United States USSA Association The Merger of the U.S. National Student Association and the National Student Lobby For Immediate Release 3/20/79 NEWS RELEASE USSA OPPOSES BASIC GRANT FAMILY CONTRIBUTION SCHEDULE The United States Student Association (USSA) expressed its strong opposition to the proposed Basic Educational Opportunity Grant (BEOG) Family Contribution Schedule which was submitted to Congress today by HEW. This Schedule, which determines who is eligible to receive a Basic Grant, takes effect unless disapproved by Congress. HEW's proposal excludes the improvements in calculation of BEOG awards for financially independent students that are mandated by the Middle Income Student Assistance Act (MISAA), P.L. 95-566. This deletion will deny 60,000 low-income students the awards they are entitled to under law. "We must urge Congress to disapprove this Schedule", said Frank Jackalone, USSA National Chairperson. "The students who will be completely prevented from receiving a Basic Grant are primarily those students with their own dependents, clearly students who are desperately in need of financial assistance. HEW is blatently ignoring the intent of Congress. They are reneging on commitments made last year." Joel Packer, USSA Legislative Director noted that the Administration initially seized on a legal technicality as an excuse to delay funding this provision, but has finally admitted that the decision to save an estimated $130 million is based on budgetary issues. "We have made this issue one of USSA's top priorities for this session", noted Packer. "We will not sit idly by while the Administration, in clear violation of the law, attempts to take away vitally needed dollars from widowed parents and young married couples attempting to obtain a college education." USSA has urged all its members to contact members of Congress on this issue. On April 23-24, 1979, USSA will bring almost 400 student leaders to Capitol Hill to lobby on this issue as part of its 10th National Lobbying Conference. Mr. FORD. The committee is in recess. [Whereupon, at 12:30 p.m., the committee was recessed subject to the call of the Chair.] REAUTHORIZATION OF THE HIGHER EDUCATION ACT AND RELATED MEASURES Part 1-Strengthening Developing Institutions WEDNESDAY, MARCH 28, 1979 U.S. HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON POSTSECONDARY EDUCATION, COMMITTEE ON EDUCATION AND Labor, Washington, D.C. The subcommittee met at 9:30 a.m., pursuant to call, in room 2175, Rayburn House Office Building, Hon. William D. Ford (chairman of the subcommittee) presiding. Members present: Representatives Ford, Peyser, Weiss, Tauke, Buchanan, and Williams. Staff present: Thomas R. Wolanin, staff director; Patricia Rissler, deputy staff director; William Clohan, minority assistant education counsel; Jennifer Vance, minority legislative associate. Mr. FORD. The Subcommittee on Postsecondary Education will come to order for the purpose of continuing hearings on the reauthorization of the Higher Education Act of 1965, and related measures. Our hearing today, and our hearing tomorrow, will consider the program for strengthening developing institutions, title III of the Higher Education Act. This is one of the original programs authorized in the Higher Education Act of 1965, and nearly $1 billion has been appropriated for this program since it was first created. The current fiscal year, the appropriation is $120 million which is the full authorization. There are, I know, many questions and concerns over the impact and effectiveness of the program as well as suggestions for improving its performance and sharpening its focus. On November 2, 1978, the Department of Health, Education, and Welfare published proposed new regulations that would dramatically overhaul the operation of the program. These regulations have not yet been finalized, but I am sure that they will be the subject of comment by our witnesses. [Regulations appear at end of hearing.] On February 13, 1979, the General Accounting Office issued a report to the Congress entitled, "Federal Programs to Strengthen Developing Institutions of Higher Education.' Our witnesses today will include representatives of the General Accounting Office, who will summarize their report and respond to questions about it. I might note that copies of the report have been made available to the members of the committee prior to today's hearing. We also have representatives from the National Center for Educational Statistics, who will comment on the new methodology proposed in the regulations for determining whether an institution of higher education is a developing institutions, representatives from several of the major consortia which provide assistance to developing institutions, and representatives of institutions higher education which have participated in the title III program. I would at this time, without objection, ask unanimous consent that the written statements on title III submitted by the witnesses, be inserted in full at this point in the record, so that we can proceed to hear from them in any manner that is most convenient. The first panel is from the General Accounting Office, Mr. Gregory Ahart, Director, Human Resources Division; and Ed Niemi, Supervisory Auditor; Marie Eldridge and Rolf Wulfsberg from the National Center for Educational Statistics. [Prepared statement of Gregory Ahart follows:] STATEMENT OF GREGORY J. AHART, DIRECTOR, HUMAN RESOURCES DIVISION Mr. Chairman and members of the subcommittee, I am pleased to appear here today to discuss our February 13, 1979, report to the Congress on the Strengthening Developing Institutions of Higher Education Program. The program is authorized by title III of the Higher Education Act of 1965, as amended. We made the review at Office of Education (OE) headquarters in Washington, D.C., 19 colleges and universities, and 7 assisting agencies. We found that serious questions remain about who the program should be assisting, how it should be organized, and where it is going. This is our second report to the Congress on the Developing Institutions Program. In the first review, which was completed in 1975, and again in this later review, we could not evaluate the success of the program because OE had not defined a "developing institution," nor had it determined when an institution would be considered developed. This report points out that there is a need for OE to: Clarify the program's direction; Reaffirm grantee selection procedures; Strengthen controls over the expenditure of funds; Better plan and account for services under funded projects; and Develop effective performance evaluation procedures. NEED TO CLARIFY PROGRAM DIRECTION Basic to each of the problems we found with the Developing Institutions Program is that it lacks direction. Prior to the program's inception there was concern over the inability to define a developing institution. The Congress included general eligibility requirements in title III of the Higher Education Act of 1965 and authorized the Commissioner of Education to issue specific eligibility criteria through program regulations. OE issued the first regulations for the program in May 1974-more than 8 years after passage of the law. After 12 years of operation and more than $728 million in grants, fundamental questions about the Developing Institutions Program are largely unanswered: What is a developing institution and how does such a school reach the mainstream of higher education? Which institutions should receive priority? How long will title III funds be necessary? Although we identified projects which provided valuable services to institutions. no institutions have been identified as having reached the mainstream of higher education as a result of their participation in the program. It is virtually impossible to determine the program's impact on moving schools toward the mainstream of American higher education. Of the 244 institutions which received grants in academic year 1977-78, 120 had been in the program for at least 8 years. NEED TO REAFFIRM GRANTEE SELECTION PROCEDURES Because so many institutions have been determined to be eligible for title III assistance, OE has been unable to fund all applications. Therefore, OE must be selective in making grant awards. However, OE's procedures for selecting institutions have been inconsistently applied, and determinations have been subjective. Because institutions which had participated in the program for several years received preference, institutions with the most critical needs or the greatest opportunity for advancement might not have been served. Institutions receiving grants might have become dependent on this support rather than seek ways to replace this money. Since 1973, the Developing Institutions Program has been divided into two programs-Basic and Advanced. OE established the Advanced program for more highly developed institutions which were close to, but not in, the mainstream of higher education. These schools were expected to reach a stage where they would no longer need title III assistance. Under the Basic program, OE offered grants to less developed schools to improve their overall quality. Technical review OE uses field readers and OE officials in the technical review of funding applications. For fiscal year 1977, field reader reviews of applications resulted in inconsistent and inconclusive recommendations for final funding and many readers had conflicts of interest based on OE procedures. Twenty-four percent of the Basic program field readers worked for institutions which applied for Basic program funding. Staff from OE's title III program reviewed applications for Basic and Advanced programs, contrary to OE's procedures. For these reasons, the value of the field reader recommendations to OE was questionable. For the technical review process for fiscal year 1977 grants, for example: Not all Advanced program applications received field reader reviews. Eighteen of the 410 Basic applications came from institutions which had already been recommended for funding under the Advanced program. Field readers' recommended funding levels varied widely for the same application. Final funding determinations After the field reader reviews, OE's Basic and Advanced program staffs separately determined which projects would be funded. Title III awards for fiscal year 1977 revealed many inconsistencies in OE's application of procedures for selecting institutions for funding. These inconsistencies resulted in questionable awards. This was especially true in the Basic program, which followed a predetermined funding strategy. This funding strategy set standards for distributing funds among colleges representing the various ethnic and racial populations in American higher education. The inconsistent application of the selection procedures shows up in an analysis of the final Basic program grantees for fiscal year 1977: Many institutions which received large grants received low funding recommendations from field readers. Many institutions which received comparatively high field reader ratings did not receive grants. Institutions in a single large, multifunction consortium arrangement of predominantly black, 4-year colleges received the largest grants. Generally, funding was based on amounts awarded institutions in the previous year. The inconsistent application of selection procedures in the Basic program raised questions about whether: (1) Institutions were treated equally in the competitive process; and (2) the most deserving institutions received grants. NEED TO STRENGTHEN CONTROLS OVER FUNDS Title III grants are intended to assist developing institutions which are struggling for survival for financial and other reasons. However, adequate financial controls for the program have not been established to ensure maximum benefits from grants. OE has not provided grantee institutions with adequate guidance for administering Federal funds and has not established postaward procedures to review expenditures under title III grants. This led to mismanagement of Federal resources by institutions. At many institutions we visited, the institutions' control over title III expenditures did not meet standards set by the law and the general grant provisions. The major problems identified were: (1) Inadequate support for grantees' payments to assisting agencies; (2) questionable charges to grants; (3) carrying over 45-934 O - 79 - 7 grant funds beyond authorized grant periods without OE approval; and (4) inaccurate and misleading reporting of financial activities to OE. Insufficient controls over payments to assisting agencies Assisting agencies (service providers) have become deeply involved in the Developing Institutions Program. Basic program grantees use assisting agencies under each arrangement, and some Basic program consortia are controlled almost entirely by assisting agencies. The agencies determine what services will be offered, which schools will be invited as members, and which schools will be coordinating institutions. Basic schools we visited did not select assisting agencies competitively, even though this was encouraged by OE regulations. Title III grantees have not adequately carried out their responsibility before making payments to assisting agencies. Grantees have functioned mainly as channels for title III funds, and often based payments to assisting agencies on budgeted projections rather than actual agency cost records and performance. We found numerous examples of deficient monitoring of assisting agency activities by grantees. An institution paid an assisting agency about $580,000, but it had no documentation to show how the funds were used or what benefits were received. A school official could not adequately explain what the agency was doing with the money and admitted that the grantee school had received no benefits from the arrange ment. Based on documentation at one assisting agency, many institutions received only a portion of the services to which they were entitled. An institution paid three assisting agencies $82,000 without verifying that the agencies incurred the reimbursed costs. Many of the problems in monitoring payments to assisting agencies exist because OE has not defined the role of assisting agencies under title III and the way coordinating institutions and other developing institutions should interact with them. Grantee institutions did not understand their responsibilities for managing funds paid to assisting agencies. In many cases, charges by institutions and assisting agencies appeared to violate OE's regulations. The most common examples of this were charges for personnel costs (salaries and fringe benefits) and consultants-normally two of the largest items budgeted under a title III grant. We found that charges to title III were not always consistent with individuals' participation in the applicable projects, consultants were paid up to $300 a day without OE's approval of payments exceeding $100 per day, and funds earmarked for consultants were used for other purposes. While these were the most common types of questionable items, there were others. Interest earned on title III funds was not returned to the Treasury, as required by the provisions. An agency used title III funds to offset deficits in other Federal and non-Federal programs. An assisting agency used title III funds to pay a portion of the costs to relocate its headquarters in another city. We found no cases where OE had collected excess funds or reduced the following year's grants because funds were available at the end of the grant period. Postaward monitoring Problems with OE's postaward monitoring activities included the following: Site visits were too few and normally did not adequately consider funding con trols. Audit exceptions were not properly resolved, and assisting agencies have not beer audited on a regular basis. NEED TO PLAN AND ACCOUNT FOR SERVICES UNDER TITLE III PROJECTS Almost any type of project can be funded under title III if it shows promise fo developing the participating institutions. While this flexibility enabled developin institutions to design individualized programs, it also led to a number of problems especially in the Basic program. Many institutions entered into cooperative arrange ments without proper consideration of how these projects would help them reac overall development objectives. The Advanced program placed heavy emphasis on the need for comprehensiv planning of an institution's title III activities and, although the institutions wer |