oversight

United Education Institute's (UEI's) compliance with the Title IV, Student Financial Assistance, verification requirements.

Published by the Department of Education, Office of Inspector General on 2001-09-06.

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

Mr. Pat Decoursey                                                               Page 2 of 5



                                    AUDIT RESULTS

UEI reported incorrect verification results for 31 (62 percent) of 50 sampled Federal Pell Grant
recipients. UEI reported that the application data for 24 of the 31 recipients contained minor
errors that did not have to be corrected. We determined that UEI had found the applications
were accurate for 18 of the recipients, and contained errors and were corrected for six recipients.
For the remaining seven recipients, the school reported that the applications were either accurate
(five recipients) or contained errors and was corrected (one recipient), or that verification was
not completed because the school was awaiting documentation (one recipient). We determined
that the school had corrected errors and reprocessed applications for the five recipients, found the
application for the one recipient to be accurate, and had completed verification and corrected the
application for the last recipient.

We also determined that UEI did not complete verification for two sample recipients, resulting in
unallowable Title IV disbursements of $7,285 ($4,612 in Federal Pell Grant, $127 in FSEOG,
and $2,546 in subsidized Federal Stafford Loan funds). The school did not obtain the required
verification documents for the two recipients.

UEI’s Vice President for Student Financial Aid Services agreed that incorrect verification results
were reported to the Department during the transition to a new third-party servicer. The official
also agreed that it had not completed the verification process for the two recipients. The school
provided documentation that showed it returned the $7,285 to the lender or Department. A copy
of UEI’s response is enclosed with this report. Based on the corrective actions UEI took in
response to our findings, our only recommendation is that the Chief Operating Officer for
Student Financial confirm that UEI 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
Mr. Pat Decoursey                                                               Page 3 of 5



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.

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
UEI is reporting correct verification results to the Department.


              OBJECTIVES, SCOPE AND METHODOLOGY
The objectives of our audit were limited to determining if UEI 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 UEI
for audit because the school reported finding only minor errors that were not corrected in the
applications of 56 percent of its Federal Pell Grant recipients for whom verification was
completed.

To accomplish our objectives, we obtained background information about the school. We
reviewed UEI’s financial aid files for 50 randomly selected recipients from the universe of 624
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 UEI’s compliance audit report for
its fiscal years ended October 31, 1999 and 2000.
Mr. Pat Decoursey                                                                Page 4 of 5



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 UEI’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 April 9-12, 2001 and we conducted an exit meeting on April 12, 2001 at UEI’s corporate
headquarters in Irvine, California. 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 UEI’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 weaknesses related to completing and documenting
verification and reporting verification results to the Department. These weaknesses are
discussed in the AUDIT RESULTS section of this report.