Top 10 Audit &Program Review Findings

2012

Effie Barnett & Briget JansU.S. Department of Education

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Top Audit Findings

• Repeat finding – failure to take corrective action

• Return to Title IV (R2T4) calculation errors

• R2T4 funds made late

• Student status – inaccurate/untimely reporting

• Pell overpayment/underpayment

Top Audit Findings

• Verification violations• Student credit balance deficiencies• Qualified auditor’s opinion cited in audit• Entrance/Exit counseling deficiencies• Overaward – Financial need exceeded

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Top Program Review Findings

• R2T4 calculation errors• Verification violations• Entrance/Exit counseling deficiencies• Crime awareness requirements not met• Student credit balance deficiencies• Satisfactory Academic Progress policy not

adequately developed/monitored

TIE

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Top Program Review Findings

• R2T4 funds made late • Pell Grant overpayments/

underpayments • Account records inadequate/not

reconciled• Inaccurate recordkeeping• Lack of administrative capability• Information in student files missing/

inconsistentTIE

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Findings on Both Lists

• R2T4 calculation errors• R2T4 funds made late• Pell Grant overpayment/underpayment• Verification violations• Student credit balance deficiencies• Entrance/Exit counseling deficiencies

Audit Findings

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Audit Findings 8

Repeat Finding –Failure To Take Corrective Action

• Failure to implement Corrective Action Plan (CAP)• CAP did not remedy the instances of

noncompliance• Internal controls not sufficient to ensure compliance

with FSA guidelines

Regulations: 34 C.F.R. §§ 668.16 and 668.174

Repeat Finding –Failure To Take Corrective Action

Example: Repeat findings for (1) Late return of Title IV funds, (2) Incorrect R2T4 calculations.

Solution: Develop and implement CAP and implementation schedule; develop R2T4 monitoring report; establish internal controls to ensure accurate calculations and timely returns.

Audit Findings 9

Audit Findings 10

Additional Compliance Solutions

• Ensure all staff are properly trained

• Perform quality assurance checks to ensure new policies & procedures are strictly followed

• Review results of CAP– Is it working?– Are changes needed to improve process?

• Accountability – assign staff to monitor

the CAP

Audit Findings 11

R2T4 Calculation Errors

• Incorrect number of days• Ineligible funds as aid that ‘could have been

disbursed’• Improper treatment of overpayments• Incorrect withdrawal date• Mathematical and/or rounding errors

Regulation: 34 C.F.R. § 668.22(e)

R2T4 Calculation Errors

Example: Incorrect calculation based on using the wrong number of days for the term/ payment period.

Solution: Work with registrar to ensure clear understanding of when classes meet, including weekends; be sure to exclude all class breaks of five days or more.

Audit Findings 12

Additional Compliance Solutions

• Pay attention to new regulations; revise procedures as needed

• Perform self-assessment by reviewing a random sample of student files

• FSA Assessment: Schools– R2T4 module

• Use R2T4 Worksheets– Electronic Web Application/Paper

Audit Findings 13

Return of Title IV Funds Made Late

Audit Findings 14

Regulation: 34 C.F.R. § 668.22(j)

Return of Title IV Funds Made Late

Example: R2T4 calculations performed timely, but the refunds to appropriate Title IV program accounts was not made timely. Solution: Review and revise policies and procedures for reviewing time frames for making returns; develop R2T4 monitoring system; provide staff training.

Audit Findings 15

Audit Findings 16

Additional Compliance Solutions

• Periodically review processes and procedures to ensure compliance

-Tracking/monitoring deadlines

-Ensuring timely communication between offices

and/or systems

• R2T4 on the Web

• FSA Assessments: Schools

- R2T4 module

Student Status –Inaccurate/Untimely Reported

• Roster file (formerly called Student Status Confirmation Report [SSCR]) not submitted timely

• Failure to provide notification of last date of attendance/changes in student enrollment status

• Conflicting status change types and dates

Regulation: 34 C.F.R. §685.309(b)

Audit Findings 17

Student Status –Inaccurate/Untimely Reported

Example: Failure to submit roster file timely; conflicting enrollment status dates and types (G vs. W); no policies and procedures.

Solution: Develop policies and procedures for processing and submitting roster file; train staff on reporting requirements and procedures.

Audit Findings 18

Additional Compliance Solutions

• Maintain accurate enrollment records

• Automate enrollment reporting

– Batch uploads or individual online updates

– Update frequently

• Designate responsibility for monitoring the reporting deadlines

• Review NSLDS newsletters for updates

• Use the correct status codes

Audit Findings 19

Audit Findings 20

Pell Grant Overpayment/Underpayment

• Incorrect Pell Grant formula • Inaccurate calculations

– Proration– Incorrect EFC– Adjustments between terms– Incorrect number of weeks/hours

Regulations: 34 C.F.R. §§ 690.62; 690.63; 690.75 & 690.80

Audit Findings 21

Pell Grant Overpayment/Underpayment

Additional Compliance Solutions

Audit Findings 22

Audit Findings 23

Verification Violations

• Verification worksheet missing/incomplete

• Income tax returns missing/not signed• Conflicting data not resolved

• Untaxed income not verified

• Corrections that exceed tolerance/not submitted

Regulations: 34 C.F.R. §§ 668.51-668.61

Verification Violations

Example: Incomplete Verification- No tax return submitted for parent of dependent student- Incorrect number in household size- Verification worksheet not signed.

Solution: Revise verification procedures to ensure submission of all required documents; create a verification checklist; resolve conflicting information.

Audit Findings 24

Audit Findings 25

Additional Compliance Solutions

• Monitor verification process• Perform internal quality control file review • FSA Assessments: Students - Verification• Review Federal Student Aid Handbook, Application

& Verification Guide, Chapter 4• Review verification regulations

– Published October 29, 2010– Effective July 1, 2012

Student Credit Balance Deficiencies

• Credit balance not released to student within 14 days

• No process in place to determine when a credit balance has been created

• Non-compliant authorization to hold Title IV credit balances

Regulations: 34 C.F.R. §§ 668.164(e); 668.165(b)

Audit Findings 26

Student Credit Balance Deficiencies

Example: Credit balances held beyond 14 days without student authorizations.

Solution: Develop and implement procedures and controls to identify and release credit balances timely; provide training for staff.

Audit Findings 27

• Increase internal controls associated with credit balances

• Conduct a self-audit of credit balance disbursements

• Ensure credit balance authorization is compliant with Title IV requirements

Additional Compliance Solutions

Audit Findings 28

Audit Findings 29

Qualified Auditor’s Opinion Cited in Audit• Anything other than an unqualified opinion• Serious deficiencies/areas of concern in the

compliance audit/financial statements– R2T4 violations– Inadequate accounting systems and/or

procedures– Lack of internal controls

Regulation: 34 C.F.R. §668.171(d)

Audit Findings 30

Other Compliance Solutions• Assessment of entire process

– Design an institution-wide plan of action• Adequate and qualified staff• Appropriate internal controls• Training

– FSA COACH– FSA Assessments– FSA Online and In-Person trainings

• Implement appropriate CAP timely and effectively

Entrance/Exit Counseling Deficiencies

Audit Findings 31

Entrance/Exit Counseling Deficiencies

Example: Failure to conduct entrance counseling before loan is disbursed; no documentation of exit counseling materials mailed to unofficially withdrawn students.

Solution: Develop and implement procedures to ensure entrance/exit counseling is completed; automate tracking, monitoring; post links on school’s web page: www.studentloans.gov for entrance, www.nslds.ed.gov for exit.

Audit Findings 32

Audit Findings 33

Additional Compliance Solutions• Assign responsibility for monitoring the

entrance/exit interview process• Develop procedures for ensuring communication

between registrar, business, and financial aid offices

• Provide staff training– FSA COACH: Module 4 - Loan Counseling– FSA Assessments: Schools

• Default Prevention & Management

Overaward – Financial Need Exceeded

Audit Findings 34

Overaward – Financial Need Exceeded

Example: Aid initially awarded and disbursed as full-time, but student enrolls only half-time.

Solution: Check enrollment at census date and make necessary adjustments to aid.

Audit Findings 35

Audit Findings 36

Additional Compliance Solutions

• Establish procedures to ensure consistent handling of outside scholarships

• Determine if student’s costs exceed original cost of attendance (professional judgment)

• Routinely monitor FWS earnings to ensure students do not exceed allowable tolerance

• Determine if any aid can replace EFC, such as TEACH, PLUS or unsub

Program Review Findings

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Program Review Findings 38

Program Review Findings

• R2T4 calculation errors• Verification violations• Entrance/Exit counseling deficiencies• Crime awareness requirements not met• Student credit balance deficiencies• Satisfactory academic progress policy not

adequately developed/monitored

TIE

Program Review Findings 39

Program Review Findings

• R2T4 funds made late • Pell Grant overpayment/underpayment • Account records inadequate/not reconciled• Inaccurate recordkeeping• Lack of administrative capability• Information in student files missing/

inconsistentTIE

Program Review Findings 40

Crime Awareness Requirements Not Met

• Campus security policies and procedures not adequately developed

• Annual report not published and/or distributed • Failure to develop a system to track and/or log all

required categories of crimes

Regulations: 34 C.F.R. §§ 668.41, 668.46(c)(1)

Crime Awareness Requirements Not Met

Example: School failed to issue timely warning in response to a campus crime incident.

Solution: Develop and implement policy and procedures for timely warnings to include an alert system; implement annual report notification procedures.

Program Review Findings 41

Program Review Findings 42

Additional Compliance Solutions

SAP PolicyNot Adequately Developed/Monitored

• Missing required components– Qualitative, quantitative, completion rate, maximum

timeframe, remedial/repeat coursework, probation, appeals

• Failure to consistently or adequately apply SAP policy

• Aid disbursed to students not meeting the standards

Program Review Findings 43

Regulation: 34 C.F.R. § 668.16(e)

Program Review Findings 44

SAP PolicyNot Adequately Developed/Monitored

Example: School’s policy did not include all required components; aid disbursed to students not meeting SAP standards. Solution: Revise SAP policy to include all components; apply SAP standards consistently; return ineligible disbursements; establish internal controls to monitor SAP; review a sample of files.

Program Review Findings 45

• FSA Assessments: Students - Satisfactory Academic Progress (SAP) Module

• Staff training on new regulatory requirements for SAP– Published October 29, 2010

– Effective July 1, 2011

Additional Compliance Solutions

Program Review Findings 46

Account RecordsInadequate/Not Reconciled

• Failure to provide appropriate documentation of disbursements to reviewers

• Failure to balance program accounts with G5 and COD• Failure to identify Federal funds in institutional bank

accounts

Regulation: 34 C.F.R. § 668 Subpart K

Account RecordsInadequate/Not Reconciled

Example: Student records not reconciled to Federal Pell Grant program records on a monthly basis.

Solution: Establish routine procedure to ensure that all program records are reconciled timely.

Program Review Findings 47

Program Review Findings 48

Additional Compliance Solutions• Perform routine reconciliation of all program

accounts with COD and G5• Establish internal reporting procedure• FSA Assessments: Schools

– Fiscal Management• FSA COACH

– School Responsibilities: Fiscal and Records Management

• The Blue Book

Program Review Findings 49

Inaccurate Recordkeeping

• Inadequate or mismatched attendance records for schools that are required to take attendance

• Failure to maintain consistent disbursement records

Regulation: 34 C.F.R. § 668 Subpart K

Inaccurate Recordkeeping

Example: Federal Work-Study timesheets which appear as if student worked 15 hours instead of three due to a.m./p.m. errors.

Solution: Enhanced oversight by FWS supervisors and payroll processors to ensure correct information.

Program Review Findings 50

Program Review Findings 51

Additional Compliance Solutions

• Communicate the importance of accuracy of all FSA records with all staff members

• Establish procedures to routinely check documents for accuracy

• Take advantage of FSA Assessments and IFAP training options to ensure that all staff members are well-informed

Program Review Findings 52

Lack of Administrative Capability

Regulation: 34 C.F.R. § 668.16

Lack of Administrative Capability

Example: Failure to obtain state, accreditor and/or ED approval before disbursing Title IV aid at an additional location.

Solution: Obtain state, accreditor, and ED approvals; determine date at which institution first began offering 50% of coursework at the ineligible location; return ineligible disbursements.

Program Review Findings 53

Program Review Findings 54

Additional Compliance Solutions

• Training– Fundamentals of Title IV administration– FSA Coach– Attend FSA training opportunities– FSA Assessments– FSA Handbook

• Establish fiscal policies and procedures to ensure that reconciliations are done monthly

Program Review Findings 55

Information In Student Files Missing/ Inconsistent

Regulation: 34 C.F.R. § 668.24(a),(c)

Information in Student Files Missing/ Inconsistent

Example: Aid application and ISIR showed student as married; tax return filed as ‘head of household.’

Solution: Determine accuracy of tax filing status; reprocess, if required; adjust aid, if needed; develop policies and procedures for resolving conflicting information.

Program Review Findings 56

Program Review Findings 57

Additional Compliance Solutions• Establish communication with other offices to

identify and address inconsistent information• Perform periodic ‘review’ of student files• Develop process to monitor and verify that all

documents are received and reviewed• Where possible, automate requests for and

receipt of documents• File documents and/or scan to student files in a

timely manner

Resources – www.ifap.ed.govMy IFAPWhat’s NewTools for SchoolsPublicationsHandbooksLetters & Announcements

Training and Conferences

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FSA Assessments

• Self-assessment tool designed to assist schools in evaluating their financial aid policies, processes, and procedures

• Includes assessment modules regarding Students, Schools, and Campus-Based Programs

http://ifap.ed.gov/qahome/fsaassessment.html

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Question and Answers

Robin Minor – Chief Compliance Officer, Program Compliance, Washington, DC, (202) 377-3717 Ron Bennett – Director, School Eligibility Service Group, Washington, DC, (202) 377-3181

School Eligibility Service Group (SESG) – 202-377-3173/caseteams@ed.gov

Call the appropriate School Participation Division for information and guidance on audit resolution, financial analysis, program reviews, school and program eligibility/recertification and school closure information.

New York/Boston School Participation Division (Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Puerto Rico, Rhode Island Vermont, Virgin Islands)

Betty Coughlin, Director – New York(646) 428-3737/betty.coughlin@ed.gov

Tracy Nave – Boston (617) 289-0145Patrice Fleming – Wash DC (202) 377-4209 Chris Curry – New York (646) 428-3738

Philadelphia School Participation Division (District of Columbia, Delaware, Maryland, Pennsylvania, Virginia, West Virginia)

Nancy Gifford, Director – Philadelphia (215) 656-6436/nancy.paula.gifford@ed.gov

John Loreng – Philadelphia (215) 656-6437Michael Frola – Wash DC (202) 377-3364

Clery Division Jim Moore – Philadelphia (215) 656-6495 or (202) 377-4089

Foreign Schools DivisionBarbara Hemelt – Wash DC (202) 377-4201Joseph Smith – Wash DC (202) 377-4321

Atlanta School Participation Division(Atlanta, Alabama, Florida, Georgia, Mississippi, North Carolina, South Carolina)

Charles Engstrom, Director – Atlanta (404) 974-9290/charles.engstrom@ed.gov

Christopher Miller – Atlanta (404) 974-9297Barbara Murray – Wash DC (202) 377-4203

Dallas School Participation Division (Arkansas, Louisiana, New Mexico, Oklahoma, Texas)

Cynthia Thornton, Director – Dallas (214) 661-9457/cynthia.thornton@ed.gov

Jesus Moya – Dallas (214) 661-9472Kim Peeler – Dallas (214) 661-9471

Kansas City School Participation Division(Iowa, Kansas, Kentucky, Missouri, Nebraska, Tennessee)

Ralph LoBosco, Director – Kansas City (816) 268-0440/ralph.lobosco@ed.gov

Dvak Corwin – Kansas City (816) 268-0420Phillip Brumback – Wash DC (202) 377-3464

Chicago/Denver School Participation Division (Illinois, Minnesota, Ohio, Wisconsin, Indiana, Colorado, Michigan, Montana, North Dakota, South Dakota, Utah, Wyoming)

Douglas Parrott, Director – Chicago (312) 730-1532/douglas.parrott@ed.gov

Earl Flurkey – Chicago (312) 730-1521Dr. Brenda Yette – Chicago (312) 730-1522Kerry O’Brien – Denver (303) 844-3319

San Francisco/Seattle School Participation Division (Alaska, American Samoa, Arizona, California, Guam, Hawaii, Idaho, Marshall Islands, Micronesia, Nevada, Northern Marianas, Oregon, Palau, Washington)

Martina Fernandez-Rosario, Director – San Francisco (415) 486-5605/ martina.fernandez-rosario@ed.gov

Gayle Palumbo – San Francisco (415) 486-5614 or Seattle (206) 615-3699Dyon Toney – Wash DC (202) 377-3639Erik Fosker – San Francisco (415) 486-5606

School Eligibility Service Group

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Contact InformationWe appreciate your feedback and comments. We can be reached at:

Effie Barnett• Phone: 312-730-1587• E-mail: effie.barnett@ed.gov

Briget Jans• Phone: 312-730-1718• E-mail: briget.jans@ed.gov