DEPARTMENT OF EDUCATION

CROSS-CUTTING SECTION

INTRODUCTION

This section contains compliance requirements that apply to more than one Department of Education (ED) program either because the program was authorized under the Elementary and Secondary Education Act (ESEA), or the program is subject to the General Education Provisions Act (GEPA), or both. The compliance requirements in this Cross-Cutting Section reference the applicable programs in Part 4, Agency Compliance Requirements. Similarly, the applicable programs in Part 4 reference this Cross-Cutting Section.

Waivers

Under Title XIV of the ESEA, States, Indian tribes, LEAs, and schools through their LEA may request waivers from ED of many of the statutory and regulatory requirements of programs authorized in ESEA. The Goals 2000: Educate America Act and the School to Work Opportunities Act also provide waiver authority. In addition, under the educational flexibility (Ed-Flex) demonstration program of Goals 2000, the Secretary has delegated to some State Educational Agencies (SEAs) the authority to waive certain Federal statutory or regulatory requirements affecting the State and its districts and schools. Auditors should ascertain from the audited SEA and LEAs whether ED (or an SEA, if an Ed-Flex State) has granted any written waivers to the SEA or the LEAs.

I. PROGRAM OBJECTIVES

The ESEA of 1965, as amended by the Improving America's Schools Act (IASA), provides for a comprehensive overhaul of programs providing more than $10 billion a year of Federal support for education, and restructures how these programs provide services. ESEA programs in this Supplement that this section applies to are shown above. These requirements are applicable for fiscal years beginning after June 30, 1995. ESEA is scheduled to be reauthorized for fiscal years beginning after June 30, 2000.

Under the IASA, Federal education programs authorized in the ESEA are designed to work in concert with each other, rather than separately. By emphasizing program coordination, planning, and service delivery among Federal programs and enhancing integration with State and local instructional programs, the ESEA reinforces comprehensive State and local educational reform efforts geared toward ensuring that all children can meet challenging State standards regardless of their background or the school they attend.

Program objectives for non-ESEA programs covered by this cross-cutting section and additional information on program objectives for the ESEA programs are set forth in the individual program sections of this Supplement.

II. PROGRAM PROCEDURES

Plans for ESEA Programs

A State educational agency (SEA) must either develop and submit separate, program-specific individual State plans to ED for approval as provided in individual program requirements outlined in the ESEA or submit, in accordance with section 14302 of the ESEA, a consolidated plan to ED for approval. Consolidated plans will provide a general description of the activities to be carried out with ESEA funds. Subgrants to LEAs and other educational service agencies and amounts to be used for State activities are often set by law for ESEA programs. However, SEAs have discretion in using funds available for State activities.

LEAs also have the choice in many cases of submitting individual program plans or a consolidated plan to the SEA to receive program funds. SEAs with approved consolidated State plans may require LEAs to submit consolidated plans.

Unique Features of ESEA Programs That May Affect the Conduct of the Audit

Consolidation of administrative funds

SEAs and LEAs (with SEA approval) may consolidate funds received for administration of many ESEA programs, thus eliminating the need to account for these funds on a program-by-program basis. SEAs may also include funds received for administration of Goals 2000 (CFDA 84.276) in this consolidation. The amount from each applicable program set aside for consolidation may not be more than the percentage, if any, authorized for State administration under that program. Federal expenditures may be charged to the ESEA program on a first in/first out method, in proportion to the funds provided by each program, or another reasonable manner. The amount set aside under each covered program for consolidation may not be more than the percentage, if any, authorized for local administration under that program.

Coordinated services projects

An LEA, an individual school, or consortium of schools (if there is no governing LEA), with the approval of the Secretary, may use not more than five percent of its ESEA funds to implement a coordinated services project under Title XI of the ESEA. Audit coverage for transferred funds is described in the Activities Allowed or Unallowed compliance requirement of Section III of these cross-cutting provisions.

Schoolwide Programs

Eligible schools are able to use their Title I, Part A funds, as well as combine most of their Federal education funds, to upgrade the entire educational program of the school and to raise academic achievement for all students. Except for some of the specific requirements of the Title 1, Part A program, funds that are used in a schoolwide program are not subject to the statutory or regulatory requirements of the programs providing the funds as long as the intent and purpose of those programs are met by the schoolwide program. The Title I, Part A requirements that apply to schoolwide programs are identified in the Title I, Part A program specific section.

General and Program-Specific Cross-cutting Requirements

The requirements in this cross-cutting section can be classified as either general or program-specific. General cross-cutting requirements are those that are the same for all applicable programs but are implemented on an entity-level. These requirements need only be tested once to cover all applicable major programs. The general cross-cutting requirements that the auditor only need test once to cover all applicable major programs are: III.G.2.1, Level of Effort-Maintenance of Effort (SEAs/LEAs); III.L.3, Special Reporting; and, III.N, Special Tests and Provisions (III.N.1, Participation of Private School Children; III.N.2, Schoolwide Programs; and, III.N.3, Comparability). Program-specific cross-cutting requirements are the same for all applicable programs, but are implemented at the individual program level. These types of requirements need to be tested separately for each applicable major program.

Program procedures for non-ESEA programs covered by this cross-cutting section and additional information on program procedures for the ESEA programs are set forth in the individual program sections of this Supplement. A copy of the Improving America's Schools Act with a hypertext index can be accessed on the Internet at http://www.ed.gov/legislation/ESEA/toc.html.

III. COMPLIANCE REQUIREMENTS

In developing the audit procedures to test compliance with the requirements for a Federal program, the auditor should first look to Part 2, Matrix of Compliance Requirements, to identify which of the 14 types of compliance requirements described in Part 3 are applicable and then look to Parts 3 and 4 for the details of the requirements.

Further, if there has been a transfer of funds to a consolidated administrative cost pool or a coordinated services project from a major program, in developing audit procedures to test compliance with Activities Allowed or Unallowed and Allowable Costs/Cost Principles, the auditor should include the consolidated administrative cost pool or coordinated services project expenditures in the universe to be tested.

A. Activities Allowed or Unallowed

1. Consolidation of administrative funds (SEAs/LEAs)

ESEA programs in this Supplement that this section applies to are: Title I, Part A (84.010); MEP (84.011); SDFSCA (except the Governor's Program authorized under Section 4114 (84.186); Eisenhower (84.281); and Title VI (84.298).

An SEA must use consolidated administrative funds for authorized administrative activities of the consolidating programs and may use such funds for administrative activities designed to enhance the effective and coordinated use of funds under the programs included in the consolidation, such as coordination of ESEA programs with other Federal and non-Federal programs; the establishment and operation of peer review mechanisms; the dissemination of information regarding model programs and practices; and technical assistance.

If an LEA consolidates administrative funds, the LEA may not use any other funds from the consolidating programs for administration.

An SEA or LEA that consolidates administrative funds is not required to keep separate records of administrative costs for each individual program. Expenditures of consolidated administrative funds are allowable if they are for administrative costs that are allowable under any of the contributing programs (Sections 14201 and 14203 of ESEA (20 USC 8821 and 8823)).

2. Use of unneeded program funds (LEAs)

ESEA programs in this Supplement that this section applies to are: MEP (84.011); SDFSCA (except the Governor's Program authorized under Section 4114) (84.186); Eisenhower (84.281); and Title VI (84.298).

With the approval of its SEA, an LEA that determines for any fiscal year that funds under an applicable program (MEP, Eisenhower, SDFSCA, and Title VI) are not needed for the purpose of that applicable program may use five percent or less of the total amount of the funds received under that applicable program for the purpose of another applicable program. Title I, Part A may receive funds but Title I, Part A funds may not be transferred funds to other programs. This determination may be made at any time during the period of availability of the funds. This provision, however, does not extend the period for obligating unneeded program funds beyond the period of availability for the applicable program from which the funds were transferred. The expenditure of the funds transferred are subject to the requirements of the program to which transferred (Section 14206(a) of ESEA (20 USC 8826(a))).

Compliance with the maximum transfer of five percent maximum is tested under III.G.3.b, Earmarking, Use of unneeded program funds.

See IV, Other Information, for guidance on Type A program determination and Schedule of Expenditure of Federal awards.

3. Coordinated services projects (LEAs)

ESEA programs in this Supplement that this section applies to are: Title I, Part A (84.010); MEP (84.011); SDFSCA (including the Governor's Program authorized under Section 4114) (84.186); Eisenhower (84.281); and Title VI (84.298).

In addition to using funds for specific purposes outlined in each program's statute and regulations, an LEA, school, or group of schools if there is no governing LEA, upon application to and approval by ED, may use a total of not more than five percent of its funds received under ESEA to develop, implement, or expand a coordinated services project. ED will notify an SEA of its approval of any coordinated services projects within the State.

Funds transferred to a coordinated services project are subject to the compliance requirements applicable to the coordinated services project. Funds reserved for a coordinated services project may be used for any activity relevant to the project, except that those funds may not be used for the direct provision of health or health-related services. Acceptable uses of funds may include, but are not limited to, hiring a coordinator, making minor renovations to existing buildings, purchasing basic operating equipment, improving communications and information-sharing among participating entities, teacher and staff training, and conducting a statutorily required needs assessment. Funds used for this purpose must be obligated within the period of availability of funds for the program from which funds were transferred (Title XI and Section 14206(b) of ESEA (20 USC 8401 et seq. and 8826(b))).

Compliance with the maximum transfer of five percent to a coordinated services project is tested under III.G.3.c, Earmarking, Coordinated services projects.

See IV, Other Information, for guidance on Type A program determination and Schedule of Expenditure of Federal awards.

4. Schoolwide Programs (LEAs)

ESEA programs in this Supplement that this section applies to are: Title I, Part A (84.010); MEP (84.011); SDFSCA (84.186); Eisenhower (84.281);Bilingual (84.288, 84.290 and 84.291); and Title VI (84.298).

This section also applies to IDEA (84.027 and 84.173) and Vocational Education (84.048).

A school participating under Title I, Part A may, in consultation with its LEA, use its Title I, Part A funds, along with funds provided from the above-identified programs, to upgrade the school's entire educational program in a schoolwide program. See III.N.2, Special Tests and Provisions - Schoolwide programs, in this cross-cutting section for testing related to schoolwide programs (Section 1114 of ESEA (20 USC 6314)).

See IV, Other Information, for guidance on Type A program determination and Schedule of Expenditure of Federal awards.

B. Allowable Costs/Cost Principles

1. Alternative Fiscal and Administrative Requirements (SEAs/LEAs)

ESEA programs in this Supplement that this section applies to are: Title I, Part A (84.010); MEP (84.011); SDFSCA (84.186); Eisenhower (84.281);Bilingual (84.288, 84.290 and 84.291); and Title VI (84.298).

A State may adopt its own written fiscal and administrative requirements, which are consistent with the provisions of OMB Circular A-87, for expending and accounting for all funds received by SEAs and LEAs under ESEA programs. The written fiscal and administrative requirements must: (1) be sufficiently specific to ensure that funds are used in compliance with all applicable statutory and regulatory provisions, including ensuring that costs are allocable to a particular cost objective; (2) ensure that funds received are spent only for reasonable and necessary costs of the program; and (3) ensure that funds are not used for general expenses required to carry out other responsibilities of State or local governments (34 CFR section 299.2).

2. Indirect Costs (All grantees/All subgrantees)

ESEA programs in this Supplement that this section applies to are: Title I, Part A (84.010); MEP (84.011); Eisenhower (84.281); Bilingual (84.288, 84.290 and 84.291); and Title VI (84.298).

This section also applies to Adult Education (84.002); IDEA (84.027 and 84.173); Vocational Education (84.048); and IDEA, Part C (84.181).

A "Restricted" Indirect Cost Rate (RICR) must be used for programs administered by State and local governments and their governmental subrecipients that have a statutory requirement prohibiting the use of Federal funds to supplant non-federal funds. Nongovernmental grantees or subrecipients administering such programs have the option of using the RICR, or an indirect cost rate of 8 percent, unless ED determines that the RICR would be lower.

The formula for the restricted indirect cost rate is as follows:

RICR = (General management costs + Fixed costs) /(Other expenditures)

General management costs are costs of activities that are for the direction and control of the grantee's affairs that are organizationwide, such as central accounting services, payroll preparation and personnel management. It does not include expenditures limited to one component or operation of the grantee. Specifically excluded from general management costs are the following costs which are reclassified and included in the "other expenditures" denominator:

1) divisional administration that is limited to one component of the grantee;

2) the governing body of the grantee;

3) compensation of the chief executive officer of the grantee;

4) compensation of the chief executive officer of any component of the grantee; and

5) operation of the immediate offices of these officers.

Fixed costs are contributions to fringe benefits and similar costs associated with salaries and wages that are charged as indirect costs, including retirement, social security, pension, unemployment compensation and insurance costs.

Other expenditures are the grantee's total expenditures for its federally and nonfederally funded activities, including directly charged occupancy and space maintenance costs (as defined in 34 CFR section 76.568), and the costs related to the chief executive officer of the grantee or any component of the grantee and their offices. Excluded are general management costs, fixed costs, subgrants, capital outlays, debt service, fines and penalties contingencies and election expenses (except for elections required by Federal statute).

Indirect costs charged to a grant are determined by applying the RICR to total direct costs of the grant minus capital outlays, subgrants and other distorting or unallowable items as specified in the grantees indirect cost rate agreement.

The other ED programs (those not having a statutory non-supplant requirement) which allow indirect costs do not require a restricted rate and should follow the applicable OMB cost principles circular (34 CFR sections 76.560 and 76.563-569).

G. Matching, Level of Effort, Earmarking

1. Matching

See individual program compliance supplement for any matching requirements.

2.1 Level of Effort - Maintenance of Effort (SEAs/LEAs)

ESEA programs in this Supplement that this section applies to are: Title I, Part A (84.010); SDFSCA (except the Governor's Program authorized under Section 4114) (84.186); and Eisenhower (84.281).

As described in II. Program Procedures under General and Program-Specific Cross-cutting Requirements, this requirement is a general cross-cutting requirement that need, only be tested once to cover all major programs to which it applies.

An LEA may receive funds under an applicable program only if the SEA finds that the combined fiscal effort per student or the aggregate expenditures of the LEA from State and local funds for free public education for the preceding year was not less than 90 percent of the combined fiscal effort or aggregate expenditures for the second preceding year, unless specifically waived by ED.

Beginning with the Federal fiscal year 1998, an LEA's expenditures from State and local funds for free public education include expenditures for administration, instruction, attendance and health services, pupil transportation services, operation and maintenance of plant, fixed charges, and net expenditures to cover deficits for food services and student body activities. They do not include the following expenditures: (1) any expenditures for community services, capital outlay, debt service and supplementary expenses as a result of a Presidentially declared disaster; and (2) any expenditures made from funds provided by the Federal government.

For fiscal years prior to 1998, SEAs were allowed to define the types of expenditures that could be included in the calculation for programs other than Title I, Part A.

If an LEA fails to maintain fiscal effort, the SEA must reduce the amount of the allocation of funds under an applicable program in any fiscal year in the exact proportion by which the LEA fails to maintain effort by falling below 90 percent of both the combined fiscal effort per student and aggregate expenditures (using the measure most favorable to the LEA) (Section 14501 of ESEA (20 USC 8891)).

In some States, the SEA prepares the calculation from information provided by the LEA. In other States, the LEAs prepare their own calculation. The audit procedures contained in the Part 3, Section G.2.1, Level of Effort - Maintenance of Effort should be adapted to fit the circumstances. For example, if auditing the LEA and the LEA does the calculations, the auditor should perform steps a, b, and c. If auditing the LEA and the SEA does the calculation, the auditor should perform step c for the amounts reported to the SEA. If auditing the SEA and the SEA performs the calculation, the auditor should perform steps a and b and amend step c to trace amounts to the LEA reports. If auditing the SEA and the LEA performs the calculation, the auditor should perform step a and, if the requirement was not met, determine if the funding was reduced appropriately.

2.2 Level of Effort - Supplement Not Supplant (SEAs/LEAs)

ESEA programs in this Supplement that this section applies to are: Title I, Part A (84.010); MEP (84.011); Bilingual (84.288, 84.290 and 84.291); and Title VI (84.298).

An SEA and LEA may use program funds only to supplement and, to the extent practical, increase the level of funds that would, in the absence of the Federal funds, be made available from non-Federal sources for the education of participating students. In no case may an LEA use Federal program funds to supplant funds from non-Federal sources (Title I, Part A, Section 1120A(b) (20 USC 6322(b)); Title I, Part C Section 1304(c)(2) (20 USC 6394(c)(2)); Title VI of ESEA, Section 6401(b) (20 USC 7371(b)); and Title VII of ESEA, Section 7116(b)(4) (20 USC 7426(h)(4)).

In the following instances, it is presumed that supplanting has occurred:

- The SEA or LEA used Federal funds (except Bilingual) to provide services that the SEA or LEA was required to make available under other Federal, State or local laws.

- The SEA or LEA used Federal funds to provide services that the SEA or LEA provided with non-Federal funds in the prior year.

- The SEA or LEA used Title I, Part A or MEP funds to provide services for participating children that the SEA or LEA provided with non-Federal funds for nonparticipating children.

These presumptions are rebuttable if the SEA or LEA can demonstrate that it would not have provided the services in question with non-Federal funds had the Federal funds not been available.

Schoolwide Program: In a Title I schoolwide program, a school is not required to provide supplemental services to identified children. A school operating a schoolwide program does not have to: (1) show that Federal funds used within the school are paying for additional services that would not otherwise be provided; (2) demonstrate that Federal funds are used only for specific target populations; or (3) separately track Federal program funds once they reach the school. Such a school, however, is required to use funds available under Title I and under any other Federal programs that are combined to support its schoolwide program to supplement the total amount of funds that would, in the absence of the Federal funds, be made available from non-Federal sources for that school, including funds needed to provide services that are required by law for children with disabilities and children with limited English proficiency (Title I, Part A, Section 1114 (20 USC 6314); MEP, Section 1306(b)(3) of ESEA (20 USC 6396(b)(3)); 34 CFR section 200.8; and 60 FR 49174).

Title I, Part A or MEP: An SEA and LEA may exclude, from determinations of compliance with the supplement, not supplant requirement, supplemental State or local funds spent in any school attendance area or school for programs that meet the requirements of section 1114 (Schoolwide Programs) or section 1115 (Targeted Assisted Schools) of the ESEA (Title I, Part A of ESEA, Section 1120A(b) (20 USC 6322(b)).

Bilingual: This supplement not supplant requirement does not preclude an LEA from using Bilingual program funds for activities carried out under a Federal or State court order respecting services to be provided to limited English proficient (LEP) children, or to carry out a plan approved by the Secretary as adequate under Title VI of the Civil Rights Act of 1964 with respect to services to be provided to LEP children (Title VII, Section 7116(h)(4) of ESEA (20 USC 7426(h)(4))).

3. Earmarking

a. Administration (SEAs)

ESEA programs in this Supplement that this section applies to are: Title I, Part A (84.010) and MEP (84.011).

An SEA may reserve for the administration of Title I programs up to one percent from each of the amounts allocated to the State under Title I, Part A (except Capital Expenses under section 1002(e) and School Improvement funds under section 1002(f)), and Part C (MEP) or $400,000, whichever is greater. An SEA may reserve less than one percent from each of Parts A, C, and D (Subpart 1). Moreover, an SEA does not need to reserve the same percentage from each part. However, the amounts reserved from Part A Basic, Concentration, and, when funded, Targeted Grants must be proportionate. For any SEA reserving $400,000, the amount taken from each of Title I, Parts A, C, and D (Subpart 1) must be proportionate. An SEA is not required to use the same proportion of funds reserved from Parts A, C, and D for administrative activities related to those Parts.

As explained in Section III.A.1, Consolidation of administrative funds, the amounts reserved above may be consolidated with State administrative funds available under other applicable programs (Title I, Section 1603 of ESEA (20 USC 6513); 34 CFR sections 200.60(a) and 200.61).

b. Use of unneeded program funds (LEAs)

ESEA programs in this Supplement that this section applies to are: MEP (84.011); SDFSCA (except the Governor's Program authorized under Section 4114) (84.186); Eisenhower (84.281); and Title VI (84.298).

With the approval of its SEA, an LEA that determines for any fiscal year that funds under an applicable program (MEP, Eisenhower, SDFSCA, Title VI) are not needed for the purpose of that applicable program may use five percent or less of the total amount of the funds received under that applicable program for the purpose of another applicable program (Section 14206(a) of ESEA (20 USC 8826(a))).

c. Coordinated services projects (LEAs)

ESEA programs in this Supplement that this section applies to are: Title I, Part A (84.010); MEP (84.011); SDFSCA (including the Governor's Program authorized under Section 4114) (84.186); Eisenhower (84.281); and Title VI (84.298).

In addition to using funds for specific purposes outlined in each program's statute and regulations, an LEA, school, or group of schools if there is no governing LEA, upon application to and approval by ED, may use a total of not more than five percent of its funds received under ESEA to develop, implement, or expand a coordinated services project (Title XI and Section 14206(b) of ESEA; 20 USC 8401 and 8826(b))).

H. Period of Availability of Federal Funds (All grantees)

ESEA programs in this Supplement that this section applies to are: Title I, Part A (84.010); MEP (84.011); SDFSCA (including the Governor's Program authorized under Section 4114) (84.186); Eisenhower (84.281); Bilingual (84.288, 84.290 and 84.291); and Title VI (84.298).

This section also applies to Adult Education (84.002); IDEA (84.027 and 84.173); Vocational Education (84.048); and IDEA, Part C (84.181).

All ESEA and other programs listed above except Bilingual and subrecipients under Vocational Education - LEAs and SEAs must obligate funds during 27 months, extending from July 1 through September 30 of the second following fiscal year. (This maximum period includes a 15 month period of initial availability plus a 12 month period for carryover.) For example, funds from the fiscal year (FY) 1995 appropriation initially became available on July 1, 1995 and can be obligated by the grantee and subgrantee through September 30, 1997. (Section 421(b) of GEPA (20 USC 1225(b); 34 CFR sections 76.704 through 76.707)).

Title I, Part A program - An LEA that receives $50,000 or more in Title I, Part A funds cannot carryover beyond the initial 15 months of availability more than 15 percent of the Title I, Part A funds. An SEA may grant a waiver for the percentage of limitation once every three years. An SEA may also grant a waiver in any fiscal year in which supplemental appropriations for Title I become available for obligation. (Section 1127 of ESEA (20 USC 6338)).

SDFSC State Grant program - An LEA that receives SDFSCA funding cannot carryover beyond the initial 15 months of availability more than 25% of SDFSCA State Grant funds. An SEA may waive the percentage limitation for good cause for additional carryover by the LEA. (Section 4113)(f)(2) of ESEA (20 USC 7113)).

Bilingual program - The recipient must obligate funds from a grant during the period for which the funds are available for obligation as set forth in the grant award document. Recipients must maintain documentation to demonstrate that the obligation occurred during the period of availability and was charged to an appropriate year's grant funds. If obligations occur outside of the period of availability, the funds are not timely obligated and must be returned. Grantees, however, have the authority under certain circumstances to extend a project period, on a one-time basis, for a period of up to 12 months (34 CFR section 75.261).

Vocational Education program - In any fiscal or program year that a subrecipient does not obligate all of the amounts it is allocated under the Secondary, and Postsecondary and Adult Education programs for that year, it must return the unobligated amounts to the State to be reallocated under 34 CFR sections 403.112(b), 403.113, or 403.116(b), as applicable (34 CFR section 403.120(a); 20 USC 2341c(a)).

Consolidated administrative funds and coordinated services projects - Consolidated administrative funds and funds used in coordinated services projects must be obligated within the period of availability of the program that the funds came from. Because expenditures in a consolidated administrative fund or a coordinated services project are not accounted for by specific Federal programs, an SEA or LEA may use a first-in, first-out method for determining when funds were obligated, may attribute costs in proportion to the dollars provided, or may use another reasonable method.

Definition of Obligation - An obligation is not necessarily a liability in accordance with Generally Accepted Accounting Principles. When an obligation occurs (is made) depends on the type of property or services which the obligation is for:

The act of an SEA or other grantee awarding Federal funds to an LEA or other eligible entity within a State does not constitute a final obligation. An SEA or other grantee may not reallocate grant funds from one subrecipient to another after the period of availability (GEPA Section 421(b); 20 USC 1225(b); 34 CFR sections 76.704 through 76.707).

If a grantee or subgrantee uses a different accounting system or accounting principles from one year to the next, it shall demonstrate that the system or principle was not improperly changed to avoid returning funds which were not timely obligated. A grantee or subgrantee may not make accounting adjustments after the period of availability in an attempt to offset audit disallowances. The disallowed costs must be refunded.

L. Reporting

1. Financial Reporting

ESEA programs in this Supplement that this section applies to are: Title I, Part A (84.010); MEP (84.011);SDFSCA (including the Governor's Program authorized under Section 4114) (84.186); Eisenhower (84.281); Bilingual (84.288, 84.290 and 84.291); and Title VI (84.298).

This section also applies to IDEA (84.027 and 84.173); and IDEA, PART C (84.181).

a. SF-269A, Financial Status Report (short form) - Not Applicable

b. SF-270, Request for Advance or Reimbursement - Only grantees placed on reimbursement are required to complete this form to request payment of grant award funds. The requirement to use this form is imposed on an individual recipient basis.

c. SF-271, Outlay Report and Request for Reimbursement for Construction Program - Not Applicable

d. SF-272, Federal Cash Transactions Report - Not Applicable

e. Grant Administration and Payment System (GAPS) (OMB No. 1875-0138) - Grantees draw funds and account to ED using GAPS. Grantees request funds by: (1) creating a payment request using the GAPS External Access System through the Internet; (2) calling the GAPS Payee Hotline; or (3) if the grantee is placed on a reimbursement basis for an award, submitting an SF-270, Request for Advance or Reimbursement to an ED program or regional office. When creating a payment request in GAPS, the grantee enters the drawdown amounts, by award, directly into GAPS. When requesting funds using the other 2 methods, the grantee provides this information to the hotline operator, or on the SF-270, and ED staff enter the data into GAPS. ED also enters other award data into GAPS, including authorization amounts and payment status. The system maintains and provides cumulative data on net draws and the available balance for each award.

ED considers drawn funds to have been expended by the grantee for the award(s) identified (notwithstanding that the grantee has up to three days to make disbursements). Cumulative drawdown amounts in GAPS should accurately reflect the grantee's actual disbursement of funds by award. Grantees can redistribute drawn amounts between grant awards by making adjustments in GAPS to reflect actual disbursements for each award. For example, if a grantee draws too much under one award, it can enter an adjustment in GAPS to reallocate the excess amount to other awards for which there were immediate cash needs, as long as the net amount of the adjustment is zero.

To assist grantees in reconciling their internal accounting records with GAPS, grantees can use the GAPS External Access System (http://gapsweb.ed.gov) to obtain a GAPS Activity Report showing cumulative and detail information for each award. The GAPS Activity Report can be created and viewed on-line and a hard copy may be printed as well.

f. LEAs and other subrecipients are generally required to report financial information to the pass-through entity. These reports should be tested during audits of LEAs.

2. Performance Reporting - Not Applicable

3. Special Reporting

State Per Pupil Expenditure (SPPE) Data (OMB No 1850-0067) (SEAs/LEAs)

ESEA programs in this Supplement that this section applies to are: Title I, Part A (84.010); and MEP (84.011).

As described in II. Program Procedures under General and Program-Specific Cross-cutting Requirements, this requirement is a general cross-cutting requirement that need only be tested once to cover all major programs to which it applies.

Each year, an SEA must submit its average State per pupil expenditure (SPPE) data to the National Center for Education Statistics. These SPPE data are used by ED to make allocations under several ESEA programs, including Title I, Part A, and MEP. SPPE data are reported on the National Public Education Finance Survey. SPPE data comprise the State's annual current expenditures for free public education, less certain designated exclusions, divided by the State's average daily attendance.

LEAs must submit data to the SEA for the SEA's report. The SEA determines the format of the data submissions.

Current expenditures to be included are those for free public education, including administration, instruction, attendance and health services, pupil transportation services, operation and maintenance of plant, fixed charges, and net expenditures to cover deficits for food services and student body activities. Current expenditures to be excluded are those for community services, capital outlay, debt service, and expenditures from funds received under Title I and Title VI of ESEA. To determine its expenditures under Title I and VI of ESEA in a schoolwide program, an LEA could calculate the percentage of funds that Title I and Title VI contributed to the schoolwide program and then apply those percentages to the total expenditures in the schoolwide program. Other reasonable methods may also be used (Section 14101(11) of ESEA (20 USC 8801)).

Except when provided otherwise by State law, average daily attendance generally means the aggregate number of days of attendance of all students during a school year divided by the number of days school is in session during such school year. For purposes of ESEA, average daily membership (or similar data) can be used in place of average daily attendance in States that provide State aid to LEAs on the basis of average daily membership or such other data. When an LEA in which a child resides makes a tuition or other payment for the free public education of the child in a school of another LEA, the child is considered to be in attendance at the school of the LEA making the payment, and not at the school of the LEA receiving the payment. Similarly, when an LEA makes a tuition payment to a private school or to a public school of another LEA for a child with disabilities, the child is considered to be in attendance at the school of the LEA making the payment.

N. Special Tests and Provisions

1. Participation of Private School Children (SEAs/LEAs)

ESEA programs in this Supplement that this section applies to are: Title I, Part A (84.010); MEP (84.011);SDFSCA (except the Governor's Program authorized under Section 4114) (84.186); Eisenhower (84.281); Bilingual 84.288, 84.290 and 84.291); and Title VI (84.298).

Depending on how the SEA/LEA implements requirements for the provision of equitable participation of private school children, this requirement may be tested on a general or program-specific basis (as described in II. Program Procedures under General and Program-Specific Cross-cutting Requirements).

Compliance Requirement - An SEA, LEA, or any other educational service agency (or consortium of such agencies) receiving financial assistance under an applicable program must provide eligible private school children and their teachers or other educational personnel with equitable services or other benefits under these programs. Before an agency or consortium makes any decision that affects the opportunity of eligible private school children, teachers, and other educational personnel to participate, the agency or consortium must engage in timely and meaningful consultation with private school officials (Section 14503 of ESEA (20 USC 8893); Title I, Section 1120 of ESEA (20 USC 6321); 34 CFR sections 200.10 through 200.13; and Title VI, Section 6402 (20 USC 7372)).

If an LEA uses funds to concentrate services on a particular "group, attendance area, or grade or age level," private school children in that "group, attendance area, grade or age level" are to be assured equitable participation in projects.

Audit Objective - Determine whether (1) the LEA, SEA, or other agency receiving ESEA funds has conducted timely consultation with private school officials to determine the kind of educational services to provide to eligible private school children, (2) the required amount was set aside for private school children, and (3) the planned services were provided.

Suggested Audit Procedures (LEA/SEA)

(a) Verify, by reviewing minutes of meetings and other appropriate documents, that the SEA or LEA conducted timely consultation with private school officials in making their determinations and set aside the required amount for private school children.

(b) Review program expenditure and other records to ascertain if educational services that were planned were provided.

2. Schoolwide Programs (LEAs)

ESEA programs in this Supplement that this section applies to are: Title I, Part A (84.010); MEP (84.011); SDFSCA (including the Governor's Program authorized under Section 4114) (84.186); Eisenhower (84.281); Bilingual (84.288, 84.290 and 84.291); and Title VI (84.298).

This section also applies to IDEA (84.027 and 84.173) and Vocational Education (84.048).

As described in II. Program Procedures under General and Program-Specific Cross-cutting Requirements, this requirement is a general cross-cutting requirement that only needs to be tested once to cover all major programs to which it applies.

Compliance Requirement - A school participating under Title I, Part A may, in consultation with its LEA, use its Title I, Part A funds, along with funds provided from the above-identified programs and other Federal education funds, to upgrade the school's entire educational program in a schoolwide program. To qualify for fiscal year 1996-97 and subsequent years, at least 50 percent of the children enrolled in the school or residing in the school attendance area for the initial year of the schoolwide program must be from low-income families. The LEA is required to maintain records to demonstrate compliance with this requirement. To operate a schoolwide program, a school must develop, in consultation with the LEA and its school support team or other technical assistance provider, a comprehensive plan to upgrade its total instructional program.

Each schoolwide program must include a number of specific components, which must be described in the comprehensive plan including: (1) a comprehensive needs assessment of the entire school; (2) schoolwide reform strategies; (3) instruction by highly qualified professional staff; (4) professional development for teachers and other staff; and, (5) strategies to increase parental involvement.

In combining funds, a schoolwide program school must also ensure that its schoolwide program addresses the needs of children who are members of the target population of any Federal program that is included in the schoolwide program. When combining funds or services received under MEP, a schoolwide program must: (1) in consultation with parents of migratory children or organizations representing those parents, address the identified needs of migratory children that result from the effects of their migratory lifestyle or are needed to permit migratory children to participate effectively in schools and (2) document that services addressing those needs have been provided. Similarly, a schoolwide program must have the approval of the Indian parent advisory committee established in section 9114(c)(4) of ESEA (20 USC 7814(c)(4)) before funds received under the Title IX, Part A, Subpart 1 Indian Education program can be combined (Sections 1114 and 1306(b) of ESEA (20 USC 6314 and 6396(b); 34 CFR sections 76.731, 200.8; and 60 FR 49174).

Audit Objectives (LEA) - Determine whether (1) the schools operating schoolwide programs were eligible to do so; and (2) the schoolwide programs were based on a comprehensive plan that included the required elements.

Suggested Audit Procedures (LEA)

a. For schools operating a schoolwide program, review records and ascertain if the schools met the poverty eligibility requirements.

b. Review the schoolwide plan and ascertain if it included the required components described above.

c. Review documentation to support:

(1) Consultation with parents including, when MEP funds are included, the parents of migratory children or organizations representing those parents; and, when Title IX, Part A, Subpart 1 (Indian Education) funds are included, approval by the Indian parent advisory committee.

(2) If MEP funds are combined in the schoolwide program, that services addressing the identified needs of migratory children were provided by the schoolwide program.

3. Comparability (SEAs/LEAs)

ESEA programs in this Supplement that this section applies to are: Title I, Part A (84.010) and MEP (84.011).

As described in II. Program Procedures under General and Program-Specific Cross-cutting Requirements, this requirement is a general cross-cutting requirement that need only be tested once to cover all major programs to which it applies.

Compliance Requirement - An LEA may receive funds under Title I, Part A and the MEP (Title I, Part C) only if State and local funds will be used in participating schools to provide services that, taken as a whole, are at least comparable to services that the LEA is providing in schools not receiving Title I, Part A or MEP funds. An LEA is considered to have met the statutory comparability requirements if it has implemented (1) an LEA-wide salary schedule; (2) a policy to ensure equivalence among schools in teachers, administrators, and other staff; and (3) a policy to ensure equivalence among schools in the provision of curriculum materials and instructional supplies. An LEA may also use other measures to determine comparability such as comparing the average number of students per instructional staff or the average staff salary per student in each school receiving Title I, Part A or MEP funds with those in schools that do not receive Title I, Part A or MEP funds. If all schools are served by Title I, Part A or MEP, an LEA must use State and local funds to provide services that, taken as a whole, are substantially comparable in each school. Determinations may be made on either a district-wide or grade-span basis.

An LEA may exclude schools with fewer than 100 students from its comparability determinations. The comparability requirement does not apply to an LEA that has only one school for each grade span. An LEA may exclude from determinations of compliance with this requirement State and local funds expended for (1) bilingual education for children with limited English proficiency (LEP); (2) excess costs of providing services to children with disabilities as determined by the LEA; and (3) supplemental State or local funds for programs that meet the intent and purposes of Title I, Part A or MEP (Title I, Section 1120A(c) of ESEA (20 USC 6322(c)).

Each LEA must develop procedures for complying with the comparability requirements and must maintain records that are updated biennially documenting compliance with the comparability requirements.

The SEA, however, is ultimately responsible for ensuring that LEAs remain in compliance with the comparability requirement (Title I, Section 1120A(c) of ESEA (20 USC 6322(c))).

Audit Objective (SEA) - Determine whether the SEA is determining if LEAs are complying with the comparability requirements.

Suggested Audit Procedure (SEA)

For a sample of LEAs, review SEA records that document SEA review of LEA compliance with the comparability requirements.

Audit Objective (LEA) - Determine whether the LEA has developed procedures for complying with the comparability requirements and maintained records that are updated at least biennially documenting compliance with the comparability requirements.

Suggested Audit Procedures (LEA)

a. Through inquiry and review, ascertain if the LEA has developed procedures and measures for complying with the comparability requirements.

b. Review LEA comparability documentation to ascertain (1) if it has been updated within two years of the end of the audit period and (2) that it documents compliance with the comparability requirements.

c. Test comparability data to supporting records.

 IV. OTHER INFORMATION

Guidance on Type A Program Determination and Schedule of Expenditure of Federal Awards (LEA)

A. Use of unneeded fund program funds

ESEA programs in this Supplement that this section applies to are: MEP (84.011); SDFSCA (except the Governor's Program authorized under Section 4114) (84.186); Eisenhower (84.281); and Title VI (84.298).

Expenditures of unneeded program funds transferred from another program should be included in the audit universe and total expenditures of the receiving program when determining Type A programs. They should not be included in the expenditures of the transferring program. On the Schedule of Expenditure of Federal Awards, the amount of unneeded program funds expended should be included in the total expenditures for the receiving program. A footnote showing the amount of funds transferred between programs is encouraged.

B. Coordinated Services Projects

ESEA programs in this Supplement that this section applies to are: Title I, Part A (84.010); MEP (84.011); SDFSCA (including the Governor's Program authorized under Section 4114) (84.186); Eisenhower (84.281); and Title VI (84.298).

Since coordinated services projects are not a separate Federal program as defined by OMB Circular A-133, amounts expended for coordinated services projects would be included in total expenditures and the audit universe for the contributing programs when determining Type A programs and in the Schedule of Expenditure of Federal Awards. A footnote showing by program the amounts used in coordinated services projects is encouraged.

C. Schoolwide Programs

ESEA programs in this Supplement that this section applies to are: Title I, Part A (84.010); MEP (84.011); SDFSCA (84.186); Eisenhower (84.281);Bilingual (84.288, 84.290 and 84.291); and Title VI (84.298).

This section also applies to IDEA (84.027 and 84.173) and Vocational Education (84.048).

Since schoolwide programs are not a separate Federal program as defined in OMB Circular A-133, amounts used in schoolwide programs should be included in the total expenditures of the program contributing the funds when determining Type A Programs and in the Schedule of Expenditure of Federal Awards. A footnote showing by program amounts used in schoolwide programs is encouraged.

DEPARTMENT OF EDUCATION

CFDA 84.002 ADULT EDUCATION--STATE GRANT PROGRAM

I. PROGRAM OBJECTIVES

The Adult Education State Grant Program provides grants to States to encourage, expand, and improve educational opportunities for adults by conducting adult education programs, services, and other activities.

II. PROGRAM PROCEDURES

Funds are provided to States each year in accordance with a statutory formula. State plans are developed every four years and may be amended in interim years. State Educational Agencies (SEAs) may administer programs directly or contract with and/or make subgrants to eligible subrecipients.

Eligible subrecipients include Local Educational Agencies (LEAs), public or private non-profit agencies, correctional educational agencies, community-based organizations, postsecondary educational institutions, institutions that serve educationally disadvantaged adults, and any other institutions that have the ability to provide literacy services to adults and families. Applications may be received on behalf of a consortium that includes one of the foregoing non-profit entities and a for-profit agency, organization, or institution that can make a significant contribution to attaining the objectives of the program.

Source of Governing Requirements

This program was authorized by the Adult Education Act (20 USC 1201 et seq.) Regulations governing this program are in 34 CFR parts 460 and 461. The Adult Education and Family Literacy Act (Title II of the Workforce Investment Act of 1998 (P.L. 105-220), 20 USC 9201 et seq.) was enacted in August 1998 and replaces the Adult Education Act. The new law will govern awards made on or after July 1, 1999.

III. COMPLIANCE REQUIREMENTS

In developing the audit procedures to test compliance with the requirements for a Federal program, the auditor should first look to Part 2, Matrix of Compliance Requirements, to identify which of the 14 types of compliance requirements described in Part 3 are applicable and then look to Parts 3 and 4 for the details of the requirements.

Certain compliance requirements which apply to multiple Department of Education (ED) programs are discussed once in the ED Cross-Cutting Section of this Supplement (page 4-84.000-1) rather than repeating in each individual program. Where applicable, this section references to the Cross-Cutting Section for these requirements.

A. Activities Allowed or Unallowed

1. Adult education programs to: (1) enable adults to acquire the basic educational skills necessary for literate functioning; (2) provide adults with sufficient basic education to enable them to benefit from job training and retraining programs and obtain and retain productive employment; and (3) enable adults to continue their education to at least the level of completion of secondary school. Adult means individuals who are at least 16 or who are beyond the age of compulsory school attendance under State law and are not enrolled in secondary school (20 USC 1201).

2. SEAs may use funds for:

a. State administrative costs, including the costs of a State advisory council (34 CFR sections 460.4 and 461.50(b)(3)).

b. Such additional State activities as evaluation, teacher training, dissemination, technical assistance, and curriculum development (34 CFR section 460.4).

3. Subrecipients may use funds for administrative costs (34 CFR section 461.40(b)).

B. Allowable Costs/Cost Principles

See ED Cross-Cutting Section

E. Eligibility

The auditor is not expected to test for eligibility.

G. Matching, Level of Effort, Earmarking

1. Matching

The Federal share may not exceed 75 percent of the total expenditures for programs, services, and activities on a State-wide basis, that are carried out with the Federal fiscal year 1992 award and from each award thereafter (34 CFR section 461.41(a)(5)).

Expenditures included in the non-Federal share are defined in 34 CFR section 461.41(c). They include (a) expenditures from State, local and other non-Federal sources for programs, services, and activities of adult education, as defined in the Act, made by public or private entities that receive from the State either or both Federal funds made available under the Act or State funds for adult education, and (b) expenditures made directly by the State for programs, services and activities of adult education, as defined in the Act.

Note: Subrecipients are not required to meet the Federal matching requirement; however, they are required to report information to the State for its matching calculation. See L, Reporting.

2.1 Level of Effort - Maintenance of Effort

To be eligible for an award, an SEA must have spent on adult education from non-Federal sources in the second preceding Federal fiscal year or program year an amount not less than the amount spent from those sources in third preceding Federal fiscal year or program year. Awards are usually made on or about July 1st, and SEAs typically use the program year, rather than the Federal fiscal year, as the basis for comparison. A program year is the period from July 1st of a calendar year through June 30th of the following calendar year. To give an illustration, in order to receive an award made on July 1, 1996, the SEA must have spent from non-Federal sources during the second preceding program year (July 1, 1993 - June 30, 1994) not less than it spent during the third preceding program year (July 1, 1992 - June 30, 1993). The types of expenditures included in the non-Federal share that must be maintained from the third to the second preceding program year are defined in 34 CFR section 461.41(c), which is referenced and described above in G.1. Matching. As used in that section, the term Anon-Federal sources@ includes expenditures made by the State, by subrecipients, or by third parties. Effort may be maintained either on a total expenditure basis or a per student expenditure basis. For general guidance on the maintenance of effort requirement, see 34 CFR sections 461.42 to 461.45.

Note: Subrecipients are not required to maintain non-Federal effort; however, they may be required to report information to the State for its maintenance of effort calculations. See L. Reporting.

2.2 Level of Effort - Supplement Not Supplant - Not Applicable

3. Earmarking

a. SEA - The following earmarking requirements are for each yearly grant award and must be met within the period of availability (generally 27 months) (34 CFR sections 76.703 through 76.707):

(1) Corrections education and education for other institutionalized adults should be at least 10 percent of the award (34 CFR section 461.32(a)).

(2) Special experimental demonstration projects and teacher training projects under Section 353 of the Act should be at least 15 percent of the award of which at least 10 percent of the award shall be used for teacher training (34 CFR sections 461.33(a) and (b)).

(3) Programs of equivalency for a certificate of graduation from secondary school: not more than 20 percent of the award (34 CFR section 461.10(b)(8)).

(4) Necessary and reasonable State administrative costs: no more than 5 percent of its award or $50,000, whichever is greater (34 CFR sections 460.4(c) and 461.40(a)(1)).

b. Subrecipients - Local administrative costs may not exceed 5 percent of the award unless the SEA determined, after negotiation with the local applicant, that a higher percentage was necessary and reasonable (34 CFR section 461.40(b)).

H. Period of Availability of Federal Funds

See ED Cross-Cutting Section.

L. Reporting

1. Financial Reporting

a. SF-269A, Financial Status Report (short form) - Applicable

b. SF-270, Request for Advance or Reimbursement - Only grantees placed on reimbursement are required to complete this form to request payment of grant award funds. The requirement to use this form is imposed on an individual recipient basis.

c. SF-271, Outlay Report and Request for Reimbursement for Construction Program - Not Applicable

d. SF-272, Federal Cash Transactions Report - Not Applicable

e. Grant Administration and Payment System (GAPS) (OMB No. 1875-0138) - Grantees draw funds and account to ED using GAPS. Grantees request funds by: (1) creating a payment request using the GAPS External Access System through the Internet; (2) calling the GAPS Payee Hotline; or (3) if the grantee is placed on a reimbursement basis for an award, submitting an SF-270, Request for Advance or Reimbursement to an ED program or regional office. When creating a payment request in GAPS, the grantee enters the drawdown amounts, by award, directly into GAPS. When requesting funds using the other 2 methods, the grantee provides this information to the hotline operator, or on the SF-270, and ED staff enter the data into GAPS. ED also enters other award data into GAPS, including authorization amounts and payment status. The system maintains and provides cumulative data on net draws and the available balance for each award.

ED considers drawn funds to have been expended by the grantee for the award(s) identified (notwithstanding that the grantee has up to three days to make disbursements). Cumulative drawdown amounts in GAPS should accurately reflect the grantee's actual disbursement of funds by award. Grantees can redistribute drawn amounts between grant awards by making adjustments in GAPS to reflect actual disbursements for each award. For example, if a grantee draws too much under one award, it can enter an adjustment in GAPS to reallocate the excess amount to other awards for which there were immediate cash needs, as long as the net amount of the adjustment is zero.

To assist grantees in reconciling their internal accounting records with GAPS, grantees can use the GAPS External Access System (http://gapsweb.ed.gov) to obtain a GAPS Activity Report showing cumulative and detail information for each award. The GAPS Activity Report can be created and viewed on-line and a hard copy may be printed as well.

f. LEAs and other subrecipients are generally required to report financial information to the pass-through entity. These reports should be tested during audits of LEAs.

2. Performance Reporting - Not Applicable

3. Special Reporting - Not Applicable

DEPARTMENT OF EDUCATION

CFDA 84.010 TITLE I GRANTS TO LOCAL EDUCATIONAL AGENCIES (LEAs) (Title I, Part A of ESEA)

I. PROGRAM OBJECTIVES

The objective of Title I, Part A of the Elementary and Secondary Education Act (ESEA), as amended by the Improving America's Schools Act (IASA), is to improve the teaching and learning of children who are at risk of not meeting challenging academic standards and who reside in areas with high concentrations of children from low-income families.

II. PROGRAM PROCEDURES

The Department of Education (ED) provides Title I, Part A funds to each State Educational Agency (SEA) through a statutory formula based primarily on the number of children ages 5 through 17 from low-income families. This number is augmented by annually collected counts of children ages 5 through 17 in foster homes, locally-operated institutions for neglected or delinquent children, and families above poverty that receive assistance under the Aid to Families with Dependent Children (AFDC) program or the successor State programs under Temporary Assistance to Needy Families (TANF) and adjusted to account for the cost of education in each State. To receive funds, an SEA must submit to ED for approval either (1) an individual State plan as provided in Section 1111 of the ESEA (20 USC 6311) or (2) a consolidated plan that includes Part A, in accordance with Section 14302 of the ESEA (20 USC 8852). The individual or consolidated plan, after approval by ED, remains in effect for the duration of the State's participation in Title I, Part A. The plan must be updated to reflect substantive changes.

SEAs allocate funds to LEAs based on the best available data that reflect the current distribution of children from low-income families. To receive Title I funds, LEAs must have on file with the SEA an approved plan that includes descriptions of the general nature of services to be provided, how program services will be coordinated with the LEA's regular program of instruction, additional LEA assessments, if any, used to gauge program outcomes, and strategies to be used to provide professional development. An LEA may also include Part A as part of a consolidated application submitted to the SEA under Section 14305 of the ESEA (20 USC 8855).

LEAs allocate Title I funds to eligible school attendance areas based on the number of children from low-income families residing within the attendance area. A school at or above 50 percent poverty may use its Part A funds, along with other Federal, State, and local funds, to operate a schoolwide program to upgrade the instructional program in the whole school. Otherwise, a school operates a targeted assistance program in which the school identifies students who are failing, or most at risk of failing, to meet the State's challenging performance standards and who have the greatest need. The school then designs, in consultation with parents, staff, and the LEA, an instructional program to meet the needs of those students.

III. COMPLIANCE REQUIREMENTS

In developing the audit procedures to test compliance with the requirements for a Federal program, the auditor should first look to Part 2, Matrix of Compliance Requirements, to identify which of the 14 types of compliance requirements described in Part 3 are applicable and then look to Parts 3 and 4 for the details of the requirements.

Certain compliance requirements which apply to multiple ESEA programs are discussed once in the ED Cross-Cutting Section of this Supplement (page 4-84.000-1) rather than repeated in each individual program. Where applicable, this section references the Cross-Cutting Section for these requirements. Also, as discussed in the Cross-Cutting Section, SEAs and LEAs may have been granted waivers from certain compliance requirements.

A. Activities Allowed or Unallowed

Also, see ED Cross-Cutting Section.

1. LEAs (Targeted assistance programs only. See special tests and provisions for schoolwide programs.)

In a targeted assistance school, funds available under Part A may be used only for programs that are designed to help participating children meet the State's student performance standards expected of all children. Allowable activities in these schools include, but are not limited to, instructional programs, counseling, mentoring, other pupil services, college and career awareness and preparation, services to prepare students for the transition from school to work, services to assist preschool children in the transition to elementary school programs, parental involvement activities, and professional staff development. If health, nutrition, and other social services are not otherwise available from other sources to participating children, Part A funds may be used as a last resort to provide such services. The LEA's plan will provide a description of the general nature of the services to be provided with Part A funds. However, each Title I school determines the actual program it will provide (Title I, Section 1115 of ESEA (20 USC 6315)).

2. SEAs

SEAs can use funds to provide subgrants to LEAs, for State administration, and for program improvement activities in accordance with the State plan (Title I, Sections 1003, 1111, 1117 and 1603 of ESEA) (20 USC 6303, 6311, 6317, and 6513).

B. Allowable Costs/Cost Principles

See ED Cross-Cutting Section.

E. Eligibility

1. Eligibility for Individuals

Eligible Children (LEA targeted assistance programs only)

Title I, Part A funds are to be used to provide services and benefits to eligible children residing or enrolled in eligible school attendance areas. Once funds are allocated to eligible school attendance areas (see E.2.a and E.2.b. below), a school operating a targeted assistance program must use Title I funds only for programs that are designed to meet the needs of children identified by the school as failing, or most at risk of failing, to meet the State's challenging student performance standards. In general, eligible children are identified on the basis of multiple, educationally-related, objective criteria established by the LEA and supplemented by the school. Children who are economically disadvantaged, children with disabilities, migrant children, and limited English proficient (LEP) children are eligible for Part A services on the same basis as other children who are selected for services. In addition, certain categories of children are considered at risk of failing to meet the State's student performance standards and are thus eligible for Title I services because of their status. Such children include: children who are homeless; children who participated in a Head Start or Even Start program at any time in the two preceding years; children who received services under a program for youth who are neglected, delinquent, or at risk of dropping out under Title I, Part D (or its predecessor authority) at any time in the two preceding years; and children who are in a local institution for neglected or delinquent children or attending a community day program. From the pool of eligible children, a targeted assistance school selects those children who have the greatest need for special assistance to receive Part A services (Title I, Section 1115 of ESEA (20 USC 6315)).

2. Eligibility for Group of Individuals or Area of Service Delivery

a. School Attendance Areas or Schools (LEAs with either schoolwide programs or targeted assistance programs)

An LEA must determine which school attendance areas are eligible to participate in Part A. A school attendance area is generally eligible to participate if the percentage of children from low-income families is at least as high as the percentage of children from low-income families in the LEA as a whole or at least 35 percent poverty. An LEA may also designate and serve a school in an ineligible attendance area if the percentage of children from low-income families enrolled in that school is equal to or greater than the percentage of such children in a participating school attendance area. When determining eligibility, an LEA must select a poverty measure from among the following data sources: (1) the number of children ages 5-17 in poverty counted in the most recent census; (2) the number of children eligible for free and reduced priced lunches; (3) the number of children in families receiving AFDC or Temporary Assistance for Needy Families (TANF); (4) the number of children eligible to receive Medicaid assistance; or (5) a composite of these data sources. The LEA must use that measure consistently across the district to rank all its school attendance areas according to their percentage of poverty.

An LEA must serve eligible schools or attendance areas in rank order according to their percentage of poverty. An LEA must serve those areas or schools above 75 percent poverty, including any middle or high schools, before it serves any with a poverty percentage below 75 percent. After an LEA has served all areas and schools with a poverty rate above 75 percent, the LEA may serve lower-poverty areas and schools either by continuing with the district-wide ranking or by ranking its schools below 75 percent poverty according to grade-span grouping (e.g., K-6, 7-9, 10-12). If an LEA ranks by grade span, the LEA may use the district-wide poverty average or the poverty average for the respective grade span grouping.

An LEA may elect not to serve an eligible area or school that has a higher percentage of children from low-income families if: (1) the school meets the Title I comparability requirements; (2) the school is receiving supplemental State or local funds that are spent according to the requirements in sections 1114 or 1115 of Title I; and (3) the supplemental State and local funds expended in the area or school equal or exceed the amount that would be provided under Part A. An LEA with an enrollment of less than 1000 students or with only one school per grade span is not required to rank its school attendance areas (Title I, Section 1113(a)-(b) of ESEA (20 USC 6313(a)-(b)); 34 CFR section 200.28(a) (3)).

b. Allocating funds to eligible school attendance areas and schools: (LEAs with either schoolwide programs or targeted assistance programs)

An LEA must allocate Part A funds to each participating school attendance area or school, in rank order, on the basis of the total number of children from low-income families residing in the area or attending the school. In calculating the total number of children from low-income families, the LEA must include children from low-income families who reside in a participating area and attend private schools, using the same poverty data, if available, as the LEA uses to count public school children. If the same data are not available, the LEA may use comparable data. If complete actual poverty data are not available on private school children, an LEA may extrapolate, from actual data on a representative sample of private school children, the number of children from low-income families who attend private schools. An LEA may also correlate sources of data. If an LEA selects a public school to participate on the basis of enrollment, rather than because it serves an eligible school attendance area, the LEA must, in consultation with private school officials, determine an equitable way to count poor private school children in order to calculate the amount of Title I funds available to serve private school children.

If an LEA serves any attendance area with less than a 35 percent poverty rate, the LEA must allocate to all its participating areas an amount per poor child that equals at least 125 percent of the LEA's Part A allocation per poor child. (An LEA's allocation per poor child is the total LEA allocation under subpart 2 of Part A divided by the number of poor children in the LEA according to the poverty measure selected by the LEA to identify eligible school attendance areas. The LEA then multiplies this per-child amount by 125 percent.) If an LEA serves only areas with a poverty rate greater than 35 percent, the LEA must allocate funds, in rank order, on the basis of the total number of poor children in each area or school, but is not required to allocate a per-pupil amount of at least 125 percent. An LEA may not allocate a higher amount per poor child to areas or schools with lower percentages of poverty than to areas with higher percentages. If an LEA serves areas or schools below 75 percent poverty by grade span groupings, the LEA may allocate different amounts per poor child for different grade span groupings as long as those amounts do not exceed the amount per poor child allocated to any area or school above 75 percent poverty. Amounts per poor child within grade spans may also vary as long as the LEA allocates higher amounts per poor child to higher poverty areas or schools within the grade span than it allocates to lower poverty areas or schools.

The LEA must reserve the amounts generated by poor private school children who reside in participating public school attendance areas to provide services to eligible private school children (Title I, Section 1113(c) of ESEA (20 USC 6313(c)); 34 CFR sections 200.27 and 200.28).

3. Eligibility for Subrecipients - Not Applicable

G. Matching, Level of Effort, Earmarking

1. Matching - Not Applicable

2.1 Level of Effort - Maintenance of Effort

See ED Cross-Cutting Section.

2.2 Level of Effort - Supplement not Supplant

See ED Cross-Cutting Section.

3. Earmarking (SEAs)

See ED Cross-Cutting Section.

H. Period of Availability of Federal Funds

See ED Cross-Cutting Section.

L. Reporting

1. Financial Reporting

See ED Cross-Cutting Section.

2. Performance Reporting - Not Applicable

3. Special Reporting

See ED Cross-Cutting Section.

N. Special Tests And Provisions

1. Participation of Private School Children

See ED Cross-Cutting Section.

2. Schoolwide Programs (LEAs)

See ED Cross-Cutting Section.

3. Comparability

See ED Cross-Cutting Section.

DEPARTMENT OF EDUCATION

CFDA 84.011 MIGRANT EDUCATION - BASIC STATE GRANT PROGRAM (Title I, Part C of ESEA)

I. PROGRAM OBJECTIVES

The objectives of the Migrant Education - Basic State Grant Program (Migrant Education Program or MEP) are to: (1) support high-quality and comprehensive educational programs for migratory children to help reduce the educational disruptions and other problems that result from repeated moves; (2) provide appropriate educational services (including support services) that address the special needs of migratory children in a coordinated and efficient manner; (3) ensure that migratory children have the opportunity to meet the same challenging State content standards and challenging State student performance standards that all children are expected to meet; (4) design programs to help migratory children overcome educational disruption, cultural and language barriers, social isolation, various health-related problems, and other factors which inhibit the ability of migrant children to do well in school, and to prepare such children to make a successful transition to postsecondary education or employment; and, (5) ensure that migratory children benefit from State and local systemic reforms.

II. PROGRAM PROCEDURES

MEP funds are allocated to a State educational agency (SEA), under either an approved consolidated program plan or an approved individual program application, in order for the SEA to provide MEP services and activities either directly, or through subgrants to local operating agencies. Local operating agencies can be either local educational agencies (LEAs) or other public or nonprofit private agencies. Because an SEA may choose to provide MEP services directly or through a local operating agency, some of the suggested audit procedures will apply for an SEA or local operating agency, depending on which agency provides the services and where the records are maintained.

III. COMPLIANCE REQUIREMENTS

In developing the audit procedures to test compliance with the requirements for a Federal program, the auditor should first look to Part 2, Matrix of Compliance Requirements, to identify which of the 14 types of compliance requirements described in Part 3 are applicable and then look to Parts 3 and 4 for the details of the requirements.

Certain compliance requirements which apply to multiple ESEA programs are discussed once in the Department of Education (ED) Cross-Cutting Section of this Supplement (page 4-84.000-1) rather than repeating in each individual program. Where applicable, this section references to the Cross-Cutting Section for these requirements. Also, as discussed in the Cross-Cutting Section, SEAs and LEAs may have been granted waivers from certain compliance requirements.

A. Activities Allowed or Unallowed

Also, see ED Cross-Cutting Section

1. SEAs

SEAs may use funds to operate the program (directly or through contracts), make subgrants to LEA or other local operating agencies, and pay for State administration. In general, funds available under the MEP may be used only to: (1) identify eligible migratory children and their needs; and (2) provide educational and support services (including, but not limited to, preschool services, professional development, advocacy and outreach, parental involvement activities and the acquisition of equipment) that address the identified needs of the eligible children.

An SEA may also use MEP funds to carry out administrative activities that are unique to the program. These activities include, but are not limited to, statewide identification and recruitment of migratory children, interstate and intrastate program coordination, transfer of student records, collecting and using information to make subgrants, and direct supervision of instructional or support staff (Title I, Part C, Sections 1301, 1304(c) and 1306(b) of ESEA (20 USC 6392, 6394(c) and 6396(b)); 34 CFR section 200.41).

2. LEA or other local operating agencies

LEA or other local operating agencies use funds in accordance with the agreement with the SEA to (1) identify eligible migratory children and their needs; and (2) provide educational and support services that address the identified needs of the eligible children.

B. Allowable Costs/Cost Principles

See ED Cross-Cutting Section

E. Eligibility

The auditor is not expected to test eligibility.

G. Matching, Level of Effort, Earmarking

1. Matching - Not Applicable

2.1 Level of Effort - Maintenance of Effort - Not Applicable

2.2 Level of Effort - Supplement not Supplant

See ED Cross-Cutting Section

3. Earmarking (SEAs)

See ED Cross-Cutting Section

H. Period of Availability of Federal Funds

See ED Cross-Cutting Section

L. Reporting

1. Financial Reporting

See ED Cross-Cutting Section

2. Performance Reporting - Not Applicable

3. Special Reporting

a. State Per Pupil Expenditure (SPPE) Data (OMB No 1850-0067) (SEAs/LEAs)

See ED Cross-Cutting Section

b. Consolidated State Performance Report for State Formula Grant Programs Under the Elementary and Secondary Education Act and Goals 2000: Educate America Act (OMB No. 1810-0614)

(1) Table VII, Items A-1 and A-2 Reporting the number of eligible migrant children (SEAs)

The SEA is required for allocation purposes to assist the ED in determining the number of eligible migratory children who reside in the state, using such procedures as ED requires. Each SEA annually provides an unduplicated count of eligible migratory children in each of two categories: (1) children ages three through 21 who resided in the State for one or more days during the preceding September 1 - August 31; and (2) such children who were served one or more days in a migrant funded project conducted during either the summer term or an intersession period (i.e., when a year-round school is not in session). The SEA's report is based upon data submitted to it by the LEAs or other local operating agencies in the State.

(2) Reporting the number of eligible migrant children to the SEA (LEAs or other local operating agencies and SEAs providing direct services)

The LEA or other local operating agencies and SEAs providing direct services must implement procedures, based on the eligibility documentation that they collect and maintain, to count and report eligible children in the two categories discussed in III.L.3.b.(1) above (Title I, Part C, Section 1304(c)(7) of ESEA (20 USC 6394(c)(7)); 34 CFR sections 76.730 and 76.731).

N. Special Tests and Provisions

1. Participation of Private School Children (SEAs/LEAs)

See ED Cross-Cutting Section

2. Schoolwide Programs (LEAs)

See ED Cross-Cutting Section

3. Comparability (SEAs/LEAs)

See ED Cross-Cutting Section

4. Priority for services

Compliance Requirement - SEAs and LEAs or other local operating agencies must give priority for MEP services to migratory children who are failing, or most at risk of failing, to meet the State's challenging content and performance standards, and whose education has been interrupted in the school year (Title I, Part C, Section 1304(d) of ESEA (20 USC 6394(d))).

Audit Objective (SEAs) - Determine whether the SEA has developed and communicated to LEA or other local operating agencies a policy regarding the need to identify and give priority for MEP services to migratory children who are failing, or most at risk of failing, to meet the State's challenging content and performance standards, and whose education has been interrupted in the school year.

Suggested Audit Procedure (SEAs)

Review documentation to verify that the SEA has established and communicated to the LEA or other local operating agencies a policy regarding the priority for MEP services.

Audit Objective (SEAs providing services directly and LEA or other local operating agencies) - Determine whether the SEA or LEA or other local operating agency gave priority in the provision of MEP services to those migratory children identified as failing, or most at risk of failing, to meet the State's challenging content and performance standards, and whose education has been interrupted in the school year (priority children). (Note: The auditor is not expected to test the SEA's or local operating agency's identification of a child as deserving priority.)

Suggested Audit Procedures (SEAs providing services directly and LEA or other local operating agencies)

(a) Review the SEA or LEA or other local operating agency's process for selecting children to receive MEP services to ascertain if it includes an identification of priority children. Because of the time of year in which the MEP program may operate (e.g. in the summer), there may not be any priority children in which case suggested audit procedure (b) below is not applicable.

(b) Select a sample of migratory children who were identified as priority children. Review program records to determine if these children were provided MEP services.

5. Targeting funds (SEAs)

Compliance Requirement - SEAs may provide MEP services either directly, or through subgrants to LEA or other local operating agencies, including LEAs. In either case, in order to target program funds appropriately, the SEA is required to take into account the needs of the State's identified population of migratory children, and the degree to which those needs are not being met through other programs. In targeting MEP funds, SEAs must take into account the needs of migratory children that result from the migratory lifestyle, such as educational disruption, failure or risk of failure to meet State content and performance standards, cultural or language barriers, social isolation, health-related problems, or other factors that stem from the migratory lifestyle or are needed to permit migratory children to participate effectively in school, as well as, the availability of other programs to address these needs (Title I, Part C, Sections 1301, 1304(b)(1), 1304(b)(6) and 1306(a) of ESEA (20 USC 6391, 6394(b)(6), 6396(a))).

Audit Objective (SEAs) - Determine whether the SEA's process to target MEP funds (whether or not through subgrants) takes into account current information on the needs of the identified population of eligible migratory children throughout the State and the locality, and the degree to which those needs are not being met through other programs.

Suggested Audit Procedure (SEAs)

Review the SEA's process to target MEP funds to ascertain if the process:

a. Uses current information.

b. Takes into account the degree to which the needs of the identified population of migratory children are not being met through other programs.

DEPARTMENT OF EDUCATION

CFDA 84.027 SPECIAL EDUCATION--GRANTS TO STATES (IDEA, Part B)

CFDA 84.173 SPECIAL EDUCATION--PRESCHOOL GRANTS (IDEA Preschool)

I. PROGRAM OBJECTIVES

The purposes of the Individuals with Disabilities Education Act (IDEA) are to: (1) ensure that all children with disabilities have available to them a free appropriate public education which emphasizes special education and related services designed to meet their unique needs; (2) ensure that the rights of children with disabilities and their parents or guardians are protected; (3) assist States, localities, educational service agencies and Federal agencies to provide for the education of all children with disabilities; and (4) assess and ensure the effectiveness of efforts to educate children with disabilities (Section 601(d) of P.L. 105-17, Individuals with Disabilities Education Act Amendments of 1997). The Assistance for Education of All Children with Disabilities Program (IDEA, Part B) provides grants to States, and through them to LEAs, to assist them in meeting these purposes (Sections 611-618 of P.L. 105-17).

IDEA's Special Education--Preschool Grants Program, also known as the "619 Program," provides grants to States, and through them to LEAs, to assist them in: (1) providing special education and related services to children with disabilities ages three through five (and, at a State's discretion, providing a free appropriate public education to two-year-old children with disabilities who will reach age three during the school year); (2) planning and developing a statewide comprehensive delivery system for children with disabilities from birth through five years; and, (3) providing direct and support services to children with disabilities aged three through five (20 USC 1419).

II. PROGRAM PROCEDURES

A State applying through its State Education Agency (SEA) for assistance under IDEA, Part B must, among other things, demonstrate to the Department of Education (ED) that it has in effect policies and procedures that ensure that all children with disabilities have the right to a free appropriate public education. The amount of a State's allocation under IDEA, Part B for a fiscal year is calculated based upon the number of eligible children with disabilities receiving special education and related services on the December 1 prior to when the funds are available to the States. Similarly, the amount of funds that the SEA distributes to each local educational agency (LEA) is based upon the number of eligible children with disabilities in the LEA's jurisdiction receiving special education and related services on the December 1 prior to when the funds are available to the States (20 USC 1411; Section 611 of P.L. 105-17).

States that receive assistance under IDEA, Part B, may receive additional assistance under the Preschool Grants for Children with Disabilities Program. A State is eligible to receive a grant under the Preschool Grants Program if: (1) the State is eligible under Section 612 of Part B and (2) the State has policies and procedures that ensure the provision of a free appropriate public education for all children with disabilities aged three through five years, and at the discretion of the State, any two-year-old children provided services under the program (20 USC 1419, as in effect prior to the enactment of P.L. 105-17).

This Compliance Supplement reflects the Law as enacted on June 4, 1997. Additional changes to this program will take effect July 1, 1998. These additional changes are NOT reflected in this Supplement.

III. COMPLIANCE REQUIREMENTS

In developing the audit procedures to test compliance with the requirements for a Federal program, the auditor should first look to Part 2, Matrix of Compliance Requirements, to identify which of the 14 types of compliance requirements described in Part 3 are applicable and then look to Parts 3 and 4 for the details of the requirements.

Certain compliance requirements which apply to multiple ESEA programs are discussed once in the ED Cross-Cutting Section of this Supplement (page 4-84.000-1) rather than repeating in each individual program. Where applicable, this section references to the Cross-Cutting Section for these requirements. Also, as discussed in the Cross-Cutting Section, SEAs and LEAs may have been granted waivers from certain compliance requirements.

A. Activities Allowed or Unallowed

Also, see ED Cross-Cutting Section.

1. SEAs

Allowable activities for SEAs are subgranting funds to LEAs and State administration, support services, and direct services (See III.G.3, Earmarking, for a further description of these activities).

2. LEAs

a. IDEA, Part B

An LEA may use Federal funds under IDEA, Part B for the costs of providing special education and related services to children with disabilities (Section 613(a)(2) of P.L. 105-17). Special education includes specially designed instruction to meet the unique needs of a child with a disability, including classroom instruction, instruction in hospitals and institutions, instruction in physical education, home instruction and instruction in other settings. Related services include transportation, physical and occupational therapy, and such other supportive services as are required to assist a child with a disability to benefit from special education. A portion of these funds, under conditions specified in the law, may also be used by the LEA for services and aids that also benefit nondisabled children and for the development and implementation of integrated and coordinated services systems (Sections 602(22), 602(25) and 613(a)(2)(D)&(a)(4) of P.L. 105-17).

b. IDEA Preschool

A LEA may use Federal funds under the Preschool Grants Program only for the costs of providing special education and related services (as described above) to children with disabilities ages three through five (and, at a State's discretion, providing a free appropriate public education to two-year-old children with disabilities who will reach age three during the school year) (34 CFR section 301.3(a); Sections 602 (22) and (25) of P.L. 105-17).

B. Allowable Costs/Cost Principles

See ED Cross-Cutting Section.

E. Eligibility

The auditor is not expected to test eligibility.

G. Matching, Level of Effort, Earmarking

1. Matching - Not Applicable

 2.1 Level of Effort - Maintenance of Effort (LEAs)

IDEA, Part B funds received by an LEA cannot be used, except under certain limited circumstances, to reduce the level of expenditures for the education of children with disabilities made by the LEA from local funds below the level of those expenditures for the preceding fiscal year. To meet this requirement, an LEA must expend, in any particular fiscal year, an amount of local funds for the education of children with disabilities that is at least equal to the amount of local funds expended for this purpose by the LEA in the prior fiscal year. Allowances may be made for: (a) the voluntary departure, by retirement or otherwise, or departure for just cause, of special education personnel; (b) a decrease in the enrollment of children with disabilities; (c) the termination of the obligation of the agency, consistent with this part, to provide a program of special education to a particular child with a disability that is an exceptionally costly program, as determined by the SEA, because the child has left the jurisdiction of the agency, has reached the age at which the obligation of the agency to provide a free appropriate public education has terminated or no longer needs such program of special education; or, (d) the termination of costly expenditures for long-term purchases, such as the acquisition of equipment and the construction of school facilities (Section 613(a)(2)(A)&(B) of P.L. 105-17).

2.2 Level of Effort - Supplement not Supplant - Not Applicable

3. Earmarking (SEAs)

a. IDEA, Part B

(1) A SEA must distribute at least 75 percent of the funds that it receives under IDEA, Part B to LEAs, based on the proportional size of each LEA's child count (20 USC 1411(c)(1), as in effect prior to the enactment of P.L. 105-17).

(2) As specified below, a SEA may use up to 25 percent of the total funds that it receives under IDEA, Part B for administration, support services, and direct services.

- An SEA may use up to five percent of the total State allotment in any fiscal year, or $450,000, whichever is greater (however, this amount may not exceed twenty-five percent of the State's total allotment), for administrative costs, including State-level planning and administration; approval, supervision, monitoring, and evaluation of local programs and projects and technical assistance to LEAs; leadership services and management of special education of children with disabilities (34 CFR sections 300.620 and 300.621; 20 USC 1411(c)(2)(a)(i), as in effect prior to the enactment of P.L. 105-17).

- A SEA may use the remainder of the 25 percent that it does not use for administration as described above for support services and direct services; and the administrative costs of the State's monitoring activities and complaint investigations, to the extent that these costs exceed the administrative costs for monitoring and complaint investigations incurred during fiscal year 1985 (34 CFR sections 300.370(a) and 20 USC 1411(c)(2)(A)(ii), as in effect prior to the enactment of P.L. 105-17).

- "Support services" includes implementing the comprehensive system of personnel development of 34 CFR sections 300.380- 300.383, recruitment and training of hearing officers and surrogate parents, and public information and parent training activities relating to free appropriate public education for children with disabilities. "Direct services" means services provided to a child with a disability by the State directly, by contract, or through other arrangements (34 CFR section 300.370(b)).

b. IDEA Preschool

(1) A SEA must distribute at least 75 percent of the funds that it receives under the Preschool Grants Program to LEAs and intermediate educational units, based on the proportional size of each LEA's child count (34 CFR section 301.30-31).

(2) A State may use not more than 20 percent of the grant for: (1) the planning and development of a statewide comprehensive service delivery system for children with disabilities from birth through five years; (2) the provision of direct and support services for children with disabilities aged three through five years; and (3) at the State's discretion, the provision of a free appropriate public education to two-year-old children with disabilities who will reach age three during the school year, whether or not those children are receiving, or have received, early intervention services under Part H of IDEA (34 CFR section 301.30).

(3) A State may use not more than five percent of the grant for the costs of administering the grant (34 CFR section 301.30).

H. Period of Availability of Federal Funds

See ED Cross-Cutting Section.

L. Reporting

1. Financial Reporting

See ED Cross-Cutting Section.

2. Performance Reporting - Not Applicable

3. Special Reporting

Report of Children and Youth with Disabilities Receiving Special Education Under Part B of the Individuals With Disabilities Education Act, as amended (OMB Form 1820-0043)

Each SEA is required to report to the Secretary no later than February 1 of each year the number of children with disabilities aged three through 21 residing in the State who are receiving special education and related services. This report of the State's "child count" is the basis of calculating the amount of the State's IDEA, Part B and 619 allocations for the following year. (34 CFR section 300.750(a))

Each SEA must: (a) establish procedures to be used by LEAs and other educational institutions in counting the number of children with disabilities receiving special education and related services; (b) obtain certification from each agency and institution that an unduplicated and accurate count has been made; and, (c) ensure that documentation is maintained that enables the State and the Secretary to audit the accuracy of the count (34 CFR sections 300.754(a),(c), and (e)).

LEAs must report to the SEA in accordance with the SEA-established procedure.

The SEA may include in this count children with disabilities who are enrolled in a school or program that is operated or supported by a public agency, and that either (1) provides them with both special education and related services or (2) provides them only with special education if they do not need related services to assist them in benefitting from that special education. The SEA may not, however, include in this count children with disabilities who: (1) are not enrolled in a school or program operated or supported by a public agency; (2) are not provided special education that meets State standards; (3) are not provided with a related service that they need to assist them in benefitting from special education; or, (5) are receiving special education funded solely by the Federal Government--except that children in any of the age ranges three, four, five, eighteen, nineteen, twenty, or twenty-one, who fall into this category, may be counted if no local or State funds are available for non-disabled children in that same age range (34 CFR section 300.753).

N. Special Tests and Provisions

1. Schoolwide Programs

See ED Cross-Cutting Section.

DEPARTMENT OF EDUCATION

CFDA 84.032 FEDERAL FAMILY EDUCATION LOANS (FFEL) - (Guaranty Agencies)

I. PROGRAM OBJECTIVES

Nonprofit and state guaranty agencies are established to guarantee student loans made by lenders and perform certain administrative and oversight functions under the Federal Family Education Loan (FFEL) Program, which includes the Federal Stafford Loan, Federal PLUS, Federal SLS and Federal Consolidation loan programs. The Department of Education (ED) provides reinsurance to the guaranty agency.

II. PROGRAM PROCEDURES

To participate in the FFEL programs and to receive various payments and benefits incident to that participation, a guaranty agency enters into agreements with ED. As part of these agreements, guaranty agencies establish and maintain a Federal Student Loan Reserve Fund and the Agency Operating Fund; service defaulted loans that have been submitted to them; make timely claim payments to lenders on defaulted loans; make timely reinsurance filings with ED; provide accurate and reliable reports to ED; apply proper charges to defaulted borrowers; and, take proper enforcement measures with respect to lenders, lender servicers, and defaulted borrowers.

Source of Governing Requirements

The primary regulations relating to Guaranty Agency requirements are located in 34 CFR 682, Subparts C, D, F and G. The FFEL program is authorized by the Higher Education Act (HEA) of 1965, as amended. The HEA was amended by the Higher Education Amendments of 1998, enacted in October of 1998. (PL 105-244) Citations to the HEA and United States Code reflect this recent revision.

III. COMPLIANCE REQUIREMENTS

A. Activities Allowed or Unallowed

The compliance requirements and suggested audit procedures for allowed and unallowed services are presented separately in 10 (Federal Student Loan Reserve Fund and Agency Operating Fund in Section N, Special Tests and Provisions.

L. Reporting

1. Financial Reporting - Not Applicable

2. Performance Reporting - Not Applicable

3. Special Reporting

a. ED Form 1189, Guaranty Agency Monthly Claims and Collections Report (OMB No. 1840-0582)

b. ED Form 1130, Guaranty Agency Quarterly/Annual Report (OMB No. 1840-0002)

In determining which amounts to test, particular attention should be given to the September 30 amounts for current year defaults, current year collections, loans receivable and the sources and uses of funds for the reserve account (or equivalent line item(s) pertaining to the Federal/Operating Funds for the September 30, 1999 report). Also, guaranty agencies are required to submit loan level detail information to the National Student Loan Data System (NSLDS) (OMB 1840-0689). When reviewing support for the above reports, the auditor should consider whether the relevant amounts in these reports reconcile with the NSLDS Extract submitted by the guaranty agency. (NOTE: There may be some differences between ED Form 1130 quarter end reporting and NSLDS Extracts due to timing factors (e.g., pulling of NSLDS Extract in third week vs. month end). Finally, ED may send edits back to the agency to be entered.

The guaranty agency is required to submit loan level detail data to the NSLDS. The following are identified as key data elements: social security number (SSN); last name (some agencies may use first name combined with the SSN since last names are subject to change); original school code; academic level; current school code; enrollment status code; enrollment status date; originating lender code; loan guarantee date; amount of guarantee; current holder lender code; date entered repayment; loan status code; loan status date; outstanding principal; amount of claim paid to lenders (principal and interest) and for loans with a defaulted status; interest and fee amounts. ED sends edits back to the guaranty agency for disposition. Samples should be selected from the guaranty agency's NSLDS Extracts (Note: Guaranty Agencies may have changed to automated exchanges of data with schools and lenders, thus, hard copy documents may not exist. In this instance, auditors may only be able to trace to system information and not to supporting records.) (34 CFR section 682.414).

In addition to providing ED with information it needs to maintain its accounting and loan database records, data in the ED Form 1130 reports are used for various purposes by ED. The use of this data is the subject of several other compliance requirements cited in Section N., Special Tests and Provisions, which identify the need to test specific items in these reports. For audit efficiency, the auditor may want to test those requirements at the same time as this compliance requirement. The other compliance requirements are 3. Federal Reinsurance Rate, 4. Conditions of Reinsurance, 5. Death, Disability, and Bankruptcy, and 10. Federal Student Loan Reserve Fund and Operating Fund.

N. Special Tests and Provisions

1. Current Records

Compliance Requirement - The guaranty agency shall maintain current complete records for each loan that it holds. The records must be maintained in a system that allows ready identification of each loan's current status, updated at least once every 10 business days (34 CFR section 682.414).

Audit Objective - Determine whether the agency's records are updated for information received from lenders, schools, borrowers, others, and NSLDS on a timely basis.

Suggested Audit Procedures

a. For a sample of loans, compare dates transactions or information were posted to the guaranty agency's system to the date the source information was received.

b. Identify whether any backlog exists that is over 10 days old.

2. Federal Reinsurance Rate

Compliance Requirement - The applicable Federal reinsurance rate for a loan depends on the amount of reinsurance claims paid to the guaranty agency during the year and the date the loan was made (34 CFR sections 682.404(b) & (c)).

For loans made prior to October 1, 1993 or transferred under a plan to transfer guarantees from an insolvent guaranty agency approved by ED, when the total amount of reinsurance claims paid to the guaranty agency during a fiscal year is less than five percent of the amount of loans in repayment at the end of the preceding fiscal year, reinsurance is paid for 100 percent of the agency's losses. When the total amount of reinsurance claims paid to the guaranty agency during a fiscal year reaches five percent of the amount of loans in repayment at the end of the preceding fiscal year, the reinsurance subsequently paid to the guaranty agency during that fiscal year, drops to 90 percent. When the amount of claims reaches nine percent, the reinsurance drops to 80 percent.

For loans made from October 1, 1993 to September 30, 1998, the above rates drop to 98/88/78 percent, respectively. For loans made on or after October 1, 1998 the rates are 95/85/75 percent (Section 428(c)(1) of HEA (20 USC 1078(c)(1))).

The Secretary uses the ED Form 1130 quarterly report for the previous September 30 to calculate the amount of loans in repayment at the end of the preceding fiscal year (34 CFR sections 682.404(b) & (c)).

Past problematic areas have been:

Agencies have:

- not established systems to verify a student's loan status with lender and school data through a reliable audit trail.

- established systems to determine loan status that rely on loan characteristic analysis or assumptions that are not adequately tested or verified.

- not established adequate procedures to ensure that lenders report and that agencies properly record loans paid in full.

- not established adequate procedures to ensure that there is a system to reconcile the agency's repayment conversion dates to the lender's repayment conversion dates.

Audit Objective - Determine whether the data submitted to ED in the September 30 Form 1130 used to calculate loans in repayment is materially correct and supported by the books and records.

Suggested Audit Procedures

a. Compare the amounts of loans in repayment in the guaranty agency system at September 30 to the amount of loans in repayment derived from the September 30 ED Form 1130. Determine the propriety of any difference.

b. Select a sample of loans in in-school and repayment status from the guaranty agency's system. Verify the loan amount and loan status by contacting the current holder of the loan or schools to confirm the authenticity and status of the loans.

3. Conditions of Reinsurance Coverage

Compliance Requirement - A guaranty agency is entitled to reinsurance payments on a loan only if the requirements cited in 34 CFR section 682.406 are met. The lender must provide the guaranty agency with documentation, as described in 34 CFR sections 682.406 and 414. The Secretary requires a guaranty agency to repay reinsurance payments received on a loan if the lender or the agency failed to meet these requirements (34 CFR section 682.406).

Past problematic areas have been:

The lender:

- Did not exercise due diligence in servicing the loan in accordance with 34 CFR section 682.411.

- Did not include adequate documentation, including a collection and payment history, to adequately verify claim eligibility and claim amount.

- Did not file a default claim with the guaranty agency within 90 days of default (Note: The guaranty agency shall reject the claim based on due diligence or timely filing violations, unless it was cured by the lender in accordance with Cure Bulletin 88-G-138.).

- Was paid interest beyond 30 days after a claim was returned for inadequate documentation for claims returned on or after July 1, 1996.

The guaranty agency:

- Filed a request for payment of reinsurance later than 45 days following payments of a default claim to the lender.

- Did not pay the lender within 90 days of the date the lender filed the claim.

- Did not pay the lender prior to filing a request for payment from ED.

Audit Objective - Determine whether loans for which reinsurance was paid met the requirements for reinsurance.

Suggested Audit Procedures

Select a sample of defaulted loans from the guaranty agency's ED Form 1189 reports. Review documentation supporting that the loans met the conditions of reinsurance.

4. Death, Disability, and Bankruptcy Claims

Compliance Requirement - If an individual borrower dies, the obligation of the borrower and any endorser to make any further payments on the loan is canceled, in accordance with 34 CFR sections 682.402(b)(2-5). If the lender determines that an individual borrower is totally and permanently disabled, the obligation of any further payments on the loan is canceled in accordance with 34 CFR sections 682.402(c)(1-4). If a borrower files a petition of relief under the Bankruptcy Code, the Secretary reimburses the holder of the loan for unpaid principal and interest on the loan, in accordance with 34 CFR sections 682.402(f), (g), and (h). Exceptions to these regulations are identified in 34 CFR sections 682.402(a)(2) and (3).

A lender must file a death, disability or bankruptcy claim within the period prescribed in 34 CFR section 682.402(g)(2). The guaranty agency shall review a death, disability, or bankruptcy claim promptly and shall pay the lender in accordance with 34 CFR section 682.402(h). Guaranty agencies are required to take specific actions in bankruptcy proceedings in accordance with 34 CFR section 682.402(i). In accordance with 34 CFR section 682.402(k)(1)(i), the guaranty agency shall not request payment from ED until the lender's claim has been paid (34 CFR section 682.402).

Audit Objective - Determine whether death, disability and bankruptcy claims met the requirements for the payment of such claims.

Suggested Audit Procedures

Select a sample of death, disability, and bankruptcy claims from the guaranty agency's ED Form 1189 reports. Review claim documentation that supports the eligibility of the claims for payment.

5. Default Aversion Assistance

Compliance Requirement -- Upon receipt of a complete request from a lender received not earlier than the 60^th day of delinquency, a guaranty agency shall engage in default aversion activities designed to prevent the default by a borrower. Default aversion activities are activities of a guaranty agency that are directly related to providing collection assistance to the lender on a delinquent loan, including due diligence activities required pursuant to regulations of the Secretary, prior to the loan being legally in a default status.

A default aversion fee shall be paid for any loan on which a claim for default has not been paid as a result of the loan being brought into current repayment status by the guaranty agency on or before the 300^th day after the loan becomes 60 days delinquent. The default aversion fee shall be equal to 1 percent of the total unpaid principal and accrued interest on the loan at the time the request is submitted by the lender. This fee shall not be paid more than once on any loan for which the guaranty agency averts the default unless (1)at least 18 months has elapsed between the date the borrower entered current repayment status and the date the lender filed a subsequent default aversion assistance request, and (2) during the period between such dates, the borrower was not more than 30 days past due on any payment of principal and interest on the loan.

Default aversion fees are paid via a transfer from the Federal Student Loan Reserve Fund to the Agency Operating Fund. A guaranty agency may transfer such fees not more frequently than monthly (Section 428(l) of HEA (20 USC 1078(l))).

Audit Objective - Determine whether the guaranty agency performed default aversion activities in accordance with the requirements and determine whether loans on which the default aversion fee was received were qualified.

Suggested Audit Procedures

a. For a sample of loans, review documentation supporting that the agency performed the necessary default aversion activities.

b. For a sample of loans on which the default aversion activities were performed and the default aversion fee was paid, review loan records to ensure the loan was brought into current repayment status by the guaranty agency on or before the 300^th day after the loan became 60 days delinquent.

6. Standard Collection Efforts

Compliance Requirement - Unless the agency uses alternative collection procedures (see next section for alternative collection procedures), the guaranty agency must engage in certain collection activities within certain time frames as prescribed by 34 CFR section 682.410(b)(6) on a loan for which it pays a default claim filed by a lender. These collection activities include written notices, contacts with borrowers, and wage garnishments, etc (34 CFR section 682.410 (b)(6)).

Audit Objective - Determine whether the agency performed required collection procedures on defaulted loans.

Suggested Audit Procedures

a. If the guaranty agency uses a collection contractor, review the contract to ascertain if the contract specified the required collection procedures to be followed for defaulted loans.

b. For a sample of defaulted loan accounts, review documentation that supports that prescribed collection activities were followed.

7. Alternative Collection Efforts

Compliance Requirement - A guaranty agency may engage in the following collection activities in lieu of the activities described above in the Standard Collection Efforts section. The regulations at 34 CFR sections 682.410 (b)(6)(ii)(A) and (B) apply to the periods of time set forth in this Alternative Collection Efforts section. Upon receipt of a payment from a borrower, the agency is not required to follow the specific collection efforts described below, but shall diligently attempt to collect the loan for 60 days following receipt of the payment. If the agency receives no payments during the 60-day period, the agency shall resume its use of the collection efforts described below, treating the first day after the end of the 60-day period as the first day of the period described in the 31-180 day period below (34 CFR section 682.410 (b)(7)).

1 - 30 days:

During this period the agency shall send to the borrower the written notice described in 34 CFR section 682.410 (b)(5)(ii).

31 - 180 days:

During this period the guaranty agency shall attempt diligently to collect the loan using such collection tools and activities as it deems appropriate, provided, however, that the agency must make at least one diligent effort to contact the borrower by telephone, as defined in 34 CFR section 682.411(l) (with references to "the lender" understood to mean "the agency"), and send at least two forceful collection letters to the borrower. By the end of this period, the agency shall refer the loan to a collection contractor in accordance with 34 CFR section 682.410(b)(7)(iv)(C). The collection contractor to whom the agency refers a loan under 34 CFR section 682.410 (b)(7)(iv)(B) must: (1) be compensated for its services on all FFEL loans referred by the agency solely on a contingency fee basis; (2) be one of at least two collection contractors simultaneously providing collection services to the agency on FFEL loans under a competitive system that the agency has established and that includes the periodic assessment by the agency of the performance of the competing contractors and periodic adjustments in the volume of loans referred by the agency to each competing contractor based on those assessments; and, (3) not receive referral of more than 70 percent of the agency's referred loans in any calendar year.

After 180 days

Notwithstanding the deadline for instituting a civil suit set forth in 34 CFR section 682.410 (b)(6)(vii), an agency that uses the procedures in 34 CFR section 682.410 (b)(7)(i)-(iv) shall institute a civil suit required by that paragraph prior to the earliest of the 90th day following the collection contractor's return of the loan to the agency or the 365th day following the later of the agency's referral of the loan to the collection contractor, or the contractor's receipt of a payment on the loan.

Audit Objective - Determine whether the agency that chose to follow alternative collection procedures complied with the applicable requirements.

Suggested Audit Procedures

a. For a sample of defaulted loan accounts, review documentation that supports that the agency performed the prescribed collection activities before referring the loans to the collection contractors.

b. Review collection agency contracts and loan referral records to ascertain if the agency (1) did not refer more than 70 percent of its referred loans to a single collection contractor, and (2) compensated the contractors only on a contingency fee basis.

c. Review records demonstrating that the guaranty agency periodically assessed the performance of the competing contractors, and if necessary, made adjustments in the volume of loans referred to each competing contractor.

8. Federal Share of Borrower Payments

Compliance Requirement - If the borrower makes payments on a loan after the guaranty agency has paid a claim on that loan, the agency must pay the Secretary an equitable share of those payments.

For payments received before October 1, 1998 - the Secretary's equitable share is the portion of payments that remains after deducting:

(1) The complement of the reinsurance percentage in effect when reinsurance was paid on the loan (See 2. Federal Reinsurance Rate above for the applicable reinsurance rate. The complement of the reinsurance percentage equals 100 minus the Federal reinsurance rate), and

(2) 27 percent of borrower payments.

For borrower payments received on or after October 1, 1998- the Secretary's equitable share is the portion of payments that remain after deducting the complement of the reinsurance percentage and 24 percent of borrower payments.

For borrower payments received on or after October 1, 2003- the Secretary's equitable share is the portion of payment that remain after deducting the complement of the reinsurance percentage and 23 percent of borrower payments (Section 428(c)(6) of HEA (20 USC 1078(c)(6))).

Loans that have been rehabilitated or paid by FFEL program consolidation loans are not covered by this requirement because the payoff amounts are not considered "payments made by the borrower." For these loans, under separate authority, agencies are allowed to retain collection costs added to the borrower's balance, not to exceed 18.5 percent of the payoff.

Unless the Secretary approves otherwise, the guaranty agency must submit the Secretary's equitable share of borrower payments within 45 days of the receipt of the payments by the agency or its servicer (34 CFR section 682.404 (g)) (NOTE: For payments received prior to February 1, 1993, the agency shall submit payments within 60 days of receipt. However, see Dear Colleague Letter 95-G-286.) (Section 428(c)(2)(D) (20 USC 1078(c)(2)(D)) and Section 428(c)(6) (20 USC 1078(c)(6)) of the HEA, March 19, 1994 Dear Guaranty Agency Director Letter).

Audit Objective - Determine whether the Secretary's equitable share of borrower payments on defaulted loans is properly computed and remitted to the Secretary in a timely manner.

Suggested Audit Procedures

Test a sample of borrower payments on defaulted loans to ascertain if the equitable share due ED was remitted to ED in a timely manner.

9. Assignment of Defaulted Loans to ED

Compliance Requirement - Unless the Secretary notifies an agency in writing that other loans must be assigned to the Secretary, an agency must assign any loan that meets all of the following criteria as of April 15 of each year: (1) the unpaid principal balance is at least $100; (2) the loan, and any other loans held by the agency for that borrower, have been held by the agency for at least four years (five years for fiscal years beginning July 1, 1997); (3) a payment has not been received on the loan in the last year; and, (4) a judgement has not been entered on the loan against the borrower. The Secretary may also direct a guaranty agency to assign to ED certain categories of defaulted loans held by the agency as described in 34 CFR section 682.409. In determining whether mandatory assignment from a guaranty agency is required, the Secretary will review the adequacy of collection efforts. ED considers the agency's record of success in collecting its defaulted loans, the age of the loans, and the amount of any recent payments on the loans (Section 428(c)(8) of the HEA (20 USC 1078(c)(8));34 CFR section 682.409).

Audit Objective - Determine whether the agency assigned to ED all loans that meet the criteria.

Suggested Audit Procedures

Review an aging of loans to ascertain if the guaranty agency is holding loans that should be assigned to ED.

10. Federal Student Loan Reserve Fund and Agency Operating Fund

Compliance Requirement - Each guaranty agency shall establish a Federal Student Loan Reserve Fund (Federal Fund) and an Agency Operating Fund by December 6, 1998.

Federal Fund

All funds, securities, and other liquid assets contained in the pre-existing reserve fund established pursuant to Section 422 of the HEA shall be deposited in this fund. After the Federal Fund is established, an agency shall deposit the following:

$ All amounts received as payment of reinsurance on loans.

$ From amounts collected on behalf of obligation of a defaulted borrower, a percentage amount equal to the complement of reinsurance.

$ Insurance premiums collected.

$ Amounts received for SPA activity performed prior to date of enactment.

$ 70% of amounts received after enactment for Administrative Cost Allowance (ACA) for loans upon which insurance was issued prior to date of enactment.

$ Other receipts as specified in regulations.

The Federal Fund may only be used for the following purposes:

$ To pay lender claims pursuant to sections 428(b)(1)(G), 428(j), 437, and 439(q) of HEA.

$ To pay default aversion fees into the Agency Operating Fund.

$ To establish the Operating Fund, each guaranty agency may transfer not more than 180 days' cash expenses for normal operating expenses (not including claim payments) as a working capital reserve as defined in Office of Management and Budget Circular A-87 from the Federal Fund for deposit into the Operating Fund for use in the performance of the guaranty agency's duties. Such transfers may occur during the first 3 years following the establishment of the Operating Fund. No agency may transfer in excess of 45 percent of the balance, as of September 30, 1998 of the agency's Federal Fund to the agency's Operating Fund during such 3-year period. The agency shall ensure that sufficient funds remain in the Federal Fund to pay lender claims within the required time periods and to meet the reserve recall requirements (Section 422A(a)-(f) of the HEA (20 USC 1072A(a)-(f))).

Agency Operating Fund

Each guaranty agency shall establish a fund designated as the Operating Fund. To establish the Operating Fund, each guaranty agency can transfer not more than 180 days cash expenses for operating expenses (not including claim payments) from the Federal Fund. Amounts deposited into the Operating Fund shall be invested at the discretion of the guaranty agency in accordance with prudent investor standards.

The guaranty agency shall deposit into the Operating Fund:

$ Loan processing and insurance fees.

$ 30% of ACA amounts received after date of enactment for loans upon which insurance was issued prior to date of enactment.

$ Account maintenance fees.

$ Default aversion fees.

$ Amounts remaining from collection on defaulted loans held by the agency, after payment of Secretary's equitable share, excluding amounts deposited in the Federal Fund pursuant to section 422(c)(2).

$ Other receipts as specified in regulations.

Funds in the Operating Fund shall be used for application processing, loan disbursement, enrollment and repayment status management, default aversion activities, default collection activities, school and lender training, financial aid awareness and related outreach activities, compliance monitoring, and other SFA related activities. During any period in which the Operating Fund contains money transferred in from the Federal Fund, the entire Operating Fund is subject to the restrictions in 34 CFR sections 682.410 and 682.418. (Sections 422B(a)-(e) of the HEA (20 USC 1072B(a)-(e))).

Past problematic areas concerning fund revenue and expense have included:

- Failure to credit funds received into the reserve fund, including lock-box operations.

- Unsupported expenses paid from reserve fund assets.

- ED Form 1130 did not include all credits to the reserve fund.

- Use of funds for other programs (e.g., SSIG and other State programs).

- Commingling of funds.

- Unreasonable allocation of indirect costs to FFEL program.

Audit Objective - Determine whether the agency established the required funds by the due date and whether the amounts required to be credited to the Federal and Operating funds were so credited and were only used for authorized purposes.

Suggested Audit Procedures

a. Review accounts to ascertain that the required funds were established and that all liquid assets held by the pre-existing reserve fund were deposited in the new Federal fund by December 6, 1998.

b. Review revenue records to assure that amounts required to be credited to the Federal and Operating Funds were so credited. Review revenues and receipts that were not credited to the Federal or Operating Funds to assure that they were not inappropriately omitted.

c. Test expenditures to ascertain if they were made for allowable purposes.

d. Examine the general journal for unusual entries that impact the Federal or Operating funds.

11. Investments - Federal Student Loan Reserve Fund (Federal Fund)

Compliance Requirement - Funds transferred to the Federal Fund shall be invested in obligations issued or guaranteed by the United States or a State, or in other similarly low-risk securities selected by the guaranty agency, with the approval of the Secretary. Earnings from the Federal Fund shall be the sole property of the Federal government. (Section 422A(b) of the HEA (20 USC 1072A(b))).

Audit Objective - Determine whether the agency invested Federal funds only in approved securities or other instruments.

Suggested Audit Procedures

a. Review investment activity during the period to ascertain that Federal Fund assets were invested in approved securities or other instruments.

12. Collection Charges

Compliance Requirement - The guaranty agency must charge a defaulted borrower an amount equal to reasonable costs incurred by the agency in collecting a loan on which the agency has paid a default. The amount charged the borrower should equal the lesser of the amount that would be charged under the formula in 34 CFR section 30.60 or, the amount that would be charged if the loan was held by ED. Costs may include, but are not limited to, attorney's fees, collection agency charges, and court costs (34 CFR section 682.410(b)(2)).

Audit Objective - To determine whether the agency charged appropriate collection costs to borrowers of loans on which the agency has paid a default or bankruptcy claim.

Suggested Audit Procedures

Test a sample of defaulted loan accounts to determine whether the agency charged for reasonable costs of collection. Determine whether the method used to calculate the amount was appropriate.

13. Enforcement Action

Compliance Requirement - The guaranty agency shall take measures to ensure enforcement of all Federal, State and guaranty requirements and at a minimum, conduct biennial on-site program reviews of such lenders and schools that meet criteria specified in 34 CFR section 682.410(c)(1). The agency is required to use statistically valid techniques to calculate liabilities owed the Secretary that the review indicates may exist, demand prompt payment from the responsible party and refer to the Secretary any case in which the payment of funds is not made within 60 days. A guaranty agency is also required to adopt procedures for identifying fraudulent loan applications and undertaking or arranging for the prompt and thorough investigation of criminal or other programmatic misconduct by its program participants. It is responsible also for promptly reporting all of the allegations and indications having a substantial basis in fact and the scope, progress and results of the Agency's investigations (34 CFR section 682.410(c)).

Audit Objective - Determine whether the agency is carrying out program reviews and related enforcement activity in accordance with the above requirements.

Suggested Audit Procedures

a. Review the guaranty agency's procedures for selecting lenders and schools to review to ascertain if they meet the regulatory criteria.

b. Review program review guidance to ascertain if that it is up-to-date and includes, when problems are found, a statistically valid method for determining liabilities due the Secretary.

c. Review program review reports to ascertain if amounts due the Secretary were identified and, if so, whether appropriate demand for payment and follow-up was conducted.

d. Through inquiry and review, determine whether the agency adopted procedures for identifying fraudulent loan applications and for reporting all allegations of misconduct having a substantial basis to ED. Review agency records on the follow-up of misconduct to determine whether ED was notified when appropriate.

DEPARTMENT OF EDUCATION

CFDA 84.041 IMPACT AID (Title VIII of ESEA)

 I. PROGRAM OBJECTIVES

The objective of the Impact Aid Program (IAP) under Title VIII of the Elementary and Secondary Education Act (ESEA) is to provide financial assistance to local educational agencies (LEAs) whose local revenues or enrollments are adversely affected by Federal activities. These activities include the Federal acquisition of real property or the presence of children residing on tax-exempt Federal property or residing with a parent employed on tax-exempt Federal property ("federally connected" children).

II. PROGRAM PROCEDURES

Funds are provided on the basis of statutory criteria and data supplied by LEAs in applications submitted to the Department of Education (ED). ED requests the applicant to forward a complete copy of the application to the state educational agency (SEA) at the same time it mails the application to ED. Payments are made directly to the LEA by ED. Generally, payments under Section 8003 of the ESEA are based on membership and attendance counts of federally connected children, with additional funds provided for certain federally connected children with disabilities and children residing on Indian lands. Except for the additional funds provided for federally connected children with disabilities under Section 8003(d) of the ESEA, funds provided under Section 8003 are considered general aid and have no restrictions on their expenditure. Any funds that are provided under Section 8007 of the ESEA to certain LEAs that received Section 8003 payments must be used for construction, as defined in the statute.

III. COMPLIANCE REQUIREMENTS

In developing the audit procedures to test compliance with the requirements for a Federal program, the auditor should first look to Part 2, Matrix of Compliance Requirements, to identify which of the 14 types of compliance requirements described in Part 3 are applicable and then look to Parts 3 and 4 for the details of the requirements.

A. Activities Allowed or Unallowed

1. Section 8003(d) - Federally connected children with disabilities

LEAs must use the payments provided under Section 8003(d) of the ESEA to conduct programs or projects for the free appropriate public education of the Federally connected children with disabilities who generated those funds. Allowable costs include expenditures reasonably related to the conduct of programs or projects for the free appropriate public education of children with disabilities, including program planning and evaluation and acquisition costs of equipment, except when the title to that equipment would not be held by the LEA. Costs for school construction are not allowable (Section 8003 of ESEA; 34 CFR section 222.53(c)).

2. Section 8007 Construction

LEAs that receive payments under Section 8003 of the ESEA and that meet certain other statutory criteria may receive assistance under Section 8007 of the ESEA in any fiscal year that the Congress appropriates funds under that Section. LEAs must use the payments provided under Section 8007 for construction, as defined in Section 8013(3) of the ESEA. Under Section 8013(3), the term "construction" includes: (1) the preparation of drawings and specifications for school facilities; (2) erecting, building, acquiring, altering, remodeling, repairing, or extending school facilities; (3) inspecting and supervising the construction of school facilities; and (4) debt service for such activities (Sections 8007 and 8013(3) of ESEA).

3. Section 8003(b) Basic Support Payments

Funds under Section 8003(b) of the ESEA usually become part of the general operating fund of the LEAs. These funds are available as general aid for free public education and may be used for current operating expenditures or capital outlays in accordance with State laws. The auditor is not expected to perform any tests with respect to these funds.

B. Allowable Costs/Cost Principles

Section 8003(b) Basic Support Payments are not subject to the A-102 Common Rule or Circular A-87 (See Appendix I).

G. Matching, Level of Effort, Earmarking

1. Matching - Not Applicable

2.1 Level of Effort - Maintenance of Effort - Not Applicable

2.2 Level of Effort - Supplement Not Supplant

Section 8003(d) funds of the ESEA may not supplant any State funds (either general or special education State aid) that were or would have been available to the LEA for the free appropriate public education of children counted under Section 8003(d). Funds provided under Section 8003(d), Federally connected children with disabilities, may not reduce either general State aid or specific State aid for federally connected children with disabilities. A reduction in the per-pupil amount of State aid for children with disabilities, including children counted under Section 8003(d), from that received in the previous year raises a presumption that supplanting has occurred. An LEA can rebut this presumption by demonstrating that the reduction was unrelated to the receipt of Section 8003(d) funds (Section 8003(d) of ESEA; 34 CFR section 222.54).

3. Earmarking - Not Applicable

L. Reporting

1. Financial Reporting - Not Applicable

2. Performance Reporting - Not Applicable

3. Special Reporting

Impact Aid Program (OMB 1810-0036) - Each year an LEA must submit this application/report which provides counts of federally connected children in various categories, membership and average daily attendance data and information on expenditures for children with disabilities. Membership and average attendance data should be tested. The auditor should use professional judgment, taking into account the relative materiality of the number of children reported in other tables, in determining what tables to test.

N. Special Tests and Provisions

1. Required Level of Expenditure

Compliance Requirement - For each fiscal year, the amount of expenditures for special education and related services provided to federally connected children with disabilities must be at least equal to the amount of Section 8003(d) of the ESEA funds received or credited for that fiscal year. This is demonstrated by comparing the amount of Section 8003(d) funds received or credited with the result of the following calculation:

a. Divide total LEA expenditures for special education and related services for all children with disabilities by the average daily attendance (ADA) of all children with disabilities served during the year.

b. Multiply the amount determined in a. above by the ADA of the federally connected children with disabilities claimed by the LEA for the year.

If the amount of section 8003(d) funds received or credited is greater than the amount calculated above, an overpayment equal to the excess section 8003(d) funds exists. This overpayment may be reduced or eliminated to the extent that the LEA can demonstrate that the average per pupil expenditure for special education and related services provided to federally connected children with disabilities exceeded its average per pupil expenditure for serving non-federally connected children with disabilities (Section 8003(d) of ESEA; 34 CFR section 222.53(d)).

Audit Objective - To determine whether the required level of expenditure for providing special education and related services to federally connected children with disabilities was met.

Suggested Audit Procedures

a. Review the LEA's calculation to ascertain if it shows that the required level of expenditure for federally connected children was met. Check accuracy of calculation.

b. Trace amounts used in the calculation to supporting records.

c. If the LEA's calculation shows that an overpayment was made, verify that the average per pupil expenditure for federally connected children with disabilities exceeded the average per pupil expenditure for non-federally connected children to the extent of the overpayment.

DEPARTMENT OF EDUCATION

CFDA 84.042 TRIO--STUDENT SUPPORT SERVICES

CFDA 84.044 TRIO--TALENT SEARCH

CFDA 84.047 TRIO--UPWARD BOUND

I. PROGRAM OBJECTIVES

The TRIO programs are authorized by Title IV of the Higher Education Act of 1965 and consist of six programs. These programs were designed to help economically disadvantaged students achieve success at the postsecondary level by facilitating high school completion and entry, retention, and completion of postsecondary education. Based on funding levels, only three of the programs are included in the TRIO Cluster.

Student Support Services Program provides academic support services to disadvantaged college students to enable them to continue enrollment in and graduate from institutions of higher education.

Talent Search Program provides grants to identify qualified youth with the potential for education at the postsecondary level and encourage them to complete or reenter secondary school and undertake or reenter a program of postsecondary education. Talent Search Program also publicizes the availability of student financial assistance for persons who seek to pursue a postsecondary education.

Upward Bound provides academic support services to low-income and potential first generation college students who are enrolled in high school, or veterans seeking to prepare themselves for success in postsecondary education.

II. PROGRAM PROCEDURES

All TRIO grants are competitive discretionary grants.

Student Support Services Program grants are awarded for four-to-five year cycles. Eligible applicants are institutions of higher education or combinations of such institutions.

Talent Search and Upward Bound grants are awarded for four to five years. Eligible applicants are institutions of higher education, public and private agencies and organizations, combinations of institutions and agencies, and in exceptional cases, secondary schools. Upward Bound has three types of programs: regular, veterans, and math science.

Source of Governing Requirements

The TRIO programs are authorized by the Higher Education Act of 1965, as amended (20 USC 1070a et seq). The applicable regulations are in 34 CFR sections 643,645 and 646.

III. COMPLIANCE REQUIREMENTS

In developing the audit procedures to test compliance with the requirements for a Federal program, the auditor should first look to Part 2, Matrix of Compliance Requirements, to identify which of the 14 types of compliance requirements described in part 3 are applicable and then look to Parts 3 and 4 for the details of the requirements.

A. Activities Allowed or Unallowed

1. Student Support Services program and Upward Bound

Allowable services and activities for these programs include the following: (1) instruction, (2) personal counseling, (3) academic advice and assistance in course selection, (4) tutorial services, (5) exposure to cultural events, academic programs, and other educational activities, (6) activities to acquaint project participants with career options, (7) instruction to prepare youths in the project for careers, (8) mentoring, (9) activities to assist students in two-year institutions to secure financial assistance and admission to a four-year program and to assist students in a four-year program to secure financial assistance and admission to graduate and professional programs (Student Support Services only), (10) on-campus residential programs (Upward Bound only), and (11) work study positions (Upward Bound only) (20 USC 1070a-13(b); 34 CFR sections 645.10 through 645.11 and 646.4).

For the Student Support Services Program these activities could include the following, if reasonably related to the objectives of the project: (1) cost of remedial and special classes and courses in English language instruction for students of limited English proficiency, under certain circumstances; (2) in-service training of project staff; (3) activities of an academic or cultural nature; (4) transportation of participants and staff to and from approved educational and cultural activities sponsored by the project; (5) purchase of computer hardware, computer software, or other equipment to be used for student development, student records and project administration; (6) professional development travel for staff; and (7) project evaluation. Student Support Services funds can not be used for activities involved in recruiting students for enrollment at the institution (34 CFR sections 646.30 and 646.31).

For the Upward Bound Program, examples of specific allowable activities are included in 34 CFR section 645.40. Also, stipends for project participants are allowed. Stipends for regular and math and science projects may not exceed $40 from September to May of the academic year per month and $60 for June, July, and August of the summer months. Youths participating in work-study positions may be paid stipend of $300 per month during June, July, and August. Stipends for veteran's projects may not exceed $40. To be eligible for a stipend, participants must show evidence of satisfactory participation including regular attendance and performance in accordance with standards. Grantees may prorate stipends in accordance with the sessions in which a student participated. Unallowable activities include room and board for administrative and instructional staff personnel who do not have responsibility for dormitory supervision of project participants and for participants in Veterans Upward Bound projects (20 USC 1070a-13(b); 34 CFR sections 646.30 through 32).

2. Talent Search

Allowable services include: (1) providing academic advice and assistance in secondary school and in college course selection, completing college admission and financial aid applications, preparing for college entrance examinations, and guidance on secondary school reentry or entry to other programs leading to a secondary school diploma or its equivalent; (2) personal and career counseling; (3) tutorial services; (4) exposure to cultural events, academic programs and other sites or activities not usually available to disadvantaged youth; (5) workshops and counseling for parents of students served; and (6) mentoring programs. Specific activities for Talent Search may include the following, if reasonably related to the objective of the Talent Search project: (1) transportation and meals, lodging with prior approval; (2) visits to postsecondary educational institutions; (3) participation in "College Day" activities; (4) career field trips; (5) purchase of testing materials; (6) fees paid to colleges for college admissions (except student aid application fees when waiver is unavailable for the participant); (7) in-service staff training; (8) rental of space, if space is not owned by the grantee; and (9) purchase of computer hardware (34 CFR sections 643.4 and 643.30).

3. Unallowable activities for any TRIO program include: (1) tuition, fees, stipends and other forms of direct financial support for employees; (2) research not directly related to the evaluation or improvement of the project; and (3) construction, renovation, and remodeling of any facilities (34 CFR sections 643.31, 645.41, and 646.31).

L. Reporting

1. Financial Reporting

a. SF-269A, Financial Status Report - Applicable

b. SF-270, Request for Advance or Reimbursement - Only grantees placed on reimbursement are required to complete this form to request payment of grant award funds. The requirement to use this form is imposed on an individual recipient basis.

c. SF-271, Outlay Report and Request for Reimbursement for Construction Program - Not Applicable

d. SF-272, Federal Cash Transactions Report - Not Applicable

e. Grant Administration and Payment System (GAPS) (OMB No. 1875-0138) - Grantees draw funds and account to ED using GAPS. Grantees request funds by: (1) creating a payment request using the GAPS External Access System through the Internet; (2) calling the GAPS Payee Hotline; or (3) if the grantee is placed on a reimbursement basis for an award, submitting an SF-270, Request for Advance or Reimbursement to an ED program or regional office. When creating a payment request in GAPS, the grantee enters the drawdown amounts, by award, directly into GAPS. When requesting funds using the other 2 methods, the grantee provides this information to the hotline operator, or on the SF-270, and ED staff enter the data into GAPS. ED also enters other award data into GAPS, including authorization amounts and payment status. The system maintains and provides cumulative data on net draws and the available balance for each award.

ED considers drawn funds to have been expended by the grantee for the award(s) identified (notwithstanding that the grantee has up to three days to make disbursements). Cumulative drawdown amounts in GAPS should accurately reflect the grantee's actual disbursement of funds by award. Grantees can redistribute drawn amounts between grant awards by making adjustments in GAPS to reflect actual disbursements for each award. For example, if a grantee draws too much under one award, it can enter an adjustment in GAPS to reallocate the excess amount to other awards for which there were immediate cash needs, as long as the net amount of the adjustment is zero.

To assist grantees in reconciling their internal accounting records with GAPS, grantees can use the GAPS External Access System (http://gapsweb.ed.gov) to obtain a GAPS Activity Report showing cumulative and detail information for each award. The GAPS Activity Report can be created and viewed on-line and a hard copy may be printed as well.

2. Performance Reporting

a. Student Support Services Program Annual Performance Report (OMB- 1840-0525) - Grantees must submit an annual performance report to the Department each year of the project period.

Key Line Items - The following line items contain critical information:

(1) Section II, subsection A, Number of Participants Assisted During the Report Period.

(2) Section II, subsection B, Participant Distribution by Eligibility.

b. Talent Search and Equal Opportunity Centers Programs Annual Performance Report (OMB- 1840-0561) - Grantees must submit a separate annual performance report for the Talent Search and the Equal Opportunity Centers (EOC) programs. (Because the EOC program is not included in the TRIO Cluster, the report for this program is not expected to be tested as part of the TRIO Cluster.)

Key Line Items - The following line items contain critical information:

(1) Section II, Subsection A, Number of Participants Assisted.

(2) Section II, Subsections B, Participant Distribution by Eligibility and E, Participation by Grade Level.

(3) Section V, Record Structure for Participant List, fields 8, 9, 11 ,12 13, 15, 19, and 23.

3. Special Reporting - Not Applicable

DEPARTMENT OF EDUCATION

CFDA 84.048 VOCATIONAL EDUCATION - BASIC GRANTS TO STATES (Perkins II)

I. PROGRAM OBJECTIVES

Vocational Education - Basic Grants to States provides grants to States and outlying areas to expand and improve their programs of vocational education and provide equal access in vocational education to special populations.

II. PROGRAM PROCEDURES

Participating States must designate or establish a State board of vocational education (sole State agency) to administer and supervise the State vocational education programs. The State must submit a two-year or three-year State plan to receive funds. The Department of Education (ED) allocates funds to the sole State agency based on a statutory formula. The State must allocate and use funds for the following statutorily prescribed activities or programs (referred to as the "basic programs"):

(a) Secondary school vocational education programs (Perkins Act, Title II-C);

(b) Postsecondary and adult vocational education programs (Perkins Act, Title II-C);

(c) Single parents, displaced homemakers, and single pregnant women programs (Perkins Act, Title II-B);

(d) Sex equity programs (Perkins Act, Title II-B);

(e) State programs and State leadership activities (Perkins Act, Title II-A);

(f) State administration (Perkins Act, Section 102(a)(4)); and

(g) Criminal offenders programs (Perkins Act, Title II-B).

The sole State agency may transfer funds to other State agencies to administer one or more these programs. A State makes grants to subrecipients, operates programs directly, or contracts for services. Subrecipients submit plans or applications to the State in order to receive funds.

Source of Governing Requirements

This program is authorized by the Carl D. Perkins Vocational and Applied Technology Education Act (Perkins II), as amended, Public Law 101-392 which is codified at 20 USC 2301 et seq., and can be retrieved on the Internet at http://www.law.cornell.edu/uscode/20/ch44.html. Regulations implementing this program are found in 34 CFR parts 400 and 403.

III. COMPLIANCE REQUIREMENTS

In developing the audit procedures to test compliance with the requirements for a Federal program, the auditor should first look to Part 2, Matrix of Compliance Requirements, to identify which of the 14 types of compliance requirements described in Part 3 are applicable and then look to Parts 3 and 4 for the details of the requirements.

Certain compliance requirements which apply to multiple ED programs are discussed once in the ED Cross-Cutting Section of this Supplement (page 4-84.000-1) rather than repeating in each individual program. Where applicable, this section references the Cross-Cutting Section for these requirements.

A. Activities Allowed or Unallowed

Also, see ED Cross-Cutting Section.

1. State-Level Activities

The State plan describes the specific activities to be carried out. Generally allowable activities for a State include:

a. Secondary School Vocational Educational Programs, and Postsecondary and Adult Vocational Education Programs - A State must distribute all funds to subrecipients to improve vocational education programs (20 USC 2342(c)(1)(C); 34 CFR section 403.111(c)(3)).

b. Single Parents, Displaced Homemakers, and Single Pregnant Women Programs - Except as provided below, funds are distributed to subrecipients (20 USC 2323 (b)(11); 34 CFR section 403.32(a)(8)).

c. Sex-Equity Programs - Except as provided below, funds are distributed to subrecipients (20 USC 2335(b)(1); 34 CFR section 403.90).

d. State Programs and State Leadership Activities - A State may use funds for: (1) professional development activities; (2) development, dissemination, and field testing of curricula; and (3) assessment of programs conducted with assistance under the Perkins Act. A State may also use funds for: (1) programs and activities that promote partnerships among business, education, industry, labor, community-based organizations, or governmental agencies; (2) tech-prep education; (3) vocational student organizations; (4) leadership and instructional programs in technology education; and (5) data collection (20 USC 2331(b) and (c); 34 CFR sections 403.70 and 403.71).

e. State Administration - A State may use funds for: (1) developing the State plan; (2) reviewing local applications; (3) monitoring and evaluating program effectiveness; (4) providing technical assistance; (5) assuring compliance with all applicable Federal laws, including required services and activities for individuals who are members of special populations; (6) supporting the activities of technical committees; and (7) carrying out the provisions regarding requirements for the elimination of sexual discrimination and sex stereotyping (20 USC 2312(a)(4); 34 CFR sections 403.13 and 403.180(b)(4)).

f. Criminal Offenders Programs - These programs operate through one or more State corrections educational agencies. They provide assistance programs for juvenile and adult criminal offenders in State or local correctional institutions. Such assistance programs include: (1) providing services to offenders who are completing their sentences and preparing for release; (2) grants for establishing vocational education programs in correctional institutions without such programs; (3) providing vocational education programs for incarcerated women; (4) improving equipment; and (5) administering and coordinating vocational education services to offenders before and after their release (20 USC 2336(a) and (b); 34 CFR sections 403.100 and 403.101).

In addition to the above, States may use funds under each program, except for the Secondary School Vocational Educational and the Postsecondary and Adult Vocational Programs, to provide technical assistance that is necessary and reasonable to promote or enhance the quality and effectiveness of the program (20 USC 2312(a) and 2323(b)(5)); 34 CFR section 403.187).

2. Subrecipient Activities

The subrecipient plan or approved application describes the specific activities to be carried out. Generally, allowable activities for a subrecipient include:

a. Secondary School Vocational Educational Program and Postsecondary and Adult Vocational Education Programs - Funds may be used to improve vocational education programs. Examples of allowable activities are identified in 34 CFR section 403.111(d). (20 USC 2342(c)(2); 34 CFR sections 403.111(a)(1) and 403.111(d)).

b. Single Parents, Displaced Homemakers, and Single Pregnant Women Programs - Funds may be used to: (1) provide preparatory services that will furnish target individuals with marketable skills; (2) make preparatory services and vocational education and training more accessible to targeted individuals by assisting those individuals with dependent care, transportation services, and supplies, books, and materials, or by organizing and scheduling the programs so that those programs are more accessible; and (3) provide targeted individuals information on vocational education programs, related support services, and career counseling (20 USC 2335(a); 34 CFR section 403.81).

c. Sex Equity Programs - Funds may be used for: (1) services, guidance and counseling, and other activities to eliminate sex bias and stereotyping in secondary and postsecondary education; (2) preparatory services and vocational education programs, services, and activities for girls and women, aged 14 through 25; and (3) support services for individuals participating in the sex equity program (20 USC 2335a (a); 34 CFR section 403.91).

In addition, subrecipients receiving funds under the Secondary School or Postsecondary and Adult Vocational Education Programs may use funds from any of the programs (including Sex Equity and Single Parents, displaced Homemakers and Single Pregnant Women Programs) to pay the reasonable and necessary costs of conducting the required annual evaluation of the respective programs (34 CFR 403.191(e).

B. Allowable Costs/Cost Principles

See ED Cross-Cutting Section.

E. Eligibility

1. Eligibility of Individuals - Not Applicable

2. Eligibility of Group of Individuals or Area of Service Delivery - Not Applicable

3. Eligibility for Subrecipients

a. Secondary School Vocational Education Programs: A subrecipient must be: (1) a local educational agency (LEA) that is eligible to receive $15,000 or more; (2) a consortium of LEAs; or (3) an area vocational education school or an intermediate educational agency that meets the requirements in 34 CFR section 403.113 (34 CFR sections 403.110, 403.112(d), and 403.113).

From the amount reserved for the Secondary School Vocational Education Programs the State shall distribute: (1) 70 percent to each LEA based on the percentage each LEA received of the total funds awarded to LEAs in the State under the Title 1, Part A in the prior year; (2) 20 percent to each LEA based on the percentage of students with disabilities who have individualized education programs under section 614(a)(5) of IDEA program to the total number of such students in the State for the prior year; and (3) 10 percent to each LEA based on the percentage of students enrolled in schools and adults enrolled in vocational educational programs under the jurisdiction of the LEA to total student enrollment in K through 12 and total adult enrollment in vocational educational programs under the jurisdiction of LEAs in the State for the prior year (34 CFR section 403.112(b)).

LEAs that do not meet the minimum grant requirement of $15,000 can form consortia with one or more LEAs to meet the minimum grant requirement. The State can also waive the minimum grant requirement for LEAs in rural sparsely populated areas under certain circumstances (34 CFR section 403.112(d)).

If the State reserves 15 percent or less for this program, in lieu of the above, it may distribute funds on a competitive basis or through any alternative (34 CFR section 403.119).

b. Postsecondary and adult vocational education programs - A subrecipient must be an institution of higher education, a local educational agency serving adults, an area vocational education school, or an intermediate educational agency that offers a program that meets the requirements of 34 CFR section 403.111 (34 CFR section 403.110(b)).

Amounts reserved for the Postsecondary and Adult Vocational Education Programs the State shall be distributed to each eligible institution based on the percentage of Pell grant recipients and recipients of assistance from the bureau of Indian Affairs that participate in programs vocational education programs to the total of such recipients enrolled in those programs in the State in the preceding year. The minimum grant is $50,000. Amounts allocated to recipients that are less than $50,000 are to be reallocated to other eligible recipients (34 CFR section 403.116).

If the State reserves 15 percent or less for this program, it may distribute funds on a competitive basis or through any alternative method (34 CFR section 403.119).

c. Single parents, displaced homemakers, and single pregnant women programs - A subrecipient must be a local educational agency, an area vocational education school, an intermediate educational agency, a Postsecondary educational institution, a corrections educational agency, an eligible institution as defined in 34 CFR section 403.117(a), or a community-based organization. Amounts must be allocated on a competitive basis. (20 USC 2335(a)(2) and (3); 34 CFR sections 403.13(a)(14) and 403.80).

d. Sex equity programs - A subrecipient must be a local educational agency, an area vocational education school, an intermediate educational agency, a Postsecondary educational institution, a corrections educational agency, an eligible institution as defined in 34 CFR section 403.117, or a community-based organization. Amounts must be allocated on a competitive basis. (20 USC 2335b(1); 34 CFR sections 403.13(a)(14) and 403.90).

G. MATCHING, LEVEL OF EFFORT, EARMARKING

1. Matching

State Administration - A State must match, from non-Federal sources and on a dollar-for-dollar basis, the funds reserved for administration of the State plan. The matching requirement may be applied overall, rather than line-by-line, to State administrative expenditures (20 USC 2312(b); 34 CFR section 403.181).

2.1 Level of Effort - Maintenance of Effort

a. General - A State must maintain its fiscal effort in the preceding year from State sources for vocational education on either an aggregate or a per-student basis when compared with such effort in the second preceding year, unless this requirement is specifically waived by the Secretary of Education. A State only has to maintain its fiscal effort on one basis: aggregate or per- student. For example, to receive its fiscal year 1997 grant award, a State must maintain its level of fiscal effort on either an aggregate or per-student basis in program year (PY) 1996 (July 1, 1995 - June 30, 1996) at the level of its fiscal effort in PY 1995 (July 1, 1994 - June 30, 1995). An example of how a State may maintain effort on a per-student basis, but not in the aggregate, is as follows:

In PY 1995, a State spends $50 million from State funds to provide vocational education to 300,000 students. In PY 1996, the State spends only $49 million to provide vocational education to 290,000 students. Even though the State's aggregate effort decreased by $10 million, the State's per-student effort increased from $166.67 per student to $168.97 per student. Thus, the State met the maintenance of effort requirement for its fiscal year 1997 grant ( 20 USC 2463(a); 34 CFR section 403.182).

If a State has been granted a waiver of the maintenance of effort requirement that allows it to receive a grant for a fiscal year, the maintenance effort requirement for the year after the year of the waiver is determined comparing the amount spent for vocational education from non-Federal sources in the first preceding fiscal year (or program year) with the amount spent in the third preceding fiscal year (or program year) (20 USC 2463; 34 CFR sections 403.183 and 403.185).

b. Administration - A State must provide from non-Federal sources for State administration under the Perkins Act an amount that is not less than the amount provided by the State from non-Federal sources for State administrative costs for the preceding fiscal or program year (20 USC 2468d; 34 CFR section 403.181(c)).

2.2 Level of Effort - Supplement not Supplant

The State and its subgrantee may use funds to supplement and to the extent practicable increase the amounts of State and local funds that would, in the absence of such funds, be made available for the purposes specified in the State plan and the local application (20 USC 2468e(a)(1); 34 CFR 403.196(a)). The examples of instances where supplanting is presumed to have occurred that are described in section III.G.2.2 of the ED Cross-Cutting Section (84.000) also apply to the vocational education program.

Notwithstanding the above paragraph, funds made available may be used to pay the costs of vocational education services required by an individualized education program (IEP) developed pursuant to Sections 612(4) and 614(a)(5) of the Individuals with Disabilities Education Act (IDEA) in a manner consistent with Section 614(a)(1) of that Act, and services necessary to meet the requirements of Section 504 of the Rehabilitation Act of 1973 with respect to ensuring equal access to vocational education. Any expenditures pursuant to 34 CFR section 403.196(b) must increase the amount of funds that would otherwise be available to meet the costs of an IEP or to comply with Section 504 of the Rehabilitation Act of 1973 (20 USC 2468e(a)(1); 34 CFR 403.196(b) and (c)).

3. Earmarking

a. A State must distribute all funds in the following programs to subrecipients (20 USC 2341 and 2341a; 34 CFR sections 403.81-91, 403.111-112, and 403.116):

(1) Secondary School Vocational Educational Programs,

(2) Postsecondary and Adult Vocational Education Programs

b. Within State Allocation (All grantees)

Subject to the requirements discussed below regarding the minimum amount for State administration and minimum (hold harmless) amounts for certain programs, a State must reserve the following percentages for each program:

(i) Secondary school programs, together with Postsecondary and adult vocational education programs - at least 75 percent.

(ii) Single parents, displaced homemakers, and single pregnant women programs, together with sex equity programs - 10.5 percent. The single parents, displaced homemakers, and single pregnant women programs must receive at least 7 percent and the sex equity programs must receive at least 3 percent.

(v) State programs and State leadership activities - not more than 8.5 percent.

(vi) State administration - not more than 5 percent or $250,000, whichever is greater, for administration of the State plan, of which not less than $60,000 must be made available for carrying out the provisions regarding personnel requirements for the elimination of sexual discrimination and sex stereotyping.

(vii) Criminal offenders programs - not less than one percent.

If the five percent reserved for administration is less than the $250,000 minimum or if any of the amounts reserved for the Program for Single Parents, Displaced Homemakers, and Single Pregnant Women, Programs for Sex Equity and/or the Program for Criminal Offenders, respectively, is less than amounts reserved for that program in its fiscal year (FY) 1991 grants (from FY 1990 appropriations) (the hold-harmless amount), the State shall subtract the minimum amount for State administration ($250,000) or the hold-harmless amounts from the basic program award and reserve such amounts for administration or the applicable programs. The State then reserves from the remainder of the basic program award, an amount for each program that is proportionate to the amount that program would have received in the absence of a shortfall in the amounts reserved for administration or to meet the hold-harmless requirements. Examples of the hold-harmless procedures are set forth in 34 CFR 403.180(c). ED provides each State with a worksheet calculating the hold-harmless set-aside amounts for each grant award. (34 CFR 403.180(a) and (c); 20 U.S.C. 2312.)

c. Administrative Costs (Subrecipients)

Subrecipients under the secondary school vocational education programs and postsecondary and adult vocational education programs may use no more than 5 percent of those funds for administrative costs (34 CFR section 403.195(b)).

H. Period of Availability of Federal Funds

See ED Cross-Cutting Section.

L. Reporting

1. Financial Reporting

a. SF-269 - Financial Status Report - Applicable

b. SF-270 - Request for Advance or Reimbursement - Only grantees placed on reimbursement are required to complete this form to request payment of grant award funds. The requirement to use this form is imposed on an individual recipient basis.

c. SF-271 - Outlay Report and Request for Reimbursement for Construction Program - Not Applicable

d. SF-272 - Federal Cash Transactions Report - Not Applicable

e. Grant Administration and Payment System (GAPS) (OMB No. 1875-0138) - Grantees draw funds and account to ED using GAPS. Grantees request funds by: (1) creating a payment request using the GAPS External Access System through the Internet; (2) calling the GAPS Payee Hotline; or (3) if the grantee is placed on a reimbursement basis for an award, submitting an SF-270, Request for Advance or Reimbursement to an ED program or regional office. When creating a payment request in GAPS, the grantee enters the drawdown amounts, by award, directly into GAPS. When requesting funds using the other 2 methods, the grantee provides this information to the hotline operator, or on the SF-270, and ED staff enter the data into GAPS. ED also enters other award data into GAPS, including authorization amounts and payment status. The system maintains and provides cumulative data on net draws and the available balance for each award.

When a grantee draws down funds, ED considers those funds to have been expended by the grantee for the awards identified and cumulative drawdown amounts in GAPS should accurately reflect the grantee's actual disbursement of funds by award. Grantees can redistribute drawn amounts between grant awards by making adjustments in GAPS to reflect actual disbursements for each award. For example, if a grantee draws too much under one award, it can enter an adjustment in GAPS to reallocate the excess amount to other awards for which there were immediate cash needs, as long as the net amount of the adjustment is zero.

To assist grantees in reconciling their internal accounting records with GAPS, grantees can use the GAPS External Access System (http://gapsweb.ed.gov) to obtain a GAPS Activity Report showing cumulative and detail information for each award. The GAPS Activity Report can be created and viewed on-line and a hard copy may be printed as well.

f. LEAs and other subrecipients are generally required to report financial information to the pass-through entity. These reports should be tested during audits of LEAs.

2. Performance Reporting - Not Applicable

3. Special Reporting - Not Applicable

N. Special Tests and Provisions

1. Schoolwide Programs

See ED Cross-Cutting Section

2. Priority for Areas with High Concentrations of Special Populations

Compliance Requirement - "Special Populations" refer to individuals with disabilities, educationally and economically disadvantaged individuals (including foster children), individuals of limited English proficiency, individuals who participate in programs designed to eliminate sex bias, and individuals in corrections institutions (20 USC 2471(31); 34 CFR section 400.4(b)).

Subrecipients shall give priority for assistance under the Secondary School and Postsecondary and Adult Vocational Educational Programs to those sites or program areas that serve the highest concentrations of special populations. Subrecipient applications must contain a description of the extent to which the its vocational education program incorporates this requirement. Examples of methods of meeting the priority requirements are shown in 34 CFR section 403.111(b) (20 USC 2342(b); 34 CFR 403.111(b) and 403.190(a)(1)(i)(A)).

Audit Objective (States) - Determine whether the State is approving applications only if they include the required description of how the subrecipient will meet the prioritization requirement.

Suggested Audit Procedure (States)

Test a sample of approved local applications to ascertain if they contain a description of how the subrecipient will meet the prioritization requirement.

Audit Objective (Subrecipients) - Determine whether the subrecipient provided services to those sites or program areas that it identified as serving the highest concentrations of special populations.

Suggested Audit Procedures (Subrecipients)

a. Review records to identify the sites or programs that the subrecipient determined serve the highest concentrations of special populations.

b. Test a sample of project and financial records to ascertain if the identified sites or programs were provided assistance.

DEPARTMENT OF EDUCATION

CFDA 84.126 REHABILITATION SERVICES - VOCATIONAL REHABILITATION GRANTS TO STATES

I. PROGRAM OBJECTIVES

The purpose of Title I of the Rehabilitation Act of 1973, as amended, (Act) which authorizes the Vocational Rehabilitation (VR) program, is to assist States in operating a comprehensive, coordinated, effective, efficient, and accountable program that is designed to assess, plan, develop, and provide VR services for individuals with disabilities, consistent with their strengths, resources, priorities, concerns, abilities, and capabilities, so such individuals may prepare for and engage in gainful employment (Section 100(a)(2) of the Act).

II. PROGRAM PROCEDURES

Federal funds are distributed to the States on a formula basis with the States required to provide a 21.3 percent match. The program is administered by an agency designated by the State as having overall administrative responsibility for the VR program. If the designated State agency is not an agency primarily concerned with VR or other rehabilitation of individuals with disabilities, it must include a designated State unit within the agency that is responsible for the designated State agency's VR program (State VR Agency).

The States must submit to the Rehabilitation Services Administration (RSA) a State Plan that provides both assurances and descriptions that are required by Title I of the Act and the implementing regulations (34 CFR part 361). The State Plan forms the basis of RSA's monitoring of the State's administration of the VR program.

Services are provided either directly by State VR Agency staff or purchased from community-based vendors. Services, except those of an assessment nature, are provided under the Individualized Written Rehabilitation Program (IWRP) which is jointly developed by the individual with a disability and the VR counselor to achieve an employment outcome that is consistent with the individual's strengths, resources, priorities, concerns, abilities, capabilities and informed choice.

III. COMPLIANCE REQUIREMENTS

In developing the audit procedures to test compliance with the requirements for a Federal program, the auditor should first look to Part 2, Matrix of Compliance Requirements, to identify which of the 14 types of compliance requirements described in Part 3 are applicable and then look to Parts 3 and 4 for the details of the requirements.

A. Activities Allowed Or Unallowed

1. Services To Individuals

VR services to individuals provided under a IWRP include: (1) assessment to determine eligibility and priority for services; (2) assessment to determine VR needs; (3) VR counseling and guidance; (4) referral and other services necessary to help applicants and eligible individuals secure needed services from other agencies and to advise those individuals about client assistance programs; (5) physical and mental restoration services necessary to correct or substantially modify a physical or mental condition that is stable or slowly progressive; (6) vocational and other training services, including personal and vocational adjustment training, books, tools, and other training materials; except no training or training services in an institution of higher education (universities, colleges, community or junior colleges, vocational schools, technical institutes or hospital schools of nursing) may be paid for with funds under this program unless maximum efforts have been made by the State unit and the individual to secure grant assistance in whole or in part from other sources to pay for that training; (7) maintenance or additional cost incurred while participating in rehabilitation; (8) transportation; (9) VR services to family members of an applicant or eligible individual if necessary to enable the applicant or eligible individual to achieve an employment outcome; (10) interpreter services for individuals who are deaf and tactile interpreting services for individuals who are deaf-blind; (11) reader services, rehabilitation teaching services, and orientation and mobility services for individuals who are blind; (12) recruitment and training services to provide new employment opportunities in the fields of rehabilitation, health, welfare, public safety, law enforcement and other appropriate public service employment; (13) job search and placement assistance and job retention services; (14) supported employment services; (15) personal assistance services; (16) post-employment services; (17) occupational licenses, tools, equipment, initial stocks, and supplies; (18) rehabilitation technology, including vehicular modification, telecommunications, sensory and other technological aids and devices; (19) transition services; and (20) other goods and services determined necessary for the individual with a disability to achieve an employment outcome (34 CFR section 361.48).

2. Services to Groups

If included in the State Plan, the State VR Agency may provide other services to groups of individuals with disabilities (34 CFR section 361.49).

a. Community Rehabilitation Programs - The establishment, development, or improvement of a public or other nonprofit community rehabilitation program that is used to provide services that promote integration and competitive employment, including under special circumstances, the construction of a facility for a public or nonprofit community rehabilitation program.

b. Telecommunications systems that have the potential for substantially improving vocational rehabilitation service delivery methods and developing appropriate programming to meet the particular needs of individuals with disabilities.

c. Special services to provide recorded material or video description services for individuals who are blind, captioned television, films, or video cassettes for individuals who are deaf, tactile materials for individuals who are deaf-blind, and other special services that provide information through tactile, vibratory, auditory, and visual media.

d. Technical assistance and support services, such as job site modification and other reasonable accommodations, to businesses that are not subject to Title I of the Americans with Disabilities Act of 1990, and that are seeking to employ individuals with disabilities.

e. Management services and supervision, acquisition of equipment, initial stocks and supplies, and initial operating expenses for small business enterprises operated by individuals with the most severe disabilities under the supervision of the State unit.

f. Other services to groups of individuals with disabilities not directly related to the IWRP of any one individual.

E. Eligibility

1. Eligibility of Individuals

In order to be eligible, the State must determine that: (1) the applicant has a physical or mental impairment; (2) the applicant's physical or mental impairment constitutes or results in a substantial impediment to employment; and (3) the applicant requires vocational rehabilitation services to prepare for, enter into, engage in, or retain gainful employment consistent with the applicant's strengths, resources, priorities, concerns, abilities, capabilities, and informed choice.

The State must presume that an applicant who meets the above eligibility requirements can benefit in terms of an employment outcome, unless it demonstrates, based on clear and convincing evidence, that the applicant is incapable of benefitting in terms of an employment outcome from vocational rehabilitation services (29 USC 722(a)(1); 34 CFR section 361.42(a)(1)).

An eligibility determination shall be made within 60 days after the individual has submitted an application to receive services, unless the individual and the State VR Agency agree to a specific extension of time or an extended evaluation is necessary in accordance with 34 CFR section 361.42 (d) (29 USC 722(a)(6); 34 CFR section 361.41(b)(1)).

The State may chose to consider the financial need of eligible individuals or individuals who are receiving services during an extended evaluation for the purposes of determining the extent of their participation in the cost of VR services other than assessment; VR counseling, guidance, and referral services; and, placement services. If the State indicates in its State Plan that it will use financial need tests for one or more types of VR services, it must apply such tests in accordance with its written policies uniformly to all individuals under similar circumstances. The policies may require different levels of need for different geographic regions in the State, but must be applied uniformly to all individuals within each geographic region (34 CFR section 361.54).

2. Eligibility for Group of Individuals or Area of Service Delivery - Not Applicable

3. Eligibility for Subrecipients - Not Applicable

G. Matching, Level of Effort, Earmarking

1. Matching

a. The State share of expenditures made by the State VR Agency under the State Plan, including expenditures for the provision of VR services, administration of the State Plan, and the development and implementation of the strategic plan is 21.3 percent (34 CFR section 361.60(a)(1)).

b. The Federal share of expenditures made for the construction of a facility for community rehabilitation program purposes may not be more than 50 percent of the total cost of the project (34 CFR section 361.60(a)(2)).

2.1 Level Of Effort - Maintenance of Effort

a. The amount otherwise payable to a State for a fiscal year under this section shall be reduced by the amount by which expenditures from non-Federal sources under the State Plan for the previous fiscal year are less than the total of such expenditures for the fiscal year two years prior to the previous fiscal year. For example, for fiscal year 1996, a State's maintenance of effort level is based on the amount of its expenditures from non-Federal sources for fiscal year 1994. Thus if the State's non-Federal expenditures in fiscal year 1996 are less than they were in fiscal year 1994, the State has a maintenance of effort deficit, and the Secretary reduces the State's allotment for fiscal year 1997 by the amount of that deficit (29 USC 731(a)(2), Section 111(a)(2)(B)(ii) of the Act and 34 CFR section 361.62).

b. If the State Plan provides for the construction of a facility for community rehabilitation program purposes, the amount of the State's share of expenditures for a fiscal year for VR services under the Plan, other than for the construction of a facility for community rehabilitation program purposes or the establishment of a facility for community rehabilitation purposes, must be at least equal to the State's share of those expenditures for the second prior fiscal year (34 CFR section 361.62).

2.2 Level of Effort - Supplement Not Supplant - Not Applicable

3. Earmarking - Not applicable

H. Period of Availability of Federal Funds

Federal funds appropriated for a fiscal year remain available for obligation in the succeeding fiscal year only to the extent that the State VR Agency met the matching requirement for those Federal funds by obligating, in accordance with 34 CFR section 76.707, the non-Federal share in the fiscal year for which the funds were appropriated. Any program income received during a fiscal year that is not obligated by the State VR Agency by the end of that fiscal year, will remain available for obligation by the State VR Agency during the succeeding fiscal year (29 USC 716; 34 CFR section 361.64).

J. Program Income

Sources of program income include, but are not limited to, payments from the Social Security Administration for rehabilitating Social Security beneficiaries, payments received from workers' compensation funds, fees for services to defray part or all of the costs of services provided to particular individuals, and income generated by a State-operated community rehabilitation program.

Except as indicated below, program income, whenever earned, must be used for the provision of VR services, the administration of the State Plan, and developing and implementing the strategic plan under the State Vocational Rehabilitation Services Program. Program income is considered earned when it is received.

The State VR Agency is authorized to treat program income as a deduction from total allowable costs or as an addition to the grant funds to be used for additional allowable program expenditures, in accordance with 34 CFR sections 80.25(g)(1) or (2), (34 CFR section 361.63).

L. Reporting

1. Financial Reporting

a. SF-269A, Financial Status Report (short form) - Applicable

b. SF-270, Request for Advance or Reimbursement - Only grantees placed on reimbursement are required to complete this form to request payment of grant award funds. The requirement to use this form is imposed on an individual recipient basis.

c. SF-271, Outlay Report and Request for Reimbursement for Construction Program - Not Applicable

d. SF-272, Federal Cash Transactions Report - Not Applicable

e. Grant Administration and Payment System (GAPS) (OMB No. 1875-0138) - Grantees draw funds and account to the Department of Education (ED) using GAPS. Grantees request funds by: (1) creating a payment request using the GAPS External Access System through the Internet; (2) calling the GAPS Payee Hotline; or (3) if the grantee is placed on a reimbursement basis for an award, submitting an SF-270, Request for Advance or Reimbursement to an ED program or regional office. When creating a payment request in GAPS, the grantee enters the drawdown amounts, by award, directly into GAPS. When requesting funds using the other 2 methods, the grantee provides this information to the hotline operator, or on the SF-270, and ED staff enter the data into GAPS. ED also enters other award data into GAPS, including authorization amounts and payment status. The system maintains and provides cumulative data on net draws and the available balance for each award.

ED considers drawn funds to have been expended by the grantee for the award(s) identified (notwithstanding that the grantee has up to three days to make disbursements). Cumulative drawdown amounts in GAPS should accurately reflect the grantee's actual disbursement of funds by award. Grantees can redistribute drawn amounts between grant awards by making adjustments in GAPS to reflect actual disbursements for each award. For example, if a grantee draws too much under one award, it can enter an adjustment in GAPS to reallocate the excess amount to other awards for which there were immediate cash needs, as long as the net amount of the adjustment is zero.

To assist grantees in reconciling their internal accounting records with GAPS, grantees can use the GAPS External Access System (http://gapsweb.ed.gov) to obtain a GAPS Activity Report showing cumulative and detail information for each award. The GAPS Activity Report can be created and viewed on-line and a hard copy may be printed as well.

f. RSA-2, Program Cost Report (OMB No. 1820-0617). State VR agencies submit the RSA-2 annually.

2. Performance Reporting - Not Applicable

3. Special Reporting - Not Applicable

N. Special Tests and Provisions

1. Individualized Written Rehabilitation Program (IWRP)

Compliance Requirement - An IWRP must be developed jointly by the VR counselor and the eligible individual (or the individual's representative). The IWRP is the plan of action that: identifies the planned employment outcome (vocational goal) of the individual; intermediate objectives that the individual must achieve in order to achieve the identified vocational goal; objective criteria and an evaluation procedure to determine if the objectives and goals are being achieved; services that are determined to be necessary to assist the individual to achieve the objectives and ultimately the planned employment goal; the projected start date and anticipated duration of each service; providers of the services; and, the terms and conditions connected with the provision of the services, including among other things, the responsibilities of the individual and the extent to which the individual participates in the cost of services (34 CFR sections 361.45-46).

Audit Objective - Determine whether an IWRP was developed jointly by the vocational counselor and the individual that included the required content and whether the services provided where included in the IWRP.

Suggested Audit Procedures

a. Select a sample of individuals served and ascertain if a IWRP was developed.

b. Review the selected IWRPs for evidence that the individuals participated in their development and to ascertain if IWRP included the required content.

c. For each selected individual, trace services provided per the case service record to the IWRP to ascertain if the services provided were included in the IWRP.

2. Comparable Services And Benefits

Compliance Requirement - The State is required to seek comparable services and benefits from other programs before providing VR services to an eligible individual or to members of the individual's family unless: (1) the search for comparable benefits and services under any other program would delay the provision of VR services to an individual determined to be at extreme medical risk based on medical evidence provided by a qualified medical professional; or (2) an immediate job placement would be lost due to a delay in the provision of the comparable services or benefits. The following services are exempt from this requirement: (1) assessment for determining eligibility and priority for services; (2) assessment for determining VR needs; (3) VR counseling, guidance, and referral services; (4) vocational and other training services, such as personal and vocational adjustment training, books, tools, and other training materials; (5) placement services; (6) rehabilitation technology; and (7) post-employment services for services "1" through "6" above (29 USC 721(a)(8); Section 101(a)(8) of the Act; 34 CFR section 361.53).

Audit Objective - Determine whether comparable services were sought before providing VR benefits to eligible individuals.

Suggested Audit Procedures

a. Select a sample of case records and review to ascertain whether comparable services were sought from other sources before providing VR services to the individual, or that a valid exception existed and was properly documented in the case record.

DEPARTMENT OF EDUCATION

CFDA 84.181 SPECIAL EDUCATION -- GRANTS FOR INFANTS AND FAMILIES WITH DISABILITIES

I. PROGRAM OBJECTIVES

The purposes of the Individuals with Disabilities Education Act (IDEA), Part C (Part C) are: (a) to develop and implement a statewide, comprehensive, coordinated, multi disciplinary interagency system that provides early intervention services for infants and toddlers with disabilities and their families; (b) to facilitate the coordination of payment for early intervention services from Federal, State, local and private sources (including public and private insurance coverage); (c) to enhance the State's capacity to provide quality early intervention services and expand and improve existing early intervention services being provided to infants and toddlers with disabilities and their families; (d) to encourage States to expand opportunities for children under the age of three years who would be at risk of having substantial developmental delay if they did not receive early intervention services; and (e) to enhance the capacity of State and local agencies and service providers to identify, evaluate, and meet the needs of historically under represented populations, particularly minority, low-income, inner-city, and rural populations (20 USC 1431(b); 34 CFR section 303.1).

II. PROGRAM PROCEDURES

Generally, the State is responsible for maintaining and implementing a statewide system to identify, evaluate and provide early intervention services to eligible children and their families. Such a system includes a public awareness and child find system, development and implementation of an individualized family service plan for eligible children, maintenance of a central directory of information about early intervention services, personnel development and contracting for or otherwise providing services to eligible children and their families.

A State must have an approved application that provides required assurances and describes the statewide system and related policies. The State designates a lead agency that is responsible for administering, and supervising activities funded by this program. Program services may be carried out by the lead agency, other State agencies, or by public or private organizations either under contract to the State or through other arrangements with such agencies. The lead agency also monitors activities that are covered by the program, whether or not they are funded by this program. The State also must establish a State Interagency Coordinating Council that, among other things, advises and assists the lead agency in the development and implementation of policies and achieving participation, cooperation and coordination of all appropriate public agencies in the State.

The amount of a State's allocation under Part C for a fiscal year is based on its proportion of the general population of infant and toddlers, from birth through two years, in the State (i.e., the ratio of the number of infants and toddlers in the State compared to the number of infants and toddlers in all the States).

Source of Governing Requirements

This program is authorized under 20 USC 1431 through 1445. Implementing regulations specific to this program are 34 CFR part 303.

III. COMPLIANCE REQUIREMENTS

In developing the audit procedures to test compliance with the requirements for a Federal program, the auditor should first look to Part 2, Matrix of Compliance Requirements, to identify which of the 14 types of compliance requirements described in Part 3 are applicable and then look to Parts 3 and 4 for details of the requirements.

Certain compliance requirements which apply to multiple Department of Education (ED) programs are discussed once in the ED Cross-Cutting Section of this Supplement (page 4-84.000-1) rather than repeating in each individual program. Where applicable, this section references to the Cross-Cutting Section for these requirements.

A. Activities Allowed or Unallowed

The approved application describes the activities to be carried out. Generally, allowable activities for a State, include (20 USC 1438; 34 CFR section 303.3):

1. Maintaining a statewide, comprehensive, coordinated, multi-disciplinary, interagency system to provide early intervention services for infants and toddlers with disabilities and their families.

2. Providing direct early intervention services for infants and toddlers with disabilities and their families, that are otherwise not funded through other public or private sources.

3. Expanding and improving on services under Part C that are otherwise available for infants and toddlers and their families.

4. Providing a free appropriate public education, in accordance with Part B of the IDEA, to children with disabilities from their third birthday to the beginning of the following school year.

5. In any State that does not provide services for at risk infants and toddlers, to strengthen the statewide system by initiating, expanding, or improving collaborative efforts related to at-risk infants and toddlers including establishing linkages with appropriate public or private community-based organizations, services, and personnel for the purpose of: (a) identifying and evaluating at-risk infants and toddlers; (b) making referrals of the infants and toddlers identified and evaluated; and (c) conducting periodic follow-up on each such referral to determine if the status of the infant or toddler involved has changed with respect to the eligibility of the infant and toddler for services.

B. Allowable Costs/Cost Principles

See ED Cross-Cutting Section.

E. Eligibility

The auditor is not expected to test eligibility.

G. Matching, Level of Effort, Earmarking

1. Matching - Not Applicable

2.1 Level of Effort - Maintenance of Effort

The total amount of State and local funds budgeted for expenditure in the current fiscal year for early intervention services for children eligible under Part C and their families must be at least equal to the total amount of State and local funds actually expended for early intervention services for these children and their families in the most recent preceding fiscal year for which the information is available. Allowances may be made for: (1) decreases in the number of children who are eligible to receive Part C early intervention services; and (2) unusually large amounts of funds expended for such long-term purposes such as the acquisition of equipment and the construction of facilities (20 USC 1437(b)(5); 34 CFR section 303.124).

Although this requirement is identified as a supplement not supplant requirement in the law and regulation, this Supplement classifies this type of requirement as maintenance of effort.

2.2 Level of Effort - Supplement not Supplant - Not Applicable

3. Earmarking - Not Applicable

H. Period of Availability of Funds

See ED Cross-Cutting Section.

L. Reporting

1. Financial Reporting

See ED Cross-Cutting Section.

2. Performance Reporting - Not Applicable

3. Special Reporting

Report of Infants and Toddlers Receiving Early Intervention Services In Accordance With Part C (OMB Form 1820 -0557) - The Lead Agency in each State is required to report to the Secretary no later than February 1 of each year the number of infants and toddlers from birth through age 2 (children who have not reached their third birthday) receiving early intervention services according to an individualized family service plan on December 1 of the prior year (20 USC 1418 and 1435(a)(14)).

Key Line Items-

Table 1 - Total row
Table 2 - Total column
Table 3 - Total column

DEPARTMENT OF EDUCATION

CFDA 84.186 SAFE AND DRUG-FREE SCHOOLS AND COMMUNITIES--STATE GRANTS (Title IV, Part A, Subpart 1 of ESEA)

I. PROGRAM OBJECTIVES

The objective of the Safe and Drug-Free School program authorized by the Safe and Drug-Free Schools and Communities Act (SDFSCA), contained in Title IV of ESEA, is to support programs to meet the seventh National Education Goal by preventing violence in and around schools and by strengthening programs that prevent the illegal use of alcohol, tobacco, and drugs, involve parents, and are coordinated with related Federal, State, and community efforts and resources.

II. PROGRAM PROCEDURES

In general, SDFSCA funds are allocated to States based on their relative share of school-aged population and Title I funds. Of each State's annual allocation amount, 80 percent is awarded to the State Educational Agency (SEA) for programs described in Section 4113 of the SDFSCA and 20 percent is awarded to the Governor for programs described in Section 4114 of the SDFSCA. On the grant documents the Department of Education codes these programs with an AA@ following the CFDA number to indicate a grant to the SEA program and a AB@ following the CFDA number to indicate a grant to the Governor's program. However, this is treated as one program under OMB Circular A-133.

SEAs may use a portion of the funds they receive for administrative activities and to carry out State-level program activities. The majority of the funds received by an SEA must be distributed to local educational agencies (LEAs) for drug and violence prevention activities. A portion of the amount required to be distributed to LEAs is required to be distributed to the LEAs that the SEA determines have the "greatest need." LEAs must submit an application which would include, among other things, how it will use the funds.

Governors also may use a portion of the funds they receive for administration. Excluding the percentage of funds reserved for administration, Governors must make grants to, or enter into contracts with eligible entities for drug and violence prevention activities. In addition, a portion of the Governor's funds must be used for law enforcement education partnerships. Governors may have another state agency, including an SEA, administer the program on their behalf. No matter who administers the program, the program remains the responsibility of the Governor's office (Sections 4113 and 4114 of the SDFSCA; 20 USC 7113 and 7114).

III. COMPLIANCE REQUIREMENTS

In developing the audit procedures to test compliance with the requirements for a Federal program, the auditor should first look to Part 2, Matrix of Compliance Requirements, to identify which of the 14 types of compliance requirements described in Part 3 are applicable and then look to Parts 3 and 4 for the details of the requirements.

Certain compliance requirements which apply to multiple ESEA programs are discussed once in the Department of Education (ED) Cross-Cutting Section of this Supplement (page 4-84.000-1) rather than repeating in each individual program. Where applicable, this section references to the Cross-Cutting Section for these requirements. Also, as discussed in the Cross-Cutting Section, SEAs and LEAs may have been granted waivers from certain compliance requirements.

A. Activities Allowed or Unallowed

Also, see ED Cross-Cutting Section.

1. Use of Funds by SEAs

An SEA may use funds for State-level programs and for making subgrants to LEAs. An SEA may use the funds reserved for State-level programs for activities including providing training and technical assistance, conducting demonstration projects, making available cost-effective prevention programs to LEAs, providing financial assistance to enhance resources in some areas, and meeting other special needs consistent with the purposes of SDFSCA. The list (see below) of authorized State-level Program activities found in Section 4113(b)(1) of the SDFSCA does not exclude other activities that may be carried out by the SEA, consistent with the purposes of SDFSCA. An SEA may carry out activities in Section 4113(b)(1) directly, or through grants or contracts.

An SEA may not use SDFSCA funds for construction, or to provide medical services, drug treatment, or rehabilitation. As stated in Section 4133 of the SDFSCA, pupil services or referral to treatment for students who are victims of or witnesses to crime or who use alcohol, tobacco, or drugs are not included in the prohibition (Section 4133 of the SDFSCA (20 USC 7143)).

List of authorized State Level Program activities found in Section 4113(b)(1) of the SDFSCA:

1. Training and technical assistance concerning drug and violence prevention for LEAs and educational service agencies, including teachers, administrators, coaches and athletic directors, other staff, parents, students, community leaders, health service providers, local law enforcement officials, and judicial officials;
2. The development, identification, dissemination, and evaluation of the most readily available, accurate, and up-to-date curriculum materials (including videotapes, software, and other technology-based learning resources), for consideration by LEAs;
3. Making available to LEAs cost-effective programs for youth violence and drug abuse prevention;
4. Demonstration projects in drug and violence prevention;
5. Training, technical assistance, and demonstration projects to address violence associated with prejudice and intolerance;
6. Financial assistance to enhance resources available for drug and violence prevention in areas serving large numbers of economically disadvantaged children or sparsely populated areas, or to meet other special needs consistent with the purposes of this Subpart; and
7. The evaluation of activities carried out within the State under this part.

2. Uses of Funds by LEAs

An LEA may use SDFSCA funds to carry out a broad range of drug and violence prevention programs. SDFSCA provides a general framework for LEA prevention efforts by requiring that SDFSCA funds be used to support comprehensive drug and violence prevention programs that: (1) are designed for all students and employees to prevent the use, possession, and distribution of tobacco, alcohol, and illegal drugs by students; prevent the illegal use, possession, and distribution of tobacco, alcohol, and illegal drugs by employees; prevent violence and promote school safety; create a disciplined environment conducive to learning; and (2) include activities to promote the involvement of parents and coordination with community groups and agencies.

Authorized activities found in Section 4116(b) of the SDFSCA are listed below. Other activities may be carried out by the LEA, consistent with the purposes of SDFSCA. Such activities specifically include mentoring, before- and after-school instructional, recreational, cultural, and artistic programs. Note that comprehensive school health education activities may be implemented only to the extent that such activities are part of an LEA's comprehensive drug and violence prevention program (Section 4116(b) of the SDFSCA (20 USC 7116(b)).

An LEA may not use SDFSCA funds for construction, or to provide medical services, drug treatment, or rehabilitation. As stated in Section 4133 of the SDFSCA, pupil services or referral to treatment for students who are victims of or witnesses to crime or who use alcohol, tobacco, or drugs are not included in the prohibition (Section 4133 of the SDFSCA (20 USC 7133)).

List of authorized activities found in Section 4116(b):

1. Age-appropriate, developmentally based drug prevention and education programs for all students, from the pre-school level through grade 12, that address the legal, social, personal and health consequences of the use of illegal drugs, promote a sense of individual responsibility, and provide information about effective techniques for resisting peer pressure to use illegal drugs;
2. Programs of drug prevention, comprehensive health education, early intervention, pupil services, mentoring, or rehabilitation referral, which emphasize students' sense of individual responsibility and which may include -the dissemination of information about drug prevention; -the professional development of school personnel, parents, students, law enforcement officials, judicial officials, health service providers and community leaders in prevention, education, early intervention, pupil services or rehabilitation referral; -the implementation of strategies, including strategies to integrate the delivery of services from a variety of providers, to combat illegal alcohol, tobacco and drug use, such as family counseling; early intervention activities that prevent family dysfunction, enhance school performance, and boost attachment to school and family; and activities, such as community service and service-learning projects, that are designed to increase students' sense of community;
3. Age-appropriate, developmentally based violence prevention and education programs for all students, from the pre-school level through grade 12, that address the legal, health, personal, and social consequences of violent and disruptive behavior, including sexual harassment and abuse, and victimization, associated with prejudice and intolerance, and that include activities designed to help students develop a sense of individual responsibility and respect for the rights of others, and to resolve conflicts without violence;
4. Violence prevention programs for school-aged youth, which emphasize students' sense of individual responsibility and may include: -the dissemination of information about school safety and discipline; -the professional development of school personnel, parents, students, law enforcement officials, judicial officials, and community leaders in designing and implementing strategies to prevent school violence; -the implementation of strategies, such as conflict resolution and peer mediation, student outreach efforts against violence, anti-crime youth councils (which work with school and community-based organizations to discuss and develop crime prevention strategies), and the use of mentoring programs, to combat school violence and other forms of disruptive behavior, such as sexual harassment and abuse; -the development and implementation of character education programs, as a component of a comprehensive drug or violence prevention program, that are tailored by communities, parents and schools; and -comprehensive, community-wide strategies to prevent or reduce illegal gang activities;
5. Supporting "safe zones of passage" for students between home and school through such measures as Drug- and Weapon-Free School Zones, enhanced law enforcement, and neighborhood patrols;
6. Acquiring and installing metal detectors and hiring security personnel;
7. Professional development for teachers and other staff and curricula that promote the awareness of and sensitivity to alternatives to violence through courses of study that include related issues of intolerance and hatred in history;
8. The promotion of before- and after-school recreational, instructional, cultural, and artistic programs in supervised community settings;
9. Drug abuse resistance education programs, designed to teach students to recognize and resist pressures to use alcohol and other drugs, which may include activities such as classroom instruction by uniformed law enforcement officers, resistance techniques, resistance to peer pressure and gang pressure, and provision for parental involvement; and
10. The evaluation of any of the activities authorized for LEAs.

3. Uses of Funds by Governor's Program

A Governor may use SDFSCA funds for a broad range of drug and violence prevention programs that may be carried out by parent groups, community action and job training agencies, community-based organizations, and other public and private nonprofit entities and organizations. The list (see below) of authorized activities found in Section 4114(c) does not exclude other activities that may be carried out by such organizations, consistent with the purposes of Subpart 1. Specifically included are mentoring, before- and after-school instructional, recreational, cultural, and artistic programs (Section 4114(c) of the SDFSCA (20 USC 7114(c)).

A Governor's grantee or contractor may not use SDFSCA funds for construction, or to provide medical services, drug treatment, or rehabilitation. As stated in Section 4133 of the SDFSCA, pupil services or referral to treatment for students who are victims of or witnesses to crime or who use alcohol, tobacco, or drugs are not included in the prohibition (Section 4133 of the SDFSCA (20 USC 7133)).

List of authorized activities found in Section 4114 (c):

1. Disseminating information about drug and violence prevention;
2. Training parents, law enforcement officials, judicial officials, social service providers, health service providers and community leaders about drug and violence prevention, comprehensive health education, early intervention, pupil services or rehabilitation referral;
3. Developing and implementing comprehensive, community-based drug and violence prevention programs that link community resources with schools and integrate services involving education, vocational and job skills training and placement, law enforcement, health, mental health, community service, mentoring, and other appropriate services;
4. Planning and implementing drug and violence prevention activities that coordinate the efforts of State agencies with efforts of the State educational agency and its local educational agencies;
5. Activities to protect students traveling to and from school;
6. Before-and-after school recreational, instructional, cultural, and artistic programs that encourage drug- and violence- free lifestyles;
7. Activities that promote the awareness of and sensitivity to alternatives to violence through courses of study that include related issues of intolerance and hatred in history;
8. Developing and implementing activities to prevent and reduce violence associated with prejudice and intolerance;
9. Coordinating and conducting community-wide violence and safety assessments and surveys;
10. Service-learning projects that encourage drug- and violence-free lifestyles; and
11. Evaluating programs and activities assisted under Section 4114.

B. Allowable Costs/Cost Principles

See ED Cross-Cutting Section.

E. Eligibility

1. Eligibility for Individuals - Not Applicable

2. Eligibility for Groups of Individuals or Areas of Service Delivery - Not Applicable

3. Eligibility for Subrecipients

As discussed in III.G.3.(a), Earmarking, State-level programs, administrative costs, initial allocations to LEAs, of the minimum 91 percent of an SEA's total allocation that must be distributed to its LEAs, 30 percent of funds must be awarded to LEAs with "greatest need." In determining LEAs with the "greatest need" for additional funds for drug and violence prevention programs, an SEA must have selected objective criteria to assess which LEAs in their State have the greatest need for additional funding (Section 4113(d) of the SDFSCA (20 USC 7113(d))).

G. Matching, Level of Effort, Earmarking

1. Matching - Not Applicable

2.1 Level of Effort - Maintenance of Effort (SEAs/LEAs)

See ED Cross-Cutting Section.

2.2 Level of Effort - Supplement not Supplant - Not Applicable

3. Earmarking

Also, see ED Cross-Cutting Section.

(a) State-level programs, administrative costs, initial allocations to LEAs (SEAs)

An SEA may reserve not more than five percent of its total allocation for State level programs, to be carried out directly, or through grants and contracts. Not more than four percent of an SEA's total allocation may be used for administrative costs. Funds not used for administration or State-level programs must flow to LEAs (Sections 4113(b)(1) and (c) of the SDFSCA).

A minimum of 91 percent of an SEA's total allocation must be distributed to its LEAs. Of the 91 percent available for distribution to LEAs, an SEA must initially allocate 70 percent to LEAs based on their relative share of enrolled students in public and private nonprofit elementary and secondary schools.

(b) Allocation of "greatest need" funds (SEAs)

The remaining 30 percent (of the minimum 91 percent) of funds must be awarded to LEAs with "greatest need," as determined by the SEA. Where appropriate and consistent with a State's needs assessment, not less than one-quarter of the "greatest need" funds must be distributed to LEAs in rural and urban areas (Section 4113(d) of the SDFSCA (20 USC 7113(d))).

If an LEA does not apply for its allocation of the 70 percent, of the minimum 91 percent of SDFSCA funds that are to be distributed based on relative enrollments, or if the SEA disapproves an LEA's application for those funds, the SEA must reallocate that LEA's funds to one or more of the LEAs that received "greatest need" funds (Section 4113 (e) of the SDFSCA (20 USC 7113(e))).

(c) Distribution of "greatest need" funds to LEAs

An SEA may distribute the Agreatest need@ funds to no more than 10 percent of its LEAs, or five LEAs, whichever is greater (the cap). An SEA may award funds to individual LEAs or to a consortia of LEAs or educational service agencies. Each individual LEA that receives funds or services from the Agreatest need@ pool of funds must be counted against the cap on the number of LEAs receiving funds from the pool. If an award is made to a consortia, the SEA may select from two options to determine how the cap is calculated and how LEAs in consortia are counted against the cap.

In the first method, the SEA includes the total number of LEAs in the State in the calculation of the cap, and must count every LEA receiving funds or services supported with SDFSCA Agreatest need@ funds (whether in consortia or not) as an individual LEA against the cap. For example, a consortium providing services to seven LEAs would be counted against the cap as seven LEAs, not one LEA.

Alternatively, if the consortium is the same entity that receives SDFSCA State Grant funds distributed under Section 4113(d)(2)(i), the SEA could count the consortium as a single LEA in calculating the cap and the consortium would count as one LEA against the cap. (Section 4113(d) of the SDFSCA (20 USC 7113(d))).

(d) Cap on security devices and security personnel (LEAs)

An LEA may acquire and install metal detectors and hire security personnel as authorized activities under SDFSCA. However, (1) LEAs may not use more than 20 percent of their SDFSCA funds to acquire or install metal detectors, to hire security personnel, or to support "safe zones of passage" for students between home and school; and (2) LEAs may use funding for these purposes only if funding for such activities is not received from other Federal agencies (Section 4116(c) of the SDFSCA (20 USC 7116(c))).

(e) Administrative costs and law enforcement education partnerships (Governor's Programs)

A Governor may use no more than five percent of the total allocation for administrative activities. At least 10 percent of the Governor's funds must be awarded for law enforcement education partnerships (Section 4114(a)(2) and (3) of the SDFSCA (20 USC 7114(a)(2) and (3))).

H. Period of Availability of Federal Funds (SEAs/LEAs/Governor's Programs)

Also, see ED Cross-Cutting Section.

An LEA may retain up to 25 percent of its fiscal year allocation for obligation in the next Federal fiscal year. If an LEA wishes to retain an amount greater than 25 percent of its fiscal year allocation for use in a succeeding year, it must demonstrate good cause for such a carryover to its SEA, and the SEA must approve the request for additional carryover (Section 4113(f) of the SDFSCA (20 USC 7113(f))).

L. Reporting

1. Financial Reporting (SEAs/LEAs/Governor's Programs)

See ED Cross-Cutting Section.

2. Performance Reporting - Not Applicable

3. Special Reporting - Not Applicable

N. Special Tests and Provisions

1. Participation of Private School Children (SEAs/LEAs)

See ED Cross-Cutting Section.

2. Schoolwide Programs (LEAs)

See ED Cross-Cutting Section.

DEPARTMENT OF EDUCATION

DEPARTMENT OF LABOR

None SCHOOL-TO-WORK OPPORTUNITIES ACT OF 1994

I. PROGRAM OBJECTIVES

The purpose of the School-to-Work (STW) Opportunities Act of 1994, P.L. 103-239, is to provide seed capital to States and localities for developing and implementing comprehensive STW Opportunities systems that will provide all students with the academic and occupational skills necessary to prepare them for first jobs in high-skill, high-wage careers, and to increase their opportunities for further education and training. The Secretary of Labor and the Secretary of Education jointly administer the STW Act in a flexible manner to promote State and local discretion in establishing and implementing statewide STW Opportunities systems. The authority provided by the STW Act will terminate October 1, 2001.

II. PROGRAM PROCEDURES

No program regulations have been issued for grants awarded under this legislation. However, grantees are bound by the STW Act, and grant agreements. Grants are awarded by either the Department of Education (ED) or the Department of Labor (DOL). However, this is treated as one program under OMB Circular A-133. The six different types of grants funded under the STW Act are described below.

State Development Grants (Title II, Subtitle A (20 USC 6121 et. seq.)): These non-competitive grants assist States in planning and developing comprehensive State-wide STW Opportunities systems.

State Implementation Grants (Title II, Subtitle B (20 USC 6141 et. seq.)): These competitive grants assist States in the implementation of comprehensive State-wide STW Opportunities systems. These grants are renewable for up to five years. States are required to subgrant most of the funding to local partnerships. Local partnerships submit applications to the State (ED CFDA 84.278B).

Local Partnership Grants (Title III, Section 302(a) (20 USC 6172(a)): These one year competitive grants provide funds directly to local partnerships in order to fund communities that are ready to begin implementing a local STW Opportunities system (ED CFDA 84.278C).

Urban/Rural Opportunities Grants (Title III, Section 302(b) (20 USC 6172(b)): These competitive grants provide funds to local partnerships to implement STW Opportunities programs in high poverty areas of urban and rural communities (ED CFDA 84.278A or D).

Grants to Indian Youth (Title II, Section 221): These competitively funded grants establish and implement STW Opportunities systems that involve schools funded by the Bureau of Indian Affairs.

Grants to Territories (Title II, Section 202(b) (20 USC 6122(b)): These grants develop and implement STW Opportunities systems in the Territories.

A "local partnership" is the grantee or subgrantee that is responsible for implementing and operating local STW Opportunities programs. A local partnership must meet the statutory definition in Section 4(11) of the STW Act and must include: (a) employers; (b) representatives of local educational agencies and local postsecondary educational institutions; (c) local educators; (d) representatives of labor organizations or nonmanagerial employee representatives; and (e) students. A local partnership may include other entities.

Additional information on this program is available through the Internet on the STW home page (http://www.stw.ed.gov).

III. COMPLIANCE REQUIREMENTS

In developing the audit procedures to test compliance with the requirements for a Federal program, the auditor should first look at Part 2, Matrix of Compliance Requirements, to identify which of the 14 types of compliance requirements described in Part 3 are applicable and then look to Parts 3 and 4 for the details of the requirements.

A. Activities Allowed or Unallowed

1. State agencies

a. State Development Grants - States are authorized to use State Development Grants only for activities to develop a statewide STW Opportunities system. Allowable activities include identifying resources, analyzing data, developing approach, and promoting involvement. Section 205 of the STW Act (20 USC 6125) contains specific examples of the types of activities that develop a statewide system (Section 205 of the STW Act (20 USC 6125)).

b. State Implementation Grants - States subgrant the majority of State Implementation Grant funds. States may use the remainder of State Implementation Grants for activities to implement the State-wide STW Opportunities System. Allowable activities include outreach, training, technical assistance and designing model curricula or programs. Section 215 (c) of the STW Act (20 USC 6145) contains specific examples of the types of activities that implement a State-wide system (Section 215(c) of the STW Act (20 USC 6145)).

2. Local partnerships

State Implementation Grants or Local Partnership Grants: Local partnerships are authorized to use funds provided through subgrants from a State Implementation Grant or a Local Partnership Grant only for activities undertaken to implement STW Opportunities systems. Allowable activities include outreach, training, technical assistance, and designing models or programs. Local partnerships can provide for supplementary and support services, such as child care and transportation, when such services are necessary for participation. Section 215 of the STW Act (20 USC 6145(b)(4)) contains specific examples of the types of activities that local partnerships can undertake (Section 215 of the STW Act (20 USC 6145)).

3. Unallowable activities (States and Local Partnerships)

STW Act grant funds cannot be expended for wages of students or workplace mentors participating in such programs (Section 601 of the STW Act) (20 USC 6231).

E. Eligibility

1. Eligibility for Individuals - Not Applicable

2. Eligibility for Area of Service Delivery - Not Applicable

3. Eligibility for Subrecipients

State Implementation Grants - A local partnership that received a Local Partnership Grant directly from either DOL or ED cannot receive a State Implementation subgrant for that same grant year. The local partnership may receive a State Implementation subgrant in later years. This provision does not apply retroactively. If the local partnership received a subgrant from a State Implementation grant prior to receiving the Local Partnership Grant, the local partnership may keep both the local grant and the subgrant. A local partnership that received a Urban/Rural Opportunities Grant directly from DOL or ED may receive a State Implementation subgrant for the same grant year (Section 215(b)(1)(B) of the STW Act (20 USC 6145(b)(1)(B))).

G. Matching, Level of Effort, Earmarking

1. Matching - Not Applicable

2.1 Level of Effort - Maintenance of Effort

State Development Grants: The amount of State funds expended per student, or in the aggregate, by the State for STW activities, for the preceding fiscal year can not be less than 90 percent of the amount so expended for the second preceding fiscal year. For example, level of effort for FY 1996 is determined by comparing the funds expended either per student or in the aggregate in FY 1995 to those expended in FY 1994. This requirement can be waived by the Secretary of Education and the Secretary of Labor under the terms of Section 206(b) of the STW Act (Section 206 of the STW Act (20 USC 6126(b))).

2.2 Level of Effort - Supplement Not Supplant - Not Applicable

3. Earmarking

a. State Implementation Grants (States)

(1) In the first fiscal year in which a State receives a State Implementation Grant, the State must use 70 percent or more of the first year funds to provide subgrants to local partnerships. In the second fiscal year, the State must use 80 percent or more of second year funds to provide subgrants to local partnerships. In the third fiscal year and in each succeeding fiscal year in which the State receives a State Implementation Grant, the State must use 90 percent or more of third and succeeding year funds to provide subgrants to local partnerships (Section 215(b)(7) of the STW Act (20 USC 6145(b)(7))).

(2) No more than 10 percent of the amounts received through the grant for a fiscal year may be used for State administrative costs. Administrative costs means the activities of a State or local partnership that are necessary for the proper and efficient performance of its duties under the STW Act and that are not directly related to the provision of services to participants or otherwise among the system's allowable activities listed in section 215(b)(4) and section 215(c) of the STW Act (Section 217 of the STW Act (20 USC 6147); May 18, 1995 FR (Vol. 60, Number 96), page 26813).

b. State Implementation Grants - Local Partnerships

A 10 percent limit on administrative costs applies. Administrative costs may be either personnel costs or non-personnel costs, and direct or indirect (Section 215 of the STW Act (20 USC 6145 (b)(6))).

L. Reporting

1. Financial Reporting

a. SF-269A, Financial Status Report (short form) - Applicable

b. SF-270, Request for Advance or Reimbursement - Only grantees placed on reimbursement are required to complete this form to request payment of grant award funds. The requirement to use this form is imposed on an individual recipient basis.

c. SF-271, Outlay Report and Request for Reimbursement for Construction Program - Not Applicable

d. SF-272, Federal Cash Transactions Report - Not Applicable

e. Grant Administration and Payment System (GAPS) (OMB No. 1875-0138) - Grantees draw funds and account to ED using GAPS. Grantees request funds by: (1) creating a payment request using the GAPS External Access System through the Internet; (2) calling the GAPS Payee Hotline; or (3) if the grantee is placed on a reimbursement basis for an award, submitting an SF-270, Request for Advance or Reimbursement to an ED program or regional office. When creating a payment request in GAPS, the grantee enters the drawdown amounts, by award, directly into GAPS. When requesting funds using the other 2 methods, the grantee provides this information to the hotline operator, or on the SF-270, and ED staff enter the data into GAPS. ED also enters other award data into GAPS, including authorization amounts and payment status. The system maintains and provides cumulative data on net draws and the available balance for each award.

ED considers drawn funds to have been expended by the grantee for the award(s) identified (notwithstanding that the grantee has up to three days to make disbursements). Cumulative drawdown amounts in GAPS should accurately reflect the grantee's actual disbursement of funds by award. Grantees can redistribute drawn amounts between grant awards by making adjustments in GAPS to reflect actual disbursements for each award. For example, if a grantee draws too much under one award, it can enter an adjustment in GAPS to reallocate the excess amount to other awards for which there were immediate cash needs, as long as the net amount of the adjustment is zero.

To assist grantees in reconciling their internal accounting records with GAPS, grantees can use the GAPS External Access System (http://gapsweb.ed.gov) to obtain a GAPS Activity Report showing cumulative and detail information for each award. The GAPS Activity Report can be created and viewed on-line and a hard copy may be printed as well.

f. LEAs and other subrecipients are generally required to report financial information to the pass-through entity. These reports should be tested during audits of LEAs.

2. Performance Reporting - Not Applicable

3. Special Reporting - Not Applicable

N. Special Tests and Provisions

1. Core Components (Local Partnerships Grants)

Compliance Requirement - As provided in the STW Act, a STW Opportunities system must incorporate three components: school-based learning (Section 102 of the STW Act (20 USC 6112)), work-based learning (Section 103 of the STW Act (20 USC 6113)), and connecting activities (Section 104 of the STW Act (20 USC 6114)). The specific activities selected by a State or local partnership to implement these components are described in the approved application (Sections 101, 215(b)(2), and 303(c) of the STW Act (20 USC 6111, 6145(b)(2) and 6173(c)).

Audit Objective - Determine whether the non-Federal entity implemented a school-based learning component, a work-based learning component, and connecting activities component, as described in its approved application.

Suggested Audit Procedures

a. Review the approved application to identify the activities supporting each of the required components.

b. Review records documenting that the activities described in the approved application were implemented.

DEPARTMENT OF EDUCATION

CFDA 84.281 EISENHOWER PROFESSIONAL DEVELOPMENT STATE GRANTS (Title II, Part B of ESEA)

I. PROGRAM OBJECTIVES

The objective of Eisenhower Professional Development State Grants (Eisenhower Program), Title II of the Elementary and Secondary Education Act (ESEA) of 1965, as amended by the Improving America's Schools Act of 1994 (P.L. 103-382), is to provide funds to State educational agencies (SEAs), local educational agencies (LEAs), State agencies for higher education (SAHEs), institutions of higher education (IHEs), and qualified non-profit organizations (NPOs) to support sustained and intensive high-quality professional development for educators in the core academic subjects.

II. PROGRAM PROCEDURES

Eisenhower Program funds are obtained by a State on the basis of the Department's approval of either (1) an individual State plan as provided in Section 2205 of the ESEA, or (2) a consolidated plan that includes Eisenhower Program, in accordance with Section 14302 of the ESEA. Separate grants are provided to SEAs and SAHEs. Of the total State allocation, the SEA receives 84 percent and the SAHE 16 percent.

LEAs apply to the SEAs for program funds. The SEAs allocate funds to LEAs based on the relative enrollment in public and private nonprofit elementary and secondary schools and the relative amounts the LEAs received under Part A of Title I for the previous year.

The SAHE makes grants to, or enters into contracts or cooperative agreements with, IHEs and NPOs of demonstrated effectiveness in order to provide professional development activities that contribute to the State plan.

III. COMPLIANCE REQUIREMENTS

In developing the audit procedures to test compliance with the requirements for a Federal program, the auditor should first look to Part 2, Matrix of Compliance Requirements, to identify which of the 14 types of compliance requirements described in Part 3 are applicable and then look to Parts 3 and 4 for the details of the requirements.

Certain compliance requirements which apply to multiple ESEA programs are discussed once in the Department of Education (ED) Cross-Cutting Section of this Supplement (page 4-84.000-1) rather than repeating in each individual program. Where applicable, this section references to the Cross-Cutting Section for these requirements. Also, as discussed in the Cross-Cutting Section, SEAs and LEAs may have been granted waivers from certain compliance requirements.

A. Activities Allowed or Unallowed

Also, see ED Cross-Cutting Section.

1. SEAs

SEAs can use funds to provide subgrants to LEAs, for State administration, and for program improvement projects. Examples of allowable program improvement projects are listed in Section 2207 of the ESEA. The SEA must have records that provide a description of the general nature of the uses of Title II funds in support of program purposes (Sections 2203(1)(a) and 2207 of the ESEA (20 USC 6643(1)(a) and 6647); 34 CFR section 76.730).

2. LEAs

Funds are to be used for professional development activities of teachers, and where appropriate administrators, pupil support personnel and parents in a manner that is consistent with the LEA's application, any school plan under Title 1, Part A and any other plan for professional development activities. Examples of allowable activities are shown in Section 2210(b)(3) of the ESEA. The LEA must have records that provide a description of the general nature of the services to be provided with Title II funds in support of the program purpose (Section 2210 of the ESEA (20 USC 6650); 34 CFR section 76.730).

3. SAHEs and their Subrecipients

SAHEs can use funds for State administration (5%) and to make subgrants to, or enter into contracts or cooperative agreements with IHEs and NPOs for professional development activities. Allowable activities of subrecipients include provision of professional development to teachers and, where appropriate, others; other professional development activities related to the achievement of the State plan for professional development; and preservice training activities (Sections 2203 and 2211 of the ESEA (20 USC 6643 and 6651)).

B. Allowable Costs/Cost Principles (All grantees)

See ED Cross-Cutting Section.

E. Eligibility

1. Eligibility for Individuals - Not Applicable

2. Eligibility for Groups of Individuals or Areas of Service Delivery - Not Applicable

3. Eligibility for Subrecipients

a. SEAs

Any LEA receiving a grant of less than $10,000 must form a consortium with another LEA or an educational service agency serving another LEA to be eligible to receive Eisenhower Program funds. SEAs may waive the consortium requirement for LEAs that can demonstrate that the amount of their allocation is sufficient to provide a program of sufficient size, scope, and quality to be effective (Section 2204 of the ESEA (20 USC 6644)).

b. SAHEs

Subrecipients must be either IHEs or NPOs. (Section 2211 of the ESEA (20 USC 6651)).

G. Matching, Level of Effort, Earmarking

1. Matching (LEAs)

Each LEA must provide not less than 33 percent of the cost of the activities assisted under the Eisenhower Program, excluding the cost of services provided to private school teachers. In other words, each participating LEA must match every two dollars in Federal funding with one dollar of its own resources, which can come from other Federal programs, such as Title I of the ESEA, or from non-Federal sources (Section 2209 of the ESEA (20 USC 6649)).

2.1 Level of Effort - Maintenance of Effort (SEAs/LEAs)

See ED Cross-Cutting Section.

2.2 Level of Effort - Supplement not Supplant - Not Applicable

3. Earmarking

Also, see ED Cross-Cutting Section.

a. Within-State allocations (SEAs)

The SEA distributes, by a formula similar to the initial Federal allocation, at least 90 percent of its allocation to the LEAs within the State. States must ensure that their share of the first $250 million of the total program appropriation in a given fiscal year is used for professional development in mathematics and science. ED provides States with allocation tables that outline the specific breakouts for the use of funds to support professional development activities in mathematics and science.

b. Within State allocations (SAHEs)

The SAHE distributes at least 95 percent of its allocation in the form of competitive subgrants to IHEs and NPOs of demonstrated effectiveness.

c. Administration (SEAs and SAHEs)

Both the SEA and SAHE may reserve up to 5 percent of their allocations for administration. The SEA may reserve up to an additional 5 percent of its allocation to carry out State-level professional development activities in support of the State's professional development plan. If the State includes the Eisenhower Program in a consolidated plan submitted under section 14302 of the ESEA, the professional development plan may not be included in the consolidated plan and may instead be in other documents. (Sections 2203, 2205, 2206, 2207 and 2211 of the ESEA (20 USC 6643, 6645, 6646, 6647 and 6651))

H. Period of Availability of Federal Funds (All grantees)

See ED Cross-Cutting Section.

L. Reporting

1. Financial Reporting

See ED Cross-Cutting Section.

2. Performance Reporting - Not Applicable

3. Special Reporting - Not Applicable

N. Special Tests and Provisions

1. Participation of Private School Children (SEAs/LEAs)

See ED Cross-Cutting Section.

2. Schoolwide Programs (LEAs)

See ED Cross-Cutting Section.

DEPARTMENT OF EDUCATION

CFDA 84.288 BILINGUAL EDUCATION--PROGRAM DEVELOPMENT AND IMPLEMENTATION GRANTS

CFDA 84.290 BILINGUAL EDUCATION--COMPREHENSIVE SCHOOL GRANTS

CFDA 84.291 BILINGUAL EDUCATION--SYSTEMWIDE IMPROVEMENT GRANTS

I. PROGRAM OBJECTIVES

Program Development and Implementation Grants (CFDA 84.288)

Develop and implement new comprehensive, coherent, and successful bilingual education or special alternative instructional programs for limited English proficient (LEP) students, including programs of early childhood education, kindergarten through twelfth grade education, gifted and talented education, and vocational and applied technology education (Title VII, Section 7112 of the ESEA (20 USC 7422)).

Comprehensive School Grants (CFDA 84.290)

Implement school wide bilingual education programs or special alternative instruction programs for reforming, restructuring, and upgrading all relevant programs and operations, within an individual school, that serve all (or virtually all) children and youth of limited English proficiency in schools with significant concentrations of such children and youth (Title VII, Section 7114 of the ESEA (20 USC 7424)).

Systemwide Improvement Grants (CFDA 84.291)

Implement district wide bilingual education programs or special alternative instruction programs to improve, reform, and upgrade relevant programs and operations, within an entire local educational agency (LEA), that serve a significant number of children and youth of limited English proficiency in local educational agencies with significant concentrations of such children and youth (Title VII, Section 7115 of the ESEA (20 USC 7425)).

II. PROGRAM PROCEDURES

The Secretary of Education awards Bilingual Education grants through a competitive grant process to the following eligible entities: one or more LEAs; one or more LEAs in collaboration with an institution of higher education, community-based organization, or State educational agency (SEA); and, in some circumstances, a community-based organization or an institution of higher education that has received approval from an LEA. If more than one entity is party to the grant, one of the entities will be designated as the fiscal agency. For purposes of audits under OMB Circular A-133, the fiscal agency is treated as the recipient of the grant.

III. COMPLIANCE REQUIREMENTS

In developing the audit procedures to test compliance with the requirements for a Federal program, the auditor should first look to Part 2, Matrix of Compliance Requirements, to identify which of the 14 types of compliance requirements described in Part 3 are applicable and then look to Parts 3 and 4 for the details of the requirements.

Certain compliance requirements which apply to multiple ESEA programs are discussed once in the Department of Education (ED) Cross-Cutting Section of this Supplement (page 4-84.000-1) rather than repeating in each individual program. Where applicable, this section references to the Cross-Cutting Section for these requirements. Also, as discussed in the Cross-Cutting Section, SEAs and LEAs may have been granted waivers from certain compliance requirements.

A. Activities Allowed or Unallowed

Also, see ED Cross-Cutting Section.

A grantee under these programs must do the following in carrying out a grant award in order to provide allowable services: (1) implement the project described in its approved application; and (2) expend the funds in accordance with the terms of the approved budget (34 CFR sections 75.234, 80.20 and 80.22).

B. Allowable Costs/Cost Principles

See ED Cross-Cutting Section.

G. Matching, Level of Effort, Earmarking

1. Matching - Not Applicable

2.1 Level of Effort - Maintenance of Effort - Not Applicable

2.2 Level of Effort - Supplement not Supplant

See ED Cross-Cutting Section.

3. Earmarking - Not Applicable

H. Period of Availability of Federal Funds

See ED Cross-Cutting Section.

L. Reporting

1. Financial Reporting

See ED Cross-Cutting Section.

2. Performance Reporting - Not Applicable

3. Special Reporting - Not Applicable

N. Special Tests and Provisions

1. Participation of Private School Children (SEAs/LEAs)

See ED Cross-Cutting Section.

2. Schoolwide Programs (LEAs)

See ED Cross-Cutting Section.

DEPARTMENT OF EDUCATION

CFDA 84.298 INNOVATIVE EDUCATION PROGRAM STRATEGIES (Title VI of ESEA)

I. PROGRAM OBJECTIVES

The objectives of Title VI of the Elementary and Secondary Education Act (ESEA) of 1965, as amended by the Improving America's Schools Act of 1994, are to (1) assist local educational reform efforts which are consistent with and support statewide reform efforts under Goals 2000: Educate America Act; (2) support State and local efforts to accomplish the National Education Goals; (3) provide funding to enable State educational agencies (SEAs) and local educational agencies (LEAs) to implement promising educational reform programs; (4) provide a continuing source of innovation, and educational improvement, including support for library services and instructional and media materials; and (5) meet the special educational needs of at-risk and high cost students (Title VI, Section 6001(b) of the ESEA (20 USC 7301(b))).

II. PROGRAM PROCEDURES

Title VI funds are obtained by a State following submission of an application or consolidated plan to the Secretary of Education that satisfies the application requirements as stipulated in the statute. The SEA distributes at least 85 percent of the funds to its LEAs that have filed an application that meets certain requirements. These funds are distributed to LEAs according to the relative enrollments in public and private, nonprofit schools within the school districts of the LEAs, adjusted to provide higher per pupil allocations to those LEAs with children whose education imposes a higher than average cost per child. The criteria for making these adjustments must be approved by the Secretary of Education. LEAs have complete discretion, subject only to legal requirements, in determining the allocation of expenditures of Title VI funds among the allowable program activities (Title VI, Sections 6102 and 6303(c) of the ESEA (20 USC 7312 and 7353(c))).

III. COMPLIANCE REQUIREMENTS

In developing the audit procedures to test compliance with the requirements for a Federal program, the auditor should first look to Part 2, Matrix of Compliance Requirements, to identify which of the 14 types of compliance requirements described in Part 3 are applicable and then look to Parts 3 and 4 for the details of the requirements.

Certain compliance requirements which apply to multiple ESEA programs are discussed once in the Department of Education (ED) Cross-Cutting Section of this Supplement (page 4-84.000-1) rather than repeating in each individual program. Where applicable, this section references to the Cross-Cutting Section for these requirements. Also, as discussed in the Cross-Cutting Section, SEAs and LEAs may have been granted waivers from certain compliance requirements.

A. Activities Allowed or Unallowed

Also, see ED Cross-Cutting Section.

1. SEAs

SEAs may reserve for State use not more than 15 percent of the Title VI funds allocated to the state. These funds may be used for technical assistance, direct grants, statewide education reform activities which assist LEAs in providing targeted assistance programs, and administration. Administration includes supervising of the allocation of funds to LEAs; planning, supervising and processing of State funds; and, monitoring and evaluating programs and activities (Title VI, Section 6201(a) of the ESEA (20 USC 7331(a)(2))).

The remaining 85 percent must be distributed to LEAs (Section 6102(a) of the ESEA (20 USC 7312(a))).

(See III.G.3, for testing of Earmarking requirement.)

2. LEAs

LEAs must use Title VI funds only for one or more of the innovative assistance program areas described in Title VI, Section 6301(b) of the ESEA (20 USC 7351(b)). The innovative assistance program areas are:

(i) Technology related to the implementation of school-based reform programs, including professional development to assist teachers and other school officials regarding how to use effectively such equipment and software;

(ii) Programs for the acquisition and use of instructional and educational materials, including library services and materials (including media materials), assessments, reference materials, computer software and hardware for instructional use, and other curricular materials which are tied to high academic standards and which will be used to improve student achievement and which are part of an overall education reform program;

(iii) Promising education reform projects, including effective schools and magnet schools;

(iv) Programs to improve the higher order thinking skills of disadvantaged elementary and secondary school students and to prevent students from dropping out of school;

(v) Programs to combat illiteracy in the student and adult population, including parent illiteracy;

(vi) Programs to provide for the educational needs of gifted and talented children;

(vii) School reform activities that are consistent with the Goals 2000: Educate America Act; and

(viii) School improvement programs or activities under sections 1116 and 1117 of the ESEA.

B. Allowable Costs/Cost Principles

See ED Cross-Cutting Section.

G. Matching, Level of Effort, Earmarking

1. Matching - Not Applicable

2.1 Level of Effort - Maintenance of Effort (SEAs)

The combined fiscal effort per child or the aggregate expenditures within the State for free public education for the preceding fiscal year must be at least 90 percent of the combined fiscal effort per child or aggregate expenditures for the second preceding fiscal year, unless specifically waived by the Secretary of Education for one fiscal year only.

Expenditures to be considered are State and local expenditures for free public education. These expenditures include expenditures for administration, instruction, attendance, health services, pupil transportation, plant operation and maintenance, fixed charges, and net expenditures to cover deficits for food services and student activities. States may include in the maintenance of effort calculation expenditures of Federal funds for which no accountability to the Federal Government is required. Certain Impact Aid funds are an example of such funds. (However, Impact Aid funds for which there is a requirement of accountability to the Federal Government, such as those received for children with disabilities, can not be included in the calculation.) States must be consistent in the manner in which they calculate maintenance of effort from year-to-year in order to ensure that the annual comparisons are on the same basis (i.e., calculations must consistently, from year-to-year, either include or exclude expenditures of Federal funds for which accountability to the Federal Government is not required). Expenditures not to be considered are any expenditures for community services, capital outlay, or debt service, and any expenditures of Federal funds for which accountability to the Federal Government is required. (Title VI, Section 6401(a) of the ESEA (20 USC 7371(a)).

2.2 Level of Effort - Supplement not Supplant (SEAs/LEAs)

See ED Cross-Cutting Section.

3. Earmarking (SEAs)

Also, see ED Cross-Cutting Section.

a. Minimum 85 Percent Distribution to LEAs

An SEA shall distribute at least 85 percent of the funds to its LEAs (Title VI, Section 6102(a) of the ESEA (20 USC 7312(a))).

b. Remaining Reserved for State Use (Maximum of 15 Percent)

Of the amount reserved for State use, no more than 25 percent may be used for State administration of Title VI or transferred to a Consolidated Administration pool. See III.A.1, Activities Allowed or Unallowed - SEAs, for what is considered "administration." (Title VI, Section 6201(b) of the ESEA (20 USC 7331(b))).

H. Period of Availability of Federal Funds

See ED Cross-Cutting Section.

L. Reporting

1. Financial Reporting

See ED Cross-Cutting Section.

2. Performance Reporting - Not Applicable

3. Special Reporting - Not Applicable

N. Special Tests and Provisions

1. Participation of Private School Children

See ED Cross-Cutting Section.

2. Schoolwide Programs (LEAs)

See ED Cross-Cutting Section.