oversight

Robert Morris College's Administration of the Talent Search, Upward Bound, and Student Support Services Programs Chicago, Illinois.

Published by the Department of Education, Office of Inspector General on 2002-09-27.

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

          Audit of Robert Morris College’s Administration
               of the Talent Search, Upward Bound,
             and Student Support Services Programs
                          Chicago, Illinois


                                     FINAL AUDIT REPORT




                             Control Number ED-OIG/A05-B0035
                                       September 2002


Our mission is promote the efficiency,              U.S. Department of Education
effectiveness, and integrity of the                 Office of Inspector General
Department’s programs and operations.               Chicago, Illinois
Statements that managerial practices need improvements, as well as
other conclusions and recommendations in this report represent the
   opinions of the Office of Inspector General. Determinations of
    corrective action to be taken will be made by the 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.
                                       UNITED STATES DEPARTMENT OF EDUCATION                                                                       SPEC
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     Audit                                                                                                                                  Investigation
(312) 886-6503                                                                                                                             (312)353-7891




                                                                                            S EP 2 7"2002
        Michael P. Viollt, President
        Robert Morris College
        Suite 410
        401 South State Street
        Chicago, Illinois 60605

        Dear Mr. Viollt :

        Attached is our report entitled Audit ofRobert Morris College's Administration ofthe Talent
        Search, Upward Bound, and Student Support Services Programs, Chicago, Illinois (ED-
        OIG/A05-B0035). The report incorporates the comments you provided in response to the draft
        audit report . Ifyou have any additional comments or information that you believe may have a
        bearing on the resolution of this audit, you should send them directly to the following Education
        Department official, who will consider them before taking final Departmental action on the
        audit:

                                   Sally Stroup, Ed.D .
                                   Assistant Secretary
                                   Office of Postsecondary Education
                                   U.S. Department of Education
                                   Room 7115
                                   1990 K Street, NW
                                   Washington, DC 20006

        Office of Management and Budget Circular A-50 directs Federal agencies to expedite the
        resolution of audits by initiating timely action on the findings and recommendations contained
        therein . Therefore, receipt of your comments within 30 days would be greatly appreciated .

        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.




                                                                                                 Department's programs and operations .
                   Our mission is to promote the efficiency, effectiveness, and integrity of the
If you have any questions or wish to discuss the contents ofthis report, please contact me at 312-
886-6503 . Please refer to the above audit control number in all correspondence relating to this
report .

                                     Sincerely,


                                     Richard4J.     d
                                     Regional Inspector General
                                      for Audit

Attachment
                            Table of Contents
Audit of Robert Morris College’s Administration of the Talent
Search, Upward Bound, and Student Support Services Programs,
Chicago, Illinois
Control Number ED-OIG/A05-B0035

                                                                            Page

Executive Summary                                                            1

Audit Results                                                                3

  Finding No. 1 RMC Did Not Maintain Documentation Sufficient to Support
                the Eligibility of Its Upward Bound Participants             4

  Finding No. 2 RMC Did Not Account Accurately for TRIO Program Funds        5

  Finding No. 3 RMC Used $7,601 in TRIO Program Funds for Unallowable
                Costs                                                        7

  Finding No. 4 RMC Paid $6,560 in Stipends to Upward Bound Students
                Without Evidence of Their Satisfactory Participation         8

  Finding No. 5 RMC Paid Unreasonable Costs for Consulting Services          9

  Finding No. 6 RMC Reported Inaccurately the Number of TRIO Program
                Participants It Served                                      10

  Finding No. 7 RMC Could Not Support Achievement of All Grant Objectives   11

Other Matters                                                               12

Background                                                                  13

Objectives, Scope, and Methodology                                          14

Statement on Management Controls                                            16

Attachment                                                                  18
                                    Executive Summary

Robert Morris College (RMC) of Chicago, Illinois, did not always administer its Talent Search,
Upward Bound, and Student Support Services (collectively known as TRIO) programs according
to Title IV of the Higher Education Act of 1965, as amended (HEA), and the regulations relevant
to the TRIO programs (34 C.F.R. Parts 74, 75, 643, 645, and 646).1 Our audit disclosed that
RMC complied with the law and relevant regulations by claiming expenses that did not exceed
its approved budgeted amounts. RMC also demonstrated that it provided only eligible services
to the agreed upon number of eligible participants in its Talent Search, Student Support Services,
and Upward Bound programs. However, during the period September 1, 1999, through August
31, 2000, RMC:

      •   Did not maintain documentation sufficient to support the eligibility of its Upward Bound
          participants;
      •   Did not account accurately for TRIO program funds;
      •   Used $7,601 in TRIO program funds for unallowable costs;
      •   Paid $6,560 in stipends to Upward Bound participants without evidence of their
          satisfactory participation;
      •   Paid unreasonable costs for consulting services, resulting in $5,990 not being available to
          serve eligible TRIO participants;
      •   Reported inaccurately the number of TRIO program participants it served; and
      •   Could not support achievement of all grant objectives.

We also noted RMC’s TRIO program budgets did not provide ED with accurate information
regarding estimated expenses, and employees shown in the budgets as 12-month employees only
worked 11 months.

In general, significant weaknesses in RMC’s management controls over (1) maintaining
documentation supporting eligibility of project participants, (2) accounting for and using grant
funds, (3) claiming travel expenses, (4) purchasing, and (5) submitting required reports caused
these problems.

We recommend that the Assistant Secretary for Postsecondary Education direct RMC to refund
$20,151, because it charged unallowable costs to the TRIO programs, paid stipends to Upward
Bound participants without evidence of their satisfactory participation in the program, and
charged unreasonable consulting costs to the TRIO programs. We also recommend that the
Assistant Secretary for Postsecondary Education direct RMC to (a) consult with U. S.
Department of Education (ED) officials if it has questions regarding the allowability of costs,
(b) consult with an ED program official prior to incurring consulting costs which are
significantly greater than those stated in the TRIO programs’ budgets, and (c) develop and
implement controls to ensure TRIO staff prepare performance reports that include all participants
served during the grant award year, regardless of their status at the time RMC prepares its
reports.
1
    Unless otherwise noted, all citations are to the regulations effective July 1, 1999.


Final Audit Report                              1                            ED-OIG/A05-B0035
In addition, we recommend that the Assistant Secretary for Postsecondary Education conduct a
review of RMC to ensure it:

   •   Implemented controls sufficient to ensure that all future Upward Bound participants meet
       all eligibility requirements;
   •   Implemented procedures to reconcile accounting and program records at least annually to
       ensure costs are charged to the correct programs and the correct grant year;
   •   Provided specialized training in accounting for federal grant funds to TRIO personnel;
   •   Reviewed accounting records for the audit period and corrected any transactions recorded
       improperly, including those identified during our audit;
   •   Implemented controls to ensure it charges only allowable costs to the TRIO programs;
   •   Provided training to its TRIO staff regarding the types of costs that can be charged to the
       TRIO programs;
   •   Adhered to its procedures for determining satisfactory participation and maintained
       sufficient records to show it made the determination for all Upward Bound students
       before paying them stipends;
   •   Implemented written policies and procedures to monitor its progress toward the
       achievement of its grant objectives; and
   •   Maintained documentation, as described in the grant proposal, to demonstrate the degree
       to which it achieved the objectives.

In response to our draft audit report, RMC disagreed with Finding Nos. 1, 5, and 6 and generally
agreed with Finding Nos. 2, 3, 4, and 7. RMC disagreed with $941 of $8,484 in costs we
considered unallowable for Finding No. 3. RMC also stated that it has taken actions to correct
the control weaknesses identified in Finding Nos. 1, 2, 3, 4, and 7.

We made changes to the report based on comments received. We deleted our draft report
recommendations requesting RMC return to ED $241,377 for the 1999-2000 grant year and
$342,467 for the 2000-2001 grant year. In response to the draft report, RMC agreed that
complete documentation for Upward Bound participants was lacking at the time of our audit.
However, RMC provided sufficient documentation to show Upward Bound participants during
those grant years were eligible to receive services. We also reduced our finding regarding
unallowable costs charged to the TRIO programs by $883. RMC provided sufficient support to
show those costs were allowable. Finally, we revised our draft report recommendations and are
now recommending that the Assistant Secretary for Postsecondary Education conduct a review
of RMC to ensure it has implemented the corrective actions described in RMC’s comments on
our draft report. We summarized RMC’s comments and our responses after each finding, and a
copy of selected pages of RMC’s comments is provided as an Attachment. Because RMC’s
comments on the draft report were voluminous, we did not include them in their entirety. A
complete copy of RMC’s comments will be forwarded to the Office of Postsecondary Education.




Final Audit Report                          2                           ED-OIG/A05-B0035
                                      AUDIT RESULTS
The objectives of our audit were to determine if, for the period September 1, 1999, through
August 31, 2000, RMC:

   •   Demonstrated that it provided only eligible services to the number of eligible TRIO
       students required under its agreement with ED;
   •   Properly accounted for and completely and accurately reported on the use of TRIO funds;
   •   Only claimed expenses that were allowable and adequately supported; and
   •   Claimed expenses that did not exceed the approved budgeted amounts.

Our audit disclosed that RMC complied with the law and relevant regulations by claiming
expenses that did not exceed its approved budgeted amounts. RMC also demonstrated that it
provided only eligible services to the agreed upon number of eligible participants in its Talent
Search, Student Support Services, and Upward Bound programs.

However, contrary to the law and relevant regulations, RMC (1) did not maintain documentation
sufficient to support the eligibility of its Upward Bound participants, (2) did not account
accurately for TRIO program funds, (3) used $7,601 in TRIO program funds for unallowable
costs, (4) paid $6,560 in stipends to Upward Bound participants without evidence of their
satisfactory participation, (5) paid unreasonable costs for consulting services, resulting in $5,990
not being available to serve eligible TRIO participants, (6) reported inaccurately the number of
TRIO program participants it served, and (7) could not support achievement of all grant
objectives. Significant weaknesses in RMC’s management controls caused these instances of
non-compliance.

In response to our draft audit report, RMC disagreed with Finding Nos. 1, 5, and 6 and generally
agreed with Finding Nos. 2, 3, 4, and 7. RMC disagreed with $941 of $8,484 in costs we
considered unallowable for Finding No. 3. RMC also stated that it has taken actions to correct
the control weaknesses identified in Finding Nos. 1, 2, 3, 4, and 7.

We made changes to the report based on comments received. We summarized RMC’s
comments and our responses after each finding, and a copy of selected pages of RMC’s
comments is provided as an Attachment. Because RMC’s comments on the draft report were
voluminous, we did not include them in their entirety. A complete copy of RMC’s comments
will be forwarded to the Office of Postsecondary Education.

Finding No. 1        RMC Did Not Maintain Documentation Sufficient to Support the
                     Eligibility of Its Upward Bound Participants

RMC did not maintain evidence showing that its Upward Bound participants had the need for
academic support. To be an eligible Upward Bound participant, an individual must have “a need
for academic support, as determined by the grantee, in order to pursue successfully a program of
education beyond high school.” 34 C.F.R. § 645.3(c). During our audit, we asked for evidence
that all 59 Upward Bound students who participated in the program during the period September
1, 1999, through August 31, 2000 (1999-2000 grant year), required academic support. RMC


Final Audit Report                           3                            ED-OIG/A05-B0035
could not provide supporting documentation showing that any of the 59 students had a need for
academic support.

At the time RMC admitted a student into the Upward Bound program, RMC used a form entitled
Individual Education Career Plan (IECP) to document its determination of a student’s need for
services. During our audit, RMC provided us with IECPs for only 44 of the 59 Upward Bound
participants it served during our audit period. The IECPs showed that RMC determined 31
students did not require any Upward Bound services. RMC determined one student needed
career counseling. The IECPs for the remaining 27 students were either missing from the
student’s file or did not indicate that RMC determined the student required Upward Bound
services.

ED awarded RMC $241,377 for the 1999-2000 grant year and $342,467 for the period
September 1, 2000, through August 31, 2001 (2000-2001 grant year), to provide services to
Upward Bound program participants who had a need for academic support in order to pursue
successfully a program of education beyond high school.

Recommendation

1.1    We recommend that the Assistant Secretary for Postsecondary Education conduct a
       review of RMC and ensure RMC has implemented controls sufficient to ensure that all
       future Upward Bound participants will meet all eligibility requirements. RMC should
       maintain a file on each participant that documents clearly its assessment of the academic
       needs of Upward Bound students.

Auditee Comments

RMC disagreed with our draft audit report finding that it provided Upward Bound services to
ineligible students. In response to our draft audit report, RMC provided support to show that all
59 program participants for the 1999-2000 grant year and 30 additional program participants for
the 2000-2001 grant year were eligible participants. RMC agreed that complete documentation
for Upward Bound participants was lacking at the time of our audit. RMC asserted that it
developed a new form that more accurately codifies each applicant’s need for service. RMC also
provided criteria for determining academic need for individual participants.

Office of Inspector General Response

We dropped our draft report recommendations for RMC to return to ED $241,377 for the 1999-
2000 grant year and $342,467 for the 2000-2001 grant year. RMC provided sufficient evidence
to show that the 89 Upward Bound program participants served during the 1999-2000 and 2000-
2001 grant years were eligible to receive services. We also revised our remaining draft report
recommendation regarding the need to implement controls. RMC stated it has already
implemented corrective action to ensure all future Upward Bound participants meet all eligibility
requirements. We recommend that the Assistant Secretary for Postsecondary Education conduct
a review of RMC to confirm it took corrective action.




Final Audit Report                          4                          ED-OIG/A05-B0035
Finding No. 2        RMC Did Not Account Accurately for TRIO Program Funds

RMC did not account accurately for TRIO program funds. RMC (1) charged costs and credited
refunds to the wrong TRIO accounts; (2) charged costs and credited refunds to the wrong grant
years; (3) did not report program income; and (4) credited a refund for unused tickets purchased
with TRIO funds to its institutional account.

For the 1999-2000 grant year, we reviewed RMC’s supporting documentation for (1) 223 TRIO
program costs totaling $146,070; (2) 27 refunds totaling $8,593; and (3) salary and fringe benefit
costs for 18 full-time and 12 part-time TRIO employees totaling $361,171. Additionally, we
reviewed RMC’s supporting documentation for equipment purchased during the 2000-2001 grant
year after we determined equipment purchased during the 1999-2000 grant year was recorded
inaccurately.

During the 1999-2000 grant year, RMC posted a $24 refund to the Upward Bound program when
it should have recorded a $24 cost. RMC also charged $12,762 of costs to the wrong TRIO
accounts. For example, RMC recorded 10 Student Support Services transactions totaling $3,650
and 15 Talent Search transactions totaling $2,217 as Upward Bound costs. It also recorded 9
Upward Bound transactions totaling $3,597 as Talent Search costs.

In addition, RMC charged two costs totaling $388 and credited a refund of $844 for costs
incurred during the 1998-1999 grant year to the Talent Search program for the 1999-2000 grant
year. It also credited a refund of $44 for the Upward Bound program for the 1998-1999 grant
year to the 1999-2000 grant year. RMC improperly recorded $23,084 in computer equipment
costs for its TRIO programs as 2000-2001 grant year costs. RMC should have charged the costs
to its 1999-2000 Talent Search ($5,514), Upward Bound ($8,495), and Student Support Services
($9,075) programs.

In another instance of not accounting accurately for TRIO program funds, RMC did not report
$721 in funds received from outside sources as program income earned during the 1999-2000
grant year. Instead, RMC recorded the additional funds received as credits for the Talent Search
($300), Upward Bound ($171), and Student Support Services ($250) programs.

Finally, RMC credited a refund of $2,506 for unused cultural event tickets paid for with TRIO
funds to its institutional account and not to the TRIO programs that paid for the tickets. RMC
should have posted the refund to the Talent Search ($1,236), Upward Bound ($462), and Student
Support Services ($808) programs. The refund that RMC did not post to the TRIO programs
would have provided an additional $2,506 in funds to serve TRIO program participants. The
$2,506 is included in our finding regarding unallowable costs (See Finding No. 3).

Pursuant to 34 C.F.R. § 74.21(b)(1) and (2), recipients of federal funds must maintain financial
management systems that provide for, among other things, (1) “accurate, current, and complete
disclosure of the financial results of each federally approved project; . . . and (2) records that
adequately identify the source and application of funds . . . . “These [r]ecords shall contain
information pertaining to awards, authorizations, obligations, unobligated balances, assets,
outlays, income, and interest.” Moreover, 34 C.F.R. § 75.702 requires that grantees “use fiscal



Final Audit Report                           5                            ED-OIG/A05-B0035
control and fund accounting procedures that insure proper disbursement of and accounting for
Federal funds.” Finally, 34 C.F.R. § 75.730 states that “A grantee shall keep records that fully
show: (a) the amount of funds under the grant; (b) how the grantee uses the funds; (c) the total
cost of the project; (d) the share of that cost provided from other sources; and (e) other records to
facilitate an effective audit.”

Because it recorded costs and refunds incorrectly, RMC did not report accurately its grant
expenditures for the 1998-1999, 1999-2000, and 2000-2001 grant years. RMC reported $888
more than it should have for its 1998-1999 Talent Search ($844) and Upward Bound ($44)
expenses. RMC also reported $21,126 less than it should have for its 1999-2000 Talent Search
($5,134), Upward Bound ($7,121), and Student Support Services ($8,871) expenses. Finally,
RMC reported $23,084 more than it should have for its 2000-2001 Talent Search ($5,514),
Upward Bound ($8,495), and Student Support Services ($9,075) expenses.

RMC’s TRIO Director agreed that miscoding of expenses was a problem. The Director also
informed us that TRIO grant employees typically have extensive social service backgrounds but
little training in accounting or financial matters.

Recommendation

2.1    We recommend that the Assistant Secretary for Postsecondary Education should conduct
       a review of RMC and ensure RMC has (a) developed and implemented procedures to
       reconcile accounting and program records at least annually to ensure costs are charged to
       the correct program and the correct grant year, (b) provided specialized training in
       accounting for federal grant funds to TRIO personnel, and (c) reviewed accounting
       records for the audit period and corrected any improperly recorded transactions including
       those identified during our audit.

Auditee Comments

RMC agreed with our finding and recommendations. RMC stated that it has implemented
procedures to reconcile accounting records, corrected accounting errors, and made arrangements
for an accounting professor to provide a workshop on federal accounting to its TRIO staff
members.

Office of Inspector General Response

We revised our recommendation to reflect RMC’s comments on our draft report.

Finding No. 3        RMC Used $7,601 in TRIO Program Funds for Unallowable Costs

RMC charged unallowable costs to the TRIO programs, resulting in $7,601 not being available
to serve eligible TRIO participants. During the 1999-2000 grant year, RMC charged the
following unallowable costs to its TRIO programs:




Final Audit Report                            6                           ED-OIG/A05-B0035
            Cost             Talent Search    Upward Bound        Student Support         Total
                                                                     Services
Flowers 2                              $58                                                      $58
Duplicate Payments                   $110                   -                  $33             $143
Activities and meals for            $2,934             $2,998               $1,468           $7,400
non-TRIO participants
Total                               $3,102             $2,998               $1,501           $7,601

Pursuant to 34 C.F.R. §§ 643.30, 645.40, and 646.30, costs are allowable if they are reasonably
related to the objectives of the TRIO programs. RMC’s TRIO Director stated that TRIO grant
employees typically have extensive training and experience in providing social services but little
or no training or experience in financial matters.

Recommendations

We recommend that the Assistant Secretary for Postsecondary Education:

3.1      Direct RMC to repay $7,601 to ED for unallowable costs charged to the TRIO programs
         during the audit period or provide documentation that it has already refunded this
         amount;

3.2      Conduct a review of RMC and ensure it has (a) developed and implemented controls to
         ensure it charges only allowable costs to the TRIO programs and (b) provided training to
         its TRIO staff regarding the types of costs that can be charged to the TRIO programs; and

3.3      Direct RMC to consult with ED officials if it has questions regarding the allowability of
         costs.

Auditee Comments

RMC agreed that $7,400 in costs for activities and meals for non-TRIO participants were
unallowable. RMC also agreed that $143 in duplicate payments were unallowable. RMC stated
that $476 in flowers, candy, and ballons should be allowable, because those items were used as
part of project recruitment efforts, which included providing informational material to
prospective program participants. RMC provided support to show $227 in fringe benefit costs
should be allowed because the costs covered a continuing employee on maternity leave. RMC
also stated that it has implemented controls to ensure only allowable costs are charged to TRIO
accounts and provided training on OMB Circular A-21 to its staff members.

Office of Inspector General Response

We accepted RMC’s support for $883 previously considered unallowable and reduced the dollar
amount of the finding from $8,484 to $7,601. We accepted RMC’s support for $238 for meals as

2
    Get-well arrangement for an individual who was not a TRIO program participant or employee.


Final Audit Report                            7                           ED-OIG/A05-B0035
well as support for $418 for flowers, candy, and balloons. We also accepted RMC’s support for
the $227 in fringe benefit costs. We did not accept RMC’s support for $58 charged to the Talent
Search grant for flowers sent as a get-well gift. Finally, we revised our recommendations to
reflect RMC’s comments on our draft report.

Finding No. 4        RMC Paid $6,560 in Stipends to Upward Bound Students without
                     Evidence of Their Satisfactory Participation

RMC paid $6,560 in stipends to students prior to ensuring the students’ satisfactory participation
in the Upward Bound program. We reviewed RMC’s supporting documentation for seven
months of stipend payments totaling $10,287 made to students listed as participants in the
Upward Bound program during the 1999-2000 grant year. During the months of December
1999, January 2000, February 2000, and July 2000, RMC did not have evidence of the students’
satisfactory participation in the program.

Pursuant to 34 C.F.R. § 645.42, an Upward Bound project may provide stipends to participants
who participate on a full-time basis, and demonstrate evidence of satisfactory participation in
activities of the project. Satisfactory participation includes regular attendance and performance
in accordance with standards established by the grantee and described in the application.

RMC experienced significant employee turnover in its TRIO programs. The Director of TRIO
programs started work in January 1999, and the Assistant Director of Upward Bound started in
June 2000. The two current Upward Bound Coordinators started in January 2001 and May 2001.
When we brought the stipends issue to their attention, RMC officials stated that the 1999-2000
grant year was the first year for the grant and some record-keeping steps were missed. RMC also
stated that it designed a Weekly Attendance Report in March 2000 to more accurately reflect
students’ involvement in the program. RMC designed the form after it paid stipends to students
for the months of December 1999, January 2000, and February 2000. For 40 of the 44 stipend
payments RMC made during the months of April, May, and June 2000, it kept a copy of the
Weekly Attendance Report in the stipend recipient’s file. RMC did not use the report to assess
students’ participation prior to making the stipend payments for July 2000.

Recommendations

We recommend that the Assistant Secretary for Postsecondary Education:

4.1    Direct RMC to repay $6,560 to ED for stipends paid to students who had no evidence of
       satisfactory participation in the Upward Bound program during the months of December
       1999, January 2000, February 2000, and July 2000; and

4.2    Conduct a review of RMC and ensure it is adhering to its procedures for determining
       satisfactory participation and maintaining sufficient records to show it determined that all
       Upward Bound students had evidence of satisfactory participation before paying stipends.




Final Audit Report                           8                           ED-OIG/A05-B0035
Auditee Comments

RMC agreed with our finding and recommendations. RMC stated that it employs a three-tier
method for dispensing stipends (full, partial, and limited) based on minimum grade point
averages and attendance of scheduled classes and activities.

Office of Inspector General Response

We revised our second recommendation to reflect RMC’s comments on our draft report.

Finding No. 5        RMC Paid Unreasonable Costs for Consulting Services

RMC charged unreasonable costs to the TRIO programs for consulting services and an employee
retreat. RMC paid a consulting firm from Arkansas a daily fee of $1,500. For the 1999-2000
grant year, RMC budgeted only $4,923 for Outside Services, the accounting classification it used
to record consulting costs. It paid $9,000, plus $1,790 in related travel costs, for 6 days of
consulting services. We discussed consulting costs with an ED program officer who stated that
up to $800 per day would be considered a reasonable and customary cost for consulting.
Accordingly, we concluded $700 of the $1,500 daily fees paid to the consultant were
unreasonable.

RMC hired the consultant to evaluate its administration of the Student Support Services program
in September 1999 and all three TRIO programs in May 2000. RMC also hired the consultant to
facilitate a teambuilding retreat for TRIO employees in May 2000.

Office of Management and Budget (OMB) Circular A-21, C.3 sets the standard for reasonable
costs. Per OMB A-21, a cost may be considered reasonable if the nature of the goods or services
and the amount involved reflect the action that a prudent person would have taken under the
circumstances prevailing at the time the decision to incur the cost was made. Major
considerations involved in the determination of the reasonableness of a cost are (a) whether the
cost is of a type generally recognized as necessary for the operation of the institution or the
performance of the sponsored agreement; (b) the restraints or requirements imposed by such
factors as arm's-length bargaining, Federal and State laws and regulations, and sponsored
agreement terms and conditions; (c) whether or not the individuals concerned acted with due
prudence in the circumstances, considering their responsibilities to the institution, its employees,
its students, the Federal Government, and the public at large; and, (d) the extent to which the
actions taken with respect to the incurrence of the cost are consistent with established
institutional policies and practices applicable to the work of the institution generally, including
sponsored agreements.

RMC did not consult with ED before paying its out-of-town consultant $5,867 more than it
originally budgeted for consulting. Had it done so, RMC’s TRIO staff would have learned what
ED considered reasonable ($4,800, or up to $800 per day). RMC’s TRIO staff also would have
learned that ED encourages TRIO staff to use local consultants. Consulting with ED would have
made the $5,990 ($9,000 plus $1,790 less $4,800) available to provide services directly to TRIO
participants.



Final Audit Report                           9                            ED-OIG/A05-B0035
Recommendations

We recommend that the Assistant Secretary for Postsecondary Education direct RMC to:

5.1    Repay $5,990 to ED for unreasonable consulting and related travel costs.

5.2    Consult with an ED program official prior to incurring consulting costs which are
       significantly greater than those stated in the TRIO program’s budgets.

Auditee Comments

RMC disagreed with our finding and recommendations. It stated that its costs to hire a
consultant from outside its geographic area were justified given the consultant’s unique
qualifications and experience. RMC also stated the consultant spent five days preparing for the
site visits and writing summary reports in addition to the five days of on-site work.

Office of Inspector General Response

We reviewed RMC’s comments and found no basis for changing our report. RMC did not
provide any written documentation supporting any additional days of work. RMC also did not
comment on whether it looked for a suitable consultant within the metropolitan Chicago area,
which could have reduced travel costs charged to the TRIO programs.

Finding No. 6        RMC Reported Inaccurately the Number of TRIO Program Participants
                     It Served

RMC reported that it served 600 participants under its Talent Search grant for the 1999-2000
grant year. We reviewed RMC’s supporting documentation and identified 18 additional
participants. The 18 additional participants included 14 students who participated in a summer
reading program, 2 high school students who did not advance to the next grade level, and 2
students who left the program prior to the end of the grant year. RMC also reported that it served
50 Upward Bound participants for the 1999-2000 grant year. We identified 9 additional
participants during our review of supporting documentation. Finally, RMC reported that it
served 160 Student Support Services participants during the 1999-2000 grant year. We
identified 22 additional participants after inquiring about the accuracy of RMC’s original list.

Pursuant to 34 C.F.R. § 74.51(d)(1), when required, performance reports must generally contain,
for each award, a comparison of actual accomplishments with the goals and objectives
established for the period, the findings of the investigator, or both. Pursuant to 34 C.F.R.
§ 75.732, a grantee shall keep records of significant project experiences and results. The grantee
shall use the records to determine progress in accomplishing project objectives and revise those
objectives if necessary.

Without complete and accurate information, ED has no assurances that RMC’s performance
reports are a true reflection of the TRIO programs RMC operated. Additionally, the data ED



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used for its performance indicators to demonstrate achievement of the TRIO programs’
objectives might not be accurate. For example, all nine of the participants RMC excluded from
its total of Upward Bound participants served under the program were dropped from the
program. Those 9 participants represent 15 percent of the 59 Upward Bound participants served
for the 1999-2000 grant year. Rather than a 100 percent success rate, RMC could only claim an
85 percent success rate.

RMC’s TRIO Director informed us that, for the Student Support Services and Upward Bound
programs, RMC reported on the number of participants served at the time they prepared the
performance reports, not the number served during the award year. However, 34 C.F.R.
§§ 74.51(d)(1) and 75.732 do not limit the record keeping requirement to those participants who
are active at the time of any performance report.

Recommendation

We recommend that the Assistant Secretary for Postsecondary Education direct RMC to:

6.1    Develop and implement controls to ensure TRIO staff preparing performance reports
       include all participants served during the grant year, regardless of their status at the time
       RMC prepares its reports.

Auditee Comments

RMC agreed that inactive participants were not included in its annual performance reports to ED,
but disagreed with our finding and recommendation.

Office of Inspector General Response

We reviewed RMC’s comments and found no basis for changing the report. RMC did not
indicate that it has implemented corrective action to ensure future performance reports include
all participants served during the grant year.

Finding No. 7        RMC Could Not Support Achievement of All Grant Objectives

RMC could not provide sufficient documentation for the 1999-2000 grant year to show that it
achieved (or did not achieve) 2 of its 10 Student Support Services objectives and 2 of its 12
Upward Bound objectives. In its 1999-2000 grant year applications, RMC stated it would
achieve 10 objectives for its Student Support Services program and 12 objectives for its Upward
Bound program. In its interim report, RMC reported all objectives for both programs were 100
percent accomplished and/or ongoing. We reviewed RMC’s support for these objectives and
found that RMC did not track the information needed to determine whether it had achieved all
objectives.

Pursuant to 34 C.F.R. § 74.51(d)(1) and (2), performance reports must generally contain a
comparison of actual accomplishments with the goals and objectives established for the period
and the reasons why the recipient did not meet established goals, if appropriate. Also, 34 C.F.R.



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§ 74.51(a) states, in part, that “[R]ecipients are responsible for managing and monitoring each
project, program, sub-award, function, or activity supported by the award.” Finally, 34 C.F.R.
§§ 646.20(a)(2)(i) and 645.30(a)(2)(i) state, in part, if any application for a new grant proposes to
continue to serve substantially the same population it is serving under an expiring grant, the
Secretary evaluates the applicant’s prior experience in delivering services under the expiring
grant.

ED awarded RMC $194,688 for the 1999-2000 grant year and $198,582 for the 2000-2001 grant
year to provide services to Student Support Services participants through 10 objectives. ED also
awarded RMC $241,377 for the 1999-2000 grant year and $342,467 for the 2000-2001 grant
year to provide services to Upward Bound participants through 12 objectives. Had RMC
reported, as required by 34 C.F.R. § 74.51(d), that it did not achieve all its objectives, ED may
not have funded the 2000-2001 awards in their entirety.

Recommendations

We recommend that the Assistant Secretary for Postsecondary Education conduct a review of
RMC and ensure it:

7.1    Has developed and implemented written polices and procedures to monitor its progress
       toward the achievement of its performance objectives, and

7.2    Is maintaining documentation, as described in the grant proposal, to demonstrate the
       degree to which it achieved the objectives.

Auditee Comments

RMC agreed with our finding and stated it has implemented both of our recommendations.

Office of Inspector General Response

We revised our recommendations to reflect RMC’s comments on our draft report.


                                     OTHER MATTERS

RMC’s Budgets Do Not Provide ED with Accurate Information

RMC’s TRIO grant budgets do not provide ED with accurate information regarding estimated
expenses. We compared RMC’s actual costs to its budgeted costs for various expense categories
within each of its three TRIO programs for the 1998-1999, 1999-2000 and 2000-2001 grant
years. RMC’s actual costs for travel and supplies were significantly greater than its budgeted
costs. For example, RMC budgeted $8,000 for travel for the Talent Search program for the
1999-2000 grant year but spent $42,985. RMC’s actual costs for salaries, fringe benefits,
indirect costs, and stipend payments were significantly less than its 1999-2000 budgeted costs,
primarily due to staff vacancies throughout the year.


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Pursuant to 34 C.F.R. §§ 643.21(f), 34 C.F.R. 645.31(f), and 34 C.F.R. 646.21(f), the Secretary
evaluates the extent to which the project’s budget is reasonable, cost-effective, and adequate to
support the project when evaluating an application for a grant. The lack of accurate budget
information could adversely affect the Secretary’s ability to determine if grant costs are
reasonable and if the grants are cost effective. RMC should strive to provide the Secretary with
accurate budget information to facilitate a fair evaluation of the application.

TRIO Employees Shown in Budgets as 12-Month Employees Only Work 11 Months

RMC indicated in its proposed budget revisions for the TRIO programs that key employees (the
TRIO Director, Associate Program Directors, and Counselor/Coordinators) were 12-month
employees. We interviewed RMC’s key employees and reviewed supporting documentation for
their salary expenses. The key employees have an unwritten agreement to work 11 months and
are to receive 1 month of unpaid leave during the award year. We discussed this matter with
RMC officials, and they agreed that the TRIO program budgets should accurately reflect the
number of months to be worked by TRIO program employees.

Auditee Comments

RMC commented on our example that budgets for the 1999-2000 grant year did not provide ED
with accurate information. RMC stated that it could not be reasonably expected to anticipate the
staff vacancies and staff turnover experienced by the Talent Search Project during its first year of
operation. RMC also stated that Expanded Authority allows for the transfer of funds from one
budget line to another.

RMC agreed that 11-month employees were shown in budgets as working 12 months and
notified ED program officers that all but one TRIO grant employee works less than 12 months.

Office of Inspector General Response

We reviewed RMC’s comments and found no basis for changing the report. RMC only
commented on the example provided in the report. The 1999-2000 grant year was the second
year for the Talent Search Program. RMC’s actual costs for travel were also significantly higher
than its budgeted costs for the 1998-1999 grant year.



                                       BACKGROUND
RMC is a private, independent, nonprofit college headquartered in Chicago, Illinois. RMC
offers Bachelor’s Degrees, Associate Degrees, and Diploma programs and operates eight Illinois
locations (Chicago, Naperville, Orland Park, Springfield, Bensenville, Oak Lawn, Peoria, and
Western Springs). RMC is accredited by the Higher Learning Commission of the North Central
Association of Colleges and approved by the Illinois Board of Higher Education.




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The Upward Bound program emerged from the Economic Opportunity Act of 1964. The HEA
created the Talent Search program. In 1968, the HEA, as amended, authorized the Special
Services for Disadvantaged Students, now known as the Student Support Services program. By
the late 1960’s, the term “TRIO” was coined to describe these Federal programs. The programs
are governed by the regulations contained in 34 C.F.R. Parts 74, 75, 643, 645, and 646.

The Talent Search program is designed to identify disadvantaged youths with potential for
postsecondary education; to encourage them in continuing in and graduating from secondary
school and enrolling in programs of postsecondary education; to publicize the availability of
student financial aid; and to increase the number of secondary and postsecondary school
dropouts who reenter an educational program. RMC first received a Talent Search grant for the
four-year period from September 1, 1998, through August 31, 2002. ED awarded RMC
$194,800 for the 1999-2000 grant year and $197,676 for the 2000-2001 grant year to provide
services to eligible Talent Search participants.

The Upward Bound program is designed to generate skills and motivation necessary for success
in education beyond high school among low-income and potential first-generation college
students and veterans. The goal of the program is to increase the academic performance and
motivational levels of eligible enrollees so that such persons may complete secondary school and
successfully pursue postsecondary educational programs. RMC first received an Upward Bound
grant for the four-year period from October 1, 1995, through September 30, 1999. RMC
received a second Upward Bound grant for the four-year period from September 1, 1999,
through August 31, 2003. ED awarded RMC $241,377 for the 1999-2000 grant year and
$342,467 for the 2000-2001 grant year to provide services to eligible Upward Bound
participants.

The Student Support Services program provides supportive services to disadvantaged college
students to enhance their potential for successfully completing the postsecondary education in
which they are enrolled and increase their transfer rates from two-year to four-year institutions.
The program also fosters an institutional climate supportive of the success of disadvantaged
college students. RMC first received a Student Support Services grant for the four-year period
from September 1, 1997, through August 31, 2001. ED awarded RMC $194,688 for the 1999-
2000 grant year and $198,582 for the 2000-2001 grant year to provide services to Student
Support Services participants.


                     OBJECTIVES, SCOPE, AND METHODOLOGY
The objectives of our audit were to determine if, for the period September 1, 1999, through
August 31, 2000, RMC:

   •   Demonstrated that it provided only eligible services to the number of eligible TRIO
       students required under its agreement with ED,
   •   Properly accounted for and completely and accurately reported on the use of TRIO funds,
   •   Only claimed expenses that were allowable and adequately supported, and
   •   Claimed expenses that did not exceed the approved budgeted amounts.


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To achieve our objectives, we reviewed:

    •   Background information shown on RMC’s web site; organization charts; 1999-2000
        participant rosters for the Talent Search, Upward Bound, and Student Support Services
        programs; administrative records related to RMC’s determination of the eligibility of
        services rendered, selection of project participants, and submission of required reports;
        TRIO program performance reports submitted to ED; and program evaluations prepared
        by RMC’s consultant.
    •   Twenty-four (of 600) randomly selected Talent Search participant files, and 10
        judgmentally selected and 23 (of 160) randomly selected Student Support Services
        participant files.3
    •   Eighteen (of 59) randomly selected Upward Bound participant files and IECPs for an
        additional 27 Upward Bound participants.
    •   RMC’s written fiscal procedures for federal grant programs, schedules of activities, and
        attendance rosters for 1999-2000 trips and activities paid with TRIO grant funds.
    •   OMB Circular A-133 audit reports prepared by RMC’s independent public accountant for
        the years ending June 30, 1999, and June 30, 2000, and the related working papers.
    •   Accounting records related to RMC’s system for requesting, accounting for, and using
        grant funds; and samples of documentation supporting RMC’s use of TRIO funds during
        the period September 1, 1999 through August 31, 2000.
    •   Disbursement data in ED’s Central Automated Processing System/Grant Administration
        and Payment System (EDCAPS/GAPS).
    •   Payroll records for 18 full-time and 12 (of 42) randomly selected part-time TRIO
        employees.
    •   Financial transactions (250) totaling $137,477 using a combination of judgmental and
        stratified random sampling. During the audit period, RMC recorded 505 non-salary
        transactions totaling $200,096. We stratified the transactions and randomly selected 116
        transactions totaling $26,551 for review. We also judgmentally4 selected 134
        transactions totaling $110,926.
    •   RMC’s comments on our draft audit report, including eligibility documents for 59
        students who participated in the Upward Bound program during the period September 1,
        1999, through August 31, 2000, and 30 additional participants who participated
        September 1, 2000, through August 31, 2001.

We also interviewed RMC’s independent public accountant and RMC officials, including the
Senior Vice President of Administration, the Vice President of Student Services, the TRIO
Programs Director, three Assistant Program Directors, four Program Coordinators, and the
Controller.

3
  RMC provided us with two Student Support Services’ Participant Rosters. We selected the
files for the 10 participants who were not on both rosters.
4
  After stratifying the transactions, we selected all transactions from five strata in five cost
categories. We also judgmentally selected transactions from three other strata based on
(1) descriptions in RMC’s accounting records that indicated the transaction might not be
allowable or might be miscoded, (2) supporting documentation that covered multiple
transactions, and (3) the dollar amount of the transactions.


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To achieve the assignment’s objectives, we extensively relied on computer-processed data
recorded in RMC’s Blumen (performance reporting) and Quodata (financial information)
software. To assess the reliability of the performance reporting and financial information, we
compared the data with source documents such as purchase orders, receipts, invoices, cancelled
checks, and student contact records. We also compared RMC’s financial data with data from
EDCAPS/GAPS. Based on these tests, we concluded that the performance reporting information
recorded in RMC’s Blumen system was reliable. However, the results of our data tests showed
an error rate in the financial information recorded in RMC’s Quodata software that casts doubt
on the data’s reliability (See Finding No. 2). When the information in RMC’s Quodata software
is viewed in context with other available evidence, we believe the opinions, conclusions, and
recommendations in this report are valid.

We performed our work at RMC’s administrative offices and the Office of Inspector General’s
regional office in Chicago, Illinois, from August 27, 2001, through March 25, 2002. We
discussed the results of our audit with RMC officials on April 18, 2002. We performed our audit
according to government auditing standards appropriate to the limited scope audit described
above.


                     STATEMENT ON MANAGEMENT CONTROLS
As part of our audit, we assessed RMC’s system of management controls over administering its
TRIO programs. The purpose of our assessment was to determine the level of control risk; that
is, the risk that material errors, irregularities, or illegal acts may occur. We completed our
assessment to assist us in determining the nature, extent, and timing of substantive tests needed
to accomplish our audit objectives.

To make our assessment, we identified RMC’s significant management controls over the TRIO
programs and classified them into the following categories:

   •   Requesting, accounting for, and using grant funds;
   •   Purchasing;
   •   Claiming travel expenses;
   •   Determining the eligibility of services rendered;
   •   Selecting project participants;
   •   Submitting required reports;
   •   Determining participant financial need; and
   •   Monitoring staff time charged to the projects.

Due to inherent limitations, a study and evaluation made for the limited purpose described above
would not necessarily disclose all material weaknesses in RMC’s management control structure.
However, our assessment disclosed significant management control weaknesses that adversely
affected RMC’s ability to administer its TRIO programs in accordance with the law and selected




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regulations. The significant control weaknesses are related to (1) documenting selection of
participants, (2) accounting for and using grant funds, (3) claiming travel expenses,
(4) purchasing, and (5) submitting required reports. These weaknesses and their effects are
discussed in the Audit Results section of this report.




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