Specifically, in fiscal year 2008, the most recent year for which data were  available, about 8 percent of districts’ funding came from federal  programs and about 2 percent of districts’ funding came from Title I,  which is generally the largest of the federal funding sources for  kindergarten through grade 12. To provide for local flexibility  in determining how to use funds, ESEA requires districts to measure  academic outcomes and achieve benchmarks, but does not generally  dictate how funds are to be spent. However,  schools and districts are still responsible for maintaining appropriate  internal controls over all federal education funds. For example, the law  requires that, generally, a state spend no more than 1 percent on  administration. Selected School Districts Used Funds to Support a Variety of Initiatives, Primarily Related to Instruction, to Improve Student Outcomes

		District Title I Initiatives Were Generally Targeted at the Elementary Level and Included Reducing Class Sizes and Extending Instructional Time

The 12 selected school districts we visited used Title I funds for activities  intended to improve academic outcomes for low-income students,  primarily in elementary school, through a variety of initiatives, such as  reducing class sizes and expanding instructional hours. Districts Generally Spent Most Title I Funds on Personnel, but Some Spent More on Purchased Services than Others Due to Title I Requirements

In the 12 districts we visited, which generally pursued personnel-intensive  strategies to improve academic outcomes, we found that salaries and  benefits, when combined, were the largest category of Title I  expenditures. Prior studies have also found that more than 80 percent of Title I funds  are spent or budgeted for instruction-related (versus administrative)  purposes. The smaller districts with  few or no schools in need of improvement had service expenditures for  other types of services, such as license agreements for software. The five selected districts we visited that reserved funds for supplemental  educational services and transportation set aside 4 to 18 percent of their  Title I funds for those purposes. Mandatory set-asides alone  amounted to as much as 28 percent in two districts. Various Title I Oversight Mechanisms Exist, But Are Not Designed to Yield Estimates of the Full Scope of Spending Noncompliance

Title I recipients are subject to various oversight mechanisms, which  provide some information on noncompliance with relevant spending  requirements, but are not designed to provide estimates of the prevalence  of noncompliance with requirements regarding use of funds. As a part of its  assessment of state oversight of districts and schools, Education reviews  Title I compliance in two to three school districts in each state being  reviewed. Education uses the results of its  monitoring efforts and others’ oversight efforts to design technical  assistance and training initiatives to assist states and school districts in  using their resources and flexibility appropriately. They also use results to  target future monitoring efforts based on risk. Among findings Education identified as common, some dealt with  program compliance issues that were unrelated to how Title I funds were  spent, such as failing to ensure that districts notified parents about  supplemental educational services or school choice in a timely manner or  failing to post information about school choice on their Web sites. OIG Audits

Education’s OIG also conducts audits of selected districts, using risk- based criteria including tips, past audit findings, and other known  weaknesses according to officials. Education’s OIG has identified some instances in which selected districts  spent Title I funds for unallowable purposes, did not adequately document  Title I expenditures, or used Title I funds to supplant state and local funds. Therefore, the single audit findings  related to allowable costs/cost principles indicate that the audited district  did not comply with one or more of these criteria. We received technical comments and incorporated  them where appropriate. Appendix I: Objectives, Scope, and Methodology

To perform this work, we visited 12 school districts, 3 in each of 4  states—Louisiana, Ohio, Rhode Island, and Washington. We selected  states and school districts based on the characteristics described in the  mandate, including variation in size, student demographics, economic  conditions, and geographic locations. We reviewed findings from Education’s fiscal year 2009 monitoring  efforts, audits conducted by Education’s Office of the Inspector General  from fiscal years 2003 to 2009 that included a review of fiscal controls  over Title I funds, and data on school district single audits for fiscal year  2009 to determine whether Title I funds were used in accordance with  relevant requirements. District characteristics

Geographic category: city (large)
Total schools in district: 112 Number of schools receiving  Title I funds: 108 (98%)

		Total number of students: 52,358

Services delivered by top five vendors Supplemental educational services (4 vendors)

		Percentage of students on free or reduced lunch: 81%

	Student demographics

		African American: 65.3%

Title I staff (full-time equivalents)

		Native American: 0.3%

	District report card

		Graduation rate: 54.3%

Overall Title I budget (showing discretionary and required reservations)

	District characteristics

Geographic category: rural (fringe)
Total schools in district: 5 Number of schools receiving  Title I funds: 1 (20%)
Schoolwide programs: none  Targeted assistance  programs: 1 (100%)

		Number of Title I schools in need of improvement, corrective action, or restructuring: none

		Total number of students: 1,713

		Percentage of students on free or reduced lunch: 10%

Title I staff (full-time equivalents)

	Student demographics

		Asian/Pacific Islander: 1.0%

Instructional (2 teachers)

	District report card

Overall Title I budget (Showing discretionary and required reservations)

		Graduation rate: 85%

	District characteristics

Geographic category: city (small)
Total schools in district: 22 Number of schools receiving  Title I funds: 8 (36%)
Schoolwide programs: 4 (50%)  Targeted assistance  programs: 4 (50%)

		Total number of students: 10,684

		Percentage of students on free or reduced lunch: 28%

Computers and supplies (2 vendors)

	Student demographics

Title I staff (full-time equivalents)

		Asian/Pacific Islander: 6.9%

Administrative positions (<1 administrators)

	District report card

		Graduation rate: 79.5%

Overall Title I budget (Showing discretionary and required reservations)

	District characteristics

Geographic category: city (midsize)
Total schools in district: 47 Number of schools receiving  Title I funds: 47 (100%)

		Total number of students: 23,710

		Percentage of students on free or reduced lunch: 86%

Supplemental educational services (3 vendors)

	Student demographics

		African American: 22.0%

Title I staff (full-time equivalents)

		Native American: 0.6%

	District report card

		Graduation rate: 66.5%

Overall Title I budget (Showing discretionary and required reservations)

	District characteristics

Geographic category: suburb (large)
Number of schools receiving  Title I funds: 12 (35%)
Schoolwide programs: 5 (42%)  Targeted assistance  programs: 7 (58%)

		Total number of students: 20,911

		Percentage of students on free or reduced lunch: 24%

	Student demographics

		Asian/Pacific Islander: 7.0%

Title I staff (full-time equivalents)

		Latino: 6.8%

	District report card

		Graduation rate: 70.6%

Overall Title I budget (showing discretionary and required reservations)

	District characteristics

Geographic category: suburb (midsize)
Total schools in district: 19 Number of schools receiving  Title I funds: 5 (26%)
Schoolwide programs: 3 (60%)  Targeted assistance  programs: 2 (40%)

		Total number of students: 13,924

		Percentage of students on free or reduced lunch: 33%

	Student demographics

		Asian/Pacific Islander: 13.1%

Title I staff (full-time equivalents)
Administrative positions (<1 clerical)

	District report card

		Graduation rate: 79.3%

Overall Title I budget (showing discretionary and required reservations)

	District characteristics

Geographic category: city (large)
Total schools in district: 99 Number of schools receiving  Title I funds: 33 (33%)
Schoolwide programs: 31 (94%)  Targeted assistance  programs: 2 (6%)

		Total number of students: 45,968

		Percentage of students on free or reduced lunch: 39%

Supplemental educational services (4 vendors)

	Student demographics

Title I staff (full-time equivalents)

		African American: 21.1%

		Native American: 1.9%

	District report card

		Graduation rate: 70.1%

Overall Title I budget (Showing discretionary and required reservations)

Appendix III: GAO Contact and Staff Acknowledgments

	GAO Contact

	Staff Acknowledgments

The following staff members made key contributions to this report:  Cornelia Ashby, Director; Betty Ward-Zukerman, Assistant Director; Lara  Laufer, Analyst-in-Charge; Matthew Alemu; Phyllis Anderson; James  Bennett; Jessica Botsford; William Colvin; Susannah Compton; Ranya  Elias; Catherine Hurley; Kimberly McGatlin; Sarah McGrath; Jean  McSween; Maria Morton; and Ellen Phelps Ranen.
Why GAO Did This Study

Title I of the Elementary and Secondary Education Act (ESEA), as amended, is the largest federal education funding source for kindergarten through grade 12. In fiscal year 2010, Congress appropriated $14.5 billion for Title I grants to school districts to improve educational programs in schools with high concentrations of students from lowincome families. ESEA includes accountability requirements for schools and districts that focus primarily on measuring academic outcomes rather than prescribing exactly how Title I funds are to be spent. ESEA, as amended, includes a mandate that requires GAO determine how selected districts expend Title I funds. In response, GAO addressed (1) how selected school districts spent their Title I funds and (2) what federal mechanisms are in place to oversee how Title I funds are used and what is known about the extent of noncompliance with relevant requirements. To do this, GAO visited a nongeneralizable sample of 12 school districts in 4 states and analyzed their Title I expenditures for the 2008-2009 school year. GAO also reviewed federal and local audit findings for a wider range of states and districts. Districts were selected based on criteria in the mandate including variation in size, student demographics, location, and economic conditions.

What GAO Found

GAO found that 12 selected districts in Louisiana, Ohio, Rhode Island, and Washington used Title I funds primarily for instructional purposes, consistent with findings from other research. Most selected districts focused Title I activities at the elementary level, where they expected the greatest improvement in academic achievement. Title I funds supported district initiatives to improve academic outcomes, such as reducing class sizes, extending class time, and coaching Title I teachers. The selected districts generally spent the majority of Title I funds on salaries and benefits, largely for instructional personnel. Districts with schools that failed to meet state adequate yearly progress goals for two or more consecutive years were required by law to reserve funds for various initiatives, such as transportation for public school choice, supplemental educational services, and professional development. In some districts such set-asides, which do not flow directly to schools, accounted for sizable portions of funds, amounting in two districts to 28 percent of Title I revenue. Predictably, such districts spent more than other districts on purchased services, such as tutoring for students eligible for supplemental educational services. Title I recipients are subject to various oversight mechanisms, which provide some information on noncompliance with relevant spending requirements, but are not designed to provide estimates of the prevalence of noncompliance. The Department of Education (Education) has conducted state-level monitoring to assess states' Title I program implementation. It has identified common issues, such as failure to ensure that districts properly calculate or reserve funds for specific purposes. To guard against fraud and abuse, Education's Office of Inspector General (OIG) uses risk-based criteria, such as past audit findings, to select districts for financial audit. In such districts, OIG has found instances of unallowable expenditures of Title I funds. Also, all states and districts that spend more than $500,000 in federal awards must file an annual audit that focuses on financial management and compliance with provisions of selected federal programs. Roughly 18 percent of districts that filed a fiscal year 2009 audit in which Title I compliance was reviewed had findings related to Title I, which most commonly dealt with unallowable costs and cost principles. However, only a subset of districts are audited for Title I compliance in any given year. When any type of oversight identifies noncompliance, school districts and states must identify and take corrective actions. Education also uses results of oversight and monitoring to target future monitoring efforts and to develop technical assistance and training to assist states and school districts in using their resources and flexibility appropriately.

What GAO Recommends

GAO is not making recommendations. Education provided technical comment on a draft of this report, which we incorporated as appropriate.