1. Top 10 Audit and Program Review Findings NJASFAA Conference Atlantic City, NJ November 2011 Nautochia Webb, Training Officer U.S. Department of Education

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

3. 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. 4 Program Review Findings Verification Violations Crime Awareness Requirements Not Met Credit Balance Deficiencies R2T4 Calculation Errors R2T4 Made Late

5. 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. 6 Findings on Both Lists Verification Violations R2T4 Made Late R2T4 Calculation Errors Pell Grant Over/Underpayments Credit Balance Deficiencies SAP Policy Errors

7. 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: 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

9. 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. 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: 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

12. 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. 13 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) R2T4 Funds Made Late

14. 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

15. 15 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 R2T4 Funds Made Late

16. 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: 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

18. 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. 19 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)

20. 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! 20

21. 21 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

22. 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: 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

24. 24 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 SAP Policy Not Adequately Developed/Monitored

25. The “Extra” Finding

26. 26 Repeat Finding-Failure to Take Corrective Action Same finding(s) in subsequent audit(s)/ program review(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: Repeat finding(s) of any kind; finding from prior audit period or program review also appears in the current report Possible Actions: Require review all files for eligibility prior to disbursement of aid Review sample files quarterly 27

28. 28 Repeat Finding-Failure to Take Corrective Action Review results of Correction Action Plan –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. 29 Suggestions for a Strong CAP Include adequate detail. Sample CAP: We trained all staff on proper verification procedures. Better CAP: The FAD developed a checklist to use when completing verification. All FA staff attended a two hour training session on verification in November 2011. The FAD will review five files where verification was done by FA staffer each quarter.

30. 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 FAD will run a weekly report each Monday to identify withdrawals from the prior week. All FA staff will review the report for the addition of their assigned students. The FAD 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. 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. Corrective Action Plans 33 Do: Note whether or not you concur with the finding. If you think you are right, say so and provide evidence Show how you corrected the specific error (adjusted the award, returned funds, etc.) AND will prevent future errors (training, checklist, etc.) Don’t: Blame the problem on: “human error” “the “system” “staff turnover” “new staff” anything else that shows a lack of administrative capability

34. QUESTIONS? 34

35. Resources

36. 36 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 FSA Assessments

37. http://ifap.ed.gov/ifap/toolsforschools.jsp 37

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. 38

39. The Remaining Top Audit Findings

40. 40 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 41

42. 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. 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: 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 44

45. 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. 46 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 Enrollment Status Not Verified Before Disbursement

47. 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 47

48. 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. 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 50

51. 51 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 Improper Certification of Stafford Loan

52. The Remaining Top Program Review Findings

53. 53 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. 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 55

56. 56 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 Crime Awareness Requirements Not Met

57. 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 58

59. 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. 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 61

62. 62 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 Account Records Inadequate/Not Reconciled

63. 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 64

65. 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. Contact Information If you have follow-up questions about this session, contact me at: –Nautochia Webb, Training Officer –Nautochia.Webb@ed.govNautochia.Webb@ed.gov –646-428-3758 To provide feedback to my supervisor: –Tom Threlkeld, Supervisor –Thomas.Threlkeld@ed.govThomas.Threlkeld@ed.gov –617-289-0144 66

67. 67 THANK YOU!