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.
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)