oversight

the University of Arkansas at Little Rocks's (UALR's) compliance with the Title IV, Student Financial Assistance, verification requirements.

Published by the Department of Education, Office of Inspector General on 2001-09-28.

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

                       UNITED STATES DEPARTMENT OF EDUCATION
                                        OFFICE OF INSPECTOR GENERAL
                                  1999 BRYAN STREET, HARWOOD CENTER, SUITE 2630
                                             DALLAS, TEXAS 75201-6817
                                       PHONE: (214) 880-3031 FAX: (214) 880-2492




September 28, 2001                                                                               ED-OIG/A06-B0013



Dr. Charles Hathaway
Chancellor
University of Arkansas at Little Rock
2801 South University
Little Rock, Arkansas 72204-1099

Dear Dr. Hathaway:

This Final Audit Report (Control Number ED-OIG/A06-B0013) presents the results of our
audit of the University of Arkansas at Little Rock’s (UALR’s) compliance with the Title IV,
Student Financial Assistance, verification requirements. The objectives of our audit were limited
to determining if UALR completed the verification of applicant data and accurately reported
verification results to the Department for the period July 1, 1999, through June 30, 2000.


                                              BACKGROUND
UALR is a public university located in Little Rock, Arkansas. It received initial approval to
participate in the Title IV, Student Financial Assistance programs on December 1, 1965. The
North Central Association of Colleges and Schools accredits the school. UALR offers bachelor
degrees in business, education, liberal and fine arts, sciences, applied arts, and health professions,
as well as master and doctoral degrees in various fields. From July 1, 1999, through June 30,
2000, UALR disbursed almost $34 million in Title IV aid, including $5.4 million in Federal Pell
Grants, $362,476 in Federal Supplemental Educational Opportunity Grants (FSEOG), $167,843
in Federal Work-Study, and $28 million in Federal Stafford and Federal PLUS Loans. The
Department’s Central Processing System (CPS) selected for institutional verification 1,372 (47.2
percent) of the school’s 2,907 Federal Pell Grant recipients during that year.


                                            AUDIT RESULTS
UALR reported incorrect verification results for 17 (34 percent) of 50 sampled Federal Pell Grant
recipients. UALR reported that the applications of 14 of the recipients contained errors that were
corrected and the applications reprocessed. We determined that UALR should have reported 10
of the applications were accurate and four had minor errors that were not corrected.




      Our mission is to ensure equal access to education and to promote educational excellence throughout the Nation.
Dr. Charles Hathaway                                                                     Page 2 of 5


For the remaining three recipients, UALR reported that their applications were accurate. We
determined that UALR should have reported that it corrected errors in the applications of the
three recipients.

We also determined that UALR did not correct an error that it found in verifying the application
of one sample recipient, resulting in a $1,172 unallowable Federal Pell Grant disbursement.

UALR’s Registrar agreed that incorrect verification results were reported to the Department. The
school’s Vice Chairman for Student Services said that the incorrect reporting occurred when the
school started using new computer software to process Title IV applications. We confirmed that
UALR began using the new software during the 1999-00 award year. We also confirmed for the
prior award year (1998-99), that UALR had not reported a large number of applicants for whom
verification was started but not completed. UALR agreed that the error in the one recipient’s
application had not been corrected and provided documentation that $1,172 of Federal Pell Grant
funds were refunded to the Department. A copy of UALR’s response is enclosed with this
report. Based on the actions UALR took in response to our findings, our only recommendation is
that the Chief Operating Officer for Student Financial Assistance confirm that UALR is currently
reporting correct verification results to the Department.

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 Federal Pell Grant for the award year, may not receive any other Title
IV disbursements, and must repay to the institution any FSEOG or Federal Perkins Loan
disbursements received. The institution must return to the lender or the Secretary, in the case of
William D. Ford Federal Direct Loans (Direct Loans), any Federal Stafford Loan or subsidized
Direct Loan proceeds that would otherwise be payable to the applicants and return to the
appropriate program account any Federal Pell Grant, FSEOG, or Federal Perkins Loan
disbursements not repaid by the student.
Dr. Charles Hathaway                                                                    Page 3 of 5


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 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.


                                RECOMMENDATION

We recommend that the Chief Operating Officer for Student Financial Assistance confirm that
UALR is reporting correct verification results to the Department.


             OBJECTIVES, SCOPE AND METHODOLOGY
The objectives of our audit were limited to determining if UALR completed the verification of
student financial aid applications and reported accurate verification results to the Department.
Our audit did not include a review of other Title IV compliance requirements. We selected
UALR for audit because the school reported that verification had been started but was not
completed for 29 percent of its Federal Pell Grant recipients who were selected for verification.

To accomplish our objectives, we obtained background information about the school. We
reviewed UALR’s financial aid files for 50 randomly selected recipients from the universe of
1,372 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 UALR’s compliance audit
report for its fiscal year ended June 30, 1999.

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 UALR’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.
Dr. Charles Hathaway                                                                   Page 4 of 5


Our audit covered the period from July 1, 1999, through June 30, 2000. We performed fieldwork
during March 12-15, 2001 and conducted an exit meeting on March 15, 2001 at UALR in Little
Rock, Arkansas. 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 UALR’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.


                         ADMINISTRATIVE MATTERS
The conclusions in this report represent the opinions of the Office of Inspector General. You are
not required to respond to this report. However, if you have any comments or information that
you believe may have a bearing on this audit, you should send them directly to the following
Education Department official:

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

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, you should provide the above official with your comments within 30 days.