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
7
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)
10
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)
13
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
16
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!
19
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)
21
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)
22
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
24
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
26
Repeat Finding-Failure to Take
Corrective Action
Finding Example:
Possible Actions:
• Repeat finding(s) of
any kind; finding from
prior audit period also
appears in the current
audit (must be
reviewed by a
specialist)
• 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.
29
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.
30
…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
– annmarie.weisman@ed.gov
– 215-656-6456
• To provide feedback to my supervisor:
– Tom Threlkeld, Supervisor
– thomas.threlkeld@ed.gov
– 617-289-0144
33
Region III Training Team
• Greg Martin, Training Officer
• gregory.martin@ed.gov
• 215-656-6452
• Craig Rorie, Training Officer
• craig.rorie@ed.gov
• 215-656-5916
• Annmarie Weisman, Training Officer
• annmarie.weisman@ed.gov
• 215-656-6456
34
QUESTIONS?
35
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
37
http://ifap.ed.gov/ifap/toolsforschools.jsp
38
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.
39
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
41
Overaward-Financial Need
Exceeded
Finding Example:
• School disbursed
subsidized loans in
excess of student’s
need
Possible Actions:
• 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
44
R2T4 Not Made
Finding Example:
Possible Actions:
• R2T4 calculation not
completed for
students who had
withdrawn
• 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
47
Enrollment Status Not Verified
Before Disbursement
Finding Example:
Possible Actions:
• Several students
tested in the sample
attended part-time,
but disbursed as fulltime students
• 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
50
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)
55
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
57
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)
58
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
61
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)
64
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