GAO Finds Misuse of Federal Grant Money
Titles III and V of the Higher Education Act provide federal funding to support colleges and universities that primarily serve racial and ethnic minorities who are underrepresented in higher ed, such as black, Hispanic and Native American students. As many recent reports have shown, these funds are desperately needed to boost both participation and persistence among minority students. But recent studies by the Government Accountability Office (GAO) indicate that the funding programs are poorly managed and, in many cases, the money is being misused.
In 2009, the GAO examined the use of federal grants funds by seven randomly selected minority-serving institutions, including Morgan State University in Baltimore, Riverside Community College in California and Wiley College in Texas. As a group, the schools received almost $1.9 billion in fiscal year 2006, the period included in the study. Of those funds, the GAO identified nearly $143,000 in 'questionable' expenditures.
The largest offender was Morgan State. The GAO feels the school misused over $105,000, almost a quarter of the $427,180 in federal funds it received in FY-2006. Nearly $80,000 was spent to take students in a leadership program to amusement parks and resorts, $6,000 was spent on office furniture and $4,578 was spent on an airplane global positioning system, even though the university doesn't own a plane. Officials from Morgan State defended the costs of the leadership program, arguing that they were taking them on challenging outdoor experiences, not to resorts or entertainment centers. But they do acknowledge that the smaller expenses were the result of 'poor judgment' by a faculty member.
Most of the improper uses of federal funds at other institutions also appear to be due more to poor judgment than corruption. One college spent $4,800 on t-shirts for students; another spent over $2,000 on late fees; a third spent $27,530 to prepay for subscription and contract services that wouldn't be delivered until after the grant was expired.
Some institutions did, however, knowingly bypass federal regulations and accounting procedures when spending these funds. When Morgan State purchased the office furniture and GPS, a college official split the payments on two credit cards to avoid limits established by the school. The GAO reports that 'officials at the institution ignored multiple warnings about mismanagement of this activity from external evaluators hired to review the grant.'
Failed Oversight Blamed for Persistent Mismanagement
The Department of Education (DOE) is responsible for both disbursing Titles III and V funds and overseeing their use. Although schools are responsible for individual misappropriations of funds, it is up to the DOE to catch and correct these errors. In both their 2009 study and the current follow-up report, the GAO found that the Department of Education is failing to perform these duties in a number of ways.
Previous to the 2009 study, the GAO had recommended several improvements to their monitoring procedures, but found that by 2009 many of the DOE's initiatives 'had yet to be fully realized.' The four key actions that the GAO recommended are:
The DOE needs to develop a set of criteria for identifying and monitoring institutions at a high risk for misusing funds. As of 2009, the organization had developed a monitoring index, but was not using it to select schools for site visits. The DOE committed to using the index to schedule half of its FY-2010 visits, but as of the time of the current report (May 2010) it had not completed any visits based on the monitoring index.
Annual monitoring plan.
The DOE had stopped developing annual monitoring plans for Titles III and V programs as of 2006, in response to which the GAO determined that the organization lacked a 'coordinated approach' to its monitoring efforts. The DOE complied with the accountability office's recommendation to create a plan for 2010, but the GAO notes that some of the monitoring activities lack 'realistic and measurable performance goals.'
Site visits and staff training.
The report notes that site visits are 'a key component of an effective grants management program.' They allow the managers to actually see where money is being spent and form more personal bonds with the people whom they're holding accountable. Unfortunately, the GAO's 2009 report found that such visits had declined significantly in recent years, and that DOE staff lacked the skills required to conduct effective financial evaluations. Site visits have continued to be limited in the past year, but the DOE has implemented training courses to address the missing skill sets.
The DOE isn't just responsible for policing grantees - it must respond to their logistical and technical needs in order to facilitate the disbursement and reporting processes. In 2009, the GAO found that the DOE hadn't made any progress in building a 'systemic approach' to targeting the needs of grantees, but in the past year the organization has taken some steps toward encouraging feedback and information sharing among grantees.
Beyond these specific requirements, the GAO has emphasized that the Department of Education needs a comprehensive and sustained approach to monitoring. Without systemic and focused monitoring efforts to ensure that grant funds are managed appropriately, the program is vulnerable to the kind of 'fraud, waste and abuse' described above.
The current GAO report was presented in late May to Congress at a hearing of the U.S. House of Representatives Subcommittee on Higher Education, Lifelong Learning and Competitiveness. Robert Shireman, deputy undersecretary of education, admitted that the DOE had failed to meet the standards that the GAO had laid forth as early as 2004. However, he pointed out that they had made improvements to the electronic system for monitoring grants and had started conducting more site visits to check compliance. Shireman also added that the slowness of the organization's progress was due primarily to a lack of money and staff, but that they're committed to working toward the GAO's goals in the coming years.