U.S. DEPARTMENT OF EDUCATION / OFFICE OF INSPECTOR GENERAL On September 11,1995, the U.S. Department of Education issued letters to State Auditors, Auditors of Local Education Agencies (LEAs), State Title I Coordinators, and Superintendents of LEAs, advising them of deletions from Office of Management and Budget (OMB) Compliance Supplement sections pertaining to the following four ED programs: Bilingual Education [CFDA No. 84.003] Educationally Deprived Children (Chapter 1 of ESEA) [84.010] Migrant Education - Basic State Formula Grant Program [84.011];and Federal, State and Local Partnerships for Educational Improvement (Chapter 2 of ESEA) [84.151] For your reference, these letters and related information are set forth below, in the following order: -Compliance Supplement Sections for the four programs -Letter to LEA Auditors -Bulletin on OIG use of Bulletin Board System (BBS) for LEA auditors -Letter to State Auditors -Bulletin on OIG use of Bulletin Board System (BBS) for state auditors -Letter to State Title I coordinators -Letter to Superintendents of LEAs ----------------------------------------------------------------------------- BILINGUAL EDUCATION 84.003 I. PROGRAM OBJECTIVES The objectives of the basic bilingual education programs of Title VII of the Elementary and Secondary Education Act (ESEA) of 1965, as amended (Title VII), are to assist in building local capacity to conduct authorized programs of bilingual education in elementary and secondary schools designed to enable children with limited English proficiency (LEP) to achieve competence in the English language and to meet grade-promotion and graduation requirements. II. PROGRAM PROCEDURES Following approval of applications, the secretary of Education awards grants to Local Education Agencies (LEAs) and to institu- tions of higher education (IHEs) applying jointly with LEAs. III. COMPLIANCE REQUIREMENTS AND SUGGESTED AUDIT PROCEDURES A. Types of Services Allowed or Unallowed Compliance Requirements Funds for basic projects may be expended only for the types of services specified in implementing regulations and in the grant-award documents. These services include classroom instruc- tions, training of parents and other project participants, planning, and curriculum development. (34 CFR 501 et seq.) There are specific statutory and regulatory requirements for each type of program authorized under the Act:  Programs of Transitional Bilingual Education (TBE) require instruction in English and in the non-English, native language of LEP participants to the extent necessary to allow a child to achieve competence in English and meet grade-promotion and graduation requirements. (20 U.S.C. 3283) (34 CFR 500.4(b))  Programs of Developmental Bilingual Education (DBE) require dual-language instruction in English and a second language. DBE programs are designed to help children achieve competence in English and a second language while mastering subject matter skills and meeting grade-promotion requirements. (20 U.S.C 3283, 34 CFR 500.4(b))  Special Alternatives Instructional (SAI) Programs, are, by definition, not TBE or DBE programs. They feature specially designed curricula to provide English-language instruction and special instructional services to allow a child to achieve competence in English and meet grade-promotion requirements. (34 CFR 500.4(b)) Suggested Audit Procedures  Determine which of the previously described types of programs is being conducted and whether the grantee is meeting the appro- priate dual-language instructional requirements of the grant.  Test expenditure and related records to determine if expendi- tures were made only for allowable services. B. Eligibility Compliance Requirements Before submitting a grant application, each applicant is required to conduct an assessment of the children in the schools and grades to be served by the project to identify children of limited English proficiency. To qualify as LEP, children must meet two test requirements. First, children must come from one of three background categories identified in the statute and regulations (section 500.4 of the regulations and section 3283 of the Act): (1) individuals who were States or whose native language is a language other than English; (2) individuals who come from environments where a language other than English is dominant; and (3) individuals who are American Indian or Alaskan natives and who come from environments where a language other than English has had a significant impact on their level of English-language proficiency. Second, children must have sufficient difficulty speaking, understanding, reading, or writing English that denies them the opportunity to learn successfully in classrooms in which the language of instruction is English. If a child meets only one requirement of the test, the child is not eligible as LEP under the Act and regulations. The native, or non-English, language used in the project must be the same language that was the basis for the child's being identified as LEP. (20 U.S.C. 3283) ********************* THIS SECTION DELETED ******************************* In TBE programs, at least 60 percent of the children participating must be LEP. Students with LEP may be enrolled in a TBE or SAI program for no more than 3 years unless specific evaluation requirements of each student's overall academic needs are satisfied. (34 CFR 501.42) 1/ 1/ The Hawkins-Stafford Act created a 3-year enrollment limitation for TBE and SAI programs. The 3-year limitation on student enrollment applies to only TBE and SAI programs. Specific evaluation requirements for extending a student's enrollment involve a comprehensive evaluation. This process determines whether it is LEP that is impeding the academic progress of the student in meeting grade promotion and graduation standards and in the case of a handicapped child, attainment of the objectives in the child's individualized education program. ************************************************************************* Suggested Audit Procedures  Review the control system used to ensure that ************************* THIS SECTION DELETED ************************** only ************************************************************************* qualified children with LEP are served. *************************** THIS SECTION ADDED ****************************** * (NOTE: Auditors should ascertain whether the primary beneficia- ries of the program are LEP students.) *****************************************************************************  Select a sample of children receiving benefits and determine if they were eligible in accordance with prescribed procedures. *************************** THIS SECTION DELETED ****************************  Determine whether the 60 percent requirement was met for TBE programs. ***************************************************************************** *************************** THIS SECTION DELETED ****************************  Ascertain whether the evaluation procedures have been satisfied for any student who has participated in the program for more than 3 years. ***************************************************************************** C. Matching, Level of Effort, and/or Earmarking Requirements Compliance Requirements Federal funds cannot be used to supplant State or local funds that would have been expended for special programs for children with LEP. (34 CFR 501.20(b)(2)) These requirements do not preclude an LEA from using funds under Title VII for activities carried out under a court order of the United States or any State regarding services to be provided to children with LEP, 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 for children with LEP. (34 CFR 501.20 (b) (2)) Suggested Audit Procedures  Evaluate the adequacy of the LEA's system to ensure that Federal funds supplement and do not supplant State and local funds.  Test the system to determine whether the grantee used Title VII funds to provide children with LEP with services that either supplemented or were additional to services that would have been provided with State and local funds in the absence of those Title VII funds. D. Special Reporting Requirements There are no special reporting requirements. Compliance Requirements 2/ 2/ Forms are approved conditionally with the understanding that changes may have to be made in the definitions of terms used in the forms at the completion of an Office of Management and Budget (OMB) cash management study. E. Special Tests and Provisions Compliance Requirement An applicant shall establish an advisory council, of which a majority must be parents and other representatives of the children to be served in the project, to assist in the development of the application. In carrying out a project, the applicant shall provide for continuing consultation with and participation by a parent advisory committee. An applicant shall also consult with the appropriate private school officials to take into account the needs of children with LEP enrolled in nonprofit private elementary and secondary schools in the area to be served. (34 CFR 501.21, 501.22) Suggested Audit Procedure Determine if consultation requirements regarding private schools and parent advisory committees have been satisfied by reviewing documentation, such as correspondence, meeting notices, and meeting minutes. Compliance Requirements  A grantee or subgrantee must obligate Federal program funds during the period for which the funds were available for obligation and expenditure as set forth in the grant award documents.  The grantee and subgrantee shall 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 time obligated and they shall be returned. Suggested Audit Procedures (LEA and SEA)  Examine transactions recorded after the end of the period of availability, and determine if the underlying obligation was recorded in the proper period.  Test some transactions that were recorded within the period of availability to determine if the underlying obligations actually occurred within the period of availability. EDUCATIONALLY DEPRIVED CHILDREN - LOCAL EDUCATIONAL AGENCIES (Chapter 1 of ESEA) 84.010 1/ I. PROGRAM OBJECTIVES The objective of Part A of Chapter 1 of Title I of ESEA of 1965, as amended, is to provide funds through SEAs to LEAs to meet the special educational needs of educationally deprived children in school attendance areas with high concentrations of children from low-income families. The objective is to help those children succeed in the regular program of LEA, attain grade level profi- ciency, and improve achievement in basic and more advanced skills. 1/ The provisions in this section are contained in Chapter 1 of Title I of ESEA of 1965, enacted as part of the Augustus F. Hawkins-Robert T. Stafford Elementary and Secondary School Im- provement Amendments of 1988. Effective July 1, 1988, these provisions superseded those in Chapter 1 of the Education Consoli- dation and Improvement Act of 1981 (ECIA). During the transition year (1988-89), however, SEAs and LEAs may comply with either the provisions in Chapter 1 of the ESEA or Chapter 1 of the ECIA. If auditors are conducting an audit of the 1988-89 transition year and they need further information, they should contact the appropriate Regional Inspector General for Audit, U.S. Department of Education. II. PROGRAM PROCEDURES Funds are provided to each SEA for allocation to LEAs based on a statutory formula. Funds are then granted to LEAs that have currently ap- proved project applications on file with SEA that describe the projects to be undertaken with the Chapter 1 funds. III. COMPLIANCE REQUIREMENTS AND SUGGESTED AUDIT PROCEDURES In addition to the Federal requirements, each SEA has the authority, in accordance with State law, to issue rules consistent with Federal statutes and regulations. These rules should be reviewed before beginning the audit. A. Types of Services Allowed or Unallowed Compliance Requirements An SEA may grant Chapter 1 funds only to an LEA that submits an application for a project to be conducted during a period of not more than 3 fiscal years. SEA shall approve an LEA's application for Chapter 1 funds if it meets the requirements in Chapter 1 Program in Local Educational Agencies, Final Regulations. (34 CFR 200.20, 200.21) Suggested Audit Procedures (SEA)  Review the policies and procedures used by SEA for the review of LEA applications for Chapter 1 funds.  Test a sample of LEA applications to determine if LEA Chapter 1 applications include the information and assurances contained in the statute and regulations and were reviewed by SEA. Compliance Requirement An LEA may use Chapter 1 funds only for programs and projects that are designed and implemented to meet the special educational needs of educationally deprived children. (34 CFR 200.4, 200.40) ************************* THIS SECTION ADDED ***************************** (NOTE: Chapter 1 funds may be used to benefit all students at schools participating in a schoolwide project (34 [CFR 200.36]) ************************************************************************** Suggested Audit Procedures (LEA)  Identify the activities in the LEA approved project applica- tion.  Test expenditure and related records to determine whether Chapter 1 funds were used only for allowable services. B. Eligibility Compliance Requirements An LEA Chapter 1 project must be based on an annual assessment of educational needs that: (1) identifies educationally deprived children in all eligible areas; (2) identifies the general instructional areas on which the program will focus; (3) selects those educationally deprived children who have the greatest need for special assistance, as identified on the educationally related objective criteria established by the LEA that are uniformly applied to particular grade levels throughout the LEA; and (4) determines the special educational needs and library resource needs of participating children with specificity to ensure concentration on such needs. (Sec. 1014(b) 34 CFR 200.31) With certain exceptions, an LEA must use funds only for children whose educational attainment is below the level that is appropriate for children of their age (educationally deprived children). An LEA must conduct Chapter 1 projects in school attendance areas having high concentrations of children from low-income families. If funds are insufficient to provide programs in all eligible areas, the LEA must annually rank its areas from highest to lowest within each grade-span grouping or for the entire LEA according to the degree of concentration of children from low-income families. An LEA may carry out a project in an eligible school attendance area only if it also carries out projects in all eligible areas that are ranked higher. (34 CFR 200.30, 200.31) Suggested Audit Procedures (LEA)  Review the annual assessment of educational needs for complete- ness as it relates to the four areas stated in the Compliance Requirement.  Review LEA procedures used for determining school attendance areas having high concentrations of children from low-income families and evaluate for accuracy.  Identify the source of the demographic information and consider its reliability.  Identify the schools in which Chapter 1 projects are being conducted, and determine whether those schools serve attendance areas having high concentrations of low-income families selected in accordance with the implementing regulations.  On a sample test basis, determine that the children served are educationally deprived. C. Matching, Level of Effort, and/or Earmarking Requirements Compliance Requirements The combined fiscal effort per student or the aggregate expendi- tures of an LEA from State and local funds for free public education for the preceding year must be at least 90 percent of the combined fiscal effort per student or aggregate expenditures for the second preceding year, unless specifically waived by SEA. In determining LEA compliance with this requirement, SEA shall consider LEA expenditures from State and local funds for free public education, which include expenditures for; administration, instruction, attendance, health services, pupil transportation, plant operation and maintenance, fixed charges, and net expendi- tures to cover deficits for food services and student body activities. SEA shall not consider any expenditures for community services, capital outlay, or debt service. In addition, SEA shall not consider any expenditures made from funds provided under Chapter 1 and Chapter 2 of Title I of ESEA or Chapter 1 and Chapter 2 of ECIA. SEA may waive this requirement, for 1 fiscal year only, if SEA determines that a waiver would be equitable due to exceptional or uncontrollable circumstances, such as a natural disaster or a precipitous and unforeseen decline in the financial resources of LEA. SEA may not consider tax initiatives or referenda to be excep- tional or uncontrollable circumstances. (34 CFR 200.41, 200.42) Suggested Audit Procedures (SEA)  Determine whether SEA procedures for reviewing LEA compliance ensure that: (1) the types of expenditures included in LEA calcula- tions are appropriate; (2) they are consistent from year to year; and (3) the level of effort is maintained.  Review the waivers granted by SEA and determine whether the basis for waiving was for authorized purposes. Suggested Audit Procedures (LEA)  Review the second and first preceding years' financial and related records of LEA, determine total expenditures, and, if appropriate, review the second and first preceding years' pupil records of LEA and determine per-pupil expenditures.  Determine if effort was maintained. Compliance Requirements An LEA may receive Chapter 1 funds only if State and local funds will be used in project areas to provide services that, taken as a whole, are at least comparable with services that LEA is providing in areas not receiving Chapter 1 funds. Determinations may be made on a district wide or grade-span basis. If all school attendance areas are designated as Chapter 1 project areas, an LEA may receive Chapter 1 funds only if LEA uses State and local funds to provide services that, taken as a whole, are substantially comparable in each project area. An LEA with not more than one building for each grade span is not required to meet the comparability requirements. LEA may exclude from determinations of compliance with this requirement (1) State and local funds expended for carrying out special programs to meet the educational needs of educationally deprived children, including compensatory education, if the Secretary of Education or SEA, as appropriate, determines in advance that the program meets the requirements in section 1018(d)(1)(B), or (2) State and local funds expended for State phase-in programs if the Secretary of Education determines in advance that the program meets the requirements in section 1018(d)(2)(B). In addition, LEA may exclude State and local funds expended for bilingual education for children with LEP or for special education for handicapped children. Each LEA must develop procedures for complying with the compara- bility requirements and must maintain records documenting compli- ance. Each LEA that is not in compliance with the comparability requirements shall be subject to withholding or repayment of funds only to the amount or percentage by which LEA has failed to comply. SEA shall monitor each LEA's compliance with the comparability requirements. (34 CFR 200.43, 200.45) Suggested Audit Procedure (SEA) Ascertain whether SEA is monitoring each LEA's compliance with the comparability requirements. Compliance Requirements An LEA may use Chapter 1 funds only to supplement and, to the extent practical, increase the level of funds that would, in the absence of Chapter 1 funds, be made available from non-Federal sources for the education of pupils participating in Chapter 1 projects. LEA may not use Chapter 1 funds to supplant funds from non-Federal sources. LEA may exclude from determinations of compliance with this requirement State and local funds expended for carrying out special programs to meet the educational needs of educationally deprived children, including compensatory education, if the Secretary of Education or SEA (as appropriate) determines in advance that the program meets the requirements of the statute and implementing regulations. (34 CFR 200.44, 200.45) Suggested Audit Procedures (LEA)  Evaluate the adequacy of the system to ensure that Federal funds are used to supplement, not supplant, non-Federal funds.  Test the system to determine whether the grantee used Chapter 1 funds to supplant non-Federal funds. D. Special Reporting Requirements Compliance Requirements Each year, an SEA must submit its average State per pupil expenditure (SPPE) data to the National Center for Education Statistics. SPPE data are reported on the Common Core of Data Survey, Revenues and Expenditures for Public Elementary and Secondary Education (SPPE survey). SPPE data comprise the annual current State expenditures for free public education, less certain designated exclusions, divided by the State's average daily attendance (``Current expenditures'' is defined in Section 1471 of Chapter 1 of Title I of ESEA). SPPE data are used for the alloca- tion of Chapter 1 funds. Current expenditures to be included are those for free public education, including administration, instruction, attendance, health services, pupil transportation services, operation and maintenance of plant, and 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 Chapter 1 and Chapter 2 funds. (20 U.S.C. 2711, 2891(b)) Suggested Audit Procedures (SEA)  Review the most recent annual SPPE survey, compare it with supporting documentation maintained by SEA, and determine whether they are consistent.  Review the SPPE survey to determine whether (1) if only appropriate current expenditures are included, (2) expenditures are double counted, and (3) the average daily attendance reported was in accordance with State law. E. Special Tests and Provisions Compliance Requirements An LEA may not carry over more than (1) 25 percent of basic and concentration grant funds appropriated for fiscal year 1989 and (2) 15 percent of basic and concentration grant funds appropriated for fiscal year 1990 and each subsequent fiscal year. The percentage limitations do not apply to an LEA that receives less than $50,000 for any fiscal year. SEA may grant a one-time waiver of the percentage limitation if SEA determines that the request is reasonable and necessary. SEA may also grant a waiver in any fiscal year in which supplemental appropriations for Chapter 1 become available for obligation. (34 CFR 200.46) Suggested Audit Procedure (LEA) Determine whether LEA has carried over no more than the percent- ages specified in the law. *************************** THIS SECTION DELETED *************************** Compliance Requirements SEA shall reallocate excess funds to other eligible LEAs with the greatest need, for the purpose of, where appropriate, redressing inequities inherent in, or mitigating hardships caused by applica- tion [of the allocation formula in section 1005(a) of Chapter 1], as a result of such factors as population shifts and changing economic circumstances. SEA shall determine LEA eligibility to receive additional funds on the basis of data that demonstrate inequities caused by the formula. SEA shall develop procedures for reallocating excess funds. The procedures should include the following:  Criteria that SEA applies to determine whether an LEA has excess funds.  Use of appropriate data to determine which LEAs are eligible to receive reallocated funds to redress inequities in the allocation formula.  Criteria that SEA applies to ensure that, of LEAs eligible to receive reallocated funds, the funds are reallocated to LEAs with the greatest need for additional funds to meet the needs of eligible children. SEA shall develop procedures for reallocating excess funds. (34 CFR 200.26) Suggested Audit Procedure (SEA) Review SEA's procedures for reallocating excess Chapter 1 funds to determine whether those procedures comply with the compliance requirement for reallocation. *************************************************************************** Compliance Requirement An LEA shall develop and implement programs, activities, and procedures for the involvement of parents in the Chapter 1 program that meet the goals and requirements specified in section 1016 of Chapter 1. (34 CFR 200.34) Suggested Audit Procedures (LEA)  Determine whether LEA has, in consultation with parents of participating children, developed programs, activities, and procedures to involve parents and whether LEA has written policies concerning parent involvement.  Determine whether LEA is implementing its policies and procedures. ************************** THIS SECTION DELETED *************************** Compliance Requirement An LEA must evaluate the effectiveness of its Chapter 1 program, in accordance with national evaluation standards required by section 1435 of Chapter 1, at least once every 3 years (using an objective measurement of individual achievement in basic and more advanced skills, aggregated for LEA as a whole). The results of such evaluations must be submitted to SEA at least once every 3-year application cycle. LEA also must determine whether improved performance is sustained over more than 1 year. (34 CFR 200.35, 200.80-200.84, 200.88, 200.89) Suggested Audit Procedure (LEA) Determine whether LEA has conducted the required Chapter 1 evaluations. Compliance Requirement An SEA must conduct an evaluation of Chapter 1 programs in the State at least once every 2 years. (34 CFR 200.35, 200.85-200.89) Suggested Audit Procedure (SEA) Determine whether SEA has conducted the required evaluation of Chapter 1 programs in the State. **************************************************************************** Compliance Requirements For children enrolled in private elementary and secondary schools who are educationally deprived and who reside in Chapter 1 project areas, an LEA must provide Chapter 1 services and arrangements that are equitable to those provided for children enrolled in public schools. Services are equitable if LEA: 1. Assesses, addresses, and evaluates the specific needs and educational progress of eligible private schoolchildren on the same basis as public schoolchildren. 2. Provides, in the aggregate, approximately the same amount of instructional time and materials for each private schoolchild as it provides for each public schoolchild. 3. Expends equal amounts on services for public and private schoolchildren in accordance with section 1017(a). 4. Provides private schoolchildren with an opportunity to participate that is equitable to the opportunity provided to public schoolchildren. If LEA provision of services and arrangements for private schoolchildren is prohibited by State law or if the Secretary of Education determines that LEA substantially failed to provide for the participation on an equitable basis of eligible private schoolchildren, the Secretary of Education invokes a bypass to have the services provided directly. (34 CFR 200.50-55, 200.60) Suggested Audit Procedures (LEA)  Review procedures for determining numbers and needs of educationally deprived children in private schools, and evaluate for adequacy.  Ascertain the Chapter 1 services that LEA provided to private schoolchildren, and determine whether LEA has provided the services on an equitable basis when compared with the services provided to public schoolchildren. Compliance Requirement An LEA may use Chapter 1 funds for a school wide project in accordance with an acceptable plan approved by SEA if in the first year of a 3-year period, not less than 75 percent of the children in the attendance area of the school or 75 percent of the children enrolled in the school are from low-income families. LEA may carry out a school wide project to upgrade the entire educational program in that school if the requirements in section 1015(b)-(e) are met. (34 CFR 200.36) (* see following Note) *********************** THIS SECTION ADDED ************************ * NOTE: Per the Improving America Schools Act of 1994, the "not less than 75 percent" criteria applicable to schoolwide projects is being changed to "not less than 60 percent." ******************************************************************** Suggested Audit Procedures (LEA) Determine if LEA planned a schoolwide project. If so, perform the following procedures.  Determine whether the school met the eligibility requirements in the first year of the 3-year period.  Test to determine if LEA is implementing the respective plans. Compliance Requirements A grantee and subgrantee must obligate Federal program funds during the period for which the funds were available for obligation and expenditure. In State administered programs, grantees and subgrantees must obligate funds by the end of the fiscal year succeeding the fiscal year for which those funds are appropriated. (34 CFR 76.704-707)  The grantee and subgrantee shall 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 occurred outside of the period of availability, the funds are not time obligated and they shall be returned.  If a grantee or subgrantee uses a different accounting system from one year to the next, it shall demonstrate that the system was not improperly changed to avoid lapsing funds.  A grantee may not reallocate grant funds from one subgrantee to another subgrantee after the period of availability.  A grantee or subgrantee may not make accounting adjustments after the period of avail-ability to offset audit disallowances. The disallowed costs must be refunded. Suggested Audit Procedures (LEA and SEA)  Examine transactions recorded after the end of the period of availability to determine if the underlying obligation was recorded in the proper period.  Test some transactions that were recorded within the period of availability to determine if the underlying obligations occurred within the period of availability.  Examine the audited entity's reallocations of Federal funds to determine whether they occurred within the period of availability. MIGRANT EDUCATION-BASIC STATE FORMULA GRANT PROGRAM 84.011 I. PROGRAM OBJECTIVES The objectives of the Migrant Education Basic State Formula Grant Program are to (1) establish or improve programs designed to meet the special educational needs of migratory children of migratory agricultural workers or migratory fishers, and (2) enable State educational agencies (SEAs) to coordinate their State migrant programs and local projects with similar programs and projects in other States, including the transfer of school records and other information about migratory children. II. PROGRAM PROCEDURES Funds are allocated to a SEA to carry out its approved State plan for providing migrant education program services and activities (1) directly, (2) through subgrants to local educational agencies (LEAs), or (3) by special arrangements and contracts with other public or private nonprofit private agencies (operating agencies). Because a SEA may choose to provide program services directly or through a LEA or other operating agencies, some of the suggested audit procedures will apply for a SEA or LEA, depending on which agency provides the services and where the records are maintained. III. COMPLIANCE REQUIREMENTS AND SUGGESTED AUDIT PROCEDURES A. Types of Services Allowed or Unallowed Compliance Requirement A SEA may use or distribute funds only to meet the special educational needs of migratory children in projects administered in accordance with the approved State plan with priority given to serving currently migrant children. Funds may be used by a LEA or other operating agency only in accordance with the approved State plan and only for those services or activities in its project application. The amount of funds that SEA subgrants must be based on criteria that include the number of currently and formerly migrant children to be served and the cost of programs designed to serve their needs. (34 CFR 201.10-201.11, 201.25, and 201.31) Suggested Audit Procedures (SEA)  Review the approved State plan, including annual updates, as appropriate.  Review the State's process for approving subgrants to a LEA or other operating agency.  Review records that indicate how SEA expended or distributed program funds, and compare those expenditures with the State plan and approved subgrant applications. Suggested Audit Procedure (LEA) Test expenditure and related records to determine if expenditures were made only for those services or activities in the project application. Compliance Requirements The State receives a supplemental 1-percent grant to defray the allowable administrative costs for all Chapter 1 programs. In addition, a SEA may use grant funds to pay the costs of necessary administrative functions that are unique to the State's Chapter 1 migrant education program or are the same or similar to the functions performed by LEAs under 34 CFR 200.4 and 200.88. Those unique functions include, but are not limited to, the following: (1) Identifying and recruiting eligible migratory children statewide. (2) Coordinating the State migrant education program and its local projects with other State programs and local projects. (3) Coordinating project level activities with other public and private agencies. (4) Implementing the migrant student record transfer system. (5) Processing reports that are submitted by the operating agencies to SEA. (6) Maintaining inventories of property acquired with Migrant Education Program funds. (7) Negotiating awarding of contracts. (8) Evaluating activities of the State migrant education program, other than the design of evaluation report forms and final preparation of SEA's evaluation report to the Secretary of Edu- cation. Suggested Audit Procedure Test SEA expenditure and related records to determine whether expenditures were made only for allowable administrative services and charged to the proper accounts. B. Eligibility Compliance Requirements Services are limited to concentrations of currently or formerly migratory children (age 3 through 21 years) with special education- al needs who have not graduated from high school and for whom SEA has documented the eligibility on a certificate of eligibility. A currently migratory child is one whose parent or guardian is a migratory agricultural worker or migratory fisher and who has moved within the past 12 months from one school district to another so that the child, the child's guardian, or a member of the child's immediate family obtained temporary or seasonal employment in an agricultural or fishing activity. A formerly migratory child is one who was eligible to be counted and served as a currently migratory child and whose parent or guardian consents to having the child considered as migratory. SEA is responsible for ensuring that no child who is found to be ineligible for the Migrant Education Program is counted as migratory. However, SEA is not responsible for auditing its determination for correctness within a 5-percent error rate. (34 CFR 201.3, 201.30) Suggested Audit Procedures (SEA Directly Operated Programs or LEA)  Review procedures for determining eligibility, and ensure the correctness of eligibility information recorded on the Certificate of Eligibility (COE).  Test COE and other records to determine if procedures are followed and errors are within the 5-percent error rate. C. Matching, Level of Effort, and/or Earmarking Requirement ************************* THIS SECTION DELETED *************************** Compliance Requirements The combined fiscal effort per student or the aggregate expendi- tures of a LEA from State and local funds for free public education for the preceding year must be at least 90 percent of the combined fiscal effort per student or aggregate expenditures for the second preceding year, unless specifically waived by SEA. In determining a LEA's compliance with this requirement, SEA shall consider LEA expenditures from State and local funds for free public education, which 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 body activities. SEA shall not consider any expenditures for community services, capital outlay, or debt service. In addition, SEA shall not consider any expenditures made from funds provided under Chapter 1 and Chapter 2 of Title I of ESEA or Chapter 1 and Chapter 2 of ECIA. SEA may waive this requirement, for 1 fiscal year only, if SEA determines that a waiver would be equitable due to exceptional or unforeseen circumstances, such as a natural disaster or a precipitous decline in the financial resources of LEA. (34 CFR 201.41-42) Suggested Audit Procedure (SEA)  Evaluate SEA's procedures for determining LEA compliance with the maintenance of effort requirement.  Review the waivers granted by SEA and determine whether the waivers were granted for exceptional and unforeseen circumstances. Suggested Audit Procedures (LEA) Review the second and first preceding years' financial and related records of LEAs and determine whether compliance had been maintained on an aggregate or per-pupil basis. *************************************************************************** Compliance Requirements A LEA or SEA may use Chapter 1 funds only to supplement and to the extent practical, increase the level of funds that would, in the absence of Chapter 1 funds, be made available from non-Federal sources for the education of pupils participating in Chapter 1 projects. A LEA must also maintain policies that will ensure comparability of service among migrant and non-migrant children. LEA may not use Chapter 1 funds to supplant funds from non-Federal sources. For purposes of determining compliance with the requirement of Section 1018 of Chapter 1, LEA may exclude State and local funds expended for carrying out special programs that the Secretary of Education or SEA, as appropriate, determines in advance to meet the educational needs of educationally deprived children. (34 CFR 201.43-44) Suggested Audit Procedures (SEA Directly Operated Programs or LEA)  Review, evaluate, and test SEA or LEA system, and determine whether Chapter 1 funds supplement and do not supplant non-Federal funds.  Determine if LEA has established and maintained required personnel practices to ensure comparability of services among migrant and non-migrant children. D. Special Reporting Requirements There are no special reporting requirements. E. Special Tests and Provisions Compliance Requirements A SEA and its operating agencies receiving Chapter 1 migrant education program funds shall design and improve their Chapter 1 migrant education program and projects on an annual assessment of educational needs that, among other things, (1) identifies needs of all significant concentrations of migratory children expected to reside in the area served by the project, ************************** THIS SECTION DELETED ************************** (2) requires selection of those currently migratory children (preschool and school age) in greatest need before selection of formerly migratory children, ************************************************************************** and (3) determines the educational needs of participating children with sufficient specificity to ensure concentration on these needs. (34 CFR 201.31, 201.32, 201.36) Suggested Audit Procedures (SEA)  Review SEA identification and recruitment process, and ensure that all significant concentrations of ************************** THIS SECTION DELETED ************************** currently ************************************************************************** migratory children are identified.  Review SEA prescribed process for selecting children to be served ************************** THIS SECTION DELETED ************************** , and determine whether currently migratory children (both preschool and school age) are selected for services before formerly migratory children. Suggested Audit Procedure (LEA) Review LEA project to ascertain whether currently migratory children with special educational needs (preschool and school age) are selected and served on a priority basis before formerly migra- tory children. ************************************************************************** Compliance Requirements A grantee and subgrantee must obligate Federal program funds during the period for which the funds were available for obligation and expenditure. In State-administered programs, grantees and subgrantees must obligate funds by the end of the fiscal year succeeding the fiscal year for which those funds are appropriated. (34 CFR 76.304-707)  The grantee and subgrantee shall 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 occurred outside of the period of availability, the funds are not time obligated and they shall be returned.  If a grantee or subgrantee uses a different accounting system from one year to the next, it shall demonstrate that the system was not improperly changed to avoid lapsing funds.  A grantee may not reallocate grant funds from one subgrantee to another subgrantee after the period of availability.  A grantee or subgrantee may not make accounting adjustments after the period of availability to offset audit disallowances. The disallowed costs must be refunded. Suggested Audit Procedures (LEA and SEA)  Examine transactions recorded after the end of the period of availability and determine if the underlying obligation was recorded in the proper period.  Test some transactions that were recorded within the period of availability and determine if the underlying obligations occurred within the period of availability.  Examine the audited entity's reallocations of Federal funds to determine whether they occurred within the period of availability. FEDERAL, STATE, AND LOCAL PARTNERSHIPS FOR EDUCATIONAL IMPROVEMENT (Chapter 2 of ESEA) 84.151 1/ I. PROGRAM OBJECTIVES The objectives of Chapter 2 of Title I of the Elementary and Secondary Education Act (ESEA) of 1965, as amended, are to (1) pro- vide the initial funding to enable State educational agencies (SEAs) and local educational agencies (LEAs) to implement promising educational programs that can be supported by State and local sources after such programs are demonstrated to be effective; (2) provide a continuing source of innovation, educational improvement, and support for library and instructional materials; (3) meet the special educational needs of at-risk and high-cost students; (4) enhance the quality of teaching and learning through initiating and expanding effective schools programs; and (5) allow SEAs and LEAs to meet their educational needs and priorities for targeted assistance. SEAs have the basic responsibility for the administration of Chapter 2 funds. Responsibility for the design and implementation of Chapter 2 programs, however, rests mainly with LEAs, school superintendents, principals, classroom teachers, and supporting personnel. II. PROGRAM PROCEDURES Funds are obtained by a State following submission of an application to the Secretary of Education. SEA distributes at least 80 percent of the funds to LEAs that have filed applications that meet certain requirements. These funds are distributed to LEAs in accordance with the relative enrollments in public and private non- profit schools which desire that their children participate in Chapter 2 within the school districts of LEAs. The amounts are adjusted by criteria approved by the Secretary of Education to pro- vide higher per-child allocations to those LEAs having the greatest number or percentage of children whose education imposes a higher than average cost per child. LEAs have complete discretion, subject only to legal requirements, in determining how they will expend the funds. III. COMPLIANCE REQUIREMENTS AND SUGGESTED AUDIT PROCEDURES In addition to the Federal requirements, each SEA has the authority, in accordance with State law, to issue rules consistent with Federal statutes and regulations. These rules should be reviewed before beginning the audit. 1/ The provisions in this section are contained in Chapter 2 of Title I of the ESEA of 1965, enacted as part of the Augustus F. Hawkins-Robert T. Stafford Elementary and Secondary School Im- provement Amendments of 1988. Effective July 1, 1988, these provisions superseded those in Chapter 2 of the ECIA of 1981. During the transition year (1988-89), however, SEAs and LEAs may comply with either the provisions in Chapter 2 of ESEA or Chapter 2 of ECIA. If an audit is being conducted of the 1988-89 transition year and if the auditors would like further information on compliance requirements and suggested audit procedures for Chapter 2 of ECIA, they may contact the appropriate Regional Inspector General for Audit, U.S. Department of Education. A. Types of Services Allowed or Unallowed Compliance Requirement SEA shall distribute at least 80 percent of the funds to its LEAs, in accordance with the relative enrollments in public and private nonprofit schools which desire that their children partici- pate in Chapter 2 programs within the school districts of LEAs, adjusted by criteria approved by the Secretary of Education to provide higher per-child allocations only to those LEAs having the greatest number or percentage of children whose education imposes a higher than average cost per child. (34 CFR 297.8) Suggested Audit Procedure (SEA) Determine if actual allocations made to LEAs adhere to these requirements. Compliance Requirements SEA may distribute funds only to LEAs that submit applications that: (1) set forth the planned allocation of funds among targeted assistance programs described in section 1531 and describe the programs, projects, and activities designed to carry out such targeted assistance together with the reasons for the selection of such programs, projects, and activities; (2) set forth the allocation of funds for services to private schoolchildren; (3) describe how use of funds will contribute to improving student achievement or improving the quality of education for students; (4) provide assurances of compliance with Chapter 2 requirements; (5) agree to keep adequate records and provide information to SEA for fiscal audit and program evaluation; and (6) provide for systematic consultation with parents, teachers, administrative staff, and other groups identified by LEA. (Sec. 1533(a)) ************************** THIS SECTION ADDED *************************** NOTE TO AUDITOR: Per an amendment to Federal law, ED regulations were amended to add an additional item to the six enumerated items - [Provide] "Programs of training to enhance the ability of teachers and school counselors to identify, particularly in the early grades, students with reading and reading-related problems that place those students at risk for illiteracy in their adult years" [34 CFR 298.12 (a) (5)] ************************************************************************* Suggested Audit Procedures (SEA)  Evaluate the adequacy of the policies and procedures used to ensure that all applications are properly reviewed for the criteria specified in the compliance requirement.  Test a sample of applications and determine if they are complete. Compliance Requirements SEA may only use Chapter 2 funds reserved for the State's use as follows:  Not more than 25 percent of the Chapter 2 funds reserved for the State's use in any fiscal year may be used for State adminis- tration of Chapter 2 programs. ************************** THIS SECTION DELETED ************************ At least 20 percent of the Chapter 2 funds reserved for the State's use must be used for assistance to LEAs and statewide activities to carry out effective school programs, unless an SEA receives a waiver. ************************************************************************ Funds may be used for assistance to LEAs in the form of direct grants, statewide activities, or technical assistance to provide targeted assistance programs. (34 CFR 298.13) Suggested Audit Procedures (SEA)  Verify that the funds were expended in accordance with the percentage requirements.  Review internal controls designed to ensure expenditures are made only for allowable services.  Test expenditure and related records to determine if expendi- tures were made only for allowable services in accordance with the preceding percentages. Compliance Requirements LEA may use Chapter 2 funds to support one or more of the targeted assistance programs in section 1531, namely, (1) programs for at-risk children; (2) programs to acquire and use instructional materials to improve the quality of instruction; (3) innovative programs for schoolwide improvements, including effective schools programs; (4) programs of training and professional development; (5) programs to enhance personal excellence of students and student achievement; and (6) other innovative projects to enhance the educational program and climate of the schools. (34 CFR 298.12) Suggested Audit Procedures (LEA)  Review internal controls designed to ensure that LEA uses funds for targeted assistance programs.  Determine if actual expenditures of funds are for targeted assistance programs and are in accordance with LEA's application. B. Eligibility The auditor is not expected to test for eligibility. C. Matching, Level of Effort, and/or Earmarking Requirements Compliance Requirements The combined fiscal effort per child or the aggregate expendi- tures within the State for free public education for the preceding 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 1 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. Expenditures not to be considered are any expenditures for community services, capital outlay, or debt service, and any expenditures of Federal funds. (34 CFR 298.21) Suggested Audit Procedures (SEA and LEA)  Evaluate the adequacy of the policies and procedures used by SEA or LEA to ensure compliance with the maintenance of effort provisions.  Determine if aggregate or per-child expendi- tures of non-Federal funds for free public education within the State during the preceding fiscal year are at least equal to 90 percent of the expenditures for the second preceding fiscal year. D. Special Reporting Requirements Compliance Requirement SEA and LEA may use Chapter 2 funds only to supplement, and not supplant, non-Federal funds that would, in the absence of Chapter 2 funds, be made available. (34 CFR 298.23) Suggested Audit Procedures (SEA and LEA)  Evaluate the adequacy of the policies and procedures estab- lished by SEA and LEA to ensure that Chapter 2 funds are used to supplement, and not supplant, non-Federal funds.  Test the system to determine if the grantee used Federal funds to supplant non-Federal funds. E. Special Tests and Provisions Compliance Requirements LEA shall provide children enrolled in private nonprofit elementary and secondary schools in the school district of LEA with secular, neutral, and nonideological services, materials, and equipment or other benefits that will ensure equitable (as compared with children enrolled in public schools) participation of private schoolchildren in the purposes and benefits of Chapter 2. If SEA conducts instructional or personnel training programs with funds reserved for the State's use, it must comply with these require- ments as if it were an LEA. If SEA or LEA provision of services and benefits to these children is prohibited by State law or if the Secretary of Education determines that SEA or LEA has substantially failed or is unwilling to provide for the participation on an equitable basis of children enrolled in private schools, the Secretary of Education waives the requirement and arranges for services to be provided through other means. (34 CFR 298.31-298.38) Suggested Audit Procedures (LEA)  Evaluate the adequacy of the policies and procedures used by LEA for determining the numbers and needs of children in private schools to ensure that the services provided to children enrolled in private, nonprofit elementary and secondary schools are equitable to services provided to children enrolled in public schools.  Determine whether LEA followed policies and procedures. Compliance Requirements A grantee or subgrantee must obligate Federal program funds during the period for which the funds were available for obligation and expenditure. In State-administered programs, grantees and subgrantees must obligate funds by the end of the fiscal year succeeding the fiscal year for which those funds are appropriated. (34 CFR 76.704-707)  The grantee and subgrantee shall maintain and be able to demonstrate that the obligation occurred during the period of availability and was charged to an appropriate year's grant funds. If obligations occurred outside of the period of availability, the funds are not time obligated and they shall be returned.  If a grantee or subgrantee uses a different accounting system from 1 year to the next, it shall demonstrate that the system was not improperly changed to avoid lapsing funds.  A grantee may not reallocate grant funds from one subgrantee to another subgrantee after the period of availability.  A grantee or subgrantee may not make accounting adjustments after the period of availability to offset audit disallowances. The disallowed costs must be refunded. Suggested Audit Procedures (LEA and SEA)  Examine transactions recorded after the end of the period of availability and determine if the underlying obligation was recorded in the proper period.  Test some transactions that were recorded within the period of availability and determine if the underlying obligations occurred within the period of availability.  Examine the audited entity's reallocations of Federal funds to determine whether they occurred within the period of availability. ---------------------------------------------------------------------------- IMPORTANT INFORMATION ENCLOSED September 11, 1995 Re: Deletion of Certain Audit Procedures for 1994-1995 Single Audits of Department of Education Programs Dear LEA Auditor: The purpose of this letter is to alert you to deletions from the Office of Management and Budget (OMB) Compliance Supplement for Single Audits of State and Local Governments (issued in 1990)(Compliance Supplement). These deletions are intended to assist State and local auditors in their work through the elimination of unnecessary audit steps. We are hopeful that these deletions will save time and resources at the State, local, and Federal levels. The enclosed mark-up of the Compliance Supplement (enclosure 1) is for use by you in conducting audits of U.S. Department of Education (Department) programs covering operations conducted during the 1994-1995 school year (generally, for the one-year period of operations ending on June 30, 1995). Since use of the Compliance Supplement is not required, neither is use of mark-up. Full-size versions of the Compliance Supplement mark-up can be readily viewed or downloaded from the Single Audit Bulletin Board Service (SABBS) (see enclosure 2 for information on access), or on the Internet, from the single audit menu of the IGNet Gopher (gopher://www.sbaonline.sba.gov:70/11/ignet/single). It is our intention to use the SABBS to inform practitioners of future developments affecting Single Audits and other audits. Please refer to enclosure 3 for more information on this. Full-size versions of the Compliance Supplement mark-up can also be obtained from your State Title I Coordinator, or by faxing your request for a copy to either Bernard Tadley or Christine Press of the Department's Office of Inspector General, at the fax numbers mentioned below. Recently-enacted legislation, the IASA, the Goals 2000: Educate America Act, and the School-to-Work Opportunities Act, has introduced greater flexibility and State and local autonomy into the administration of a variety of Department programs. In partnership with several States, the Department has embarked on a Cooperative Audit Resolution and Oversight Initiative. One result of that initiative is this mark-up of the Compliance Supplement. While the IASA does not change requirements for the period preceding the effective date of the IASA (generally, July 1, 1995), the Department has deleted many compliance requirements and audit steps which correspond to requirements that are not contained in the IASA. Therefore, the Department does not believe that it is necessary or useful for auditors to review these matters for the purposes of the 1994-1995 Single Audit. An updated Compliance Supplement is scheduled to be issued in May 1996, for use in future audits. The following are the programs affected by the IASA and to which the deletions and notations in the enclosed mark-up apply: Catalogue of Federal Domestic Assistance Number (CFDA No.) Program 84.003 Bilingual Education 84.010 Educationally Deprived Children - LEAs (Chapter 1 of ESEA) 84.011 Migrant Education - Basic State Formula Grant Program 84.151 Federal, State and Local Partnerships for Educational Improvement (Chapter 2 of ESEA) Note: While the IASA also affected the Impact Aid Program, no changes to the Compliance Supplement are being made at this time. If you have any questions on this matter or to request full-size copies of this mark-up of the Compliance Supplement, please send a fax to either Bernard Tadley, at (215) 596-0124, or Christine Press, at (202) 205-8238, at the Department's Office of Inspector General. Thank you for your assistance in this matter. Sincerely, Steven A. McNamara Assistant Inspector General for Audit Services Enclosures: 1 - Reduced-size Mark-up of OMB Compliance Supplement 2 - Single Audit Bulletin Board Instructions 3 - Information on Future Use of SABBS by the Department's Office of Inspector General ---------------------------------------------------------------------------- ENCLOSURE 3 Re: Information on Future Use of SABBS by the Department's Office of Inspector General Enclosure 2, which accompanies this package, describes the "Single Audit Bulletin Board System" (SABBS), located on the General Accounting Office's (GAO), Office of Policy Bulletin Board System. Enclosure 2 also contains complete instructions on how to access the SABBS via a personal computer and a modem with software. We plan to use the SABBS to provide relevant and timely information to practitioners conducting Single Audits and other audits of U.S. Department of Education (ED) programs. As such, we have recently uploaded our most recent Lender and SFA Audit Guides to the SABBS. These documents are located in the Single Audit - Education Conference. Also, we have revised the suggested audit procedures contained in the OMB Compliance Supplement sections covering the Chapters I and II, Migrant Education, and Bilingual Education programs. To obtain these revisions, practitioners should download the file-- REVSUPP.TXT which is located in the SABBS Single Audit - Education Conference/Compliance Supplement file area. It is also our intention to use the SABBS to inform practitioners of future developments affecting Single Audits and other audits as they occur. As such, prior to commencing audits, practitioners should review the bulletins posted in the SABBS Education Conference and scan the Education file areas for information about recently issued audit guides, risk alerts, technical bulletins, CFDA listings, and Compliance Supplements. The SABBS also includes a message capability whereby practitioners can leave messages for the Conference Sysop, or other practitioners, who may be able to assist them on Single Audit or other matters. Practitioners may also want to scan the other Conferences/File areas for other guidance affecting Single Audits and other audits. ---------------------------------------------------------------------------- IMPORTANT INFORMATION ENCLOSED September 11, 1995 Re: Deletion of Certain Audit Procedures for 1994-1995 Single Audits of Department of Education Programs Dear State Auditor: The purpose of this letter is to alert you to deletions from the Office of Management and Budget (OMB) Compliance Supplement for Single Audits of State and Local Governments (issued in 1990)(Compliance Supplement). These deletions are intended to assist State and local auditors in their work through the elimination of unnecessary audit steps. We are hopeful that these deletions will save time and resources at the State, local, and Federal levels. The enclosed mark-up of the Compliance Supplement (enclosure 1) is for use by auditors for audits of U.S. Department of Education (Department) programs covering operations conducted during the 1994-1995 school year (generally, for the one-year period of operations ending on June 30, 1995). Use of the mark-up is not required. Enclosed is a full-size version of the relevant portion of the Compliance Supplement with deletions of compliance requirements and audit steps as well as some explanatory notes. We have also enclosed a copy of a reduced-size version that we have asked local Superintendents to pass along to their auditors (enclosure 2). The recently-enacted legislation, the Improving America s Schools Act (IASA), the Goals 2000: Educate America Act, and the School-to-Work Opportunities Act have introduced greater flexibility and State and local autonomy to the administration of a variety of Department programs. In cooperation with several State representatives, the Department has embarked on a Cooperative Audit Resolution and Oversight Initiative. One result of that initiative is this mark-up of the Compliance Supplement. While IASA does not change requirements for the period preceding the effective date of the IASA (generally July 1, 1995), the Department has deleted many compliance requirements and audit steps from the Compliance Supplement which correspond to requirements that are not contained in the IASA. Therefore, the Department does not believe that it is necessary or useful for auditors to review these areas for the purposes of the 1994-1995 Single Audit. An updated Compliance Supplement is scheduled to be issued in May 1996 for use in future audits. We are informing your State's Title I Coordinator and local superintendents of schools of these modifications, in addition to providing them with information on how to obtain copies of the full-size mark-up directly from the Department's Office of Inspector General. Moreover, full-size versions of the Compliance Supplement mark-up can be readily viewed or downloaded from the Single Audit Bulletin Board Service (SABBS) (see enclosure 3 for information on how to access the SABBS), or on the Internet, from the single audit menu of the IGNet Gopher (gopher://www.sbaonline.sba.gov:70/11/ignet/single). It is our intention to use the SABBS to inform practitioners of future developments affecting Single Audits and other audits as they occur (see enclosure 4 for more information on this). Any assistance you could provide in disseminating this information to appropriate auditors would be appreciated. The following are the programs affected by the IASA and to which the deletions and notations in the enclosed mark-up apply: Catalogue of Federal Domestic Assistance Number (CFDA No.) Program 84.003 Bilingual Education 84.010 Educationally Deprived Children - LEAs (Chapter 1 of ESEA) 84.011 Migrant Education - Basic State Formula Grant Program 84.151 Federal, State and Local Partnerships for Educational Improvement (Chapter 2 of ESEA) Note: While the IASA also affected the Impact Aid Program, no changes to the Compliance Supplement are being made at this time. If you have any questions about the enclosed mark-up of the Compliance Supplement or other matters discussed in this letter, please fax them to either Bernard Tadley, at (215) 596-0124, or Christine Press, at (202) 205-8238, at the Department's Office of Inspector General. In the near future, the Department will be providing you with additional information about the Cooperative Audit Resolution and Oversight Initiative. Thank you for your assistance in this matter. Sincerely, Steven A. McNamara Assistant Inspector General for Audit Services Enclosures 1 - Full-size Mark-up of OMB Compliance Supplement 2 - Reduced-size Mark-up of OMB Compliance Supplement 3 - Single Audit Bulletin Board Instructions 4 - Information on Future Use of SABBS by the Department's Office of Inspector General ---------------------------------------------------------------------------- ENCLOSURE 4 Re: Information on Future Use of SABBS by the Department's Office of Inspector General Enclosure 3, which accompanies this package, describes the "Single Audit Bulletin Board System" (SABBS), located on the General Accounting Office's (GAO), Office of Policy Bulletin Board System. Enclosure 3 also contains complete instructions on how to access the SABBS via a personal computer and a modem with software. We plan to use the SABBS to provide relevant and timely information to practitioners conducting Single Audits and other audits of U.S. Department of Education (Department) programs. As such, we have recently uploaded our most recent Lender and SFA Audit Guides to the SABBS. These documents are located in the Single Audit - Education Conference. Also, we have revised the suggested audit procedures contained in the OMB Compliance Supplement sections covering the Chapters I and II, Migrant Education, and Bilingual Education programs. To obtain these revisions, practitioners should download the file-- REVSUPP.TXT which is located in the SABBS Single Audit - Education Conference/Compliance Supplement file area. It is also our intention to use the SABBS to inform practitioners of future developments affecting Single Audits and other audits as they occur. As such, prior to commencing audits, practitioners should review the bulletins posted in the SABBS Education Conference and scan the Education file areas for information about recently issued audit guides, risk alerts, technical bulletins, CFDA listings, and Compliance Supplements. The SABBS also includes a message capability whereby practitioners can leave messages for the Conference Sysop, or other practitioners, who may be able to assist them on Single Audit or other matters. Practitioners may also want to scan the other Conferences/ File areas for other guidance affecting Single Audits and other audits. ---------------------------------------------------------------------------- IMPORTANT INFORMATION September 11, 1995 Re: Deletion of Certain Audit Procedures for 1994-1995 Single Audits of Department of Education Programs Dear State Title I Coordinator: The purpose of this letter is to alert you to deletions from the Office of Management and Budget (OMB) Compliance Supplement for Single Audits of State and Local Governments (issued in 1990)(Compliance Supplement). These deletions are intended to assist State and local auditors in their work through the elimination of unnecessary audit steps. The Compliance Supplement provides guidance on major compliance requirements that should be considered in conducting audits under the Single Audit Act. We are hopeful that these deletions will save time and resources at the State, local, and Federal levels. The enclosed mark-up of the Compliance Supplement (enclosure 1) is for use by auditors for audits of U.S. Department of Education (Department) programs covering operations conducted during the 1994-1995 school year (generally, for the one-year period of operations ending on June 30, 1995). Since use of the Compliance Supplement is not required, neither is use of the mark-up. Enclosed is a full-size version of the relevant portion of the Compliance Supplement with deletions of compliance requirements and audit steps as well as some explanatory notes. We have also enclosed a copy of a reduced-size version that we have asked local Superintendents to pass along to their auditors (enclosure 2). The recently-enacted Improving America's Schools Act (IASA), Goals 2000: Educate America Act, and School-to-Work Opportunities Act introduced greater flexibility, as well as State and local autonomy into the administration of a variety of Department programs. The Department and representatives of several States have been working in partnership as part of a Cooperative Audit Resolution and Oversight Initiative to improve the Department's overall audit and oversight processes and to ensure that they are consistent with the new flexibility contained in these laws. Among the first actions undertaken jointly by the Department and these State partners, in consultation with OMB, has been a review of the current edition of the Compliance Supplement as it pertains to programs affected by the IASA. The purpose of the review was to identify and delete from the Compliance Supplement those compliance requirements and audit procedures that are no longer important to these affected programs, for audits covering the operations conducted during the 1994-1995 school year. While IASA does not change requirements for the period preceding the effective date of the IASA (generally, July 1, 1995), the Department has deleted many compliance requirements and audit steps which correspond to requirements that are not contained in the IASA. Therefore, the Department does not believe that it is necessary or useful for auditors to review these matters for the purposes of the 1994-1995 Single Audit. We are sending this information concurrently to your State's auditor and local superintendents of schools. However, we also encourage you to distribute the enclosed mark-up to other appropriate State officials and to the auditor who performs your annual Single Audit. The following are the programs affected by the IASA and to which the deletions and notations in the enclosed mark-up apply: Catalogue of Federal Domestic Assistance Number (CFDA No.) Program 84.003 Bilingual Education 84.010 Educationally Deprived Children - LEAs (Chapter 1 of ESEA) 84.011 Migrant Education - Basic State Formula Grant Program 84.151 Federal, State and Local Partnerships for Educational Improvement (Chapter 2 of ESEA) NOTE: While the IASA also affected the Impact Aid Program, no changes to the Compliance Supplement are being made at this time. If you have any questions on this matter or wish to request additional copies of the mark-up of the Compliance Supplement, please send a fax to either Bernard Tadley, at (215) 596-0124, or Christine Press, at (202) 205-8238, at the Department's Office of Inspector General. In the near future, the Department will be providing you with further information on the Cooperative Audit Resolution and Oversight Initiative. Thank you for your assistance in this matter. Sincerely, Steven A. McNamara Mary Jean LeTendre Assistant Inspector General Director, Compensatory Education for Audit Services Office of Elementary and Secondary Education Enclosures: 1 - Full-size Mark-up of OMB Compliance Supplement 2 - Reduced-size Mark-up of OMB Compliance Supplement ---------------------------------------------------------------------------- IMPORTANT INFORMATION September 11, 1995 Re: Deletion of Certain Audit Procedures for 1994-1995 Single Audits of Department of Education Programs Dear Superintendent: The purpose of this letter is to alert you to deletions from the Office of Management and Budget (OMB) Compliance Supplement for Single Audits of State and Local Governments (issued in 1990)(Compliance Supplement). These deletions are intended to assist State and local auditors in their work through the elimination of unnecessary audit steps. We are hopeful that these deletions will save time and resources at the State, local, and Federal levels. The Compliance Supplement provides guidance on conducting audits under the Single Audit Act. The enclosed mark-up of the Compliance Supplement is for use by auditors for audits of U.S. Department of Education (Department) programs covering operations conducted during the 1994-1995 school year (generally, for the one-year period of operations ending on June 30, 1995). Since use of the Compliance Supplement is not required, neither is use of the mark-up. We request your assistance in providing the enclosed letter and information to your local auditors. The recently-enacted Improving America's Schools Act (IASA), Goals 2000: Educate America Act, and School-to-Work Opportunities Act introduced greater flexibility, as well as State and local autonomy into the administration of a variety of Department programs. The Department and representatives of several States have been working in partnership as part of a Cooperative Audit Resolution and Oversight Initiative to improve the Department's overall audit and oversight processes and to ensure that they are compatible with the new flexibility contained in these laws. Among the first actions undertaken jointly by the Department and these State partners, in consultation with OMB, has been a review of the current edition of the Compliance Supplement, as it pertains to programs affected by the IASA (see the list of programs on page 2 of this letter). The purpose of the review was to identify and delete from the Compliance Supplement those compliance requirements and audit procedures that are no longer important to these affected programs, for audits covering the operations conducted during the 1994-1995 school year. While the IASA does not change requirements for the period preceding the effective date of the IASA (generally, July 1, 1995), as reflected in the reduced-size mark-up of the Compliance Supplement accompanying the enclosed "Letter to LEA Auditor," this joint effort has resulted in the striking out of many compliance requirements and audit steps which correspond to requirements that are not contained in the IASA. Therefore, the Department does not believe that it is necessary or useful for auditors to review these matters for the purposes of the 1994-1995 Single Audit. We are mailing a full-size copy of this mark-up of the Compliance Supplement directly to your State Auditor and to your State Title I Coordinator. The full-size version of the mark-up is also available on the Single Audit Bulletin Board System (SABBS) and on the Internet (instructions on how to access these on-line services have been provided to your State auditors and are provided to your local auditors in the enclosed materials). The following are the programs affected by the IASA and to which the deletions and notations in the enclosed mark-up apply: Catalogue of Federal Domestic Assistance Number (CFDA No.) Program 84.003 Bilingual Education 84.010 Educationally Deprived Children - LEAs (Chapter 1 of ESEA) 84.011 Migrant Education - Basic State Formula Grant Program 84.151 Federal, State and Local Partnerships for Educational Improvement (Chapter 2 of ESEA) Note: While the IASA also affected the Impact Aid Program, no changes to the Compliance Supplement are being made at this time. If you have any questions on this matter or wish to request additional copies of the mark-up of the Compliance Supplement, please send a fax to either Bernard Tadley, at (215) 596-0124, or Christine Press, at (202) 205-8238, at the Department's Office of Inspector General. In the near future, the Department will be providing you with further information on the Cooperative Audit Resolution and Oversight Initiative. Thank you for your assistance in this matter. Sincerely, Steven A. McNamara Mary Jean LeTendre Assistant Inspector General Director, Compensatory Education for Audit Services Office of Elementary and Secondary Education Enclosures: Letter to LEA Auditors with Enclosures