oversight

McLennan Community College's (MCC's) compliance with the Title IV, Student Financial Assistance, verification requirements.

Published by the Department of Education, Office of Inspector General on 2001-07-23.

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

Dr. Dennis Michaelis                                                            Page 2 of 4



MCC’s Director of Financial Aid told us that MCC agreed incorrect verification results were
reported to the Department and that the school had begun a process to ensure verification status
codes were reported accurately. MCC also agreed that it had not corrected all of the errors
identified as a result of verifying the two recipients’ applications. The school provided
documentation that showed it refunded the $486 to the Department. A copy of MCC’s response
is enclosed. Based on the corrective actions MCC took in response to our findings, we have no
recommendations in this report.

Verification Requirements
Verification of information submitted by applicants for Title IV assistance is governed by
Subpart E of Title 34, Code of Federal Regulations (34 CFR), Part 668. Applicants must submit
information on income, family size, and other data to the CPS. The CPS uses the information to
determine each applicant’s expected family contribution (EFC) and Title IV eligibility. To
ensure the information is correct, the CPS selects certain applications for verification based on
edits specified by the Secretary.

Pursuant to 34 CFR § 668.54, schools must require each applicant selected for verification to
complete the verification process, except no school is required to verify more than 30 percent of
its total number of applicants. Schools are required to verify five major data elements reported
by students on their financial aid applications (34 CFR § 668.56). These elements are adjusted
gross income, income tax paid, household size, number enrolled in college, and certain untaxed
income/benefits. Schools and applicants must complete verification by established deadlines or
the applicants forfeit their Pell Grant for the award year, may not receive any other Title IV
disbursements, and must repay to the institution any FSEOG or Perkins Loan disbursements
received. The institution must return to the lender or the Secretary, in the case of Direct Loans,
any Stafford loan or subsidized Direct Loan proceeds that would otherwise be payable to the
applicants and return to the appropriate program account any Pell Grant, FSEOG, or Perkins
Loan disbursements not repaid by the student.

For the Federal Pell Grant Program, the school has completed verification when it has corrected
the applicant’s data or determined that the application data are correct. Except for the Federal
Stafford Loan and William D. Ford Federal Direct Loan programs, schools are allowed to make
an interim disbursement before verification is completed as long as the school has no reason to
believe the application information is inaccurate. The school must document the verification and
have on file the final and valid federal output document showing the student’s official EFC.

When a school disburses a Federal Pell Grant, it must report the disbursement and the results of
verification to the Department’s Recipient and Financial Management System (RFMS). Schools
use verification status codes to report verification results. Proper reporting of these codes shows
that the verification procedures have been followed and allows the Department to gather
information on the effectiveness of the verification requirements. Verification results do not
have to be reported for loan only students.
Dr. Dennis Michaelis                                                             Page 3 of 4



             OBJECTIVES, SCOPE AND METHODOLOGY
The objectives of our audit were to determine if MCC completed the verification of student
financial aid applications and reported accurate verification results to the Department. We
selected MCC for audit because the school reported that it found the application data were
accurate for all of its Federal Pell Grant recipients for whom verification was completed (MCC
reported that it had not completed verification for one recipient).

To accomplish our objectives, we obtained background information about the school. We
reviewed MCC’s financial aid files for 50 randomly selected recipients from the universe of 813
Federal Pell Grant recipients who were selected for verification in award year 1999-00 (July 1,
1999, through June 30, 2000). We interviewed school officials and reviewed the school’s
policies and procedures relating to verification. We reviewed MCC’s compliance audit report
for its fiscal year ended August 31, 2000.

We relied on computer-processed data obtained from the RFMS for background information and
to select a random sample of Federal Pell Grant recipients for review. We performed limited
tests of the data to verify reliability by comparing the data to information in MCC’s student files.
Based on the results of these tests, we concluded that the computerized data was sufficiently
reliable to formulate conclusions associated with the objectives of our audit.

Our audit covered the period from July 1, 1999, through June 30, 2000. We performed fieldwork
during January 8-10, 2001, at MCC in Waco, Texas. We conducted our exit conference on
January 10, 2001. Our audit was performed in accordance with generally accepted government
auditing standards appropriate to the scope of the review described above.


            STATEMENT ON MANAGEMENT CONTROLS
As part of our review, we assessed MCC’s management controls, policies, procedures, and
practices applicable to the scope of the audit. We assessed the level of control risk for
determining the nature, extent, and timing of our substantive tests. For the purposes of this
report, we assessed and classified the significant management controls into the following
categories: (1) completion and documentation of verification, and (2) reporting verification
results to the Department.

Because of inherent limitations, a study and evaluation made for the limited purposes described
above would not necessarily disclose all material weaknesses in management controls.
However, our assessment disclosed a weakness related to reporting verification results to the
Department. This weakness is discussed in the AUDIT RESULTS section of this report.
                             DISTRIBUTION SCHEDULE
                             Control Number OIG/A06-B0010
                                                                              Copies

Auditee                                                                           1
      Mr. Dennis Michaelis, President
      McLennan Community College

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
      Chief of Staff, Office of the Secretary                                     1
      Deputy Secretary, Office of the Deputy Secretary                            1
      Director, Budget Service, Office of the Under Secretary                     1
      Director, Office of Public Affairs                                          1
      General Manager for Schools, Student Financial Assistance                   1
      Chief Financial Officer, Student Financial Assistance                       1
      Director, Case Management and Oversight, Student Financial Assistance       1
      Area Case Director, Dallas Case Management Team,
       Case Management and Oversight, Student Financial Assistance                1
      General Counsel, Office of the General Counsel                              1

Office of Inspector General
       Inspector General                                                          1
       Deputy Inspector General                                                   1
       Assistant Inspector General for Analysis and Inspections                   1
       Assistant Inspector General for Investigation                              1
       Assistant Inspector General for Audit                                      1
       Deputy Assistant Inspector General for Audit                               1
       Director, Student Financial Assistance                                     1
       Regional Audit Offices                                                     6
       Dallas Regional Office                                                     6

Others
         Texas Guaranteed Student Loan Corporation                                1
         Southern Association of Colleges and Schools                             1
                                     DATA
                                     DATAINPUT
                                          INPUTSHEET
                                               SHEET
  OIG                                                                                                                                   OIG
                   OFFCODE:          06             AUDIT TYPE:               A                A C N:   B0010
                               Proj Audits of Selected Postsecondary
PROJ MGR#:     2000017         Name: Institutions                              AWPI       PI   STATEGIC GOAL #:         2
                                                                                                                      (1, 2,3)
TITLE:          McClennan Community College                            STATE    TX

                 FROM                          TO
PERIOD
                10/1 /99                                                      AUD SCOPE:       3        PROGRAM OFFICE:
AUDITED:                                    9/30/00                                                                                3

 DIRECT TIME (Y/N):        Y            JOB STATUS CODE:               6           ENTITY CODE #:        31

     PLANNED START DATE:                                 DATE NEEDED BY
                                        2/2001
AUDIT PLAN BUDGET:         (STAFF DAYS)
                                                  AFTER
FY               1ST YR    INTIAL
                                                  SURVEY
                                                                           REVISED              2ND YR              TOTAL        50
                           SURVEY

LEAD AUDITOR:           Emp#: 2375              Name:    Vanessa Walters                   CFDA CODE: 84.032         84.063

                                                                                   FINAL REPORT (Check One)
                        Planned Date             Actual Date
1.   Assignment Start                             1/8/01                          ALTERNATIVE PRODUCT       Code = 5
2.   Planning Conf.                                                               NO REPORT                         Code = 0
3.   Entrance Conf.                                 1/8/01                        ISSUED W/FINDING              X   Code = 1
4.   Survey Complete                                1/24/01
5.   Team Complete                                  5/11/01                       ISSUED W/O FINDING                Code = 2
6.   Draft Report                                                                                                   Code = 4
                                                                                  REPORT CANCEL
7.   Comments Rec’d
                                                                       PREPARER’S SIGNATURE                                      DATE
8.   Final Report                                   7/23/01
                                                                           Approved By:                                           AWP.FRM 2/97
OIG
                                                 DATA INPUT SHEET
            ACN: A06-B0010                                                                                       OIG
                                           (only to be used for finding code 1)
     Questioned Costs
  Number of                   Total $486
  Findings    1


 Finding
 Number:          $ Amount                 Significant                      Recommendation #     Significant

       1           486




  Unsupported Costs

      Number of               Total $
      Findings

      Finding
      Number:      $ Amount                  Significant                      Recommendation #     Significant