CREW: Department of Education: Regarding For-Profit Education: 4/21/11 - FOIA 10-1704ODS

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From: Miller, Tony <lO=U SDOED/OU=U SDO ED/CN= RECl£I ENIS/CN=TQNY ,~
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Subject: OMB Call on Gainful Employment
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From: Milkr. Tony </Q=USDOEP /QU=USDOED/CN=REQ £lENTS/CN=IONY.MlLLER>
To: Mi.Jk.L..:[Qnx
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Shireman. Bob
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Subject: OMBIED GE Conference Call
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From: Miller, Tony </O-USDOED/OU~USDOED/CN-RECIPIENTS/CN-TQNY.MILLER>
To:~
Shireman, Bob
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Subject: GE Update: Bob & Tony
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From: Miller, Tony </O~USDOED/OU=USDOED/CN=RECIPIENTS/CN=TONY.MILLER>
To: Mil~r, Tony
Shireman, Bob
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From: Miller, Tony </O~USDOED/OU-USDOED/CN-RECIPIENTS/CN~TONY.MILLER>
To: Milter, Tony
Shireman, Bob
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From: Miller, Tony </O-USDOED/OU=USDOED/CN=RECIPIENTS/CN=TONY.MILLER>
To: Miller, TQny
Kanter, Martha
Shireman, Bob
Kvaal, James
Yuan, Georgi!!
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Subject: GE Meeting
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-----Original Message-----
From: Yuan, Georgia
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To: Miller, Tony; Kanter, Martha; Shireman, Bob; Kvaal, James; Ferguson, Keith
Subject: Re: Info Request
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----- Original Message -----

From: Miller, Tony
r 8i Kanter Martha- Shireman , ; Kvaal, James; Yuan, Georgia; Ferguson, Keith

j(b)(5)
Sent using BlackBerry

From: Kanter, Martha
To: Miller, Tony; Shireman, Bob; Kvaal, James; Yuan, Georgia; Ferguson, Keith
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Subject: RE: Info Request
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From: Miller, Tony

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To: Shireman, Bob; Kvaal, James
Cc: Kanter, Martha
Subject: Info Request
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From: Miller, Tony <IO=USDOED/OU=USDOED/CN=RECIPIENTS/CN=TONY.MILLER>
To: Miller, Tony
Shireman, Bob
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Subject: GE & Talent Search
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From: Miller, Tony </O=USDOED/OU=USDOED/CN=RECIPIENTS/CN=TONY.MILLER>
To: S£hmjdt, Greg
RQbinson-Kimble. Stephanie
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Subject: ?FW: GE Data Working Group
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-----Original Appointment-----
From: Fine, Stephanie
l(b)(5 ) I
To: Miller, Tony; Shireman, Bob; Bergeron, David; Madzelan, Dan; Finley, Steve; Dannenberg, Michael; Yuan,
Georgia; Weko, Tom; Miller, Elise; Graham, William; Fine, Stephanie
. Subject: GE Data Working Group
(b)( 5)
Pollack,Joshua
From: Miller, Tony
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To: Kanter, Martha; Shireman, Bob; Kvaai, James; Yuan, Georgia; Ferguson, Keith
SUbject: Re: Info Request
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From: Miller, Tony

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From: Yuan, Georgia
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To: Miller, Tony; Kanter, Martha; Shireman, Bob; Kvaal, James; Ferguson, Keith
(b)( 5)

From: Miller, Tony
To: Kanter, Martha; Shireman, Bob; Kvaal, James; Yuan, Georgia; Ferguson, Keith
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SU6ject: Re: Info Request
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From: Miller, Tonv

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Cc: Kanter, Martha
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From: Miller, Tony
l(b)(5)
To: Rogers, Margot
Subject: Re: ATTORNEY-CLIENT COMMUNICATION-PRIVILEGED AND CONFIDENTIAL-
(b)(5 )

From: Rogers, Margot
To: Miller, Tony
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Subject: FW: ATTORNEY-CLIENT COMMUNICATION-PRNILEGED AND CONFIDENTIAL-
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From: Bergeron, David
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To: Gomez, Gabriella; Yuau, Georgia; Jenkins, Harold; Siegel, Briau; Madzelau, Dau
Cc: Shiremau, Bob; Rogers, Margot
Subject: RE: ATTORNEY-CLIENT COMMUNICATION-PRNILEGED AND CONFIDENTIAL-
(b)( 5)
From: Gomez, Gabriella

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0: Yuan, Georgia; Jellkins, Harold; Siegel, Briau; Madzelan, Dau; Bergeron, David
Cc: Shireman, Bob; Rogers, Margot
Subject: Re: ATTORNEY-CLIENT COMMUNICATION-PRIVILEGED AND CONFIDENTIAL-
(b)( 5)
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From: Yuan, Georgia
To: Jenkins, Harold; Siegel, Brian; Madzelan, Dan; Bergeron, David
Cc: Shireman, Bob; Rogers, Margot; Gomez, Gabriella
Sent: Wed May 2620:58:162010
Subject: Fw: ATTORNEY-CLIENT COMMUNICATION-PRNILEGED AND CONFIDENTIAL-
(b )(5 )

From: Rose, Charlie
To: Gomez, Gabriella; Rogers, Margot; Martin, Carmel; Miller, Tony; Kanter, Martha; Cunningham, Peter; Shireman,
Bob; Yuan, Georgia; Rosenfelt, Phil; Miceli, Julie
Sent: Wed May 26 20:52:16 2010
Subject: Re: ATTORNEY-CLIENT COMMUNICATION-PRNILEGED AND CONFIDENTIAL -
(b )(5 )

To: Rogers, Margot; Martin, Carmel; Miller, Tony; Kanter, Martha; Rose, Charlie; Cunningham, Peter; Shireman, Bob;
Yuan, Georgia
Sent: Wed May 26 20:31:44 2010
Subject: RE: ATTORNEY-CLIENT COMMUNICATION-PRNILEGED AND CONFIDENTIAL-
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-----Original Mcssagc-v->-
Sent: Wednesday, May 26,20109:26 PM
To: Gomez, Gabriella; Martin, Carmel; Miller, Tony; Kanter, Martha; Rose, Charlie; Cunningham, Peter; Shireman, Bob;
Yuan, Georgia
Subject: ATTORNEY-CLIENT COMMUNICATION-PRIVILEGED AND CONFIDENTIAL-
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IS

Sent: Wednesday, May 26, 2010 9:00 PM
To: Martin, Carmel; Rogers, Margot; Miller, Tony; Kanter, Martha; Rose, Charlie; Cunningham, Peter
Subject: URGENT - Request from Obey Staff, Black Caucus Issue
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Pollack,Joshua
From: Miller, Tony
Sent: Wednesday, May 12,20109:31 AM
To: Kanter, Martha; Shireman, Bob; Shelton, Jim; Melendez, Thelma; Martin, Carmel; Posny,
Alexa
Cc: Snyder, Jason
Subject: RE: ED- List- of- Documents- for- OMB Review 05-07-10
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From: Miller, Tony

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•• • •
To: Kanter, Martha; Shireman, Bob; Shelton, Jim; Melendez, Thelma; Martin, carmel; Posny, Alexa
Subject: ED_List_oCDocuments_for_OMB_Review_05-07-1O
(b )(5 )
1
Pollack, Joshua
From: Snyder, Jason

Sent: Friday, May 07, 2010 10:31 AM
To: Kanter, Martha
Cc: Shireman, Bob; Dann-Messier, Brenda; Madzelan, Dan; Ferguson, Keith; Ceja, Alejandra;
Cichowski, Carol; Dannenberg, Michael; Bergeron, David; Wurtzel, Judy
Subject: RE: New Draft Spending Plan Priority
(b)( 5)
-----Origina1 Message-----
From: Kanter, Martha •
Sent: Friday, May 07, 2010 12:08 AM
To: Snyder, Jason
Cc: Shireman, Bob; Darm-Messier, Brenda; Madze1an, Dan; Ferguson, Keith; Ceja, Alejandra
Subject: FW: New Draft Spending Plan Priority
(b)( 5)
From: Manheimer, Ann

To: Snyder, Jason
1
Suhject: RE: New Draft Spending Plan Priority
(b )(5)
From: Snyder, Jason

Sent: Monday, May 03,2010 1:10 PM
To: Dann-Messier, Brenda; Kanter, Martha
Cc: Wurtzel, Judy; Cichowski, Carol; Manheimer, Ann
Subject: New Draft Spending Plan Priority
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Draft 5-7-10
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Pollack,Joshua
From:
Sent:
re.
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From: Miller, Tony

To: Madzelan, Dan; Bergeron, David; Yuan, Georgia; Finley, Steve; Dannenberg, Michael; Weko, Tom; Miller, Elise;
Graham, William
(b)( 5)
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Pollack, Joshua
From: Kolotos, John

Sent: Tuesday, May 18, 20104:24 PM
To: Miller, Tony; Sellers, Fred; Shireman, Bob
Cc: Bergeron, David; Fine, Stephanie; Arsenault, Leigh; Manheimer, Ann; Madzelan, Dan
Subject: RE: Tony and Bobs comments on GE
Tony, see below. Thanks. john
From: Miller, Tony

Sent: Tuesday, May 18, 2010 3:55 PM
To: Sellers, Fred; Shireman, Bob
(b)( 5)
From: Sellers, Fred
To: Miller, Tony; Shireman, Bob
Cc: Bergeron, David; Fine, Stephanie; Arsenault, Leigh; Manheimer, Ann; Kolotos, John;
Madzelan, Dan
Subject: FW: Tony and Bobs comments on GE
(b)( 5)
Thanks.
Fred Sellers, OPE

202 502-7502
From: Kolotos, John
To: Sellers, Fred; McCullough, Carney; Guthrie, Marty; Bergeron, David
Subject: Tony and Bobs comments on GE
To move the discussion along, here are Bob's and Tony's comments and some responses.
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Pollack,Joshua
From: Sellers, Fred
To: Miller, Tony; Shireman, Bob
Cc: Bergeron, David; Fine, Stephanie; Arsenault, Leigh; Manheimer, Ann; Kolotos, John;
Madzelan, Dan
Subject: FW: Tony and Bobs comments on GE
(b)(5 )
Thanks.
Fred Sellers, OPE

202 502-7502
From: Kolotos, John
Sent: Tuesday, May 18, 201012:57 PM
To: Sellers, Fred; McCullough, Carney; Guthrie, Marty; Bergeron, David
Subject: Tony and Bobs conunents on GE
To move the discussion along, here are Bob's and Tony's conunents and some responses.
Bobs conunents:
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Tony's conunents:
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Pollack, Joshua
Sent: Monday, May 24, 2010 8:43 AM
To: Miller, Tony
Subject: RE: Guaranty Agency FINAL Letter
Done.
From: Miller, Tony
Sent: Sunday, May 23, 2010 11:11 PM
To: Rogers, Margot
Subject: Fw: Guaranty Agency FINAL Letter
(b)( 5)
----- Original Message ----- I

To: Rogers, Margot
Cc: Miller, Tony; Martin, Cannel; Cunningham, Peter; Rose, Charlie; Shireman, Bob
Sent: Sun May 2319:35:532010
Subject: FW: Guaranty Agency FINAL Letter
(b)( 5)
Martha
From: Shireman, Bob

Sent: Sunday, May 23,2010 8:33 PM
To: Kanter, Martha
Cc: Gomez, Gabriella
(b )(5 )
-Bob
Robert Shireman
Deputy Undersecretary
U.S. Department of Education
1
(202) 260-0101
From: Moran, Pamela

Sent: Friday, May 21,2010 5:20 PM
To: David, Fanta; Taggart, Bill; Runcie, James; Yuan, Georgia; Duporte, Franklyn; Jenkins, Harold; Marinucci, Fred;
Bergeron, David; Madzelan, Dan; Baker, Jeff; Szabo, Susan; Shireman, Bob; Martin, Phil; Skelly, Thomas; Ferrier, Evan;
Siegel, Brian
Cc: Turner, Katrina
(b )(5 )
From: David, Fanta
Sent: Friday, May 21,2010 5:01 PM
To: Taggart, Bill; Runcie, James; Yuan, Georgia; Duporte, Franklyn; Jenkins, Harold; Marinucci, Fred; Bergeron, David;
Madzelan, Dan; Baker, Jeff; Szabo, Susan; Shireman, Bob; Martin, Phil; Skelly, Thomas; Ferrier, Evan; Siegel, Brian
Cc: Turner, Katrina; Moran, Pamela; David, Fanta
Subject: Guaranty Agency FINAL Letter
All,
(b)( 5)
Fanta David
(202) 377-4668
From: David, Fanta
Sent: Friday, May 21,2010 10:11 AM
Madzelan, Dan; Baker, Jeff; Szabo, Susan; Shireman, Bob; Martin, Phil; Skelly, Thomas; Ferrier, Evan
Cc: Turner, Katrina
Subject: FW: PGA Letter 2
Importance: High
All,
(b)( 5)
Thank you.
2
Fanta on behalf of Katrina Turner
Fanta David
(202) 377-4668
From: Turner, Katrina
Sent: Thursday, May 20,2010 4:27 PM
To: David, Fanta
Importance: High
(b)( 5)
Thanks
°
Sent: Thursday, May 20, 20 I II :59 AM
To: Siegel, Brian; Duporte, Franklyn; Graham, William; Turner, Katrina
Cc: Taggart, Bill; Runcie, James; Yuan, Georgia; Jenkins, Harold; Marinucci, Fred; Madzelan, Dan; Baker, Jeff; Szabo,
Susan; Shireman, Bob; Martin, Phil; Skelly, Thomas; Ferrier, Evan
Subject: RE: PGA Letter 2
Importance: High
(b)(5 )
David
From: Siegel, Brian
Sent: Thursday, May 20, 2010 II :46 AM
To: Bergeron, David; Duporte, Franklyn; Graham, William; Turner, Katrina
3
(b)( 5)
Brian
Sent: Thursday, May 20,2010 II :23 AM iI
To: Duporte, Franklyn; Graham, William; Siegel, Brian; Turner, Katrina
Importance: High
(b)( 5)
David
From: Duporte, Franklyn
To: Bergeron, David; Graham, William; Siegel, Brian; Turner, Katrina
Subject: Re: PGA Letter 2
(b)( 5)

To: Graham, William; Siegel, Brian; Turner, Katrina
Cc: Taggart, Bill; Runcie, James; Yuan, Georgia; Duporte, Franklyn; Jenkins, Harold; Marinucci, Fred; Madzelan, Dan;
Baker, Jeff; Szabo, Susan; Shireman, Bob; Martin, Phil; Skelly, Thomas; Ferrier, Evan
Sent: Thu May 2009:54:512010
(b)( 5)
From: Graham, William
Sent: Thursday, May 20, 2010 9:40 AM
To: Siegel, Brian; Turner, Katrina
Cc: Taggart, Bill; Runcie, James; Yuan, Georgia; Duporte, Franklyn; Jenkins, Harold; Marinucci, Fred; Bergeron, David;
•
(b)(5 )
: .-
From: Siegel, Brian
To: Turner, Katrina
Madzelan, Dan; Baker, Jeff; Szabo, Susan; Graham, William; Shireman, Bob; Martin, Phil
(b)( 5)

To: Taggart, Bill; Siegel, Brian; Bergeron, David; Madzelan, Dan; Baker, Jeff; Szabo, Susan; Duporte, Franklyn; Graham,
William; Yuan, Georgia; Shireman, Bob; Martin, Phil
Cc: Runcie, James; Turner, Katrina
All,
(b )(5 )
5
Pollack, Joshua

Sent: Monday, May 24, 20106:47 AM
To: Miller Tonv
(b)( 5)
iI
I
From: Miller, Tony
To: Rogers, Margot
Sent: Sun May 2322:10:472010
Subject: Fw: Guaranty Agency FINAL Letter
(b)( 5)

To: Rogers, Margot
Cc: Miller, Tony; Martin, Carmel; Cunningham, Peter; Rose, Charlie; Shireman, Bob
Sent: SunMay2319:35:532010
(b)( 5)
iI -
From: Shireman, Bob
I
Sent: Sunday, May 23,2010 8:33 PM i
To: Kanter, Martha
Cc: Gomez, Gabriella
Martha:
(b)( 5)
Robert Shireman
1
(202) 260-01 01
From: Moran, Pamela

Sent: Friday, May 21, 2010 5:20 PM
To: David, Fanta; Taggart, Bill; Runcie, James; Yuan, Georgia; Duporte, Franklyn; Jenkins, Harold; Marinucci, Fred;
Bergeron, David; Madzelan, Dan; Baker, Jeff; Szabo, Susan; Shireman, Bob; Martin, Phil; Skelly, Thomas; Ferrier, Evan;
Siegel, Brian
Cc: Turner, Katrina
Irb )(S )
From: David, Fanta
Ub i'S ) ." ., , I
Madzelan, Dan; Baker, Jeff; Szabo, Susan; Shireman, Bob; Martin, Phil; Skelly, Thomas; Ferrier, Evan; Siegel, Brian
Cc: Turner, Katrina; Moran, Pamela; David, Fanta
Subj ect: Guaranty Agency FINAL Letter
All,
(b)( S)
Fanta on behalf of Katrina.
Fanta David
(202) 377-4668
From: David, Fanta
Sent: Friday, May 21,2010 10:1l AM
Cc: Turner, Katrina
Importance: High
All,
(b)( S)
Thank you.
2
Fanta on behalf of Katrina Turner
Fanta David
(202) 377-4668
Sent: Thursday, May 20, 2010 4:27 PM
To: David, Fanta
Importance: High
(b)( 5)
Thanks
l(b )(5 ) I
To: Siegel, Brian; Duporte, Franklyn; Graham, William; Turner, Katrina

Importance: High
(b)( 5)
David
From: Siegel, Brian
To: Bergeron, David; Duporte, Franklyn; Graham, William; Turner, Katrina
(b)( 5)
3
(b)( 5)
Brian
To: Duporte, Franklyn; Graham, William; Siegel, Brian; Turner, Katrina
Importance: High
(b)( 5)
From: Duporte, Franklyn
Sent: Thursday, May 20, 2010 11 :00 AM
To: Bergeron, David; Graham, William; Siegel, Brian; Turner, Katrina
Subject: Re: PGA Letter 2
l(b )(5 )

To: Graham, William; Siegel, Brian; Turner, Katrina
Cc: Taggart, Bill; Runcie, James; Yuan, Georgia; Duporte, Franklyn; Jenkins, Harold; Marinucci, Fred; Madzelan, Dan;
Baker, Jeff; Szabo, Susan; Shireman, Bob; Martin, Phil; Skelly, Thomas; Ferrier, Evan
Sent: Thu May 20 09:54:512010
(b)( 5)
4
From: Graham, William
To: Siegel, Brian; Turner, Katrina
Cc: Taggart, Bill; Runde, James; Yuan, Georgia; Duporte, Franklyn; Jenkins, Harold; Marinucci, Fred; Bergeron, David;
(b )(5 )
From: Siegel, Brian
To: Turner, Katrina
Madzelan, Dan; Baker, Jeff; Szabo, Susan; Graham, William; Shireman, Bob; Martin, Phil
(b)(5 )
Brian Siegel

l(b)(5 ) I
To: Taggart, Bill; Siegel, Brian; Bergeron, David; Madzelan, Dan; Baker, Jeff; Szabo, Susan; Duporte, Franklyn; Graham,
William; Yuan, Georgia; Shireman, Bob; Martin, Phil
Cc: Runde, James; Turner, Katrina
All,
(b)(5 )
5
Pollack, Joshua
From: Mitchelson, Mary

Sent: Thursday, May 13, 20109:19 PM
To: Miller, Tony
Cc: Tighe, Kathleen S.; Clark, Teresa; Fine, Stephanie; Shireman, Bob
Subject: RE: Information on GIG audits of proprietary schools
Good, glad it's helpful. Mary
From: Miller, Tony

To: Mitchelson, Mary
Cc: Tighe, Kathleen S.; Clark, Teresa; Fine, Stephanie; Shireman, Bob
Subject: RE: Information on OIG audits of proprietary schools
Mary,
(b)( 5)
Thanks,
Tony
From: Mitchelson, Mary

Sent: Thursday, May 13, 201010:55 AM
To: Miller, Tony
Cc: Tighe, Kathleen S.; Clark, Teresa; Fine, Stephanie
Subject: Information on OIG audits of proprietary schools
Tony,
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This message, including any attachment, is for the use of the intended recipient; it may contain information that is
privileged, confidential and exempt from disclosure under applicable law. Intended recipients should take appropriate
steps to protect the confidential nature ofthis communication. If you are not an intended recipient, please notify the sender
and delete/destroy this message.
!
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!,
3
Pollack, Joshua
From: Miller, Tony
Sent: Friday, May 21,20103:35 PM
To: Fine, Stephanie
SUbject: FW: Important Correspondence Summary for May 21, 2010
From: Monroe, Tanya

Sent: Friday, May 21,20102:34:53 PM
To: Anderson, Jo; Ceja, Alejandra; Cunningham, Peter; Gomez, Gabriella;
Kanter, Martha: Martin, Carmel: Miller, Tony; Rogers, Margot;
Rose, Charlie; Snyder, Jason; Tada, Wendy; Whalen, Ann; Yale, Matt
Subject: Important Correspondence Summary for May 21, 2010
Auto forwarded by a Rule
May 21,2010
MEMORANDUM FOR THE SECRETARY

CHIEF OF STAFF
FROM; Teresa A. Garland, Director (DLW for)

Office of Executive Secretariat
SUBJECT: Important Correspondence Summary
Congressman Shares Ideas about "Gainful Employment"

Congressman Ron Klein writes regarding the Department's proposed definition of "gainful employment in a
recognized occupation." He has several specific proposals he believes may help the Department weed out the
"bad actors" in the higher education system, while allowing the good quality educational institutions to continue
to thrive. To OPE for the signature of the Secretary. Copies to Tony Miller, Martha Kanter, Margot Rogers,
Matt Yale, Ann Whalen, FSA, OS/RMS, OCFO, OCO, OGC, OLCA, OPEPD, and OPEPDlBudget Service.
Klein.pdf
fumport for Regulations on Gainful Employment and Incentive Compensation

Lauren Asher, President, The Institute for College Access & Success, writes on behalf of 33 organizations to
express support for regulations on gainful employment and incentive compensation. They support regulations
that will protect students and taxpayers from the deceptive practices of programs with little or no value. They
stand ready to be of assistance. To OPE for appropriate handling. Copies to Tony Miller, Martha Kanter,
Margot Rogers, Matt Yale, Ann Whalen, FSA, OS/RMS, OCFO, OCO, OGC, OLCA, OPEPD, and
OPDPD/Budget Service.
1
Asher.pdf
GAO Final Report on HUD's Emergency Shelter Grants Program

GAO transmits the final report, "Homelessness: Information on Administrative Costs for HUD's Emergency
Shelter Grants Program." The report does not have any recommendations. To OESE for information. Copies
to Tony Miller, Martha Kanter, Margot Rogers, Matt Yale, Ann Whalen, FSA, OS/RMS, OCFO, OCO, ODS,
OGC, OIG, OLCA, OPEPD, OPEPDlBudget Service, and OPEPDIPPSS.
Final Report.pdf
Attached is an image file should you wish to see the whole document. To do so, click 011 the icon for the document, and it should open in your PC's image viewer.
2
Mayes. Ed9.:::ar:.... _
From: Mayes, Edgar on behalf of Duncan, Arne
To: 'lau ren Asher'
Subject: RE: letter from broad coalition seeking strong regulation of career education programs
Dear Ms., Asher:
1bank you for your e-mail to Secretary of Education Arne Duncan. We appreciate hearing from you.
Your message has been forwarded to the appropriate staff member for review.
Thank you again for contacting us.
Sincerely,
Edgar Mayes •
Director of Correspondence and
Communications Control Unit
Office of the Secretary
U,S. Department of Education
Washington, DC 20202
From: Lauren Asher [mailto:LASher@tlcas.org]

sent: Thursday, May 20, 2010 1:07 PM
To: Duncan, Arne
ee: Kanter, Martha; Plotkin, Hal; Gomez, Gabriella; Shireman, Bob; Madzelan, Dan; Arsenault, Leigh; Manheimer, Ann;
Hamilton, Justin; Paullne_abernathy@tlcas.org
Subject: Letter from broad coalition seeking strong regulation of career education programs
Dear Secretary Duncan,
Please find attached a letter from a diverse coalition of more than 30 student, college, consumer and civil rights
organizations seeking strong and effective regulation of career education programs. Those signing the letter
represent many public institutions that are subject to the gainful employment and incentive compensation rules,
as well as advocates for college access for African-American, Hispanic and low-income students.
Thank you for your initiative in reviewing the Department's current program integrity regulations to ensure
their consistency with federal law and to protect both students and taxpayers. We support your efforts and stand
ready to assist you in improving the Department's regulations. Please feel free to contact me or any of the staff
listed below should you or your staff have any questions about this letter or the issues it addresses.
- Institute for College Access & Success: Pauline Abernathy (pabemathy@ticas.org) or Debbie Cochrane
(dcochrane@ticas.org),510-318-7900
- Florida State College at Jacksonville: Susan Lehr (slehr@fscj.edu)or Jim Simpson (jsimpson@fscj.edu),
904-632-3391
- National Association fur College Admission Counseling: David Hawkins (dhawkins@nacacnet.org) or
Amanda Modar (amodar@nacacnet.org), 703/836·2222
- National Consumer Law Center: Deanne Loonin (dloonin@nclc.org), (617) 542-8010
I
- Public Advocates: Jamienne Studley Gstudley@publicadvocates.org), (415) 431-7430
- United States Students Association: Angela Peoples (leg@usstudents.org1.J202) 640-6570
- U.S. PIRG: Chris Lindstrom (chris.lindstrom@pirg.org),617)747-4330
Sincerely,
Lauren Asher
President, Institute for College Access & Success
-------- ---
(PI9BSe note our new phone number and address!)

Lauren Asher
President
The Institute for College Access & Success
405 14th 51., 11 th Floor
Oakland, CA 94612
(510) 318-7900, x304
nasher@ticas,org
www.licas.org
www.~tonstudentdebt.org
www.colle!)e-insight.org
2
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May 20, 2010
The Honorable Arne Duncan

Secretary of Education
400 Maryland Avenue, SW
Washington. DC 20202
Dear Secretary Duncan:
As organizations representing students. higher education, consumers and civil rights, we

write to express our support for the Department of Education's efforts to make its
regulations more consistent with the program integrity provisions in Title IV of the Higher
Education Act. In particular, we urge you to propose regulations on incentive
compensation and gainful employment that will more effectively protect students from
high-pressure and deceptive sales tactics for educational programs of little or no benefit to
them. and will ensure that taxpayer dollars do not subsidize such practices and programs.
To protect both students and taxpayers. federal law prohibits "any commission, bonus, or
other incentive payment based directly or indirectly on success in securing enrollments or
financial aid," and requires vocational programs and nearly all programs at for-profit
institutions to "prepare students for gainful employment in a recognized occupation." Yet,
examples of overly aggressive recruiting are plentiful. Some for-profit institutions recently
made headlines by targeting homeless shelters in their recruitment efforts. i Another for-
profit institution paid $78.5 million to settle a whistleblower False Claim Act lawsuit" and
another $9.8 million to the Department of Education to resolve claims that it was paying
improper incentive compensation to its recruiters. m Yet another large for-profit institution
paid $6.5 million to settle a lawsuit brought by the California Attorney General charging "a
persistent pattern of unlawful conduct." including the inflation ofjob placement and
starting salary information in order to recruit students to enroll in costly vocational
programs, and falsification of records provided to the government,"
While most schools may not engage in such practices, federal data suggest these are not
isolated incidents. Students at for-profit schools are the most likely to borrow and borrow
the most. According to the most recent federal data, one in five for-profit school students
defaults on their federal loans. A full 44% of all defaulters attended for-profit institutions,
even though just 7% of all students attend for-profit schools. v Low-income, first-
generation and minority students attend for-profit institutions at disproportionate rates,
making them particularly vulnerable to illegal or unscrupulous acts by these schools."
Incentive Compensation. In direct conflict with federal law prohibiting institutions of

higher education from providing "any commission. bonus, or other incentive payment
based directly or indirectly OD success in securing enrollments or financial aid." current
regulations permit incentive payments that are not "based solely" on the number of
students recruited, admitted, enrolled or awarded financial aid. Some schools have
aggressively exploited this and other loopholes in the current regulations to do just what
the statute is intended to prohibit. Consistent with the Department's proposals during the
negotiated rulemaking process. the proposed new regulations should conform to the law
and prohibit any employee or contractor compensation "based directly or indirectly" on
successfully securing student enrollments or aid. To avoid creating additional loopholes, it
is important that the prohibition include compensation based directly or indirectly on
applications or enrollment up to and including completion, as well as payments for
prospective student contact information.
Gainful Employment Each year, students borrow and taxpayers spend billions of dollars
to subsidize attendance at programs required to "prepare students for gainful employment
in a recognized occupation." Yet, the Department's current regulations include no official
definition of "gainful employment." We urge you to develop regulations that define
gainful employment in a way that is measurable, enforceable, not overly burdensome to
schools, and is aligned with the following principles:
• Include all debt incurred at any affiliated school. All debt incurred at a school
under the same control structure must be included in any measure of gainful
employment that considers debt. Otherwise, schools controlled by the same
company could simply move students from one school or program to
another. Excluding debt from unaffiliated schools also has the benefit of allowing
low-cost schools to enroll and graduate students with high debt from unaffiliated
schools without fear of penalty.
• Include all private loans known to the school and its affiliates. Debt-related
measures of gainful employment must include all private loans that should be
known to the school. Excluding private loans would create a perverse incentive for
schools to promote risky private loans before students have exhausted their safer
federal loan options. Private loans that should be known to the school must include
all credit provided by any school under the same control structure as well as any
loans provided by lenders with which the school has a preferred lender
arrangement.
• Avoid loopholes for programs with hoth high student horrowing and low
completion rates. A low completion rate is one of the ways schools can fail to
prepare students for gainful employment. Students who borrow but do not
complete are often left carrying substantial debt without the increased earning
power that should come from a completed degree or certificate. The definition of
gainful employment should not create a loophole for schools to discourage
completion by students they consider likely to have trouble repaying their loans.
• Use only data that are accurate and consistent across colleges and programs.
Existing requirements for the calculation and reporting of completion and
placement rates are not sufficient for use in any success-based measure of gainful
employment. Accrediting agency requirements vary widely and allow for
substantial variation in the calculation of rates, and some schools have been found
to have falsified and manipulated their placement data. It is therefore essential that
the data and reporting standards are clear, consistent and independently verified.
Again, we applaud your initiative in reviewing the Department's current program integrity
regulations to ensure their consistency with federal law and to protect both students and
2
taxpayers. We support your efforts and stand ready to assist you in improving the
Department's regulations.
Sincerely,
American Association of Collegiate Registrars and Admissions Officers

American Association of University Women
American Federation of Teachers
American Medical Student Association
California Community College Student Financial Aid Administrators Association
California Tomorrow
Campus Progress Action
Center for Law and Social Policy
Community College League of California
Consumer Action
Consumer Federation of California
Crittenton Women's Union
Demos: A Network for Ideas & Action
Empire Justice Center
Florida State College at Jacksonville
Greater Boston Interfaith Organization
The GreenIining Institute
The Institute for College Access & Success and its Project on Student Debt
NAACP
National Association for College Admission Counseling
National Association of Consumer Bankruptcy Attorneys
National Center for Public Policy and Higher Education
National Consumer Law Center (on behalf of its low-income clients)
National Consumers League
National Council of La Raw
Neighborhood Economic Development Advocacy Project (NEDAP)
New York Community College Association of Presidents
Public Advocates Inc.
Public Higher Education Network of Massachusetts
Rainbow PUSH Coalition
. Student Senate for California Community Colleges
U.S. PIRG
United States Student Association
i Golden, Daniel, "Homeless Dropouts From High School Lured by For-Profit Colleges," Bloomberg.com,
April 30, 2010. Available at http://www,w..oombere·COml312pstnews?I)Ld=newsarchjye&sjd-aA2 EI.YUaS..k
ii O'Reilly, Cary and Daniel Golden, "Apollo Settles University of Phoenix Recruiting Suit," Bloomberg.com,
December 14, 2009. Available at hnP'/lwwwhloowbm <jom!apps/pews?pid=2060l{!8Z&sid-aQ ~&pos-;5
'" Gilbertson, Dawn, "Student-recruitment tactics at University ofPhoenix blasted by feds," The Arizona
Republic, September 14,2004. Available at hup'f/www fm;entral !XlllV&pecialstsneciat9:UartitJe$/09~?&wired.
i, California Attorney General's office July 31,2007 press release on settlement with Corinthian Schools at
hthrUag Cft goylDewsaJerts!release.p~
TICAS press release available at !)ltp:l/1lrojectonS1uden«lebt.on:/rmb yiew.php?idx=537
v.
~ Based On calculations by the Project on Student Debt on data from the 2008 National Postsecondary
Student Aid Study (NPSAS).
3
taxpayers. We support your efforts and stand ready to assist you in improving the
Department's regulations.
•
Sincerely,
American Association of Collegiate Registrars and Admissions Officers

American Association of University Women
American Federation of Teachers
American Medical Student Association
California Community College Student Financial Aid Administrators Association
California Tomorrow
Campus Progress Action
Center for Law and Social Policy
Community College League of California
Consumer Action
Consumer Federation of California
Crittenton Women's Union
Demos: A Network for Ideas & Action
Empire Justice Center
Florida State College at Jacksonville
Greater Boston Interfaith Organization
The Greenlining Institute
The Institute for College Access & Success and its Project on Student Debt
NAACP
National Association for College Admission Counseling
National Association of Consumer Bankruptcy Attorneys
National Center for Public Policy and Higher Education
National Consumer Law Center (on behalf of its low-income clients)
National Consumers League
National Council of La Raza
Neighborhood Economic Development Advocacy Project (NEDAP)
New York Community College Association of Presidents
Public Advocates Inc.
Public Higher Education Network of Massachusetts
Rainbow PUSH Coalition
Student Senate for California Community Colleges
U.S. PIRG
United States Student Association
1 Golden, Daniel, "Homeless Dropouts From High School Lured by For-Profit Colleges," Bloomberg.com,
April 30. 2010. Available at htu)'J(www bloomberg cQmIa~slnews?pid=n~ws6rchjve&sid=aA2]lVDs2S~
u O'Reilly, Cary and Daniel Golden, "Apollo Settles University of Phoenix Recruiting Sun," Bloomoerg.com,
December 14, 2009. Available at bttp'Uwww,bloombeTg comlapps/news'i'pid=20601087Jtsid""atLTscSKjRBr&pos=5
til Gilbertson, Dawn, "Student-recruitment tactics at University of Phoenix blasted by feds," The Arizona
Republic, Septe mber 14, 2004. Available al.http:Uwww.azcentrnl.comtspecialsispecia! 42/anicieslO914apolloJ4,html?&wired

IV California Attorney' General's office July 31, 2007 press release on settlement with Corinthian Schools a1
hmrllag ca'iQy/newsalertsirelease.p~
v.TICAS press release available at hnD;f/prQi~tQnstudwdebt.orglpub view php')idx=537
vt Based on calculations by the Project on Student Debt on data from the 2008 National Postsecondary
Studenl Aid Study (NPSAS).
3
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May 20, 2010

STEERING ANa POLIcY COMMITTEE
The Honorable Arne Duncan

Secretary
United States Department of Education
400 Maryland Avenue SW
Washington, DC
20202-0008
Dear Secretary Duncan,
I would like to thank you for taking the time to meet with me and other members of Congress this past
Tuesday to discuss the Department's proposal for defining "gainful employment in a recognized
occupation." As we discussed after the meeting, I have several spedfic proposals that I think may help
the Department weed out the "bad actors" in our higher education system (those schools with abysmal
graduation, job placement and default rates), while allOWing the good quality educational institutions to
continue to thrive.
I strongly believe that a robust disclosure policy, with real penalties for schools that fail to disclose
information or misrepresent themselves in any way, will help students make informed decisions on both ,
the quality of the program and the amount of debt they stand to incur. These are the components that I
believe should be a part of that disclosure policy.
Debt-to-Income ratio disclosure:
Schools would be required to disclose the estimated debt-to-income ratio each student stands to
incur based on data from either the 8ureau of Labor Statistic's 25th and 75'h percentile of wages for
careers the program prepares students to enter, or based on the actual wages of graduates of the
program when sufficient data Is available. These ratios would be calculated on 10, 15 and 20 year
repayment plans so that students understand their repayment options and what each plan will cost
them in the long run.
Programmatic accreditation disclosure:
Schools would be required to disclose whether or not a program has programmatic accreditation if
the program is supposed to prepare students for a career that requires professional licensure. This
piece Is critical because, as I'm sure you know, certain professions, such as psychologists, nurses,
engineers and more require graduation from an accredited program before that student can begin
practicing as a licensed professional.
.....lASl REPlY TO;
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Standardlzed disclosure forms:
Schools are already required to disclose graduation and job placement rates, as well as types of
employment typically obtained by graduates. We would also require schools, as part of their
obligation to disclose debt-to-income ratios and programmatic accreditation to potential students,_
to include ali this information in one standardized disclosure form to be given to students prior to
enrollment. The school would have an obligation to interact with the student and convey the
importance of this information.
Consequences for schools that do not comply;
Schools regulated under this proposal that fail to disclose this information prior to enrollment, or
misrepresent this information in anyway would be subject to fines and/or risk temporarily or
indefiniteiy
,
losing their Title IV eligibility.
Ifthe goal of defining "gainful employment" is to prevent students from being taken advantage of by
institutions that strap them with enormous levels of debt, while failing to prepare them for Jobs within
their fields of study, then increased disclosure could realistically meet that goal by encouraging students
and investors (in the case of for-profit institutions) to take their money to schools that offer more
quality products. Like any business, these institutions are only as good as the services they provide, so if
we make It abundantly clear that an institution fails to deliver to students within a particular program,
students will take their business elsewhere, and the school will have new incentives to improve.
Igreatly appreciate the time you have devoted to this issue and your consideration of my ideas. Irealize
this is a difficult clause to define, but an important one none the less to ensure students are protected
from the unfair practices of a few "bad actors" In our higher education system. Ilook forward to
working with you toward a successful resolution of this matter and encourage you to contact me with
any questions you may have.
regards,
•
Ron Klein
Member of Congress
Mayes, Ed9:.;;;,ar;... _
From: Toye, Theresa
Sent: Friday, May 21, 2010 11 :02 AM
To: Mayes, Edgar
SUbJect: FW: letter on gainful employment
Attachments : Klein letter to Secretary Duncan on Gainful Employment PDF. pdf; Klein letter to secretary
Duncan on GainfUl Employment.doc
Good morning!!! it!!!!!!!!!!!1!
·····Original Message-----
Sent: May 21,2010 11:01 AM
To: Toye, Theresa
Subject: FW: letter on gainful employment
PIs log in
From: Neale, Virginia [mailto:Virginia,Neale@maiI.house.gov]

To: Gomez, Gabriella
Subject: letter on gainful employment
Thanks again for your help with our independent living council- I spoke with Andy Peppin (sorry if I'm spelling
his name wrong) and we're going to set up a meeting to work everything out.
On another note- here is a letter from Congressman Klein with a more specific alternative proposal for the
gainful employment proposed rule, as we talked about earlier, I've attached the pdfand the word document.
Thank you so much for your consideration of our ideas. Please let me know if you have any questions.
All the best,
Virginia
1
Virginia Neale
Legislative Assistant
Congressman Ron Klein (FL-22)
313 Cannon House Office Building
202.225.3026
2
United States Government Accountability Office
GAO Report to Congressional Committees
May 2010
HOMELESSNESS
Information on
Administrative Costs
for HUD's Emergency
Shelter Grants
Program
,
"
'"
"" ":::
****
~ Accountability * Integrity * Reliability
GAO-IO-491
May 2010
HOMELESSNESS
Information on Administrative Costs for HUD's
Emergency Shelter Grants Program
What GAO Found

ESG grantees and subgrantees we visited in four states performed a range of
administrative activities, but the ESG program's allowance for administrative
costs-currently 5 percent-did not fully cover the cost of these activities.
Grantees generally focused their administrative activities on awarding
subgrants and monitoring subgrantee performance, while subgrantees focused
their administrative activities on operating their programs and reporting
results to their respective grantees. To cover unfunded ESG administrative
costs, grantees and subgrantees told us they used other sources, such as other
grants or private donations. They added that these estimated unfunded
administrative costs, which averaged 13.2 percent and ranged from amounts
equal to 2.5 percent to 56 percent of their ESG grant proceeds, diminished
their ability to support other program activities. In addition, we found minimal
standards available for evaluating the appropriateness of ESG administrative
costs, and grantees and subgrantees in the states we visited monitored ESG
administrative costs in varying levels of detal!.
The funding and treatment of administrative costs varied across other

targeted federal homeless grant programs we reviewed. For example, the
maximum administrative allowance for grantees ranged from 4 percent to 50
percent for programs with such a provision; the ESG program's current 5
percent allowance is thus one of the lower amounts provided. Programs with
similar funding structures varied in their requlrements for grantees to share
their administrative allowance with subgrantees; the ESG program generally
does not requlre grantees to share their allowance. In addition, none of the
programs we reviewed offered comprehensive direction on eligible and
ineligible administrative activities.
•
Overall, these and other varying program
features malre it difficult to malre direct comparisons between the
administrative cost provisions of the ESG program and those of other targeted
federal homeless grant programs.
A number of ESG grantees and subgrantees we visited told us they expect the
new ESG activities authorized by the HEARTH Act will result in different
kinds of administrative activities that in many cases will be more costly. They
cited client screening and eligibility verification, technical assistance to
subgrantees, number of grant applicants, and facility management and
collaboration with third parties as among areas where administrative costs
may increase. Although the HEARTH Act makes significant changes, including
increasing the administrative cost allowance to 7.5 percent, it remains unclear
when new program activities might be implemented. Uncertainty over how
and when the new ESG program might be implemented, plus variation in
administrative activities under the current program, complicate any attempt to
determine the appropriate size of the ESG administrative allowance.
HUD told us in comments on a draft ofthis report that some subgrantees

:;Vi~W;:GA6~1,b~49'1' :or k'ey comj:WnEm-tS:' " ',':_ ,::' , appear to be confusing program and administrative costs, thus potentially •
I',AFQr::hiore :irifo@atiQn';cQntac(Alicl'a';Puente :
:;:G&cKley,af (202).51'2~861'8 or" overstating any need for a larger administrative allowance.
/: '9aGkI~y~lli?Jgt;\O,gov._'
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ United States Government Accountability Office
Contents
Letter 1
Background 3
Grantees and Subgrantees We Visited Reported a Range of
Administrative Activities Whose Costs Generally Were Not Fully
Covered by the ESG Allowance 9
Funding and Treatment of Administrative Costs Varied Across
Selected Federal Grant Programs 23
Some ESG Recipients Expect the Nature of Administrative Costs to
Change and the Amount to Increase under New Activities
Authorized by the HEARTH Act 27
Agency Comments and Our Evaluation 29
Appendix I Scope and Methodology 32
Appendix II GAO Contact and Staff Acknowledgments 35
Tables
Table 1: Retention of ESG Administrative Allowance by Selected
Grantees 11
Table 2: Grantee Administrative Allowance for Selected HUD
Formula Grant Programs 27
Table 3: ESG Grantee Summary for States Visited, Fiscal Year 2009 32
Figures
Figure 1: The Distribution of ESG Grants by State, Fiscal Year 2009 5
Figure 2: How ESG Grants Fund Homeless Services 7
Figure 3: ESG Grantee Administrative Activities by Major
Categories 10
Figure 4: ESG Subgrantee Administrative Activities by Major
Categories 12
Figure 5: Estimated Unfunded ESG Administrative Costs for
Grantees and Subgrantees in Selected States 14
Figure 6: ESG Administrative Cost Provisions Compared to
Selected Other Federal Homeless Programs 24
Page i GAO-1O-491 Homelessness

Abbreviations
CDBG Community Development Block Grant

ESG Emergency Shelter Grants Program
HEARTH Act Homeless Emergency Assistance and Rapid Transition to
Housing Act of 2009
HUD Department of Housing and Urban Development
OMB Office of Management and Budget
This is a work of the U.S. government and is not subject to copyright protection in the
United States. The published product may be reproduced and distributed in its entirety
without further permission from GAO. However, because this work may contain
copyrighted images or other material, permission from the copyright holder may be
necessary if you wish to reproduce this material separately.
Page ii GAO~10~491 Homelessness

!
~ GAO
#t A"ou"t.bmty. ,"",';ly' R.II.blllly
United States Government Acconntability Office

May 20, 2010
Congressional Committees
Against a backdrop of economic recession, an estimated 1.2 million to 2

million people used an emergency shelter or transitional housing program
during the 12-month period ending September 30, 2008, according to a July
2009 report to Congress on homelessness. I That report also provided some
early indications of how the sheltered homeless population might be
changing as a result of the recent economic downturn. For example, the
report noted that family homelessness, considered to be more sensitive to
economic conditions than homelessness among individuals, has increased.
In addition, the report noted that the number of those who reported living
with family or friends the night before entering a homeless residential
facility has increased, which could also reflect the economic downturn,
because people tend to use all alternative housing options before resorting
to the shelter system. Finally, the report noted that a larger percentage of
sheltered homeless persons have come from stable accommodations prior
to entering a facility.
The U.S. Department of Housing and Urban Development (RUD)

Emergency Shelter Grants Program (ESG), a widely used federal program
to address homelessness, provides funds for emergency shelters to help
people achieve independent living. Under the program, HUD makes grants
to states, large cities, urban counties, and U.S. territories. With the
exception of states, these direct recipients, or "grantees," may carry out
ESG projects through their own departments or agencies, or may make the
funds available in the form of subgrants to nonprofit organizations that
carry out ESG projects. State grantees, however, cannot use their ESG
grant funds to conduct their own program activities and instead must
subgrant funds to nonprofit organizations or local governments to carry
out ESG projects.' Eligible ESG projects include the renovation,
rehabilitation, or construction of buildings to be used as emergency
shelters; operation of the facilities; essential supportive services (including
ISee The 2008 Annual Homeless Assessment Report to Congress, U.S. Department of
Housing and Urban Development, Office of Community Planning and Development, July
2009.
2Grantees that make subgrants are responsible for ensuring that subgrantees comply with
ESG program requirements.
Page 1 GAO-IO-491 Homelessness

those related to employment, health, drug abuse, or education); and
homeless prevention.
The Homeless Emergency Assistance and Rapid Transition to Housing Act

of 2009 (HEARTH Act) made significant changes to the ESG program. 3
Among other things, the act, which renamed the program the Emergency
Solutions Grants Program, increased the range of eligible homeless
prevention and re-housing activities, including short- or medium-term
rental assistance and housing stabilization services. In general, according
to HUD, the act shifted program emphasis from providing shelter to
fostering housing stability. The act also increased the percentage of grant
funds that grantees may use for administrative purposes from 5 percent to
a maximum of 7.5 percent. Finally, the HEARTH Act directed GAO to
conduct a study of the appropriate administrative costs for the ESG
program.
In this report, we provide information about ESG program administrative

costs, based in significant pari on our work at selected grantees and
subgrantees in four states. More specifically, this report discusses (1) for
selected recipients, the types of administrative activities performed and
administrative costs incurred under the ESG program, and the extent to
which grant proceeds cover these administrative costs; (2) how the ESG
program's allowance for administrative costs compares with
administrative cost allowances for selected other targeted federal
•
homeless grant programs, plus selected other HUD formula-based grant •
iI .
programs; and (3) how the nature or amount of administrative costs might I
be different under the changes Congress made to the ESG program in the
HEARTH Act.
To address these issues, we reviewed the ESG program's authorizing

legislation, objectives, and implementing regulations. In addition, we
interviewed HUD officials knowledgeable about the ESG program. We
made site visits to four states-California, Georgia, Michigan, and
Pennsylvania-where we interviewed selected ESG grantees and
subgrantees and obtained estimates of their ESG administrative costs. We
selected these states based on geographic balance and the total amount of
funding HUD provided to state grantees for fiscal year 2009. We also
reviewed available sources, including from HUD, regarding eligible
The HEARTH Act is contained in Division B of Public Law 111-22. Pub. L. No. 111~22 §
3
1001, et seq., 123 Stat. 1632 (May 20, 2009).
Page 2
administrative costs for federal grants. Further, we reviewed the
administrative cost allowances for homeless grant programs administered
by the Departments of Labor, Education, and Health and Human Services,
and we interviewed officials from these departments knowledgeable about
the programs. Finally, we reviewed the HEARTH Act changes to the ESG
program and obtained the perspectives of HUD officials, 34 grantees and
subgrantees we visited, various nonprofit organizations that advocate for
people experiencing homelessness, and others regarding how these
changes might affect the nature or amount of administrative costs for the
ESG program. Appendix I provides a more detailed description of our
scope and methodology.
We conducted this performance audit from August 2009 to May 2010, in

accordance with generally accepted government auditing standards. Those
standards require that we plan and perform the audit to obtain sufficient,
appropriate evidence to provide a reasonable basis for our findings and
conclusions based on our audit objectives. We believe that the evidence
obtained provides a reasonable basis for our findings and conclusions
based on our audit objectives.
According to HUD, the ESG program was designed to be the first step in a
Background continuum of assistance to prevent homelessness and to enable
individuals and families experiencing homelessness to move toward
independent living.' More specifically, the program objectives were to
increase the number and quality of emergency shelters for individuals and i
i
families experiencing homelessness, to operate these facilities and provide i
essential social services, and to help prevent homelessness. The ESG
program is targeted at persons experiencing homelessness." It was
originally established by the Homeless Housing Act of 1986, in response to
the growing issue of homelessness among men, women, and children in
4In this report, we use "ESG" primarily to refer to the current version of the program,
because the new Emergency Solutions Grants Program, as authorized by the HEARTH Act,
has not yet been implemented. Where appropIiate, we distinguish between the current
program and the new program.
'Targeted homeless programs such as ESG are designed to specifically assist people
experiencing homelessness; homeless persons may also obtain assistance from mainstream
programs, which are not specifically designed to assist them. Examples of such
mainstream programs include Medicaid, HUD's Section 8 Rental Voucher Program, and
employment and training activities provided under the Workforce Investment Act. See, for
example, GAO, Homelessness: Barriers to Using Mainstream Programs,
GAOIRCED-OO-l84 (Washington, D.C.: July 6,2000).

the United States.' In general, the ESG program uses the Community
Development Block Grant (CDBG) formula as the basis for allocating
funds to states, metropolitan cities, and urban counties.' The CDBG
formula uses factors reflecting community need, including poverty,
population, housing overcrowding, and age of housing. According to RUD,
in fiscal year 2009, there were 360 ESG grantees.'
For fiscal year 2009, RUD awarded $160 million in ESG funding to
grantees. Figure 1 shows the total amount of ESG funds received by
grantees, by state, for fiscal year 2009.
"The Homeless Housing Act of 1986 was enacted at Pub. L. No. 99-500 § 101(g), 100 Stat.
1783 (Oct. 18, 1986) and Pub. L. No. 99-691 § 101(g), 100 Stat. 3341 (Oct 30, 1986). In 1987,
the ESG program was incorporated into Subtitle B of Title IV of the Stewart B. McKinney
Homeless Assistance Act. Pub. L. No. 100-371 (July 22, 1987).
7For purposes of the CDBG formula, a metropolitan city is a city within a metropolitan area
that is the central city of the area, as deflned by the Office of Management and Budget
COMB), or any other city within a metropolitan area that has a population of 50,000 or
more. An urban county is, generally, one meeting specified population or density
requirements. 24 C.F.R. § 576.3; see Housing and Community Development Act of 1974, as
amended, 42 U.S.C. § 5302(a). Prior to the CDBG-based allocation, HUD first sets aside 0.2
percent of the annual appropriation for allocation among U.S. territories.
8Accordingto HUD, the grantees were: the 50 states, the District of Colwnbia, Puerto Rico,
202 metropolitan cities, 102 urban counties, and the U.S. territories of Guam, Virgin Islands,
American Samoa, and the Northern Mariana Islands.
I,
Figure 1: The Distribution of ESG Grants by State, Fiscal Year 2009
-
Puerto Rico
Total amount received by state and eligible local governments
0$500,000 or less
D Greater than $500,000 to $1 million
D Greater than $1 million to $3 million
_ Greater than $3 million 10 $10 million
_ Greater than $10 million
Source: GAO analysis of HUD data; map (Maplnfo).
Notes: Amounts shown are for federal ESG grants only. The U.S. territories of Guam, Virgin Islands,
American Samoa, and Northern Mariana Islands received $320,000 combined.
Page 5 GAO-I0-491 Homelessness

..
The ESG program generally requires matching contributions by grantees,

thus increasing the total funds used to provide services under the
program. Metropolitan cities and urban counties must match the ESG
funding dollar-for-dollar with cash or noncash resources from public or
private sources. States are generally subject to the same requirement, with
an exemption for the first $100,000 in funding."
ESG funds may reach eligible projects through different routes, as shown
in figure 2. First, HUD allocates ESG funds to grantees. Metropolitan
cities, urban counties, and territories may carry out the program directly
or subgrant all or part of their ESG
,
funds to nonprofit organizations. States
cannot carry out program activities directly, and must subgrant ESG funds
(but may retain up to 5 percent for administration, as discussed below) to
local governments or nonprofit organizations. Local governments
receiving ESG funds as a subgrant from the state may carry out the
program themselves or further subgrant funds to nonprofit organizations.
HUD allows ESG grantees flexibility to determine how to award funds to
subgrantees. For example, many grantees conduct a competitive process
for awarding funds to subgrantees. Other grantees offer repeat funding to
organizations that have demonstrated success with ESG-funded homeless
assistance programs in the past, or they alternate funding each year among
multiple agencies with ongoing homeless assistance programs. Grantees
also might make relatively few, but relatively larger, subgrants, or award
relatively smaller grants to a greater number of subgrantees.
9Grantees that are local governments may comply with the matching requirement by
providing matching foods themselves, or through matching funds or voluntary efforts
provided by any subgrantee. For state grantees, ESG subgrantees can also contribute the
matching funds, but each state grantee must distribute the benefit of a $100,000 credit
toward the state's required match amount to those subgrantees that are least capable of
contributing matching funds. Matching funds can be cash or other fOITIlS including donated
materials, rental value of a building, or value of time and services contributed. Territories
are not subject to the matching requirement.

Figure 2: How ESG Grants Fund Homeless Services
HUD
Funding
(generally based on formula for Community
Development Block Grant program)
Metropolitan cities (including

States
the District of Columbia),
(including Puerto Rico)
urban counties, terrttcnes"
(can retain administrative allowance)
(can relain administrative allowance)
Must subgrant to...

Can carry out I
program directly, or
subgrant to... Must share portion of
administrative allowance
____-----'t-~
Nonprofit Nonprofit local
organizations \organizations \ governments
Can carry out

program directly, or
subgrant to...
Nonprofit
organizations
Source: GAO, HUD.
"Hequtations require HUD to set aside 0.2 percent of the total ESG allocation for U.S. territories.
Subgrantees and grantees that are not states may use ESG funding to
conduct a range of eligible activities which, as previously noted, include
the rehabilitation or remodeling of buildings to be used as shelters,
operation of the facilities, essential supportive services, and homeless
prevention.

Under current law, ESG program grantees may use up to 5 percent of their
grant award for administrative purposes, which can include staff to
administer the grant, the preparation of progress reports and audits, or the
monitoring of subgrantees. W Grantees are not required to share any of
their ESG administrative allowance with subgrantees, except in one
instance--when a state awards a subgrant to a unit of local government.
According to HUD, the department does not track the extent to which
grantees share their ESG administrative allowance with subgrantees.
The HEARTH Act made major changes to the ESG program, while
renaming it the Emergency Solutions Grants Program. As noted earlier, the
HEARTH Act changed the amount of ESG funds that grantees may use to
cover adIninistrative costs, increasing it from 5 percent to a maximum of
7.5 percent of the total grant amount. Programmatically, the HEARTH Act
also made the following changes:
• The act authorized new eligible homeless assistance activities: short-term

rental assistance, medium-term rental assistance, security deposits, utility
deposits and payments, and moving costs. 11
• It established housing relocation and stabilization services as a major

focus area for both homeless assistance and homeless prevention,
including outreach, housing search, legal services, and credit repair.
• It established rapid re-housing as a major focus area for homeless

assistance. The aim of rapid re-housing is to help people experiencing
homelessness return to permanent housing as soon as possible. According
to a national homeless advocacy group, these efforts reduce the length of i
time people remain in homeless shelters, which in turn opens beds for
I
others who need them and reduces the public and personal costs of
homelessness."
IOAs noted previously, the 5 percent limitation, set forth at 42 U.S.C. § 11378, will increase
to 7.5 percent when the pertinent provisions of Pub. L. No. 111~22 take effect. The effective
date is the earlier of 18 months from the date of enactment (May 20, 2009) or 3 months
after the publication of HUD's [mal regulations implementing the amendments, which are
to be promulgated not later than 12 months after the date of enactment. Pub. L. No. 111-22
§ 1503.
IlSee Pub. L. No. 111-22 § 1202.
Rapid Re-Housing: Creating Programs That Work, National Alliance to End

12See
Homelessness, Washington, D.C., July 2009.

HUD expects to implement the HEARTH Act changes, including increasing
the allowance for administrative costs, with the program's fiscal year 2011
allocation.
We found that ESG grantees and subgrantees in the states we visited

Grantees and performed a range of administrative activities, but the program's
Subgrantees We allowance for administrative costs generally did not fully cover the cost of
these activities. As a result, grantees and subgrantees told us they must
Visited Reported a cover any shortfalls with funds from other sources, which diminishes their
Range of ability to support other activities. In addition, there are minimal standards
that can be used as guidance for evaluating the appropriateness of ESG
Administrative administrative costs, and we found that grantees and subgrantees in the
Activities Whose states we visited monitored ESG administrative costs at varying levels of
Costs Generally Were detail.
Not Fully Covered by

the ESG Allowance
Grantees' Administrative Grantees in the states we visited told us they conducted various activities
Activities Focus on to administer their ESG allocations. As figure 3 shows, these activities
Awarding and Monitoring generally fell into live categories: application/approval, financial,
reporting, monitoring/oversight, and other. Our review found these
Subgrants, while grantees' ESG administrative activities generally focused on awarding
Subgrantee Administrative subgrants and monitoring subgrantee performance. For example, City of
Activity Centers on Philadelphia officials told us they awarded a total of $2.2 million through
Operating Programs and live ESG grants for fiscal year 2009 and their administrative activities
Reporting Outcomes included, among other things, approval and tracking of subgrantee budgets
and program monitoring.

Figure 3: ESG Grantee Administrative Activities by Major Categories
Application! • Advise localities of grant availability

approval • Create, distribute, receive applications
• Hold workshops, provide information and technical assistant to applicants
• Troubleshoot applications
• Evaluate, rank, approve applications
• Share proposals with citizens, local government officials for review
• Recommend funding decisions to local government officials
• Conduct public hearings on grant funding decisions
• Determine subqrantee funding sources and mix, if multiple programs involved
• After approval, submit plans to HUD
• Negotiate, prepare contracts
• Conduct post-award workshops, provide other information and technical assistance to
subgrantees
Financial • Process grant disbursements, including related financial and accounting functions
• Planning, budgeting
• Audits, including auditor review of subqrantee reports
• Review, adjust subgrantee budgets
• Monitor subgrantee budgets, programs to ensure HUD compliance
• Report information to HUD grant management system
• Reconcile data discrepancies between HUD system and local accounting system
• Secure matching funds
Reporting • Prepare reports to HUD

• Provide technical assistance to subqrantees for their reporting requirements to primary
grantee
• Collect, assess required subgrantee progress reports
• Prepare annual reports on program activity
• Financial monitoring of subgrantees, including procurement and financial systems, to

ensure costs incurred are eligible
• Program monitoring of subgrantees, including reviews for program eligibility, timeliness ,i
of service delivery, that the proper clients being served
I
• Conduct site visits/inspections
• Share best practices
Other • Portion of rent, utilities

• Portion of senior managers' time
• Information technology, including grants management system
• Legal review
• Incidental expenses
• Prepare Consolidated Plan (master plan for addressing homelessness)
• General problem-solving, including denial of applications, funding reductions, trouble
with grant reimbursements, and monitoring
• Addressing complaints
Source; GAO interviews with grantees.
Similarly, City and County of San Francisco officials reported they

awarded $944,900 in ESG grants to 19 local service providers for fiscal
year 2009 and their administrative activities included site visits and audit
•
reviews.
Among grantees we reviewed, current practice in retaining the 5 percent

administrative allowance varied, as shown in table 1. Where grantees kept
all or most of the administrative allowance, officials told us this was to
cover, at least in part, their administration costs. Where they kept none of

the allowance, officials said this was to maximize ftmds avallable to local
service providers. Table 1 also shows what grantees told us they expect to
retain under the higher administrative allowance provided under the
HEARTH Act.
Table 1: Retention of ESG Administrative Allowance by Selected Grantees
Percentage retained under Expectation for percentage

current ESG program (up to retained under new ESG
Grantee 5%) program (up to 7.5%)
State of California Retain 4% Retain 6%
Share 1% Share 1.5%
Oakland Retain 5% Retain 7.5%
San Francisco Retain 5% Retain 7.5%
State of Michigan Retain 0% Retain 0%
Detroit Retain O%a Retain 7.5%
Commonwealth of Retain 2.5% Retain 3.75%
Pennsylvania" Share 2.5% with local Share 3.75% with local
governments governments
Philadelphia Retain 5% Retain 7.5%
State of Georgia Retain 5% Retain 7.5%
Atlanta Retain 5% Retain 7.5%
Source: As reported to GAO by grantees.
"Before 2009, Detroit retained 5 percent, but officials reduced the amount to zero, in part due to
declining grant amounts.
bFor compliance purposes.fhe state uses local governments to distribute ESG funds to local service
providers. In such cases, sharing of the administrative allowance, from state to local government, is
mandatory, although the amount is not specified.
Subgrantees in the states we visited also reported a range of

administrative activity." As figure 4 shows, these activities generally fell
into six categories: application/approval, financial, reporting, management,
monitoring/oversight, and other. Our review found that their ESG
administrative activities generally focused on operating programs and
reporting outcomes. For example, one Georgia subgrantee told us its ESG
administrative activities included a portion of the executive director's
13As noted earlier, ESG funding may reach eligible projects through different routes. In our
state visits, we spoke with homeless service providers that were nonprofit organizations.
We did not visit any local governments that use ESG funds to provide homeless services
themselves. We refer collectively to the nonprofit organizations we visited as
"subgrantees."
Page 11 GAO~1O~491 Homelessness

time, for program oversight; preparing monthly reimbursement requests;
coordinating maintenance; and training and coordinating volunteers.
Figure 4: ESG SUbgrantee Administrative Activities by Major Categories
Application! • Write grant proposals, applications

approval • Review grant contracts
• Participate in grant orientations, training
Financial • BUdgeting • Audit

• Cash management • Procurement
• Track, allocate grant funds • Pay contractors
• Billing • Process checks
• Obtain reimbursements from primary grantees
• Review documentation for
• Accounting, payroll
checks, invoices
Reporting • Various reports to primary grantees or others, including financial matters, number of
clients served, services provided, number of clients housed, referrals made
"i~
• Data collection, reporting for Homeless Management Information System
Management • General supervision/oversight of program operations, including time of executive

director, managers of finance, operations, human resources
• Outreach to funding sources, participate in networking meetings
• Community relations, such as with police or neighbors who dislike shelter nearby
• Recruit, hire, train staff
• Supervise volunteers
•
• Participate in oversight meetings, visits, other activities with primary grantee
• Prepare staff for auottszoversiqnt
Other • Utilities, incfuding phone, Internet • Risk management

• Technical support, including for copiers • Human resources, including
• Staff time for mailings employee assistance program
• Building, maintenance costs • Train, coordinate volunteers,
• Rent including background checks
• Document staff time utilization
Source: GAO interviews with subgrantees.
Similarly, a Michigan subgrantee told us its ESG administrative activities

included oversight and supervision of its program, financial reporting and
auditing, and reporting shelter statistics.
I
I
I
Neither Grantees Nor Grantees and subgrantees in the states we visited told us the ESG
Subgrantees Fully Cover administrative allowance generally did not fully cover their actual costs to
Administrative Costs with administer the grant award, and that as a result, they relied on other
sources to cover any unfunded costs. We found that grantees' and
Amounts Designated for subgrantees' actual ESG administrative costs depended on a number of
Administration and Rely factors, such as the number of grant awards made, level of oversight
on Other Sources to Cover provided, number of staff involved in administrative tasks, and types of
Unfunded Costs ESG program activities funded. Figure 5 provides details on the estimated
unfunded ESG administrative costs and sources used to cover these costs
for grantees and subgrantees we visited. Overall, the unfunded
administrative costs reported to us across the eight grantees and 22
subgrantees we visited for which information was available averaged an
estimated 13.2 percent of the ESG allocation, with a range of 2.5 percent to
56 percent. However, HOD officials cautioned that some subgrantees we
visited appear to be confusing program activities with administrative
activities, which might have affected their estimates of actual
administrative costs.

Figure 5: Estimated Unfunded ESG Administrative Costs for Grantees and Subgrantees in Selected States
California Grantees
ESG grant Est. unfunded ESG administrative
funds received expenses as percentage of grant Source(s) used to fill the gap
State of California $6.8M
------------------
" _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _,, 40°'
'2
\!: . /0 General fund
~ - - -- -- - - - - - --,
Oakland $371,000 iE4lm1.mL --,25.0 General fund, redevelopment funds
San Francisco $939,000

111"0( - - - -- - - - - - - - --,--,16.0
~
CDBG8., general fund
Local homeless service provider Use of ESG funds

m- - - - - - - - - - - - - - - --,
Shelter for homeless women, children General operations W
.. --' 3.4 Private fund raising
Emergency shelter, transitional housing Case manager salary 11_-_-_-_-_-_-_-_-_-_-_-_-_-_-_ -J 13.5 Federal, county funding;
rfvate fund raisin
Range of housing options from emergency shelter to
ermanent su ortive housin Ius homeless services
Facilities, food, and direct operating costs
for a e 18-24 shelter
;-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-J 9.0 City funding, private fundraising
Shelter for abused and homeless women, children General operations 1ft.
-~----------------
J 9.0 County funding, private fundraising
Drop-in resource center for homeless

milC······
5
••.•••••••,J 10.0 Private fund raising
~---------------
Shelter for homeless adults filmL
[lliw _: 12.0 City funding
Grantees
!lelJ'" - - - - - - - - - - - - - - - ,
State of Michigan $2.8M ~ --,13.0% State housing development
authori b
Detroit

Emergency shelter, transitional housing, other housing "'''' - - - - - - - - - - - - - - --, Private fund raising,
and services, for men, women, children
General operations 5Ji1 , 8.5
~---------------- foundation rants
- - - - - - - - - - - - - - -,
Emergency shelter for victims of domestic violence and
sexual assault, and their children ffiL
~"""~
--,14.0 Private fund raising

Transitional housing, apartments, case management, ""~=- - - - - - -.- - - - - --,
~:.2illm
_.._- _ _ _ m _ _ _ _ 20.0
_ _ _ _ _ m-m-··i Federal, state, county funding;
reveruton other services
f5P~~
~?;;;;:- - - - - - - - - - - - - --,
United Wa rivate fundraisin ---1
Shelter, apartments for homeless women General operations Private fund raising,
is''''''iX
;~- - - - - - - - - - - - - - -,18.0 endowment funds
Figura continues on next page.
Notes: "Use of ESG funds" refers to program services funded by ESG grants. "Est. unfunded ESG
administrative expenses" refers only to administrative costs. Funding is as reported for fiscal year
2009. When range provided by source, mid-point is reported here. Figures for unfunded
administrative costs are for actual or minimum amount, as reported by source. Some local homeless
service providers may receive ESG funds from state as well as local government sources. Omitted is
one additional homeless service provider in Detroit, for which information was unavailable.
"Community Development Block Grant
"Specifically, proceeds from operations of the Michigan State Housing Development Authority, a !
quasi-governmental authority that oversees the state's ESG program.
!
"City combines ESG funding with other sources to make lump sum grants to homeless service
providers, of which 12 percent may be used for administration. ESG funds do not go towards the 12
I
percent allowance.
"Also, some charges not billed, and some costs absorbed through growth.

Grantees
Pennsylvania
~-----------------
Commonwealth of Pennsylvania $3.2M , Not available % General fund
£,- - - - - - - - - - - - - - - - -,
Philadelphia $2.3M fifL , 5.0 General fund

Rent, utilities, equipment, insurance, §g----------------
Human services, including homeless family shelter U2:' ' 7.3 Subsidy from parent organization
sometimes fuel
f;" - - - - - - - - - - - - - - --,
Shelter for domestic violence victims and their children Supplies, utilities, maintenance 'ii:%.
St1 ' 6.5 United Way, private fund raising
n11i- - - - - - - - - - - - - - - -, Federal, county funding;
Shelter and services for famiiies, single adults General operations mid ,10.0
United Wa
Shelters for men and women, other programs General operations ilJ[jf~ _ __ __ _ __ _ _ __ _ _ _I 13 .0
l''F~_::::::_:::-::::::_::::::_:::_:::_:::_:::_:::_::::::---::i
City fundingC , internal funds
Homeless shelter, transitional housing for Heating, ventilation, air-conditioning United Way, corporate and
women children re airs foundation donations
Emergency shelter, other housing, case management, q;:;;;:r n _n __ n _ , 10
employment support for homeless families General operations UruHlli ' City fundingC
Multi-state human service agency, inclUding GG- - - - - - - - - - - - - - --,
homeless shelters General operations rae
=- --------------- , 15 City fundingC•d
Grantees
Georgia
"""': - - - - - - - - - - - - - - -, State trust fund for homeless,
State of Georgia $2.2M \§t?0i
ll'=--_______________ ,12.5% t t hOUSIn
state . f mance au th on.
$369,000
Homeless prevention Prevention services; in most cases, County funding, United Way
to a client rent
Emergency shelter, transitional housing for women, ~f- - - - - - - - - - - - - - - - -, Donations from congregations,
families with children; homeless prevention
General operations lrr ~ 5.0 other rivate donations
Emergency shelter, residential recovery,
Utilities
rusc
\::1U
.~-
-- -- - -- - -- - -- - -'10
_, .
5
Generally from other sources
transitional housing
r --------,- ------, Generally from other sources,
Sheller, financial assistance, employment education Short-term housing AfiS€ ,13.0
s -_-_-_-_-_-_-_-_-_-_-_-_-_-_-J
I,,"%~"_ - __ - - - __ - - --I
United Wa
Comprehensive homeless service center, including shelter, 7.0 Generally from other sources,
Food, security
da center medical clinic em J rnent and lrainin services United Wa
Legal services Foreclosure prevention
------------------
Not avejatse Generally from other sources
Source: GAO interviews with respective government officials, homeless service providers.
For example, California ESG program officials estimated their unfunded

ESG administrative costs at 4 percent of the state's ESG allocation (actual
administrative costs equal to 8 percent of ESG allocation, less 4 percent
retained for administrative costs). To cover these unfunded costs, the
officials said they rely on the state's general fund revenues. Similarly, City
of Oakland (California) officials estimated their unfunded ESG
administrative costs at 25 percent of their ESG annual allocation (actual
administrative costs equal to 30 percent of ESG allocation, less 5 percent
retained for administrative costs). These officials also told us that they
Page 15 GAOwIO-491 Homelessness

used the city's general and redevelopment funds to cover the unfunded
costs. In Pennsylvania, one subgrantee estimated its unfunded ESG
administrative costs at 2.5 percent of its grant award (based on actual
costs, with no administrative allowance from its grantee). This subgrantee,
which reported using ESG funds for a one-time building repair project,
told us that it used private donations, including from corporations and
foundations, to cover its unfunded costs. In Michigan, a subgrantee
estimated its uncovered ESG administrative costs at 14 percent (based on
actual costs with no administrative allowance), saying it also relied on
private donations to cover its unfunded costs. A13 previously noted,
grantees must match their ESG allocations, and subgrantees can provide
the match. These matching funds provide a potential source for covering
administrative costs.
Several subgrantees in the states we visited told us there has been a trend
toward more private donations being restricted-that is, made for specific
programs or purposes, rather than generally available for a subgrantee's
operations, including administrative costs. Thus, reliance on private
donations to cover unfunded ESG administrative costs may become more
challenging. For example, one subgrantee told us that donors feel it is
more attractive to fund specific programs that have more tangible
outcomes compared withfunding administrative costs. Another
subgrantee told us that business donors tend to target contributions to
address specific issues and achieve particular results. Finally, one
subgrantee told us that nonprofits themselves have contributed to this
trend by telling potential donors they will use donations to undertake
specific nonadministrative tasks."
Some grantees and subgrantees in the states we visited told us the need to
cover unfunded ESG administrative costs using other funding sources has
diminished their ability to fund other program activities. For example, one
grantee told us that amounts spent to cover unfunded ESG administrative
costs could otherwise be directed toward community and economic
development activities. Another grantee cited housing counseling and
home purchase down-payment assistance as areas that could receive
"Representatives of two national organizations we contacted that are familiar with

charitable giving-the National Council of Nonprofits and the Center on Nonprofits and
Philanthropy of the Urban Institute-echoed the views of the subgrantees, saying there is a
pronounced trend toward more restricted donations, accompanied by a growing awareness
among nonprofits that too much restricted funding can undermine their ability to perform
by not providing enough money for essential general and administrative activities.
Page 16 GAO-1O-491 Homelessness

funding but for the need to cover unfunded ESG administrative costs. One
subgrantee also told us it could otherwise devote more resources to
programs aimed at adoption, single mothers, and family counseling if not
for unfunded ESG administrative costs.
Some grantees and subgrantees also told us that unfunded ESG

administrative costs can affect program administration, interest in
participating in the program, and program oversight, rs For example, one
grantee told us that it chooses to make fewer but larger ESG awards to
subgrantees, rather than make a greater number of smaller awards, in part
because it is less costly to oversee a smaller number of subgrantees. In
addition, two subgrantees told us that but for other mitigating factors, they
would consider not participating in the ESG program because of the
unfunded administrative costs." Some grantees also told us that if more
funds were available for administrative costs, there could be greater
monitoring of subgrantee activity. One grantee noted that it must stop
monitoring subgrantees during parts of the year and generally does not do
as much oversight as is desirable. Another grantee added it has difficulty
meeting its goal of making at least one site visit to subgrantees each year.
According to HUD officials, the ESG program was established with a lower
administrative cost allowance based on the expectation that grantees
could obtain funds from other sources to cover unfunded ESG
administrative costs. The officials also told us that although they do not
have comprehensive information on the extent to which the ESG
administrative cost allowance is sufficient to cover grantees' actual
150ur review focused on current ESG grantees and subgrantees. We did not seek to identity
any instances of grantees or subgrantees dropping out of the ESG program, or declining to
participate, because of unfunded administrative costs.
16For one subgrantee, the mitigating factor was the ability to realize economies by using
data produced for other purposes to satisfy ESG requirements. For the other, officials told
us that cost notwithstanding, they believed it is important to be an active participant in the
local community.
Page 17 GAOMI0-491 Homelessness

administrative costs, the agency has received many informal comments
over time characterizing the allowance as insufficient. "
Available Sources for As GAO has noted previously, there is no government-wide definition of
Evaluating the what constitutes an administrative cost. ta For the ESG program in
Appropriateness of ESG particular, there are a number of sources that provide standards for
administrative costs, but we found they generally offer little detail for
Program Administrative evaluating the appropriateness of these costs.
Costs Offer Little Detail,
and Monitoring of These For grantees, there are regulations and agency guidance that address
Costs Varies administrative costs.
• HUD Regulations. HUD regulations for ESG administrative costs define

such costs by way of example only, to include costs associated with:
accounting for the use of grant funds, preparing reports for submission to
HUD, obtaining program audits, similar costs related to administering the
grant after the award, and staff salaries associated with these
administrative costs. is Under the regulations, administrative costs do not
include the costs of carrying out eligible activities under the ESG
program."
general, federal grant programs can treat administrative expenses, and expected
17In
contributions by grant recipients, a number of different ways. See, for example, GAO,
Human Service Programs: Demonstmtion Projects Could Identify Ways to Simplify
Policies and Facilitate Technology Enhancements to Reduce Administrative Costs,
GAO-D6-942 (Washington, D.C.: Sept. 19,2006). This report describes, among other things,
how deflnitlons of administrative costs vary across programs, and how federal and state
participation in funding administrative costs can be governed by matching rates, block
grants, spending caps, or other rules.
"See. for example, GAO, Title I: Although Definitions ofAdministrative Expenditures
Vary, Almost All School Districts Studied Spent Less Than 10 Percent on
Administration, GAO-03-386 (Washington, D.C.: Apr. 7, 2003). Additionally, a relevant
OMB circular-OMB Circular A-87, Cost Principlesfor State, Local, and Indian Tribal
Governments-does not define administrative costs. Similarly, OMB Circular A-122, Cost
Principlesfor Non-Profit Organizations, which establishes cost principles for
determining costs of grants, contracts and other agreements with nonprofit organizations,
states that "[b]ecause of the diverse characteristics and accounting practices of non-profit
organizations, it is not possible to specify the types of cost which may be classified as
indirect cost in all situations," where "indirect cost" includes "administration" expenses.
See 24 CFR 576.3 (defining ESG "administrative costs" by reference to 24 C.F.R. §

19
583.135(b)).
"'.rd.

• HUD ESG Program Desk Guide. The desk guide provides an overview
of the ESG program, describes the funding process, and covers topics
including the initial application, grant administration, project
implementation, and performance monitoring. For administrative costs,
the desk guide also works on the basis of example, stating that eligible
administrative costs include staff to operate the program, preparation of
progress reports and audits, and monitoring of recipients. ineligible
administrative costs include the preparation of the Consolidated Plan and
other application submissions," conferences or training in professional
fields, and salary of an organization's executive director, except to the
extent they are involved in carrying out eligible administrative functions.
In addition to the regulations and the desk guide, HUD also publishes the
Guide for Review ofESG Cost Allowability and the Guide for Review of
ESG Financial Management as resources for grantees." These guides,
however, do not provide any additional details on the appropriateness of
administrative expenses. The guides refer to compliance with reguiations
and circulars published by the Office of Management and Budget (OMB).
In particular, OMB Circular A-87, Cost Principlesfor State, Local, and
Indian Tribal Governments, details principles for determining allowable
costs incurred by state, local, and federally recognized Indian tribal
governments under grants and other agreements with the federal
government. These principles are not specific to the ESG program, and the
circular is not necessarily the final authority on such matters, as it requires
agencies administering programs to issue reguiations implementing the
circular. HUD officials told us the agency's ESG regulations incorporate
the provisions of OMB Circular A-87. 23
It is difficult to evaluate the appropriateness of grantees' ESG

administrative costs because the available sources for doing so, as
described above, are brief and not exhaustive. For example, Pennsylvania
"According to HUD, a Consolidated Plan is a plan resulting from a collaborative process in

which a community establishes a unified vision for community development. The process
aims to have local jurisdictions shape various housing and community development
programs into coordinated neighborhood and community development strategies. HUD
requires jurisdictions receiving ESG grants, among other programs, to submit a
Consolidated Plan detailing objectives for community revitalization.
21bese are contained within HUD's CPD Monitoring Handbook, which contains HUD
monitoring criteria for programs administered by HUD's Office of Community Planning and
Development.
"See, e.g., 24 C.F.R. § 576.57 (specifying applicability of OMB Circulars).
Page 19 GAO~10-491 Homelessness

ESG program officials undertake a number of activities during the
preaward application stage, including providing technical assistance to
applicants and offering general training every several years, but it is not
explicitly clear under the federal guidance whether such activities are
eligible administrative costs based on available sources for evaluation. In
addition, San Francisco ESG program officials told us they included office
space rental, general overhead, and utility costs among their ESG
administrative costs, but the available sources do not address
nonpersonnel costs. As a result, it is not clear whether such specific
activities are eligible administrative costs. Further complicating the issue
of examining administrative costs is grantees' self-funding of ESG
administrative costs. To the extent grantees use other funding sources to
cover unfunded ESG administrative costs, as discussed earlier, the ESG
program standards for administrative expenses do not apply.
For subgrantees we visited, we also found that ESG administrative cost

standards were varied and can offer little or no detail for evaluating the
appropriateness of these costs. Generaily, grantees address subgrantee
administrative costs by providing rules or guidance through program
solicitation documents or contracts with subgrantees. The State of
California's ESG Notice of Funding Availability, for example, states that
eligible administrative costs are "only those necessary to administer the
[ESG] grant, not to administer or operate the shelter." In addition, specific
ailowable administrative expenses include staff costs to prepare ESG
reports, communications with ESG staff, payment for the ESG share of a
required audit, and staff costs associated with processing accounting
records and billings. The City of Atlanta takes a different approach, citing
administrative expenses as identified under OMB Circular A-122, Cost
Principles for Non-Profit Organizations, as acceptable. This circular
distinguishes administrative costs from other types of expenses, and
includes consideration of a number of different expense categories." The
state of Georgia took the least detailed approach among the states we
visited, as Georgia ESG program officials told us they do not provide
criteria for administrative costs because the state does not fund these
types of costs.
2~e circular identifies administrative costs as a form of "indirect costsv-, those incurred
for common or joint objectives-and specifically defines "administration" as "general
administration and general expenses" such as a director's office, accounting, personnel, ,i,
library expenses, and other nonfacility expenses. OMB Circular A-122, Attachment A
(Revised June 9, 2004). See 2 C.F.R. Part 230.

••
As with grantees, the level of detail in the various cost standards for
subgrantees' administrative costs can make it difficult to assess the
appropriateness of spending. For example, as noted, California rules cite
expenses necessary to administer the ESG grant itself, not to administer or
operate a shelter. However, one California subgrantee reported to us that
its ESG administrative activities include those associated with client
intake, handling client case management forms, and technical support.
Similarly, as noted, the City of Atlanta relies on OMB Circular A-122, which
identifies administrative costs as a form of "indirect costs"-those
incurred for common or joint objectives-and defines "administration" as
"general administration and general expenses." However, a subgrantee
also reported to us that its ESG administrative activities include those
associated with a range of client-focused dealings spanning intake to post-
program follow-up. HUD officials told us that both client intake and case
management (including handling case management forms) activities are
not eligible administrative costs under the ESG program; rather, these
activities are eligible program costs under the shelter operations and
essential services categories. Moreover, as with grantees, a complicating
factor is subgrantees' self-funding of ESG administrative costs.
To monitor the ESG program's grantees, HUD field offices annually

conduct a risk analysis to determine which grant programs are higher risk
and thus warrant attention. According to HUD officials, the ESG program
usually is not identified for any heightened on-site monitoring. However,
HUD officials said that HUD field office staff conduct off-site monitoring
of many ESG grants annually. ESG grantees must submit a Consolidated
Annual Performance and Evaluation Report that contains qualitative and
quantitative information about ESG, including annual expenditures and
accomplishments. More broadly, grantees prepare an annual action plan
that describes, among other things, how they plan to use ESG funds. The
plan includes a brief description of activities, and it varies as to whether
the plan includes details on administrative expenses, HUD officials told
25
US. Overall, HUD officials told us they have not conducted any
21n addition to HUD's own monitoring of grantees, there can also be monitoring by entities
other than HUD. For example, officials of the Michigan State Housing Development
Authority, which runs the state's ESG program, described to us how credit rating agencies
playa role in overseeing their agency's performance. As an issuer afbonds, the authority is
subject to evaluations by credit rating agencies. According to authority officials, the ratings
agencies look at such things as the authority's fmances, legal situation, and program and
service delivery. The officials told us that despite the scrutiny, rating agency attention is
more constructive than a liability and has contributed to the agency's financial stability and
ability to expand.

comprehensive evaluation of ESG administrative costs for grant
recipients. 26
Grantees and subgrantees in the states we visited also monitored ESG

administrative costs at varying levels of detail. Grantees told us they
generally monitored subgrantee administrative costs through budget
reviews, either before or after grant award, or both, and also through in-
office monitoring and subgrantee site visits. For example, San Francisco
ESG program officials told us they evaluate subgrantees' audits, conduct
site visits, perform business and cost reviews, and provide technical
assistance. In addition, City of Detroit ESG program officials told us they
do not perform a specific check of ESG administrative spending but watch
for any obvious problems, such as whether a program's total
administrative costs exceed 10 percent. Further, City of Atlanta officials
told us they review proposed budgets of subgrantees as part of the
application process, and applications with administrative costs deemed to
be too high (greater than 20 percent) are rated negatively. They added that
the city monitors its ESG subgrantees annually, but does not specifically
track the administrative costs of ESG-funded activities because the city
provides no funding for these administrative costs.
2wn officials said the last major evaluation of the ESG program was in 1994; see HUD
Office of Policy Research and Development, Evaluation of the Emergency Shelter Grants
Program, Washington, D.C., prepared by Abt Associates: September 1994. The report
contains limited discussion of administrative costs. Since then, the agency has not
undertaken a separate analysis of ESG administrative costs, officials told us.
Page 22 GAO-1O-491 Homelesenese

We found that the funding and treatment of administrative costs varied
Funding and across the other targeted federal homeless grant programs we reviewed.
Treatment of We identified variations in areas such as the administrative allowance
Administrative Costs provided to grantees, requirements for sharing any of that allowance with
subgrantees, and guidance on the appropriateness of administrative costs.
Varied Across First, as shown in figure 6, the extent to which each program included a
Selected Federal maximum administrative allowance varied, and when a maximum
allowance was specified, the amount of that allowance varied widely.
Grant Programs Among programs with a maximum administrative allowance, the ESG
program's current 5 percent maximum administrative allowance for
grantees is one of the lower allowances. The maximum administrative
allowance for the other programs that have specified a maximum
allowance ranges from 4 percent to 50 percent.
Page 23 GAO~lO-491 Homelessness

Figure 6: ESG Administrative Cost Provisions Compared to Selected Other Federal Homeless Programs
Administrative allowance Adminlstratlve costs not funded

(percentage of grant if
specified) authorized for: Provision for
sharing
sue- administrative
Grantees grantees allowance Other
HUD Emergency Shelter Grants Program: Law, regulations silent on whether
Emergency shelter, related services, grantees must share allowance
homeless prevention with nonprofit subgrantees
Supportive Housing Program: Supportive Government grantees that pass on

at least 50% of acminrstrauve
JJJJ
housing, related services for independent
living funds deemed to have met sharing
requirement
Labor Homeless Veterans' Reintegration Grantees required 10 attend

Program: Job placement for homeless financiat management training,
Education
veterans
Education for Homeless Children and

IJ which includes administrative
costs
States can impose more stringent

requirements than 25% federal
J
Youth - Grants for State and Local
Activities: Public education for homeless rul
children
Homeless Education Disaster Assistance One-lime program ending in 20t 0;
under the grant, states not
J
Program: Assistance to local education
agencies where homeless student enrollment responsible for monitoring local
increased due to 2008 natural disasterst educational agency aclivilles
HHS
Grants for the Benefit of Homeless
J
Individuals: Treatment lor homeless
Grantees must have indirect
persons wlth mental illness or substance NA NA cost agreement if claiming
use disorders (funds (funds indirect costs, which include
distributed distributed administration. Otherwise,
Services in Supportive Housing Program: gran! specialists review
J
Housing assistance and support services for directly) directly) administrative items.
homeless persons with mental illness and
substance use disorders
o Not applicable
l!i~slit; Provision/allowance
_ No provision/allowance
Source: Agency documents, GAO interviews with respective agency officials.
Note: This comparison does not include HUD's Shelter Plus Care Program, which provides rental
assistance for permanent housing. According to HUD, the program provides an allowance for
administering rental assistance, such as providing housing information or inspecting housing units,
but does not provide funds for grant administration. On that basis, although Shelter Plus Care is a
targeted homeless program, we excluded it from our comparison.

"Salary of an organization's executive director is an ineligible administrative cost, except to extent he
or she is involved in carrying out eligible administrative functions.
"Administrative costs must be reasonable and necessary, as indicated in OMS Circular A-87.
"Program's 20 percent administrative allowance cap applies even if the grantee has negotiated an
indirect cost rate greater than 20 percent.
'Limited to 20 percent total for grantees and subgrantees combined.
"State grantees may retain up to 25 percent of grant for state-level activities, which may include
administration; in minimally funded states, figure is up to 50 percent.
'Eligibility determined according to a Federal Emergency Management Agency compilation of
disasters, available at www.fema.gov/news/disasters.fema#sev1.
Second, we found that program rules for grantee sharing of administrative

allowances with subgrantees varied across homeless programs with
similar funding structures. For example, HUD's Supportive Housing
Program requires grantees to share administrative allowances with
subgrantees, but does not specify the amount. 27 The Department of Labor's
Homeless Veterans' Reintegration Program does not require sharing of
administrative allowances, but gives grantees discretion to share with
subgrantees. The ESG program combines mandatory and discretionary
sharing-it requires grantees that are state governments to share an
unspecified portion oftheir administrative allowance when passing funds
to local governments. Otherwise, sharing is optional but not mandated."
These specific programs and their particular rules notwithstanding, most
of the programs we reviewed do not provide administrative cost
allowances for when grantees pass along funds to subrecipients. In all,
there was considerable variation across programs in provision of
subgrantee administrative allowances.
27Under the program, when a state or local government receives a grant to fund projects
operated by nonprofit organizations, the administrative funds provided as part of the grant
must be passed on to the nonprofit in proportion to the administrative burden borne. HUD
considers sharing of at least 50 percent of the administrative allowance as meeting this
requirement.
"Regarding sharing of the ESG administrative allowance in particular, subgrantees to

whom we spoke said they would welcome additional money, but there were mixed views
about requiring sharing in all cases. Some said sharing should be mandated and questioned
the worth of the activities performed by grantees. Other service providers, however, said
they recognized that grantees themselves have legitimate administrative costs or that
programs could suffer if their administrative funding were reduced through a mandatory
sharing feature. HUD officials echoed this view, saying that in focus groups held in
preparation for writing the HEARTH Act regulations, participants were divided on whether
there should be mandatory sharing. If sharing were required, less funding would be
available for programs. HUD officials also told us it is a significant concern for them that
oversight could be compromised if grantees are required to transfer some of their
administrative allowance to local service providers.

Third, we found that program guidance on the appropriateness of
administrative costs differed across the targeted homeless programs we
reviewed, and that no program offered comprehensive direction on
eligible and ineligible administrative activities. As noted earlier, the ESG
program's desk guide provides examples of both eligible and ineligible
administrative activities, albeit not exhaustively. By contrast, five of the
targeted programs' rules-including programs ofthe Departments of
Education, Labor, and Health and Human Services-do not specifically
define eligible or ineligible administrative activities. Instead, some of these
programs' rules reference OMB cost principles and note that
administrative costs must be reasonable and necessary, as defined by
OMB Circular A-87. 29 HUD's Supportive Housing Program follows an ESG-
style example approach.
We also found that the ESG program's maximum administrative allowance

for grantees was one of the lower allowances for HUD formula grant
programs offered through HUD's Office of Community Planning and
Development. As table 2 shows, the ESG program's administrative
allowance for grantees will also remain one of the lower of the group after
it increases to 7.5 percent. The ESG program is among four formula grant
programs offered through the Office of Community Planning and
Development, which seeks to develop communities by promoting decent
housing and expanded economic opportunities for low- and moderate-
income persons. However, given the programs' diverse missions, as also
shown in table 2, the nature and amount of administrative costs may vary
among them.
29 HOD officials said they have adopted OMB's reasonabie and necessary standard into the
agency's own rules.

Table 2: Grantee Administrative Allowance for Selected HUD Formula Grant Programs
Grant program and purpose Administrative allowance Total allocation. FY 2009

Emergency Shelter Grants Program Up to 5% of grant amount; increasing to 7.5% $160 Million
Emergency shelter, related services, homeless
prevention
Community Development Block Grants Up to 20% of grant amount $3.64 Biliion
Range of purposes, including affordable housing, (also includes planning costs)
community services, job creation through
expansion and retention of business
HOME Investment Partnerships Program Up to 10% of grant amount $1.82 Billion
Build, buy, rehabilitate affordable housing for rent
or ownership, or provide rental assistance to low-
income renters
Housing Opportunilies for People with AIDS Up to 3% of grant amount $276 Miliion
Housing, social services, program planning costs
Source: HUD Office of Community Planning and Development
A number of grantees and subgrantees in the states we visited and others

Some ESG Recipients told us they expect that the newly allowable ESG activities authorized by
Expect the Nature of the HEARTH Act will result in different kinds of administrative activities
; .
that in many cases will be more costly than before. As previously noted.
Administrative Costs the act increased the range of eligible prevention and re-housing activities
to Change and the to include short- or medium-term rental assistance and housing relocation
or stabilization services. Overall. grantees and subgrantees told us they
Amount to Increase expect changes in areas including client screening and eligibility
under New Activities verification, technical assistance to subgrantees, number of applicants for
Authorized by the grants, and facility management and collaboration with third parties,
which in turn could affect administrative costs. For example, City of San
HEARTH Act Francisco and Pennsylvania state officials told us the new activities
authorized by the act might result in a greater number of applicants for
grant awards. or their agencies might have to provide more outreach and
technical assistance to subgrantees. In addition, one California subgrantee
told us that they expect an effort to have people leave shelters more
quickly under the new ESG activities. This subgrantee added that this
might increase the administrative costs associated with collecting and
reporting data on an increased number of people coming through the
program. This subgrantee also said it expects the new ESG activities to
have a secondary effect in shelters themselves, where a changing mix of
residents likely will mean higher administrative costs. This subgrantee said
that new HEARTH Act-style programs will likely enroll the best
functioning people, so those left in shelters will be relatively less
functioning-and hence more costly to manage. Another subgrantee, in

Michigan, told us it is already startiug to see changes in administrative
costs with expansion of activities beyond traditional emergency shelter
services and into rapid re-housing. For example, new program activities
require more time for administration, both internally and externally, and
there have been organizational changes such as in handling of rent funds.
Finally, one California subgrantee estimated its administrative costs could
rise from about 3.5 percent to between 12 percent to 14 percent under the
new ESG activities. AB noted previously, however, HUD officials told us
that some subgrantees we visited appear to be confusing program
activities with administrative activities, which might have affected their
estimates of actual administrative costs.
While a number of grantees and subgrantees told us they expect the nature
of administrative activities to change, and their costs to increase, not all
the recipients we visited agreed that higher administrative costs are likely.
For example, a Pennsylvania subgrantee told us it anticipates that the
administrative costs associated with a prevention program would probably
be equal to the costs of a shelter program, and it would not expect costs to
be higher unless program requirements become more onerous. California
state officials told us they do not expect the nature or amount of
administrative costs will change with new program activities, because
activities already change frequently today. Similarly, a Michigan
subgrantee told us that barring any increase in regulatory requirements, it
does not expect any added burden in areas such as reporting of program
activity, audit duties, or office space required for administration. Overall,
expectations about higher administrative costs are plainly prospective in
nature, because the new activities have not yet been implemented.
Although the HEARTH Act makes significant changes to allowable ESG

activities, it remains unclear when actual program changes might be
implemented. According to HUD officials, the total funds allocated to the
ESG program will determine the extent to which money is available for the
new services. HUD officials also told us that a significant increase in ESG
funding, along with significant program changes, could increase grantees'
costs of monitoring and reporting, because more money must be tracked

..
and monitored in conjunction with a wider array of program

requirements."
Uncertainty over how and when the new ESG program might be
implemented, as well as variation in the nature of administrative activities
seen in the current ESG program, complicate any attempt to determine the
appropriate size of the program's administrative allowance. Providing such
an allowance helps ensure funds are spent properly and directed to their
appropriate purpose. But if the allowance is insufficient to allow adequate
administration and oversight, program efficiency and effectiveness could
be at risk. Grantees and subgrantees we spoke with reported that the
current ESG administrative allowance does not fully cover their
administrative costs. Moreover, our work indicates that even with the new
administrative allowance of 7.5 percent, the ESG program would still have
one of the lower allowances among similarly structured homeless grant
programs. If the new ESG program increases in complexity or scope of
services, its administrative cost allowance will take on even more
significance in the future.
We provided a draft ofthis report to the Departments of Housing and

Agency Comments Urban Development, Education, Health and Human Services, and Labor
and Our Evaluation for their review and comment. HUD did not provide formal comments, but
noted bye-mail that some subgrantees we visited may not be making a
proper distinction between program costs and administrative costs, which
could have the effect of overstating any need for a larger ESG
administrative allowance. We reflected this sentiment throughout this
report as appropriate. HUD further indicated that the department would
examine what steps it could take to help grantees and subgrantees better
understand which administrative costs can be funded under the ESG
program and the extent to which administrative costs differ from activity
delivery costs. HUD added that these steps would include providing
greater clarity and detail on what costs are eligible under the different
ESG activity categories, including administrative costs, in a proposed new
rule the department is developing to implement the changes to the
McKinney-Vento Homeless Assistance Act provided in the HEARTH Act.
3w.m officials told us they are drafting regulations to implement the new Emergency
Solutions Grant Program, but did not specify a schedule for publishing proposed
regulations for public comment. HUD expects to implement the new ESG program in the
fiscal year 2011 allocation process. In its fiscal year 2011 budget proposal, HUD requested
$200 million for the new ESG program, a 25 percent increase above the $160 million
allocated for ESG in fiscal year 2010.

HUD also provided technical comments bye-mail, which we have
incorporated into the report as appropriate.
The Secretaries of Education, Health aud Hurnau Services, aud Labor did
not provide comments.
We are sending copies of this report to interested congressional

committees aud the Secretaries of the Departments of Housing aud Urbau
Development; Education; Health aud Hurnau Services; aud Labor. This
report will also be available at no charge on GAO's Web site at
http://www.gao.gov. Please contact me at (202) 512-8678 or
cackleya@gao.govifyou or members of your staffs have auy questions
about this report. Contact points for our Offices of Congressional
Relations aud Public Affairs may be found on the last page of this report.
See appendix II for key contributors to this report.
Alicia Puente Cackley

Director, Finaucial Markets
aud Community Investment

List of Committees
The Honorable Christopher J. Dodd

Chairman
The Honorable Richard C. Shelby
Ranking Member
Committee on Banking, Housing, and Urban Affairs
United States Senate
The Honorable Robert Menendez

Chairman
The Honorable David Vitter
Ranking Member
Subcommittee on Housing, Transportation and
Community Development
Committee on Banking, Housing, and Urban Affairs
United States Senate
The Honorable Barney Frank

Chairman
The Honorable Spencer Bachus
Ranking Member
Committee on Financial Services
House of Representatives
The Honorable Maxine Waters

Chairwoman
The Honorable Shelley Moore Capito
Ranking Member
Subcommittee on Housing and Community Opportunity
Committee on Financial Services
House of Representatives

.,,
Appendix I: Scope and Methodology
To determine the types of administrative activities performed and costs

incurred under the Emergency Shelter Grants Program (ESG) of the U.S.
Department of Housing and Urban Development (HUD), and the extent to
which grant proceeds cover these administrative costs, we made site visits
to four states: California, Georgia, Michigan, and Pennsylvania. We
selected these states based on the amount of ESG funding distributed to
these grantees for fiscal year 2009 and their geographic location across the
country. We initially identified state-level grantees receiving more than
$1.5 million inESG funding, in order to focus on states with relatively
more ESG activity, This criterion reduced our target group to 20 states. We
judgmentally selected the four states we visited by considering proximity
of the capital city, where state officials are located, to the location of other
grantees we could visit concurrently. Within the four states, we visited
nine grantees (four state governments and five local governments) and 25
subgrantees. This allowed us to obtain illustrative observations from state
officials, local government officials, and representatives of local homeless
service providers on the operation of the ESG program, with an emphasis
on type and level of spending to administer grants received under the
program. Table 3 provides details on grantees' receipt of ESG funds in the
states we visited.
Table 3: ESG Grantee Summary for States Visited, Fiscal Year 2009
!
California Georgia Michigan Pennsylvania ,i

,
,.
,
State government $6.8 million $2.2 milllon $2.8 million $3.2 million ,
award
I
Total awards to local $13.4 million $1.4 miilion $2.9 million $6.4 rnltllon
governments
Number of local 46 8 10 22
governments with
awards
Median local award $147,700 $131,800 $138,000 $149,200
Largest local award $3.2 million $368,900 $1.6 million $2.3 million
Los Angeles Atlanta Detroit Philadelphia
(city)
Smallest local award $84,000 $91,800 $81,000 $85,100
Fontana Clayton Genesee Wilkes-Barre
County County
Source: GAO analysis of U.S. Department of Housing and Urban Development data.
Note: Figures for state governments, total awards to local governments rounded to nearest $100,000;
local award figures rounded to nearest $100.
The states we visited collectively received 24.5 percent of the total ESG
funds HUD awarded to grantees in fiscal year 2009, Because we used a

nongeneralizable sample to select state grantees that had received larger

amounts of ESG funding in fiscal year 2009, our findings cannot be used to
make inferences about other grant recipients. Other grantees that we did
not visit may have different characteristics that are unknown to us.
However, we believe that our selection of the states and recipients was
appropriate for our design and objectives, and that the selection provides
valid and reliable evidence to support our work. We interviewed grantees
and subgrantees in the states we visited to obtain information on
administrative activities performed, the cost of performing those activities,
and related topics.' We also interviewed HUD officials, plus
representatives of national organizations involved with homeless issues,
that are familiar with trends in charitable giving, or that represent local
governments. We also researched the legislative history ofthe ESG
program. We examined HUD guidance, federal reguiations, and relevant
Office of Management and Budget COMB) circulars on allowability of
administrative costs, including circulars A-87, Cost Principles for State,
Local, and Indian Tribal Governments, and A-122, Cost Principles for
Non-Profit Organizations. Further, we reviewed state and local
government ESG solicitation documents, such as Notices of Funding
Availability and Requests for Proposal.
To determine how the ESG program's allowance for administrative costs

compares with administrative cost allowances for selected other targeted
federal homeless grant programs, plus selected other HUD formula-based
grant programs, we interviewed officials from HUD and the Departments
of Education, Labor, and Health and Human Services. We examined
relevant federal statutes and regulations, as well as relevant OMB
circulars. We also examined program guidance and documents, such as
desk guides, resource manuals, solicitations for grant applications, and
requests for applications, for the federal targeted homeless grant programs
and the other HUD formula grant programs that we reviewed.
To determine how the nature or amount of administrative costs might be

different under the changes Congress made to the ESG program in the
Homeless Emergency Assistance and Rapid Transition to Housing Act of
IWe obtained cost information expressed as a percentage of the ESG grant amount. The
amounts reported to us generally were estimates and not the product of formal accounting
systems, because ESG grant recipients generally did not track ESG administrative costs
specifically. We compared the cost figure to any administrative allowance received from
ESG grant proceeds, also expressed as a percentage of the grant amount. We netted the
two amounts to calculate any unfunded ESG administrative expenses.

2009, we reviewed relevant provisions of the act detailing the newly

allowable activities. We also interviewed HOD officials, state and local
government officials, representatives of homeless organizations, and
homeless service providers to obtain their perspectives.
We conducted this performance audit from August 2009 to May 2010, in

accordance with generally accepted government auditing standards. Those
standards require that we plan and perform the audit to obtain sufficient,
appropriate evidence to provide a reasonable basis for our findings and
conclusions based on our audit objectives. We believe that the evidence
obtained provides a reasonable basis for our findings and conclusions
based on our audit objectives.

Appendix II: GAO Contact and Staff
Acknowledgments
Alicia Puente Cackley, (202) 512-8678, or cackleya@gao.gov

GAO Contact
in addition to the individual named above, Marshall Hamlett, Assistant

Staff Director; William Chatlos; Meredith Graves; Kun-Fang Lee; Marc Molino;
Acknowledgments Christopher Schmitt; Jennifer Schwartz; and Paul Thompson made major
contIibutions to this report.
(250487)
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Pollack,Joshua
Sent: Thursday, April 29, 20107:49 AM
To: Miller, Tony
Subject: FW: Here's the story: "Comparing Higher Ed to Wall Street"
From: Shireman, Bob

Sent: Thursday, April 29, 2010 7:44 AM
To: Hamilton, Justin; Kanter, Martha; Cunningham, Peter; Rogers, Margot
Subject: RE: Here's the story: "Comparing Higher Ed to Wall Street"
(b )(5)
·•
- i
· i,
·,
· !
, !
•
_ i
•,
Robert Shireman •
•
U .S. Department of Education •
, :
(202) 260-0 I0 1
From: Hamilton, Justin

Sent: 'Thursday, April 29, 2010 7:3 0 AM
To: Shireman, Bob; Kanter, Martha; Cunningham, Peter; Rogers, Margot
Subject: Here's the story: "Comparing Higher Ed to Wall Street"
Comparing Higher Ed to Wall Street

Whenever worried leaders of for-profit colleges have implied in recent months that the U.S . Education Department is
gunning for the institutions, officials of the federal agency have discouraged such talk, ,! .
<http ://www .insidehighered.com/news/2009/06/16/cca> offering evenhanded rhetoric about treating all sectors the same i
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in their push for increased accountability. I
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The words have provided little reassurance to the colleges, since they haven't always seemed to square with the aggressive I
approach <http://www.insidehighered.com/news/20 10/04/2 l/gainful> the Obama administration is taking in rewriting
federal rules governing vocational and other programs.
I
On W ednesday, in a speech to state regulators who oversee for-profit colleges, the chief architect of the Education
\
Department's strategy, Robert Shireman, offered a much more critical assessment of the private sector institutions than he
•
has in his public comments to date, according to accounts given by several people who were in the room. He compared
the institutions repeatedly to the Wall Street firms whose behavior led to the fmancial meltdown and called them out
individually, one by one, for the vast and quickly increasing sums of federal student aid money they are drawing down. •
While Shireman's comments were aimed most directly at the for-profit colleges themselves, they may be most noteworthy \•
for his indictment of accreditation, higher education's system o f institutional peer review. In Shireman's narrative before
the annual meeting <http://www.nasasps.org/conference/registration-m aterials> of the National Association o f State
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; ,
Pollack,Joshua
From: Rogers , Margot
To: Miller, Tony
Subject: FW: Here's the story: "Comparing Highe r Ed to Wall Street"
From: Shireman, Bob

Sent: T hursday, April 29, 20 10 7:44 AM
To: Hamilton, Justin; Kanter, Martha; Cunningham, Peter; Rogers, Margot
I,, Subj ect: RE: Here's the story: "Comparing Higher Ed to Wall Street"
(b)( 5 )
From: Hamilton, Justin

To: Shireman, Bob; Kanter, Martha; Cunningham, Peter; Rogers, Margot
Subject: Here's the story: "Comparing Higher Ed to Wall Street"
Comparing Higher Ed to Wall Street

Whenever worried leaders of for-profit colleges have implied in recent months that the U.S. Education Department is
gunning for the institutions, officials of the federal agency have discouraged such talk,
<http://www.insidehighered.comlnews/2009/06/1 6/cca> offering evenhanded rhetoric about treating all sectors the same
in their push forincreased accountability.
The words have provided little reassurance to the co lleges, since they haven't always seemed to square with the aggressive
approach <http ://www.insidehighered.comlnews/20 I 0/04/21 /gainful> the Obama administration is taking in rewriting
federal rules governing vocational and other programs.
On Wednesday, in a speech to state regulators who overs ee for-profit colleges, the chief architect of the Education
Department's strategy, R obert Shireman, offered a much more critical assessment of the private sector institutions than he
has in his public comments to date, according to accounts given by several people who were in the room. He compared
the institutions repeatedly to the Wall Street firms whose behavior led to the financial meltdown and called them out
individually, one by one, for the vast and quickly increasing sums of federal student aid money they are drawing down.
While Shireman's comments were aimed most directly at the for-profit colleges themselves, they may be most noteworthy
for his indictment of accreditation, higher education's system of institutional peer review . In Shireman's narrative before
the annual meeting <http://www .nasasps.org/conference/registration-materials> of the National Association of State
t
Administrators and Supervisors of Private Schools, the accrediting agencies are to the for-profit colleges what the Wall
Street ratings agencies were to the misbehaving financial firms: entities charged with regulating an industry that has
grown too quickly and too complex for them to control, and that have an "inherent conflict of interest" because their
existence depends on financial contributions from those they regulate.
Accreditors lack the "firepower" to regulate the for-profit sector, and the states and the federal government don't
necessarily have all the tools they need to do it either, Shireman said, according to the notes of several in the audience.
That, he suggested, is why the Education Department must toughen its rules in the way it is now proposing.
I Shireman could not be reached for comment, and an Education Department spokesman said its officials did not wish to
comment on this article.
To several people in the audience, Shireman's comments represented a much more candid (and critical) appraisal ofthe
for-profit sector than he has offered publicly since he became deputy under secretary of education almost exactly a year
ago <http://www.insidehighered.comlnews/2009/04/21/shireman> . Many supporters of the education companies feared
his appointment because they believed his track record as an advocate for low-income students and a foe of student debt
would result in a crackdown on the institutions, whose students are disproportionately needy and disproportionately go
into heavy debt <http://www.insidehighered.comlnews/201 0/04/27/debt> to finance their educations.
But with Wall Street analysts hanging on his every word <http://www.insidehighered.comlnews/2009/06/01/qt#200115>
looking for snippets that might threaten the publicly traded companies' stock prices, Shireman has often seemed to go out
of his way to avoid singling the institutions out for criticism.
A typical quotation, from last sunnner: <http://www.insidehighered.comlnews/2009/06/16/cca> "Our overall goal at the
Department of Education in postsecondary education is to make sure that students ... have the information they need to
make good choices, and that they have good quality postsecondary education that serves both them as students and
taxpayers as well," Shireman said. "...If there is not quality, we want to know about it and if we can, we want to do
something about it. Whether that involves a public institution, a nonprofit, a for-profit, a two-year, a four-year, a trade
program, whatever type or sector of institution, we want to do all we can to make sure that we have good quality."
Different Tone
In his comments Wednesday, Shireman laid out the context underlying the Obama administration's elevation of higher
education as a central focus of its domestic policies. The economic slide. created in part by the collapse of the credit
markets has sent Americans streaming back to college in record numbers, and has made it more imperative than ever that
more Americans get a higher education to strengthen the country's economic base for the future, Shireman said.
The administration has poured tens of billions of dollars into Pell Grants and restructured the federal student loan
programs to try to ensure that Americans have access to higher education, Shireman said Wednesday. Many public
institutions, facing cuts in their state funding, have had to limit or even cut their enrollments, reducing their ability to meet
the increasing demand from students.
The for-profit colleges, by contrast, have stepped up, seeing their enrollments explode -- and with them, the amount of
Pell Grant money that follows the students to the institutions, Shireman said. Anyone in the audience from Corinthian
Colleges? Shireman asked the assembled audience Wednesday.
A hand went up. The California-based for-profit higher ed company has seen its revenue from Pell Grants grow by 38
percent in the first three quarters of this fiscal year compared to the last one, he said. Anyone from DeVry? Forty-two
percent, Shireman said. Strayer? ITT? One by one, he ticked through a list of publicly traded companies, pointing out the
increasing amounts of federal money the institutions were collecting ("It was like fourth grade, with a teacher scolding
students over their grades," said one person who was in the room).
What are taxpayers and students getting in return for that investment? Shireman asked. It has historically been up to the
"triad" -- the three-headed regulatory scheme involving the federal government, state governments and accrediting
agencies -- to ensure access, quality and integrity in higher education, he said.
2
But is that regulatory system up to the job? To draw a parallel, Shireman noted that as this meeting was unfolding in St.
Paul, politicians back in Washington were debating possible reforms of Wall Street, to try to fix the "flawed" regulatory
process that allowed Goldman Sachs and other purveyors of subprime mortgages to engage in misbehavior that helped
devastate the economy.
.,
One major reason the process was flawed, Shireman said, was because the bond rating agencies that were supposed to be
judging the riskiness of the financial instruments were supported in large part by fees from the companies that were asking
the agencies to rate the financial instruments -- "a clear, inherent conflict of interest," Shireman said, according to the
accounts of several in the room.
.! On top of that inherent conflict, the ratings agencies have been struggling to keep tabs on industries that grew quickly and
adopted increasingly complex practices, Shireman said, suggesting that the ratings agencies lacked the "firepower" to
regulate the financial markets.
In case anyone missed it, Shireman drove his point home, pointing out that higher education accrediting agencies are
made up of (and financially supported by) their member colleges, and see it as their mission both to help the institutions
"improve" and also to ensure, in what is essentially a subcontract from the federal govermnent, that they are of sufficient
quality.
The peer review nature of higher education accreditation has an inherent conflict of interest similar to the ratings agencies,
Shireman said. Given that, he suggested, it is crucial for state and federal agencies, as the other two parts of the triad, to
step up their role in regulating higher education. But do state regulators think they have the "firepower" to keep tabs on
the big, growing and complex private market college sector? Shireman asked the state officials in the room. The response
was underwhelming.
The federal govermnent's own powers may be insufficient to do the job, too, Shireman suggested, according to members
of the audience. That is why the department needs new approaches to ensuring integrity in the financial aid programs, he
said, such as requiring most for-profit colleges and non-degree vocational programs at nonprofit colleges to show that
they are preparing students for gainful employment.
Several people who heard the speech said they viewed it as a much more strident critique of for-profit colleges, and of
higher education accreditation, than Shireman has delivered before. But David Dies, who heads the Wisconsin
Educational Approval Board and just finished a term as president of the national group of state regulators, didn't hear it
quite that way.
"I think Bob was explaining why we need state regulation and [Education] Department oversight to be part ofthis three-
legged stool, not just accreditation, and why we all need to work together," said Dies. "He was pointing out some
limitations of accreditation, but I didn't really see it" as highly critical of accreditors or for-profit colleges.
- Doug Lederman <mailto:doug.lederman@insidehighered.com>

CREW: Department of Education: Regarding For-Profit Education: 4/21/11 - FOIA 10-1704ODS

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Tony, see below. Thanks. john

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MEMORANDUM FOR THE SECRETARY

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SUBJECT: Important Correspondence Summary

Congressman Shares Ideas about "Gainful Employment"

fumport for Regulations on Gainful Employment and Incentive Compensation

GAO Final Report on HUD's Emergency Shelter Grants Program

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From: Lauren Asher [mailto:LASher@tlcas.org]

Dear Secretary Duncan,