Education has seven principal offices that administer discretionary grants to entities that provide education or education-related services (see fig. 1). These principal offices generally focus on specific areas of education, such as career, technical, and adult education; elementary and secondary education; or postsecondary education. Each principal office has individual program offices responsible for specific grant programs. Program offices have directors, supervisors, and program specialists (referred to in this report as grant staff) responsible for grant administration. Department-wide offices—the Risk Management Service (RMS), Office of the Chief Financial Officer (OCFO), and Office of Human Resources (OHR)—provide support and guidance to the principal offices. RMS, in particular, is responsible for effectively communicating discretionary grant policies to principal offices and providing guidance to assist them in their efforts to adhere to those policies. Additionally, RMS offers training on discretionary grants to staff across the department. OCFO, among other things, resolves discretionary grant award findings resulting from single audit reports and offers training on financial aspects of grants administration. OHR works with principal offices to identify staffing needs and to post job positions, among other responsibilities. Discretionary grants refer to an award for which the awarding agency has discretion, or choice, in deciding which applicants receive funding. Education generally awards these types of grants through a competitive process. Grant project periods can vary in duration, ranging from less than a year to 5 years. When Education funds grants with project periods longer than a year (referred to in this report as multiyear grants), it generally funds the grants in annual increments called budget periods, usually 12 months. With multiyear grants, grantees are generally eligible to receive funding beyond the initial budget period provided certain conditions are met; for example, Education must determine that a grantee has made substantial progress toward the project’s goals and objectives, and Congress must have appropriated sufficient funds, among other conditions. Award amounts can vary widely. For example, in 2012 Education awarded a grantee $27,315 to help subsidize fees for low- income students registering for Advanced Placement and International Baccalaureate tests, and in the same year, Education awarded another grantee about $5 million to support professional development for teachers and school administrators. In fiscal year 2015, Education awarded about $4.3 billion in discretionary grants across its seven principal offices (see table 1). The lifecycle of a discretionary grant has three general phases: pre- award, award, and post-award (see fig. 2). The Handbook establishes department-wide policies and procedures for each phase. For example, in the award phase, the Handbook describes policies for notifying grantees about their awards. During the post-award phase, the Handbook establishes specific monitoring activities Education grant staff should perform, and requires grant staff to document these activities in the official file they are to keep for each grantee, which may be paper-based or electronic (see fig. 3). For example, all grant files should include the following three key documents: grant award notifications, post-award conference records, and grantee performance reports. As we describe below, the purpose of these documents is to record information on various key monitoring activities. Grant award notification. According to the Handbook, Education’s grant staff are to send all discretionary grantees a grant award notification (referred to in this report as an award notice) that provides details about the grant, including the amount of the award; the binding terms and conditions of the grant, including statutory and regulatory requirements; and any specific conditions. For example, as a specific condition, a grantee may be required to seek reimbursements from Education for grant-related expenditures (referred to in the Handbook as “cost reimbursement”), or may be prohibited from proceeding with its project until Education receives satisfactory evidence of acceptable performance. If Education later assigns specific conditions, grant staff are to amend the award notice and resend it to the grantee, according to the Handbook. Additionally, the Handbook specifies that grant staff should save copies of award notices, as well as amended versions, if applicable, to include in the grantee’s official grant file. Post-award conference records. According to the Handbook, the post- award conference is the initial discussion between Education’s grant staff responsible for monitoring the grant and the grantee’s project director or other authorized representative. The Handbook specifies that this meeting should take place within 30 days of the award to establish a mutual understanding of the specific outcomes that are expected, and to clarify measures and targets for assessing the project’s progress and results, among other things. This meeting may take place in-person, via telephone or e-mail, or as part of a virtual or in-person conference. Following the discussion, grant staff are to document that a meeting occurred and should also save any related notes from the discussion to the official grant file, according to the Handbook. Calls, site visits, technical assistance to grantees (as needed). According to the Handbook, certain day-to-day activities that occur or apply (as needed) to the particular circumstances of a grantee must be documented in the official grant file. These activities include, among other things, routine telephone or e-mail correspondence; reports from a site visit by Education staff; and, if relevant, contracts into which a grantee may have entered as a condition of receiving the grant (e.g., a contract for a rigorous post-grant evaluation of a pilot project). Grant staff can adjust the scope and frequency of these activities using their professional judgment, according to grant staff supervisors. When making these determinations, grant staff may consider various factors, such as the amount awarded; past grantee performance, if applicable; and any reported problems by the grantee or requests for specific assistance. Performance reports. Education requires discretionary grantees to submit reports that describe the specific activities they performed during a budget period. Education encourages grantees to use a standardized form to submit these reports. Using this form, grantees can describe work and activities completed, as well as progress made toward their project’s goals and objectives. Recipients of multiyear discretionary grants must generally submit these reports annually. According to the Handbook, grant staff are to review these reports— along with other information on financial and project management activities—to determine, among other things, if the grantee has made substantial progress in reaching the project’s objectives and if continuing the project is in the best interest of the federal government. Additionally, grant staff must sign and date these reports to indicate their review and save them to the official grant file, according to the Handbook. Discretionary grant recipients and grant staff are to use Education’s G5 web-based grants management system to perform various activities throughout the grant lifecycle. For instance, grantees are to use G5 to withdraw funds from their grant accounts during the post-award phase, and can also use the system to submit required performance reports. G5 is the grant staff’s primary tool for providing fiscal oversight of discretionary grantees, according to the Handbook. For instance, using G5, grant staff can monitor the rate at which grantees withdraw funds from their grant accounts to ensure their spending patterns are consistent with the project’s approved scope of work and project milestones. Education officials told us it added a Post-Award Monitoring (PAM) Module to G5 in 2013 that allows grant staff to enter information on the performance of the grantees they monitor to a central location, among other things. The sample of official grant files we reviewed did not consistently contain documentation of certain key required monitoring activities outlined in Education’s Handbook. Specifically, almost all—69 of the 75 grant files we reviewed—were incomplete; most were missing at least one award notice, post-award conference record, or grantee performance report, which are all key monitoring documents that should be included in the official files, according to the Handbook. Federal internal control standards call for the clear, prompt, and accurate documentation of internal control and all other significant events, including monitoring activities, and state that this documentation should be readily available for examination. More specifically, with respect to grantee performance reports, based on our analysis and the requirements outlined in the Handbook, the 75 official grant files should have contained 179 performance reports. We found 121, which is 58 less than required by the Handbook. In these 58 instances—associated with 54 of the 75 grant files we reviewed—about $21 million in discretionary grant awards lacked complete and correct documentation in the official grant file of the progress and results grantees achieved. As a result, and contrary to federal internal control standards, we could not, using the official grant files Education provided to us, verify the existence of documentation that would demonstrate whether these grantees achieved the results for which they received grant funds or made adequate progress that would warrant receiving additional funds. In commenting on a draft of this report, Education reiterated its reliance on a variety of safeguards and monitoring procedures (discussed below) to ensure it provides additional funding only to grantees that achieve substantial progress with their grant funds and comply with applicable regulations. Education also stated that it conducted its own review and found all the appropriate performance reports, though some were found outside of the official grant files or in other Education systems, and the agency is therefore confident that no funds were at risk. We note that the focus of our file review was on Education’s application of the documentation requirements for official grant files included in its Handbook. Our analysis was not designed or intended to determine whether any discretionary grant funds are “at risk” or were awarded improperly. Additional required monitoring documentation—describing the terms and conditions of the grant, as well as general expectations of Education’s grant monitoring staff—were also often not included in the official grant files we reviewed. Specifically: Grant Award Notifications. Per Education’s Handbook, the 75 official grant files we reviewed should have contained 175 award notices, but we found 132, which was 43 less than required.