oversight

The Implementation of the District of Columbia College Access Act of 1999.

Published by the Department of Education, Office of Inspector General on 2001-08-31.

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

     Audit of the Implementation of the District of
        Columbia College Access Act of 1999



                                  FINAL AUDIT REPORT




                        CONTROL NUMBER ED-OIG/A03-B0003
                                            AUGUST 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, Pennsylvania
                                NOTICE:

Statements that financial and/or managerial practices need improvement or
recommendations that costs questioned be refunded or unsupported costs
be adequately supported, and recommendations for the better use of funds,
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 the appropriate officials. In accordance with the
Freedom of Information Act (5 USC §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 THE IMPLEMENTATION OF THE DISTRICT OF
          COLUMBIA COLLEGE ACCESS ACT OF 1999
                      CONTROL NUMBER ED-OIG/A03-B0003

                                TABLE OF CONTENTS

                                            Page
Executive Summary……………………………………………………………….……. 1

Audit Results……………………………………………………………………………. 3

Issue No. 1 – Cash management practices do not minimize the time elapsing between
the transfer of funds from the U.S. Treasury and the disbursement of funds for the
program………………………………………………………………..………...……… 3

 Recommendations…………………………………………………………………….. 5

Issue No. 2 – Budget practices may have resulted in the fiscal year 2001
administrative expense budget exceeding the Act’s administrative expense limit...…… 6

 Recommendations...…………………………………………………………………... 7

Other Matters…………………………………………………………………………… 8

Subsequent Event……………………………………………………………………….. 10

Background……………………………………………………………………………... 10

Audit Objective, Scope and Methodology……………………………………………… 11

Statement of Management Controls……………………………………………………. 13

Attachment: Mayor Williams’ Comments to the Report………………………………. 15

Attachment: DC Chief Financial Officer’s Comments to the Report………………….. 17
AUDIT OF THE IMPLEMENTATION OF THE
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                                 EXECUTIVE SUMMARY

The objective of our audit was to determine if adequate controls, pertaining to the grant
award program created by the District of Columbia College Access Act of 1999 (the
Act), were in place to protect the federal interest. Specifically, we assessed the
management controls pertaining to student eligibility, institution eligibility, grant award
refunds, cash management, and administrative expenses.

Except for the weaknesses described below, the District of Columbia Tuition Assistance
Grant Program Office (the Program Office) had in place adequate management controls
over the student eligibility, institution eligibility, and grant award refund processes as of
December 31, 2000. Our review disclosed the following management control
weaknesses that have a negative impact on the federal interest:

The District of Columbia Office of Finance and Treasury (the Finance Office) draws the
annual federal appropriation for the program in one lump-sum payment, regardless of the
program's actual and immediate cash outlays. Furthermore, the Finance Office invests
the funds received for the program, with investment earnings credited to the District of
Columbia (DC) government.

The Finance Office drew down approximately $23.7 million of federal payments in
excess of the program’s cash disbursements for the period January 1, 2000, through June
30, 2001. As a result, the U.S. Treasury incurred approximately $1,179,000 of interest
costs, due to the issuance of U.S. Treasury securities to fund the program. While this
cash management practice does not violate the Act, the DC Appropriations Acts for fiscal
years 2000 and 2001, or the Cash Management Improvement Act of 1990 and
implementing regulations, it does not protect the federal interest.

The Program Office’s fiscal year 2001 budget may have exceeded the Act’s
administrative expense limit by $476,637, because the DC government carried over the
previous year’s unexpended and unobligated administrative expense budget balances to
the subsequent fiscal year’s administrative expense budget. The fiscal year 2001
administrative expense budget of $1,664,019 includes $1,190,000 (budgeted at
approximately seven percent of the amount appropriated in fiscal year 2001) and a
carryover of $474,019 from fiscal year 2000. The Act contains a specific restriction that
not more than seven percent of the funds made available for the program in a fiscal year
may be used to pay the administrative expenses of the program for the fiscal year.

We noted minor issues involving internal controls and other operational matters that
require corrective action on the part of the program’s management. The issues requiring
corrective action include the use of the DC Public Schools’ student roster to verify
applicants’ domiciles, the processing of grant award refunds, and the approval of
administrative expenses.




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We recommend that the Mayor and DC Chief Financial Officer:

‰   Implement cash management policies for the program, requiring that future transfers
    of funds from the U.S. Treasury be limited to the minimum amounts needed and be
    timed to be in accordance with the program’s actual, immediate cash needs.

‰   Establish a separate restricted account for the program’s current fund balances, with
    any earnings generated by the funds held in the account to be used for tuition
    assistance grant awards.

‰   Request a Comptroller General opinion to determine if the Act permits DC’s current
    practices with respect to administrative expense budgets at the end of a fiscal year,
    and request Congressional clarification, through legislative amendments, of the Act’s
    language concerning administrative expenses.

A draft of this audit report was provided to the Mayor and DC Chief Financial Officer.
In their response, the DC Chief Financial Officer did not concur with the two major
issues raised in the report and the respective recommendations. In addition, the Mayor
did not concur with all the issues raised in the “Other Matters” section of the report,
although the Mayor did agree with the respective recommendations. Copies of the
responses received from the Mayor and DC Chief Financial Officer are included as
attachments to this report.




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                                     AUDIT RESULTS

This report presents issues identified during our audit of the District of Columbia Tuition
Assistance Grant Program (the program). The objective of our audit was to determine if
adequate controls, pertaining to the grant award program created by the District of
Columbia College Access Act of 1999 (the Act), were in place to protect the federal
interest. Specifically, we assessed the management controls pertaining to student
eligibility, institution eligibility, grant award refunds, cash management, and
administrative expenses.

Except for the weaknesses described below, the District of Columbia Tuition Assistance
Grant Program Office (the Program Office) had in place adequate management controls
over the student eligibility, institution eligibility, and grant award refund processes as of
December 31, 2000. Our review disclosed the following management control
weaknesses that have a negative impact on the federal interest:

‰   Cash management practices do not minimize the time elapsing between the transfer of
    funds from the U.S. Treasury and the disbursement of funds for the program.

‰   Budget practices may have resulted in the Program Office’s fiscal year 2001 budget
    exceeding the Act’s administrative expense limit.


Issue No. 1 – Cash management practices do not minimize the time elapsing between
the transfer of funds from the U.S. Treasury and the disbursement of funds for the
program.

The District of Columbia Office of Finance and Treasury’s (the Finance Office’s) cash
management of the federal payments for the program does not protect the federal interest.
The Finance Office draws the annual federal appropriation for the program in one lump-
sum payment, regardless of the program's actual and immediate cash outlays. The federal
payments for the program are accounted for in the District of Columbia (DC)
government’s unrestricted general fund. The Finance Office invests the federal payments
received for the program through their cash management pool. The resulting investment
earnings are classified as general revenue for the DC government.

The Act, the DC Appropriations Acts for fiscal years 2000 (P.L. 106-113) and 2001 (P.L.
106-522), and the Cash Management Improvement Act of 1990 (P.L. 101-453) and
implementing regulations do not prohibit the Finance Office from receiving the annual
appropriation in one lump-sum payment. The program is also not subject to the Office of
Management and Budget’s apportionment process. The funds provided for the program
are appropriated as no-year funds, thus remaining available until expended.




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Generally, the Cash Management Improvement Act and implementing regulations require
states (including DC) to minimize the time elapsing between the transfer of funds from
the U.S. Treasury and the disbursement of funds by a state. The Cash Management
Improvement Act and implementing regulations also generally prohibit states from
earning and retaining the interest earned on federal funds. 31 CFR § 205.12. However,
the implementing regulations of the Cash Management Improvement Act apply to
programs listed in the Catalog of Federal Domestic Assistance. 31 CFR § 205.2(a). The
program is not contained in the Catalog of Federal Domestic Assistance. Nonetheless,
the underlying rationale for the cash management practices required by the Cash
Management Improvement Act and implementing regulations should apply in this
circumstance, because they represent sound cash management practices that protect the
federal interest. Specifically, 31 CFR § 205.20(a), Cash advances, states:

           Cash advances to a State shall be limited to the minimum amounts needed and
           shall be timed to be in accord only with the actual, immediate cash requirements
           of the State in carrying out a program or project. The timing and amount of cash
           advances shall be as close as is administratively feasible to the actual cash outlay
           by the State for direct program costs and the proportionate share of any allowable
           indirect costs.

Based upon information provided by the DC Office of Finance and Resource
Management (DC OFRM), during the period January 1, 2000, through June 30, 2001, the
Finance Office drew down approximately $33.9 million in federal payments for the
program and disbursed approximately $10.2 million for grant awards and administrative
expenses. On June 30, 2001, DC government had on hand $23.7 million of federal
payments in excess of the program's cash outlays (see Table 1).

                         Table 1: Federal Payments and Cash Outlays for the Program
                            For the period January 1, 2000, through June 30, 2001

    Federal Payments (Fiscal Years 2000 and 2001)                                              $33,898,000

    Less: Grant Awards                                                                        ($8,528,111)

    Less: Administrative Expenses                                                             ($1,637,171)

    Federal Payments in Excess of the Program’s Cash Outlays                                   $23,732,718


The Finance Office’s cash management practices resulted in the U.S. Treasury incurring
approximately $1,179,000 of interest costs, due to the issuance of U.S. Treasury
securities to fund the program, for the period January 1, 2000, through June 30, 2001.1

1
 We estimated interest charges by calculating the average monthly balance of the program’s cumulative
net receipts and expenditures as reported by DC OFRM, including the imputed cumulative interest charges.
In calculating the interest charges, we used 5.77 percent for the period January 1, 2000, through September
30, 2000, which is the U.S. Treasury’s Cash Management Improvement Act Interest Rate for States with a
FY 2000 of 10/1/99 – 9/30/00. For the period October 1, 2000, through June 30, 2001, we used 4.99
percent, which is the average yield of 13-week U.S. Treasury Bills auctioned during the period.



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We expect this condition to continue, because after completion of the second fiscal year
of the program on September 30, 2001, we estimate that the DC government may have as
much as $23 million in unexpended funds on hand and invested, with the President’s
budget containing an additional $17 million for the program in fiscal year 2002.

RECOMMENDATIONS:

We recommend that the Mayor and DC Chief Financial Officer:

1.1    Implement cash management policies for the program, requiring that future
       transfers of funds from the U.S. Treasury be limited to the minimum amounts
       needed and be timed to be in accordance with the program’s actual, immediate
       cash needs.

1.2    Establish a separate restricted account for the program’s current fund balances,
       with any earnings generated by the funds held in the account to be used for tuition
       assistance grant awards.

DC Government’s Comments:

The DC government acknowledges that the Finance Office draws the annual
appropriation in one lump-sum payment and that interest earned on the funds is credited
to DC’s general fund. However, the DC government does not believe that the practice
should be cited as an issue. The DC government notes that the funds for the program are
provided through a federal payment, similar to the appropriations and funding methods of
other DC agencies, and that the interest earned on the funds are properly accounted for in
their general fund. The DC government notes that the DC Appropriations Acts for 2000
and 2001 and the Cash Management Improvement Act of 1990 and implementing
regulations do not prohibit the DC government from receiving the annual appropriation in
one lump-sum payment.

OIG’s Response:

We do not agree with the DC government’s response to this issue. We acknowledge that
the DC Appropriations Acts for 2000 and 2001 and the Cash Management Improvement
Act of 1990 and implementing regulations do not prohibit the Finance Officer from
receiving the annual appropriation in one lump-sum payment. However, as noted above,
during the period of our audit, the Finance Office’s cash management practices resulted
in the federal government incurring approximately $1,179,000 in interest costs. Because
of the resulting costs to the federal government, Congress should work with the DC
government to address this issue and the respective recommendations made in this report.




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Issue No. 2 - Budget practices may have resulted in the fiscal year 2001
administrative expense budget exceeding the Act’s administrative expense limit.

The Program Office’s fiscal year 2001 budget for administrative expenses may have
exceeded the Act’s administrative expense limit by $476,637, because the DC
government carried over the previous fiscal year’s unexpended and unobligated
administrative expense budget balances to the subsequent fiscal year’s administrative
expense budget.

The Act and the DC Appropriations Acts for fiscal years 2000 and 2001 contain the
general provision that the funds appropriated shall remain available until expended.
However, the Act contains the specific restriction that not more than seven percent of the
“funds made available” for the grant program “for a fiscal year” may be used to pay the
administrative expenses of the program for “the fiscal year.”2 In our view, funds should
only be carried over to subsequent fiscal years for tuition assistance grants, because the
Act’s administrative expense limitation applies to each fiscal year by the terms of the
Act.

The Program Office’s fiscal year 2001 budget for administrative expenses is $1,664,019,
or approximately 9.8 percent of the fiscal year 2001 appropriation amount. This budget
amount includes approximately $1,190,000 for fiscal year 2001 administrative expenses
(budgeted at approximately seven percent of the amount appropriated of $16,962,600)
and a $474,019 carryover from fiscal year 2000 uncommitted administrative expense
budget balances (see Table 2).

Carrying over unexpended and unobligated administrative expense budget balances in
this manner reduces the amounts available in subsequent years for tuition assistance
grants.

                                  Table 2: Administrative Expense Budget
                                             Fiscal Year 2001

           Net Appropriation Amount                                                   $16,962,600

           Administrative Expense Limit at 7 Percent                                   $1,187,382

           Administrative Expense Budget (Including Carryover)                         $1,664,019

           Administrative Expense Budget as Percent of Appropriation Amount                   9.8%

           Administrative Expense Budget in Excess of 7 Percent Limit                    $476,637

2
  Section 6(b) of the Act states, “The Mayor of the District of Columbia may not use more than 7 percent of
the funds made available for a program under section 3 or 5 [the tuition grant programs for public and
private institutions of higher education, respectively] for a fiscal year to pay the administrative expenses of
a program under section 3 or 5 for the fiscal year.”



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Based upon information provided by DC OFRM, as of June 30, 2001, the Program Office
had incurred approximately $997,222 of administrative expenses in fiscal year 2001. The
program can incur approximately $190,000 of additional fiscal year 2001 administrative
expenses before exceeding the Act’s administrative expense limitation. We expect the
Program Office will likely exceed the Act’s administrative expense limitation by
September 30, 2001, fiscal year end 2001, because as of June 30, 2001, the program’s
fiscal year 2001 administrative expenses have averaged $330,000 per quarter.

RECOMMENDATIONS:

We recommend that the Mayor and DC Chief Financial Officer:

2.1    Request a Comptroller General opinion to determine if the Act permits DC’s
       current practices with respect to administrative expense budget balances at the
       end of a fiscal year.

2.2    Request Congressional clarification, through legislative amendments, of Section
       6(b) of the Act.

DC Government’s Comments:

The DC government does not concur with our conclusion that the fiscal year 2001
administrative expense budget may have exceeded the Act’s administrative expense
limitation. The DC government believes that we incorrectly defined “funds made
available for a program…for a fiscal year” [Section 6(b)] as those funds provided in a
current fiscal year’s federal appropriation. The DC government believes that because the
funds “shall remain available until expended” [Sections 3(i) and 5(f)], the “funds made
available for a program” includes the sum of the current fiscal year’s federal
appropriation plus the balance of funds remaining from prior fiscal years. For fiscal year
2001, the DC government calculates the funds made available for the program to be
$33,300,000. This amount includes $17,000,000 from the fiscal year 2001 federal
appropriation and $16,300,000 remaining available from the fiscal year 2000 federal
appropriation. The DC government calculates the program’s allowable administrative
expense budget for fiscal year 2001 at $2,331,000, or seven percent of $33,300,000. The
DC government believes that the program’s administrative expenses in fiscal year 2001
will not exceed this amount.

OIG’s Response:

We do not agree that the DC government’s stated interpretation of the Act is reasonable,
because it results in the double counting of “funds made available” in more than one
fiscal year. We wish to note that the position stated by the DC government in its
comments is not consistent with the budget practices that were described to us, and
confirmed during our fieldwork and contained in the report’s discussion on this issue, i.e.,




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that the DC government carries forward unexpended and unobligated administrative
expense budget balances at fiscal year end.

By calculating the administrative expense limitation based upon the sum of the current
fiscal year’s federal appropriation plus the balance of funds remaining from prior fiscal
years, the DC government is double counting those funds that are carried over to
subsequent fiscal years - once in the fiscal year the funds are appropriated and again in
subsequent fiscal years if the funds are carried over (see Table 3).


                Table 3: Calculation of Administrative Expense Limitations on Funds
                                  Appropriated in Fiscal Year 2000

       Funds Appropriated in Fiscal Year 2000                    $17,000,000
       Fiscal Year 2000 Administrative Expense Limitation
                                                                                 $1,190,000
        at 7 Percent

       Funds Carried Over from Fiscal Year 2000                  $16,300,000
       Fiscal Year 2001 Administrative Expense Limitation
                                                                                 $1,141,000
        at 7 Percent (Based on the Funds Carried Over)

       Cumulative Administrative Expense Limitation                              $2,331,000
       Cumulative Administrative Expense Limitation as a
                                                                                      13.7%
        Percent of Original Fiscal Year 2000 Appropriation

If funds are carried over in more than one fiscal year, the DC government’s methodology
may result in multiple countings of funds in several fiscal years’ calculations of the
administrative expense limitation. We do not believe that this is what Congress intended
when it promulgated the administrative expense limitation in the Act’s Section 6(b) on
“funds made available…for a fiscal year.” Congress should work with the DC
government to address this issue and the respective recommendations made in this report.


                                     OTHER MATTERS

We noted minor issues involving internal controls and other operational matters that
require corrective action on the part of the program’s management. The issues are
intended to improve internal controls or result in operating efficiencies.

A draft of this audit report was provided to the Mayor and DC Chief Financial Officer.
In his response, the Mayor did not concur with all the issues raised in this section of the
report, although the Mayor did agree with the respective recommendations.




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         USE OF DISTRICT OF COLUMBIA PUBLIC SCHOOLS’ STUDENT ROSTER

The Program Office utilized a DC Public Schools (DCPS) student roster to verify
applicants’ DC domicile. The student roster lists students’ names, social security
numbers, addresses, and grade levels. The documentation required by DCPS to verify a
student’s DC residency is similar to that required by the Program Office. However, the
DCPS residency requirement is for only a two-month time period prior to the start of
enrollment for the school year, while the Act requires eligible students to be domiciled in
DC for the twelve consecutive months prior to the start of their freshman year of college.
Use of the DCPS student roster as sole documentation to verify an applicant’s domicile
may result in grant awards made on behalf of individuals not domiciled in DC for the full
twelve months prior to the start of their freshman year of college.

We requested the Program Office to verify the domicile of eight applicants who were
determined to be eligible for the program through the use of the DCPS student roster. It
was able to obtain sufficient documentation to support the eligibility of the eight students.
The Program Office expressed interest in continuing to use the DCPS student roster.
Although the results of the review of the eight selected applicants were positive, we
continue to have concerns regarding the use of the DCPS student roster.

If the Program Office continues to utilize the DCPS student roster to verify applicants’
domicile, the Program Office should:

‰   Ensure the applicants appear in the DCPS student roster for the preceding school year
    (i.e., the applicants’ senior year of high school) and require applicants to submit
    supporting documentation to verify their current domicile.
‰   Require applicants to submit sufficient documentation to verify their past and present
    domiciles, if the DCPS student roster or grant program application indicate a change
    of address.
‰   Establish policies and regulations to incorporate the use of the DCPS student roster in
    verifying an applicant’s domicile.

                PROCESSING OF GRANT AWARD REFUND TRANSACTIONS

We reviewed 11 grant award refund checks, totaling $16,640, issued by institutions to the
program. The DC OFRM deposited five of the 11 checks without the knowledge of the
Program Office. As a result, the refund amounts were not credited to the respective
students’ accounts. If a grant award refund is not credited to a student’s account, the
student may be denied a subsequent grant award, because the Program Office’s records
erroneously indicate the student had received the maximum annual or lifetime limit for
grant awards.

We discussed this issue with officials from the program and DC OFRM. The DC OFRM
official agreed to provide the Program Office copies of any grant award refund checks
and related information received prior to depositing the checks. The Program Office has



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credited three of the students’ accounts, and intends to research and resolve the remaining
two refund checks.

The Program Office should establish a policy to periodically reconcile all grant award
refund checks deposited by the DC OFRM to refunds credited to students’ accounts by
the Program Office.

                      APPROVAL OF PROGRAM OFFICE EXPENSES

We reviewed 61 randomly selected expense transactions totaling $143,772, and found
that four of the transactions, totaling $2,243.90, were erroneously charged to the
program. The four transactions were for supplies intended for other offices, and were
ordered and approved by the Executive Office of the Mayor (EOM) Support Services. In
July 2001, DC OFRM initiated journal entries to correctly charge the four expense
transactions to the offices that received the office supplies. Based upon conversations
with officials from the program and DC OFRM, the purchase of supplies and services
may be initiated and approved by the program’s Director or the EOM Chief of Support
Services.

The Program Office should develop procedures to review, in a timely manner, all
invoices for supplies and services approved by the EOM Support Services that will be, or
have been, charged to the program.


                                 SUBSEQUENT EVENT

After the completion of our work, subsequent events occurred that might have an impact
on the program’s control environment. In fiscal year 2002, the services performed by the
Program Office will be transferred from the Executive Office of the Mayor to the DC
State Education Office. The program will be incorporated into the State Education
Office’s Postsecondary Financial Assistance Programs. The DC OFRM and the Finance
Office will continue to provide accounting and financial management services for the
program. In addition, amendments to the Act were proposed in bill H.R. 1499 titled The
District of Columbia College Access Act Technical Corrections Act of 2001. Under H.R.
1499, individuals who graduated from high school prior to 1998 and individuals who
enroll in a college or university more than three years after graduating from high school
will be eligible to participate in the program.

                                    BACKGROUND

The purpose of the District of Columbia College Access Act of 1999 (P.L. 106-98) is to
establish a program that enables college-bound residents of the District of Columbia to
have greater choices among institutions of higher education. To accomplish this purpose,
the Act created a tuition assistance grant program for eligible students and provided



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financial assistance to the University of the District of Columbia. Specifically, in
relevant parts:

‰   Section 3 of the Act provides grant awards for eligible public colleges and
    universities that enroll eligible students to pay the difference between the tuition and
    fees charged for in-state students and the tuition and fees charged for out-of-state
    students. Eligible students may have paid on their behalf up to $10,000 per award
    year, with a cumulative total of $50,000.

‰   Section 4 of the Act provides financial assistance to the University of the District of
    Columbia.

‰   Section 5 of the Act provides grant awards to eligible private, non-profit colleges and
    universities within the DC metropolitan area and private historically Black colleges
    and universities located in Maryland and Virginia that enroll eligible students to pay
    the cost of tuition and fees. Eligible students may have paid on their behalf up to
    $2,500 per award year, with a cumulative total of $12,500.

During the period of our review, to be eligible for the tuition grant programs, students
must (1) be domiciled in DC for not less than twelve consecutive months preceding the
commencement of their freshman year at an institution of higher education, (2) received a
secondary school diploma on or after January 1, 1998, (3) begin their undergraduate
course of study within three years of receiving a secondary school diploma, (4) be
enrolled on at least a half-time basis in a degree or certificate program, (4) be maintaining
satisfactory academic progress, and (5) have not completed their first undergraduate
baccalaureate course of study.

The Mayor of the District of Columbia, through the Program Office, administers the
program in consultation with the Secretary of the U.S. Department of Education. The
program’s first grant awards were issued for the fall 2000 semester. For the year ending
December 31, 2000, the Program Office reviewed approximately 3,373 applications to
determine applicants’ eligibility status, and made approximately 1,565 grant awards
totaling approximately $3.9 million.


                 AUDIT OBJECTIVE, SCOPE AND METHODOLOGY

The objective of our audit was to determine if adequate controls, pertaining to the grant
award programs created by the Act, were in place to protect the federal interest. In
general, our audit covered the administration of the program during the period January 1,
2000, through December 31, 2000. We expanded our review of the program’s cash
management and administrative expense budget practices to cover the period January 1,
2000, through June 30, 2001, and our review of grant award refunds covered the period
January 1, 2000, through March 30, 2001. The scope of the review covered the tuition
grant program, established under Sections 3 and 5 of the Act, for students attending



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public colleges and universities nationwide, private, non-profit colleges and universities
within the DC metropolitan area, and private historically Black colleges and universities
located in Maryland and Virginia.

To accomplish our objective, we reviewed the Program Office’s and the DC OFRM’s
written policies and procedures, applicant files, and accounting records; and interviewed
staff and officials from the Program Office, Finance Office, and DC OFRM.

We randomly selected 50 applicants and reviewed the Program Office’s files for
documentation of the applicants’ eligibility status, grant awards calculation and payment,
and the eligibility of the institutions attended. The Program Office determined 35
applicants to be eligible for the program and 13 to be ineligible. One application
submitted was found to be incomplete, and one applicant applied for the incorrect
academic year. From our sample, 26 eligible applicants received grant awards during the
period of our review. We reviewed the Program Office’s files for 14 judgmentally
selected applicants whose phone numbers or postal ZIP codes did not reflect a DC
domicile.

We conducted site visits to Montgomery College, in Rockville, MD, and Howard
University, in Washington, DC, on April 18 and 19, 2001, respectively. Montgomery
College was selected because it is a public college within the DC metropolitan area.
Howard University was selected because it is a private, non-profit university within the
DC metropolitan area. Both institutions have in attendance a relatively large number of
students who received the grant awards for the fall 2000 semester. At each institution we
reviewed the institution’s pertinent policies and procedures, reviewed student files for 15
randomly selected grant recipients, and interviewed officials responsible for
administering the program’s grants at the institution.

We reviewed the Program Office’s documents and Congressional reports pertaining to
the decision to expand the program to include public colleges and universities outside of
Maryland and Virginia in accordance with Section 3(c)(1) of the Act.

We reviewed the Program Office’s and DC OFRM’s grant award refund practices.

We reviewed administrative expenses to determine if they were properly approved and
related to the program. We randomly selected 61 expense transactions contained in the
accounts payable ledgers with invoices dated between January 1, 2000, and December
31, 2000. We also reviewed three expense transactions selected because no vendor name
was specified in the ledger. In addition, we reviewed judgmentally selected transactions
not contained in the accounts payable ledger. The judgmentally selected transactions
included personnel costs for two payroll periods and four intra-district transfers for
accounting, telecommunication, and janitorial services and occupancy costs.

We reviewed the Program Office’s administrative expense budgets for fiscal years 2000
and 2001, and compared the fiscal year 2000 and 2001 administrative expense budgets to
DC OFRM expenditure reports for the period January 1, 2000, through June 30, 2001.



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AUDIT OF THE IMPLEMENTATION OF THE
DISTRICT OF COLUMBIA COLLEGE ACCESS ACT OF 1999         CONTROL NUMBER ED-OIG/A03-B0003



We reviewed the Finance Office’s cash management practices and analyzed the receipt
and disbursement of funds for the program during the period January 1, 2000, through
June 30, 2001.

To achieve our objective, we relied upon computer-processed data contained in the
Program Office’s applicant and award databases and the DC OFRM’s System of
Accounting and Reporting. We assessed the reliability of this data including relevant
general and application controls and found them to be adequate. We also conducted
sufficient tests of the data. Based upon these tests and assessments, we concluded the
data used was sufficiently reliable to be used for the assignment's objective.

We conducted the on-site fieldwork at the Program Office in Washington, DC during the
period March 7, 2001, through May 10, 2001. We held an exit conference with DC
government officials on August 1, 2001. We conducted the audit in accordance with
government auditing standards appropriate to the scope described above.


                   STATEMENT OF MANAGEMENT CONTROLS

We studied and evaluated the management control structure of the program in effect
during the period January 1, 2000, through December 31, 2000. For purposes of this
review, we assessed and classified the significant management control structure into the
following categories:
       •   Student eligibility.
       •   Institution eligibility.
       •   Grant award refunds.
       •   Cash management.
       •   Administrative expenses.
The management of the Program Office is responsible for establishing and maintaining a
management control structure. In fulfilling this responsibility, estimates and judgements
by management are required to assess the expected benefits and related costs of control
procedures. The objectives of the system are to provide management with reasonable,
but not absolute, assurance that assets are safeguarded against loss from unauthorized use
or disposition, and that the transactions are executed in accordance with management's
authorization and recorded properly, so as to permit effective and efficient operations.

Because of inherent limitations in any management control structure, errors or
irregularities may occur and not be detected. Projection of any evaluation of the system
to future periods is subject to the risk that procedures may become inadequate because of
changes in conditions.




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AUDIT OF THE IMPLEMENTATION OF THE
DISTRICT OF COLUMBIA COLLEGE ACCESS ACT OF 1999          CONTROL NUMBER ED-OIG/A03-B0003



Our assessment disclosed the following conditions in the management control structure
of the program in effect as of December 31, 2000. In our opinion, these conditions result
in more than a relatively low risk that errors, irregularities and other inefficiencies may
occur resulting in inefficient and/or ineffective performance.

•   Cash management practices do not minimize the time elapsing between the transfer of
    funds from the U.S. Treasury and the disbursement of funds for the program.

•   Budget practices may have resulted in the fiscal year 2001 administrative expense
    budget exceeding the Act’s administrative expense limit.

These weaknesses and their effects are fully discussed in the Audit Results section of this
report.




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                                     REPORT DISTRIBUTION LIST


                                                                           No. of
District of Columbia Government Officials:                                 Copies

Honorable Anthony A. Williams                                              4
Mayor

Mr. Natwar M. Gandhi, Ph.D.                                                4
Chief Financial Officer

United States House of Representatives:

Chair and Ranking Minority Member                                          1 each
Subcommittee on the District of Columbia, Committee on Government Reform

Chair and Ranking Minority Member                                          1 each
Subcommittee on the District of Columbia, Committee on Appropriations

United States Senate:

Chair and Ranking Minority Member                                          1 each
Subcommittee on Oversight of Government Management, Restructuring and
 the District of Columbia, Committee on Government Affairs

Chair and Ranking Minority Member                                          1 each
Subcommittee on the District of Columbia, Committee of Appropriations

ED Officials:

Mr. Terry Abbott                                                           1
Chief of Staff, Office of the Secretary

Mr. William Hansen                                                         1
Deputy Secretary, Office of the Deputy Secretary

Mr. Eugene W. Hickok                                                       1
Under Secretary, Office of the Under Secretary

Ms. Maureen McLaughlin                                                     1
Office of Postsecondary Education

Mr. Greg Woods                                                             1
Chief Operating Officer, Student Financial Assistance

Mr. Tom Lyon                                                               1
News and Information Dissemination Branch Chief
Office of Public Affairs, Office of the Secretary

Mr. Philip Rosenfelt                                                       1
Assistant General Counsel, Office of General Counsel
Office of Inspector General (electronically):

Inspector General                                           1
Deputy Inspector General                                    1
Assistant Inspector General for Audit                       1
Deputy Assistant Inspector General for Audit                1
Assistant Inspector General for Investigations              1
Assistance Inspector General for Analysis and Inspections   1
Regional Inspectors General for Audit                       1 each
Director, Student Financial Advisory and Assistance Team    1
Director, Non-Federal Audit Team                            1