and analyze grantee performance reports and make 

the aggregate data available to the public on the Department's Web site in an 

accessible format. 

Update on Follow-up Action 

The Department has made progress in addressing the management and program 

deficiencies identified in the PART assessment of the Independent Living programs. The 

Department has developed a schedule to ensure the timely posting of performance data, an 

efficiency measure that is based on cost per successful outcome, and annual and long-term 

performance measures that capture program objectives. Due to delays in revising the 

programs’ data collection instrument, data will not be available until 2006. The Department 

has made limited progress in addressing the requirements for a site visit system and in 

developing a plan for conducting high-quality evaluations; the Department intends to give 

more attention to these efforts. 

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U.S. Department of Education FY 2005 Performance and Accountability Report

Program: TRIO Talent Search 

Year of Rating: For FY 2005 Budget 

Rating: Results Not Demonstrated

Program Type: Competitive Grant 

Recommended Follow-up Action 

• Complete program evaluation currently in 

progress and use its findings to improve 

program performance. 

• Develop a meaningful efficiency measure. 

• Explore policies that would open up the Talent Search application process to include 

more worthy new applicants, while still rewarding high-performing prior grantees. 

Update on Follow-up Action 

The Department has taken significant steps in response to the Talent Search PART 

recommendations and, as a result, has reassessed Talent Search in 2005 using the PART. 

First, the Department completed data collection and analysis for the program evaluation. 

The Department is reviewing the final evaluation report and plans to use the findings to 

inform the FY 2006 competition. Second, the Department developed and began 

implementing an efficiency measure to examine the average annual cost per successful 

annual outcome—defined as a student who persists toward high school completion or who 

completes school and enrolls in college. Third, the Department tightened the process for 

awarding prior experience points to ensure that the competitive preference given to existing 

grantees is based on demonstrated performance. As part of the Higher Education Act

reauthorization, the Department continues to examine ways to better link prior experience 

points to achievement of the key program outcomes. 

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Goal 5: Enhance the Quality of and Access to 

Postsecondary and Adult Education 

Findings and Recommendations From 

Program Evaluations, Studies, and Reports 

Information that the Department uses to inform management and program improvements 

comes from many sources, including evaluations, studies, and reports that are Departmentsponsored studies and those from the Government Accountability Office (GAO) and the 

Office of Inspector General (OIG). The following evaluations, studies, and reports were 

completed during FY 2005. 

Audit Follow-up Process for Office of Inspector General Internal Audits in the 

Office of Postsecondary Education: Final Audit Report (ED-OIG/A19F0002) 

This Office of Inspector General audit is a part of a review of the Department's internal audit 

follow-up processes being performed in four departmental offices. Each assistant secretary 

is responsible for the overall audit follow-up process, determines the financial adjustments 

to be made to resolve findings in audit reports, and oversees the implementation of audit 

recommendations. The Office of Inspector General determined that improvements are 

needed in the Office of Postsecondary Education's internal control over its audit follow-up 

process. (See p. 172 for a summary of this report.)

Case Management and Oversight's Monitoring of Postsecondary Institutions: Final 

Audit Report (ED-OIG/A04-D0014) 

In this report, the Department's Office of Inspector General examined the Office of Federal 

Student Aid's Case Management and Oversight's use of program reviews and technical 

assistance and headquarters management controls over regional offices' monitoring of 

postsecondary institutions. Case Management and Oversight's primary responsibility is to 

monitor postsecondary institutions' compliance with statutory and regulatory requirements 

for participation in Title IV programs. The Office of Inspector General identified weaknesses 

in the Institutional Assessment Model used to identify and select institutions for review, 

regional office program review and technical assistance processes, and the monitoring of 

regional office operations. (See p. 173 for a summary of this report.) 

Federal Family Education Loan Program: More Oversight Is Needed for Schools 

That Are Lenders (GAO-05-184)

In FY 2004, lenders made about $65 billion in loans through the Federal Family Education 

Loan Program to assist students in paying for postsecondary education. This report 

determined the extent to which schools have participated as program lenders, their 

characteristics, and federal statutory and regulatory safeguards that are in place to protect 

borrowers and taxpayers. Under the Higher Education Act, Federal Family Education Loan 

Program lenders must submit annually audited financial statements and compliance audits. 

As of FY 2004, 10 out of 29 school lenders had not submitted an audit for FY 2002. (See 

p. 174 for a summary of this report.) 
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U.S. Department of Education FY 2005 Performance and Accountability Report

Student Aid and Postsecondary Tax Preferences: Limited Research Exists on 

Effectiveness of Tools to Assist Students and Families Through Title IV Student Aid 

and Tax Preferences (GAO-05-684)

Title IV of the Higher Education Act provides federal assistance for postsecondary education 

to students and families through grant and loan programs. While both Title IV and tax 

preferences provide assistance to students and families, tax preferences differ from Title IV 

assistance in the areas of timing, distribution, and students' and families' responsibility. 

This report examines how Title IV assistance compares to that provided through the tax 

code, the extent to which tax filers effectively use postsecondary tax preferences, and 

reviews what is known about the effectiveness of federal financial assistance. While tax 

preferences are of more recent origin than Title IV aid, the number of tax filers using 

preferences has grown quickly, surpassing the number of students aided under Title IV in 

2002. (See p. 175 for a summary of this report.) 

Student Financial Aid: Need Determination Could Be Enhanced Through 

Improvements in Education's Estimate of Applicants' State Tax Payments 

(GAO-05-105)

Most federal student financial aid is awarded based on the applicant's cost of college 

attendance less the amount of the student's and/or family's expected contribution. The tax 

allowance effectively reduces the expected family contribution. This report examines the 

Department's updating of tax data and the effects the update might have on financial 

assistance for aid applicants. Had the Department updated the tax allowance annually, the 

family's expected contribution would have increased for a majority of aid applicants, with 

38 percent of applicants either receiving less in Pell grants or becoming ineligible for them. 

(See p. 176 for a summary of this report.) 
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U.S. Department of Education FY 2005 Performance and Accountability Report

Report on Audit Processes in the Department's 

Office of Postsecondary Education 

Report Title 

Audit Followup Process for Office of Inspector General Internal Audits in the Office of 

Postsecondary Education: Final Audit Report (ED-OIG/A19F0002) September 2005. 

Overview 

This audit report is part of a review of the Department's internal audit follow-up processes 

being performed in four departmental offices. The Office of Inspector General determined 

that improvements are needed in the Office of Postsecondary Education's internal control 

over its audit follow-up process. 

Findings 

• Although the Office of Postsecondary Education (OPE) certified that corrective action 

items were completed, the office was unable to document completion of 7 of the 22 

corrective action items (32 percent). 

• Although OPE maintained audit resolution files, the file documentation did not support 

completion of 12 of the 22 corrective action items (55 percent). 

• The Office of Inspector General was able to validate closure dates for 9 of the 15 

supported corrective actions through documentation; OPE reported 3 of 9 action items 

(33 percent) as completed prior to dates reflected by supporting documentation. 

Recommendations 

• OPE should ensure audit follow-up documentation clearly supports completion of the 

stated action item. 

• OPE should ensure completion dates reported in the automated tracking system are 

consistent with dates reflected in supporting documentation. 

• OPE should update its automated audit tracking system to reflect the actual 

completion dates of action items noted in the audit with discrepancies in the reported 

completion dates and should ensure that changes to agreed upon action items are 

identified by editing the Action Item field rather than using the Principal Office 

Comments field. 

Department’s Response 

• OPE has implemented several changes to improve audit tracking process, which 

include documenting operating procedures for audit resolution; establishing a 

database to ensure tracking of audit activities; maintaining electronic files of all audits 

and supporting documentation; and augmenting contractor support for additional 

automation of audit processes. 

• OPE will conduct training to address action item completion and recommended 

supporting documentation. 

• OPE has taken action to ensure that the Office of Inspector General is notified of any 

action item changes by correctly entering the information in the automated tracking 

system. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

Report on Monitoring of Postsecondary Institutions 

Report Title 

Case Management and Oversight's Monitoring of Postsecondary Institutions: Final Audit 

Report (ED-OIG/A04-D0014) September 2004. 

Overview 

The Department's Office of Inspector General examined the Office of Federal Student Aid's 

Case Management and Oversight's use of program reviews and technical assistance and 

headquarters management controls over regional offices' monitoring of postsecondary 

institutions for participation in Title IV programs. The Office of Inspector General identified 

weaknesses in the Institutional Assessment Model used to identify and select institutions for 

review, the regional office program review and technical assistance processes, and the 

monitoring of regional office operations. 

Findings 

• The Institutional Assessment Model is an ineffective tool for identifying at-risk institutions. 

• The program review and technical assistance processes are not adequately 

documented and there is limited follow-up. 

• Case Management and Oversight—Headquarters’ monitoring of regional office 

operations needs improvement. 

Recommendations 

• The Department's Office of Federal Student Aid (FSA) should require Case Management 

and Oversight—Headquarters to develop and implement management controls to ensure 

that the data used to identify the most at-risk institutions are complete and accurate; 

develop a methodology for evaluating the effectiveness of any risk assessment model used 

to identify institutions presenting the highest risk of loss of Title IV funds; and provide 

guidance to regional case management teams for identifying institutions for program 

review and technical assistance. 

• FSA should establish policies and procedures over program reviews and the appropriate 

monitoring actions to be taken based on specific compliance issues and develop quality 

control processes to ensure compliance with monitoring and enforcement actions. 

• FSA should implement policies and procedures for providing technical assistance and 

follow up for compliance and implement management controls for oversight of Case 

Management and Oversight operations.

Department’s Response

• FSA will revise the procedures as necessary and provide training to case teams; it has 

identified requirements for a new model for identifying at-risk institutions. 

• FSA agreed to strengthen the documentation of the fiscal review process. 

• FSA issued new Management Improvement Services (technical assistance) procedures 

for selecting institutions for technical assistance, using corrective action plans, and 

ensuring proper documentation and follow-up. 

• FSA currently has an appropriate oversight and monitoring process in place but will 

work continuously to improve processes.
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U.S. Department of Education FY 2005 Performance and Accountability Report

Report on the Federal Family Education Loan Program 

Report Title 

Federal Family Education Loan Program: More Oversight Is Needed for Schools That Are 

Lenders (GAO-05-184) January 2005. 

Overview 

In FY 2004, lenders processed about $65 billion in loans through the Federal Family 

Education Loan program to assist students in paying for postsecondary education. The 

Department's Office of Federal Student Aid is responsible for ensuring that lenders comply 

with program laws and regulations. Questions have arisen as to whether it is appropriate 

for schools to become lenders, given that they determine eligibility for loans and set the 

price of attendance. This GAO report determined the extent to which schools have 

participated as program lenders and their characteristics, the structure of schools’ lending 

operations, benefits for borrowers and schools, and statutory and regulatory safeguards 

designed to protect taxpayers' and borrowers' interests. 

Findings 

• The Office of Federal Student Aid has had limited information about how school 

lenders have complied with Federal Family Education Loan program regulations. 

• Under the Higher Education Act, program lenders that originate or hold more than $5 

million in program loans must annually submit audited financial statements and 

compliance audits; in October 2004, the Office of Federal Student Aid discovered that 

10 out of 29 school lenders that were required to submit an audit for FY 2002 had not 

done so, and the Office of Federal Student Aid had not conducted program reviews of 

school lenders. 

Recommendations 

• The Office of Federal Student Aid needs to enhance oversight of school lenders by 

ensuring compliance with applicable statutory and regulatory requirements through 

timely audited financial statements and compliance audits. 

• The Office of Federal Student Aid also needs to conduct program reviews. 

Department's Response 

• The Department's efforts to verify that lenders submitted the required annual 

compliance audits for FY 2002 were instrumental in ensuring compliance, and all 

school lenders who were required to submit such audits for FY 2003 have done so. 

• The Department has requested additional information of 31 school lenders regarding 

compliance with regulations on the use of interest income and special allowance 

payments for need-based grants. The Department is planning to conduct a more 

thorough review of 10 school lenders. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

Report on Student Aid and Postsecondary Tax Preferences 

Report Title 

Student Aid and Postsecondary Tax Preferences: Limited Research Exists on Effectiveness 

of Tools to Assist Students and Families Through Title IV Student Aid and Tax Preferences 

(GAO-05-684) July 2005. 

Overview 

Title IV of the Higher Education Act provides federal assistance to students and families through 

grant and loan programs to pay for postsecondary education. While both Title IV aid and tax 

preferences provide assistance to students and families, tax preferences assist students and 

families saving for and repaying postsecondary costs and require greater responsibility on the part 

of students and families. In light of the relative newness of tax preferences, the Government 

Accountability Office reported on the difference between Title IV assistance and that provided 

through the tax code, the extent to which tax filers effectively use postsecondary tax preferences, 

and current knowledge about the effectiveness of federal financial assistance. 

Findings 

• While tax preferences are of more recent origin than Title IV aid, the number of tax 

filers using preferences has grown quickly, surpassing the number of students aided 

under Title IV in 2002. 

• Some tax filers do not make optimal education-related tax decisions; 27 percent of 

eligible tax filers did not claim either the tuition deduction or a tax credit. 

• Little is known about the effectiveness of Title IV aid or tax preferences in promoting choice, 

attendance or persistence, and as a result, policymakers do not have information to make the 

most efficient use of limited federal resources to help students and families. 

• Tax preferences differ from Title IV assistance in three key areas: timing, distribution, 

and students' and families' responsibility for obtaining benefits. 

Recommendations 

• The report made no new recommendations; instead, it cited a 2002 Government 

Accountability Office report that recommended the Department sponsor research into 

key aspects of the effectiveness of Title IV programs, but little progress has been 

made on that recommendation. 

• The Department should make available information about the effectiveness of both tax 

preferences and Title IV federal grant and loan programs, so that decisionmakers can 

make efficient use of limited federal resources to help students and families pay for 

postsecondary education. 

Department's Response 

The Department disagrees that the Title IV programs have not been adequately studied. 

The Government Accountability Office analysis failed to cite the more than 60 reports and 

other publications that the National Center for Education Statistics prepared using data from 

the sixth National Postsecondary Student Aid Survey, the Survey of Beginning 

Postsecondary Students Longitudinal Study, and the Baccalaureate and Beyond Student 

Survey, each repeated four times.
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U.S. Department of Education FY 2005 Performance and Accountability Report

Report on the Need Determination for Student Financial Aid 

Report Title 

Student Financial Aid: Need Determination Could Be Enhanced Through Improvements in 

Education's Estimate of Applicants' State Tax Payments (GAO-05-105) January 2005. 

Overview 

Most federal student financial aid is awarded based on the applicant's cost of college 

attendance less the amount of the student's and/or family's expected contribution. The tax 

allowance effectively reduces the expected family contribution. Given the impact of the 

allowance on the awarding of financial aid, the Government Accountability Office reported 

on what factors affected the updating of the tax data, the possible effects the 2003 update 

would have on financial assistance for aid applicants, and limitations in the method for 

deriving the tax allowance. 

Findings 

• Although required by law to revise the tax allowance annually, the Department has 

attempted the updates only twice—in FY 1993 and again in FY 2003. 

• The Department did not seek data to update the allowance annually and did not 

establish effective internal controls to guide the updating process. The Department 

did not consider alternatives when data were not available. 

• Had the update been implemented in 2004-05, the allowance would have decreased in 

most states, and the family's expected contribution would have increased for a 

majority of aid applicants. 

Recommendations 

• The Department should improve procedures to ensure annual receipt of the most 

current tax data from the Internal Revenue Service. 

• The Department should revise the methodology for calculating the allowance to better 

reflect the varying tax rates paid by students and families in different income groups 

and use a standard allowance for all aid applicants regardless of state residence. 

• The Department should consider collecting tax information directly from student aid 

applicants and their families. 

Department's Response 

• Since 2002, the Department has had formal procedures to ensure that it annually 

requests and obtains the most current tax data from the Internal Revenue Service. 

• Replacing Internal Revenue Service file data with an alternative source, applying a 

uniform allowance to the incomes of all applicants, incorporating different or additional 

income bands, and collecting information on state and local taxes directly from federal 

aid applicants would require statutory change. 

• The Department is sensitive to the burden that applying for student financial 

assistance places on families and institutions; collecting state and local tax information 

directly from families or institutions of higher education would create an unacceptable 

increase in burden. 
DRAFT Key Measures Goal 2 

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U.S. Department of Education FY 2005 Performance and Accountability Report

Goal 6: Establish Management Excellence 

Performance Goals 

Financial Integrity and Management

The Department of Education’s annual financial statements have earned an unqualified or 

“clean” opinion for four consecutive years, after having achieved only one clean opinion 

previously. We demonstrate to the American public that we account accurately for the 

dollars supporting federal education programs. 

Strategic Human Capital Management

The Department is ensuring that a highly skilled work force will carry out the responsibilities 

of managing federal education programs for years to come through participation in federal 

activities to speed the hiring process and the implementation of performance standards for 

employees based on strategic plan objectives. A human capital deployment index 

established during 2005 sets a robust benchmark against which our future work force 

development efforts can be measured. 

Information Technology Management

The Department is playing a leading role in federal initiatives to extend the use of electronic 

communication in delivering public services to Americans. These efforts include the 

increasing use of electronic applications in our discretionary grant competitions. 

Customer Service for Student Financial Assistance

The Department is committed to enabling access to a quality education for all Americans, 

and the provision of financial aid to help millions of citizens complete a postsecondary 

degree is a particularly important customer service function. We are sustaining previous 

success in meeting the needs of aid applicants and recipients, and we are preparing 

improvements to service functions that have not produced expected levels of customer 

satisfaction. 

Budget and Performance Integration

The Department is improving performance measures and management functions in order to 

demonstrate effectiveness across the majority of Department programs. Our progress on 

ensuring effectiveness was slower than anticipated for FY 2005, emphasizing the urgency of 

the task at hand. 

Faith-Based and Community Organization Grantees

The emergence of faith-based and community organizations among the pool of grant 

applicants has reinforced the need for the Department to treat all applicants equitably, 

regardless of their level of experience in the application process. Novice applicants, many 

of whom represent these emergent organizations, are proving to be successful in winning 

grant awards in programs most amenable to their participation. 
DRAFT Key Measures Goal 2 

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U.S. Department of Education FY 2005 Performance and Accountability Report

Goal 6: Establish Management Excellence 

Key Measures 

The Office of Management and Budget has required all 16 Cabinet-level departments and 10 

other major federal agencies to report quarterly on their progress toward demonstrating 

administrative excellence. The President’s Management Agenda comprises five major 

initiatives designed to assure Americans of the efficient use of federal funds and the 

effective responsiveness of the federal government to their needs. 

At the Department, we have identified within our sixth goal, Establishing Management 

Excellence, nine key measures aligned with the initiatives of the President’s Management 

Agenda. Success in meeting challenging targets for these measures ensures management 

results that maximize value to taxpayers, channel available resources toward highperforming programs, and help students achieve in the classroom. 

See p. 58 for an explanation of the documentation fields for key measures. 

Financial Integrity and Management 

One major initiative of the President’s Management Agenda is Improved Financial 

Performance. In December 2003, the Department of Education became the first Cabinetlevel agency to achieve the Office of Management and Budget’s elite green status score in 

this initiative. This recognition was based on consecutive unqualified audit opinions in 

FY 2002 and FY 2003 and the demonstrated ability to provide timely, pertinent program 

performance and financial stewardship data to senior managers via the monthly internal 

publication, Fast Facts. 

The Department has kept green status, earning unqualified opinions in FY 2004 and FY 2005 

while remaining free of material weaknesses and maintaining a low number of reportable 

conditions. During FY 2005, we earned the most prestigious fiscal management honor for 

federal agencies, the President’s Quality Award for Improved Financial Performance, based 

on our work of the previous year. Additionally, our FY 2003 and FY 2004 Performance and 

Accountability Reports both won Certificates of Excellence in Accountability Reporting from 

the Association of Government Accountants. 
DRAFT Key Measures Goal 2 

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U.S. Department of Education FY 2005 Performance and Accountability Report

Analysis of Progress. Prior to 

FY 2002, the Department had not 

received an unqualified or clean audit 

opinion since FY 1997 and had never 

received an unqualified opinion from an 

independent audit firm. The 

Department has since earned four 

consecutive clean opinions from 

independent auditors. We will 

maintain this status in the future, as 

unqualified opinions assure the 

American public of the high quality of 

our financial management and 

reporting. 

Data Quality. Independent auditors follow professional standards and conduct the audit 

under the oversight of the Department’s Office of Inspector General. There are no data 

limitations. 

Related Information. The Department’s annual Performance and Accountability Reports, 

which can be accessed at http://www.ed.gov/about/reports, contain information on each 

unqualified audit opinion conferred upon the Department from FY 2002 onward. Look in 

each report for the “Report of Independent Auditors” section. 

Additional Information. Recognition of reliability in financial reporting by independent 

auditors signifies that the Department produces timely and accurate financial information to 

the President, the Congress, and the American public. Beyond the scope of the audit, we 

also demonstrate timeliness and quality in our various financial and program performance 

reports, ensuring reliable information for our senior officials to assess performance and 

better allocate resources for effective program management. 

Strategic Human Capital Management 

“Having the right people, in the right place, doing the right work at the right time” conveys 

the essence of a second major initiative in the President’s Management Agenda, Strategic 

Management of Human Capital. Not only must the federal government compete with the 

private sector for top talent, but also it faces a potential shortage of experienced staff, as 

half of current federal employees will by 2010 be eligible either to retire or to seek early 

retirement. At the Department, we are approaching historic lows in total personnel, while 

our budget is at an all-time high. Our employees must manage increasing responsibilities 

while maintaining exemplary performance to guarantee the effective use of federal dollars 

for the benefit of America’s students. 

The Department made significant progress in this initiative during FY 2005. Four-fifths of 

our employees established effective performance standards for their current rating cycle in a 

timely manner. Additionally, more than 2,500 employee performance plans were reviewed 

6.1 The achievement of an unqualified audit opinion. 

Fiscal Year Actual 

1999 Qualified 

2000 Qualified 

2001 Qualified 

2002 Unqualified 

2003 Unqualified 

2004 Unqualified 

2005 Unqualified 

We met our 2005 target of unqualified. 

Independent Auditors’ Financial Statement and Audit Reports, 

FY 1999 through FY 2005. 
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in 2005, and upon completion of the review, over 95 percent of the plans were properly 

aligned with the goals of the Department’s Strategic Plan 2002–2007. 

Human capital activities also serve a key function in a third major initiative of the 

President’s Management Agenda, Competitive Sourcing. During FY 2005, the Department 

continued the implementation of new organizational structures in human resources and 

payments processing. These structures resulted from two competitions between private 

vendors and Department employee teams in which the Department employee team 

prevailed. Experienced staff oversee the development of more efficient operations in these 

business sectors, freeing up additional staff for other vital administrative tasks. 

Analysis of Progress. The 

Department has initial results in 

FY 2005 on a new index of human 

capital performance, based on an 

average of three equally weighted 

elements. The first element is the 

percentage of employee performance 

plans with effective performance 

standards entered into the Education 

Department Performance Appraisal 

System (EDPAS) prior to the beginning of the new rating cycle, and 79 percent of all 

required employee plans were so entered. The second element is the percentage of 

employees subject to EDPAS with documented ratings of record in the Federal 

Personnel/Payroll System (FPPS) within 30 days after the close of the rating cycle just 

ended, and 85 percent of employees had documented ratings in FPPS within this time 

frame. The last element is the percentage of employee performance award dollars paid to 

employees who received outstanding ratings in the EDPAS cycle most recently completed. 

As of September 30, 2005, 51 percent of award dollars had been paid to those employees. 

With an approach now in place to capture three key components of human capital 

performance aligned with ongoing work force development efforts, the Department will 

establish ambitious improvement targets above the baseline in subsequent years. 

Data Quality. The Department’s Office of Management has expressed concern that the 

first component of the index is an insufficient indicator, as there is no follow-up verification 

included in the number to ensure that an employee’s performance plan was discussed with 

management and signed by the employee. New procedures and software support are being 

put in place to encourage compliance and increase data integrity. 

Information Technology Management 

Expanded Electronic Government comprises a fourth major initiative of the President’s 

Management Agenda. The Department’s primary task in this initiative is the migration of 

discretionary grant competitions from paper to electronic format. We are building the future 

6.2 Index of quality human capital performance 

management activities. 

Fiscal Year Actual 

2005 72 

We established a baseline in 2005. 

U.S. Department of Education, Office of Management, via data from 

the Education Department Performance Appraisal System (EDPAS) 

and the U.S. Department of the Interior’s Federal Personnel/Payroll 

System (FPPS). The latter system provides personnel and payroll 

support to numerous federal agencies, including the Department of 

Education. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

of our customer transactions on an electronic platform because of the versatility, 

convenience, speed, and cost efficiency with which public business can be transacted in this 

medium. To ensure the security of our data, we are nearing the satisfactory completion of 

certification and accreditation of our information technology systems. 

The Department has played a leading role in initiatives to simplify federal government grant 

application and award processes. We have been recommended as a servicer in the Grants 

Management Line of Business project, which if approved will establish the Department as a 

grant administration service center for multiple agencies. We have also actively participated 

in Grants.gov, an effort to direct all search, application, and reporting functions for federal 

grants through a single portal. 

Analysis of Progress. In 2005, 120 

of 142 discretionary grant competitions 

provided an electronic method by 

which interested parties could submit 

applications. Additionally, 72 

Department programs required 

electronic submission for all applicants, 

more than double the 2004 total. 

The Office of Management and Budget 

has requested that agencies begin full 

migration of all discretionary grant 

competitions to the federal Grants.gov platform to provide a one-stop shop for finding and 

applying for federal grants. Accordingly, the Department continued to move competitions 

away from the internal e-Application system and toward Grants.gov, a process begun in 

2004. The Department intends to migrate all competitions to Grants.gov by FY 2007, 

including competitions for programs currently not using electronic means. 

Data Quality. The data are based on the 142 competitions held by the Department’s 

discretionary grant programs that held competitions during FY 2005. These programs may 

elect to use the Department’s internal e-Application system or the federal cross-agency 

Grants.gov platform. Formula grant programs, which include most large grants to states 

provided under No Child Left Behind, are not competed and therefore not included in this 

measure. 

Target Context. The FY 2005 target was an extrapolation of trend data from previous 

years. Subsequent targets will be aligned with the Department’s plan, as approved by the 

Office of Management and Budget, to compete more discretionary awards via the federal 

cross-agency Grants.gov initiative. 

Related Information. Information regarding e-Application can be accessed at http://egrants.ed.gov. Information regarding Grants.gov can be accessed at 

http://www.grants.gov/. 

6.3 The percentage of discretionary grant programs 

providing online application capability. 

Fiscal Year Actual 

2000 5 

2001 20 

2002 29 

2003 57 

2004 77 

2005 86 

We exceeded our 2005 target of 78. 

U.S. Department of Education, Office of the Chief Financial Officer, 

Grant Administration and Payment System. 
DRAFT Key Measures Goal 2 

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U.S. Department of Education FY 2005 Performance and Accountability Report

Customer Service for Student Financial Assistance 

A major foundation of the President’s Management Agenda is that government must be 

focused on the citizens it serves, and student financial assistance programs unquestionably 

comprise the busiest area of Department customer service activity. In overseeing a student 

loan portfolio comprising about $400 billion and exceeding 26 million borrowers, and in 

managing the Pell Grant program that provided more than $15 billion in FY 2005 for lowincome postsecondary students, we demonstrate the quality level of our customer service 

activities before a very large audience. Thus, our customer service performance measures 

focus on various aspects of service delivery within student financial assistance operations. 

The Department’s Common Origination and Disbursement System received increased scores 

in the American Customer Satisfaction Index Survey in FY 2005 over FY 2004. Scores for 

other student financial assistance services remained relatively unchanged from a year ago, 

but all our indexed services compare favorably in customer satisfaction with similar 

governmental and private-sector organizations, often exceeding them. We will draw upon 

survey results to improve customer satisfaction with our student financial assistance 

services in FY 2006. 

FY 2005 featured the removal of student aid programs from the Government Accountability 

Office’s federal high-risk program list, as well as a green status score in a special President’s 

Management Agenda category on eliminating fraud and waste from student aid programs. 

Additionally, the recently determined FY 2003 national student loan cohort default rate 

reached an all-time low of 4.5 percent, down from 5.2 percent in FY 2002, a credit to the 

diligent efforts of Department staff in coordination with postsecondary institutions and loan 

industry partners to increase student loan repayment. 

Analysis of Progress. FAFSA on the 

Web is the Web-based product that 

applicants complete to determine their 

eligibility for federal student aid. While 

the FY 2005 result falls short of the 

target, it compares favorably to the 

national satisfaction trend for similar 

entities. The latest score from the 

American Customer Satisfaction Index 

(ACSI) e-Commerce Index, in December 2004, which includes transactional Web sites much 

like the FAFSA on the Web, declined from 81 to 79. 

FAFSA on the Web continues to deliver outstanding service to the customer. Its score ranks 

third of all the companies included in the ACSI e-Commerce Index, with only Barnes and 

Noble (87) and Amazon (84) ahead of it. In addition, the FAFSA on the Web score is higher 

than the best e-Government’s eCommerce sites, which include the Social Security 

Administration (79), U.S. Mint (76), and Treasury Direct (72). 

Customers have become accustomed to world-class Web services and continue to have high 

expectations in this area. Meeting these expectations is an ongoing challenge. The 

6.4 Customer service level for Free Application for Federal 

Student Aid (FAFSA) on the Web. 

Fiscal Year Actual 

2003 86 

2004 81 

2005 81 

We did not meet our 2005 target of 86. 

FY 2005 American Customer Satisfaction Index Survey. 
DRAFT Key Measures Goal 2 

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U.S. Department of Education FY 2005 Performance and Accountability Report

Department will use results from the ACSI Survey to inform the development of the new 

ADvance System platform, which will include enhanced aid application functionality. 

Data Quality. The Department’s Office of Federal Student Aid annually conducts customer 

surveys of its most high-profile, highly used products and services by means of the ACSI 

Survey. This survey, which also provides the satisfaction scores in measures 6.5 through 

6.7, is produced annually by a partnership of the National Quality Research Center (at the 

University of Michigan’s Stephen M. Ross School of Business), CFI Group, and the American 

Society for Quality. The index provides a national, cross-industry, cross-public, and privatesector economic indicator, using a widely accepted methodology to obtain standardized 

customer satisfaction information. Survey scores are indexed on a 100-point scale. The 

Department began tracking the index as a measure of customer service in FY 1999 and has 

tracked the index each subsequent year except in 2002. 

Related Information. Information on the ACSI, which is also applicable for measures 6.5 

through 6.7, can be accessed at http://www.theacsi.org/overview.htm. 

Additional Information. In FY 2005, nearly 90 percent of the 13.9 million federal 

financial aid applications were filed electronically, with 96 percent of electronic filers using 

FAFSA on the Web as their means of transmittal. 

Analysis of Progress. Direct Loan 

Servicing, the process by which Federal 

Direct Student Loans are repaid, 

includes issuing monthly statements, 

collecting loan balances, and offering 

customer-service help and Web-based 

help and information. The ACSI score 

decline is within the confidence interval from a year ago, such that the difference is 

statistically insignificant. Likewise, the target is within the 2.5-point confidence interval 

around the current score, and thus we cannot say conclusively that the target was not met. 

The Direct Loan Servicing score compares favorably with the latest ACSI private-sector 

banking sector average score of 75, and better than most firms in the sector, including Bank 

of America (72), Wells Fargo (70), and J.P. Morgan (70). The Direct Loan Servicing score is 

also on par with notable financial services companies like New York Life (76) and Allstate 

Insurance (76). 

The Department will use results from the ACSI Survey to inform the development of the 

new Common Services for Borrowers platform, which will include enhanced Direct Loan 

Servicing functionality. As with other student financial assistance platforms, Common 

Services for Borrowers will have user interfaces via both the World Wide Web and telephone 

customer service representatives. 

Data Quality. See measure 6.4. 

Related Information. See measure 6.4. 

6.5 Customer service level for Direct Loan Servicing. 

Fiscal Year Actual 

2003 77 

2004 78 

2005 76 

We did not meet our 2005 target of 77. 

FY 2005 American Customer Satisfaction Index Survey. 
DRAFT Key Measures Goal 2 

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U.S. Department of Education FY 2005 Performance and Accountability Report

Additional Information. The Direct Loan Servicer is handling about 6.8 million customer 

accounts in repayment status with a combined outstanding principal balance of 

$89.5 million as of September 30, 2005. This represents a 6 percent increase in 

outstanding balances for Direct Loan Program accounts in repayment status. 

Analysis of Progress. The Common 

Origination and Disbursement system 

is the mechanism that schools use to 

receive and account for federal funds 

used in the Federal Direct Student Loan 

and Pell Grant programs. The ACSI 

score is reflective of improvements 

initiated in the Common Origination 

and Disbursement system to improve customer inquiry handling, as well as a credit to the 

accuracy and timeliness of information on the system’s Web site. The system’s score 

exceeds the average of private-sector organizations operating within the CFI Business to 

Business Index (68), and is above scores of similar governmental operations like the 

Export-Import Bank (72), Treasury Direct (72), and GSA Advantage (69). 

The Department will use results from the ACSI Survey to inform the development of the 

new ADvance System platform, which will include enhanced origination and disbursement 

functionality for both eligible programs. 

Data Quality. See measure 6.4. 

Related Information. See measure 6.4. 

Additional Information. Approximately 5,200 schools participating in either or both 

eligible programs used the Common Origination and Disbursement system during FY 2005, 

and $26.8 billion in loans and grants were processed through the system. 

Analysis of Progress. The Lender 

Reporting System is the mechanism 

that lenders and servicers use to 

receive interest and special allowance 

payments from the Department on 

their active Federal Family Education 

Loan portfolios. The ACSI score 

decline is within the confidence interval from a year ago, such that the difference is 

statistically insignificant. Likewise, the target is within the 2.5-point confidence interval 

around the current score, and thus we cannot say conclusively that the target was not met. 

Nonetheless, the Lender Reporting System exceeds the average of private-sector 

organizations operating within the CFI Business to Business Index (68), and is on par with 

similar governmental operations like the Export-Import Bank (72), Treasury Direct (72), 

and GSA Advantage (69). 

6.6 Customer service level for Common Origination and 

Disbursement. 

Fiscal Year Actual 

2003 66 

2004 72 

2005 76 

We exceeded our 2005 target of 74. 

FY 2005 American Customer Satisfaction Index Survey. 

6.7 Customer service level for Lender Reporting System. 

Fiscal Year Actual 

2003 71 

2004 73 

2005 72 

We did not meet our 2005 target of 74. 

FY 2005 American Customer Satisfaction Index Survey. 
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The Department will use results from the ACSI Survey to inform the development of any 

new enhancements to the Lender Reporting System. As with other student financial 

assistance systems, the Lender Reporting System provides user interfaces via both the 

World Wide Web and telephone customer service representatives. 

Data Quality. See measure 6.4. 

Related Information. See measure 6.4. 

Budget and Performance Integration 

A fifth major initiative of the President’s Management Agenda is Budget and Performance 

Integration. Simply put, the size of a federal education program’s budget should 

significantly correlate with its efficacy in improving student achievement. If a program 

works, more funding is justified; if it doesn’t, the program either should undergo corrective 

action or be eliminated. 

The Office of Management and Budget and the Department have worked together to 

measure program effectiveness by means of the Program Assessment Rating Tool (PART). 

By analyzing a program’s purpose, strategic planning functions, management capability, 

and demonstrated results, this tool has identified the strengths and weaknesses of both 

major and minor Department programs. We have used the PART process to make 

significant changes to ineffective programs or, in some cases, to recommend their 

termination. The overriding goal is that Department-funded programs demonstrate proven 

effectiveness. In FY 2005, we discovered that much work remains to certify the 

effectiveness of numerous Department programs. 

Analysis of Progress. The Department 

measures progress based upon programs 

reviewed via the PART. The Department 

defines effective programs as those ranked 

effective, moderately effective, or adequate 

through means of the review. For any given 

year, the actual data reflect the reviews 

conducted during or prior to that year, with 

total appropriations for that given year of 

effective programs constituting the 

numerator and total appropriations for that 

given year of all programs reviewed to date 

constituting the denominator. 

Programs analyzed by the PART that have mandatory funding and are not subject to 

congressional appropriations, including the Federal Direct Student Loan Subsidies and 

Federal Family Education Loan Program and Liquidating accounts, are excluded from both 

the numerator and the denominator in the calculation. 

6.8 The percentage of Department program dollars 

associated with programs reviewed under the Program 

Assessment Rating Tool (PART) process that demonstrate 

effectiveness. 

Fiscal Year Actual 

2002 57 

2003 47 

2004 47 

2005 Target is 57. 

We did not meet our 2004 target of 56. 

Data for 2005 are pending. 

U.S. Department of Education, analysis of Program Assessment 

Rating Tool findings. 
DRAFT Key Measures Goal 2 

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U.S. Department of Education FY 2005 Performance and Accountability Report

The Department expects to see improvements in program performance information as 

performance measures are improved, the Department analyzes Consolidated State 

Performance Reports of elementary and secondary education data, the EDFacts analysis 

tools become operational, and additional program evaluations provide new findings. 

Data Quality. The PART analysis began in 2002 and is conducted annually. Results 

become available in February each year with the release of the President’s budget. Upon 

the release in February 2005 of the analyses completed during FY 2004, 56 Department 

programs have been reviewed to determine the effectiveness of their purpose, strategic 

planning, management, and results. These programs represent 67 percent of the FY 2004 

budget for the 103 Department programs that either have been or eventually will be 

analyzed through use of this tool. 

Target Context. While the FY 2004 result for this measure has not been presented in a 

previous Performance and Accountability Report, a score of 56 percent was included for 

FY 2004 in the Department’s FY 2006 Program Performance Plan. This score, however, 

erroneously included mandatory programs not subject to congressional appropriations, and 

the 47 percent score shown for FY 2004 properly excludes these programs. In addition, a 

recalculation of appropriations for FY 2002 and FY 2003 by the Department’s Budget Service 

has resulted in new actual numbers for those years based on the same methodology. 

Related Information. Specific information about programs analyzed by the PART is 

available in the PART section of each goal chapter. General information about the PART can 

be accessed at http://www.whitehouse.gov/omb/part. 

Additional Information. For 35 programs that were analyzed and subsequently received 

a rating of results not demonstrated, the Department has not yet collected sufficient 

performance data to ascertain their effectiveness. No conclusion should necessarily be 

drawn that these programs are ineffective. An additional six programs have received an 

ineffective rating via the PART, however, and thus fail to meet the Department’s standard 

for effectiveness. 

FY 2005 data will be available in February 2006 upon the release of the President’s FY 2007 

Budget. 

Faith-Based and Community Organization Grantees 

In addition to the five major President’s Management Agenda initiatives, the Office of 

Management and Budget also grades the Department on eliminating improper barriers that 

hinder faith-based and community organizations from participating in the provision of 

certain federal social services. The Department has actively encouraged faith-based and 

community organizations to apply for discretionary grant competitions deemed amenable to 

their participation. Of particular significance, we developed clear guidance for our program 

offices on the equal treatment of grant applicants regardless of their organizational 

background. This effort has had a side benefit of increasing our awareness of the efforts of 

novice (first-time) applicants other than faith-based and community organizations. 
DRAFT Key Measures Goal 2 

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U.S. Department of Education FY 2005 Performance and Accountability Report

Analysis of Progress. The 

Department initially calculated the 

success rate for faith-based 

organizations in three discretionary 

grant programs based on the 

FY 2003 grant cycle. This 

calculation indicated that such 

organizations were successfully 

awarded grants at a rate only 

1 percent less than that of other 

applicants. Competitions included 

in this calculation in all years are 

for programs considered “amenable” by the Department, meaning that the Department 

determined the programs to be both open by statute and suitable to participation by faithbased and community organizations. 

The amenable program base for FY 2004 and FY 2005 consisted of the Community 

Technology Centers Program, the Physical Education Program, and the Mentoring Program. 

All three programs held new competitions and made grant awards from these competitions 

in FY 2004. In FY 2005, all three programs made awards further down the slate to eligible 

applicants who had not been awarded funding in FY 2004. Given this explanation, award 

success rates for individual programs are as follows: 

• For the Community Technology Centers Program, faith-based and community 

organizations had a 4 percent award success rate in FY 2004 compared to 10 percent 

for other entities; the success rate for faith-based and community organizations in 

FY 2005 was 4 percent compared to 2 percent for other entities. 

• For the Physical Education Program, faith-based and community organizations had a 

12 percent award success rate in FY 2004 compared to 20 percent for other entities; 

the success rate for faith-based and community organizations in FY 2005 was 

5 percent compared to 9 percent for other entities. 

• For the Mentoring Program, faith-based and community organizations had a 

10 percent award success rate in FY 2004 compared to 13 percent for other entities; 

the success rate for faith-based and community organizations in FY 2005 was 

6 percent compared to 8 percent for other entities. 

Data Quality. The rate of success for faith-based and community organizations is 

computed as the percentage of such applicants who win discretionary grant awards via 

competitions. The rate of success for other applicants is computed in the same way. The 

target specifies the maximum rate by which faith-based and community organizations can 

be less successful in winning awards than other entities. The Department intends that all 

grant proposals be appraised on their merits without regard to the applicant’s organizational 

identity. 

Target Context. The targets for FY 2004 and FY 2005, which were established before the 

final FY 2003 number was known, were lower than the FY 2003 actual number, which was 

not tied to a target. 

6.9 The difference between the success rate of faith-based and 

community organizations (FBCOs) and non-FBCOs in receiving 

federal discretionary grant awards from the Department of 

Education. 

Fiscal Year Actual 

2003 FBCO rate was 1 percentage point less. 

2004 FBCO rate was 5.5 percentage points less. 

2005 FBCO rate was 1.6 percentage points less. 

We did better than our 2004 target of 10 percentage points less. 

We did better than our 2005 target of 5 percentage points less. 

U.S. Department of Education, Office of the Secretary, Center for FaithBased and Community Initiatives. 
DRAFT Key Measures Goal 2 

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U.S. Department of Education FY 2005 Performance and Accountability Report

The established target was based on the overall federal goal to provide equal opportunity to 

faith-based and community organizations. However, the measure for FY 2003 only 

addresses the success of faith-based organizations, as community organizations were not 

included due to resource limitations. Community organizations are included in the count 

beginning in FY 2004. 

Related Information. Information about grant opportunities for faith-based and 

community organizations can be accessed at

http://www.ed.gov/fund/grant/apply/newapplicant.html. 

Discontinued Strategic Measures 

The following measures were discontinued after FY 2004 but were reported as pending in 

our FY 2004 Performance and Accountability Report. We report here our results. (See 

p. 23 for a discussion of why we discontinued measures.) 

Measure Fiscal 

Year Target Actual Status 

6.1.5 The percentage of erroneous payments 2004 Less 

than 2.5 0.3 Met 

6.4.8 The number of material weaknesses and reportable 

conditions in FSA financial statements audit 2004 1 2 Not Met 

6.7.1 President’s Quality Award 

2004 

Apply 

for and 

win the 

award 

Applied for 

and won 

the award 

Met 

Sources and Notes 

6.1.5 U.S. Department of Education, Office of the Chief Financial Officer, contracted analysis 

performed by the U.S. Department of Energy’s Oak Ridge National Laboratory in 

December 2004. 

The 0.3 percent rate is the estimated grand average rate of questioned costs 

determined by Oak Ridge as a percentage of total expenditures for FY 2004, applying 

the methodology used for actual expenditures in FY 2000 through FY 2003. The 

methodology is based on data available from the Federal Audit Clearinghouse, the 

Department’s Audit Accountability and Resolution Tracking System, and the 

Department’s Grant Administration and Payment System. The scope of this project is 

limited to grants and excludes all federal student financial assistance programs; 

therefore, the 0.3 percent questioned cost rate applies in the aggregate to all 

Department programs outside the student financial assistance sector. 

The Department’s Office of Inspector General questioned parts of the Oak Ridge 

methodology in an April 29, 2005, memorandum. As a result, the Office of the Chief 

Financial Officer has extended the Oak Ridge contract both to reanalyze the data with 

respect to major findings of the Office of Inspector General memorandum and to 

perform an analysis of new information in the audit databases. The revised analysis is 

expected to be complete in January 2006. 

The Department is performing ongoing work to reduce improper payments in risksusceptible programs; this work is described in detail in the section of the Performance 
DRAFT Key Measures Goal 2 

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U.S. Department of Education FY 2005 Performance and Accountability Report

and Accountability Report that summarizes the Department’s compliance with the 

Improper Payments Information Act of 2002. 

6.4.8 Independent Auditors’ FY 2004 Federal Student Aid Financial Statement Audit Report. 

In January 2005, the Office of Federal Student Aid was removed from the Government 

Accountability Office’s list of government programs at high risk for fraud, waste, 

abuse, and mismanagement. This removal enabled the Department to earn a green 

status score in March 2005 on a program-specific initiative of the President’s 

Management Agenda category, Elimination of Fraud and Error in Student Aid Programs 

and Deficiencies in Financial Management. The independent auditors reported no 

material weaknesses and two reportable conditions in their FY 2004 Office of Federal 

Student Aid financial statement audit. These conditions were the same as those 

reported by the independent auditors in their Department of Education financial 

statement audit for FY 2004. Additionally, the FY 2004 Performance and 

Accountability Report incorrectly reported the number of actual material weaknesses 

or reportable conditions in the Office of Federal Student Aid financial statement audits 

for FY 2002 and FY 2003; the actual numbers were 3 and 2, respectively. 

6.7.1 U.S. Department of Education, Office of Management and Office of the Chief Financial 

Officer. 

The Department received the President’s Quality Award in FY 2004 for exemplary work 

in the Improved Financial Performance category of the President’s Management 

Agenda. The President’s Quality Award is the highest honor available to federal 

agencies that demonstrate outstanding achievement in various internal management 

activities. 
190

Goal 6: Establish Management Excellence 

Performance Summary 

The Department attributes the accounts below to Goal 6. In the table we provide an overview of the resultoffices on their performance measures. (See p. 59 for our methodology of calculating the percentage of tamet, and without data.) Individual performance reports are available at http://www.ed.gov/about/reports/annual/2005report/program.html. We also provide both FY 2005 approp

FY 2005 expenditures for each of these accounts. (See pp. 24-25 for an explanation of why appropriations for a given year are not the same and the effect that difference has on the connection between funding and 

Program Name 

Appropriations† Expen- ditures‡ Program Performance Results Percent of Targets Met, Not Met, Without Da

FY 2005 FY 2004 FY 2003 

FY 2005

$ in 

millions

FY 2005

$ in 

millions

% 

Met 

% 

Not 

Met 

% 

No 

Data

% 

Met 

% 

Not 

Met 

% 

No 

Data

% 

Met 

% 

Not 

Met 

% 

No 

Data

Office for Civil Rights 89 86 50 0 50 100 0 0 100 0 0 Office of Inspector General 47 50 33 67 0 Program Administration # 419 420 # # # TOTAL 555 * 556† Budget for each account represents function budget authority. ‡ Expenditures occur when recipients draw down funds to cover actual outlays. FY 2005 expenditures may include funds from prior y A shaded cell denotes that the program did not have targets for the specified year. # The Department does not plan to develop performance measures for programs, activities, or budgetary line items that are administr

serve to support other programs and their performance measures. 

* Expenditures by program do not include FY 2005 estimated accruals in the amount of $9 million. 
191

U.S. Department of Education FY 2005 Performance and Accountability Report

Goal 6: Establish Management Excellence 

Findings and Recommendations from 

Program Evaluations, Studies, and Reports 

Information that the Department uses to inform management and program improvements 

comes from many sources, including Department-sponsored evaluations and Government 

Accountability Office (GAO) reports. The following evaluation was completed during 

FY 2005. 

Department’s Compliance with the Prompt Payment Act 

The Prompt Payment Act requires federal agencies to pay their bills on a timely basis, pay 

interest penalties when payments are made late, and take discounts only when payments 

are made by the discount date. The objectives of this audit by the Department’s Office of 

Inspector General audit were to determine the Department's compliance with the provisions 

of the Prompt Payment Act and the adequacy of its internal controls. (See p. 192 for a 

summary of this report.) 
192

U.S. Department of Education FY 2005 Performance and Accountability Report

 Report on the Department's Compliance with the Prompt Payment Act 

Report Title 

Department of Education's Compliance with the Prompt Payment Act: Final Audit Report

(ED-OIG/A17-E0008) September 2005. 

Overview 

The Prompt Payment Act, Public Law 97-177, requires federal agencies to pay their bills on 

a timely basis, pay interest penalties when payments are made late, and take discounts 

only when payments are made by the discount date. The objectives of the audit were to 

determine (1) the Department's compliance with the provisions of the Prompt Payment Act

and (2) the adequacy of its internal controls to ensure compliance with the act. The audit 

disclosed that (1) incorrect receipt dates were used to calculate invoice payment due dates, 

(2) adjustments to the payment process are needed, and (3) annual quality control 

procedures need to be developed and reviews need to be conducted. The auditors project 

that about 3,100 invoice payments during the review period, January 1, 2004, through 

September 30, 2004, had underpaid interest. The auditor’s estimate of the total amount of 

interest underpayments during the review period was no less than $175,135 and no more 

than $353,055. 

Recommendations 

• The Department should develop a special use report and prepare a written reminder to 

procurement staff regarding the requirements for properly annotating the date of 

receipt of invoices. The Department should cease combining current and overdue 

invoices and should strengthen controls over the invoice approval process to ensure 

timely request of payment. 

• Prior to implementation of Oracle 11i, the Department should develop a process that 

would monitor and correct the recording and paying of invoices. The Department 

should also develop policy and procedures to ensure that an annual quality control 

validation review is performed. 

Department's Response 

• The Department concurred with most recommendations but determined that 

modification to the present Oracle system would not be economically practical. 

• The Department will update current operating procedures to address the proper 

annotation of receipt of invoices. 

• The Department will place greater emphasis on monitoring the timeliness of invoice 

payments. 

• The Department will establish formal policy and procedure to ensure that prompt 

payment processes are validated no less frequently than annually. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

Data Quality and Timeliness 

The Quality of the Department’s 

Performance Data 

Complete, accurate, and reliable data 

are essential for effective decisionmaking. The Department has had a 

consistent focus on improving the 

quality of the data we use to 

administer our programs and to 

develop policy. More, see p. 194.

EDEN 

The Performance-Based Data 

Management Initiative is a 

collaborative effort among the 

Department, state educational 

agencies, and industry partners to 

improve the quality and timeliness of 

education information. It has built the 

Education Data Exchange Network 

(EDEN) repository that consolidates 

K-12 education data. More, see p. 196. 

 

Data Improvement Strategies 

at the Program Level 

Virtually every program office within 

the Department is improving the 

quality, timeliness, and reliability of 

the information used within the 

Department. 

Detailed examples from three program 

offices are highlighted. More, see p. 199.
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U.S. Department of Education FY 2005 Performance and Accountability Report

The Quality of the Department’s Performance Data 

Complete, accurate, and reliable data are essential for effective decisionmaking. State and 

local educational agencies have historically provided education performance data that do not 

meet our information quality standards. Since the passage of the No Child Left Behind Act, 

the accuracy of state and local education performance data has become even more crucial. 

Funding decisions are made and management actions are taken on the basis of this 

performance information. Reliable information is a prerequisite for effective management 

and essential for implementing the requirements of laws and governmentwide standards for 

dissemination of information. 

Ensuring that data are high quality is not solely the responsibility of our grantees that report 

data to us. The Department is responsible for accurate definitions of requested data, 

efficient systems to gather it, and technical assistance to data providers. The Department 

itself also develops and uses data. One of the most visible areas in which this occurs is the 

annual budget development process. The central focus of our budget process is to align 

goals, objectives, performance measures, and program funding levels to develop a 

performance budget. One of the five governmentwide elements of the President’s 

Management Agenda is the integration of budget and performance, which focuses on 

making budget decisions based on results. 

The Department, facing the opportunities provided by both the No Child Left Behind Act and 

the integrated performance-based budget process, recognizes that we need to improve the 

accuracy, reliability, and completeness of our data. 

Although immediate connections between specific grantee performance and funding levels 

are sometimes challenging to make, the Department is building systems to yield reliable 

performance data to inform budget and policy decisions. These systems will enhance our 

budget process and increase the accuracy and reliability of the information we receive from 

state and local educational agencies. 

Chief among these efforts is the Education Data Exchange Network (EDEN), the 

Department’s centralized K-12 data management repository. Other data quality 

improvement efforts include those supported by the Office of Vocational and Adult 

Education, the National Center for Education Statistics, and the Office of Safe and Drug-Free 

Schools. 

In addition to these efforts, the Department is also working with states to address systemic 

issues in improving the reliability and accuracy of states’ data. During Title I compensatory 

education state monitoring visits, for example, Department staff collect evidence on 

whether a state has established clear criteria and quality control mechanisms for collecting 

data from schools and school districts that are used for accountability purposes. 

The Department has recently initiated a contract task order to develop data quality 

guidelines for states and school districts that will provide guidance and suggestions for 

improving states’ internal quality control systems to reduce errors and increase reliability, 

as well as to improve data quality monitoring procedures. The Department will disseminate 

this guide to states along with training material to accompany the guide. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

The performance data in this Performance and Accountability Report, the best data we 

have, are only as accurate as what is reported to us by our grantees. Our evolving 

management controls are not yet able to fully describe the accuracy of these data. 

However, the Department has had a consistent focus on improving the quality of the data 

we use to administer our programs and to develop policy. Each year the data we report are 

more accurate and more reliable than those of prior years. 

Major hurdles must be overcome before the states and the Department have the data 

systems that will yield timely, reliable, accurate, high-quality data. Among them are 

improving the timeliness and accuracy of performance information; building and maintaining 

the technical infrastructure of hardware, software, and networks; and securing the services 

of staff who are able to work with these systems. We are no longer working to build a 

single data system; our goal is an integrated system of systems. We welcome this 

challenge. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

EDEN 

The Education Data Exchange Network: 

Improving Data Quality and Timeliness in the Near Future 

The Department’s Performance-Based Data Management Initiative (PBDMI) has been a 

collaborative effort among the Department, state educational agencies, and industry 

partners to establish a process for states to directly submit elementary and secondary 

education data from the state, district, and school levels to the Department by electronic 

means. Funded in 2003 and operational by 2004, this initiative has built a currently 

operational Education Data Exchange Network (EDEN)—a central repository that 

consolidates K–12 information collected from states, districts, and schools. Through EDEN 

the Department is improving data quality and reducing the paperwork burden for state and 

local education partners. Through its data collections, EDEN will collect and manage the 

following types of educational data: achievement and performance statistics, school 

characteristics, demographics; and program financial data. 

The Department is now developing EDFacts, which will allow Department staff, state 

education officials, and the public to access the EDEN data repository. State educational 

agencies, as well as federal program offices, will find EDFacts useful for benchmarking and 

for identifying best practices. 

Data collected will be used to evaluate the effectiveness and efficiency of federal education 

programs. It will provide the business intelligence required to track and improve program 

management, including the budgetary focus on the federal education programs that provide 

the best outcomes for the students and their families. 

Since EDEN data will be used to help determine which federal programs are working and to 

monitor the status of states in meeting the mandates of the No Child Left Behind legislation, 

the need for accurate and complete data is crucial. Confidence in the EDEN data starts with 

data quality. There are two major areas of focus to ensure the quality of EDEN data: 

• Outside EDEN—Before submission to EDEN, data collection that occurs at the school, 

district, and state levels needs well-organized, methodologically rigorous datacollection techniques. The Department is providing intensive technical assistance to 

states through their participation in EDEN, and through the National Center for 

Education Statistics, and individual program offices. 

• Inside EDEN—After the data files have been submitted by the state educational 

agencies, data will be screened and validated through electronic and human subjectmatter expert review processes. 

The data quality control procedures and checkpoints ensure that the data and the reports 

produced by EDEN are both accurate and timely. The quality control procedures and 

associated data business rules include standards for data acceptance; documenting the 

criteria for all edit, validation, and reasonability checks; developing meaningful data alerts 

to state educational agencies (for missing or erroneous data); and developing standards for 

data certification and validations. Quality control standards and procedures also will be 
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U.S. Department of Education FY 2005 Performance and Accountability Report

established in accordance with regulations to help ensure compliance with audit 

requirements. 

EDEN is currently undergoing a rigorous assessment to determine the best course of 

development and implementation of data quality control processes. Once this assessment 

has been completed and the recommended options are selected, the data quality 

procedures will be refined and enhanced. In general, the system will do the following: 

• Validate and improve data accuracy by identifying gaps between data collections, 

inaccurate data, and data anomalies. 

• Ensure that the data presented in reports represent valid comparisons. 

• Display quality metrics in reports. 

• Provide reporting tools and data access to Department leadership, federal program 

offices, state and local educational agencies, schools, and the public. 

• Limit access to data based on security and privacy requirements. 

• Allow data providers to run predefined reports that display transmittal statistics on 

their state’s submissions and provide the Department the same information at the 

national level. 

The future state of data quality consists of the following: 

• An organization responsible for data quality throughout the information management 

life cycle. 

• The ability for state educational agencies to view and resolve data submission errors 

via a user-friendly Web interface. 

• A centralized data certification system and process. 

• A single data repository for data usage. 

• Most importantly, wide availability of the data through EDFacts and its use for budget 

decisions and program accountability will increase attention to the quality of the data. 

These processes and controls will ensure that data quality is maintained during the 

collection and transmission stages and the Department’s data are complete, accurate, and 

valid. 

A recent report by the Office of the Inspector General indicates that PBDMI has achieved 

success in a number of areas: 

• The PBDMI Decision Support System Pilot successfully collected large amounts of 

education data (i.e., over 2,200 files containing 63 different file types) from 50 state 

educational agencies via the Internet. 

• The EDEN Submission System has received education data submissions from 50 

states. 

• EDEN has definitions for over 140 common data elements that will be used by the 

program managers and state educational agencies for collecting and reporting 

education information. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

The following challenges remain a focus of the project: 

• Providing guidance to state and local educational agencies in developing effective data 

input controls (i.e., edit checks, business processes) to verify the quality of education 

data at the source level and to ensure that data quality is maintained during the 

collection and data transmission process. 

• Implementing comprehensive requirements and configuration management controls to 

develop EDEN integrated systems that will meet system functionality and performance 

requirements. 

• Developing a comprehensive approach to define, collect, and standardize a complete 

listing of standard data elements and definitions. 

• Developing comprehensive training programs and guidance to assist state educational 

agencies in reducing ongoing data submission errors with the EDEN Submission 

System. 

• Coordinating with the Department’s Enterprise Chief Architect to adopt a PBDMI 

metadata dictionary as part of the Department’s Enterprise Architecture to define 

standard data elements, data definitions, and the business rules associated with 

collecting those data elements. 

The Department has moved to address each of these recommendations contained within the 

Office of Inspector General’s report. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

Data Improvement Strategies at the Program Level 

National Center for Education Statistics 

The work of the National Center for Education Statistics (NCES) has been guided by written 

standards since 1988. As part of the congressionally mandated governmentwide Information 

Quality Guidelines activity of 2002, NCES standards underwent a substantial revision. NCES 

requires that all of its products meet the specifications identified in the 2002 Statistical 

Standards. The Statistical Standards are built on the basic tenets of quality, utility, and 

integrity. They cover the range of activities for which NCES has been given responsibility—

from research and procurement plans, sampling, data collection, and processing to 

evaluation of the data, protecting confidentiality, analysis, report writing, data set 

preparation, and dissemination. NCES reports and data products must also pass an 

extensive technical quality review, including both internal review and a "blind" external 

review conducted by the Office of the Institute of Education Sciences Deputy Director for 

Science. 

NCES continues to monitor the implementation of the statistical standards and centersponsored data collections by documenting the use of incentives, response rates, timeliness, 

and utility of all data collections. These efforts contribute to the ongoing improvement of 

NCES data. By documenting the interaction between the use of incentives and the resulting 

response rates, NCES staff can make more effective decisions concerning where incentives 

are most useful in improving response rates and what types and levels of incentives are 

most effective with different types of respondents. Monitoring the use of incentives provides 

a basis for promulgating shared best practices across data collections. Finally, the data 

collected on timeliness serve as a baseline for newly developed performance standards 

intended to decrease the time period from the end of data collection to the release of the 

first report. 

NCES is also charged with the responsibility of working with other components of the 

Department and with state and local educational institutions to improve the quality of 

education data. To this end, NCES conducted research that provided the basis for the 

Department's selection of the average freshman graduation rate, and anticipates publishing 

that report and related data this fall. This rate is the most reliable among a number of 

possible alternatives and will be used by the Department on an interim basis until the data 

required for individual states to compute a true cohort graduation rate are available. 

Related to this, NCES is responsible for a grant program that provides funding to states for 

the development of high-quality longitudinal student information systems that are needed 

to compute a true cohort graduation rate. 

Through its Cooperative Systems, NCES encourages improved quality in the data collected 

at the elementary/secondary and postsecondary levels. At the elementary/secondary level, 

NCES recently released a Cooperative System Guide to Building a Culture of Data Quality, 

aimed at schools and school districts. At the postsecondary level, NCES has redesigned the 

Integrated Postsecondary Education Data System from a paper system to an online data 

collection. The combination of built-in edits and the shortened time to release has served to 

improve the quality of these data, while at the same time increasing their utility. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

Office of Vocational and Adult Education 

Federal and state officials are in agreement that all states must have valid and reliable 

accountability systems. Through a number of activities, the Office of Vocational and Adult 

Education (OVAE) and states have significantly improved the quality of state adult education 

performance data over the last several years as states have implemented the National 

Reporting System for adult education. Our joint efforts have paid dividends: state adult 

education programs’ performance is now measured on the basis of participant learning gains 

that are determined by standardized assessments. 

OVAE has enhanced states’ capacity to provide high-quality assessment data by developing 

state data quality standards that identify the policies, processes, and materials that states 

and local programs should have in place to collect valid and reliable data. OVAE uses these 

standards when conducting onsite monitoring of states. If a state does not meet one or 

more of the standards, OVAE identifies the deficiencies in the monitoring report and requires 

the state to address them through a corrective action plan. 

OVAE also provides ongoing training and technical assistance to states to promote 

compliance with the NRS requirements, the collection of valid and reliable data, and the use 

of data to improve program performance. OVAE also provides guidebooks and training to 

state teams, as well as materials states can use in training local providers on the following 

topics: 

• Developing an individual student record system that can be used for accountability 

and program improvement purposes. 

• Setting local program performance standards, monitoring local program performance, 

and using performance data to help local programs improve student outcomes. 

• Using NRS data for program management and improvement. 

• Data collection guidelines and procedures. 

OVAE also offers online tutorials on these topics for local program staff. 

To improve the quality of outcome data, OVAE has promoted the use of unemployment 

insurance wage records to identify the employment outcomes of adult education 

participants, consistent with the requirements of the Family Educational Rights and Privacy 

Act. Unemployment insurance wage records are a more accurate and less expensive way of 

identifying employment outcomes than follow-up student surveys. Nearly half of the states 

are now using state unemployment insurance wage records, and more are planning to begin 

using them in the next year. 

Office of Special Education Programs 

For the past eight years, the Office of Special Education Programs (OSEP) has implemented 

a data-dependent accountability system (Continuous Improvement and Focused Monitoring 

System-CIFMS) that has focused on state performance on a number of performance 

measures and regulation-based compliance requirements. In support of CIFMS, the office 

has provided the following ongoing technical assistance and data reviews to support states’ 

efforts to provide valid, reliable and accurate data related to the implementation of the 

Individuals with Disabilities Education Act: 
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U.S. Department of Education FY 2005 Performance and Accountability Report

• Conducting onsite verification visits to examine state systems for the collection of 

valid, reliable, and accurate data and providing follow-up technical assistance as 

needed. 

• Providing individual state-tailored technical assistance through Westat, OSEP’s data 

collection contractor. 

• Providing ongoing technical assistance and support to states on sampling and the 

development of measurable and rigorous targets. 

• Creating the General Supervision Enhancement Grant program, using Part D (National 

Activities) of the act’s technical assistance funds to provide funds to states for the 

development of outcome indicators and measurement systems. Projects have 

included such activities as creating web-based data systems, creating individual 

student identifier record systems, and creating new systems to allow data from 

different agencies to “talk” to each other. 

Section 616 of the reauthorized Individuals with Disabilities Education Act requires state 

educational agencies and lead agencies for Part C (Infants and Toddlers Program) to 

develop State Performance Plans with indicators established by the Department and targets 

set by the states, and to use those targets and indicators in reporting annually to the 

Secretary on the performance of the state. States must also use those targets and 

indicators to report annually to the public on the performance of each local educational 

agency and local early intervention service provider in the state. 

The Department recognized that many state and local educational agencies lacked methods 

to collect and analyze outcome indicator data and, therefore, the capacity to collect 

sufficient data to determine the impact of early intervention and special education services. 

Section 616(i) of the reauthorized Individuals with Disabilities Education Act created a new 

funding authority and required the Secretary to provide technical assistance, where needed, 

to improve the capacity of states to meet the data collection requirements for all children, 

including infants and toddlers with disabilities. 

The General Supervision Enhancement Grant Program, funded under Special Education 

Technical Assistance on State Data Collection at $4.5 million, has as its focus developing or 

enhancing state outcome indicators and methods to collect and analyze outcome indicator 

data. 

Project proposals are expected to support states in their efforts to ensure that required data 

submissions are valid, reliable, and accurate. OSEP expects to make grant awards in 

January 2006. 

Improving Data Systems—Office of Safe and Drug-Free Schools 

The Department’s Office of Safe and Drug-Free Schools is improving state data systems and 

linking those improvement activities to the Performance-Based Data Management Initiative. 

The No Child Left Behind Act requires that each state collect certain school crime and safety 

data elements and report the data collected to the public. Under the statute, states must 

create a system for collecting and disseminating information for several data elements, 
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U.S. Department of Education FY 2005 Performance and Accountability Report

including truancy and the incidence of violence and drug-related offenses leading to 

suspension and expulsion. 

The Grants to States to Improve Management of Drug and Violence Prevention Program 

provides support to states to explore strategies that will address the challenges they face in 

collecting and using data, including the following: 

• Lack of standardized collection instruments and definitions both within and across 

states. 

• Lack of expertise related to collecting data about youth drug use and violence. 

• Lack of time and other resources to support high-quality data collection and analysis 

in these areas. 

Improved data collection systems that result from this program will allow state, district, and 

school administrators to develop, expand, and/or enhance the capacity of state and local 

educational agencies to collect, analyze, and use data to improve the quality of drug and 

violence prevention programs. In addition, these systems will be able to identify the needs 

of students and assess progress in addressing these important problems. 

Project proposals are expected to adhere to the following requirements: 

• Be consistent with the state’s Performance-Based Data Management Initiative strategy 

and produce data that can be transmitted to the Department via its Education Data 

Exchange Network. 

• Include validation and verification activities at the state and substate recipient levels 

designed to ensure the accuracy of data collected and reported. 

The first projects funded under this program were awarded in September 2004. Additional 

projects were awarded funds in September 2005.
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U.S. Department of Education FY 2005 Performance and Accountability Report

Financial 

Details 
 204

U.S. Department of Education FY 2005 Performance and Accountability Report

At End of Year FY2005 FY2004 FY2003 FY2002

Condensed Balance Sheet Data

FBWFund Balance with Treasury + 17% $ 77,569 $ 66,371 $ 57,908 $ 52,116

CPRCredit Program Receivables + 3% 104,966 107,937 97,965 91,706

AR Accounts Receivable - 9% 141 155 183 265

Oth Other - 18% 1,117 920 1,202 1,280 

Total Assets + 8% $ 186,567 172,609 $ 157,258 $ 145,367 $ 

Treasury Debt for Loan Program + 8% $ 96,649 104,597 $ 92,018 $ $ 89,782

Other Intragovernmental Liabilities + 2% 6,146 6,051 8,250 6,089

Liabilities for Loan Guarantees + 31% 30,611 23,329 15,432 11,679

Other Liabilities + 6% 2,246 2,371 2,124 2,534 

Total Liabilities + 12% 128,275 143,725 117,824 110,084 

Unexpended Appropriations + 0% 47,288 47,285 43,931 39,121

Cumulative Results of Operations + 51% (4,446) (2,951) (4,497) (3,838) 

Total Net Position - 3% 44,334 42,842 39,434 35,283 

Total Liabilities and Net Position + 8% $ 186,567 172,609 $ 157,258 $ 145,367 $ 

For the Year FY2005 FY2004 FY2003 FY20021

Statement of Net Cost Net Cost by Strategic Goal

Total Cost + 17% $ 82,204 $ 70,187 $ 65,327 $ 55,923

Earned Revenue + 6% (6,965) (6,564) (6,523) (6,157) 

Total Net Cost of Operations + 18% $ 63,623 75,239 $ 58,804 $ 49,766 $ 

Net Cost by Strategic Goal2

Goal 2 Improve Student Achievement + 11% $ 36,415 $ 32,687 $ 29,679 N/A

Goal 3 Develop Safe Schools and Strong Character + 16% 877 756 776 N/A

Goal 4 Transform Education into Evidenced-Based Field - 5% 442 467 490 N/A

Goal 5 Enhance Quality of and Access to Postsecondary -

 and Adult Education + 24% 36,940 29,713 27,859 N/A

Goal 6 Management Excellence 565 - - N/A

+ 18% $ 75,239 $ 63,623 $ 58,804 $ -

Net Cost Percentages by Strategic Goal

Goal 2 Improve Student Achievement - 6% 48.40% 51.38% 50.47%

Goal 3 Develop Safe Schools and Strong Character - 2% 1.17% 1.19% 1.32%

Goal 4 Transform Education into Evidenced-Based Field - 19% 0.59% 0.73% 0.83%

Goal 5 Enhance Quality of and Access to Postsecondary

 and Adult Education + 5% 49.09% 46.70% 47.38%

Goal 6 Management Excellence 0.75% N/A N/A

1 The Department's Strategic Goals were developed in fiscal year 2002. Net costs by Strategic Goal were not readily available at that time 2 In fiscal year 2004 Goal 6 was not included in this summary

% Change

2005 / 2004

(Dollars in Millions)

Financial Summary

% Change

2005 / 2004

$42.8 $44.3

$39.4

$35.3

in Billions

FY2005 FY2004 FY2003 FY2002

Net Position

$186.6 $172.6 $157.3 $145.4

in Billions

FY2005 FY2004 FY2003 FY2002

Goal 5

46.70%

Goal 4

0.73%

Goal 2

51.38%

Goal 3

1.19%

FY 2004

Total Assets

Total Liabilities

Goal 6

0.75%

Goal 5

49.09%

Goal 4

0.59%

Goal 2

48.40%

Goal 3

1.17%

FY 2005

$143.7 $128.3 $117.9 $110.1

in Billions

FY2005 FY2004 FY2003 FY2002

Limitations of Financial Statements 

Management has prepared the accompanying financial statements to report the financial position 

and operational results for the U.S. Department of Education for fiscal years 2005 and 2004 

pursuant to the requirements of Title 31 of the United States Code, section 3515(b). 

While these statements have been prepared from the books and records of the Department in 

accordance with generally accepted accounting principles (GAAP) for federal entities and the 

formats prescribed by OMB, these statements are in addition to the financial reports used to 

monitor and control budgetary resources, which are prepared from the same books and records. 

The statements should be read with the realization that they are a component of the U.S. 

Government, a sovereign entity. One implication of this is that the liabilities presented herein 

cannot be liquidated without the enactment of appropriations, and ongoing operations are subject 

to the enactment of future appropriations. 

 206

U.S. Department of Education FY 2005 Performance and Accountability Report

Principal Financial Statements 

Consolidated Balance Sheet (See p. 207.) 

Consolidated Statement of Net Cost (See p. 208.) 

Consolidated Statement of Changes in Net Position (See p. 209.) 

Combined Statement of Budgetary Resources (See p. 210.) 

Consolidated Statement of Financing (See p. 211.) 

Notes to the Principal Financial Statements (See p. 212.) 
 207

U.S. Department of Education FY 2005 Performance and Accountability Report

Assets:

 Intragovernmental:

1001 Fund Balance with Treasury (Note 2) $ 77,569 $ 66,371

1003 Accounts Receivable (Note 5) 0 3

Other Intragovernmental Assets 12 17

Total Intragovernmental 77,581 66,391

2001Cash and Other Monetary Assets (Note 3) 888 1,040

2003Accounts Receivable, Net (Note 5) 141 152

2004Credit Program Receivables, Net (Note 4) 107,937 104,966

2006General Property, Plant and Equipment, Net (Note 6) 19 21

2007Other Assets 1 39

Total Assets $ 186,567 $ 172,609

Liabilities:

 Intragovernmental:

3001 Accounts Payable $ 12 $ 14

3002 Treasury Debt (Note 7) 104,597 96,649

3003

Guaranty Agency Federal and Restricted Funds Due to 

Treasury (Note 3) 888 1,040

3004 Payable to Treasury (Note 8) 5,166 4,993

3005 Other Intragovernmental Liabilities (Note 9) 80 4

Total Intragovernmental 110,743 102,700

4001Accounts Payable 684 485

4002Accrued Grant Liability (Note 11) 1,328 1,361

4003Liabilities for Loan Guarantees (Note 4) 30,611 23,329

4004Federal Employee and Veterans' Benefits (Note 10) 17 19

4005Other Liabilities (Note 9) 342 381

T Total Liabilities (Note 10) $ 143,725 $ 128,275

Commitments and Contingencies (Note 18)

Net Position:

6001Unexpended Appropriations (Note 12) $ 47,288 $ 47,285

6002Cumulative Results of Operations (Note 12) (4,446) (2,951)

Total Net Position $ 42,842 $ 44,334

Total Liabilities and Net Position $ 186,567 $ 172,609

0 0.00

The accompanying notes are an integral part of these statements.

Fiscal Year

2005

Fiscal Year

2004

(Dollars in Millions)

United States Department of Education

Consolidated Balance Sheet

As of September 30, 2005 and 2004
 208

U.S. Department of Education FY 2005 Performance and Accountability Report

Program Costs

Program A (Enhancement of Postsecondary and Adult Education)

101 Intragovernmental Gross Costs $ 7,141 $ 6,376

102 Less: Intragovernmental Earned Revenue 2,140 1,627

Intragovernmental Net Costs 5,001 4,749

201 Gross Costs with the Public 35,210 28,167

202 Less: Earned Revenues from the Public 4,730 4,812

Net Costs with the Public 30,480 23,355

$ 35,481 $ 28,104

Program B (Creation of Student Achievement, Culture of Achievement and Safe Schools)

101 Intragovernmental Gross Costs $ 186 $ 174

102 Less: Intragovernmental Earned Revenue 76 103

Intragovernmental Net Costs 110 71

201 Gross Costs with the Public 24,278 21,933

202 Less: Earned Revenues from the Public (0) (0)

Net Costs with the Public 24,278 21,933

$ 24,388 $ 22,004

Program C (Transformation of Education)

101 Intragovernmental Gross Costs $ 82 $ 77

102 Less: Intragovernmental Earned Revenue 3 4

Intragovernmental Net Costs 79 73

201 Gross Costs with the Public 1,138 578

202 Less: Earned Revenues from the Public 14 14

Net Costs with the Public 1,124 564

$ 1,203 $ 637

Program D (Special Education and Program Execution)

101 Intragovernmental Gross Costs $ 94 $ 34

102 Less: Intragovernmental Earned Revenue 2 4

Intragovernmental Net Costs 92 30

201 Gross Costs with the Public 14,075 12,848

202 Less: Earned Revenues from the Public (0) (0)

Net Costs with the Public 14,075 12,848

$ 14,167 $ 12,878

Total Program Net Costs $ 75,239 $ 63,623

Net Cost of Operations (Note 17) $ 75,239 $ 63,623

The accompanying notes are an integral part of these statements.

Fiscal Year

2005

Fiscal Year

2004

Program D Total Net Cost 

Program A Total Net Cost 

Program B Total Net Cost 

Program C Total Net Cost 

United States Department of Education

Consolidated Statement of Net Cost

For the Years Ended September 30, 2005 and 2004

(Dollars in Millions)
 209

U.S. Department of Education FY 2005 Performance and Accountability Report

Beginning Balance $ (2,951) $ 47,285 $ (4,496) $ 43,931

Budgetary Financing Sources

4 Appropriations Received (0) 77,033 (0) 72,091

6 Other Adjustments (+/-) (3) (1,312) (0) (981)

7 Appropriations Used 75,718 (75,718) 67,756 (67,756)

10 Nonexpenditure Financing Sources - Transfers-Out (33) (0) (4) (0)

Other Financing Sources

14 Imputed Financing 31 (0) 32 (0)

15 Adjustments to Financing Sources (+/-) (1,969) (0) (2,616) (0)

Total Financing Sources $ 73,744 $ 3 $ 65,168 $ 3,354

Net Cost of Operations (+/-) $ (75,239) $ - $ (63,623) $ -

Net Change (1,495) 3 1,545 3,354

Ending Balances (Note 12) $ (4,446) $ 47,288 $ (2,951) $ 47,285

The accompanying notes are an integral part of these statements.

Cumulative 

Results of 

Operations

Unexpended 

Appropriations

Cumulative 

Results of 

Operations

Unexpended 

Appropriations

Fiscal Year

2005

Fiscal Year

2004

(Dollars in Millions)

United States Department of Education

Consolidated Statement of Changes in Net Position

For the Years Ended September 30, 2005 and 2004
 210

U.S. Department of Education FY 2005 Performance and Accountability Report

Budgetary Resources:

1. Budget Authority :

# Appropriations Received $ 76,981 $ 3 $ 72,090 $ 1

# Borrowing Authority 0 32,209 0 22,483

2. Unobligated Balance:

# Beginning of Period 2,245 15,128 5,329 9,766

3. Spending Authority From Offsetting Collections: 0 0

3.1 Earned

# Collected 3,198 49,536 5,250 37,716

# Receivable From Federal Sources (3) (2) 0 4

3.2 Change in Unfilled Customer Orders 0

# Advance received (collected) 64 0 (34) 0

# Without advance from Federal sources (68) 34 (5) 0

 3.5 Subtotal $ 3,191 $ 49,568 $ 5,211 $ 37,720

4. Recoveries of Prior Year Obligations 1,536 1,973 1,587 3,047

6. Permanently Not Available (4,047) (24,692) (6,575) (18,893)

Total Budgetary Resources (Note 14) $ 79,906 $ 74,189 $ 77,642 $ 54,124

Status of Budgetary Resources:

8. Obligations Incurred: (Note 14)

# Direct $ 77,677 $ 51,372 $ 75,306 $ 38,996

# Reimbursable 92 (0) 91 (0)

# Subtotal $ 77,769 $ 51,372 $ 75,397 $ 38,996

9. Unobligated Balance:

# Apportioned 526 (0) 655 948

10. Unobligated Balance Not Available 1,611 22,817 1,590 14,180

Total Status of Budgetary Resources $ 79,906 $ 74,189 $ 77,642 $ 54,124

Relationship of Obligations to Outlays:

12.Obligated Balance, Net, Beginning of Period $ 48,147 $ 7,788 $ 42,419 $ 8,399

14.Obligated Balance, Net, End of Period:

# Accounts Receivable (0) (0) (3) (2)

# Unfilled customer orders from Federal Sources (3) (34) (71) (0)

# Undelivered Orders 46,493 10,472 46,468 7,666

# Accounts Payable 1,720 330 1,753 124

15.Outlays:

# Disbursements 76,251 46,389 68,087 36,557

# Collections (3,264) (49,536) (5,217) (37,716)

# Subtotal $ 72,987 $ (3,147) $ 62,870 $ (1,159)

16.Less: Offsetting Receipts 32 (0) 51 (0)

Net Outlays (Note 14) $ 72,955 $ (3,147) $ 62,819 $ (1,159)

The accompanying notes are an integral part of these statements.

Budgetary Budgetary

Non-Budgetary 

Credit Reform 

Financing Accounts

Non-Budgetary 

Credit Reform 

Financing Accounts

Fiscal Year

2005

Fiscal Year

2004

United States Department of Education

Combined Statement of Budgetary Resources

For the Years Ended September 30, 2005 and 2004

(Dollars in Millions)
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U.S. Department of Education FY 2005 Performance and Accountability Report

Resources Used to Finance Activities

 Budgetary Resources Obligated

Obligations Incurred (Note 14) $ (129,141) $ (114,393)

Less: Spending Authority from Offsetting Collections & Recoveries 56,268 47,565

Obligations Net of Offsetting Collections and Recoveries (72,873) (66,828)

Less: Offsetting Receipts (32) (51)

Net Obligations $ (72,905) $ (66,879)

 Other Resources

Imputed Financing From Costs Absorbed by Others (31) (32)

Net Other Resources Used to Finance Activities (31) (32)

Total Resources Used to Finance Activities $ (72,936) $ (66,911)

Resources Used to Finance Items Not Part of Net Cost of Operations

Change in Budgetary Resources Obligated for Goods, Services and Benefits Ordered 

but not Yet Provided (+/-) $ (3,197) $ (4,809)

Resources that Fund Expenses Recognized in Prior Period (Note 15) (1,610) 213

Budgetary offsetting collections and receipts that do not affect net cost of operations 2 0

Credit Program Collections Which Increase/Decrease Liabilities for Loan Guarantees, 

or Credit Program Receivables, Net including Allowances for Subsidy 46,891 35,339

Resources Used to Finance the Acquisition of Fixed Assets, or Increase/Decrease 

Liabilities for Loan Guarantees or Credit Program Receivables, Net in the Current or 

Prior Period (39,977) (31,145)

Total Resources Used to Finance Items Not Part of the Net Cost of Operations $ 2,109 $ (402)

Total Resources Used to Finance the Net Cost of Operations $ (75,045) $ (66,509)

 Components Requiring or Generating Resources in Future Periods (Note 15)

Increase in Annual Leave Liability $ (28) $ (30)

Upward/Downward Re-estimates of Credit Subsidy Expense (2,789) (1,559)

Increase in Exchange Revenue Receivable from the Public 1,163 1,070

Other (+/-) 15 41

Total Components of the Net Cost of Operations that Will Require or Generate 

Resources in Future Periods $ (1,639) $ (478)

 Components Not Requiring or Generating Resources

Depreciation and Amortization $ 1,442 $ 1,797

Other (+/-) (Note 15) 3 1,567

Total Components of the Net Cost of Operations that Will Not Require or Generate 

Resources $ 1,445 $ 3,364

$ (194) $ 2,886

$ (75,239) $ (63,623)

The accompanying notes are an integral part of these statements.

Net Cost of Operations (Note 17)

Components of the Net Cost of Operations that Will Not Require or Generate 

Resources in the Current Period

(Dollars in Millions)

Fiscal Year

2005

Fiscal Year

2004

United States Department of Education

Consolidated Statement of Financing

For the Years Ended September 30, 2005 and 2004

Total Components of the Net Cost of Operations that Will Not Require or Generate 

Resources in the Current Period
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U.S. Department of Education FY 2005 Performance and Accountability Report

Notes to Principal Financial Statements 

For the Years Ended September 30, 2005 and 2004 

Note 1. Summary of Significant Accounting Policies 

Reporting Entity 

The U.S. Department of Education (the Department) was established on May 4, 1980, by Congress, 

under the Department of Education Organization Act of 1979 (Public Law 96-88). It is responsible, 

through the execution of its congressionally approved budget, for administering direct loans, 

guaranteed loans, and grant programs. 

The Department administers the Federal Direct Student Loan Program (Direct Loan), the Federal 

Family Education Loan Program (FFEL), the Pell Grant Program and the Campus-Based Student Aid 

Program. The Direct Loan Program, authorized by the Student Loan Reform Act of 1993, enables 

the Department to make loans directly to eligible undergraduate and graduate students and their 

parents through participating schools. The FFEL Program, authorized by the Higher Education Act 

of 1965, as amended (HEA), cooperates with state and private nonprofit Guaranty Agencies to 

provide loan guarantees and interest subsidies on loans made by private lenders to eligible 

students. The Pell Grant Program and the Campus-Based Program provide educational grants and 

other financial assistance to eligible applicants. 

The Department also administers numerous grant programs and the Facilities Loan Programs. 

Grant programs include grants for elementary and secondary education, special education and 

rehabilitative services, and educational research and improvement, along with grants for needs of 

the disadvantaged. Through the Facilities Loan Programs, the Department administers low-interest 

loans to institutions of higher learning for the construction and renovation facilities. 

Organization and Structure of Education 

The statements consolidate 230 discrete appropriations comprising 64 fund accounts within the 

following 10 reporting groups: 

• Federal Student Aid 

• Office of Elementary and Secondary Education 

• Office of Special Education and Rehabilitative Services 

• Office of Vocational and Adult Education 

• Office of Postsecondary Education 

• Institute of Education Sciences 

• Office of English Language Acquisition 

• Office of Safe and Drug-Free Schools 

• Office of Innovation and Improvement 

• Department Management 
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U.S. Department of Education FY 2005 Performance and Accountability Report

Basis of Accounting and Presentation 

These consolidated financial statements have been prepared to report the financial position, net 

cost of operations, changes in net position, budgetary resources, and financing of the U.S. 

Department of Education, as required by the Chief Financial Officers Act of 1990 and the 

Government Management Reform Act of 1994. The financial statements were prepared from the 

books and records of the Department, in accordance with accounting principles generally accepted 

in the United States of America and Office of Management and Budget (OMB) Circular No. A-136 

(Revised), Financial Reporting Requirements. Generally accepted accounting principles (GAAP) for 

federal entities are the standards prescribed by the Federal Accounting Standards Advisory Board 

(FASAB), which is the official standard setting body for the federal government. These financial 

statements are different from the financial reports prepared by the Department pursuant to OMB 

directives that are used to monitor and control the Department’s use of budgetary resources. 

The Department’s financial statements should be read with the realization that they are for a 

component of the U.S. Government, a sovereign entity. One implication of this is that liabilities 

cannot be liquidated without legislation providing resources and legal authority to do so. 

The accounting structure of federal agencies is designed to reflect both accrual and budgetary 

accounting transactions. Under the accrual method of accounting, revenues are recognized when 

earned, and expenses are recognized when a liability is incurred, without regard to receipt or 

payment of cash. Budgetary accounting facilitates compliance with legal constraints and controls 

over the use of federal funds. 

Use of Estimates 

The preparation of the financial statements in accordance with accounting principles generally 

accepted in the United States requires management to make assumptions and estimates that 

directly affect the amounts reported in the financial statements. Actual results may differ from 

those estimates. 

Estimates for credit program receivables and liabilities contain assumptions that have a significant 

impact on the financial statements. The primary components of this assumption set include, but 

are not limited to, collections (including loan consolidations), repayments, default rates, prevailing 

interest rates and loan volume. Actual loan volume, interest rates, cash flows and other critical 

components used in the estimation process may differ significantly from the assumptions made at 

the time the financial statements were prepared. Minor adjustments to any of these assumption 

components may create significant changes to the estimate. 

The Department recognizes the sensitivity of the changes in assumptions and the impact that the 

projections can have on estimates. Management has attempted to mitigate these fluctuations by 

using trend analysis to project future cash flows. The assumptions used for the September 30, 

2005 and 2004, financial statements are based on the best information available at the time the 

estimate was derived. 

Changes in assumptions could significantly affect the amounts reflected in these statements. For 

example, a long-term change in the projected interest rate charged to borrowers could change the 

current subsidy re-estimate by a significant amount. 

The Student Loan Model (SLM) and estimating methods used are updated periodically to reflect 

changing conditions. The SLM was the official estimating model of the Department as of 
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U.S. Department of Education FY 2005 Performance and Accountability Report

September 30, 2005 and 2004, and was used to calculate the subsidy re-estimates recorded in 

these financial statements. 

Budget Authority 

Budget authority is the authorization provided by law for the Department to incur financial 

obligations that will result in outlays. The Department’s budgetary resources for fiscal years 2005 

and 2004 included (1) unobligated balances of resources from prior years, (2) recoveries of 

obligations in prior years, and (3) new resources—appropriations, authority to borrow from the 

U.S. Department of Treasury (Treasury), and spending authority from collections. Unobligated 

balances associated with resources expiring at the end of the fiscal year remain available for five 

years after expiration only for upward adjustments of prior-year obligations, after which they are 

canceled and may not be used. Unobligated balances of resources that have not expired at yearend may have new obligations placed against them, as well as net upward adjustments of prioryear obligations. 

Treasury Debt provides most of the funding for the loan principal disbursements made under the 

Federal Direct Student Loan Program. Subsidy and administrative costs of the program are funded 

by appropriations. Budgetary resources from collections are used primarily to repay the 

Department’s debt to Treasury. Major sources of collections include (1) principal and interest 

collections from borrowers or through the consolidation of loans to borrowers, (2) related fees, and 

(3) interest from Treasury on balances in certain credit accounts that make and administer loans 

and guarantees. 

Fund Balance with Treasury 

The fund balance with Treasury includes appropriated, revolving, and trust funds available to pay 

current liabilities and finance authorized purchases, as well as funds restricted until future 

appropriations are received. Treasury processes the cash receipts and cash disbursements for the 

Department. The Department’s records are reconciled with those of Treasury. (See Note 2.) 

Cash and Other Monetary Assets 

Cash and other monetary assets consist of Guaranty Agency reserves and deposits in transit. 

Guaranty Agency reserves represent the Department’s interest in the net assets of the FFEL 

Program Guaranty Agencies. Guaranty Agency reserves are classified as non-entity assets with the 

public (see Note 3) and are offset by a corresponding liability due to Treasury. Guaranty Agency 

reserves include initial federal start-up funds, receipts of federal reinsurance payments, insurance 

premiums, Guaranty Agency share of collections on defaulted loans, investment income, 

administrative cost allowances, and other assets purchased out of reserve funds. 

Section 422A of the HEA required FFEL Guaranty Agencies to establish a Federal Student Loan 

Reserve Fund (the “Federal Fund”) and an Operating Fund by December 6, 1998. The Federal 

Fund and the non-liquid assets developed or purchased by a Guaranty Agency as a result, in whole 

or in part with federal funds, are the property of the United States. However, such ownership by 

the Department is independent of the actual control of the assets. 

The Department disburses funds to the Guaranty Agency through the Federal Fund to pay lender 

claims and default aversion fees of a Guaranty Agency. The Operating Fund is the property of the 

Guaranty Agency except for funds an agency borrows from the Federal Fund (under Section 422A 

of the HEA). The Operating Fund is used by the Guaranty Agency to fulfill its responsibilities. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

These responsibilities include repaying money borrowed from the Federal Fund, default aversion 

and collection activities. 

Accounts Receivable 

Accounts receivable are amounts due to the Department from the public and other federal 

agencies. Receivables from the public typically result from such items as disputed costs resulting 

from audits of educational assistance, whereas amounts due from other federal agencies result 

from agreements entered into by the Department with these agencies for various goods and 

services. Accounts receivable are recorded at cost less an allowance for uncollectible amounts. 

The estimate of the allowance for loss on uncollectible accounts is based on experience in the 

collection of receivables and an analysis of the outstanding balances. (See Note 5.) 

Credit Program Receivables and Liabilities for Loan Guarantees 

The financial statements at September 30, 2005 and 2004 reflect the Department’s estimate of the 

long-term cost of direct and guaranteed loans in accordance with the Federal Credit Reform Act of 

1990. Loans and interest receivable are valued at their gross amounts less an allowance for the 

present value of the amounts not expected to be recovered and thus having to be subsidized—

called “allowance for subsidy.” The difference is the present value of the cash flows to and from 

the Department that are expected from the receivables over their expected lives. Similarly, 

liabilities for loan guarantees are valued at the present value of the cash outflows from the 

Department less the present value of related inflows. The estimated present value of net longterm cash outflows of the Department for subsidized costs (primarily defaults) is net of recoveries, 

interest supplements, and offsetting fees. The Department records all credit program loans and 

loan guarantees at their present values. 

Components of subsidy costs involved with loans and guarantees include defaults, net of 

recoveries, contractual payments to third-party private loan collectors who receive a set 

percentage of amounts they collect, and, as an offset, application and other fees to be collected. 

For direct loans, the difference between interest rates incurred by the Department on its 

borrowings from Treasury and interest rates charged to target groups is also subsidized (or may 

provide an offset to subsidy if the Department’s rate is less). The corresponding interest subsidy in 

loan guarantee programs is the payment of interest supplements to third-party lenders in order to 

buy down the interest rates on loans made by those lenders. Subsidy costs are recognized when 

direct loans or guaranteed loans are disbursed to borrowers and are re-estimated each year. (See 

Note 4.) 

General Property, Plant and Equipment 

The Department capitalizes single items of property and equipment with a cost of $50,000 or more 

that have an estimated useful life greater than two years. Additionally, the Department capitalizes 

bulk purchases of property and equipment with an aggregate cost of $500,000 or more. A bulk 

purchase is defined as the purchase of like items related to a specific project or the purchase of like 

items occurring within the same fiscal year that have an estimated useful life greater than two 

years. Property and equipment are depreciated over their estimated useful lives using the straightline method of depreciation. (See Note 6.) Internal Use Software (IUS) meeting the above cost 

and useful life criteria is also capitalized. IUS is software purchased off the shelf, internally 

developed, or contractor developed solely to meet the agency’s internal needs. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

The Department adopted the following useful lives for the major classes of depreciable property 

and equipment: 

Major Classes of Depreciable Property and Equipment Years 

Information Technology (IT), Internal Use Software (IUS) and Telecommunications 

equipment 3 

Furniture and Fixtures 5 

Liabilities 

Liabilities represent actual and estimated amounts likely to be paid as a result of transactions or 

events that have already occurred. However, no liabilities can be paid by the Department without 

an appropriation or other collection of revenue for services provided. Liabilities for which an 

appropriation has not been enacted are classified as liabilities not covered by budgetary resources, 

and there is no certainty the appropriation will be enacted. The government acting in its sovereign 

capacity can abrogate Departmental liabilities that arise from activities other than contracts. FFEL 

Program and Direct Loan Program liabilities are entitlements covered by permanent indefinite 

budget authority enacted as of year-end. 

Treasury Debt 

The amount shown for the liability to Treasury from borrowings represents unpaid principal owing 

on the loans at year-end associated with the Department’s loan activities. The Department repays 

the loan principal based on available fund balances. Interest on the debt is calculated at fiscal 

year-end using rates set by Treasury, with such rates generally fixed based on the rate for 10-year 

securities. As discussed in Note 4, the interest received by the Department from borrowers will 

vary from the rate paid to the Treasury. Principal and interest payments are made annually. (See 

Note 7.) 

Accrued Grant Liability 

Disbursements of grant funds are recognized as expenses at the time of disbursement. However, 

some grant recipients incur expenditures prior to initiating a request for disbursement based on the 

nature of the expenditures. A liability is accrued by the Department for expenditures incurred by 

grantees prior to receiving grant funds for the expenditures. The amount is estimated using 

statistical sampling techniques. (See Note 11.) 

Net Position 

Net position consists of unexpended appropriations and cumulative results of operations. 

Unexpended appropriations include undelivered orders and unobligated balances of appropriations, 

except those for federal credit financing and liquidating funds, and trust funds. Cumulative results 

of operations represent the net difference since inception between (1) expenses and (2) revenues 

and financing sources. (See Note 12.) 

Personnel Compensation and Other Employee Benefits 

Annual, Sick and Other Leave. The liability for annual leave, compensatory time off, and other 

leave is accrued when earned and reduced when taken. Each year, the accrued annual leave 

account balance is adjusted to reflect current pay rates. Annual leave earned but not taken, within 

established limits, is funded from future financing sources. Sick leave and other types of nonvested leave are expensed as taken. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

Retirement Plans and Other Retirement Benefits. Employees participate either in the Civil Service 

Retirement System (CSRS), a defined benefit plan, or in the Federal Employees Retirement System 

(FERS), a defined benefit and contribution plan. For CSRS employees, the Department contributes 

a fixed percentage of pay. 

FERS consists of Social Security, a basic annuity plan, and the Thrift Savings Plan. The 

Department and the employee contribute to social security and the basic annuity plan at rates 

prescribed by law. In addition, the Department is required to contribute to the Thrift Savings Plan 

a minimum of 1 percent per year of the basic pay of employees covered by this system and to 

match voluntary employee contributions up to 3 percent of the employee’s basic pay, and 50 

percent of contributions between 3 percent and 5 percent of basic pay. For FERS employees, the 

Department also contributes the employer’s share of Medicare. 

Contributions for CSRS, FERS and other retirement benefits are insufficient to fully fund the 

programs, which are subsidized by the Office of Personnel Management (OPM). The Department 

imputes its share of the OPM subsidy, using cost factors OPM provides, and reports the full cost of 

the programs related to its employees. 

Federal Employees Compensation Act. The Federal Employees Compensation Act (FECA) provides 

income and medical cost protection to covered federal civilian employees injured on the job, to 

employees who have incurred work-related occupational diseases, and to beneficiaries of 

employees whose deaths are attributable to job-related injuries or occupational diseases. The 

FECA program is administered by the U.S. Department of Labor (Labor), which pays valid claims 

and subsequently seeks reimbursement from the Department for these paid claims. 

The FECA liability consists of two components. The first component is based on actual claims paid 

by Labor but not yet reimbursed by the Department. The Department reimburses Labor for the 

amount of actual claims as funds are appropriated for this purpose. There is generally a two-to 

three-year time period between payment by Labor and reimbursement to Labor by the 

Department. As a result, the Department recognizes a liability for the actual claims paid by Labor 

and to be reimbursed by the Department. 

The second component is the estimated liability for future benefit payments as a result of past 

events. This liability includes death, disability, medical and miscellaneous costs. Labor determines 

this component annually, as of September 30, using a method that considers historical benefit 

payment patterns, wage inflation factors, medical inflation factors, and other variables. The 

projected annual benefit payments are discounted to present value using the Office of Management 

and Budget economic assumptions for 10-year Treasury notes and bonds. To provide for the 

effects of inflation on the liability, wage inflation factors (i.e., cost of living adjustments), and 

medical inflation factors (i.e., consumer price index medical adjustments) are applied to the 

calculation of projected future benefit payments. These factors are also used to adjust historical 

benefit payments and to adjust future benefit payments to current year constant dollars. A 

discounting formula is also used to recognize the timing of benefit payments as 13 payments per 

year instead of one lump sum payment per year. 

Labor evaluates the estimated projections to ensure that the resulting projections were reliable. 

The analysis includes three tests: (1) a comparison of the percentage change in the liability 

amount by agency to the percentage change in the actual payments; (2) a comparison of the ratio 

of the estimated liability to the actual payment of the beginning year calculated for the current 
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U.S. Department of Education FY 2005 Performance and Accountability Report

projection to the liability-payment ratio calculated for the prior projection; and (3) a comparison of 

the incremental paid losses (the medical component in particular) in congressional budget year 

2005 (by injury cohort) to the average pattern observed during the prior three charge back years. 

Intragovernmental Transactions 

The Department’s financial activities interact with and are dependent upon the financial activity of 

the centralized management functions of the federal government. The Department is subject to 

financial regulation and management control by the Office of Management and Budget and 

Treasury. As a result of this relationship, operations may not be conducted and financial positions 

may not be reported as they would if the Department were a separate, unrelated entity. 

Transactions and balances among the Department’s entities have been eliminated from the 

Consolidated Balance Sheet. 

Other Intragovernmental Assets 

Other intragovernmental assets represent interagency agreements between the Department and 

the National Science Foundation. As of September 30, 2005 and 2004, other intragovernmental 

assets totaled $12 million and $17 million, respectively. This amount represents unexpended 

balances for interagency agreements with the Department. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

Note 2. Fund Balance with Treasury 

Fund Balance with Treasury at September 30, 2005 and 2004, consisted of the following: 

(Dollars in Millions) 2005 2004 

Appropriated Funds $ 49,455 $ 49,353 

Revolving Funds 28,104 17,010 

Other Funds 10 8 

Total Fund Balance with Treasury $ 77,569 

 

$ 66,371 

Status of Fund Balance with Treasury 

(Dollars in Millions) 2005 2004 

Unobligated Balance 

 Available $ 526 $ 1,603 

 Unavailable 23,540 14,738 

Obligated Balance, Not Yet Disbursed 53,493 50,022 

Other Funds 10 8 

Total Status of Fund Balance with Treasury $ 77,569 $ 66,371 

Fund Balance with Treasury is an entity asset maintained with Treasury. The monies are available 

to pay current liabilities and finance loan programs. The Department has the authority to disburse 

funds to agencies and institutions participating in its programs through the Treasury, which 

processes cash receipts and disbursements on its behalf. 

A portion of the appropriated funds included at September 30, 2005 and 2004, was funded in 

advance by multi-year appropriations for expenditures anticipated during the current and future 

fiscal years. Revolving funds conduct continuing cycles of business-like activity do not require 

annual appropriations. Their fund balance comes from other federal entities and the public 

collections and from borrowings. Other funds primarily consist of suspense, deposit funds and 

clearing accounts. 

Available unobligated balances represent amounts that are apportioned for obligation in the current 

fiscal year. Unavailable unobligated balances represent amounts that are not apportioned for 

obligation during the current fiscal year and expired appropriations no longer available to incur new 

obligations. Obligated balances not yet disbursed include reimbursements and other income 

earned, undelivered orders and unpaid expended authority. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

Note 3. Cash and Other Monetary Assets 

Cash and Other Monetary Assets consisted of Guaranty Agency reserves (non-entity assets) and 

deposits in transit as of September 30, 2005 and 2004. 

 2005 

(Dollars in Millions)

Guaranty 

Agency Reserves 

Deposits 

in Transit Total 

 

Beginning Balance, September 30 $ 1,040 

 

$ - $ 1,040 

 Current Year Activity (152) - (152) 

Ending Balance, September 30 $ 888 

 

 $ - $ 888 

 2004 

(Dollars in Millions)

Guaranty 

Agency Reserves 

Deposits 

in Transit Total 

 

Beginning Balance, September 30 $ 1,107 

 

$ 1 $ 1,108 

 Current Year Activity (67) (1) (68) 

Ending Balance, September 30 $ 1,040 $ - $ 1,040 

Guaranty Agency reserves are held on behalf of the U.S. government, a liability due to Treasury 

and considered intragovernmental liabilities. These balances represent the federal government’s 

interest in the net assets of state and nonprofit FFEL Program Guaranty Agencies. (See Note 1.) 

On September 30, 2005 and 2004, Guaranty Agencies held in the Federal Fund approximately 

$888 million and $1,040 million in federal assets, respectively. The agencies use the funds to pay 

lender claims, primarily for loan defaults and discharges. Consistent with Section 422A (e) of the 

HEA, these funds are considered property of the United States and are reflected in the Budget of 

the United States Government. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

Note 4. Credit Program Receivables and Liabilities for Loan Guarantees 

The Department operates the William D. Ford Direct Student Loan Program (Direct Loan) and 

Federal Family Education Loan Program (FFEL) to help students finance the costs of higher 

education. Under the programs, the Department makes loans directly or guarantees all or a 

portion of loans made by participating lending institutions to individuals who meet statutorily set 

eligibility criteria and attend eligible institutions of higher education—public and private two- and 

four-year institutions, graduate schools, and vocational training schools. Students and their 

parents receive loans regardless of income or credit rating. Student borrowers who demonstrate 

financial need also receive federal interest subsidies. 

Under the Direct Loan Program, the federal government makes loans directly to students and 

parents through participating schools. Loans are originated and serviced through contracts with 

private vendors. Under the FFEL Program, more than 3,200 financial institutions make loans 

directly to students and parents. FFEL loans are guaranteed by the federal government against 

default, with 35 state or private nonprofit Guaranty Agencies acting as intermediaries in 

administering the guarantees. Beginning with loans first disbursed on or after October 1, 1993, 

financial institutions became responsible for 2 percent of the cost of each default. Guaranty 

Agencies also began paying a portion of the cost (in most cases, 5 percent) of each defaulted loan 

from federal funds they hold in trust. FFEL lender participants receive statutorily set federal 

interest and special allowance subsidies. Guaranty Agencies receive fee payments as set by 

statute. In most cases, loan terms and conditions under the two programs are identical. 

The Federal Credit Reform Act of 1990 (the Act of 1990) underlies the proprietary and budgetary 

accounting treatment of direct and guaranteed loans. The long-term cost to the government for 

direct loans or loan guarantees, other than for general administration of the programs, is referred 

to as “subsidy cost.” Under the Act of 1990, subsidy costs for loans obligated beginning in fiscal 

year 1992 are the net present value of projected lifetime costs in the year the loan is disbursed. 

Subsidy costs are revalued annually through the re-estimate process. 

The Department estimates all future cash flows associated with Direct Loans and FFEL. Projected 

cash flows are used to develop subsidy estimates. Subsidy costs can be positive or negative; 

negative subsidies occur when expected program inflows of cash (e.g., repayments and fees) 

exceed expected outflows. Subsidy is recorded as the initial amount of the loan guarantee liability 

when guarantees are made (the loan liability) and as a valuation allowance to government-owned 

loans and interest receivable (i.e., direct and defaulted guaranteed loans). 

The Department uses a computerized cash flow projection Student Loan Model to calculate subsidy 

estimates for Direct Loan and guaranteed FFEL programs. Cash flows are projected over the life of 

the loan, aggregated by loan type, cohort year, and risk category. The loan’s cohort year 

represents the year a direct loan was obligated or a loan was guaranteed, regardless of the timing 

of disbursements. Risk categories include two-year colleges, freshmen and sophomores at fouryear colleges, juniors and seniors at four-year colleges, graduate schools, and proprietary (forprofit) schools. 

Estimates reflected in these statements were prepared using assumptions developed for the 

FY 2006 Mid-Session Review, a governmentwide exercise required annually by the Office of 

Management and Budget (OMB). Assumptions regarding the volume of loan consolidations and 

their impact on newly repaid loans were updated after the Mid-Session Review to account for 
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U.S. Department of Education FY 2005 Performance and Accountability Report

significant subsequent increases in activity. These estimates are the most current available to the 

Department at the time the financial statements are prepared. Department management has a 

process to review these estimates in the context of subsequent changes in activity and 

assumptions, and to reflect the impact of these changes as appropriate. 

In recent years, the consolidation of existing loans into new direct or guaranteed loans has 

increased significantly. Under the Federal Credit Reform Act of 1990 and requirements provided by 

OMB Circular No. A-11, Preparation, Submission, and Execution of the Budget, the retirement of 

loans being consolidated is considered a receipt of principal and interest; this receipt is offset by 

the disbursement related to the newly created consolidation loan. The underlying direct or 

guaranteed loans, whether performing or nonperforming, in any given cohort are paid off in their 

original cohort, and new loans are opened in the cohort in which consolidation activity occurs. This 

consolidation activity is taken into consideration in establishing the subsidy rate for defaults. 

The FFEL estimated liability for loan guarantees is reported as the present value of estimated net 

cash outflows. Defaulted FFEL loans are reported net of an allowance for subsidy computed using 

net present value methodology, including defaults, collections, and loan cancellations. The same 

methodology is used to estimate the allowance on Direct Loan receivables. 

The Department disbursed approximately $27.5 billion in direct loans to eligible borrowers in fiscal 

year 2005 and approximately $20 billion in fiscal year 2004. Loans typically disburse in multiple 

installments over an academic period; as a result, loan disbursements for an origination cohort 

year often cross fiscal years. Half of all loan volume is obligated in the fourth quarter of the fiscal 

year. Regardless of the fiscal year in which they occur, disbursements are tracked by cohort as 

determined by the date of obligation rather than disbursement. 

As of September 30, 2005 and 2004, total principal balances outstanding of guaranteed loans held 

by lenders were approximately $289 billion and $245 billion, respectively. As of September 30, 

2005 and 2004, the estimated maximum government exposure on outstanding guaranteed loans 

held by lenders was approximately $288 billion and $240 billion, respectively. Of the insured 

amount, the Department would pay a smaller amount to the Guaranty Agencies, based on the 

appropriate reinsurance rates, which range from 100 to 95 percent. Any remaining insurance not 

paid as reinsurance would be paid to lenders by the Guaranty Agencies from their federal funds. 

Payments by Guaranty Agencies do not reduce government exposure because they are made from 

the Federal Fund administered by the agencies but owned by the federal government. 

The Department accrues interest receivable and records interest revenue on its performing direct 

loans. Given the Department’s substantial collection rates, interest receivable is also accrued and 

interest revenue recognized on defaulted direct loans. Guaranteed loans that default are initially 

turned over to Guaranty Agencies for collection, and interest receivable is accrued and recorded on 

the loans as the collection rate is substantial. After approximately four years, defaulted 

guaranteed loans not in repayment are turned over to the Department for collection; accrued 

interest is calculated but only realized upon collection. 

As previously noted, borrowers may prepay and close out existing loans without penalty from 

capital raised through the disbursement of a new consolidation loan. The loan liability and net 

receivables include estimates of future prepayments of existing loans; they do not reflect costs 

associated with anticipated future consolidation loans. 
 223

U.S. Department of Education FY 2005 Performance and Accountability Report

Due to the nature of the loan commitment process in which schools establish a loan commitment 

with the filing of an aid application, which may occur before a student has been accepted by the 

school or begins classes, approximately 7 percent of loan commitments are never disbursed. For 

direct loans committed in fiscal year 2005, an estimated $1.6 billion will not be disbursed; for 

guaranteed loans committed in fiscal year 2005, an estimated $7.1 billion will not be disbursed. 

Direct loan schools may originate loans through a cash advance from the Department, establishing 

a loan receivable, or by advancing their own funds in anticipation of reimbursement from the 

Department. 

Loan Consolidations 

Variable student loan interest rates were reset on July 1, 2005, increasing nearly two percentage 

points from 3.37 percent for academic year 2004-05 to 5.30 percent for academic year 2005-06. 

In anticipation of this increase, private lenders, schools, and others encouraged borrowers to 

consolidate their existing variable rate loans into fixed rate loans. This resulted in an 

unprecedented surge in loan consolidations, leading to substantially higher volume than the 

previous fiscal year. 

Direct loan consolidation disbursements for fiscal year 2005 were $15.3 billion compared to $7.7 

billion for fiscal year 2004. The effect of new consolidations is reflected in subsidy expense for the 

2005 cohort, while the effect on prior cohorts of the pay-offs of underlying loans is reflected in reestimate expense. 

Based on current estimates, the prepayment of the underlying FFEL loans produces significant 

savings through the elimination of future special allowance payments. New consolidations are 

reflected in the 2005 cohort resulting in increased prepayments of underlying loans from prior 

cohorts. The effect of new consolidations is reflected in subsidy expense for the 2005 cohort, while 

the effect on prior cohorts is reflected in the re-estimate. 
 224

U.S. Department of Education FY 2005 Performance and Accountability Report

Credit Program Receivables, Net 

The Credit Program Receivables, Net consisted of the following program loans: 

(Dollars in Millions) 2005 2004 

Direct Loan Program Loan Receivables, Net $ 95,696 $ 93,747 

FFEL Program Loan Receivables, Net 11,712 10,671 

Perkins Program Loan Receivables, Net 194 194 

Facilities and Other Loan Receivables, Net 335 354 

Credit Program Receivables, Net $ 107,937 $ 104,966 

The following schedules summarize the Direct and defaulted FFEL Loan principal and related 

interest receivable, net or inclusive of the allowance for subsidy. 

Direct Loan Program Receivables 

(Dollars in Millions)

 

2005 2004 

Principal Receivable $ 94,707 $ 89,245 

Interest Receivable 3,121 2,858 

Receivables 97,828 92,103 

Less: Allowance for Subsidy 2,132 (1,644) 

Credit Program Receivables, Net $ 95,696 $ 93,747 

Of the $97.8 billion in Direct Loan receivables as of September 30, 2005, $7.2 billion in loan 

principal was in default and held at the Department’s Borrowers Services Collections Group. As of 

September 30, 2004, $6.3 billion in loan principal was in default and held at the Department’s 

Borrowers Services Collections Group out of a total receivable of $92.1 billion. 

FFEL Program Receivables 

2005 2004 

(Dollars in Millions) Pre-1992 Post-1991 Total Pre-1992 Post-1991 Total 

Principal Receivable $ 9,306 $ 8,567 $ 17,873 $ 10,324 $ 7,247 $ 17,571 

Interest Receivable 595 1,691 2,286 857 1,580 2,437 

Receivables 9,901 10,258 20,159 11,181 8,827 20,008 

Less: Allowance for Subsidy 6,736 1,711 8,447 7,921 1,416 9,337 

Credit Program Receivables, 

Net $ 3,165 $ 8,547 $ 11,712 $ 3,260 $ 7,411 $ 10,671 
 225

U.S. Department of Education FY 2005 Performance and Accountability Report

Direct Loan Program Reconciliation of Allowance for Subsidy 

(Dollars in Millions) 2005 2004 

Beginning Balance, Allowance for Subsidy $ (1,644) $ 657 

Components of Subsidy Transfers 

Interest Rate Differential (238) (1,276) 

Defaults, Net of Recoveries 355 390 

Fees (401) (401) 

Other 1,286 1,117 

Current Year Subsidy Transfers 1,002 (170) 

Components of Subsidy Re-estimates 

Interest Rate Re-estimates1

 1,703 (1,526) 

Technical and Default Re-estimates 2,457 1,153 

Subsidy Re-estimates 4,160 (373) 

Components of Teacher Loan Forgiveness Modification 

Loan Modification Costs 49 - 

Modification Adjustment Transfers (1) - 

Teacher Loan Forgiveness Modification 48 - 

Activity 

Fee Collections 461 450 

Loan Cancellations2

 (110) (92) 

Subsidy Allowance Amortization (1,454) (1,815) 

Other (331) (301) 

Total Activity (1,434) (1,758) 

Ending Balance, Allowance for Subsidy $ 2,132 $ (1,644) 

1

 The interest rate re-estimate relates to subsidy associated with establishing a fixed rate for the 

Department’s borrowing from Treasury. 2

 Loan cancellations include write-offs of loans because the primary borrower died, became disabled, or 

declared bankruptcy. 
 226

U.S. Department of Education FY 2005 Performance and Accountability Report

FFEL Program Reconciliation of Liabilities for Loan Guarantees 

Liabilities for Loan Guarantees represent the present value of all future projected cash outflows 

from the Department, net of inflows such as fees, and collection of principal and interest on 

defaulted guaranteed loans assumed for direct collection. 

The FFEL Program Liability for Loan Guarantees reconciliation is associated with the FFEL Program 

loans guaranteed in the financing account. The FFEL liquidating account liability for loan 

guarantees is included in the total Liabilities for Loan Guarantees. 

(Dollars in Millions) 2005 2004 

Beginning Balance, Liability for Loan Guarantees $ 23,214 $ 15,310 

Components of Subsidy Transfers 

Interest Supplement Costs 12,562 10,087 

Defaults, Net of Recoveries 865 888 

Fees (5,554) (4,230) 

Other1 2,500 2,151 

Current Year Subsidy Transfers 10,373 8,896 

Components of Subsidy Re-estimates 

Interest Rate Re-estimates (72) 70 

Technical and Default Re-estimates (586) (1,449) 

Subsidy Re-estimates (658) (1,379) 

Components of Teacher Loan Forgiveness Modification 

Loan Modification Costs 148 - 

Modification Adjustment Transfers (3) - 

Teacher Loan Forgiveness Modification 145 - 

Activity 

Interest Supplement Payments (5,077) (2,345) 

Claim Payments (3,716) (2,803) 

Fee Collections 3,060 2,588 

Interest on Liability Balance 565 436 

Other2 2,594 2,511 

Total Activity (2,574) 387 

Ending Balance, Liability for Loan Guarantees 30,500 23,214 

FFEL Liquidating Account Liability for Loan Guarantees 111 115 

Total Liabilities for Loan Guarantees $ 30,611 $ 23,329 

1 Subsidy primarily associated with debt collections and loan cancellations due to death, disability, and 

bankruptcy. 2

 Activity primarily associated with the transfer of subsidy for defaults; loan consolidation activity; and 

loan cancellations due to death, disability, and bankruptcy. 
 227

U.S. Department of Education FY 2005 Performance and Accountability Report

Teacher Loan Forgiveness Modification of Subsidy Cost 

The Taxpayer-Teacher Protection Act of 2004 (P.L. 108-409) increased the maximum amount of 

loan cancellation from $5,000 to $17,500 at the end of the fifth year of teaching for certain 

teachers who were new student loan borrowers between October 1, 1998 and October 1, 2005, as 

described in Dear Colleague letter GEN-04-14. According to OMB Circular No. A-11, Section 185.3, 

any government action that differs from actions assumed in the baseline estimate of cash flows and 

changes the estimated cost of an outstanding direct loan or any outstanding loan guarantee is 

defined as a modification. The FFEL Program recognized $148 million and the Direct Loan Program 

recognized $49 million in modification costs in fiscal year 2005. 

Separate amounts are calculated for modification costs and modification adjustment transfers. 

Modification adjustment transfers are required to adjust for the difference between cohort discount 

rates used to calculate modification costs and the discount rates used to calculate cohort interest 

expense and revenue. The FFEL Program recognized a net modification adjustment transfer gain of 

$3 million, while the Direct Loan Program recognized a net gain of $1 million. 

Direct Loan Financing Account Interest Expense and Revenue 

The Direct Loan Financing Account borrows from Treasury to fund the unsubsidized portion of its 

lending activities and, as required, calculates and pays Treasury interest at the end of each year. 

Interest is earned on the outstanding Direct Loan portfolio during the year. The Financing Account 

is paid interest by Treasury on its weighted average fund balance with Treasury at year-end. 

Subsidy amortization is calculated, as required in Statement of Federal Financial Accounting 

Standards No. 2 (SFFAS No. 2), Accounting for Direct Loans and Loan Guarantees, as the 

difference between interest revenue and interest expense. The allowance for subsidy is adjusted 

with the offset to interest revenue. 

Direct Loan Financing Account Interest Expense and Revenue 

(Dollars in Millions) 2005 2004 

 

Interest Expense on Treasury Borrowing $ 6,171 $ 5,761 

Interest Expense $ 6,171 $ 5,761 

Interest Revenue from the Public $ 3,242 $ 2,946 

Amortization of Subsidy 1,454 1,815 

Interest Revenue on Uninvested Funds 1,475 1,000 

Interest Revenue $ 6,171 $ 5,761 
 228

U.S. Department of Education FY 2005 Performance and Accountability Report

Subsidy Expense 

Direct Loan Program Subsidy Expense 

(Dollars in Millions) 2005 2004 

Components of Current Year Subsidy Transfers 

Interest Rate Differential $ (238) $ (1,276) 

Defaults, Net of Recoveries 355 390 

Fees (401) (401) 

Other 1,286 1,117 

Current Year Subsidy Transfers 1,002 (170) 

Subsidy Re-estimates 4,160 (373) 

Loan Modification Costs 49 - 

Direct Loan Subsidy Expense $ 5,211 $ (543) 

In the 2005 re-estimates, Direct Loan subsidy expense was increased by $4.2 billion. Changes in 

assumptions for variables (such as assumed term and maturity, loan volume and prepayment 

rates) increased subsidy expense by $4.0 billion. The remaining $195 million increase is related to 

changes in actual and forecasted interest rates. A 1 percent increase in projected borrower base 

rates would reduce projected Direct Loan costs by $1.1 billion. In the 2004 re-estimates, Direct 

Loan subsidy expense was reduced by $373 million. Changes in actual and forecasted interest 

rates reduced subsidy expense by $847 million. The re-estimate related to changes in assumptions 

for other variables increased subsidy expense by $474 million. 

FFEL Program Loan Guarantee Subsidy Expense 

(Dollars in Millions) 2005 2004 

Components of Current Year Subsidy Transfers 

Interest Supplement Costs $ 12,562 $ 10,087 

Defaults, Net of Recoveries 865 888 

Fees (5,554) (4,230) 

Other 2,500 2,151 

Current Year Subsidy Transfers 10,373 8,896 

Subsidy Re-estimates (658) (380) 

Loan Modification Costs 148 - 

FFEL Loan Guarantee Subsidy Expense $ 9,863 $ 8,516 

In the 2005 re-estimates, FFEL subsidy expense was decreased by $658 million. An increase of 

$932 million was caused by changes in actual and forecasted interest rates. Changes in 

assumptions for variables (such as assumed term and maturity, loan volume and prepayment 

rates) decreased subsidy expense by $1.6 billion. A 1 percent increase in borrower interest rates 

and the guaranteed yield for lenders would increase projected FFEL costs by $6.4 billion. In the 

2004 re-estimates, FFEL subsidy expense was reduced by $380 million, of which changes in actual 

and forecasted interest rates reduced subsidy expense by $352 million. The re-estimate related to 

changes in assumptions for other variables reduced subsidy expense by $28 million. 
 229

U.S. Department of Education FY 2005 Performance and Accountability Report

Subsidy Rates 

The subsidy rates applicable to the 2005 loan cohort year were as follows: 

Subsidy Rates—Cohort 2005 

Interest 

Differential Defaults Fees Other Total 

 

Direct Loan Program (.60%) 1.16% (1.33%) 4.24% 3.47% 

Interest 

Supplements Defaults Fees Other Total 

FFEL Program 13.66% .93% (6.01%) 2.67% 11.25% 

These subsidy rates cannot be applied to direct or guaranteed loans disbursed during the current 

reporting year to yield the subsidy expense, nor are these rates applicable to the portfolio as a 

whole. The subsidy expense for new direct or guaranteed loans reported in the current year relate 

to disbursements of loans from both current and prior years’ cohorts. Subsidy expense is 

recognized when direct loans are disbursed by the Department or third-party lenders disburse 

guaranteed loans. 

The costs of the Department’s student loan programs, especially the Direct Loan Program, are 

highly sensitive to changes in actual and forecasted interest rates. The formulas for determining 

program interest rates are established by statute; the existing loan portfolio has a mixture of 

borrower and lender rate formulas. Governmentwide interest rate projections are developed by the 

President’s Office of Management and Budget. 

Administrative Expenses 

The administrative expenses for Direct Loan and FFEL programs were as follows: 

 2005 2004 

(Dollars in Millions) Direct Loan FFEL Direct Loan FFEL 

Operating Expense $ 401 $ 268 $ 409 $ 281 

Other Expense 17 8 10 - 

Total Administrative Expenses $ 418 $ 276 $ 419 $ 281 

Perkins Loan Program 

The Perkins Loan Program is a campus-based program providing financial assistance to eligible 

postsecondary school students. In fiscal year 2004, new federal capital contributions of $99 million 

were provided to make loans to eligible students through participating schools at 5 percent 

interest. No new federal capital contributions were appropriated in fiscal year 2005. In some 

statutorily defined cases, funds are provided to schools so that student loans may be cancelled. 

For certain defaulted loans, the Department reimburses the originating school and collects from the 

borrowers. These collections are transferred to the Treasury. At September 30, 2005 and 2004, 

loans receivable, net of an allowance for loss, were $194 million. These loans are valued at 

historical cost. 
 230

U.S. Department of Education FY 2005 Performance and Accountability Report

Facilities Loan Programs 

The Department administers the College Housing and Academic Facilities Loan Program (CHAFL), 

the College Housing Loan Program (CHL), and the Higher Education Facilities Loan Program (HEFL). 

From 1952 to 1993, these programs provided low-interest financing to institutions of higher 

education for the construction, reconstruction, and renovation of housing, academic, and other 

educational facilities. Since 1998, no new loans have been authorized. 

The Department also administers the Historically Black Colleges and Universities Capital Financing 

Program (HBCU). Since 1992, this program has given HBCUs access to financing for the repair, 

renovation, and, in exceptional circumstances, the construction or acquisition of facilities, 

equipment, and infrastructure through federally insured bonds. The Department has authorized a 

designated bonding authority to make the loans to eligible institutions, charge interest, and collect 

principal and interest payments. In compliance with statute, the bonding authority maintains an 

escrow account to pay the principal and interest on bonds for loans in default. 

The credit program receivables were as follows: 

(Dollars in Millions) 2005 2004 

Principal Receivable $ 427 $ 452 

Interest Receivable 6 6 

Receivables 433 458 

Less: Allowance for Subsidy 98 104 

Credit Program Receivables, Net $ 335 $ 354 
 231

U.S. Department of Education FY 2005 Performance and Accountability Report

Note 5. Accounts Receivable 

Accounts receivable consisted of the following at September 30, 2005 and 2004: 

 2005 

(Dollars in Millions)

Gross 

Receivables 

 

Allowance 

 Net 

Receivables 

 

Intragovernmental $ - 

 

 $ - $ - 

With the Public 318 (177) 141 

Total Accounts Receivable $ 318 $ (177) $ 141 

 2004 

(Dollars in Millions)

Gross 

Receivables 

 

Allowance 

 Net 

Receivables 

 

Intragovernmental $ 3 

 

 $ - $ 3 

With the Public 377 (225) 152 

Total Accounts Receivable $ 380 $ (225) $ 155 

Accounts receivable represent balances due from recipients of grant and other financial assistance 

programs, and reimbursable agreements from other federal agencies. They are recorded at their 

estimated net realizable value. Estimates for the allowance for loss on uncollectible accounts are 

based on historical data. 

 
 232

U.S. Department of Education FY 2005 Performance and Accountability Report

Note 6. General Property, Plant and Equipment 

General property, plant and equipment consisted of the following at September 30, 2005 and 

2004: 

 2005 

(Dollars in Millions)

Asset 

Cost 

Accumulated 

Depreciation 

Net Asset 

Value 

 

IT Equipment and Software $ 86 $ (68) $ 18 

Furniture and Fixtures 3 (2) 1 

Total General Property, 

Plant and Equipment $ 89 $ (70) $ 19 

 2004 

(Dollars in Millions)

Asset 

Cost 

Accumulated 

Depreciation 

Net Asset 

Value 

 

IT Equipment and Software $ 76 $ (57) $ 19 

Furniture and Fixtures 3 (1) 2 

Total General Property, 

Plant and Equipment $ 79 $ (58) $ 21 

Information Technology (IT) equipment consists of computer hardware and related software. The 

majority of the fiscal year 2005 and 2004 costs represent the acquisition and implementation of 

the financial management system, and additional information technology and communications 

improvements. Furniture and fixtures and building improvements are related to renovating and 

furnishing new quarters for FSA and PCP. 

Leases 

The Department leases office space from the General Services Administration (GSA). The lease 

contracts with GSA for privately and publicly owned buildings are operating leases. Future lease 

payments are not accrued as liabilities, but expensed as incurred. Estimated future minimum lease 

payments for privately owned buildings as of September 30, 2005 and 2004, were as follows: 

2005 2004 

(Dollars in Millions) (Dollars in Millions)

Fiscal 

Year

Lease 

Payment 

Fiscal 

Year

Lease 

Payment

2006 $ 43 2005 $ 46 

2007 49 2006 55 

2008 51 2007 61 

2009 52 2008 63 

2010 53 2009 64 

After 2010 54 After 2009 66 

Total $ 302 Total $ 355 
 233

U.S. Department of Education FY 2005 Performance and Accountability Report

Note 7. Treasury Debt 

The Department’s Debt to the Treasury and the Federal Financing Bank (FFB) as of September 30, 

2005, consists of the following: 

2005

 Treasury 

(Dollars in Millions)

Direct 

Loans 

Facilities 

Loans Total FFB Total 

Beginning Balance $ 96,421 $ 110 $ 96,531 $ 118 $ 96,649 

Accrued Interest (2) - (2) - (2) 

New Borrowing 31,299 - 31,299 10 31,309 

Repayments (23,346) (10) (23,356) (3) (23,359) 

Ending Balance $ 104,372 $ 100 $ 104,472 $ 125 $ 104,597 

The Department’s Debt to the Treasury and FFB as of September 30, 2004, consisted of the 

following: 

2004 

 Treasury 

(Dollars in Millions)

Direct 

Loans 

Facilities 

Loans Total FFB Total 

Beginning Balance $ 91,787 $ 151 

 

$ 91,938 $ 80 $ 92,018 

Accrued Interest 1 - 1 2 3 

New Borrowing 21,191 - 21,191 53 21,244 

Repayments (16,558) (41) (16,599) (17) (16,616) 

Ending Balance $ 96,421 $ 110 $ 96,531 $ 118 $ 96,649 

Funds were borrowed to provide funding for direct loans to students and facilities loan programs. 

In addition, the FFB holds bonds issued by the Department on behalf of the HBCU Capital Financing 

Program. The Department reports the corresponding liability for full payment of principal and 

accrued interest as a payable to the FFB. 

The level of repayments on borrowings to Treasury is derived from many factors: 

• Beginning-of-the-year cash balance, collections, interest collections, disbursements, and 

interest payments have an impact on the available cash to repay Treasury. 

• Cash is held to cover future liabilities, such as contract collection costs and disbursements in 

transit. 

 
 234

U.S. Department of Education FY 2005 Performance and Accountability Report

Note 8. Payable to Treasury 

At September 30, 2005 and 2004, Payable to the Treasury for estimated liquidating fund future 

cash inflows in excess of outflows and for downward re-estimates of subsidy is shown in the table 

below: 

(Dollars in Millions) 2005 2004 

Future Liquidating Account Collections, Beginning Balance $ 3,491 $ 3,761 

Valuation of Pre-1992 Loan Liability and Allowance 851 847 

 Capital Transfers to Treasury 

 

(931) (1,117) 

Future Liquidating Account Collections, Ending Balance 3,411 3,491 

FFEL Downward Subsidy Re-estimate 1,755 1,502 

Total Payable to Treasury $ 5,166 $ 4,993 

In accordance with the Federal Credit Reform Act of 1990, the liquidating fund pays monies to 

Treasury each year based on available fund balances, and the FFEL financing fund pays the liability 

related to downward subsidy re-estimates upon budget execution. 

Note 9. Other Liabilities 

Other liabilities include current liabilities for contractual services, administrative services, deferred 

credits, liability for deposit funds, contingent liabilities, custodial liabilities, and the liability for 

unfunded accrued annual leave. Additionally, the noncurrent liabilities include accrued unfunded 

FECA. Other liabilities consisted of the following at September 30, 2005 and 2004: 

(Dollars in Millions) 2005 2004 

Intragovernmental 

 Accrued Unfunded FECA Liability $ 3 $ 3 

 Liability for Deposit Funds (11) (21) 

 Advances From Others 88 22 

 Total Intragovernmental 80 4 

With the Public 

 Accrued Payroll and Benefits 15 15 

 Accrued Unfunded Annual Leave 30 30 

 Custodial Liability 204 206 

 Deferred Credits 1 1 

 Liability for Deposit Funds 21 30 

 Other 71 99 

 Total With the Public 342 381 

Total Other Liabilities $ 422 $ 385 
 235

U.S. Department of Education FY 2005 Performance and Accountability Report

Note 10. Liabilities Not Covered by Budgetary Resources 

Liabilities on the Department’s Balance Sheet as of September 30, 2005 and 2004 include liabilities 

for which congressional action is needed before budgetary resources can be provided. Although 

future appropriations to fund these liabilities are likely, it is not certain that appropriations will be 

enacted to fund these liabilities. Liabilities not covered by budgetary resources consisted of the 

following: 

(Dollars in Millions) 2005 2004 

Intragovernmental 

 Accrued Unfunded FECA Liability $ 3 $ 3 

 Total Intragovernmental 3 3 

With the Public 

 Custodial Liability 204 206 

 Accrued Unfunded Annual Leave 30 30 

 Federal Employee and Veterans’ Benefits 17 19 

 Total With the Public 251 255 

Liabilities Not Covered by Budgetary Resources 254 258 

Liabilities Covered by Budgetary Resources 143,471 128,017 

Total Liabilities $ 143,725 $ 128,275 

Note 11. Accrued Grant Liability 

The accrued grant liability by reporting groups are shown in the table below. (See Note 1.) 

(Dollars in Millions) 2005 2004 

Federal Student Aid $ 635 $ 637 

Office of Elementary and Secondary Education 248 207 

Office of Special Education and Rehabilitative Services 90 158 

Office of Vocational and Adult Education 35 39 

Office of Postsecondary Education 167 242 

Institute of Education Sciences 70 10 

Office of English Language Acquisition 20 30 

Office of Safe and Drug-Free Schools 41 3 

Office of Innovation and Improvement 22 35 

Total Accrued Grant Liability $ 1,328 $ 1,361 
 236

U.S. Department of Education FY 2005 Performance and Accountability Report

Note 12. Net Position 

The nature of the Department’s net position was discussed in Note 1, and the components are set 

forth in the Statement of Changes in Net Position. The table below reports the composition of 

appropriations that have not been used to fund goods and services received or benefits provided as 

of September 30, 2005 and 2004: 

(Dollars in Millions) 2005 2004 

Unobligated Balances 

 Available $ 526 $ 619 

 Not Available 380 280 

Undelivered Orders 46,382 46,386 

Total Unexpended Appropriations $ 47,288 $ 47,285 

Undelivered orders and unobligated balances for federal credit financing and liquidating funds, and 

trust funds are not included in the chart above because they are not funded through 

appropriations. As a result, unobligated and undelivered order balances in the chart above will 

differ from these balances in the Combined Statement of Budgetary Resources. 

The Department had Cumulative Results of Operations of ($4,446) million as of September 30, 

2005, and ($2,951) million as of September 30, 2004. Cumulative Results of Operations consists 

mostly of purchases of capitalized assets and unfunded expenses, including upward subsidy reestimates for loan programs. 
 237

U.S. Department of Education FY 2005 Performance and Accountability Report

Note 13. Interest Revenue and Expense 

For the Direct Loan Program, interest revenue is earned on the individual loans in the loan 

portfolio, while federal interest is earned on the uninvested fund balances with Treasury. For the 

Direct Loan Program, interest expense is recognized on the Department’s borrowings from 

Treasury. For the FFEL Program, federal interest revenue is earned on the uninvested fund balance 

with Treasury in the financing fund. Program A, on the Statement of Net Cost, Enhancement of 

Postsecondary and Adult Education, includes the Direct Loan Program and the FFEL Program. 

The interest revenues and expenses attributable to the Direct Loan Program, the FFEL Program, 

and other remaining programs are summarized below as of September 30, 2005 and 2004: 

Direct Loan Program FFEL Program Other Programs Total 

(Dollars in Millions) 2005 2004 2005 2004 

 

2005 2004 2005 2004 

Interest Revenue: 

 Federal $ 1,475 $ 1,000 $ 565 $ 436 $ - $ - $ 2,040 $ 1,436 

 Non-federal 4,696 4,761 - - 26 50 4,722 4,811 

Total Interest 

Revenue $ 6,171 $ 5,761 $ 565 $ 436 $ 26 $ 50 $ 6,762 $ 6,247 

Interest Expense: 

 Federal $ 6,171 $ 5,761 $ 565 $ 436 $ 15 $ 16 $ 6,751 $ 6,213 

 Non-federal - - - - - (3) - (3) 

Total Interest 

Expense $ 6,171 $ 5,761 $ 565 $ 436 $ 15 $ 13 $ 6,751 $ 6,210 
 238

U.S. Department of Education FY 2005 Performance and Accountability Report

Note 14. Statement of Budgetary Resources 

The Statement of Budgetary Resources compares budgetary resources with the status of those 

resources. As of September 30, 2005, budgetary resources were $154,095 million and net outlays 

were $69,808 million. As of September 30, 2004, budgetary resources were $131,766 million and 

net outlays were $61,660 million. 

Apportionment Categories of Obligations Incurred 

The Department receives apportionments of its resources from the Office of Management and 

Budget (OMB). Category A apportionments are those resources that can be obligated without 

restriction on the purpose of the obligation, other than to be in compliance with legislation 

underlying programs for which the resources were made available. Category B apportionments are 

restricted by purpose for which obligations can be incurred. In addition, some resources are 

available without apportionment by OMB. 

The apportionment categories of obligations incurred as of September 30, 2005 and 2004, are 

summarized below: 

(Dollars in Millions) 2005 2004 

Direct: 

 Category A $ 1,308 $ 1,279 

 Category B 127,489 112,970 

 Exempt from Apportionment 252 53 

 129,049 114,302 

Reimbursable: 

 Category A 4 1 

 Category B 3 4 

 Exempt from Apportionment 85 86 

 92 91 

Total Apportionment Categories of 

Obligations Incurred $ 129,141 $ 114,393 

Permanent Indefinite Budget Authority 

The Federal Direct Loan Program and the Federal Family Education Loan Program were granted 

permanent indefinite budget authority through legislation. Part D of the William D. Ford Federal 

Direct Loan Program and Part B of the Federal Family Education Loan Program, pursuant to the 

HEA, pertains to the existence, purpose, and availability of this permanent indefinite budget 

authority. 

Reauthorization of Legislation 

Funds for most Department of Education programs are authorized, by statute, to be appropriated 

for a specified number of years, with an automatic one-year extension available under Section 422 

of the General Education Provisions Act. Congress may continue to appropriate funds after the 

expiration of the statutory authorization period, effectively reauthorizing the program through the 

appropriations process. The current Budget of the United States Government presumes all 

programs continue per congressional budgeting rules. 
 239

U.S. Department of Education FY 2005 Performance and Accountability Report

Unused Borrowing Authority 

The Department is given authority to draw funds from the Treasury to help finance the majority of 

its direct lending activity. Unliquidated Borrowing Authority is a budgetary resource and is 

available to support obligations. The Department periodically reviews its borrowing authority 

balances in relation to its obligations and may cancel unused amounts. Unused Borrowing 

Authority as of September 30, 2005 and 2004, was determined as follows: 

(Dollars in Millions) 2005 2004 

Beginning Balance, Unused Borrowing Authority $ 5,952 $ 6,978 

Current Year Borrowing Authority 32,209 22,483 

Funds Drawn From Treasury (31,309) (21,244) 

Prior Year Unused Borrowing Authority Cancelled (1,326) (2,265) 

Other (45) - 

Ending Balance, Unused Borrowing Authority $ 5,481 $ 5,952 

Comparison to the Budget of the United States Government 

Statement of Federal Financial Accounting Standards No. 7 (SFFAS No. 7), Accounting for Revenue 

and Other Financing Sources and Concepts for Reconciling Budgetary and Financial Accounting, 

requires an explanation of material differences between budgetary resources available, the status 

of those resources, and outlays as presented in the Statement of Budgetary Resources to the 

related actual balances published in the Budget of the United States Government (President’s 

Budget). However, the President’s Budget has not yet been published. The President’s Budget is 

scheduled for publication in February 2006 and will be available through OMB. Accordingly, 

information required for such disclosure is not available at the time of publication of these financial 

statements. There were no material differences between the Fiscal Year 2004 column on the 

Statement of Budgetary Resources and the fiscal year 2004 actual amounts reported in the 

President’s Budget. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

Note 15. Statement of Financing 

The Statement of Financing (SOF) provides information on the total resources used by an agency, 

both those received through budgetary resources and those received through other means during 

the reporting period. The statement reconciles these resources with the net cost of operations by 

(1) removing resources that do not fund net cost of operations, and (2) including components of 

net cost of operations that did not generate or use resources during the year. 

The SOF is presented as a consolidated statement for the Department and its major programs. Net 

interagency eliminations are presented for proprietary amounts. The budgetary amounts are 

reported on a combined basis as presented in the Statement of Budgetary Resources. Accordingly, 

net interagency eliminations for budget amounts are not presented. 

The difference between the amounts reported as liabilities not covered by budgetary resources on 

the Balance Sheet and amounts reported as other components requiring or generating resources in 

future periods on the Statement of Financing represents a decrease in custodial liability activities. 

Components Not Requiring or Generating Resources primarily result from the subsidy expense 

recognized for financial statement re-estimate purposes as required by the Statement of Federal 

Financial Accounting Standards No. 2 (SFFAS No. 2), Accounting for Direct Loans and Loan 

Guarantees. Re-estimates published in the President’s Budget generate or require resources. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

Note 16. Cost and Earned Revenue by Budget Function 

The Department’s gross costs and revenue, by budget function for September 30, 2005 and 2004, 

are presented below: 

 2005 2004 

(Dollars in Millions)

Gross 

Costs 

Earned 

Revenue 

Net 

Costs 

Gross 

Costs 

Earned 

Revenue 

Net 

Costs 

Education, Training Employment 

and Social Services $ 82,068 $ (6,965) $ 75,103 $ 70,062 $ (6,564) $ 63,498 

Administration of Justice 136 - 136 125 - 125 

Total $ 82,204 $ (6,965) $ 75,239 $ 70,187 $ (6,564) $ 63,623 

The Department’s intragovernmental gross costs and revenue, by budget function for September 

30, 2005 and 2004, are presented below: 

 2005 2004 

(Dollars in Millions)

Gross 

Costs 

Earned 

Revenue 

Net 

 Costs 

Gross 

Costs 

Earned 

Revenue 

Net 

Costs 

Education, Training Employment 

and Social Services $ 7,367 $ (2,221) $ 5,146 $ 6,536 $ (1,738) $ 4,798

Administration of Justice 136 - 136 125 - 125

Total $ 7,503 $ (2,221) $ 5,282 $ 6,661 $ (1,738) $ 4,923
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U.S. Department of Education FY 2005 Performance and Accountability Report

Note 17. Program Costs by Segment 

Effective fiscal year 2006, Office of Management and Budget (OMB) Circular No. A-136 (Revised), 

Financial Reporting Requirements, changes the presentation format of the Consolidated Statement 

of Net Cost. Early implementation is permitted but not required for fiscal year 2005. The 

Department has chosen not to implement these changes and will follow the guidance provided in 

OMB Bulletin 01-09, Form and Content of Agency Financial Statements. Specifically, responsibility 

segments were aligned with the major goals of the Department of Education’s Strategic Plan 2002–

2007, as required by the Government Performance and Results Act (GPRA). 

Reporting groups were aligned with the following Strategic Goals: 

• Enhance the quality and access to postsecondary and adult education, 

• Create a culture of achievement, 

• Improve student achievement, 

• Develop safe schools and strong character, and 

• Transform education into an evidence-based field. 

The importance of special education was highlighted by maintaining a separate responsibility 

segment on the Statement of Net Cost. 

Program A on the Statement of Net Cost relates directly to Strategic Goal 5: Enhance the quality of 

and access to postsecondary and adult education. It combines the reporting groups of Federal 

Student Aid, the Office of Vocational and Adult Education, and the Office of Postsecondary 

Education. Program B relates directly to Strategic Goals 1, 2, and 3: Create a culture of 

achievement, Improve student achievement, and Develop safe schools and strong character. 

Program B combines the Office of Elementary and Secondary Education, the Office of English 

Language Acquisition, and the Office of Safe and Drug-Free Schools. Program C relates to 

Strategic Goal 4: Transform education into an evidenced-based field, and includes the Institute of 

Education Sciences and Office of Innovation and Improvement. Finally, Program D relates to 

“special education and program execution” and includes the Office of Special Education and 

Rehabilitative Services. 
 243

U.S. Department of Education FY 2005 Performance and Accountability Report

Note 18. Contingencies 

Guaranty Agencies 

The Department can assist Guaranty Agencies experiencing financial difficulties by advancing funds 

or by other means. No provision has been made in the principal statements for potential liabilities 

related to financial difficulties of Guaranty Agencies because the likelihood of such occurrences is 

uncertain and cannot be estimated with sufficient reliability. 

Perkins Loan Reserve Funds 

The Perkins Loan Program is a campus-based program providing financial assistance to eligible 

postsecondary school students. In fiscal year 2005, the Department provided funding of 84.6 

percent of the capital used to make loans to eligible students through participating schools at 5 

percent interest. The schools provided the remaining 15.4 percent of program funding. For the 

latest academic year ended June 30, 2005, approximately 779,129 loans were made, totaling 

approximately $1.6 billion at 1,653 institutions, averaging $2,069 per loan. The Department’s 

share of the Perkins Loan Program was approximately $6.4 billion as of June 30, 2005. 

In fiscal year 2004, the Department provided funding of 84.8 percent of the capital used to make 

loans to eligible students through participating schools at 5 percent interest. The schools provided 

the remaining 15.2 percent of program funding. For the academic year ended June 30, 2004, 

approximately 750,420 loans were made, totaling $1.6 billion at 1,700 institutions, averaging 

$2,161 per loan. The Department’s share of the Perkins Loan Program was approximately $6.5 

billion as of June 30, 2004. 

Perkins Loan borrowers who meet statutory eligibility requirements—such as service as a teacher in 

low-income areas, as a Peace Corps or VISTA volunteer, in the military or in law enforcement, in 

nursing, or in family services—may receive partial loan forgiveness for each year of qualifying 

service. In these circumstances, a contingency is deemed to exist. The Department may be 

required to compensate Perkins Loan institutions for the cost of the partial loan forgiveness. 

Litigation and Other Claims 

The Department is involved in various lawsuits incidental to its operations. Judgments resulting 

from litigation against the Department are paid by the Department of Justice. In the opinion of 

management, the ultimate resolution of pending litigation will not have a material effect on the 

Department’s financial position. 

Hurricanes Katrina and Rita 

On August 29, 2005, Hurricane Katrina struck the Gulf Coast, resulting in widespread catastrophic 

damage to the coastal regions of Louisiana, Mississippi and Alabama. Hurricane Katrina is 

expected to be the costliest natural disaster in U.S. history. Immediately following Katrina, 

Hurricane Rita struck the Gulf Coast, adding Texas to the states already catastrophically damaged 

and hindering recovery efforts. The death toll, property damage, dislocation of families, and 

destruction of the infrastructure of the communities and economies of the Gulf Coast represent a 

humanitarian crisis that will affect these areas for many years to come. 

To begin the reconstruction of the education process, the Department of Education has been asked 

by the White House to render all appropriate assistance to the region’s loan applicants, students, 
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U.S. Department of Education FY 2005 Performance and Accountability Report

borrowers, guaranty agencies, educational institutions and other program participants. It is 

impossible at this time to accurately estimate the impact of Hurricanes Katrina and Rita on the 

education systems, educational facilities, teachers, students, and financial institutions of the 

affected areas, or the demands or costs that this impact will place on the Department of Education. 

Any potential financial impact will relate to a future period rather than the current period. 

Other Matters 

Some portion of the current year financial assistance expenses (grants) may include funded 

recipient expenditures that were subsequently disallowed through program review or audit 

processes. In the opinion of management, the ultimate disposition of these matters will not have a 

material effect on the Department’s financial position. 
 245

U.S. Department of Education FY 2005 Performance and Accountability Report

Required Supplementary Stewardship Information 

Investment in Human Capital (See p. 246.) 

Human Capital Programs (See p. 247.) 

Stewardship Expenses (See p. 252.) 

Program Outputs (See p. 253.) 

Program Outcomes (See p. 254.) 
 246

U.S. Department of Education FY 2005 Performance and Accountability Report

Investment in Human Capital 

The U.S. Department of Education executes programs under the Education, Training, Employment, 

and Social Services function established by the Congress in the Budget Act of 1974. This report 

presents Human Capital activity related to the execution of the Department’s congressionally 

approved budget and programs. 

The Department’s mission is to ensure equal access to education and to promote educational 

excellence throughout the nation. To carry out this mission, the Department works in partnership 

with states, schools, communities, institutions of higher education, and financial institutions—and 

through them, with students, teachers and professors, families, administrators, and employers. 

Key functions of the partnership are as follows: 

• Leadership to address critical issues in American education. 

• Grants to education agencies and institutions to strengthen teaching and learning and to 

prepare students for citizenship, employment in a changing economy, and lifelong learning. 

• Student loans and grants to help pay for the costs of postsecondary education. 

• Grants for literacy, employment, and self-sufficiency training for adults. 

• Monitoring and enforcement of civil rights to ensure nondiscrimination by recipients of federal 

education funds. 

• Support for statistics, research, development, evaluation, and dissemination of information to 

improve educational quality and effectiveness. 
 247

U.S. Department of Education FY 2005 Performance and Accountability Report

Human Capital Programs 

Federal investment in Human Capital comprises those expenses for general public education and 

training programs that are intended to increase or maintain national economic productive capacity. 

The Department of Education’s Human Capital programs are administered by the following offices: 

Elementary and Secondary Education, Safe and Drug-Free Schools, Innovation and Improvement, 

Postsecondary Education, Federal Student Aid, Special Education and Rehabilitative Services, 

Institute of Education Sciences, English Language Acquisition, and Vocational and Adult Education. 

A list of key programs for each office is outlined below. 

Office of Elementary and Secondary Education 

The Office of Elementary and Secondary Education provides leadership, technical assistance, and 

financial support to state and local educational agencies for maintenance and improvement of 

preschool, elementary, and secondary education. Programs administered by this office include the 

following: 

• Improving the Academic Achievement of the Disadvantaged Programs (Title I)

provide financial assistance to state and local educational agencies and other institutions to 

support services for children in high-poverty schools, institutions for neglected and 

delinquent children, homeless children, and certain Indian children. 

• The Impact Aid Program provides financial assistance for the maintenance and operations 

of school districts in which the federal government has acquired substantial real property. It 

provides direct assistance to local educational agencies that educate substantial numbers of 

federally connected pupils (children who live on or whose parents work on federal property). 

• Migrant Education Programs support high-quality comprehensive educational programs for 

migratory children and youth to address disruptions in schooling and other problems that 

result from repeated moves. 

• Improving Teacher Quality State Grants Program (Title II) provides funds, on a 

formula basis, to increase the academic achievement of students by ensuring that all 

teachers are highly qualified to teach. 

Office of Safe and Drug-Free Schools 

The Office of Safe and Drug-Free Schools supports efforts to create safe schools, respond to crises, 

prevent drug and alcohol abuse, ensure the health and well-being of students, and teach students 

good citizenship and character. Programs administered by this office include the following: 

• Health, Mental Health, and Physical Education programs promote the health and wellbeing of students and families as authorized under Part D of Title V of the Elementary and 

Secondary Education Act of 1965, as amended by the No Child Left Behind Act of 2001. 

• Drug and Violence Prevention—State and National Programs provide support to state 

and local educational agencies, community-based organizations, and other public and nonpublic entities to prevent youth drug use and violence and create safe, disciplined, and drugfree learning environments. These funds are also used to provide support to local educational 

agencies to prepare for and respond to crisis situations, and support training and technical 
 248

U.S. Department of Education FY 2005 Performance and Accountability Report

assistance activities in these areas. Finally, these funds support information development 

and dissemination activities, data collection activities and a variety of interagency initiatives. 

• Character, Civic, and Correctional Education programs provide support for a variety of 

activities, including character and civic education programs in elementary and secondary 

schools, and correctional education initiatives in state and local correctional institutions. 

These programs also support various leadership activities including technical assistance to 

state and local education officials, as well as information development and dissemination. 

• Policy and Cross-Cutting programs staff administer certain discretionary grant initiatives 

authorized by Title IV, Safe and Drug-Free Schools and Communities Act National Programs, 

including programs that emphasize coordinated, collaborative responses to developing and 

maintaining safe, disciplined, and drug-free learning environments. 

Office of Innovation and Improvement 

The Office of Innovation and Improvement makes strategic investments in educational practices 

through grants to states, schools, and community and nonprofit organizations. The office leads the 

movement for greater parental options and information in education. Programs administered by 

this office include the following: 

• The Charter Schools Program supports the planning, development, and initial 

implementation of charter schools. Charter schools provide enhanced parental choice and are 

exempt from many statutory and regulatory requirements. In exchange for increased 

flexibility, charter schools are held accountable for improving student academic achievement. 

• Teaching American History Program is designed to raise student achievement by 

improving teachers' knowledge and understanding of and appreciation for traditional U.S. 

history. Grant awards will assist local educational agencies (LEA), in partnership with entities 

that have content expertise, to develop, document, evaluate, and disseminate innovative and 

cohesive models of professional development. By helping teachers to develop a deeper 

understanding and appreciation of U.S. history as a separate subject matter within the core 

curriculum, these programs improve instruction and raise student achievement. 

Office of Postsecondary Education 

The Office of Postsecondary Education formulates policy and coordinates programs that assist 

postsecondary educational institutions and students pursuing a postsecondary education. 

Programs and functions administered by this office include the following programs: 

• The Fund for the Improvement of Postsecondary Education provides grants to colleges 

and universities to promote reform, innovation, and improvement in postsecondary 

education. 

• The Higher Education Programs (HEP) provide discretionary funds and support services 

that improve student access to postsecondary education and foster excellence in institutions 

of higher education. Specifically, under HEP, the TRIO programs allow for increased access 

to and completion of postsecondary education by disadvantaged students; the Aid for 

Institutional Development programs strengthen the capacity of colleges and universities that 

serve a high percentage of minority and disadvantaged students; the Teacher and Student 

Development programs provide teacher and student development resources to strengthen 
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U.S. Department of Education FY 2005 Performance and Accountability Report

teaching; and the International programs promote international education and foreign 

language studies and research. 

• The Accreditation and State Liaison (ASL) staff administers the accrediting agency 

recognition process and coordinates activities with states that impact institutional 

participation in the federal financial assistance programs. ASL prepares a list of 

postsecondary educational institutions and programs accredited by accrediting agencies and 

state approval agencies recognized by the Department. 

Office of Federal Student Aid 

The Office of Federal Student Aid administers need-based financial assistance programs for 

students pursuing postsecondary education. The Department makes available federal grants, 

loans, and work-study funding to eligible undergraduate and graduate students. The Department’s 

two major loan programs are as follows: 

• The Federal Family Education Loan Program operates with state and private nonprofit 

Guaranty Agencies to provide loan guarantees and interest supplements through permanent 

budget authority on loans by private lenders to eligible students. 

• The William D. Ford Direct Student Loan Program is a direct lending program in which 

loan capital is provided to students by the federal government through borrowings from the 

U.S. Treasury. 

Office of Special Education and Rehabilitative Services 

The Office of Special Education and Rehabilitative Services supports programs that assist in 

educating children with special needs. It provides for the rehabilitation of individuals with 

disabilities and supports research focused on improving their lives. This office includes three 

components: 

• The Office of Special Education Programs administers programs and projects relating to 

the education of all children, youth, and adults with disabilities from birth through age 21 by 

providing leadership and financial support to assist states and local districts. The largest 

program is the Grants to States under the Individuals with Disabilities Education Act. 

• The Rehabilitation Services Administration oversees programs and projects related to 

vocational rehabilitation and independent living of individuals with disabilities to increase their 

employment, independence, and integration into the community. The largest program is the 

Vocational Rehabilitation State Grants. 

• The National Institute on Disability and Rehabilitation Research provides leadership 

and support for a comprehensive program of research related to the rehabilitation of 

individuals with disabilities. 

Institute of Education Sciences 

The Institute of Education Sciences is the main research arm of the Department. It compiles 

statistics; funds research, evaluations, and dissemination; and provides research-based guidance 

to further evidence-based policy and practice. Its four operational divisions are as follows: 

• The National Center for Education Research (NCER) supports research that contributes 

to the solution of significant education problems in the United States. Through its research 
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U.S. Department of Education FY 2005 Performance and Accountability Report

initiatives and the national research and development centers, NCER supports research 

activities that examine the effectiveness of educational programs, practices, and policies, 

including the application of technology to instruction and assessment. The goal of its 

research programs is to provide scientific evidence of what works, for whom, and under what 

conditions. 

• The National Center for Special Education Research (NCSER) supports comprehensive 

programs of research designed explicitly to examine empirically the full range of issues facing 

children and individuals with disabilities, parents of children with disabilities, school 

personnel, and others. Through its grants and contracts, NCSER supports research to 

improve the quality of life and educational outcomes for infants, toddlers, and children with 

disabilities and works to develop and sustain the most rigorous programs of research in 

special education and related services. 

• The National Center for Education Evaluation and Regional Assistance is responsible 

for conducting evaluations of the impact of federal programs and disseminating information 

from evaluation and research, and for providing technical assistance to improve student 

achievement. The National Library of Education, established within the center, is the largest 

federally funded library devoted entirely to education and provides services in three areas: 

reference and information services, collection and technical services, and resource sharing 

and cooperation. 

• The National Center for Education Statistics is responsible for collecting, analyzing, and 

reporting education information and statistics on the condition and progress of education at 

the preschool, elementary, secondary, postsecondary, and adult levels, including data related 

to education in other nations. Among its data collection efforts is the National Assessment of 

Educational Progress. 

Office of English Language Acquisition 

The Office of English Language Acquisition administers programs designed to enable students with 

limited English proficiency to become proficient in English and meet challenging state academic 

content and student achievement standards. Programs from this office include the following: 

• The State Formula Grant Program is designed to improve the education of limited English 

proficient children and youths by helping them learn English and meet challenging state 

academic content and student academic achievement standards. The program provides 

enhanced instructional opportunities for immigrant children and youths. 

• The National Professional Development Program provides grants to institutions of 

higher education in partnership with local or state educational agencies to improve classroom 

instruction for English language learners and to improve the qualifications of teachers of 

English language learners and other educational personnel. 

• The Native American and Alaska Native Children in School Program provides grants to 

eligible entities that support language instruction educational projects for limited English 

proficient (LEP) children from Native American, Alaska Native, native Hawaiian and Pacific 

Islander backgrounds. The program is designed to ensure that LEP children master English 

and meet the same rigorous standards for academic achievement that all children are 

expected to meet, including meeting the challenging state academic content and student 
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U.S. Department of Education FY 2005 Performance and Accountability Report

academic achievement standards, and to support, to the extent possible, the native language 

skills of such children. 

• The Foreign Language Assistance Program provides grants to pay for the federal share 

of the cost of innovative model programs providing for the establishment, improvement, or 

expansion of foreign language study for elementary and secondary school students. 

Office of Vocational and Adult Education 

The Office of Vocational and Adult Education provides funds for vocational-technical education for 

youth and adults. Most of the funds are awarded as grants to state educational agencies. This 

office administers the following and other programs: 

• Perkins Vocational and Technology Education State Grants help state and local schools 

offer programs to develop the academic, vocational, and technical skills of students in high 

schools, community colleges, and regional technical centers. 

• Adult Education and Literacy State Grants provide educational opportunities for adults 

over the age of 16, not currently enrolled in school, who lack a high school diploma or the 

basic skills to function effectively as parents, workers, and citizens. 
 252

U.S. Department of Education FY 2005 Performance and Accountability Report

Stewardship Expenses 

In the Department of Education, discretionary spending constitutes approximately 78 percent of 

the budget and includes nearly all programs, the major exceptions being student loans and 

rehabilitative services. While spending for entitlement programs is usually a function of the 

authorizing statutes creating the programs and is not generally affected by appropriations laws, 

spending for discretionary programs is decided in the annual appropriations process. Most 

Department programs are discretionary, including Impact Aid, Vocational Education, Special 

Education, Pell Grants, Research, and Statistics.
 253

U.S. Department of Education FY 2005 Performance and Accountability Report

Program Outputs 

Education, in the United States, is primarily a state and local responsibility. States and 

communities, as well as public and private organizations, establish schools and colleges, develop 

curricula, and determine requirements for enrollment and graduation. The structure of education 

finance in America reflects this predominantly state and local role. Of the estimated $909 billion 

being spent nationwide on education at all levels for school year 2004–05, about 90 percent comes 

from state, local, and private sources. The federal contribution to national education expenditures 

is about $90.9 billion. The federal contribution includes education expenditures not only from the 

Department, but also from other federal agencies such as the Department of Health and Human 

Services’ Head Start Program and the Department of Agriculture’s School Lunch Program. The 

Department’s $73.0 billion appropriation is about 8.0 percent of total education expenditures and 

about 2.9 percent of the federal government’s $2.5 trillion budget in fiscal year 2005. 

The Department currently administers programs affecting every area and level of education. The 

Department’s elementary and secondary programs annually serve 14,600 school districts and more 

than 54 million students attending over 94,000 public schools and more than 27,000 private 

schools. Department programs also provide grant, loan, and work-study assistance to more than 

9.9 million postsecondary students. 

While the Department’s programs and responsibilities have grown substantially over the years, the 

Department itself has not. The Department’s staff of approximately 4,454 is nearly 41 percent 

below the 7,528 employees who administered federal education programs in 1980, when the 

Department was created. These staff reductions, along with a wide range of management 

improvements, have helped limit administrative costs to less than 2 percent of the Department’s 

budget. This means that the Department delivers about 98 cents on the dollar in education 

assistance to states, school districts, postsecondary institutions, and students. 

Summary of Human Capital Expenses 

(Dollars in Millions) 2005 2004 2003 2002 2001 

Federal Student Aid Expense 

 Direct Loan Subsidy $ 5,211 $ (543) $ 4,716 $ 877 $ 1,307

 Guaranteed Loan Subsidy 9,863 8,516 2,509 3,988 (314)

 Grant Programs 15,070 14,943 13,836 12,256 10,812 

 Salaries & Administrative 164 186 179 207 249 

 Subtotal 30,308 23,102 21,240 17,328 12,054

Other Departmental 

 Elementary and Secondary Education 22,940 21,188 19,493 16,127 13,851 

 Special Education & Rehabilitative Services 13,995 12,687 11,529 9,906 8,590 

 Other Departmental Programs 6,067 5,160 4,828 4,531 3,893 

 Salaries & Administrative 486 448 395 472 341 

 Subtotal 43,488 39,483 36,245 31,036 26,675

Grand Total $73,796 $62,585 $57,485 $48,364 $38,729
 254

U.S. Department of Education FY 2005 Performance and Accountability Report

Program Outcomes 

Education is the stepping-stone to higher living standards for American citizens. Education is key 

to national economic growth. But education’s contribution is more than increased productivity and 

incomes. Education improves health, promotes social change, and opens doors to a better future 

for children and adults. 

Economic outcomes, such as wage and salary levels, historically have been determined by the 

educational attainment of individuals and the skills employers expect of those entering the labor 

force. Recently, both individuals and society as a whole have placed increased emphasis on 

educational attainment as the workplace has become increasingly technological and employers now 

seek employees with the highest level of skills. For prospective employees, the focus on higherlevel skills means investing in learning or developing skills through education. Like all investments, 

developing higher-level skills involves costs and benefits. 

Returns, or benefits, of investing in education come in many forms. While some returns accrue for 

the individual, others benefit society and the nation in general. Returns related to the individual 

include higher earnings, better job opportunities, and jobs that are less sensitive to general 

economic conditions. Returns related to the economy and society include reduced reliance on 

welfare subsidies, increased participation in civic activities, and greater productivity. 

Over time, the returns of developing skills through education have become evident. Statistics 

illustrate the rewards of completing high school and investing in postsecondary education.

Unemployment rate. Persons with lower levels of educational attainment were more likely to be 

unemployed than those who had higher levels of educational attainment. The 2005 unemployment 

rate for adults (25 years old and over) who had not completed high school was 8.2 percent 

compared with 5.0 percent of those with four years of high school and 2.4 percent for those with a 

bachelor’s degree or higher. Younger people with high school diplomas tended to have higher 

unemployment rates than persons 25 and over with similar levels of education. 

Annual Income. As of September 2005, the 

annualized median income for adults (25 years 

and over) varied considerably by education level. 

Men with a high school diploma earned $33,800, 

compared with $60,736 for men with a college 

degree. Women with a high school diploma 

earned $25,532, compared with $45,448 for 

women with a college degree. Men and women 

with college degrees earned 77.3 percent more 

than men and women with high school diplomas. 

Earnings for workers with college degrees have 

increased in the past year by 2.8 percent for women and 4.0 percent for men. These returns of 

investing in education directly translate into the advancement of the American economy as a 

whole. 

Unemployment Rate by Educational Level

0

2

4

6

8

10

12

199319941995

1996

1997

1998

1999

200020012002200320042005

Percentage

No high

school

degree

High

school

degree

College

degree
 255

U.S. Department of Education FY 2005 Performance and Accountability Report

Required Supplementary Information 

Intragovernmental Assets (See p. 256.) 

Intragovernmental Liabilities (See p. 257.) 

Intragovernmental Earned Revenues and Related Costs (See p. 257.) 

Statement of Budgetary Resources (See p. 258.) 
 256

U.S. Department of Education FY 2005 Performance and Accountability Report

Intragovernmental Assets 

Intragovernmental assets at September 30, 2005, consisted of the following: 

(Dollars in Millions) 

Fund Balance 

with Treasury 

Other 

Assets 

Trading Partner 

 Department of the Treasury $ 77,569 $ - 

 National Science Foundation - 12 

Grand Total $ 77,569 $ 12 
 257

U.S. Department of Education FY 2005 Performance and Accountability Report

Intragovernmental Liabilities 

Intragovernmental liabilities at September 30, 2005, consisted of the following: 

Intragovernmental Earned Revenues and Related Costs 

The Department’s intragovernmental earned revenues are not reported by “trading partner” 

because they are below the Office of Management and Budget threshold of $500 million. 

(Dollars in Millions) 

Accounts 

Payable 

Treasury 

Debt 

Guaranty Agency 

Federal and 

Restricted Funds 

Due to Treasury 

Payable to 

Treasury 

Other 

Liabilities 

Trading Partner 

 Department of the Treasury $ 1 $ 104,597 $ 888 $ 5,166 $ - 

 Department of Labor - - - - 3 

 General Printing Office 1 - - - (1) 

 General Services Administration 2 - - - (4) 

 Department of Commerce 3 - - - - 

 Department of Interior - - - - (1) 

 Department of Health and Human 

Services 3 - - - 81 

 Office of Personnel Management - - - - 2 

 Department of Agriculture - - - - 2 

 Department of Homeland Security - - - - (1) 

 National Science Foundation 2 - - - - 

 Other - - - - (1) 

Grand Total $ 12 $ 104,597 $ 888 $ 5,166 $ 80 
258

Budgetary Resources:

1. Budget Authority :

# Appropriations Received $ 76,981 $ 3 $ 31,813 $ 1 $ 22,003 0 

# Borrowing Authority 0 32,209 0 32,170 00

# Net Transfers 0000 (4) 0

2. Unobligated Balance:

# Beginning of Period 2,245 15,128 1,567 15,128 267 0 

3. Spending Authority From Offsetting Collections:3.1 Earned

# Collected 3,198 49,536 3,073 49,510 17 0 

# Receivable From Federal Sources (3) (2) 0 (2) 00

3.2 Change in Unfilled Customer Orders

# Advance received (collected) 64 000 (13) 0 

# Without advance from Federal sources (68) 34 0 34 (4) 0 

 3.5 Subtotal $ 3,191 $ 49,568 $ 3,073 $ 49,542 $ - 0 4. Recoveries of Prior Year Obligations 1,536 1,973 1,024 1,973 342 0 6. Permanently Not Available (4,047) (24,692) (3,507) (24,678) (246) 0 

Total Budgetary Resources $ 79,906 $ 74,189 $ 33,970 $ 74,136 $ 22,362 $ - Status of Budgetary Resources:

8. Obligations Incurred: 

# Direct $ 77,677 $ 51,372 $ 32,541 $ 51,319 $ 22,048 (0) 

# Reimbursable 92 (0) (0) (0) (0) (0) 

# Subtotal $ 77,769 $ 51,372 $ 32,541 $ 51,319 $ 22,048 (0) 

9. Unobligated Balance:

# Apportioned 526 (0) 31 (0) 221 (0) 

10. Unobligated Balance Not Available 1,611 22,817 1,398 22,817 93 (0) 

Total Status of Budgetary Resources $ 79,906 $ 74,189 $ 33,970 $ 74,136 $ 22,362 $ - Relationship of Obligations to Outlays:

12.Obligated Balance, Net, Beginning of Period $ 48,147 $ 7,788 $ 9,800 $ 7,778 $ 20,156 (0) 14.Obligated Balance, Net, End of Period:

# Unfilled customer orders from Federal Sources (3) (34) (0) (34) (0) (0) 

# Undelivered Orders 46,493 10,472 8,413 10,433 18,510 (0) 

# Accounts Payable 1,720 330 812 330 313 (0) 

15.Outlays:

# Disbursements 76,251 46,389 32,092 46,364 23,044 (0) 

# Collections (3,264) (49,536) (3,072) (49,510) (4) (0) 

# Subtotal $ 72,987 $ (3,147) $ 29,020 $ (3,146) $ 23,040 (0) 

16.Less: Offsetting Receipts 32 (0) 32 (0) (0) (0) 

Net Outlays $ 72,955 $ (3,147) $ 28,988 $ (3,146) $ 23,040 $ - 

United States Department of Education

Combining Statement of Budgetary Resources

For the Year Ended September 30, 2005

(Dollars in Millions)

Combined 

Budgetary

Non-Budgetary 

Credit Reform 

Financing 

Accounts 

Federal Student Aid

Budgetary

Non-Budgetary 

Credit Reform 

Financing 

Accounts

Office of Elementary & 

Secondary Education

Budgetary 

Non-Budgetary 

Credit Reform 

Financing 

Accounts

Page 1 of 3
259

Budgetary Resources:

1. Budget Authority :

## Appropriations Received $ 2,027 $0 $ 2,376 $ 2 $ 527 $0 

## Borrowing Authority 000 39 00

## Net Transfers 0000 4 0

2. Unobligated Balance:

## Beginning of Period 220 0 40 0 8 0 

3. Spending Authority From Offsetting Collections:3.1 Earned

## Collected 0 0 28 26 3 0

## Receivable From Federal Sources 000000

3.2 Change in Unfilled Customer Orders

## Advance received (collected) 0000 1 0

## Without advance from Federal sources 0000 (1) 0

 3.5 Subtotal $0 $0 $28 $26 $3 $0 4. Recoveries of Prior Year Obligations 8 0 58 0 29 0 6. Permanently Not Available (23) 0 (67) (14) (35) 0 

Total Budgetary Resources $ 2,232 $ - $ 2,435 $ 53 $ 536 $ - Status of Budgetary Resources:

8. Obligations Incurred: 

## Direct $ 2,094 ($0) $ 2,352 $ 53 $ 504 ($0) 

## Reimbursable (0) (0) (0) (0) 3 (0) 

## Subtotal $ 2,094 ($0) $ 2,352 $ 53 $ 507 ($0) 

9. Unobligated Balance:

## Apportioned 136 (0) 26 (0) 25 (0) 

10. Unobligated Balance Not Available 2 (0) 57 (0) 4 (0) 

Total Status of Budgetary Resources $ 2,232 $ - $ 2,435 $ 53 $ 536 $ - Relationship of Obligations to Outlays:

12.Obligated Balance, Net, Beginning of Period $ 1,636 ($0) $ 2,865 $ 10 $ 602 ($0) 14.Obligated Balance, Net, End of Period:

## Unfilled customer orders from Federal Sources (0) (0) (0) (0) (0) (0) 

## Undelivered Orders 1,712 (0) 2,690 39 497 (0) 

## Accounts Payable 43 (0) 180 (0) 124 (0) 

15.Outlays:

## Disbursements 1,967 (0) 2,290 25 461 (0) 

## Collections (0) (0) (29) (26) (4) (0) 

## Subtotal $ 1,967 ($0) $ 2,261 $ (1) $ 457 ($0) 

16.Less: Offsetting Receipts (0) (0) (0) (0) (0) (0) 

Net Outlays $ 1,967 $ - $ 2,261 $ (1) $ 457 $ - 

Non-Budgetary 

Credit Reform 

Financing 

Accounts

Institute of Education Sciences

Budgetary

Non-Budgetary 

Credit Reform 

Financing 

Accounts

Page 2 of 3

United States Department of Education

Combining Statement of Budgetary Resources

For the Year Ended September 30, 2005

(Dollars in Millions)

Budgetary

Office of Vocational & Adult 

Education

Non-Budgetary 

Credit Reform 

Financing 

Accounts

 Office of Postsecondary 

Education

Budgetary
260

Budgetary Resources:

1. Budget Authority :

## Appropriations Received $ 868 $0 $ 1,101 $0 $ 

## Borrowing Authority 0000

## Net Transfers 0000

2. Unobligated Balance:

## Beginning of Period 8 0 1 0 

3. Spending Authority From Offsetting Collections:3.1 Earned

## Collected 59 0 14 0 

## Receivable From Federal Sources (2) 000 

3.2 Change in Unfilled Customer Orders

## Advance received (collected) 77 000

## Without advance from Federal sources (66) 000 

 3.5 Subtotal $ 68 $0 $ 14 $0 $ 4. Recoveries of Prior Year Obligations 1 000 6. Permanently Not Available (7) 0 (9) 0 

Total Budgetary Resources $ 938 $ - $ 1,107 $ - $ Status of Budgetary Resources:

8. Obligations Incurred: 

## Direct $ 861 ($0) $ 1,091 ($0) $ 

## Reimbursable 69 (0) 14 (0) 

## Subtotal $ 930 ($0) $ 1,105 ($0) $ 

9. Unobligated Balance:

## Apportioned 7 (0) 1 (0) 

10. Unobligated Balance Not Available 1 (0) 1 (0) 

Total Status of Budgetary Resources $ 938 $ - $ 1,107 $ - $ 

Relationship of Obligations to Outlays:

12.Obligated Balance, Net, Beginning of Period $ 827 ($0) $ 1,041 ($0) $ 14.Obligated Balance, Net, End of Period:

## Unfilled customer orders from Federal Sources (0) ($0) (0) ($0) ## Undelivered Orders 1,244 ($0) 1,567 ($0) 

## Accounts Payable 47 (0) 28 (0) 

15.Outlays:

## Disbursements 534 (0) 552 (0) 

## Collections (137) (0) (14) (0) 

## Subtotal $ 397 ($0) $ 538 ($0) $ 

16.Less: Offsetting Receipts (0) (0) (0) (0) 

Net Outlays $ 397 $ - $ 538 $ - $ 

Budg

Office of Safe & Drug-Free Schools Office of Innovation & Improvement

Page 3 of 3

United States Department of Education

Combining Statement of Budgetary Resources

For the Year Ended September 30, 2005

(Dollars in Millions)

 

Budgetary

Non-Budgetary 

Credit Reform 

Financing Accounts Budgetary

Non-Budgetary 

Credit Reform 

Financing Accounts
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U.S. Department of Education FY 2005 Performance and Accountability Report

Report of 

Independent 

Auditors 

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Other 

Accompanying 

Information 
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U.S. Department of Education FY 2005 Performance and Accountability Report

Other Accompanying Information Overview 

• Management Challenges (See p. 281.) 

• Improper Payment Information Act of 2002 Reporting Details (See p. 289.) 

• Report to Congress on Audit Follow-up (See p. 305.) 

• Credit Management and Debt Collection Improvement Act (See p. 307.) 
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U.S. Department of Education FY 2005 Performance and Accountability Report

Management Challenges for Fiscal Year 2006 

2005 marks the 25th anniversary of the U.S. Department of Education (Department), with its 

mission to ensure equal access to education and to promote educational excellence throughout the 

nation, as well as to improve the management, efficiency, and accountability of federal education 

programs and activities. The U.S. Congress has entrusted the Department with increasing sums of 

taxpayer dollars to fulfill this mission. The Department’s funding has grown five-fold, from 

approximately $14 billion for fiscal year (FY) 1981 to over $71 billion for FY 2005. The Department 

exercises stewardship over these taxpayer dollars and has an obligation to carry out this 

responsibility with diligence. America’s taxpayers and students require and deserve nothing less. 

For nearly a quarter of a century, effective financial management of its programs and operations 

has been a fundamental challenge for the Department. In the 1990s, the Government 

Accountability Office (GAO) cited the Department’s student financial assistance programs as “high 

risk,” noting their significant vulnerability to waste, fraud, and abuse. 

Since 2002, the Department has made noteworthy progress in improving its financial management 

systems and information technology (IT) security. The Department received a clean audit opinion 

for FY 2002, FY 2003, and FY 2004. In 2004, the Department won the President’s Quality Award 

for Financial Management, and received a “green” score on financial management from the Office 

of Management and Budget, signifying that it had satisfied the requirements of the President’s 

Management Agenda for that area. In January 2005, GAO removed the student financial 

assistance programs from its “high risk” list. These are achievements for which the Department 

should be commended. However, additional steps should be taken for continuous improvement of 

the Department’s financial management accountability.

While the Department’s improved systems are helping it to identify a number of problem areas and 

possible misappropriations of federal funds, the Department has much to do to fully achieve 

effective oversight, accountability, and enforcement throughout its programs and operations. To 

improve its stewardship of the taxpayer dollars with which it has been entrusted, the Department 

must increase its diligence to prevent waste, fraud, and abuse. For example, the Office of 

Inspector General (OIG) has recently found: 

• Widespread improper payments in the Migrant Education Program, which has distributed 

more than $1.5 billion in federal funds since FY 2000. 

• Although a Department internal review found that between fiscal years 2001 and 2004, $25.6 

million was awarded to potentially ineligible Hispanic-Serving Institutions, the Department 

has not yet taken immediate action to fix the problem or recover misappropriated funds. 

• Failure to appropriately monitor the expenditure of grant funds in various instances to ensure 

that grantees comply with federal statutes and regulations. 

• Failure to provide required oversight to some Department contracts and contractors, 

including inability to account for contract deliverables. 

• Ongoing deficiencies in internal and external audit follow-up processes leave the Department 

susceptible to risks that related programs are not being effectively managed and Department 

funds are not being used as intended. 
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To correct these problems, the Department has implemented numerous actions since the last 

reporting period. It has established a new Internal Control and Evaluation staff group to assist in 

the review of the monitoring of programs, continues with initiatives and corrective action plans to 

identify high-risk grantees, implemented a procurement training program for Contracting Officer’s 

Representatives, implemented data mining techniques to identify improper payment risks, and 

adapted program monitoring procedures. While these are positive actions, the Department still 

lacks an overall strategy to improve accountability. 

The Reports Consolidation Act of 2000 requires OIG to annually identify and summarize the top 

management and performance challenges facing the Department, as well as to provide information 

on the Department’s progress in addressing those challenges. This report summarizes those key 

areas where effective stewardship is warranted. While this report discusses the progress the 

Department is making, it is evident that additional focus, attention, and emphasis are needed. 

The Department must continue to make the goal of effective stewardship of taxpayer dollars a 

priority. It must establish effective accountability of its grantees, its program participants, its 

contractors, and its employees. Only by emphasizing oversight and enforcement can the 

Department provide effective stewardship over the hundreds of billions of dollars supporting its 

programs and operations. 

Following are some specific areas in which the Department faces the challenge of effective 

accountability of its programs and operations. 

Program Accountability 

The Challenge—Student Financial Assistance 

The Department’s student financial assistance programs are large and complex. The loan and 

grant programs rely upon over 6,000 postsecondary institutions, more than 3,000 lenders, 35 

guaranty agencies, and many contractors. The size and scope of the programs have increased 

greatly in recent years, with total program dollars doubling in the last 10 years alone. Continued 

developments in the modes of education delivery (e.g., non-traditional terms, distance education) 

and virtual paperless electronic delivery of program funds bring new challenges to ensure adequate 

oversight to identify and manage risks. With approximately $70 billion awarded annually through 

the student financial assistance programs and an outstanding loan portfolio of over $400 billion, 

the Department must ensure all entities involved in the programs are adhering to statutory and 

regulatory requirements. The Department’s Office of Federal Student Aid (FSA) must provide 

adequate program monitoring to reduce fraud and abuse in these programs. 

The Department’s responses to OIG audits have shown that stewardship remains a challenge for 

the Department, as it has not taken sufficient actions to protect federal funds or recover funds to 

which entities were not entitled. Examples include: 

• In February 2005, we issued our audit report on Direct Consolidation Loans. We found the 

Department’s procedures did not ensure that all of an applicant’s eligible loans were 

consolidated in a Direct Consolidation Loan. When a loan holder failed to return a loan 

verification certificate (LVC) time, or failed to provide all the information requested on the 

LVC, the Department did not take effective action to ensure that the applicant’s loan was 

consolidated. In addition, the Department provided inappropriate guidance to applicants 

when their loan holders failed to return timely or complete LVCs. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

• In 1997, OIG reported a problem in regard to foreign school Federal Family Education Loan 

(FFEL) borrowing. The problem persists today. An example is the case of an individual who 

pled guilty to student financial aid fraud in February 2003 after obtaining $161,000 in FFEL 

funds by falsely claiming that he and his brother were enrolled at a university in the United 

Kingdom. Our investigation developed information that the individual was responsible for the 

submission and/or preparation of an additional 2,370 loan applications requesting 

disbursement of approximately $43.8 million. Additionally, an OIG audit in August 2005 

found that two guaranty agencies responsible for approximately 79 percent of all foreign 

school loans did not have policies and procedures in place to provide compliance with Dear 

Colleague Letter G-03-348. This Dear Colleague Letter was issued specifically to provide 

assurance that borrowers, who are receiving FFEL disbursement checks directly, were indeed 

enrolled at the foreign institution. 

The Department’s Progress. FSA has agreed to improve its management and to develop and 

implement consistent oversight procedures among its regions. In December 2004, OIG and FSA 

representatives initiated the OIG/FSA Joint Fraud Initiative—a proactive approach to identify and 

reduce fraud and abuse in federal student financial assistance programs. 

The Challenge—Risk Management of Elementary and Secondary Education Programs 

The funds the Congress has provided to elementary and secondary programs have grown from 

$6.9 billion in FY 1980 to nearly $38 billion in FY 2005. Identifying and taking corrective action to 

detect and prevent fraudulent activities by state and local employees, as well as addressing 

accountability and compliance issues by program participants, remains a challenge for the 

Department. Some recent examples follow. 

• An OIG audit of the Wyandanch Union Free School District in New York found that 

Wyandanch’s records for $6.6 million of Title I and Title II expenditures from July 1, 1999, 

through June 30, 2004, were unauditable. Specifically, we noted that Wyandanch had weak 

controls over its accounting functions, including reconciliations, reclassifications, and 

recording of expenditures for Title I and Title II funds. 

• An OIG audit of telecommunications charges at the New York City Department of Education 

found approximately $1.5 million (75 percent of sampled transactions from July 1, 1999, 

through June 30, 2003) that could not be supported. 

• A federal task force consisting of OIG, the Federal Bureau of Investigation (FBI), Internal 

Revenue Service/Criminal Investigation Division, U.S. Department of Agriculture, and the 

Texas Education Agency developed information that led to the conviction and sentencing of a 

number of officials of a charter school in Texas for their roles in defrauding federal and state 

government agencies. Our investigation found that the school misreported student 

attendance data and consequently received funding for which it was not entitled. From 

academic year 1999–2000 ending through academic year 2001–02, the school received 

approximately $2,566,565 in federal funding. 

• OIG conducted both an audit and an investigation related to the accountability of Title I funds 

by the Orleans Parish School Board (Orleans Parish). The audit found that Orleans Parish did 

not properly account for nearly $69.3 million of Title I funds from July 1, 2001, through 

December 31, 2003. Our investigation, conducted jointly with the FBI and the New Orleans 
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U.S. Department of Education FY 2005 Performance and Accountability Report

Police Department, uncovered a $70,000 kickback scheme. Seven former employees of 

Orleans Parish have pled guilty for their roles in the scheme to date. 

• A recent OIG audit of the Migrant Education Program administered by the Puerto Rico 

Department of Education found that from a sample of 171 enrolled students, all were 

determined to be ineligible. In May 2003, the Department visited the Puerto Rican 

department, and although the team examined eligibility certificates, it did not test the 

accuracy of the data. Had the Department performed such testing, the inaccuracy and 

fabrication of enrollment data most likely would have been uncovered. Also, we are currently 

performing Migrant Education Program audits in Georgia, Oklahoma, and Arkansas, and 

reviewing allegations regarding inflated migrant student counts in a number of other states. 

Increased awareness by program managers regarding their responsibility to oversee 

programs carefully, rather than to focus exclusively on technical assistance, would help 

prevent these losses and protect program integrity. 

The Department’s Progress. The Department has made risk management a priority. Its interoffice 

Risk Management Team, under the leadership of the Under Secretary, is undertaking projects to 

address accountability and compliance issues, as identified by OIG audits, referrals, and single 

audits conducted by nonfederal auditors. It works with program offices to designate grantees as 

“high-risk” when the situation warrants and has dedicated a weekly meeting to risk management 

issues. In addition, the Department has sent multidisciplinary teams into key locations, as 

identified through OIG audits, to review and assess the progress the “high-risk” entity is making in 

addressing its weaknesses. 

The Challenge—Unsolicited Grants and Congressional Earmarks 

Unsolicited grants are awards made by the Department, in most cases, as a result of grantee 

initiative. Such awards do not result from formal Department solicitations for applications. 

Complications can arise with unsolicited grants, as many recipients of these funds tend to be firsttime participants in federal education programs. They are often unfamiliar with applicable 

regulations and require additional direction, guidance, and support with the compliance processes. 

In FY 2004, unsolicited grants totaled more than $47 million for 59 grantees. The Department 

must ensure that unsolicited grant applications receiving awards are genuinely unsolicited, contrary 

to the evidence in some of our recent audits. 

Like unsolicited grants, congressional earmarks do not result from formal solicitations for 

applications. Congress earmarked specific education appropriations totaling nearly $400 million for 

1,175 local projects in FY 2005, an increase of more than 40 percent over the previous year. The 

Department is required to ensure that recipients of its funds use them in accordance with 

applicable laws and regulations. However, the Department has stated it does not have enough 

staff to administer and properly monitor the recipients of congressional earmarks. It should be 

noted that some grant projects that begin as unsolicited grants receive congressional earmarks in 

subsequent years. 

The Department’s Progress. The Department plans to develop a toolkit to help new grantees 

properly administer their grant programs and to continue to re-engineer its grants monitoring 

process. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

The Challenge—Data Reliability 

Data reliability is both a compliance issue and a performance issue. For example, the No Child Left 

Behind Act, which ties funding directly to student achievement and accountability, requires states 

to report on performance in many areas. The utility of this reporting, and ultimately funding 

decisions, depends on the collection of reliable data. Without reliable data, the Department cannot 

make effective decisions on its programs, or know if the funds it disburses are indeed reaching the 

intended recipients. OIG has performed a number of audits of Title I, Part A, and the Carl D. 

Perkins Vocational and Technical Education Act education programs and concluded that 

management controls must be strengthened at the local, state, and federal levels to ensure that 

data are complete, accurate, and reliable. 

The Department’s Progress. The Department recognized the need to improve its data quality and 

data reliability, and, in FY 2003, launched the Performance-Based Data Management Initiative to 

streamline existing data collection efforts and information management processes. The resulting 

Education Data Exchange Network is expected to provide state educational agencies and the 

federal government the capacity to transfer and analyze information about education programs. 

Operations Accountability 

The Challenge—IT Capital Investment 

The Department anticipated its FY 2006 IT capital investment portfolio will be $385.8 million. It is 

critical that the Department have a sound information technology investment management control 

process that can ensure that technology investments are appropriately evaluated, selected, 

justified, and supported. The Department needs to continue to improve its capital planning and 

investment control oversight. The Department has focused significant attention on this area and 

has made an effort to make this process more efficient. In the past few months, the Department 

has revised the charter of the Investment Review Board (IRB) and restructured the Planning and 

Investment Review Working Group, the working group that supports the IRB. It is premature to 

judge the effectiveness of these changes. 

Many critical IT projects are pending, such as the Oracle 11i project. In 2004, OCFO and FSA 

announced plans to consolidate their separate platforms into one functional financial management 

system, using version 11i of Oracle Federal Financials, by October 2006. However, in February 

2005, we were informed that the Department had decided to forego this consolidation. Although 

this decision is bound to mitigate significant risks associated with the consolidation and changes in 

interfacing systems, the initiative is still quite complex and high risk. We have recommended, due 

to the growing complexity and costs for IT projects, the Department consider, at least for its most 

major investments, arranging for an independent, professional assessment of those projects as 

part of its capital investment process. While the Department appears to be routinely including 

Earned Value Management in its business cases, as required by the Office of Management and 

Budget (OMB), and including Independent Verification and Validation contracts in several projects, 

these actions alone will not provide the type of expert, outside assessment that we believe would 

greatly benefit the Department’s capital investment process, particularly if this assessment occurs 

prior to the initiation of a major project.

The Department’s Progress. The Department has made an effort to better articulate the 

relationship between IT projects and the Department’s lines of business. It has also strengthened 
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U.S. Department of Education FY 2005 Performance and Accountability Report

its business cases and is doing a better job of systematically tracking its high-risk IT investments. 

In 2004, it also deployed the Electronic Capital Planning and Investment Control system, which will 

assist in the management of IT projects across the Department. 

The Challenge—IT Systems 

The Department is required to adequately manage and safeguard IT assets and meet 

e-government requirements. Its 60 IT systems comprise a number of complex and costly 

investments that are essential to conducting ongoing business and meeting the agency’s core 

mission. The Department needs to complete its development of a well-defined enterprise 

architecture, practice sound system analysis, and design concepts and ensure that robust system 

acquisition and development life cycle methodologies are in place and adhered to. Currently, there 

is a lack of common understanding of the life cycle of systems development processes across the 

agency, and varied methods of life cycle development execution have led to inefficient use of both 

time and resources. The Department must continue moving forward in ensuring that its systems 

are secure, in accordance with the Federal Information Security Management Act of 2002, in order 

to protect the data they contain and the operations they support. Lastly, the Department must 

ensure that it is effectively managing its transition to governmentwide system solutions and in 

addressing OMB’s Line of Business initiative, a governmentwide analysis of five lines of business 

supporting the PMA goal of expanding electronic government. 

The Department’s Progress. The Department has embarked on several modernization efforts that 

have the potential to increase business efficiency and improve customer service. It is moving 

forward with its ongoing system development and consolidation efforts planned for FY 2006. It has 

also devoted time and resources to enhance security for its systems, including formally certifying 

most of its general support systems and major applications. We noted that the process did not 

adequately identify the residual risks that Department officials were accepting at the time of 

system certification, and the Department implemented a corrective action plan. In addressing 

OMB’s Line of Business initiative, the Department currently has an E-Authentication Program that 

represents its commitment to the implementation of E-Authentication and lays out the roles and 

responsibilities for implementing the initiative. 

The Challenge—Procurement 

The Department contracts for many services that are critical to its operations, at a value of over 

$929 million in FY 2004 alone. The Department must improve its procurement and contract 

management process to ensure that it is receiving quality goods and services in accordance with 

the contract terms. The Department needs to use pre-award audits, strengthen its ability to clearly 

and completely define contract requirements, ensure effective communication between relevant 

contracting and program office personnel, and ensure that contractors are performing in 

accordance with contract terms and conditions. 

The Department’s Progress. In 2005, the Secretary directed the Chief Acquisition Officer and 

Contracts and Acquisition Management Director to develop a training program reinforcing the 

Department’s contracting processes and applicable laws and regulations. Senior managers, 

contracting personnel, and relevant program office personnel will be required to attend this 

training. The Secretary has also directed each Principal Officer leading a program office to take 

immediate steps and personal responsibility for ensuring contracts are awarded properly and 
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U.S. Department of Education FY 2005 Performance and Accountability Report

effectively monitored, and has designated a senior advisor reporting directly to her to oversee 

transformation activities to ensure effective investing and risk management of contracts. 

The Challenge—Human Capital Management 

Like most federal agencies, the Department will see a significant percentage of its work force 

eligible for retirement in 2006. The Department is also continuing to see a significant change in 

critical skill requirements for many of its staff. Identification of needed action steps and prompt 

implementation of those action items to adequately address these work force and succession 

planning issues, including recruitment, hiring, and retention, is critically important. Absent 

sufficient well-trained and highly skilled staff, the Department cannot provide program or 

operations accountability. In 2004, the Department recognized that its OneED plan, which it 

developed in 2001 in response to the President’s Management Agenda, was not a comprehensive 

human capital plan, and it developed and began implementing a new plan in fall 2004. The 

development of this plan was a positive step by the Department; however, it is premature to judge 

the extent to which the specific needs of the individual offices are being identified or effectively 

addressed as the plan is being implemented. 

The Department’s Progress. As noted, in 2004, the Department released a new Human Capital 

plan that replaced its OneED report. The Department has begun implementation of the plan. In 

2005, FSA, with the aid of a consultant, also developed its own Human Capital plan. The FSA plan 

specifically focuses on the needs of FSA and is intended to help SFA attract and retain a highly 

skilled and motivated work force. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

Improper Payments Information Act of 2002 

Reporting Details 

The Improper Payments Information Act of 2002 (IPIA)1 and the Office of Management and 

Budget’s (OMB) implementing guidance, Memoranda M-03-132

, and OMB Circular A-1363, require 

agencies to annually review all programs and activities to identify those susceptible to significant 

improper payments. The guidance defines significant improper payments as those in any particular 

program that exceed both 2.5 percent of program payments and $10 million annually. For each 

program identified as susceptible, agencies are required to report the annual amount of estimated 

improper payments, along with steps taken and actions planned to reduce them, to the President 

and the Congress. 

To facilitate agency efforts to meet the reporting requirements of the IPIA, OMB announced a new 

President’s Management Agenda4

 (PMA) program initiative beginning in the first quarter of fiscal 

year 2005 entitled Eliminating Improper Payments. Previously tracked along with other financial 

management activities through the Improving Financial Performance initiative, the establishment of 

a dedicated initiative focused the Department of Education’s (Department) improper payments 

efforts. Under the new initiative, the status and progress of actions to further identify, report on, 

and reduce improper payments are now tracked and reported to OMB in quarterly PMA scorecards. 

The Department has divided its improper payment activities into the following segments: Student 

Financial Assistance Programs, Title I Program, Other Grant Programs, and Recovery Auditing. 

Student Financial Assistance Programs 

Federal Student Aid (FSA) operates and administers the majority of the Higher Education Act of 

1965, as amended (HEA), Title IV Student Assistance (Title IV) programs for the Department of 

Education.5

 In fiscal year 2004, nearly $70 billion was provided to students and families to assist 

them in overcoming the financial barriers that make it difficult to attend and complete 

postsecondary education. FSA administers a variety of grants, loans, and loan guarantees through 

its financial assistance programs. The processes developed to administer the programs are 

responsive to changes in statutes, the reauthorization of existing statutes, and the changing needs 

of educational institutions and their students. 

Title IV student assistance programs are large and complex. FSA relies upon over 6,000 eligible 

postsecondary institutions in addition to 3,200 lenders, 35 loan guaranty agencies, and a number 

of loan servicers to administer its programs. Except for funds received as an administrative cost 

allowance, FSA program funds received by a school are held in trust by the school for the students, 

the Department, and, in some cases, for private lenders and guaranty agencies. 

 

1

 Public Law 107-300, Stat. 2350, November 26, 2002. 

2

 OMB Memorandum M-03-13, Improper Payments Information Act of 2002, Public Law 107-300 (May 21, 2003). 

3

 OMB Circular No. A-136 (Revised), Financial Reporting Requirements (August 23, 2005). 

4

 Executive Office of the President, Office of Management and Budget, The President’s Management Agenda, Fiscal Year 

2002 (August 2001). 

5

 Title IV is a part of the Higher Education Act of 1965 that authorized and regulates various student financial aid programs. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

The HEA and subsequent Department regulations to implement the law are comprised of a 

succession of eligibility definitions, standards, requirements, tests, and other internal controls 

designed to minimize the risk that improper payments will be made either to students, or to 

postsecondary or financial institutions. The law provides criteria for an institution to be eligible to 

participate in student financial assistance programs and mandates the joint responsibility of a 

program integrity triad made up of state educational agencies, accrediting agencies, and the 

Department. This structure, while empowering educational institutions to operate programs based 

on area needs, can increase the risk of improper payments and pose oversight and monitoring 

challenges for the federal government. 

FSA engages in an ongoing process of actively identifying new risks in the programs it administers. 

Noncompliance with statutes, regulations and policies, whether by students, schools, lenders, 

guaranty agencies, or loan servicers, not only places Title IV funds at risk, but also erodes public 

trust in the programs. To address these concerns, FSA has several initiatives underway to identify 

real or potential risks for fraud, waste, abuse, mismanagement, and inadvertent errors in the 

delivery of student financial assistance programs and funds. 

Controls Over Financial Aid Applications 

Over 13 million postsecondary school students apply for federal student aid each year by 

completing the required Free Application for Federal Student Aid (FAFSA). Information provided on 

the FAFSA is used to (1) calculate the expected family contribution (EFC), an amount applicants 

and their families are expected to contribute to the cost of their postsecondary education expenses 

for a given award year, and (2) confirm eligibility through computer matches with other agencies. 

Unless the application is rejected due to inconsistencies or inadequate information, the 

Department’s central processing system will automatically calculate the EFC. The HEA establishes 

the formula for the EFC calculation. The result is a measure of the applicant’s financial strength, 

and is significant in the determination of the amount and type of aid a student can receive. 

The Department processes the FAFSA data it receives each year, using a sophisticated set of 

database matches and computerized editing techniques to confirm student eligibility for the Title IV 

programs and to target error-prone applications for a process called verification. All applicants are 

subjected to one or more of the student eligibility database matches and approximately 30 percent 

(approximately 3.9 million) are selected for verification. 

Those applicants selected for verification are required to submit documentation to their school in 

order to verify their reported household size, number of family members attending college, 

adjusted gross income (AGI), U.S. income taxes paid, and certain untaxed income and benefits 

reported on the FAFSA. Schools are required to collect copies of income tax returns from 

applicants who file returns (and their parents, if the applicant is dependent) to determine that AGI, 

income taxes paid, and certain untaxed income and benefits amounts were correctly reported on 

the FAFSA. Any discrepancies detected during the verification process must be corrected. 

Risk Assessment 

As required by the IPIA, FSA inventoried its programs during fiscal year 2005, and reviewed 

program payments made during fiscal year 2004 (the most recent complete fiscal year available), 

to assess the risk that a significant amount of improper payments were made. The review 

identified and then focused on five key programs, denoting 99.6 percent of FSA’s fiscal year 2004 
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U.S. Department of Education FY 2005 Performance and Accountability Report

outlays. (Outlays in this context represent the amount of money actually spent during a fiscal 

year.) 

The criteria for determining susceptible risk within the programs were defined as follows: 

• For those programs whose annual outlays did not exceed the OMB Memorandum M-03-13 

susceptibility threshold of $10 million, a comprehensive program risk assessment was not 

prepared and the programs were determined to be unsusceptible to the risk of significant 

improper payments. 

• For programs whose outlays were greater than $10 million, but less than $200 million, 

estimates of improper payments were prepared using the susceptible threshold error rate 2.5 

percent. Programs with improper payment estimates of less than $5 million were deemed 

unlikely to be susceptible to the risk of significant improper payments. 

• Programs were selected for further determination of susceptibility to significant improper 

payments if annual outlays exceeded $200 million. 

• Finally, programs were automatically deemed susceptible if previously required to report 

improper payment information under OMB Circular A-11, Budget Submission, former Section 

57.6

 

Risk Susceptible Programs 

The following Title IV programs were deemed to be potentially susceptible to the risk of significant 

improper payments based on OMB’s threshold of potential annual improper payment amounts 

exceeding both 2.5 percent of program payments and $10 million. 

Federal Family Education Loan Program 

The Federal Family Education Loan (FFEL) program is a guaranteed loan program established by 

the HEA. Under the FFEL program, eligible students apply to lenders such as banks, credit unions, 

and savings and loan associations for loans to vocational, undergraduate, and graduate schools to 

help pay for educational expenses. If the lender agrees to make the loan, a state or private 

nonprofit loan guaranty agency insures the loan against default. The federal government 

subsequently reinsures this loan. FFEL programs offer various repayment options and provide four 

types of loans to qualified applicants. 

• Subsidized Stafford Loans—Need-based loans in which the government pays interest when 

the student is in school and during qualified periods of grace and deferment. 

• Unsubsidized Stafford Loans—Loans in which the government does NOT pay interest. 

• PLUS Loans—Loans to parents of dependent undergraduate students in which the 

government does NOT pay interest. 

• Consolidated Loans—Loans that allow borrowers to combine multiple outstanding federal 

student assistance loans. 

 

6

 The four original programs identified in OMB Circular A-11, Section 57 were Student Financial Assistance (now Federal 

Student Aid), Title I, Special Education Grants to States, and Vocational Rehabilitation Grants to States. Subsequently, 

after further review of the program risk, OMB removed Special Education Grants to States and Vocational Rehabilitation 

Grants to States from the list. OMB considers Section 57 programs susceptible to significant improper payments regardless 

of the established thresholds. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

During fiscal year 2004, net loans of $39 billion were provided to 5.4 million FFEL recipients. The 

average subsidized FFEL loan was $3,450, while the average unsubsidized loan was $4,868. In 

addition, FSA paid an estimated $3.0 billion to lenders for interest and special allowance subsidies, 

and an estimated $3.9 billion to guaranty agencies to reimburse them for defaulted FFEL loans, 

loan processing fees, issuance fees, and account maintenance fees required by the HEA. The 

interest payments and special allowance subsidies, combined with the default, loan processing, 

issuance, and account maintenance fees comprise the program outlays at risk. 

Federal Pell Grant Program 

The Federal Pell Grant (Pell Grant) program provides need-based grants to low-income 

undergraduate and certain post baccalaureate students to promote access to postsecondary 

education. Students may use their grants at any one of approximately 6,000 eligible 

postsecondary institutions. Grant amounts are dependent on the student’s EFC, the cost of 

attending the institution, whether the student attends full-time or part-time, and whether the 

student attends the institution throughout the entire academic year. The statutory maximum 

award in fiscal year 2004 was $4,050, and the average award was $2,441. 

Under the terms of the HEA, eligibility for Pell Grant awards is determined exclusively through 

applicant self-reported income, family size, number of dependents in college, and assets. These 

data are key drivers in the determination of program eligibility and eligible amounts. However, 

FSA historical analysis indicates that the accuracy of self-reported data is prone to error, and that 

these errors subsequently increase the risk of improper payments within the Pell Grant program. 

While limited matching of some self-reported income data is currently conducted with data from 

the Department of the Treasury’s (Treasury) Internal Revenue Service (IRS) annual income tax 

filings, FSA is pursing additional authority to allow greater access to the IRS data. Specifically, FSA 

has requested authorization to verify 100 percent of the annual student financial aid applications 

with the financial data reported to the IRS in annual income tax returns. The ability to verify selfreported financial data could result in a significant reduction of the risk of improper payments in 

the Pell Grant program. Legislation to amend the Internal Revenue Code to permit a 100 percent 

data match has not yet been enacted, and at this time we are uncertain as to whether, or when 

such legislation may be enacted. In the interim, FSA is working with OMB to develop alternative 

methods. 

Federal Supplemental Educational Opportunity Grant 

and Federal Work-Study Programs 

The Federal Supplemental Educational Opportunity Grant (FSEOG) program is one of three 

campus-based7

 formula grant programs allocated to eligible institutions for the purpose of 

providing grants to needy undergraduate students attending the institution. During fiscal year 

2004, the Department allocated $770 million through the FSEOG program to institutions who 

awarded grants to about 1.2 million low-income students. The awards ranged from $100 to 

$4,000, with the average award about $778. 

The Federal Work-Study (FWS) program is another of the three campus-based formula grant 

programs allocated to more than 3,300 participating institutions of higher education for the 

purpose of providing part-time employment to needy undergraduate and graduate students. In 

 

7

 Campus-based financial aid programs are administered to students by the postsecondary institutions they attend and not 

by the Department of Education. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

fiscal year 2004, the Department allocated $999 million to schools, which provided funds for parttime employment assisting about 858,000 students with financing the costs of postsecondary 

education. The average award was $1,394. 

The FSEOG and FWS programs were surveyed and determined not to be at risk of significant 

improper payments. Combined, the two programs constituted $1.8 billion, or just 2.6 percent of 

the Department’s total payments in fiscal year 2004. Each year, participating institutions complete 

the Fiscal Operations Report and Application to Participate (FISAP). The FISAP serves as a 

mechanism to report prior year funds usage and current year need. Each year, the aggregated 

amount of need (for all participating institutions) far exceeds the appropriated amounts for both 

FSEOG and FWS programs. Therefore, by design, the risk of over-awarding funds is inherently 

minimized since award distribution is prioritized by order of need, and not all students with 

demonstrated need actually receive awards. Moreover, ongoing oversight activities, including 

audits and program reviews have not revealed significant risk in either of these programs. 

William D. Ford Federal Direct Loan Program 

Like loans made under the FFEL program, the William D. Ford Federal Direct Loan (Direct Loan) 

program provides the following four types of loans to qualified individuals to assist with the cost of 

postsecondary education: (1) Stafford Subsidized; (2) Stafford Unsubsidized; (3) PLUS; and 

(4) Consolidation. 

Under the Direct Loan program, the Department uses U.S. Department of the Treasury (Treasury) 

funds to provide loan capital directly to schools, which then disburse loan funds to students. 

During fiscal year 2004, the Department loaned $12.8 billion in Direct Loans through participating 

institutions to 1.8 million applicants with financial need who met the program criteria. The average 

subsidized loan amount was $3,675 while the average unsubsidized loan amount was $4,991. 

Similar to the Pell Grant program, improper payments in the Direct Loan program are generally the 

result of errors in the self-reported eligibility data provided on the FAFSA. However, since the aid 

is provided as a loan rather than a gift, and is subject to full repayment (some loans including 

interest), eligibility errors alone do not necessarily result in a significant loss to the government. 

Moreover, the authority of the Department to successfully pursue the collection of defaulted loans 

(properly or improperly made) through tax refund offsets, wage garnishment offsets, and other 

legal actions, further reduces the government’s risk. The principal risk to the government lies in 

the cost of administering the loans and the subsidy—the net present value of cash flows to and 

from the government that result from providing these loans to borrowers. 

FSA contracts with multiple educational and financial institutions to originate, disburse, service, and 

collect Direct Loans, while the HEA and subsequent reauthorization actions determine the allowable 

interest rates and fees. Eligibility requirements are determined through the analysis of factors 

such as income and assets, and the schools make the final award decisions. Because of this 

multifaceted structure that encompasses multiple entity involvement and variable annual eligibility 

requirements, a full and rigorous assessment of the rate of improper payments in the Direct Loan 

program is extremely complex. Despite this challenge, FSA is analyzing the eligibility data used to 

determine the Pell Grant improper payment rate as part of its comprehensive effort to lower the 

risk of improper payments in all FSA financial aid programs that are reliant on applicant’s selfreported eligibility information. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

FSA Administrative Payments 

As part of our annual assessment of risk for the susceptibility of significant improper payments, we 

reviewed other types of payments made by FSA. An initial review of the administrative payments 

such as payroll disbursements, vendor payments, and travel expenses, determined that those 

payments were not susceptible to the risk of significant improper payments, as defined by the IPIA

and the related OMB implementation guidance. Further information on vendor payments is 

reported in the Recovery Auditing section of this report. 

Statistical Sampling 

The size and complexity of the student aid programs make it difficult to consistently define 

“improper” payments. The legislation and OMB guidance use the broad definition, “Any payment 

that should not have been made or that was made in an incorrect amount under statutory, 

contractual, administrative, or other legally applicable requirement.” FSA has a wide array of 

programs, each with unique objectives, eligibility requirements, and payment methods. 

Consequently, each program has its own universe (or multiple universes) of payments that must 

be identified, assessed for risk, and, if appropriate, statistically sampled to determine the extent of 

improper payments. 

Federal Family Education Loan Program 

FSA has been working with OMB and the Department of Education’s Office of the Chief Financial 

Officer (OCFO) on the implementation of the PMA initiative, Eliminating Improper Payments. The 

initiative involves a range of quarterly activities designed to ensure that the Department is 

prepared to meet the annual reporting requirements of the IPIA. Through meetings and 

discussions with OMB and OCFO, FSA is finalizing its sampling methodology for estimating improper 

FFEL program payments in compliance with the requirements of the IPIA and implementation 

guidance established in OMB Memorandum M-03-13. 

In fiscal year 2005, FSA developed a baseline of estimated improper payments in the FFEL program 

by evaluating the following information: 

• Overpayments identified during FSA Financial Partners Service (FP) program reviews of 

guaranty agencies, lenders and loan servicers during fiscal year 2004. 

• Overpayments identified by independent public accountants (IPA) and third-party audit firms 

in Single Audit8

 reports for guaranty agencies and lenders. 

• Overpayments reported by the Department of Education’s OIG in audits and reviews of 

guaranty agencies, lenders, and loan servicers during fiscal year 2004. 

• Outstanding loan balance amounts at guaranty agencies, lenders, and servicers selected for 

review by the OIG, IPAs and FSA’s FP. 

The information was compiled by entity and compared to the total payments made to those entities 

in fiscal year 2004 to determine if there exists a susceptibility to significant improper payments. 

The focus of this analysis was to (1) determine a baseline error rate for FFEL payments, (2) 

establish an action plan for improving the accuracy of future measurements, and (3) ensure that 

 

8

 “Single audit” means an audit, which includes both the entity's financial statements and the Federal awards pursuant to 

the Single Audit Act of 1984, P.L. 98-502, and the Single Audit Act Amendments of 1996, P.L. 104-156. The provisions of 

the statute are set forth in OMB Circular No. A-133, Audits of States, Local Governments, and Non-Profit Organizations. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

the planned methodology and approach for measuring improper payments meets the requirements 

of the IPIA. 

In March 2005, the OIG raised concerns with FSA's estimates of improper payments. Specifically, 

FSA did not attempt to include any estimate of improper payments within the student loan 

programs, did not extrapolate liabilities from compliance problems identified through OIG audits, 

and did not include restitutions and penalties resulting from OIG investigations. FSA relied on the 

actual sustained liabilities from audits and program reviews, and estimated the effect of 

misreporting of income in the Pell Grant program, which was not reflective of the actual magnitude 

of improper payments in the student loan programs. 

Federal Pell Grant Program 

Section 484(q) of the HEA authorized the Department to confirm directly with the IRS, the AGI, 

taxes paid, filing status, and number of exemptions reported by students and parents on the 

FAFSA. Under IRS Code, FSA is not authorized to view the complete data, but is provided with 

summary data by the IRS. 

The Department began routinely conducting studies with the IRS using FAFSA data for the 2000-

2001 award year. Data provided by the IRS study were used to estimate improper payments for 

the Pell Grant program for the 2003-2004 award year. It is currently working with the IRS on the 

fifth annual study, using FAFSA data collected for the 2004-2005 award year, which will be 

matched with IRS data for 2003 income tax year. (Applicants for the 2004-2005 award year 

reported income information based on their actual or estimated 2003 income tax year.) 

In the latest completed study, which compared 2003-

2004 FAFSA data with 2002 IRS data, a sample file of 

155,000 FAFSA applicant records was provided to the 

IRS along with a sampling program designed to allow 

IRS to select the desired analysis sample from the 

larger file. This was done to preserve IRS 

confidentiality requirements. The final sample, 

generated by the IRS, contained 50,000 independent 

undergraduates and 50,000 dependent 

undergraduates (for whom parental data was 

matched). 

The IRS matched the final sample to its main 

database, and when a match occurred, it extracted the 

fields for AGI, taxes paid, type of return filed and 

earned income tax credit information for the tax filer 

and compared this information to similar information 

reported to the Department on the FAFSA. Using a 

computer program supplied by FSA, the IRS calculated revised EFC and Pell Grant awards for 

matching records by substituting the IRS income information for the FAFSA income information. 

The IRS provided aggregated statistical tables to the Department that presented the results of 

these comparisons. The results allowed the Department to estimate the following Pell Grant 

improper payment information: 

Pell Grant Improper Payment Estimates 

($ in millions)

Fiscal Year Disbursements UnderpaymentsOverpaymentsTotal Improper Payments*Percent Underpayments*Percent Overpayments*Percent Total Improper Payments*

 2001 $ 9,851 $ 64 $272 $336 .8% 3.4% 4.2% 

 2002 $11,619 $ 49 $328 $378 .5% 3.3% 3.8% 

 2003 $12,680 $205 $365 $569 1.8% 3.1% 4.9% 

 2004 $13,042 $221 $349 $571 1.8% 2.8% 4.5% 

 *amounts are rounded 
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U.S. Department of Education FY 2005 Performance and Accountability Report

• Improper Payment Rate and Amount—The average amount of over- and under-reporting of 

FAFSA income data—as compared to the IRS income data—and the potential dollar amount of 

improper Pell Grant awards, 

• Assessment of Measurement Accuracy—The volume of applicants for whom a mismatch 

between FAFSA and IRS data may be legitimate, 

• Identification of Further Potential Risks—Types of applicants who are more likely to misreport 

income on the FAFSA, 

• Analysis of Existing Edits—Validity of the current verification selection edits, and information 

to further refine them. 

The previous table presents a historical analysis of the results of the IRS Statistical Study of Pell 

Grants. 

William D. Ford Federal Direct Loan Program 

The analysis and corrective actions developed for the Pell Grant program, relative to application 

accuracy, will also improve the accuracy of Direct Loan program applications, because (1) the same 

application is used for both programs, and (2) eligibility for subsidized Direct Loans are founded on 

the same needs-based analysis formula and institutional cost of attendance. FSA, in coordination 

with OMB, plans to continue analyzing the interactive effects of the targets and strategies 

developed for the Pell Grant program before determining an appropriate sampling methodology for 

the Direct Loan program. Should the program be determined to be susceptible to the risk of 

significant improper payments, a statistically valid sample will be developed and reported in the 

FY 2006 Performance and Accountability Report. 

Corrective Actions 

Federal Family Education Loan Program 

FSA is working closely with OMB and OCFO in the development of an action plan designed to (1) 

improve the accuracy of the FFEL improper payment estimate, and (2) reduce the level of risk and 

the amount of known improper payments in the FFEL program. Understanding and developing 

systems of internal controls over program payments is crucial to these goals. FSA has a number of 

existing internal controls integrated into its systems and activities. Program reviews, IPA and OIG 

audits of guaranty agencies, lenders, and servicers are some of its key management oversight 

controls. Other control mechanisms in place are described below. These controls, among others 

throughout FSA, greatly reduce the potential risk of significant improper payments. 

• System Edits—The systems used by the guaranty agencies, lenders, and servicers to submit 

fee bills for payment include “hard” and “soft” edits to prevent erroneous information from 

being entered into the system and translated into erroneous payments. The hard edits 

prevent fee bills with certain errors from being approved, and these errors must be corrected 

before proceeding with payment processing. The soft edits alert the user and FSA to 

potential errors. These warnings are reviewed by FSA prior to approval of payment. 

• Reasonability Analysis—Data stored in the National Student Loan Data System (NSLDS) are 

used as a tool to assess the reasonability of fee billing, and to determine payment amounts 

for account maintenance and loan issuance processing fees paid to guaranty agencies. FSA 

also performs trending analysis of previous payments to guaranty agencies and 
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U.S. Department of Education FY 2005 Performance and Accountability Report

lenders/servicers, as a means of evaluating reasonableness of changes in payment activity 

and payment levels. 

• Focused Monitoring and Analysis—FSA targets specific areas of FFEL payment processing that 

are at an increased risk for improper payments as areas of focus for increased monitoring 

and oversight. 

These existing controls are re-evaluated on a regular basis to determine their effectiveness and to 

allow FSA to make necessary corrections. Further, FSA’s action plan incorporates the development 

of additional internal controls designed to improve the accuracy of future FFEL payments to 

lenders, servicers, and guaranty agencies. 

• Special Allowance Payments—Increased focus and review of payments of fees to lenders and 

servicers associated with loans eligible for tax- exempt special allowance payments. 

• Guaranty Agencies—Enhanced review of the Guaranty Agency Financial Report (Form 2000) 

to report collection activities, claims reimbursement, and loan portfolio status; and underand over-billings for account maintenance, loan issuance, and processing fees associated with 

incorrect NSLDS reporting. 

Additional controls are being considered for both cost efficiency and effectiveness in reducing FFEL 

payment errors. Updates to the corrective action plan will be reported to OMB in the quarterly PMA 

scorecard for Eliminating Improper Payments. 

Federal Pell Grant Program 

FSA has several initiatives underway designed to improve its ability to detect and reduce improper 

payments made in the Pell Grant program. Working with OMB on quarterly action plan objectives 

designed to facilitate full implementation of the IPIA, it has identified additional methods to 

determine the error rate and to estimate the annual amount of improper payments. 

Preliminary Analysis. Eligibility for Title IV student aid is determined exclusively through 

applicant self-reported income, family size, number of dependents in college, and assets. These 

data are reported through the FAFSA, which applicants typically complete prior to the April 15 IRS 

tax filing deadline. The FAFSA data are key drivers in the determination of student aid program 

eligibility and eligible amounts. FSA performs regular analysis on the accuracy of income and other 

financial data submitted via the FAFSA. These routines include a variety of methods and 

techniques designed to ensure payment accuracy. 

• Annual Analysis of System Data—Analysis of central processing system data for anomalies. 

• Focus Groups—Meetings with educational institutions to discuss improving the integrity of 

FSA programs. 

• Quality Assurance—Enhanced program integrity processes. 

• Verification—A process by which institutions compare applicant data to IRS data for the same 

period. 

FSA is also using the IRS statistical study in which financial data from a random sample of FAFSA 

submissions is compared to financial data reported to the IRS in annual income tax filings to 

identify new solutions for preventing improper payments. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

The analysis of the IRS statistical study indicates that failure to accurately report income, family 

size, number of dependents in college, and assets may be the primary cause of improper payments 

within the Pell Grant program. It is expected that a decrease in financial reporting errors would 

have the greatest impact on the reduction of estimated improper payments. In an effort to 

achieve this reduction, FSA has requested authorization to perform a 100 percent match of the 

financial data reported on the FAFSA to the financial data reported to the IRS on applicant income 

tax returns. However, current law does not permit FSA to verify income data with the IRS. 

Although FSA plans to pursue this option, it must continue to meet the reporting requirements of 

the IPIA. FSA is pursuing alternatives that will accomplish the same result: reduced improper 

payments in the Pell Grant program. 

Alternatives to Verifying Self Reported AGI. FSA, working with officials from OMB and OCFO 

has been exploring alternatives to the 100 percent IRS match for verifying self-reported financial 

information reported on the FAFSA, and assessing the strengths and weaknesses of those 

alternatives. Listed below are some of the alternatives that are being considered: 

• Private database matches (data aggregators). 

• Require actual tax returns for FAFSA filing. 

• Require update to income data at tax filing deadline. 

• Expand verification beyond 30 percent. 

The ongoing action plan details the steps necessary to (1) perform statistical analysis, (2) complete 

the review of the alternative, (3) incorporate current IRS statistical analysis, and (4) submit the 

recommended alternative or combination of alternatives. Progress in completing actions will 

continue to be reported to OMB in the quarterly PMA scorecard initiative, Eliminating Improper 

Payments. 

FSA’s ability to project improper payment reductions is wholly dependent upon the completion of 

the corrective action plan and the selection of an alternative approach to a 100 percent IRS income 

match for every application. This will not be a quick or easy process. It is important to note that 

the system development life cycle for the pertinent FSA systems requires significant lead time for 

requirements, testing, coding and implementation of changes required to deploy the changes 

necessary to reduce improper payments. 

William D. Ford Federal Direct Loan Program 

While the risk of significant improper payments in the Direct Loan program has been considered 

minimal—based on the nature of the program (fully repayable loans)—FSA will develop a separate 

action plan to achieve IPIA reporting elements for this program during fiscal year 2006. Should the 

program be determined to be susceptible to the risk of significant improper payments, a 

statistically valid sample will be developed and reported in the FY 2006 Performance and 

Accountability Report. 

Summary 

The following table presents the improper payments outlook for Federal Student Aid Programs. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

Federal Student Aid Improper Payment Reduction Outlook Fiscal Years 2004 – 2008 

($ in millions) 

Program 2004 Net 

Outlays (1)

2004 

 IP % 

2004 

IP $ 

2005 

Outlays 

2005 

IP % 

2005 

IP $ 

2006 Est. 

Outlays 

2006 

IP % 

2006 

IP $ 

2007 Est. 

Outlays 

2007 

IP % 

2007 

IP $ 

2008 Est. 

Outlays 

2008 

IP % 

2008 

IP $ 

Direct Loan 

Program $16,453 N/A(2) N/A $18,831 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 

Federal 

Family 

Education 

Loan 

Program(4)

 $6,481 .16% $10 $10,085 .16% $16 $6,543 .16% $10 $5,345 .16% $9 $5,468 .16% $9 

Pell Grant 

Program $12,866 4.5%(3) $571 $12,602 4.5% $617 $12,990 4.5% $637 $13,171 4.5% $645 $13,179 4.5% $646 

(1) Outlays reported in the table have been adjusted to reflect actual disbursements of funds, net of internal and intra-governmental adjustments or transfers. 

(2) FSA is working with OMB and OCFO to determine whether a statistically valid estimate of improper payments is necessary for the Direct Loan program. Should the 

estimate be deemed necessary, FSA will report details in the FY 2006 Performance and Accountability Report. 

(3) Combined over- and under-payment error rate is 4.5 percent. A separate analysis of the overpayments and underpayments was previously presented in the Pell Grant table. 

(4) FSA is working to update future year improper payment estimates as the methodology is further developed. 

Manager Accountability 

FSA program managers are responsible for making recommended improvements and achieving 

quantifiable savings. The FSA Executive Management Team monitors these efforts. The 

Management Team is composed of approximately twelve key managers and is the executive 

decision-making body within FSA. Further, the Office of Inspector General conducts periodic 

audits of student aid programs and makes appropriate recommendations to management and the 

Congress. Reducing improper payments in the Pell Grant program has been a performance 

measure in the Department’s Strategic Plan since 2002. The IRS statistical study has also been 

included in FSA’s Annual Plans. In addition, projects have also been included in the FSA Annual 

Plan to improve the verification process results. Beginning in 2005, a control group of FAFSA 

applicants who had estimated their 2004 income when completing the application, were advised 

after April 15, to revise the application with the correct and known information filed on their 2004 

income tax return. 

Information Systems and Infrastructure 

In fiscal year 2005, FSA introduced ADvance, its front-end business integration solution. ADvance 

will integrate FSA’s student aid awareness; FAFSA application processing; Pell Grant and Direct 

Loan origination and disbursement; customer service support; and publication development 

services. A phased-in approach will be used for the ADvance solution, which is scheduled for 

completion in fiscal year 2007. The system will enhance the overall integrity of the payment 

process by predicting the risk based on applicant responses at the time of entry, and prompting the 

applicant to correct inaccurate, incomplete, or possible conflicting information for a particular field. 

If fatal errors are not corrected, a disbursement will not be made. 

Statutory or Regulatory Barriers 

As stated previously, a database match with the IRS would likely improve the accuracy of Pell 

Grant awards. In addition, it would eliminate the need for schools to rely on paper copies of tax 
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U.S. Department of Education FY 2005 Performance and Accountability Report

returns submitted by the applicant (and the applicant’s parent, if the applicant is dependent) to 

verify AGI and taxes paid amounts. However, legislation to amend the Internal Revenue Code to 

permit a 100 pecent database match has not yet been enacted and at this time we are uncertain as 

to whether, or when such legislation may be enacted. 

Title I 

The Department performed a risk assessment of the Elementary and Secondary Education Act

Title I Program, parts A, B, and D, during fiscal year 2005. The chart on p. 301 documents the 

assessment that the risk of improper payments under the current statutory requirements is very 

low. In order to refine the process for assessing risk in the program the Department implemented 

a monitoring plan to review all states and territories receiving Title I funds within a three-year 

review cycle. The first three-year monitoring cycle began in fiscal year 2005 and will be completed 

in fiscal year 2007. The Office of the Chief Financial Officer is participating with OESE in the 

monitoring process to provide technical support in the fiduciary area of the reviews. 

A key element of the monitoring process is to monitor the wide use by local educational agencies of 

the number of children who qualify for free and reduced-price meals to determine an individual 

school’s Title I eligibility and allocation. The Title I statute authorizes a local educational agency to 

use these data, provided under USDA’s National School Lunch Program, for this purpose. In many 

districts, these data are the only indicator of poverty available at the individual school level. 

USDA has raised concerns about the reliability of these data. USDA is working with states and 

localities to improve program integrity, within the existing statutory and regulatory framework, 

through enhanced monitoring and auditing. USDA is also working with the Department and other 

federal agencies that have programs that make use of these data to explore longer-term policy 

options. 

Remaining Grant Programs 

During fiscal year 2005, the Department expanded and strengthened its approach to evaluating the 

risk of improper payments associated with its remaining grant programs. The Department put in 

place a vehicle to complete a much more detailed risk assessment for these grants. We 

established a memorandum of understanding with the Department of Energy’s Oak Ridge National 

Laboratory (ORNL) to perform data mining on information available in the Federal Audit 

Clearinghouse’s Single Audit Database (SAD), the Department’s Grant Administration and Payment 

System (GAPS), and the Department’s Audit Accountability and Resolution Tracking System 

(AARTS). 

Our approach to establishing the initial improper payment estimates for non-FSA grant programs 

was to develop a methodology to produce statistically valid measures that could be applied 

uniformly across the Department’s programs. We wanted to use the same methodology across all 

non-FSA grant programs to establish a level of quality control for all programs and at the same 

time produce a cost effective measure. Since resource availability is always an issue, we decided 

to utilize the results of the thousands of single audits already being performed by independent 

auditors on grant recipients. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

The ORNL project team sought input from various offices within the Department to define the 

elements of risk in the context of the Department’s programs and activities. This process, termed 

“issues identification,” was the focus of an ORNL/Department of Education workshop on August 26 

and 27, 2004 in Washington, D.C. Subsequently, the ORNL explored data sources, particularly 

GAPS and AARTS, and refined the estimation procedure based on preliminary understanding of 

data available in AARTS. As part of this process, ORNL held a second workshop in Washington on 

November 9, 2004. Participation in this data-oriented workshop was more interactive and focused. 

The second workshop revealed several concerns that needed to be addressed in order to utilize the 

single audit data. Questioned costs identified initially in the “Single Audit” process are sustained at 

a rate far less than 100 percent when the Department resolves the audits through its post-audit 

resolution process. Consequently, using the initial questioned costs would overestimate the 

erroneous payments. Other issues raised in the second workshop and reviewed by the ORNL team 

related to small grantees and pass though funds to local educational agencies. ORNL concluded 

that there was sufficient information in the SAD, AARTS and GAPS to proceed. 

Risk Assessment 

To conduct the risk screening, ORNL augmented the 

AARTS database with imputed values for the “likely 

questioned costs” for grants that were not audited. The 

imputed and real questioned costs could then be 

tabulated to provide a reasonable upper bound estimate 

of the rate of erroneous payments for each of the 

functional programs of interest. If the computed upper 

bound percentage is below 2.5 percent, then the actual 

value will be lower than 2.5 percent. If the computed 

upper bound percentage is greater than 2.5 percent, 

then the actual value may be greater or less than 

2.5 percent but will need additional information to 

determine the appropriate estimate. 

The key results of the analysis are presented in the 

chart. It contains the estimates of the average 

functional program rates of questioned costs for recent 

years. The most striking point about the table is the 

generally low rate of questioned costs. With only two 

exceptions, the rates are below 2.5 percent. The key 

finding of this analysis is that for the most recent year 

for which data is available (fiscal year 2003), none of the 

functional programs exceeds the threshold value of 

2.5 percent. Consequently, none of the programs should 

be labeled as a high-risk program. 

Improper Payment Estimates 

Functional 

Program 

2000 

(%) 

2001

(%) 

2002

(%) 

2003

(%) 

Education 

Research, 

Statistics 

& Assessment 0.12 0.00 0.02 0.36 

Elementary & 

Secondary 

Education 0.35 0.13 0.12 0.13 

English 

Language 

Acquisition 3.55 0.00 0.02 0.10 

Higher Education 0.13 2.72 0.29 0.21 

Impact Aid 0.01 0.00 0.55 0.04 

Innovation and 

Improvement 0.06 0.28 0.21 0.23 

Rehabilitation 

Services & 

Disability 

Research 0.12 0.07 0.12 0.32 

Safe & Drug-Free 

Schools 0.88 0.37 0.33 0.13 

Special Education 0.09 0.09 0.06 0.83 

Title I 0.42 0.04 0.16 1.19 

Vocational & 

Adult Education 0.20 0.20 0.25 0.12 

Total 0.10 0.06 0.04 0.16 
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U.S. Department of Education FY 2005 Performance and Accountability Report

Changes Being Considered for the Next Review 

One of the concerns that have been discussed since the ORNL study results have been available is 

the definition of what constitutes a “program.” Our original definition was at a high level in order 

to effectively match anticipated outlays as defined in our budget submissions. The concern that 

has been uncovered is that calculating estimated improper error rates at that high of a level can 

effectively mask the potentially higher rates that might exist if “program” is defined to mean the 

Catalogue of Federal Domestic Assistance (CFDA) level. 

In fact, individual audits conducted by the OIG have indicated the potential for higher improper 

payment estimates if they are measured at the lower CFDA level. 

For instance, an OIG audit in the Hispanic-Serving Institutions (HSI) program identified grantees 

that were unable to provide documentation to substantiate their assurances relating to the 

institutions’ eligibility as eligible Hispanic-Serving institutions. Based on the audit and additional 

analyses, the Department estimates that the amount of potential improper payments awarded for 

fiscal years 2001 through 2004 could total as much as $25.6 million. The Department is working 

with those grantees identified as receiving potentially improper payments to determine if any 

additional information exists that can substantiate their eligibility. If additional information is not 

identified to substantiate the grantees’ eligibility, the Department will discontinue the grantees’ 

funding for the remainder of the grant performance period. 

To reduce the potential for improper payments in this program, the Department has implemented a 

number of changes that include improved guidance to grantees and requiring grantees to submit 

documentation supporting their institutional eligibility assurances prior to receiving an award under 

the HSI Program. 

To avoid overlooking improper payments such as these, the Department is considering performing 

the next risk assessment at a lower “program” level than the fiscal year 2005 assessment. 

The OIG has also expressed other concerns regarding the ORNL study. Specifically the need to 

extrapolate questioned costs in the sample audited to the universe of payments made by the 

auditees, the possibility of missing questioned costs in grant funds passed through states to subgrantees, and the fact that some questioned costs are not sustained for reasons other than 

determining that the costs were allowable. These situations will be discussed further with the OIG 

and considered for the next review. 

Managing Risk in Discretionary Grants

In fiscal year 2005, the Department managed more than 10,000 discretionary grant awards. Due 

to the vast legislative differentiation and the complexity of the Department's grant award 

programs, ensuring that our program staff are fully aware of potentially detrimental issues relating 

to individual grantees is a significant challenge. Program offices must occasionally designate 

specific grants as high-risk, following collaboration with the respective program legal counsel and 

the Department's Grants Policy and Oversight staff. Unfortunately, other program offices across 

the Department have heretofore been unaware of such determinations. 

In an effort to ensure efficiency and reduce risk, the Department has established the Grants HighRisk Module. This module is housed within the Department's Grant Administration and Payment 

System, such that program office staff are required to review and certify their awareness of the 

high-risk status of applicable grantees before making awards. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

Policies and procedures are being developed to support implementation of the high-risk module. 

System input to the module's database will be limited to specific grants policy staff who are fully 

trained in policy and system use. In addition to the module's certification requirement, various 

reports will be provided such that continual monitoring of grantee risk is made available 

to Department program administrators. 

Implementation of the module provides greater accountability and significantly reduces risk within 

the Department's grant award process by ensuring program office awareness of potentially 

detrimental grantee issues prior to award determination. We anticipate that increased accessibility 

and communication across our program offices will promote further monitoring of high-risk 

grantees, such that the number of grantees so designated will decline. 

Manager Accountability 

As part of the Department’s agreement with Oak Ridge National Laboratory to assess and measure 

the risk of improper payments in the Department’s grant programs, a two-day improper payment 

workshop was held for Department managers. The goal was to increase the overall awareness of 

the requirements of the Improper Payments Information Act and gather manager feedback 

regarding the available methods and data available to effectively and efficiently measure the risk 

and amount of improper payments. 

The Department also plans to develop manager’s internal control training that will focus on controls 

to eliminate improper payments. Managers will be required to attend a one-day seminar that will 

provide a framework for managing the Department’s improper payment controls program utilizing 

applicable regulations, guidelines, and best practices. Part of this one-day training will focus on the 

utilization of the risk assessment criteria to properly assess the risk of improper payments in the 

Department’s programs. 

Planned Corrective Actions 

In addition to the actions previously outlined under the Federal Student Aid Programs and Title I 

sections, the Department will configure our corrective action plans based on the results of the 

initiatives outlined above. The Department will record and maintain corrective action plans as 

required. These will include due dates, process owners, and task completion dates. 

Information Systems and Infrastructure 

The Department has requested $450,000 for fiscal year 2006 and $450,000 for fiscal year 2007 in 

our budget submission. A portion of the funds will be used to continue the refinement of the ORNL 

data mining effort. It is also anticipated that the Department will incur costs related to mitigation 

activities. 

Recovery Auditing Progress 

To effectively address the risk of improper administrative payments, the Department executed a 

formal agreement for recovery auditing work on contract payments. All vendor payment 

transactions made from fiscal year 1998 through fiscal year 2004 were reviewed. Potential 

recoveries are minimal. Fiscal year 2005 payments will be reviewed during fiscal year 2006. Our 

purchase and travel card programs remain subject to monthly data-mining to identify potential 

misuse or abuse. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

Summary 

The Department of Education is continuing its efforts to comply with the Improper Payments 

Information Act of 2002. While there are still challenges to overcome, the Department has 

demonstrated in fiscal year 2005 that it is committed to ensuring the integrity of its programs. 

OMB recognized our progress in managing improper payments when they raised the Department’s 

implementation progress to green on the PMA initiative for Eliminating Improper Payments. 

The Department is focused on identifying and managing the risk of improper payment problems 

and mitigating the risk with adequate control activities. In fiscal year 2006, we will continue to 

work with OMB and the OIG to explore additional methods for identifying and reducing improper 

payment activity in our programs, and to ensure compliance with the IPIA. 
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U.S. Department of Education FY 2005 Performance and Accountability Report

Report to Congress on Audit Follow-up 

The Inspector General Act, as amended, requires that the Secretary report to the Congress on the 

final action taken for the Inspector General audits. With this Performance and Accountability 

Report, the Department of Education is reporting on audit follow-up activities for the period 

October 1, 2004, through September 30, 2005. 

The Audit Accountability and Resolution Tracking System (AARTS) is the Department’s single 

database system used for tracking, monitoring, and reporting on the audit follow-up status of the 

Government Accountability Office (GAO) audits; the Office of Inspector General (OIG) issued 

internal audits, external audits, and alternative products; and Single Audits of funds held by nonfederal entities. AARTS functionalities allow the following: 

• Tracking of internal, external, GAO, sensitive, and alternative product types from inception to 

final disposition. 

• Evaluation and escalation points for audit reports and recommendations at appropriate levels 

in the user hierarchy. 

• Notifying users of audit decisions and approaching or expiring events and transactions. 

• Downloading report and query results into electronic file formats. 

• Attaching files to the audit record. 

• Providing a personal portal (Digital Dashboard) for user-assigned transactions. 

• Providing a search function to query application (Audit Report) data. 

• Providing for both a defined and an ad hoc report generation environment. 

Number of Audit Reports and Dollar Value of Disallowed Cost. 

At the start of this reporting period, the balance for audit reports with disallowed costs totaled 62, 

representing $31.7 million. At the end of the reporting period, the outstanding balance was 

59 audits, representing $34.3 million. The information in the table below represents audit reports 

for which receivables were established. 

 Final Actions on Audits with Disallowed Costs for Fiscal 

Year Ending September 30, 2005 

Number of 

Reports 

Disallowed 

Costs 

Beginning Balance as of 10/1/2004 62 $31,680,403 

+ Management Decision 164 16,771,135 

Pending Final Action 226 $48,451,538 

- Final Action 167 14,166,397 

Ending Balance as of 9/30/2005 59 $34,285,141 
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U.S. Department of Education FY 2005 Performance and Accountability Report

Number of Audit Reports and Dollar Value of Recommendations 

That Funds Be Put to Better Use 

The Department has a total of nine audit reports totaling $244 million with recommendations that 

funds be put to better use. Only three of these, totaling $5.3 million, have been resolved. 

Resolution occurs when there is agreement between the program office and the Department’s OIG 

on the corrective actions that will be taken to address all of the recommendations in the audit. 

Reports Pending Final Action One Year or More After 

Issuance of a Management Decision 

As of September 30, 2005, the Department has a total of 11 OIG internal and nationwide audit 

reports on which final action was not taken within a year after the issuance of a management 

decision; 82 percent were less than two years old. Many corrective actions are dependent upon 

major system changes that are currently being implemented. For detailed information on these 

audits, refer to the Department’s Semiannual Report to Congress on Audit Follow-up Number 33.
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U.S. Department of Education FY 2005 Performance and Accountability Report

Credit Management and Debt Collection Improvement Act 

The Department of Education has designed and implemented a comprehensive credit management 

and debt collection program that enables us to effectively administer our multi-billion-dollar 

student loan and other programs. The credit management and debt collection program covers 

each phase of the credit cycle—including prescreening of loan applicants, account servicing, 

collection, and close-out—and it conforms to the governmentwide policies in the Federal Claims 

Collection Standards, the Office of Management and Budget (OMB) Circular A–129, and the Debt 

Collection Improvement Act (DCIA). As a result, the Department has made significant strides in 

student loan default management and prevention. 

The Department has been working diligently with schools and partners in the student loan industry 

to reduce the cohort default rate. The fiscal year 2003 cohort default rate dropped to an all-time 

low of 4.5 percent. The low default rate is a function of the Department’s improved borrower 

counseling and the steps we have taken in gatekeeping to remove schools with high rates from 

participating in the federal student loan programs. 

Borrowers who default on student loans face serious repercussions, such as the withholding of 

federal income tax refunds and other federal payments, wage garnishment, adverse credit bureau 

reports, denial of further student aid, and prosecution. To avoid these sanctions, defaulters now 

have the option to consolidate their loans and establish an income-based repayment plan that 

more realistically matches their ability to pay. 

The Department also continues to conduct computer matches with other federal agencies as part of 

our effort to strengthen the management and oversight of student financial assistance programs. 

The computer matches are designed to ensure that students meet various eligibility criteria and to 

increase the collections from students who have defaulted on their loans. 

The Department of Education categorizes our debt into two basic categories: student loan debt, 

which accounts for approximately 99 percent of all of the Department’s outstanding debts, and 

institutional and other administrative debt. The Department of Treasury granted the Department a 

permanent exemption from the cross-servicing requirements of the DCIA for defaulted student 

loans and approval to continue to service our own internal student loan debts because of our 

successful track record. However, we have been referring eligible student loan debts—those we 

previously tried to collect using all other available tools—to the Department of Treasury for tax 

refund offset since 1986. 

The Department handles our institutional and administrative debts outside of the systems 

established for student loans. The Department was one of the first to participate in the Treasury 

Cross Servicing Program and has been referring delinquent debts since October 1996. As of 

September 30, 2005, we have forwarded approximately 99 percent of all institutional and 

administrative debts eligible for cross servicing to Treasury.

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U.S. Department of Education FY 2005 Performance and Accountability Report

Glossary of 

Acronyms and 

Abbreviations 
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U.S. Department of Education FY 2005 Performance and Accountability Report

Glossary of Acronyms and Abbreviations 

AARTS Audit Accountability and Resolution Tracking System 

ACSI American Customer Satisfaction Index 

AEFLA Adult Education and Family Literacy Act 

AGI Adjusted Gross Income 

APEB Act to Promote the Education of the Blind 

ASL Accreditation and State Liaison 

ATA Assistive Technology Act 

AYP Adequate Yearly Progress 

CFAA Compact of Free Association Act, Amendments of 2003 

CFDA Catalogue of Federal Domestic Assistance 

CHAFL College Housing and Academic Facilities Loans 

CHL College Housing Loans 

CIFMS Continuous Improvement and Focused Monitoring System 

CRA Civil Rights Act 

CSRS Civil Service Retirement System 

DCIA Debt Collection Improvement Act 

ED Department of Education 

EDA Education of the Deaf Act of 1906 

EDEN Education Data Exchange Network 

EDPAS Education Department Performance Appraisal System 

EFC Expected Family Contribution 

ESEA Elementary and Secondary Education Act of 1965 

ESRA Education Sciences Reform Act of 2002 

FAFSA Free Application for Federal Student Aid 

FASAB Federal Accounting Standards Advisory Board 

FBI Federal Bureau of Investigation 

FBCO Faith-Based and Community Organizations 

FECA Federal Employees Compensation Act 

FERS Federal Employees Retirement System 

FFB Federal Financing Bank 

FFEL Federal Family Education Loan 

FFMIA Federal Financial Management Improvement Act 

FISAP Fiscal Operations Report and Application to Participate 
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U.S. Department of Education FY 2005 Performance and Accountability Report

FMFIA Federal Managers’ Financial Integrity Act of 1982 

FP Financial Partners Service 

FPPS Federal Personnel/Payroll System 

FSA Office of Federal Student Aid 

FSEOG Federal Supplemental Educational Opportunity Grant 

FWS Federal Work-Study 

FY Fiscal Year 

GAAP Generally Accepted Accounting Principles 

GAO Government Accountability Office 

GAPS Grant Administration and Payment System 

GED General Educational Development 

GEAR-UP Gaining Early Awareness and Readiness for Undergraduate Programs 

GPRA Government Performance and Results Act of 1993 

GRS Graduation Rate Survey 

GSA General Services Administration 

HBCUs Historically Black Colleges and Universities 

HEA Higher Education Act of 1965 

HEFL Higher Education Facilities Loans 

HEP Higher Education Programs 

HKNCA Helen Keller National Center Act 

HQT Highly Qualified Teacher 

HSIs Hispanic-Serving Institutions 

IDEA Individuals with Disabilities Education Act 

IG Inspector General 

IP Improper Payments 

IPA Independent Public Accountants 

IPIA Improper Payments Information Act of 2002 

IRB Investment Review Board 

IRS Internal Revenue Service 

IT Information Technology 

IUS Internal Use Software 

LEA Local Educational Agency 

LEP Limited English Proficient 

LVC Loan Verification Certificate 

MECEA Mutual Educational and Cultural Exchange Act of 1961 
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U.S. Department of Education FY 2005 Performance and Accountability Report

MVHAA McKinney-Vento Homeless Assistance Act 

NACSA National Association of Charter School Authorizers 

NAEP National Assessment of Educational Progress 

NCER National Center for Education Research 

NCSER National Center for Special Education Research 

NCES National Center for Education Statistics 

NLA National Literacy Act of 1991 

NSLDS National Student Loan Data System 

OCFO Office of the Chief Financial Officer 

OCR Office for Civil Rights 

OELA Office of English Language Acquisition 

OESE Office of Elementary and Secondary Education 

OIG Office of Inspector General 

OMB Office of Management and Budget 

OPE Office of Postsecondary Education 

OPM Office of Personnel Management 

ORNL Oak Ridge National Laboratory 

OSEP Office of Special Education Programs 

OSERS Office of Special Education and Rehabilitative Services 

OUS Office of the Under Secretary 

OVAE Office of Vocational and Adult Education 

PAR Performance and Accountability Report 

PART Program Assessment Rating Tool 

PBDMI Performance-Based Data Management Initiative 

PCP Potomac Center Plaza 

PMA President’s Management Agenda 

RA Rehabilitation Act of 1973 

REAP Rural Education Achievement Program 

RSA Rehabilitation Services Administration 

SAD Single Audit Database 

SAMHSA Substance Abuse and Mental Health Services Administration 

SES Supplemental Educational Services 

SFA Student Financial Assistance 

SFFAS Statement of Federal Financial Accounting Standards 

SLM Student Loan Model 
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U.S. Department of Education FY 2005 Performance and Accountability Report

SOF Statement of Financing 

SY School Year 

TASSIE Title I Accountability Systems and School Improvement Efforts 

TRIO A group of grant programs under the HEA, originally three programs; not an acronym 

USC United States Code 

USDA United States Department of Agriculture 

VTEA Perkins Vocational and Technical Education Act 

YRBSS Youth Risk Behavior Surveillance System

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Fiscal Year 2005 Performance and Accountability Report 

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