oversight

Gallaudet University's (GU) Compliance with Selected Aspects of Title IV of the Higher Education Act Program Requirements

Published by the Department of Education, Office of Inspector General on 2008-02-25.

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

                              UNITED STATES DEPARTMENT OF EDUCATION
                                    OFFICE OF INSPECTOR GENERAL

                                                                                                     Audit Services
                                                                                            Region III- Philadelphia

                                                    February 25, 2008

                                                                          Control Number ED-OIG/A03H0008

Dr. Robert E. Davila
President
Gallaudet University
800 Florida Avenue, NE
Washington, DC 20002

Dear Dr. Davila:

This Final Audit Report, entitled Gallaudet University’s (GU) Compliance with
Selected Aspects of Title IV of the Higher Education Act Program Requirements, presents
the results of our audit. Our audit objective was to determine whether GU complied with
Title IV of the Higher Education Act of 1965, as amended (Title IV), program
requirements for student eligibility; return of Title IV funds; and cash management,
including disbursements, for the period July 1, 2004, through June 30, 2006.


                                                  BACKGROUND


GU is a privately owned post-secondary university that receives a substantial proportion
of its annual revenue by direct appropriation from the Federal government under the
authority of the Education of the Deaf Act. It is the only accredited university in the
world designed exclusively for deaf or hard of hearing students. GU also admits a small
number of hearing, degree-seeking undergraduate students–up to five percent of an
entering class.

GU has participated in the Title IV programs since December 1965. Federal funds
disbursed in the 2005-2006 and 2004-2005 award years for the Federal Supplemental
Educational Opportunity Grant (FSEOG), the Federal Work-Study (FWS), and the
Federal Pell Grant (Pell) programs, as well as loans under the Federal Family Education
Loan (FFEL) and the Federal Perkins Loan (Perkins) programs were as follows.




The Department of Education’s mission is to promote student achievement and preparation for global competitiveness by fostering
                                     educational excellence and ensuring equal access.
Final Audit Report
ED-OIG/A03H0008                                                                         Page 2 of 6


PROGRAMS                                  2005-2006                         2004-2005
FSEOG                                    $ 134,420                         $ 139,281
FWS                                         127,310                           135,211
Pell                                      1,209,702                         1,234,185
FFEL
        Subsidized Stafford               2,335,723                        2,491,665
        Loans
        Unsubsidized Stafford             1,915,523                        2,020,921
        Loans
        PLUS Loans                          519,372                         341,911
Perkins                                     249,0511                        326,4882
TOTAL Funds Disbursed                    $6,491,101                      $6,689,662


GU normally disbursed FSEOG, FWS, and Pell funds to eligible students using its own
funds. At the beginning of the next month following the disbursement, GU drew down
Federal funds to reimburse itself.




                                       AUDIT RESULTS


We did not identify any significant reportable instances of non-compliance with the Title
IV program requirements for student eligibility; return of Title IV funds; and cash
management, including disbursements. However, we did note the following minor issues.

    •   Two of the three FFEL federal bank account statements reviewed did not indicate
        that the account contained federal funds. GU officials provided the audit team
        with documentation to show that during a bank merger, GU’s new bank omitted
        the proper wording from GU’s monthly paper statement, however, on other
        official bank documentation the account title was properly worded. We suggest
        that GU work with its bank to have the bank statements properly titled.

    •   Two instances in which a student’s credit balance was not paid within the 14 day
        timeframe and one instance in which a student did not receive entrance
        counseling.

        1. In award year 2004-2005, a $375 credit balance was paid to a student one day
           late.
1
  This amount does not include Perkins funds awarded by the U.S. Department of Education (ED). The
entire amount is from other non-Title IV sources.
2
  $31,774 of this amount was from Perkins funds awarded by ED. The remainder of the funds was from
other non-Title IV sources.
Final Audit Report
ED-OIG/A03H0008                                                                Page 3 of 6

       2. In award year 2005-2006, a $760 credit balance was paid to a student 15 days
          late.
       3. In award year 2005-2006, a student did not receive entrance counseling.

We suggest that GU enhance its procedures to ensure that credit balances are paid to
students in a timely manner and that all students receive entrance counseling as required.

We also noted that GU did not have documented policies and procedures for all of its
departmental offices involved in the administration of the Title IV programs. The Financial
Aid Office was the only office that had documented Title IV program policies and
procedures. We suggest that GU develop written Title IV program policies and procedures
for its other offices (Office of the Registrar, Office of Admissions, Student Accounts Office,
and Student Financial Services) to ensure a higher level of management control and to avoid
the possibility of misinterpretation between management and staff.




                   OBJECTIVE, SCOPE, AND METHODOLOGY


Our audit objective was to determine whether GU complied with the Title IV program
requirements for student eligibility; return of Title IV funds; and cash management,
including disbursements, for the period July 1, 2004, through June 30, 2006.

To accomplish our objective, we performed the following procedures:

   •   Reviewed GU’s Title IV policies and procedures and interviewed GU officials in
       order to obtain an understanding and make an assessment of GU’s internal
       controls over its processes for determining student eligibility, returning Title IV
       funds, managing federal funds, and disbursing these funds to students.

   •   Reviewed GU’s PeopleSoft Financial and PeopleSoft Federal Student Aid
       computer generated reports, ED’s Grant Administration Payment System (GAPS)
       activity reports, and student files in order to determine GU’s level of compliance
       with the Title IV program compliance requirements described above.

   •   Reviewed GU’s Office of Management and Budget Circular A-133 single audit
       reports for fiscal years ending December 31, 2004, December 31, 2005, and
       December 31, 2006.

   •   Identified, using GU’s PeopleSoft database and ED’s National Student Loan Data
       System (NSLDS), the following universes of GU students that participated in the
       Title IV programs during the audit period:
           1. All students that received Title IV program funds.
           2. Students that withdrew, dropped, or were terminated.
Final Audit Report
ED-OIG/A03H0008                                                                               Page 4 of 6

             3. Students that earned a zero grade point average (GPA) at the end of a
                school semester.

     •   Randomly selected nine bank account statements for review from GU’s federal
         fund bank accounts; three from each of GU’s three federal fund bank accounts.
         Identified all draw downs that occurred during these periods from ED’s GAPS
         activity reports, and traced the draw downs to the appropriate federal fund bank
         account statement.

    •    Reviewed the bank statement titles for the selected bank statements and
         determined if the titles indicated that they contained federal funds.

    •    From the nine randomly selected bank account statements identified above,
         judgmentally selected three draw downs and determined if GU met the Title IV
         program cash management requirements. We selected one Pell draw down in the
         amount of $54,1363, one FSEOG draw down in the amount of $ 134,4204, and a
         FFEL deposit in the amount of $198,7295. We randomly sampled 6 Pell
         disbursements, 10 FSEOG disbursements, and reviewed all 58 FFEL
         disbursements to determine if the funds were disbursed within three working
         days.

    •    From the universe of students that received Title IV program funds, randomly
         selected a sample of 50 students (25 from each award year) and judgmentally
         selected an additional sample of 5 students6 to determine if these students were
         eligible to receive Title IV program funds.

    •    Reviewed student academic and financial records for the 55 students identified
         above to determine if each student’s Title IV program funds were disbursed in
         accordance with Title IV program requirements.

    •    Randomly selected 10 of the 38 students that withdrew, dropped, or were
         terminated, and reviewed their academic and financial files. For each student,
         determined if GU calculated the proper return of Title IV fund amount, returned
         the funds in a timely manner, and in the proper sequence according to the Title IV
         program requirements.


3
  This draw down consisted of 55 student disbursements. We selected this draw down because it was the
only draw down in our bank statement sample that was not a reimbursement, and included student
disbursement transactions. As noted in the Background section, GU normally used its own funds to make
student disbursements and then reimbursed itself.
4
  This drawdown consisted of 325 student disbursements. We selected this draw down because it was the
only FSEOG draw down in our bank statement sample.
5
  This deposit consisted of 58 student disbursements. We selected this deposit because it was the only
FFEL deposit in our bank statement sample.
6
  We selected these students to test student eligibility requirements for those students who received only
FWS funds.
Final Audit Report
ED-OIG/A03H0008                                                               Page 5 of 6

   •   From the universe of 120 students identified as earning a zero GPA at the end of a
       school semester, randomly selected five students from each award year and
       determined if GU correctly identified the student’s withdrawal date, calculated the
       proper return of Title IV funds, and returned the funds timely and in the proper
       sequence.

We gained an understanding of, and assessed the system of internal controls, policies,
procedures and practices applicable to GU's compliance with cash management,
disbursements, return of Title IV funds, and student eligibility. This assessment was
performed to determine the nature, extent, and timing of our substantive tests to
accomplish our audit objectives. For purposes of the audit, we assessed and classified the
significant controls into the following categories:

   •   Drawdown of federal funds
   •   Disbursement of federal funds
   •   Return of Title IV funds
   •   Determination of Title IV student eligibility

Because of inherent limitations, a study and evaluation made for the limited purposes
described above would not necessarily disclose all material weaknesses in internal
controls. Our assessment only disclosed the minor issues noted above, which were not
substantive in nature, and therefore did not appear to have an adverse affect on GU's
ability to administer its Title IV programs.

To achieve our audit objective, we relied, in part, on computer-processed data from GU’s
PeopleSoft Financial and PeopleSoft Federal Student Aid databases. We verified the
completeness of the data by comparing source records to computer-generated documents
and verified the authenticity by comparing computer-generated documents to source
documents. Based on our testing, we concluded that the computer-processed data were
sufficiently reliable for the purpose of our audit.

We conducted our fieldwork at GU’s campus, located at 800 Florida Avenue, N.E.,
Washington, D.C., between May 14, 2007, and September 6, 2007. We held an exit
conference on January 17, 2008. Our work was performed in accordance with generally
accepted government auditing standards appropriate to the scope of the review described
above.
Final Audit Report
ED-OIG/A03H0008                                                                 Page 6 of 6




                           ADMINISTRATIVE MATTERS


Our audit was for the limited purpose described above and would not necessarily disclose
all material weaknesses pertaining to GU’s compliance with the Title IV program
requirements. Accordingly, the contents of this audit report should not be construed as
acceptance or approval of GU’s compliance with the all Title IV requirements. -This
audit does not preclude further reviews and audits of this or similar areas by the Office of
Inspector General (OIG), nor does it preclude the U. S. Department of Education from –
initiating other actions concerning GU’s compliance with Title IV program requirements.
The audit we performed is not a substitute for any other reviews required by law, license,
or accreditation.

In accordance with the Freedom of Information Act (5 U.S.C. §552), reports, and other
documents issued by the OIG are available to members of the press and general public to
the extent information contained therein is not subject to exemptions in the Act.

We appreciate the cooperation and assistance extended by your staff during the audit.
Because our audit did not disclose any significant instances of non-compliance with the
compliance areas identified in our audit objective, and because our report does not
contain any recommended corrective actions, no action on your part is necessary. If you
have any questions, please contact me at (215) 656-6279, or Teri Lewis, Assistant
Regional Inspector General for Audit, at (215) 656-6276.



                                              Sincerely,

                                                  /s/

                                              Bernard E. Tadley
                                              Regional Inspector General for Audit



Cc:    Lawrence A. Warder, Acting Chief Operating Officer, Federal Student Aid
       (FSA)
       Jay Hurt, Acting Chief Financial Officer, FSA
       Sherry Quade, Audit Liaison Officer, FSA