Low-Income and Minority Serving Institutions: Sustained Attention Needed to Improve Education's Oversight of Grant Programs
Published: 2010-05-27T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Higher education has become more accessible than ever before, although students from some demographic groups still face challenges in attending college. To help improve access to higher education for minority and low-income students, Titles III and V of the Higher Education Act, as amended, provide grants to strengthen and support institutions that enroll large proportions of these students. GAO was asked to testify on the Department of Education's (Education) oversight of institutions receiving Title III or V grants and progress Education has made in monitoring the financial and programmatic performance of Title III and V grantees. GAO's testimony is based primarily on its recent report, Low-Income and Minority Serving Institutions: Management Attention to Long-standing Concerns Needed to Improve Education's Oversight of Grant Programs ( GAO-09-309 , August 2009) and updated information provided by Education. In that report, GAO recommended that Education, among other things, (1) develop a comprehensive, risk-based approach to target monitoring and technical assistance; (2) ensure staff training needs are fully met; (3) disseminate information about implementation challenges and successful projects; and (4) develop appropriate feedback mechanisms. No new recommendations are being made in this testimony.
section_title: What GAO Found
paragraphs: GAO's 2009 report found that Education had taken steps in response to previous GAO recommendations to improve its monitoring of Title III and V grants, but many of its initiatives had yet to be fully realized. A coordinated, risk-based approach, targeting monitoring and assistance to grantees with the greatest risk and needs is critical, especially as Education's oversight responsibilities are expanding. Education agreed with GAO's 2009 recommendations and has begun taking steps to implement them, but it is too early to determine the effectiveness of these efforts, described below. (1) Risk-based monitoring criteria: At the time of the 2009 report, Education had developed a monitoring index to identify high-risk institutions, but was not using it to target schools for site visits. Education committed to use the index to select half of its fiscal year 2010 site visits, but none of the visits completed to date were based on the monitoring index. (2) Annual monitoring plan: Because it stopped developing annual monitoring plans for Title III and V programs in 2006, GAO determined that Education lacked a coordinated approach to guide its monitoring efforts. Since then, Education has developed a 2010 monitoring plan, but some of the monitoring activities lack realistic and measurable performance goals. (3) Site visits and staff training: The 2009 report found that site visits to Title III and V grantees, a key component of an effective grants management program, had declined substantially in recent years and that staff lacked the skills to conduct financial site visits. Since then, site visits have remained limited, but Education has developed training courses to address the skill deficits identified that about half the program staff have attended. (4) Technical assistance: The 2009 report found Education had not made progress in developing a systemic approach to target the needs of grantees. In response to GAO's recommendations, Education has taken some steps to encourage grantee feedback and information sharing among grantees. Without a comprehensive approach to target its monitoring, GAO previously found that Education lacked assurance that grantees appropriately manage federal funds, increasing the potential for fraud, waste, or abuse. For example, GAO identified $105,117 in questionable expenditures at one school, including student trips to amusement parks and an airplane global positioning system.

section_title: Letter
paragraphs: I am pleased to be here today to discuss the Department of Education’s  (Education) oversight of grant assistance to schools that provide low- income and minority students with access to higher education. While  higher education has become more accessible than ever before, students  from some demographic groups still face challenges in attending college.  In 2007, for example, an estimated 58 percent of low-income students  enrolled in college soon after completing high school, compared to 78  percent of students from high-income families. Similarly, African American  and Hispanic high school graduates enrolled at lower rates than white  students. To help improve access to higher education for minority and  low-income students, Titles III and V of the Higher Education Act, as  amended, provide grants to strengthen and support institutions that enroll  large proportions of these students.
Today I will discuss progress Education has made in monitoring the  financial and programmatic performance of Title III and V grantees. In  August 2009, we issued a report that discussed long-standing concerns  regarding Education’s oversight of these programs that limit its ability to  ensure grant funds are used appropriately. This testimony is based on that  report and updated information provided by Education. In developing that  report, we analyzed data from grantees’ annual performance reports  detailing expenditures of fiscal year 2006 grant funds and conducted site  visits at seven grantee institutions. We also interviewed officials at  Education and reviewed grant program requirements and monitoring  plans. We conducted the work for our August 2009 report from September  2007 to June 2009 in accordance with generally accepted government  auditing standards and updated this information from April to May 2010.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.
subsections: section_title: Background
paragraphs: Postsecondary institutions that serve large proportions of low-income and  minority students are eligible to receive grants from Education through  programs authorized under Title III and Title V of the Higher Education  Act, as amended. Institutions eligible to receive these grants include  historically black colleges and universities, Hispanic-serving institutions,  tribally controlled colleges and universities, Alaska Native-serving  institutions and Native Hawaiian-serving institutions, and other  undergraduate postsecondary institutions that serve large numbers of low- income students. In 2007, Congress authorized new programs for other  categories of minority serving institutions, including predominantly black  institutions, Native American-serving nontribal institutions, and Asian  American and Native American Pacific Islander-serving institutions.
Funding for Title III and V programs included in our review has increased  significantly over the past 10 years. In fact, funding almost tripled from  fiscal year 1999 to fiscal year 2009, increasing from $230 million to $681  million (see table 1). In addition, fiscal year 2009 funding for the three new  Title III programs created in 2007 was $30 million.
While the institutions included in these programs differ in terms of the  racial and ethnic makeup of their students, they serve a disproportionate  number of financially needy students and have limited financial resources,  such as endowment funds, with which to serve them. The Higher  Education Act outlines broad goals for these grants, but provides  flexibility to institutions in deciding what approaches will best meet their  needs. An institution can use the grants to focus on one or more activities  to address challenges articulated in its comprehensive development plan,  which is required as part of the grant application and must include the  institution’s strategy for achieving growth and self-sufficiency. Under  Education’s program guidance, institutions are allowed to address  challenges in four broad focus areas: academic quality, student support  services, institutional management, and fiscal stability. For example, funds  can be used to support faculty development; purchase library books,  periodicals, and other educational materials; hire tutors or counselors for  students; improve educational facilities; or build endowments.
section_title: Long-Standing Deficiencies in Grant Monitoring and Technical Assistance Limit Education’s Ability to Ensure That Funds Are Used Properly and Grantees Are Supported
subsections: section_title: Education Has Made Limited Progress toward Implementing a Systematic Approach to Monitoring and Technical Assistance
paragraphs: GAO and Education’s Inspector General have recommended multiple  times that Education implement a systematic monitoring approach to  better assess the fiscal and programmatic performance of Title III and V  grantees. Such an approach would include implementing formal  monitoring and technical assistance plans based on risk models and  developing written procedures for providing technical assistance. In 2004,  for example, we recommended that Education complete its electronic  monitoring system and training programs to ensure its monitoring plans  are carried out and target at-risk grantees. In our 2009 report, however,  we found that while Education had taken some steps to better target its  monitoring in response to our previous recommendation, many of its  initiatives had yet to be fully realized. Accordingly, we recommended that  the Secretary of Education develop a comprehensive, risk-based approach  to target grant monitoring and technical assistance based on the needs of  grantees. Education officials agreed with this recommendation and told us  that they were working to implement it. At this time, however, Education  is still in the process of modifying its monitoring approach and it is too  early to determine the effectiveness of its efforts. Table 2 summarizes the  status of Education’s key monitoring initiatives, followed by a more  detailed discussion of each initiative.
In 2009, we found that Education had made progress in automating its  monitoring tools and developing risk-based criteria. Specifically,  Education redesigned its electronic monitoring system in 2007 to add  several key enhancements which, if fully integrated into the oversight  activities of program staff, have the potential to improve the quality and  consistency of monitoring. The redesigned system brings together  information about an institution’s performance in managing its entire  portfolio of higher education grants, increasing Education’s ability to  assess the risk of grantee noncompliance with program rules. Program  officers can also enter into the system updates about a grantee’s  performance, based on routine interactions with the grantee. Because the  system integrates financial and programmatic data, such as institutional  drawdown of grant funds and annual performance reports, staff have  ready access to information needed to monitor grantees. However, it will  be important for Education to ensure that staff use the system to  appropriately monitor grantee performance. For example, our 2009 report  found that program staff did not consistently review the annual  performance reports grantees are required to submit—reports that provide  key information to determine whether grantees have demonstrated  adequate progress to justify continued funding. Education officials  reported that they have established new processes and a new form to  ensure that staff review these reports as part of their regular monitoring  activities.
Another feature of the system is a monitoring index, implemented in 2008,  that identifies institutions that need heightened monitoring or technical  assistance based on criteria designed to assess risk related to an  institution’s ability to manage its grants. For example, at the time of our  2009 report, an institution that had lost accreditation or had grants totaling  more than $30 million was automatically prioritized for heightened  monitoring, which could involve site visits or other contacts with the  school. Since our 2009 report, Education has twice updated the index. For  fiscal year 2010, Education officials told us they reduced the number of  criteria to focus on those that it has found more accurately identify high- risk schools that are likely to be experiencing financial or management  problems. The fiscal year 2010 index has identified 64 institutions across  all higher education grant programs for heightened monitoring, half of  which participate in Title III or V programs.
subsections: section_title: Annual Monitoring Plans
paragraphs: Our 2009 report found that Education still lacked a coordinated approach  to guide its monitoring efforts. In 2002, Education directed each program  within the agency to develop a monitoring plan to place greater emphasis  on performance monitoring for all grantees and to consider what  assistance Education could provide to help grantees accomplish program  objectives. However, Education rescinded the requirement in 2006  because the practice did not achieve the intended purpose of better  targeting its monitoring resources, and Education officials told us the  program office for Title III and V grants discontinued the development of  annual monitoring and technical assistance plans.
Since our report was published, Education required all major program offices  to develop a monitoring plan for fiscal year 2010. Officials from the office  responsible for administering Title III and V programs said they submitted a  monitoring plan for review in February 2010, and have been using the plan in  draft form while waiting for it to be approved. The plan for Title III and V  programs outlines Education’s monitoring approach and describes various  monitoring tools and activities—such as the monitoring index and site visits;  how they are to be used to target limited monitoring resources to grantees  that need it most; and an increased focus on staff training. The monitoring  plan also includes a section on next steps and performance measures, but  Education has not consistently developed realistic, attainable, and  measurable targets for each of the monitoring tools and activities outlined in  the plan. For example, Education developed specific goals for the number of  site visits and technical assistance workshops it would conduct, but it will  consider these goals attained if it completes at least 75 percent of them.  Additionally, under staff training, Education commits to offering fiscal  monitoring training sessions, but it has not established measurable targets for  how many staff will receive the training or how it will determine the  effectiveness of the training in meeting staff needs.
section_title: Site Visits
paragraphs: With the implementation of an electronic monitoring system and risk-based  monitoring index, Education now has tools to enhance its ability to select  grantees for site visits, a critical component of an effective grants  management program. Targeting grantees that need assistance or are at high  risk of misusing grant funds is critical, given Education’s limited oversight  resources and the expansion of its grant oversight responsibilities with the  addition of new Title III programs created in 2007. In our 2009 report,  however, we found that overall site visits to Title III and V grantees had  declined substantially in recent years (see table 3), and Education was not  making full use of its risk-based criteria to select grantees for visits. Since our  2009 report, site visits to Title III and V grantees have remained limited, with  six visits conducted in fiscal year 2009 and five visits completed more than  half-way through fiscal year 2010.
One former senior Education official told us that site visits had declined  because the program office had limited staff and few had the requisite  skills to conduct financial site visits. To obtain the experience and skills  needed to conduct comprehensive site visits, Education leveraged staff  from another office to conduct site visits for Title III and V programs in  2008, but Education officials recently told us that staff from that office  have been dispersed and are no longer available to conduct site visits.  They also told us they anticipate hiring four new program officers during  the summer of 2010, but it is unclear what effect such hiring will have on  Education’s ability to conduct site visits.
Our 2009 report also found that the program office for Title III and V  grants was not fully using its monitoring index to select high risk schools  for site visits. Aside from referrals from the Inspector General, Education  officials told us they selected schools for fiscal year 2008 and 2009 site  visits based on the total amount of higher education grants awarded (i.e.  grantees receiving $30 million or more), which represented only 5 percent  of the monitoring index criteria in these years. In response to our 2009  report, Education officials said that they would use the revised monitoring  index to select half of the schools chosen for site visits. However, none of  the five site visits completed so far in fiscal year 2010 was selected based  on the monitoring index. Education officials told us that they have used  the index to select five of the eight remaining site visits planned for 2010,  but these have not been scheduled yet. Using its monitoring index to select  fewer than half of its site visits does not seem to be a fully risk-based  approach, leaving open the possibility that Education will not target its  limited resources to those grantees most likely to experience problems.
section_title: Staff Training
paragraphs: In our 2009 study, we reported that Education had made progress in  developing grant monitoring courses to enhance the skills of Title III and V  program staff, but skill gaps remained that limited their ability to fully  carry out their monitoring and technical assistance responsibilities. For  example, Education had developed courses on internal control and grants  monitoring, but these courses were attended by less than half of the  program staff. Senior Education officials also identified critical areas  where additional training is needed. Specifically, one official told us that  the ability of program staff to conduct comprehensive reviews of grantees  had been hindered because they had not had training on how to review the  financial practices of grantees. As a result, our 2009 report recommended  that Education provide program staff with the training necessary to fully  carry out their monitoring and technical assistance responsibilities.  Education agreed with the recommendation and has developed additional  training in key areas. Specifically, Education developed two courses on  how to conduct programmatic and fiscal monitoring during a site visit, but  only about half of the program officers have attended both courses so far.  Education has also established a mentoring program that pairs new  program officers with experienced staff. While Education is taking steps to  develop training in needed skill areas, implementing an effective  monitoring system will require sustained attention to training to ensure  that all staff can perform the full range of monitoring responsibilities.
section_title: Technical Assistance
paragraphs: While Education provides technical assistance for prospective and current  Title III and V grantees through preapplication workshops and routine  interaction between program officers and grant administrators at the  institutions, our 2009 report found that it had not made progress in  developing a systemic approach that targeted the needs of grantees.  According to one senior Education official, technical assistance is  generally provided to grantees on a case-by-case basis at the discretion of  program officers. Grantees we interviewed told us that Education does not  provide technical assistance that is consistent throughout the grant cycle.  Several officials complimented the technical assistance Education  provided when they applied for grants, but some of those officials noted a  precipitous drop in assistance during the first year after grants were  awarded. During the initial year, grantees often need help with  implementation challenges, such as recruiting highly qualified staff,  securing matching funds for endowments, and overcoming construction  delays. In the past, grantees had an opportunity to discuss such challenges  at annual conferences sponsored by Education, but Education did not hold  conferences for 3 years from 2007 to 2009, despite strong grantee interest  in resuming them. According to Education officials, resource constraints  prevented them from holding the conferences in those years.
To improve the provision of technical assistance, our 2009 report  recommended that Education disseminate information to grantees about  common implementation challenges and successful projects and develop  appropriate mechanisms to collect and use grantee feedback. In response,  Education held a conference for all Title III and V grantees in March 2010,  with sessions focused specifically on best practices. Education officials  told us that they plan to organize another conference in 2011 and said they  will explore the use of webinars to share information with grantees that  may be unable to attend. Education has also created an e-mail address for  grantees to express concerns, ask questions, or make suggestions about  the programs. The address is displayed on every program Web page and is  monitored by an Education official not associated with the program office  to allow grantees to provide anonymous feedback. In addition, Education  officials reported that they have developed a customer satisfaction survey  that the Office of Management and Budget has approved for distribution.  The survey will be sent to new grantees and grantees that are near the end  of their grant period and will obtain feedback on the quality of information  provided before a grant is approved, the quality of technical assistance  provided, and satisfaction with communications with the program office.
section_title: Education Lacks Assurance That Grant Funds Are Used Appropriately
paragraphs: Without a comprehensive approach to target its monitoring, Education  lacks assurance that grantees appropriately manage federal funds,  increasing the potential for fraud, waste, or abuse. In our 2009 report, we  reviewed financial and grant project records at seven institutions  participating in Title III and V programs in fiscal year 2006 and identified  $142,943 in questionable expenses at 4 of the 7 institutions we visited (see  table 4).
At one institution—Grantee D—we identified significant internal control  weaknesses and $105,117 in questionable expenditures. A review of grant  disbursement records revealed spending with no clear link to the grant  and instances in which accounting procedures were bypassed by the  school’s grant staff. Of the questionable expenditures we identified,  $88,195 was attributed to an activity designed to promote character and  leadership development, of which more than $79,975 was used for student  trips to locations such as resorts and amusement parks. According to the  grant agreement, the funds were to be used for student service learning  projects; instead, more than $6,000 of grant funds was used to purchase a  desk and chair and another $4,578 was used to purchase an airplane global  positioning system even though the school did not own an airplane. In  purchasing the global positioning system and office furniture, a school  official split the payments on an institutionally-issued purchase card to  circumvent limits established by the institution. Officials at the institution  ignored multiple warnings about mismanagement of this activity from  external evaluators hired to review the grant. Education visited the school  in 2006 but found no problems, and recommended we visit the institution  as an example of a model grantee. We referred the problems we noted at  this institution to Education’s Inspector General for further investigation.
Examples of the questionable expenditures we identified at three other  institutions we visited included:    At Grantee A, we were unable to complete testing for about $147,000 of  grant fund transactions due to a lack of readily available supporting  documentation. For one transaction that was fully documented, the  grantee improperly used $2,127 in grant funds to pay late fees assessed to  the college. Once we pointed out that grant funds cannot be used for this  purpose, the college wrote a check to reimburse the grant.
Grantee B used $27,530 to prepay subscription and contract services that  would be delivered after the grant expired.
Grantee F used more than $1,500 in grant funds to purchase fast food and  more than $4,800 to purchase t-shirts for students.
Our 2009 report recommended that Education follow up on each of the  improper uses of grant funds identified. In response, Education  conducted a site visit to one institution in November 2009 and approved its  corrective action plans. Education officials also reported that they visited  two other institutions in April 2010 and plan to visit the fourth institution  before November 2010.
section_title: Concluding Observations
paragraphs: We have recommended multiple times that Education implement a  systemic approach to monitoring postsecondary institutions receiving  Title III and V grants. As we reported in 2009, Education has made  progress in developing tools—such as an electronic monitoring system  and risk-based criteria—to assess potential risks, but it lacks a  comprehensive risk-based monitoring and technical assistance approach  to target its efforts. In the 9 months since our report was issued, Education  taken some steps to respond to our most recent recommendations, but it  is too early to tell if it has fully embraced a risk-based monitoring  approach. For example, Education is still not relying on its risk-based  monitoring index to target site visits to schools at highest risk. Until  Education is fully committed to such an approach, Title III and V funds  will continue to be at risk for fraud, waste, or abuse. The internal control  weaknesses and questionable expenditures we identified at some grantees  we reviewed demonstrate the importance of having a strong and  coordinated monitoring and assistance program in place, especially as  Education is called on to administer additional programs and funding.  Targeting monitoring and assistance to grantees with the greatest risk and  needs is critical to ensuring that grant funds are appropriately spent and  are used to improve institutional capacity and student outcomes. To do  this effectively will require Education’s sustained attention and  commitment. We will continue to track Education’s progress in fully  implementing our recommendations.
Mr. Chairman, this concludes my prepared remarks. I would be happy to  answer any questions that you or other members of the subcommittee may  have.
For further information regarding this testimony, please contact George A.  Scott (202) 512-7215 or ScottG@gao.gov. Contact points for our Office of  Congressional Relations and Public Affairs may be found on the last page  of this statement. Individuals who made key contributions to this  testimony include Debra Prescott (Assistant Director), Michelle St. Pierre,  Carla Craddock, Susan Aschoff, and James Rebbe.
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