oversight

The Title IV, Higher Education Act Programs Administered by Cleveland State University, Cleveland, Ohio.

Published by the Department of Education, Office of Inspector General on 2000-09-28.

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

                   Audit of the Title IV, Higher Education Act
                           Programs Administered by
                           Cleveland State University
                                 Cleveland, Ohio



                                          FINAL AUDIT REPORT




                                Control Number ED-OIG/A05-90054
                                         September 2000




Our mission is to promote the efficient                   U.S. Department of Education
and effective use of taxpayer dollars                     Office of Inspector General
in support of American education                          Chicago, Illinois
                               NOTICE
Statements that management practices need improvement, as well as other
conclusions and recommendations in this report, represent the opinions of the
Office of Inspector General. Determination of corrective action to be taken
will be made by appropriate Department of Education officials.

In accordance with the 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.
Table of Contents
      Audit of the Title IV, Higher Education Act
      Programs Administered by
      Cleveland State University, Cleveland, Ohio
      Control Number ED-OIG/A05-90054

Executive Summary                                                          1

Background                                                                 3

Audit Results

      The University Did Not Comply with Refund Requirements
      for Title IV, HEA Programs                                           5

      The University Did Not Make Satisfactory Academic Progress
      Determinations                                                       7

      The University Did Not Accurately Account for Title IV, HEA Funds    9

Other Matters

      The Financial Aid Office Does Not Adequately Communicate
      Federal Work Study Eligibility to Other Offices                     11

Objective, Scope, and Methodology                                         12

Statement on Management Controls                                          12

Appendix A

      Cleveland State University’s Response

Appendix B

      OIG Response to Cleveland State University’s Response

Attachment
                        Executive Summary
Except for the deficiencies contained in this report, nothing came to our attention indicating
Cleveland State University (University) had not administered the Title IV, Higher Education Act
(HEA) programs in accordance with the applicable Title IV, HEA program requirements for the
period July 1, 1998, through June 30, 1999 (1998-99 award year). We identified deficiencies
related to (1) calculating accurate student refunds, making all refunds, and making refunds timely;
(2) determining satisfactory academic progress (SAP); and (3) recording student account and
general ledger transactions accurately. These deficiencies adversely affected the University’s
administration of the Title IV, HEA programs. The Chief Operating Officer for Student Financial
Assistance should instruct the University to (1) refund to the U.S. Department of Education (ED)
or return to lenders $86,189; (2) make SAP determinations and refund to ED or return to lenders
any funds disbursed to ineligible students; and (3) establish and implement policies, procedures,
and controls to correct the deficiencies we identified.

The University Did Not Comply with Refund Requirements for Title IV, HEA Programs.
The University did not calculate accurate student refunds, make all required refunds, and make
refunds timely. The University did not include tuition charges, reductions in tuition based on
withdrawals, disbursements, and student payments recorded in 10 of 10 student accounts
reviewed (100%) when calculating refunds. In addition, the University did not make refunds of
$10,954 (based on the University’s calculated amounts) for 3 of 10 students in our sample (30%).
We also found 13 refunds for 10 students were between 142 and 369 days late. Prior to our field
work, the University had not developed and implemented policies and procedures to accurately
analyze student account transactions when determining amounts needed to calculate refunds, and
did not have adequate controls to ensure it makes all required refunds and makes refunds timely.
In its response, the University claimed to have developed and implemented revised policies and
procedures for the 1999-2000 year but was silent on whether it established the necessary controls.
 We recommend that the Chief Operating Officer for Student Financial Assistance instruct the
University to refund $10,954 to ED or lenders as appropriate, review all 1998-99 award year
refund calculations and refunds to determine if they were calculated correctly and made, and
develop and implement controls to ensure it implements the new policies and procedures and it
calculates accurate refunds, makes all required refunds, and makes refunds timely.

The University Did Not Make Satisfactory Academic Progress Determinations. The
University did not make SAP determinations for the 1998-99 award year because of problems
implementing its new software. As a result, the University awarded and disbursed Title IV, HEA
funds to students who failed SAP. We tested 120 students from a universe of 10,771 recipients.
We found the University continued to receive Title IV, HEA funds totaling $75,235 for 7 (5.8%)
students who failed SAP. The Chief Operating Officer for Student Financial Assistance should
instruct the University to make a SAP determination for all students and return to ED or lenders
the amount of aid and loan interest and special allowance disbursed to or on behalf of all students,
including the $75,235 for the seven students identified, who did not meet SAP.




FINAL AUDIT REPORT                          Page 1                 Control Number ED-OIG/A05-90054
                                                                                   Executive Summary

The University Did Not Accurately Account for Title IV, HEA Funds. The University’s
accounting records contained conflicting information for the Federal Supplemental Education
Opportunity Grant (FSEOG), Federal Perkins Loan (Perkins), Federal Pell Grant (Pell), and
Federal Work Study (FWS) programs, and the University did not record all transactions or record
transactions separately in student accounts. The University did not maintain accurate accounting
records due to (1) an incomplete understanding of the new software and a lack of training; and (2)
a lack of adequate policies, procedures, and controls. Therefore, the University cannot give ED
assurance that the program funds recorded as awarded and disbursed are accurate or that it
recorded all account transactions and recorded each transaction separately. The Chief Operating
Officer for Student Financial Assistance should instruct the University to complete proposed
accounting record adjustments; and develop and implement policies, procedures, and controls to
ensure it accurately maintains accounting records.

The University’s Response. The University did not concur with the refund findings and
recommendations. The University did concur with our recommendation to return $75,235 for
seven students specifically identified as failing to meet the SAP policy, but it did not concur that it
should make further SAP determinations. The University did not concur with the finding and
recommendations to complete the reconciliation of accounting records. The University claimed to
have reconciled its records, but did not provide adequate documentation to support its claim. The
University’s response indicated that it has implemented new policies and procedures to prevent
some of the problems identified in this report. The University’s response is included in its entirety
in Appendix A. Our response to the University’s response is included in Appendix B.




FINAL AUDIT REPORT                           Page 2                 Control Number ED-OIG/A05-90054
                           Background
Description of the         The University is a public institution of postsecondary
University                 education located in Cleveland, Ohio. It was established as a
                           state-assisted university in 1964. The University adopted the
                           buildings, faculty, staff, and programs of Fenn College, a
                           private institution of 2,500 students. In 1969 the University
                           merged with the Cleveland-Marshal College of Law. It
                           offers courses of instruction leading to both undergraduate
                           and graduate degrees. The Commission on Institutions of
                           Higher Education of the North Central Association of
                           Colleges and Schools accredits the University.

The University             In 1998, the University began implementing new software
Implemented New Software   from PeopleSoft. The new software was purchased to
                           administer the University’s human resources, financial
                           systems, and Title IV, HEA programs. The University
                           implemented the student financial assistance module first,
                           even though the manufacturer indicated that the other
                           modules were fully production ready and could be
                           implemented immediately. The manufacturer further
                           indicated that the experience gained would shorten the
                           implementation timeframe for the student financial assistance
                           module. The Enrollment Services Associate Director told us
                           the University implemented the new software without
                           running it parallel with the old system. In addition, the
                           University implemented the new software without adequate
                           training or completely understanding it.

Program Participation,     During the period July 1, 1998, through June 30, 1999, the
Authorizing Law, and       University participated in the Perkins, FWS, FSEOG, Federal
Governing Regulations      Family Education Loan, and Pell programs. Title IV of the
                           HEA, as amended, authorizes these programs. The
                           programs are also governed by regulations contained in 34
                           Code of Federal Regulations (CFR) Parts 674, 675, 676, 682
                           and 690, respectively. In addition, these programs are
                           subject to the provisions contained in the Student Assistance
                           General Provisions regulations (34 CFR Part 668), and the
                           institution must comply with the Institutional Eligibility
                           regulations (34 CFR Part 600) to participate in these
                           programs. All regulatory citations in this report are to the
                           codification revised as of July 1, 1998.

Funds Disbursed            The University expended Title IV, HEA funds totaling
                           $45,987,262 for the 1998-99 award year, consisting of
                           Perkins funds totaling $2,527,897; FWS funds totaling
FINAL AUDIT REPORT               Page 3                 Control Number ED-OIG/A05-90054
                                                                          Background

                     $612,399; FSEOG funds totaling $639,795; Pell funds
                     totaling $6,299,737; and in Federal Family Education Loans
                     totaling $35,907,434 according to information in the
                     National Student Loan Data System.




FINAL AUDIT REPORT         Page 4                Control Number ED-OIG/A05-90054
                                Audit Results
The objective of our audit was to determine whether the University administered the Title IV,
HEA programs according to applicable regulations and the HEA during the 1998-99 award year.
Specifically, we evaluated the areas of (1) management controls and reliability of computer-
processed data, (2) institutional and program eligibility, (3) cash management and financial
responsibility, and (4) selected administrative and compliance requirements. We identified
deficiencies related to (1) calculating accurate student refunds, making all refunds, and making
refunds timely; (2) determining SAP; and (3) recording student account and general ledger
transactions accurately. These deficiencies adversely affected the University’s administration of
the Title IV, HEA programs.

The University Did Not Comply with Refund Requirements for Title IV, HEA
Programs


Noncompliance with                  The University did not calculate accurate student refunds,
Refund Requirements                 make all required refunds, and make refunds timely.
                                    According to 34 CFR 668.22(b), (c)&(d), an institution must
                                    make refund calculations that include tuition and fees,
                                    student payments, and aid received. In addition, 34 CFR
                                    668.22(a)(1)&(j)(4) and 34 CFR 682.607(c)(1) require that
                                    an institution make a refund within 30 days of specified
                                    refund dates for the Campus-based and Pell programs and 60
                                    days for the Federal Family Education Loan program,
                                    respectively.

Accurate Refunds Not                The University did not calculate accurate student refunds.
Calculated                          We reviewed information for a sample of 10 of 441 students
                                    who received refunds for the 1998-99 award year. Our
                                    review disclosed significant differences between the amounts
                                    the University used to calculate refunds and the amounts
                                    recorded in all 10 students' accounts (100 percent error rate).
                                     The University did not include tuition charges, reductions in
                                    tuition based on withdrawal, disbursements, and student
                                    payments recorded in student accounts when calculating
                                    refunds.

Refunds Not Made                    The University did not refund calculated amounts for all
                                    students who did not attend, withdrew, or dropped out. Our
                                    review disclosed the University did not make refunds of
                                    $10,954 (based on the University’s calculated amounts) for 3
                                    of 10 students in our sample (30%). When the University
                                    does not make required refunds, students could default on
                                    loan balances which are too high.
Refunds Not Made Timely             The University did not always make refunds within the
FINAL AUDIT REPORT                         Page 5                Control Number ED-OIG/A05-90054
                The University Did Not Comply With Refund Requirements for Federal Programs

                                  required timeframes. We found that 13 refunds for 10
                                  students tested were between 142 and 369 days late. When a
                                  loan refund is significantly late, the government or the
                                  student will incur unnecessary interest on the loan.

The University Lacked             Prior to our field work, the University had not developed and
Refund Controls                   implemented (1) policies and procedures to accurately
                                  analyze student account transactions when determining
                                  amounts needed to calculate refunds, and (2) adequate
                                  controls to ensure it makes all required refunds and makes
                                  refunds timely. As a result, the University did not calculate
                                  accurate student refunds, make all required refunds, and
                                  make refunds timely. In its response, the University claimed
                                  to have developed and implemented revised policies and
                                  procedures for the 1999-2000 year, but was silent on
                                  whether it established the necessary controls.

Recommendations                   We recommend that the Chief Operating Officer for Student
                                  Financial Assistance instruct the University to

                                  1.1    refund $10,954 to ED or lenders as appropriate;

                                  1.2    review all 1998-99 award year refund calculations to
                                         determine if they were correct and, if not, recalculate
                                         them;

                                  1.3    review all 1998-99 refunds to ensure it made or
                                         makes the appropriate refunds based on the correct
                                         refund calculations;

                                  1.4    develop and implement controls to ensure it
                                         implements the new policies and procedures and it
                                         calculates accurate refunds, makes all required
                                         refunds, and makes refunds timely; and

                                  1.5    have an independent accountant attest to the accuracy
                                         of the refund determinations.

Auditee’s Response and Our        The University did not concur with the finding and
Response                          recommendations. The University’s response is included in
                                  its entirety in Appendix A. Our response to the University’s
                                  response is included in Appendix B.




FINAL AUDIT REPORT                      Page 6                 Control Number ED-OIG/A05-90054
The University Did Not Make Satisfactory Academic Progress Determinations

SAP Determinations Not       The University did not make SAP determinations for the
Made                         1998-99 award year. According to 34 CFR 668.16(e), the
                             University must apply reasonable standards for measuring
                             whether its Title IV, HEA recipients are maintaining
                             satisfactory progress in their educational programs. The
                             University’s SAP policy is published in its course catalog.
                             (See Attachment)

Students Failed SAP and      We reviewed student information for 120 randomly selected
Continued to Receive Title   students from a universe of 10,771 Title IV, HEA recipients
IV Funds                     and applied the University’s SAP policy. We reviewed each
                             student’s cumulative grade point average for every term the
                             student enrolled in courses. We compared the cumulative
                             grade point average at the end of each term with CSU’s SAP
                             policy. If the student failed to meet the minimum SAP
                             requirements, we looked at the next semester to see if the
                             student again failed to meet the minimum requirements.
                             According to CSU’s SAP policy, if a student fails to meet
                             SAP for two consecutive terms, the student will be subject to
                             a probation/dismissal review by the Faculty Committee on
                             Academic Standards and may lose Title IV, HEA eligibility.
                             Our review disclosed that the University received $24,901 of
                             Pell and FSEOG and $50,334 of Perkins and Federal Family
                             Education Loans for 7 students (5.8%) who failed to meet
                             SAP for two consecutive terms, but were not subject to a
                             probation/dismissal review by the Faculty Committee on
                             Academic Standards.

The University Is            The University started using PeopleSoft financial aid
Developing New Process       software for the 1998-99 award year. The University did not
                             make SAP determinations because of problems implementing
                             its new software. The Financial Aid Director told us that the
                             University is developing a new SAP determination process
                             (incorporating the published policies), which is in the testing
                             phase. According to the University, it recognizes the
                             importance of having controls in place to monitor academic
                             progress and is taking steps to assure compliance.




FINAL AUDIT REPORT                 Page 7                 Control Number ED-OIG/A05-90054
                     The University Did Not Make Satisfactory Academic Progress Determinations

Recommendations                     We recommend that the Chief Operating Officer for Student
                                    Financial Assistance instruct the University to

                                    2.1    make the required SAP determination for all students,
                                           and return to ED or lenders the amount of aid and
                                           loan interest and special allowance disbursed to or on
                                           behalf of all students, including the $75,235 for the
                                           seven students identified, who did not meet SAP; and

                                    2.2    have an independent accountant attest to the accuracy
                                           of the SAP determinations.

Auditee’s Response and Our          The University concurred with our recommendation to return
Response                            $75,235 for seven students specifically identified as failing to
                                    meet the SAP policy but it did not concur that it should make
                                    further SAP determinations. The University’s detailed
                                    response is included in its entirety in Appendix A. Our
                                    response to the University’s response is included in Appendix
                                    B.




FINAL AUDIT REPORT                        Page 8                  Control Number ED-OIG/A05-90054
The University Did Not Accurately Account for Title IV, HEA Funds

Accounting Records         The University’s accounting records contained conflicting
Contain Conflicting        information for the FSEOG, Perkins, Pell, and FWS
Information                programs, and the University did not record all Title IV,
                           HEA transactions or record the transactions separately.
                           According to 34 CFR 668.24(b), an institution must establish
                           and maintain, on a current basis, financial records that reflect
                           each program transaction and general ledger control
                           accounts and related subsidiary accounts that identify each
                           Title IV program transaction.

Awards and Disbursements   For the 1998-99 award year, the University started using
Were Recorded Using New    PeopleSoft financial aid software. The Financial Aid Office
Software                   (FAO) used the new software to record Title IV, HEA
                           awards and authorize payments. The Bursar’s Office used it
                           to record the Pell, FSEOG, and Perkins disbursements.

Conflicting Perkins,       Our review disclosed conflicting amounts in the FAO and
FSEOG, Pell, and FWS       Bursar’s Office records and the general ledger for the
Information                Perkins, FSEOG, and Pell programs. The University
                           proposed adjustments to reconcile the records and the
                           general ledger for all three programs. However, as of the
                           end of our field work on January 21, 2000, the University
                           had made adjustments to reconcile the FSEOG program
                           records, but had not made adjustments to reconcile the
                           Perkins or Pell program records. We tested the FSEOG
                           information for the 1999-2000 award year and found no
                           differences between the amounts the FAO recorded as
                           awards and the amounts the Bursar’s Office recorded as
                           disbursed. Therefore, it appears the University has corrected
                           the systemic accounting problems that caused differences
                           between the records for the three programs.

                           The Career Services Center and Financial Aid - Law office
                           administered the off-campus FWS program. Information on
                           wages in their records conflicted with the amount of off-
                           campus FWS wages recorded in the general ledger.
                           Subsequent to our field work, the University claimed to have
                           reconciled the general ledger and supporting information to
                           accurately reflect the Federal share of off-campus FWS
                           wages. However, the University did not provide a copy of
                           the general ledger to support it made the changes.




FINAL AUDIT REPORT               Page 11                 Control Number ED-OIG/A05-90054
                         The University Did Not Accurately Account for Title IV, HEA Funds

The University Did Not          Our review of 10 student accounts, selected from a universe
Record All Transactions or      of 441 student accounts with refunds for the 1998-99 award
Recorded Each Transaction       year, disclosed that the University had not recorded all
Separately                      transactions or recorded each transaction separately. The
                                University did not post 4 refund transactions to 3 student
                                accounts until we questioned whether it had made the
                                refunds. (The University had made the 4 refunds.) The
                                University made 2 transactions as early as April 26, 1999, but
                                did not post the transactions to the students’ accounts until
                                February 11, 2000. In addition, for 2 of the 10 accounts
                                reviewed, the University combined both a tuition charge and
                                a tuition credit into 1 transaction.

                                The University did not maintain accurate accounting records
                                due to (1) an incomplete understanding of the new software
                                and a lack of training, and (2) inadequate policies,
                                procedures and controls. Therefore, the University cannot
                                give ED assurance that the recorded program funds awarded
                                and disbursed are accurate or that it recorded all account
                                transactions and recorded each transaction separately.

Recommendations                 We recommend that the Chief Operating Officer for Student
                                Financial Assistance instruct the University to

                                3.1    complete the proposed adjustments and make
                                       corrections to the student records to ensure it recorded
                                       all transactions and recorded each transaction
                                       separately. The University should have an independent
                                       accountant attest to the accuracy of the adjustments;
                                       and

                                3.2    develop and implement policies, procedures, and
                                       controls to ensure it accurately maintains, on a current
                                       basis, financial records that reflect each program
                                       transaction and general ledger control accounts and
                                       related subsidiary accounts that identify each Title IV,
                                       HEA program transaction.

Auditee’s Response and Our      The University did not concur with the finding and
Response                        recommendations to complete the reconciliation of accounting
                                records. The University claimed to have reconciled its records,
                                but did not provide adequate documentation to support its
                                claim. The University’s response is included in its entirety in
                                Appendix A. Our response to the University’s response is
                                included in Appendix B.


FINAL AUDIT REPORT                    Page 10                Control Number ED-OIG/A05-90054
                            Other Matters
The Financial Aid Office Does Not Adequately Communicate Federal Work
Study Eligibility to Other Offices

FAO Does Not Enter All        The University’s FAO does not enter all relevant information
Relevant Information          into the PeopleSoft financial aid software that other offices
                              rely on to administer the FWS program. According to 34
                              CFR 668.16(b)(3), an institution must communicate to
                              responsible individuals all information received that bears on
                              a student’s eligibility for Title IV, HEA assistance. In
                              addition, 34 CFR 668.16(b)(4) requires the institution to
                              have written procedures for or written information indicating
                              the responsibilities of the various offices with respect to the
                              approval, disbursement, and delivery of Title IV, HEA
                              program assistance. The FAO receives students’ acceptance
                              or declination of FWS awards. However, the FAO did not
                              enter the students’ acceptance or declination into the
                              PeopleSoft financial aid software.

Other Offices Rely on FAO     Students applied through the Career Services Center and
Information to Administer     Financial Aid - Law office to obtain jobs. The University
FWS Program                   stated that the policy for these offices is to identify students
                              that accepted their FWS award by reviewing the student
                              information in the PeopleSoft financial aid software.
                              However, our review disclosed 11 of 31 students we tested
                              participated in the FWS program even though data in the
                              PeopleSoft financial aid software did not indicate that the
                              students accepted the FWS awards.

The University Lacks          FAO lacks management controls and written procedures to
Controls and Written          ensure it communicates students’ FWS award status to the
Procedures                    Career Services Center and Financial Aid - Law office. By
                              relying on incomplete records, the University could provide
                              FWS jobs to students who declined their FWS award.




FINAL AUDIT REPORT                  Page 11                  Control Number ED-OIG/A05-90054
     Objective, Scope, and Methodology
The objective of our audit was to determine whether the University administered the Title IV,
HEA programs according to applicable regulations and the HEA during the 1998-99 award year.
Specifically, we evaluated the areas of (1) management controls and reliability of computer-
processed data, (2) institutional and program eligibility, (3) cash management and financial
responsibility, and (4) selected administrative and compliance requirements.

To meet our objective, we reviewed state and accrediting agency documents, placement and
completion statistics, student complaints, Internet information, organizational charts, news
articles, the University’s Title IV, HEA budgets, written operating policies and procedures, the
University’s catalogs, and various ED accounting and administrative records. We also reviewed
the 1997-98 audit report prepared in accordance with Office of Management and Budget Circular
A-133 (unqualified opinion) and auditor working papers for the 1997-98 and 1998-99 audit
reports. In addition, we reviewed 60 randomly selected student records from a universe of
10,771 Title IV, HEA recipients (we expanded our review to 120 randomly selected student
records for SAP), 10 judgmentally selected student records from a universe of 441 students with
refunds, and 31 randomly selected student records from a universe of 316 FWS recipients. We
reviewed selected accounting records and reports for the 1998-99 and 1999-00 Title IV, HEA
programs. We interviewed various University, external auditor, and ED personnel. In addition,
we interviewed personnel from other universities about experiences implementing and using the
PeopleSoft software.

To achieve our audit objective, we relied in part on computer-processed data contained in the
University’s PeopleSoft student recipient data base. We assessed the reliability of the relevant
general and application controls and found them to be adequate. We tested the accuracy,
authenticity, and completeness of the data by comparing source records to computer data,
comparing computer data to source records, and testing the processing of computer data. Based
on these tests and assessments, we concluded that the data were sufficiently reliable to be used in
meeting the audit’s objective.

We conducted our field work at the University’s administrative offices in Cleveland, Ohio, from
October 4, 1999, through January 21, 2000. We performed our audit in accordance with
government auditing standards appropriate to the scope of audit described above.


   Statement on Management Controls
As part of our audit, we made an assessment of the University’s management control structure,
policies, procedures, and practices applicable to the Title IV, HEA programs. The purpose of our
assessment was to assess the level of control risk, that is, the risk that material errors,
irregularities, or illegal acts may occur. We performed the control risk assessment to assist us in
determining the nature, extent, and timing of our substantive tests needed to accomplish our audit
objective.


FINAL AUDIT REPORT                         Page 12                 Control Number ED-OIG/A05-90054
                                                                 Statement on Management Controls

To make the assessment, we identified the significant Title IV, HEA management controls and
classified them into the following five categories: Institutional Eligibility, Program Eligibility,
Student Eligibility, File Maintenance, and Cash Management.

Because of inherent limitations, a study and evaluation made for the limited purpose described
above would not necessarily disclose all material weaknesses in the control structure. However,
our assessment disclosed significant weaknesses in the University’s system of management
controls. These weaknesses had a material effect in the University’s ability to administer the Title
IV, HEA programs according to the law and regulations. See Audit Results for descriptions of
the weaknesses.




FINAL AUDIT REPORT                          Page 13                 Control Number ED-OIG/A05-90054
The University’s response included seven attachments. We included the seven attachments with
the printed version of this report. However, because of their size, we did not include them with
this electronic version. Contact the Office of Inspector General, Chicago, Illinois to obtain
printed copies of the seven attachments.
                                                                                     Appendix B


       OIG Response to Cleveland State University’s Response
I.A.   OIG’s calculations are based on incorrect methodologies or misinterpreted data,
       resulting in the appearance that additional refunds are owed.

       Improper Queries – We ran queries to obtain a database of transactions to be reviewed
       and tested and did not rely exclusively on the results of these queries to make our refund
       findings. We transferred the transactions into spreadsheets where we sorted them to
       identify all transactions for the semester in which the student withdrew or dropped out.
       We then compared the identified transactions with the transactions the University used to
       calculate refunds. We identified differences between the transactions we identified and the
       transactions the University used to calculate refunds for all ten students in our sample.
       Because we used spreadsheets to sort the data obtained through the query process and
       make our analysis, the order of data obtained through queries was not relevant.

       Term Identification - The University’s response stated, “To the extent the OIG relied only
       on the term identified, without inquiring into what term was actually relevant, the
       calculations would be inaccurate.” We did not rely only on the term identified but also
       upon the ITEM TERM for the students’ transactions. The University’s response also
       indicates the POSTED DATE must be considered to determine the appropriate term to
       which the transaction applies. We disagree. The date a transaction is posted is not
       necessarily an indicator of the period to which it applies. The University was still making
       changes to the student accounts for the 1998-99 period at the time of our field work in
       February 2000. If the term identified and ITEM TERM are incorrect as the University
       may be suggesting, then the University does not meet the requirement to maintain
       adequate accounting records (34 CFR 668.24(b)).

       Misapplied Fee Adjustments - The example cited in the University’s response is one of the
       cases of combined transactions reported in the finding titled The University Did Not
       Accurately Account for Title V, HEA Funds. Combining transactions does not comply
       with 34 CFR 668.24(b). In addition, because the individual transactions, which the
       University claims it combined, are not maintained in the students’ accounts, we cannot
       determine if the combined transactions are reliable data. We based our analysis on the
       transactions recorded in the accounting records.

       Dropped Class Fees - When reviewing the students’ accounts, we could not distinguish
       the dropped class fees in the University’s example from other tuition credit transactions
       for students who drop out after beginning classes. Therefore, if these transactions are
       indeed for students who withdrew prior to beginning the course, they are not adequately
       identified as required in 34 CFR 668.24(b). Because these transactions cannot be
       separately identified, we cannot determine if the University correctly calculated the refund.

       The University’s response addresses only three of the ten refunds in the finding and did
       not change our position as stated above. Therefore, we have no basis for changing the
       report as the University requested in its response.
                                                                                    Appendix B

I.B.   Untimely refunds were largely caused by problems associated with PeopleSoft
       software implementation.

       The University agrees that it did not make all refunds timely. In addition, the University’s
       response identifies the problem as the implementation of the PeopleSoft software. The
       University made the decisions regarding purchasing and implementing the software and
       was responsible for the administration of the Title IV, HEA programs. We made no
       change to the report based on the University’s response.

I.C.   CSU has adopted and implemented revised policies and procedures for Title IV
       refunds and repayments.

       We reviewed the University’s new policies and procedures and they appear adequate.
       However, the University’s response does not address the controls needed to ensure the
       new policies and procedures work correctly. Based on the University’s response, we
       changed the recommendation for developing and implementing new policies and
       procedures.

I.D.   Comments to specific recommendations

       Because the University’s response does not support changing our methodology for
       reviewing refund calculations, we did not change recommendation 1.1. In addition, the
       University’s most recent A-133 audit reported a problem with refunds. That audit finding
       overlapped part of our finding. This is a matter for audit resolution. Therefore, we did
       not change our recommendations, except the wording in recommendation 1.4 to stress the
       controls the University needs for the new policies and procedures.

II.A. SAP policies and procedures are in effect at CSU

       The discussion referred to in the University’s response does not support the University’s
       statement that it ran a query to identify students who were not making SAP. The
       discussion explains the SAP process, but does not indicate the University in fact followed
       the process. According to the Financial Aid Director at the time of our review, the
       University had not made SAP determinations for the 1998-99 award year. The
       recommendation to make the SAP determinations as required by 34 CFR 668.16(e) is
       based on the Financial Aid Director’s statement and our sampling.

       The documents provided with the University’s response (Appendix A, Attachment 3) were
       not given to us during our field work even though the dates show they were prepared
       prior to the completion of our field work. In addition, we provided the University with a
       written preliminary description of the finding prior to leaving the audit site. The
       University responded, in writing, but did not provide any documents indicating it made
       any SAP determinations. If the University had provided the documents, we would have
       tested the application of the SAP policy and procedures to ensure SAP determinations
       were complete or accurate. Therefore, we made no change to the report.
                                                                                    Appendix B

II.B.   The SAP errors identified by the draft report are de minimus and do not require an
        expanded review.

        The OIG review of 120 student records was not a statistically valid sample and we made
        no projection to the whole population. Our review of SAP records was only to determine
        if there were students who did not meet the University’s SAP policy and continued to
        receive Title IV, HEA funds. OIG audits are governed by the Government Auditing
        Standards, not the Program Review Guide as suggested in the University’s response. Our
        work satisfies the fifth field work standard for evidence of an audit finding effect. The
        University’s argument that, based on criteria in the Program Review Guide, we cannot
        recommend further work is without merit because, as discussed above, the Financial Aid
        Director stated the University had not made SAP determinations for the 1998-99 award
        year. Because the University did not provide evidence that it made SAP determinations,
        we made no change to the report.

III.A. The University appropriately reconciled Perkins, Pell and FSEOG amounts for the
       1998-99 program year.

        Perkins Program - As of the end of our field work, the University was proposing
        adjustments to the general ledger and to the Bursar’s Office records. The University’s
        response states it reconciled the Perkins program, and referred to Attachment 4, pages 1-
        2, to support its statement. However, the attachment shows journal entries dated
        November 1999, and the program had not been reconciled at that time. In addition, the
        attachment does not show that the University made the adjustments it proposed for the
        general ledger, and the University did not provide any documentation to support that it
        made adjustments to the Bursar’s Office records. Therefore, we cannot determine if the
        FAO, Bursar’s Office, and general ledger records reconcile.

        Pell Program - The University proposed adjustments to the 1998-99 FAO, Bursar’s
        Office, and general ledger records. However, Attachment 4, page 3, of the response only
        shows that the adjustments were made to the general ledger. It does not support that the
        adjustments were made to the FAO and Bursar’s Office records. Therefore, we cannot
        determine if the FAO, Bursar’s Office, and general ledger records reconcile.

III.B. CSU properly transferred $49,270 in Pell funds from 1998-99 to 1999-2000 using the
       EDCAPS/GAPS system.

        We reviewed the documentation in the University’s response and agree that the University
        properly transferred $49,270 of Pell funds. Based on the University’s actions after our
        field work, we removed the finding on excess Pell funds and the associated
        recommendation.

III.C. CSU properly reconciled FWS amounts in the Career Services Center’s wage
       records and the University’s general ledger.

        We provided the University with a written preliminary description of the finding prior to
        leaving the audit site. The University responded in writing and provided documents
        indicating it reconciled the general ledger and the supporting information. The
                                                                                     Appendix B
      transactions provided in Attachment 6 to the University’s response were not the
      adjustments in the reconciliation previously provided.

III.D. Comments on specific recommendations

      We removed recommendation 3.1 as discussed above (III.B.). However, we made no
      changes to recommendation 3.2 because the University’s response did not support it made
      adjustments to reconcile the general ledger and the supporting information. Attachment 7
      to the University’s response contains a procedure for determining if the records reconcile.
       It does not document that the University developed and implemented policies,
      procedures, and controls to ensure it accurately maintains financial records that reflect
      each program transaction. Therefore, we did not change recommendation 3.3.

IV.   Other Draft Audit Matters: The Financial Aid Office Does Not Adequately
      Communicate Federal Work Study Eligibility to Other Offices

      Other matters represent minor issues brought to the auditee’s attention to surface policies,
      procedures, or practices, that, if changed, could result in better administration of the Title
      IV, HEA programs. We make no recommendations because the decision to take action is
      left to the University. We made no change to the report based on the University’s
      response.
Attachment
                                     Distribution Schedule
                                  Control Number OIG/A05-A0054
                                                                                            Copies
Auditee                                                                                      1

Action Official                                                                               1

       Greg Woods, Chief Operating Officer
       Student Financial Assistance
       Department of Education
       ROB-3, Room 4004
       7th and D Streets, SW
       Washington, DC 20202-5132

Other ED Offices

       General Manager for Schools, Student Financial Assistance                              1

       Chief Financial Officer, Student Financial Assistance                                  1

       Director, Case Management & Oversight, Schools, Student
       Financial Assistance                                                                   1

       Area Case Director, Chicago Case Team, Case Management &
       Oversight, Schools, Student Financial Assistance                                        1

       General Counsel, Office of the General Council                                          1

       Office of Public Affairs                                                                1

       Secretary’s Regional Representative, Region V                                           1

OIG

       Inspector General                                                                      1
       Deputy Inspector General                                                               1
       Assistant Inspector General for Investigation                                          1
       Assistant Inspector General for Audit (A)                                              1
       Deputy Assistant Inspector General for Audit (A)                                       1
       Director, Student Financial Assistance, Advisory and Assistance Team                   1
       Regional Audit Offices                                                                 6




FINAL AUDIT REPORT                                                    Control Number ED-OIG/A05-90054