Top 10 Audit and Program Review Findings

PASFAA Conference Pittsburgh, PA October 2011 Annmarie Weisman, Training Officer U.S. Department of Education

Audit Findings

• Return to Title IV (R2T4) Calculation Errors • Pell Overpayment/Underpayment • R2T4 Funds Made Late • Verification Violations • Overaward-Financial Need Exceeded 2

Audit Findings

• R2T4 Not Made • Enrollment Status Not Verified Before Disbursement • Improper Certification of Stafford Loan • Credit Balance Deficiencies • Ineligible Student-Not Making Satisfactory Academic Progress (SAP) • Repeat Finding—Failure to Take Corrective Action 3

Program Review Findings

• Verification Violations • Crime Awareness Requirements Not Met • Credit Balance Deficiencies • R2T4 Calculation Errors • R2T4 Made Late 4

Program Review Findings

• Entrance/Exit Counseling Deficiencies • Account Records Inadequate/Not Reconciled • Info. in Student Files Missing/Inconsistent • SAP Policy Not Adequately Developed/ Monitored • Pell Overpayment/Underpayment 5

Findings on Both Lists

• Verification Violations • R2T4 Made Late • R2T4 Calculation Errors • Pell Grant Over/Underpayments • Credit Balance Deficiencies • SAP Policy Errors 6

Verification Violations

• Verification Worksheet not signed • Untaxed income not verified • Conflicting data on ISIR and verification documents not resolved • Required corrections not processed

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

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Verification Violations

Finding Example:

• Incomplete Verification – Tax return unsigned – Tax return not submitted even required to file – Incorrect # in household size

Possible Actions:

• Follow published procedures • Ensure all required items are verified (checklist) • Document student files 8

Verification Violations

Other Compliance Solutions: • Monitor verification process to ensure procedures are followed • Perform your own audit of sample files • FSA Assessments: Students – FSA Verification • Use Verification Worksheet – School developed or ED worksheet 9

R2T4 Calculation Errors

• Incorrect institutional charges for the period – Payment period vs. period of enrollment • Scheduled breaks not correctly determined • Incorrect # of days counted for the period • Incorrect withdrawal date • Mathematical and/or rounding errors

Regulation: 34 CFR § 668.22(e)

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R2T4 Calculation Errors Finding Example:

• Clock hour school used completed hours rather than scheduled hours • For student who failed to return from a LOA, used last date of LOA for withdrawal date rather than LDA

Possible Actions:

• Recalculate unearned aid and make needed adjustments • Modify policies and procedures • Have two staff members independently perform same calculation & compare 11

R2T4 Calculation Errors

Other Compliance Solutions: • Pay attention to new regulations; revise procedures as needed • Perform self-assessment by reviewing a random sample of student files • FSA Assessments: Managing Funds – R2T4 module • Use R2T4 Worksheets – Electronic Web Application – Paper 12

R2T4 Funds Made Late

• • • • Returns not made timely (45 days) Inadequate system in place to identify/track official and unofficial withdrawals No system in place to track number of days remaining to return funds Lack of coordination between offices

Regulation: 34 C.F.R. § 668.22(j)

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R2T4 Funds Made Late Finding Example:

• School completed calculations, but did not return funds within the 45-day timeframe

Possible Actions:

• Determine why funds weren’t returned timely • Revise procedures • Assign responsibility for monitoring the process 14

R2T4 Funds Made Late

Other Compliance Solutions: • Periodically review processes/procedures – Tracking/monitoring deadlines – Timely communication between offices • Use R2T4 on the Web • FSA Assessment: Managing Funds – Fiscal Management 15

Pell Grant Over/Under Payment

• Adjustments not made for change in enrollment status between terms • Attendance not documented in all coursework counted in enrollment status – Modules or compressed coursework • Incorrect information used – Pell formula, EFC, # of weeks/hours • Inaccurate proration calculation

Regulations: 34 C.F.R. §§ 690.62 and 690.79

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Pell Grant Over/Under Payment Finding Example:

• Lack of internal controls over file maintenance and disbursement process resulted in Pell over/under payments

Possible Solutions:

• Adjust aid • Verify student eligibility prior to disbursing aid • Develop procedures for resolving errors once identified 17

Pell Grant Over/Under Payment

Other Compliance Solutions: • Use correct enrollment status • Use correct Pell Formula/Schedule • Verify that student began attendance in all coursework • Prorate when needed • Assign responsibility of monitoring to ensure Pell disbursements are accurate and timely 18

Credit Balance Deficiencies Finding Example:

• Credit balances held from 32 to 111 days without student authorizations

Possible Actions:

• Implement procedures that identify and release credit balances timely • Do NOT require all students to sign an authorization; must be voluntary!

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Credit Balance Deficiencies

Other Compliance Solutions: • Develop a process to determine when a credit balance is created • Develop a system to track number of days remaining to release funds timely • Understand regulations regarding minor prior year charges – May create more credit balances if entire program cost is charged upfront – 2010-11 FSA Handbook, Vol. 4, pp. 4-10 to 4-13 20

Credit Balance Deficiencies

• No process in place to determine when a credit balance has been created • Credit balances not released to students within required 14-day timeframe • Credit balances held without student authorizations

Regulation: 34 C.F.R. § 668.164 (e)

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SAP Policy Not Adequately Developed/Monitored

• Missing required components – Qualitative, quantitative, completion rate, maximum timeframe, probation, appeals • Policy not at least as strict as for non-Title IV recipients • Standards inconsistently applied • Aid disbursed to students not making SAP

Regulation: 34 C.F.R. § 668.16(e)

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SAP Policy Not Adequately Developed/Monitored Finding Example:

• School did not include courses in previous period of attendance in SAP determination

Possible Actions:

• Return aid disbursed to ineligible students • Revise policy • Establish internal controls 23

SAP Policy Not Adequately Developed/Monitored

Other Compliance Solutions: • Develop adequate SAP policy – remedial and repeat coursework – warning/probation periods – appeal process • Document each student’s file to reflect eligibility for disbursements • 34 C.F.R. 668.34 consolidated all SAP

regulations - published Nov. 1, 2010

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The “Extra” Finding

Repeat Finding-Failure to Take Corrective Action

• Same finding(s) in subsequent audit(s) – School failed to adequately develop, implement, and/or monitor procedures to ensure Corrective Action Plan (CAP) was followed – Problem identified too late to avoid repeat finding – New issue but same finding title

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

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Repeat Finding-Failure to Take Corrective Action Finding Example:

• Repeat finding(s) of any kind; finding from prior audit period also appears in the current audit (must be reviewed by a specialist)

Possible Actions:

• Require DFA to review all files for eligibility prior to disbursement of aid • Review sample files quarterly 27

Repeat Finding-Failure to Take Corrective Action

• Review results of CAP – Is it working?

– Are changes needed to improve process?

• Develop specific procedures for CAP action items • Assign responsible person/office to ensure CAP is implemented/monitored • Conduct student file reviews • FSA Assessments 28

Suggestions for a Strong CAP

Include adequate detail.

Sample CAP: We trained all staff on proper verification procedures.

Better CAP: The DFA developed a checklist to use when completing verification. All FAO staff attended a two hour training session on verification in March 2011. The DFA will review five files where verification was done by each FAO each quarter.

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Suggestions for a Strong CAP

Provide a strong solution.

Sample CAP: This finding was the result of staff oversight. Staff will be more careful in the future.

Better CAP: The DFA will run a weekly report each Monday to identify withdrawals from the prior week. All FAO staff will review the report for the addition of their assigned students. The DFA will also run a report of students who withdrew more than 30 days ago, but with no R2T4 calculation.

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…The Rest of the Story

Other Findings of Note…

• Ineligible Location (or Program or Student) • Excess Cash • Early Disbursements • Lack of Administrative Capability • Consumer Info. Requirements Not Met • Borrower Not Notified (Timely) of Disb./Right to Cancel • Failure to Follow Institutional Policy • Failure to Resolve Conflicting Information 32

Contact Information

• If you have follow-up questions about this session, contact me at: – Annmarie Weisman, Training Officer – [email protected]

– 215-656-6456 • To provide feedback to my supervisor: – Tom Threlkeld, Supervisor – [email protected]

– 617-289-0144 33

Region III Training Team

• Greg Martin, Training Officer • • [email protected]

215-656-6452 • Craig Rorie, Training Officer • • [email protected]

215-656-5916 • Annmarie Weisman, Training Officer • • [email protected]

215-656-6456 34

QUESTIONS?

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Resources

FSA Assessments

• Self-assessment tool designed to assist schools in evaluating their financial aid policies, processes, and procedures • Includes assessment modules on Students, Schools, Managing Funds, and Policies and Procedures http://www.ifap.ed.gov/qahome/fsaassessment.html

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http://ifap.ed.gov/ifap/toolsforschools.jsp

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School Participation Team (SPT) Contact Information

Call your SPT for information and guidance on audit resolution, financial analysis, program reviews, school and program eligibility/ recertification and school closure information.

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The Remaining Top Audit Findings

Overaward-Financial Need Exceeded

• No system in place to ensure overawarding does not occur • Lack of communication between offices • Non-Title IV funds not included with financial aid received • Incorrect budget

Regulations: 34 C.F.R. §§ 682.204 and 685.301

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Overaward-Financial Need Exceeded

Finding Example: Possible Actions:

• School disbursed subsidized loans in excess of student’s need • Reallocate to unsubsidized • Conduct file review • Update policy and procedures; train staff 42

Overaward-Financial Need Exceeded

Other Compliance Solutions: • Assign staff responsibility to monitor effectiveness of revised policies and procedures • Perform internal review of student files • Increase communication between offices • Review systems/calculations to ensure compliance 43

R2T4 Funds Not Made

• Institution unaware that student withdrew • No system in place to verify that R2T4 calculations (or the return) were made • Lack of communication/coordination between offices

Regulation: 34 C.F.R. § 668.22

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R2T4 Not Made

Finding Example:

• R2T4 calculation not completed for students who had withdrawn

Possible Actions:

• Return unearned aid • Implement an increase in controls over the Title IV funds • Provide training and support to staff 45

R2T4 Not Made

Other Compliance Solutions: • Design procedures to ensure timely communication among offices • Train and assign responsibility to staff for monitoring the R2T4 process • Perform internal audit by reviewing a random sample of student files of students who have withdrawn • Review internal system to track withdrawals 46

Enrollment Status Not Verified Before Disbursement

• Incorrect award amounts • Institution unaware that student(s) withdrew • Changes in units/hours • Leave of absence (LOA) issues

Regulation: 34 C.F.R. § 668.164

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Enrollment Status Not Verified Before Disbursement Finding Example:

• Several students tested in the sample attended part-time, but disbursed as full time students

Possible Actions:

• Return ineligible funds • Re-train staff on enrollment requirements 48

Enrollment Status Not Verified Before Disbursement

Other Compliance Solutions: • Verify student enrollment status prior to disbursement • Perform “self-audit” of student files • Conduct meetings for all offices involved in monitoring status of students 49

Improper Certification of Stafford Loan

• Use of incorrect annual loan amount based on college grade level or dependency status • Failure to prorate loans when necessary • At least ½ time enrollment not documented

Regulations: 34 C.F.R. §§ 682.603 and 685.301

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Improper Certification of Stafford Loan Finding Example:

• Additional unsubsidized loans awarded to dependent students with no documentation of PLUS denial

Possible Actions:

• Return loan funds incorrectly awarded • Document/maintain documentation for PLUS denial • Implement system edits to prevent certification of loans without appropriate PLUS denial flag 51

Improper Certification of Stafford Loan

Other Compliance Solutions: • Maintain documentation to support award – Enrolled at least ½ time, grade level, remaining period of study • Monitor loan periods and enrollment • Implement system edits to prevent disbursements to ineligible students • Perform “self-audit” of student files 52

The Remaining Top Program Review Findings

Program Review Findings

• Crime Awareness Requirements Not Met • Return to Title IV Calculation Errors • Return of Title IV Funds Made Late • Entrance/Exit Counseling Deficiencies • Account Records Inadequate/Not Reconciled • Information in Student Files Missing or Inconsistent • SAP Policy Not Adequately Developed and/or Monitored or Ineligible Student 54

Crime Awareness Requirements Not Met

• Policies and procedures regarding campus security not adequately developed • Annual report not published and/or distributed annually to current students/staff by the required deadline • Failure to develop a system to track and/or log all required categories of crimes

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

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Crime Awareness Requirements Not Met Finding Examples:

• Report not distributed • Did not list statistics for three most recent years • No process for reporting crimes to school officials

Possible Actions:

• Fully develop all required components of the report • Actively distribute the report as required 56

Crime Awareness Requirements Not Met

Other Compliance Solutions: • Review Handbook for Campus Crime Reporting http://www.ed.gov/admins/lead/safety/handbook.pdf

• Review HEOA additional requirements – Emergency response, timely warnings – Fire safety, missing persons • Review Information Required to be Disclosed Under

the Higher Education Act: Suggestions for Dissemination

http://nces.ed.gov/pubs2010/2010831rev.pdf

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Entrance/Exit Counseling Deficiencies

• Entrance counseling not conducted/not documented for 1st-time, 1st-year borrowers • Exit counseling materials not mailed to students who failed to complete in-person or online counseling • Exit counseling not conducted for withdrawn students

Regulation: 34 C.F.R. § 682.604(f),(g)

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Entrance/Exit Counseling Deficiencies Finding Example:

• No documentation that students who unofficially withdrew completed exit counseling

Possible Actions:

• Mail required exit counseling materials • Revise procedures to ensure all borrowers receive counseling • Conduct file review to determine if other students failed to complete counseling 59

Entrance/Exit Counseling Deficiencies

Other Compliance Solutions: • Assign responsibility for monitoring the entrance/exit interview process • Develop procedures for ensuring communication between offices – Registrar, Bursar, Financial Aid • Provide staff training – FSA Coach, Module 4: Loan Counseling – FSA Assessments: Schools • Default Prevention & Management 60

Account Records Inadequate/Not Reconciled

• Failure to maintain financial records reflecting all program transactions • Failure to reconcile financial aid records with general ledger and/or Department systems • Incomplete audit trail

Regulation: 34 C.F.R. § 668.16

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Account Records Inadequate/Not Reconciled Finding Example:

• The school’s accounting system did not provide for student ledgers showing charges, payments, or the dates that credit balances were created or released

Possible Actions:

• Purchase a system that meets GAAP ( generally acceptable accounting principles) • Revise procedures to maintain accurate student account data 62

Account Records Inadequate/Not Reconciled

Other Compliance Solutions: • Develop policies and procedures – G5, handling credit balances, drawdowns and disbursements • Provide for a clear audit trail – Trace federal cash from drawdown to its final destination – Cross-reference accounting entries • FSA Assessments/Fiscal Management 63

Information in Student Files Missing or Inconsistent

• No method to coordinate information collected at different offices at the school • ISIR data conflicts with data in student’s file • Insufficient or missing documentation needed to support PJ or DO decisions

Regulation: 34 C.F.R. § 668.24(a),(c)

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Information in Student Files Missing or Inconsistent Finding Example:

• ISIR lists student as married; tax return submitted for verification showed Head of Household; school did not resolve conflict

Possible Actions:

• Determine if tax filing status was correct • Adjust aid if needed • Develop policies to address conflicts 65

Information in Student Files Missing or Inconsistent

Other Compliance Solutions: • Develop adequate policies and procedures to address conflicting information • Establish communication with other offices to identify and address inconsistent information • Perform a periodic review of student files to determine if procedures are working • Review all subsequent ISIRs 66