Title III and Title V of the Higher Education Act (HEA) authorize federal funding for postsecondary institutions that provide large proportions of low-income and minority students access to higher education. In 1965, Congress authorized grant programs to strengthen and support developing postsecondary institutions, leading to today’s Strengthening Institutions Program. This program provides discretionary grants to help institutions that serve large numbers of low-income students improve their academic quality, institutional management, and fiscal stability. In subsequent reauthorizations, Congress established several programs to target grant funding to certain institutions that serve large numbers of minority students. Specifically, in 1986, a program was created to designate formula grant funding for historically black colleges and universities. In 1998, further amendments to the HEA created new grant programs specifically for tribally controlled colleges and universities, Alaska Native and Native Hawaiian-serving institutions, and Hispanic- serving institutions. Prior to these amendments, these institutions competed for funding under the Strengthening Institutions program. Collectively, these institutions are referred to as minority serving institutions. Institutions that participate in the Historically Black Colleges and Universities and Tribal programs receive mandatory grants based on two distinct formulas. Institutions that participate in all other programs receive grants based on a ranking of applications by a competitive peer- review evaluation. Such institutions may apply individually or as part of a cooperative partnership for development grants to develop capacity in specified areas on selected campuses. Institutions that receive cooperative grants partner and share resources with another postsecondary institution—which may or may not be eligible for Title III or V funding—to achieve common goals without costly duplication of effort. In addition to 5-year individual development and cooperative grants, Title III, Part A and Title V institutions may apply for a 1-year grant for the purposes of planning an application for a 5-year grant, 1-year construction grant, or 1- year renovation grant. Table 1 briefly describes the characteristics and eligibility criteria of Title III and V programs. From fiscal year 1999 to fiscal year 2008, total appropriations for these programs increased from $230 million to $667 million. In fiscal year 2008, the range of new annual institutional awards was $172,560 for a 1-year planning grant to $3 million for an individual development grant (see table 2). The HEA outlines broad goals for Title III and V programs to strengthen participating institutions but provides institutions flexibility in deciding what approaches will best meet their needs. An institution can use the grants to focus on one or more activities to address the challenges articulated in its comprehensive development plan, which is required as part of the grant application and must include the institution’s strategy for achieving growth and self-sufficiency. Under Education’s program guidance, institutions are allowed to address challenges in four broad focus areas: academic quality, student support services, institutional management, and fiscal stability. More specifically, funds can be used for activities such as supporting faculty development; purchasing library books, periodicals, and other educational materials; hiring tutors or counselors for students; improving educational facilities; or building endowments. Although each Title III and V program allows funds to be used in the same broad areas, there are variations in the rules for allowable activities across each of the Title III and V programs (see table 3). Title III and V programs are administered by the Institutional Development and Undergraduate Education Service (IDUES) within Education’s Office of Postsecondary Education (OPE). In addition to the Title III and V programs we examine in this report, IDUES administers the Strengthening Historically Black Graduate Institutions, Minority Science and Engineering Improvement, and the Robert C. Byrd Honors Scholarships programs. Additionally, in 2007, IDUES assumed responsibility for several new grant programs for other categories of minority serving institutions, including Native American-serving Nontribal Institutions and Asian American and Native American Pacific Islander-serving Institutions. IDUES currently has 32 program staff members to administer more than 1,000 grants across its portfolio. The Comptroller General’s Domestic Working Group highlights areas of opportunity and promising practices in grants management—focused both on ensuring grant funds are spent properly and on achieving their desired results (see table 4). Effective grants management calls for establishing adequate internal control systems, including efficient and effective information systems, training, policies, and oversight procedures, to ensure grant funds are properly used and achieve intended results. Internal controls provide federal managers with reasonable assurance that their program is (1) achieving its primary objectives of effective and efficient operations, reliable financial reporting, and compliance with applicable laws and regulations; (2) safeguarding assets; and (3) preventing fraud, waste, abuse, and mismanagement. Like other federal departments and agencies, Education is expected to implement internal control systems consistent with the requirements established by the Office of Management and Budget and GAO. Entities that receive federal funds, such as institutions of higher education, are also expected to implement effective internal control systems consistent with federal requirements. We estimate that 28 percent of 2-year and 4-year public and private not-for- profit postsecondary institutions are eligible to participate in the Title III and V programs, and together these institutions enrolled just over 4 million students. About one-half of all eligible institutions are 2-year colleges, such as community colleges, compared to 31 percent of 2-year institutions that are ineligible to participate in the programs (see table 5). The substantial representation of 2-year public institutions that are eligible to participate in the programs appears to amplify some of the overall differences in both institutional and student characteristics between eligible and ineligible populations discussed throughout this section. Overall, eligible institutions had access to fewer revenue sources, including endowment holdings and tuition and fees, to serve their students. Endowments provide additional funds for activities, such as providing scholarships and constructing facilities, which would be unaffordable if institutions relied solely on tuition, private philanthropic gifts, or government funding. The median per-student endowment holdings at eligible institutions were lower than the holdings of their ineligible peers. For example, the median per-student endowment for eligible 4-year private, not-for-profit institutions was nearly three times less per student ($7,297) than the median for ineligible 4-year private, not-for-profit institutions ($20,391). Another major source of revenue for institutions is the tuition and fees charged to students. For all eligible institutions, the median tuition and fees reported were lower than what was reported at ineligible institutions. Median tuition and fees at eligible institutions were 12 percent less than at ineligible institutions for 2-year private, not-for- profit institutions, and 38 percent less at 4-year private, not-for-profit institutions. Lower revenues may limit an institution’s ability to undertake activities that build institutional capacity, such as improving campus facilities and enhancing academic offerings. In 2006, per-student spending on instructional equipment at eligible institutions was almost 47 percent less than spending at ineligible institutions. Eligible institutions also spent almost 60 percent less per student on expenses related to day-to-day operations, such as financial aid and registration, and about two times less per student on certain services, such as providing technology in classrooms and activities related to student life and development. While eligible institutions had lower revenues and per-student spending, they more often had admissions policies associated with the enrollment of students who need greater academic support. Research has shown that students attending institutions that accept any student who applies for admission—known as open-enrollment institutions—are less likely to be prepared to successfully undertake college-level coursework. About 60 percent of eligible institutions had open enrollment, compared to 35 percent of ineligible institutions. Almost all 2-year public institutions— both eligible and ineligible—reported open enrollment policies, which is consistent with the mission most community colleges have to work with students of all ability levels. Open-enrollment policies were much less common at eligible 4-year institutions. Less than 30 percent of these schools had open enrollment, but it was still more prevalent than at ineligible 4-year institutions, of which 10 percent or less had such policies. Limited revenues may also impact the ability of eligible institutions to meet the demand of future students based on population projections. Specifically, about two-thirds of eligible institutions are located in southern and western states, many of which are projected to experience an increase in the number of college-age students in coming years (see fig. 1). Studies also project long-term growth in the number of minority and low-income high school graduates in these two regions beginning in 2015 and extending through 2022, driven in part by accelerated growth in the Hispanic population. Given the importance many students enrolled at minority-serving institutions place on geographic proximity to home when choosing a college, eligible institutions in high-growth states could experience proportionately more growth in numbers of students and changes in the demographics of the college-age population may result in an expansion in the number of eligible institutions. For example, a 2008 Education study found that in some states including Texas, Arkansas, and North Carolina, over 80 percent of entering freshmen are state residents. Additionally, Education’s 2004 NPSAS survey found that 80 percent of students enrolled at Hispanic-serving institutions and almost 73 percent of students enrolled at Historically Black Colleges and Universities stated that geographic location was a key reason for selecting their postsecondary institution. On average, eligible institutions enrolled more minority students than ineligible institutions. In 2006, about one-half of all students enrolled at eligible institutions were minority, compared to about one-quarter at ineligible institutions (see fig. 2). While eligible institutions represent 28 percent of all postsecondary institutions, they enrolled over 43 percent of all minority students. Eligible institutions were largely comprised of the minority group associated with their program eligibility. For example, at Historically Black Colleges and Universities the predominant student population was African American, and at Hispanic-serving institutions, it was Hispanic.