Top 10 Audit and Program Review Findings PASFAA Conference Pittsburgh, PA October 2011 Annmarie Weisman, Training Offic

1. Top 10 Audit and Program Review Findings PASFAA Conference Pittsburgh, PA October 2011 Annmarie Weisman, Training Officer U.S. Department of Education

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

3. 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 Tie

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

5. 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

6. Findings on Both Lists • Verification Violations • R2T4 Made Late • R2T4 Calculation Errors • Pell Grant Over/Underpayments • Credit Balance Deficiencies • SAP Policy Errors

7. 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

8. Verification Violations Finding Example: Possible Actions: Follow published procedures Ensure all required items are verified (checklist) Document student files • Incomplete Verification • Tax return unsigned • Tax return not submitted even required to file • Incorrect # in household size

9. 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

10. 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)

11. R2T4 Calculation Errors Finding Example: Possible Actions: Recalculate unearned aid and make needed adjustments Modify policies and procedures Have two staff members independently perform same calculation & compare • 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

12. 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

13. 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)

14. R2T4 Funds Made Late Finding Example: Possible Actions: Determine why funds weren’t returned timely Revise procedures Assign responsibility for monitoring the process • School completed calculations, but did not return funds within the 45-day timeframe

15. 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

16. 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

17. Pell Grant Over/Under Payment Finding Example: Possible Solutions: Adjust aid Verify student eligibility prior to disbursing aid Develop procedures for resolving errors once identified • Lack of internal controls over file maintenance and disbursement process resulted in Pell over/under payments

18. 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

19. Credit Balance Deficiencies Finding Example: Possible Actions: Implement procedures that identify and release credit balances timely Do NOT require all students to sign an authorization; must be voluntary! • Credit balances held from 32 to 111 days without student authorizations

20. 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

21. 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)

22. 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)

23. SAP Policy Not Adequately Developed/Monitored Finding Example: Possible Actions: Return aid disbursed to ineligible students Revise policy Establish internal controls • School did not include courses in previous period of attendance in SAP determination

24. 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

25. The“Extra” Finding

26. 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

27. Repeat Finding-Failure to Take Corrective Action Finding Example: Possible Actions: Require DFA to review all files for eligibility prior to disbursement of aid Review sample files quarterly • Repeat finding(s) of any kind; finding from prior audit period also appears in the current audit (must be reviewed by a specialist)

28. 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

29. 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.

30. 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.

31. …The Rest of the Story

32. 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

33. 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

34. 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

35. QUESTIONS?

36. Resources

37. 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

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

39. 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.

40. The RemainingTop Audit Findings

41. 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

42. Overaward-Financial Need Exceeded Finding Example: Possible Actions: Reallocate to unsubsidized Conduct file review Update policy and procedures; train staff • School disbursed subsidized loans in excess of student’s need

43. 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

44. 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

45. R2T4 Not Made Finding Example: Possible Actions: Return unearned aid Implement an increase in controls over the Title IV funds Provide training and support to staff • R2T4 calculation not completed for students who had withdrawn

46. 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

47. 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

48. Enrollment Status Not Verified Before Disbursement Finding Example: Possible Actions: Return ineligible funds Re-train staff on enrollment requirements • Several students tested in the sample attended part-time, but disbursed as full-time students

49. 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

50. 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