oversight

Lincoln University's Administration of the Title III Grant.

Published by the Department of Education, Office of Inspector General on 2001-07-01.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

        AUDIT OF LINCOLN UNIVERSITY’S
        ADMINISTRATION OF THE TITLE III
                    GRANT

                                   FINAL AUDIT REPORT




                          CONTROL NUMBER: ED-OIG/A03-A0019
                                     July 2001




Our mission is to promote the efficiency,        U.S. Department of Education
effectiveness, and integrity of the              Office of Inspector General
Department’s programs and operations.            Philadelphia, PA
                                         Notice


       Statements that financial and/or managerial practices need improvement or
 recommendations that costs questioned be refunded or unsupported costs be adequately
supported, as well as other conclusions and recommendations in this report, represent the
opinions of the Office of Inspector General. Determinations on these matters will be made
 by appropriate U.S. Department of Education officials. In accordance with Freedom of
  Information Act (5 U.S.C. §552), reports issued by the Office of Inspector General are
     available, if requested, to members of the press and general public to the extent
          information contained therein is not subject to exemptions in the Act.
          Audit of Lincoln University’s Administration of the Title III Grant
                                    Final Report
                                ED-OIG/A03-A0019



              ~TABLE OF CONTENTS~


EXECUTIVE SUMMARY                                                                   1


AUDIT RESULTS                                                                       3


    FINDING NO. 1 –       TITLE III FUNDS WERE USED FOR
                          UNALLOWABLE EXPENDITURES                                  3

    FINDING NO. 2 –       LU DID NOT MAINTAIN ADEQUATE
                          SUPPORTING DOCUMENTATION                               5

    FINDING NO. 3 –       TITLE III PAYROLL EXPENDITURES
                          WERE NOT BEING ACCURATELY
                          RECORDED                                              7


OTHER MATTERS                                                                   9


BACKGROUND                                                                      11


OBJECTIVES, SCOPE AND METHODOLOGY                                               12


STATEMENT ON MANAGEMENT CONTROLS                                                13



APPENDIX – SCHEDULE OF FINDINGS BY AWARD YEAR                                   15



ATTACHMENT – LU’S RESPONSE TO OIG DRAFT REPORT
FINAL REPORT
LU ADMINISTRATION OF TITLE III GRANT FUNDS ED-OIG/ A03-A0019                         PAGE 1

                                EXECUTIVE SUMMARY

We conducted an inspection and follow-up audit to determine if Lincoln University (LU),
in Pennsylvania, administered Title III, Part B of the Strengthening Historically Black
Colleges and Universities Program grant funds in accordance with applicable laws,
regulations, and program requirements. We initially reviewed the period October 1,
1992, through September 30, 1998, and later conducted a follow-up audit of the period
July 1, 1999, through June 30, 2000. The Strengthening Historically Black Colleges and
Universities Program is authorized under Title III, Part B of the Higher Education Act of
1965, as amended.

For the period July 1, 1999, through June 30, 2000, our audit disclosed that LU generally
administered the Title III grant funds they received in accordance with applicable laws,
regulations, and program requirements. During this period LU expended $801,477 of the
Title III grant award. We reviewed approximately $186,399 (23%) of these expenditures.
For the 1999-2000 period, the audit disclosed $835 in unallowable grant expenditures.

For the period October 1, 1992, through September 30, 1998, we found that LU did not
adequately administer the Title III grant funds they received. During this period, LU
expended $5.2 million of the Title III grant awards. We reviewed approximately $1.2
million of these expenditures. For the 1992-1998 period, the inspection disclosed
$61,644 in unallowable grant expenditures, 1 $124,818 in unsupported expenditures,2
noncompliance with LU’s internal policies and procedures. LU’s failure to maintain
adequate financial controls and follow its policies and procedures adversely affected its
ability to administer its Title III grants.

During our audit, we noted that LU has made significant improvements in the
administration of Title III grant funds. These improvements include LU’s monitoring of
its grant expenditures and comparing expenditures to its approved budget. Additionally,
management is emphasizing internal controls and adherence to LU’s policies and
procedures.

RECOMMENDATIONS:

We recommend that the Assistant Secretary for Postsecondary Education, U.S.
Department of Education (ED), require LU to:

1) refund to ED $62,479 ($61,644+$835) for the unallowable expenditures;

2) provide adequate documentation to show that the unsupported expenditures
   amounting to $124,818 are reasonable and allowable, or refund the recoverable
   portions that ED determines have not been adequately documented;

1
    Details provided in Findings No. 1 and No. 3 and the schedule in the Appendix.
2
    Details provided in Findings No. 2 and No. 3 and the schedule in the Appendix.
FINAL REPORT
LU ADMINISTRATION OF TITLE III GRANT FUNDS ED-OIG/ A03-A0019                       PAGE 2


3) ensure that ED-approved Title III budgets are followed and grant expenditures
   continue to be monitored; and

4) revise procedures for documenting employees’ time worked so that this information
   is verified to be complete and accurate.

LU officials generally concurred with the findings and related recommendations in the
draft report. LU’s response to the draft report is incorporated in the body of this report.
A complete copy of their response is attached.
FINAL REPORT
LU ADMINISTRATION OF TITLE III GRANT FUNDS ED-OIG/ A03-A0019                                       PAGE 3

                                     AUDIT RESULTS
LU generally administered the Title III grant funds it received for the period July 1, 1999,
through June 30, 2000, in accordance with applicable laws, regulations, and program
requirements. However, our inspection disclosed that LU did not adequately administer
Title III grant funds it received for the period October 1, 1992, through September 30,
1998, as detailed below.


FINDING NO. 1 TITLE III FUNDS WERE USED FOR
              UNALLOWABLE EXPENDITURES

LU expended $801,477 in Title III grant funds for the 1999-2000 audit period. We tested
21 non-payroll expenditures in the amount of $47,905. During this period, LU made
seven Title III grant expenditures, totaling $835, that were unallowable. Additionally,
LU had a total of $5.5 million in Title III expenditures for the 1992-1998 award period.
We tested 246 non-payroll expenditures in the amount of $1,107,654. During this period,
LU made 19 unallowable expenditures, totaling $54,041, with Title III grant funds. The
appendix section of this report provides a schedule of monetary findings by award year.

MAINTENANCE AND RENOVATION

Our inspection of expenditures made during the 1992-1998 award period disclosed that
LU used $50,405 in Title III grant funds for maintenance and renovation of the LU
President’s house and faculty housing. Costs associated with the housing for an
institution’s officers, which includes maintenance and renovation to the housing, are
expressly unallowable. Office of Management and Budget (OMB) Circular
A-213 J.20.a, states that costs of housing (e.g., depreciation, maintenance, etc.) of
an institution’s officers are unallowable. Improvements to facilities are only allowed if
the facility is used for instructional purposes as provided by 34 CFR §608.10(a)(2), 4
which states that grant expenditures are only allowable for construction, maintenance,
renovation or improvement in classroom, library, laboratory, and other instructional
facilities.

OTHER NON-TITLE III RELATED EXPENDITURES

We found that LU used $4,471 in grant funds to pay for goods and services that were
either not allowable or not a reasonable use of grant funds. LU improperly expended
$835 during the 1999-2000 audit period and $3,636 during the 1992-1998 inspection
period.



3
  OMB Circular A-21 sets forth the governing cost principles for allowable costs for educational
institutions, as stated in 34 CFR§ 74.27.
4
  Title 34 of the Code of Federal Regulations, part and section.
FINAL REPORT
LU ADMINISTRATION OF TITLE III GRANT FUNDS ED-OIG/ A03-A0019                       PAGE 4

During the 1999-2000 audit period, funds were used to purchase business cards for an
employee ($65), and to reimburse visiting educators for travel expenses to LU to
participate as panelists in a discussion on international education, which was a part of the
inaugural celebration of LU’s new president ($770). Neither of these expenditures were
in LU's approved Title III budget for the period. In addition, the expenditures were not
reasonable based on the following definition in OMB Circular A-21 C.3:

       A cost may be considered reasonable if the nature of the goods or services
       acquired or applied and the amount involved therefor reflect the action that a
       prudent person would have taken at the time... Major considerations involved in
       the determination of the reasonableness of a cost are: a) whether or not the cost is
       of a type generally recognized as necessary for the operation of the institution or
       the performance of the sponsored agreement; c) whether or not the individuals
       concerned acted with due prudence…; d) the extent to which the actions taken
       with respect to the incurrence of the cost are consistent with established
       institutional policies and practices…

During the 1992-1998 award period, LU used funds to purchase a La-Z-Boy recliner
($728), to remove lint from the gym laundry ($1,366), and to landscape planter boxes
($1,541). The recliner was requested and authorized by the former Title III coordinator.
The purchase of these goods and services were not reasonable based on the definition
provided in the prior paragraph OMB Circular A-21 C.3.

Inadequate monitoring of Title III grant expenditures by LU led to the unallowable
expenditures during the 1992-1998 award period. Specifically, LU did not compare
expenditures to the approved Title III budget for reasonableness and allowability. Also,
LU did not consistently use Special Program Vouchers. LU Title III policy requires that
all Title III expenditures paid for with restricted funds (e.g., Title III) must be approved
by the Office of Special Programs (OSP) using the Special Program Voucher. As of
December 1998, LU’s OSP had begun to monitor grant expenditures, which has
significantly assisted in eliminating unallowable expenditures.

RECOMMENDATIONS:

We recommend that the Assistant Secretary for Postsecondary Education require LU to:

1.1   Refund to ED $54,876 for unallowable expenditures;
1.2   Ensure that Title III grant expenditures continue to be monitored; and
1.3   Ensure that ED-approved Title III budgets are followed.
FINAL REPORT
LU ADMINISTRATION OF TITLE III GRANT FUNDS ED-OIG/ A03-A0019                       PAGE 5

LU RESPONSE:

LU concurred with all of our finding recommendations. Specifically, LU’s response
was:

1.1   The University concurs with the auditor’s recommendation and will refund any
      portion that is still recoverable under the time limitations defined by the General
      Education Provisions Act.

1.2   The Office of Special Programs, which was assigned grant monitoring
      responsibility for Title III in fiscal year 1999, has established a system of
      monitoring all Title III funds for each grant activity during each year. This system
      is consistent with monitoring procedures for all other grants within the University.
      This monitoring process will ensure that Title III budgets will be followed.

1.3   The Office of Special Programs, which was assigned grant monitoring
      responsibility for Title III in fiscal year 1999, has established a system of
      monitoring all Title III funds for each grant activity during each year. This system
      is consistent with monitoring procedures for all other grants within the University.
      This monitoring process will ensure that Title III budgets will be followed.



FINDING NO. 2 LU DID NOT MAINTAIN ADEQUATE
              SUPPORTING DOCUMENTATION
Supporting documentation was provided for all expenditures reviewed for the 1999-2000
audit period, however, during the 1992-1998 award period, LU did not maintain adequate
records and was unable to support all Title III grant expenditures. LU was unable to
provide adequate supporting documentation for 28 of the 246 non-payroll expenditures
we reviewed for this period. These 28 expenditures totaled $123,678.

Cancelled checks were provided for 12 of the 28 expenditures. No other documentation
was provided to support the purpose of these expenditures. Due to the lack of additional
supporting documentation, we identified $13,049 paid for these 12 expenditures as
unsupported costs. LU had partial or no supporting documentation for the remaining 16
expenditures, totaling $110,629.

LU Administrative Policies and Procedures Manual, Sections 1, 2 and 8, requires that
the following supporting documents be submitted for approval prior to disbursement of
payments for all expenditures: 1) expenditures for the purchase of goods and services
must be supported by a Purchase Requisition (PR), a Purchase Order (PO), and a vendor
invoice, 2) travel expenditures must be supported by an Expense Report and receipts; 3)
purchases for personal services must be supported by a Check Request and an invoice;
and 4) imprest fund purchases must be supported by a voucher and receipts. In addition,
34 CFR §§74.21(b)(7) and 75.730(b) require grant recipients to keep records that fully
FINAL REPORT
LU ADMINISTRATION OF TITLE III GRANT FUNDS ED-OIG/ A03-A0019                       PAGE 6

show how funds are utilized and to have accounting records that are supported by source
documentation. In each of the instances noted, LU failed to maintain the records
necessary to comply with its own policy, as well as the Federal regulations that govern
Title III grant recipients. Because LU did not maintain adequate supporting
documentation, we could not determine if these expenditures were reasonable and
allowable Title III expenditures.

RECOMMENDATION:

We recommend that the Assistant Secretary for Postsecondary Education require LU to:

2.1   Provide adequate documentation to show that the unsupported expenditures
      amounting to $123,678 are reasonable and allowable, or refund the recoverable
      portions that ED determines have not been adequately documented.

LU RESPONSE:

Although the University did not follow all policies and procedures, the University still
contends that all of the expenses were budgeted, reasonable, and allowable Title III
expenditures. The University provided all the available support at the time of the audit
and believes the cumulative effect of the documentation provided supports the expenses
claimed. The University has assigned the Office of Special Programs the monitoring
responsibility for Title III funds and ensures that full documentation for all expenditures
will be maintained.

OIG RESPONSE:

Although the University provided all of the available supporting documentation, the
documentation provided was not adequate to determine if these expenditures were
reasonable and allowable Title III expenditures. During our review of the expenditures,
we found other expenditures that LU could not provide adequate supporting
documentation for, but we were able to determine the reasonableness and allowability of
these expenditures based on other similar expenditures reviewed. On the contrary, we
were not able to do this for the 28 expenditures discussed above. Since LU cannot
provide the supporting documentation for these expenditures, the University should
refund the recoverable portion of the $123,678.

Assigning the responsibility for ensuring that full supporting documentation will be
maintained to the Office of Special Programs should help to continue to improve LU’s
administration of Title III grant funds.
FINAL REPORT
LU ADMINISTRATION OF TITLE III GRANT FUNDS ED-OIG/ A03-A0019                                   PAGE 7




FINDING NO. 3 TITLE III PAYROLL EXPENDITURES WERE
              NOT BEING ACCURATELY RECORDED

Our audit of the payroll expenditures for the 1999-2000 audit period did not disclose any
unallowable or unsupported costs. However, our inspection of the Title III payroll
expenditures for the 1992-1998 award period disclosed that LU did not accurately record
grant payroll costs. We reviewed 15 payroll expenditures, totaling $61,993. We found
$7,603 in unallowable payroll costs. Additionally, we reviewed 8 timesheets and time
and pay records of Title III employees. We found $1,140 in unsupported payroll costs.

UNALLOWABLE COSTS

The $7,603 in unallowable payroll costs relates to seven payroll expenditures. LU either
charged salaries to the grant for positions that were not included in LU’s Title III
approved budget, or LU charged the grant for an incorrect percentage of the employee’s
salary as identified in the approved budget.5 As stated in 34 CFR §608.10(b)(1), “A
grantee may not carry out… activities that are not included in the grantee’s approved
application.” Therefore, since the employees were not working on Title III activities
and the positions or salary percentages were not included in the approved budget, their
salaries should not have been paid with Title III funds.

UNSUPPORTED COSTS

Two of the 8 payroll expenditures reviewed was not adequately supported. The
unsupported payroll costs represent the salary for one employee whose timesheet for the
pay period ending April 10, 1998, could not be located and one employee whose Time
and Pay Record for the pay period ending April 15, 1994, could not be located by LU.

Administrative employees complete daily timesheets to record and support hours worked
for the week. Clerical employees punch a timeclock to record daily hours worked. Time
and Pay Records were used to summarize the clerical employees' weekly hours worked.
The normal hours worked per day per person for administrative and clerical staff is 7.5.

For one administrative employee, 14.5 hours in the month of April 1998 could not be
supported, because the weekly timesheet supporting these hours could not be located.
There were a total of 165 working hours (22 days multiplied by 7.5 hours) in the month
of April. Because LU could only support 150.5 hours worked, we are questioning the
payroll costs for the 14.5 hours, or $238.6 The remaining unsupported cost of $902


5
  For four employees, the grant was charged for 100 percent of the employee’s salary instead of the 50
percent detailed in LU’s approved budget. Also, 50 percent of one employee’s salary was charged to the
grant instead of the approved 40 percent.
6
  This calculation uses the employee hourly rate of $16.41 (monthly salary of $2,708 divided by 165 hours)
multiplied by 14.5 hours.
FINAL REPORT
LU ADMINISTRATION OF TITLE III GRANT FUNDS ED-OIG/ A03-A0019                       PAGE 8

represents the salary for the bi-weekly pay period ended April 15,1994, for one clerical
employee for whom a Time and Pay Record could not be located.

Payroll costs should be verifiable by supporting source documentation, such as
timesheets and “time and pay records,” as required by 34 CFR §74.21(b)(7), which states,
"Recipients financial management systems shall provide for…cost accounting records
that are supported by source documentation.” In addition, the source documentation
should be maintained for a period of three years from the date the grant’s final
expenditure report is submitted, as required by 34 CFR §74.53(b).


TIMESHEETS

During our review of employee timesheets, we noted that LU’s timesheets did not
provide a specific place for the signature of the employee and the supervisor. Although
there were spaces for the employee’s and supervisor’s names, the names were often just
printed in the space provided, with no signature. Since timesheets are used as the original
source documentation for payroll charges, employee and supervisory signatures are
required, as stated in OMB Circular A-21 J.8c(2)(c) and (f). Requiring the signature of
both the supervisor and the employee on timesheets provides documentation to help
verify that the recorded information is complete and accurate.

RECOMMENDATIONS:

We recommend that the Assistant Secretary for Postsecondary Education require LU to:

3.1   Refund to ED $7,603 for unallowable payroll costs,
3.2   Provide adequate documentation to show that unsupported payroll costs amounting
      to $1,140 are reasonable and allowable or refund the recoverable portions that ED
      determines have not been adequately documented; and
3.3   Revise procedures for documenting employees’ time worked so that this
      information is verified to be complete and accurate, e.g., amending the employee
      timesheets to require employee and supervisory signatures.

LU RESPONSE:

LU concurred with finding recommendations 3.1 and 3.3. LU’s specific responses were:

3.1   The University concurs with the auditor’s recommendation and will refund any
      portion that is still recoverable under the time limitations defined by the General
      Education Provisions Act.

3.2   Although the University did not follow all policies and procedures, the University
      still contends that all of the payroll costs were budgeted, reasonable, and allowable
      Title III expenditures. The University provided all the available support at the time
      of the audit. The University has assigned the Office of Special Programs the
FINAL REPORT
LU ADMINISTRATION OF TITLE III GRANT FUNDS ED-OIG/ A03-A0019                                   PAGE 9

      monitoring responsibility for Title III funds and ensures that full documentation for
      all expenditures will be maintained.

3.3   Although the University did not follow all policies and procedures, the University
      still contends that all of the payroll costs were budgeted, reasonable, and allowable
      Title III expenditures. The University provided all the available support at the time
      of the audit. The University has assigned the Office of Special Programs the
      monitoring responsibility for Title III funds and ensures that full documentation for
      all expenditures will be maintained. The University has revised timesheet
      procedures to require both employee and supervisor signatures.


OIG RESPONSE:

3.2   Although the payroll costs may have been budgeted, reasonable and allowable Title
      III expenditures, supporting documentation should have been maintained. Since
      LU cannot provide the supporting documentation for these expenditures, the
      University should refund the recoverable portion of the $1,140.

      Assigning the responsibility for ensuring that full supporting documentation will be
      maintained to the Office of Special Programs should help to continue to improve
      LU’s administration of Title III grant funds.


                                    OTHER MATTERS

Drawdowns

Although LU’s Title III drawdowns are based on the expenditures, we noted that the
expenditure report (Summary Account Detail Report) used as the basis for the
drawdowns did not capture the account adjustments made by LU’s Office of Special
Programs. The adjustments are captured in the Detail Account Detail Report, and
therefore, we recommend that the expenditure amounts included in this report be used as
the basis for the Title III drawdowns.

Also, during our review of the drawdowns, we noted that the total expenditures on the
Detail Account Detail Report do not agree with the total expenditures on the
Conformance Report.7 The Office of Special Programs tracks grant expenditures using
the grants accounting module in LU’s accounting system. The expenditures from the
grants accounting module should be the same as in the general ledger accounting system
(captured in the Detail Account Detail Report). We recommend that the two reports be


7
 This report is a summary (cumulative for the year and current month) of grant expenditures by cost center,
prepared by the Office of Special Programs.
FINAL REPORT
LU ADMINISTRATION OF TITLE III GRANT FUNDS ED-OIG/ A03-A0019                                        PAGE 10

reconciled periodically to ensure that all grant expenditures are being captured and that
the drawdowns are accurate.

Policies and Procedures

Our inspection of grant award years 1992-1998 disclosed that LU did not follow its
purchasing policies and procedures when procuring Title III related goods and services.
LU purchased Title III goods and services without proper approval and documentation.
During our audit of award year 1999-2000, we noted that LU was significantly more
diligent in following its purchasing policies and procedures than in the prior years.

We reviewed 86 expenditures made during the 1992-1998 award years that required
purchasing documentation and approval prior to payment, and in 39 instances (45 percent
of the total number of expenditures), LU administrators failed to follow their own
policies and procedures.

During our audit of the 1999-2000 award year we reviewed 21 non-payroll expenditures.
The required documentation for all of the expenditures was available. We noted that a
Special Program Voucher (SPV)8 was not completed in two instances, and the Title III
Coordinator did not approve the vendor invoice in six instances and did not approve an
SPV in one instance. While LU has made significant progress in following its
purchasing policies and procedures, improvement can still be made. We recommend that
the Title III Coordinator and the Office of Special Programs work to ensure that the SPV
is always used and approved, and that vendor invoices are approved before payments are
made from grant funds.

Also, during our review of LU’s policies and procedures, we found that the current
Business Travel policies and procedures do not include a rate for mileage when the
employee uses his or her own vehicle. As Title III staff may need to travel to fulfill the
goals of LU’s Title III program, it is important that a personal vehicle mileage rate be
established. We recommend LU revise its policy to include such a rate, which is in line
with federal standards.

Additionally, we noted that LU has not documented the Title III policies and procedures
that are currently in place. Changes have occurred in the Title III process since the last
revision of the policies and procedures.9 These changes include how LU tracks time and
effort reporting, and changes in the expenditure approval process. Accordingly, we
recommend that the current Title III policies and procedures be documented
expeditiously.




8
  LU policy requires that purchases made from restricted funds, such as Title III grants, must be
documented, with required approval, by means of Special Program Vouchers.
9
  The last documented revision of the Title III polices and procedures was in 1997.
FINAL REPORT
LU ADMINISTRATION OF TITLE III GRANT FUNDS ED-OIG/ A03-A0019                       PAGE 11

                                  BACKGROUND
Title III, Part B, of the Strengthening Historically Black Colleges and Universities
Program provides grant funds to colleges and universities that were established prior to
1964 and whose principal mission was and is the education of African-Americans. The
purpose of the Title III program is to provide financial assistance to establish or
strengthen the physical plants, financial management, academic resources, and
endowments of Historically Black Colleges and Universities (HBCU). Title III grant
funds may be used for: 1) purchase, rental or lease of scientific or laboratory equipment
for educational purposes; 2) construction, maintenance, and renovation of instructional
facilities; 3) faculty development and exchanges; 4) academic instruction in disciplines
where African-Americans are underrepresented; 5) purchase of educational material; 6)
student services; 7) funds for administrative management and acquisition of equipment
for use in strengthening management; 8) joint use of facilities; 9) establishing or
improving a development office; 10) establishing or enhancing a program of teacher
education; and 11) establishing community outreach programs. The grants are awarded
for a five-year period, with authorizations made yearly. The authorization period is for
the year ended September 30.

LU is an HBCU and, as such, was awarded $1.13 million for the period October 1999
through September 2000. During the audit period (July 1999 through June 2000), LU
expended $801,477 of the Title III award. Likewise, LU was awarded $5.2 million from
October 1992 through September 1998. During the award periods for these 6 years, LU
expended $5.5 million, which includes $300,000 of its own funds.

LU used the Title III grant funds for four specific activities and the overall administration
of the program. The specific activities are Academic Enhancement, Student
Development, Strengthening Development, and Facilities Management. The Academic
Enhancement activity is intended to support LU’s ability to provide students with a
supportive environment, which facilitates their success in college and also provides
education with a global perspective. The Student Development activity is intended to
provide additional support to students who require assistance in navigating the academic
process and in defining their future scholastic and career goals. The Strengthening
Development activity is intended to provide LU with the ability to attract and pursue
external funding sources to supplement its finances. The Facilities Management activity
is intended to serve in assisting in the survival of the university physical and
technological infrastructure. Each activity is given an account code (cost center) to
which related expenditures are charged.
FINAL REPORT
LU ADMINISTRATION OF TITLE III GRANT FUNDS ED-OIG/ A03-A0019                    PAGE 12

         OBJECTIVES, SCOPE AND METHODOLOGY
Our audit objective was to determine if LU has administered the Title III grant funds in
accordance with applicable laws, regulations, and program requirements during the 1999-
2000 and the 1992-1998 review periods.

To accomplish our objective, we reviewed LU administrative policies and procedures,
Title III program policies and procedures, accounting records, bank records, and
disbursement records. We interviewed LU officials responsible for administering its
Title III program, including drawing down, disbursing and monitoring grant funds. In
addition, we reviewed LU’s audit reports prepared by an independent public accountant
for the years ended June 30, 1996, June 30, 1997 (in draft), and June 30, 1998. We also
reviewed other letters and reports relating to management and procurement practices at
LU.

We reviewed a sample of 302 Title III expenditures for both review periods. Samples for
both reviews were selected from LU’s Account Detail Reports, which detail by cost
center account code the expenditures for the periods reviewed. Our samples of grant
expenditures were randomly and judgmentally selected. The random sample selections
were based on the universe size. The judgmental sample selections were based on the
type of expenditure (e.g., travel, equipment, or adjustment), the dollar amount, the
vendor, or the cost center charged. We reviewed payroll expenditures (excluding fringe
benefits) separately from the other types of expenditures.

Cumulatively, we reviewed 35 payroll expenditures for the two periods covered by our
review (see Table I). The 1999-2000 and the 1992-1998 payroll samples were selected
from a universe of 223 and 492 payroll expenditures, respectively. The total payroll
expenditure (excluding fringe benefits) for each period is $474,497 and $1.9 million,
respectively. The sample of payroll expenditures reviewed for the 1992-1998 period was
selected from the award years 1993-94, 1994-95, 1996-97, and 1997-98.

                      Table I. Payroll Sample Reviewed

                                 PAYROLL EXPENDITURES
                             1999-2000            1992-1998
                        Sample #    Sample $ Sample #    Sample $

          Random            20         $138,494           12          $41,855

        Judgmental           0             $0             3           $20,138

            Total           20         $138,494           15          $61,993


Cumulatively, we reviewed 267 non-payroll expenditures for the two periods covered by
our review (see Table II). The 1999-2000 and the 1992-1998 non-payroll samples were
FINAL REPORT
LU ADMINISTRATION OF TITLE III GRANT FUNDS ED-OIG/ A03-A0019                         PAGE 13

selected from a universe of 152 and 750 non-payroll expenditures, respectively. The total
non-payroll expenditure for each period was $225,473 and $2.2 million, respectively.
We reviewed the expenditures to determine if they were reasonable, allowable, and
allocable Title III expenditures.

                       Table II. Non-Payroll Sample Reviewed

                                 NON-PAYROLL EXPENDITURES
                               1999-2000            1992-1998
                          Sample #    Sample $ Sample #    Sample $

           Random            12           $17,583            69          $101,130

         Judgmental           9           $30,322           177         $1,006,523

            Total            21           $47,905           246         $1,107,653

Our audit period covered Title III grant funds received by LU from July 1, 1999, through
June 30, 2000. Previously, we performed inspection work covering the period October 1,
1992, through September 30, 1998. The inspection did not identify any issues that
warranted further investigation; however, we identified issues that warranted corrective
action, as noted in the Audit Results section of the report. We performed follow-up audit
work to determine if the issues noted during the inspection had been corrected. We
performed our follow-up audit fieldwork at LU, in August 2000. The inspection
fieldwork was performed from March 1999 through June 1999. We made additional
requests for information through August 1999. An initial exit conference was held on
July 15, 1999, and a follow-up exit conference was held on September 1, 2000. Our audit
was performed in accordance with government auditing standards appropriate to the
scope of the audit described above. Additionally, our inspection was performed in
accordance with Quality Standards for Inspections, adopted by the President’s Council on
Integrity and Efficiency, appropriate to the scope of review described above.


         STATEMENT ON MANAGEMENT CONTROLS
As a part of our review, we assessed the system of management controls, policies,
procedures, and practices applicable to LU’s administration of the Title III grant funds.
Our assessment was performed to determine the level of control risk for determining the
nature, timing, and extent of our substantive tests to accomplish the audit objectives.

For the purpose of this report, we assessed and classified the significant controls into the
following categories:

•   General environment
•   Recordkeeping
FINAL REPORT
LU ADMINISTRATION OF TITLE III GRANT FUNDS ED-OIG/ A03-A0019                    PAGE 14

•   Disbursements
•   Cash management

Because of the inherent limitations, a study and evaluation made for the limited purpose
described above would not necessarily disclose all material weaknesses in the
management controls. Our assessment, for the period 1992-1998, disclosed significant
management control weaknesses, which adversely affected LU’s ability to administer
Title III grant funds. These weaknesses included failure to maintain adequate financial
controls, inadequate recordkeeping, noncompliance with LU’s internal policies and
procedures, and failure to monitor grant expenditures. These weaknesses and their
effects are fully discussed in the AUDIT RESULTS section of this report.
FINAL REPORT
LU ADMINISTRATION OF TITLE III GRANT FUNDS ED-OIG/ A03-A0019                        PAGE 15

                                                                                  APPENDIX




               SCHEDULE OF FINDINGS BY AWARD YEAR
                 October 1, 1992 through September 30, 1998
                                     and
                     July 1, 1999 through June 30, 2000


 TYPE & NO.
 OF FINDING           1992-93      1993-94       1994-95      1996-97   1997-98    1999-00    TOTALS

Unallowable Costs:
Finding #1                        $50,405                      $3,636               $835      $54,876
Finding #3                           $450         $894           $935   $5,325                 $7,603
   Subtotals                       $50,855        $894         $4,571   $5,325      $835      $62,479

Unsupported Costs:
Finding #2       $7,942            $44,290       $21,117      $50,207    $122                 $123,678
Finding #3                            $902                               $238                   $1,140
   Subtotals     $7,942            $45,192       $21,117      $50,207    $360                 $124,818

 Grand Totals          $7,942      $96,047       $22,011      $54,778   $5,685      $835      $187,298


Notes:
1. There are no monetary findings associated with award year 1995-96.
2. The reviews did not cover expenditures in 1998-99.
3. Differences in totals due to rounding.
Attachment
                     REPORT DISTRIBUTION SCHEDULE
                            ED-OIG/A03-A0019

                                                                   No. of copies
Auditee
       Dr. Ivory Nelson, President                                        1
       Lincoln University
       Lincoln University, PA 19352

Action Official
       Maureen McLaughlin                                                 2
       U. S. Department of Education
       Office of Postsecondary Education
       1990 K Street, N.W., Room 7115
       Washington, D.C. 20006

Other ED Offices
       Chief of Staff, Office of the Secretary                            1
       Office of the Deputy Secretary                                     1
       Office of the Under Secretary                                      1
       Office of General Counsel                                          2
       Office of the Chief Financial Officer
         Financial Improvement and Post Audit Operations                  1
       Office of Public Affairs                                           1

Office of Inspector General
       Inspector General                                                  1
       Deputy Inspector General                                           1
       Deputy Assistant Inspector General for Audit                       1
       Assistant Inspector General for Audit                              1
       Assistant Inspector General for Analysis and Inspection            1
       Assistant Inspector General for Investigations                     1
       Director, State and Local Program Advisory and Assistance          1
       Counsel to the Inspector General                                   1
       Regional Inspector General for Audit                               1 (each)