oversight

Audit of Saint Louis University's Use of Professional Judgment.

Published by the Department of Education, Office of Inspector General on 2005-02-10.

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 


                                                       FEB I 0 2005


Reverend Lawrence Biondi, S. J., Ph.D.
President
Saint Louis University
221 N. Grand Boulevard
St. Louis, Missouri, 63103

Dear Reverend Biondi:

This Final Audit Report (Control Number ED-OIG/A06-D0018) presents the results of our
follow up audit of Saint Louis University's (University) use of professional judgment for the
two-year period from July 2000 through June 2002 (award years 2000-2001 through 2001-2002).
The audit period was expanded, at the request of the Financial Aid Director, to include a third
year, from July 1, 2002 through June 30, 2003 (award year 2002-2003). The objective of our
audit was to determine whether the University's use of professional judgment resulted in
appropriate Federal Pell (pell) Grant awards in accordance with Section 479A of the Higher
Education Act of 1965, as amended (REA) and the guidance laid out in Dear Colleague Letter
GEN-03-07, published in May 2003.

We provided a draft of this report to the University. In its response to our draft report, the
University disagreed with our findings and recommendations except for the one Pell Grant over
award resulting from a clerical error. The University also stated that it has implemented
procedures to ensure that all professional judgment decisions are properly reported to the
Secretary of Education (Secretary). We summarized the University's comments in the body of
the report and included the complete response as an Attachment to the report.



   II                                            BACKGROUND                                                                  II 

Saint Louis University is a Catholic, Jesuit university founded in 1818. During the 2002-2003
school year, it enrolled more than 11,000 full and part-time students in 95 academic programs.
The University offers Bachelor, Master, and Doctorate degrees. In addition to its main campus
in St. Louis, Missouri, the University also has a campus in Madrid, Spain. The University is
accredited by the North Central Association of Colleges and Universities. It participates in the
Federal Pell Grant, Federal Family Education Loan, Federal Direct Student Loan, Federal
Perkins Loan, Federal Work Study, and Federal Supplemental Educational Opportunity Grant
programs. According to data provided by the University, $3,374,389 in Pell Grants was awarded
to 1,593 students for award year 2000-2001, $3,157,985 was awarded to 1,391 students in 2001­
2002, and, as of May 14,2003, $3,088,190 was awarded to 1,295 students in 2002-2003. The
Uni versity also provided data reporting that $1,642,115 in Pell Grants was paid to 777 students



        Our mission is to promote the efficiency, effectiveness, and integrity of the Department's programs and operations
ED-OIG/A06-D0018                                                                        Page 2 of 14


with University financial aid counselor-approved professional judgment applications in award
year 2000-2001, $1,174,838 was paid to 518 students in 2001-2002, and, as of May 14, 2003,
$221,257 was paid to 103 students in 2002-2003. Saint Louis University reported that Pell Grant
awards were changed as a result of exercising professional judgment for 41.2% of its students in
award year 2000-2001, 26.5% of its students in award year 2001-2002, and 6.6% of its students
in award year 2002-2003. The national average for the total use of professional judgment,
whether or not the amount of Pell Grant awards changed, was approximately 2.25% during
award year 2000-2001 and 2.42% during award year 2001-2002.


Previous Audit Report

In July 1997, the Office of Inspector General (OIG) issued an audit report titled Professional
Judgment at Saint Louis University. That audit found during award years 1994-1995 and 1995-
1996 a projected 90 percent of the University’s professional judgment actions were unreasonable
and resulted in projected total Pell Grant overpayments of $2,599,709. The report recommended
the refund of that amount.

The previous audit concluded that the University’s use of professional judgment resulted in a de
facto substitution of the statutory needs analysis formula with the University’s own formula.
The University reduced family incomes for reported living and other expenses that exceeded the
Income Protection Allowance (IPA) in the statutory needs analysis formula.

In December 1998, the Department issued its final audit determination (FAD) on the report. The
Department found that there was no case-by-case “judgment” exercised in granting the reduction
for the annual living expenses, and that the University required no supporting documentation.
The Department concluded that deductions for medical expenses and elementary and secondary
tuition could not be justified in the absence of documentation of special circumstances to support
such deductions. The Department also stated it believed the OIG’s projected amount of
$2,599,709 to be refunded was understated. Based on its review of the OIG’s audit, the
Department projected an amount of $2,816,029 to be refunded.

In March 1999, the University appealed the Department’s FAD. An administrative judge entered
a decision in favor of the University on May 25, 2000. The administrative judge stated that the
University met its burden of establishing that the students at issue were eligible for the Pell Grant
funding they were awarded, and that the financial aid administrators did not abuse their
discretionary authority in utilizing the provisions regarding professional judgment in making the
awards. The judge further held that the University did not abuse its statutory discretion when it
established per se categories of special circumstances and performed no further case-by-case
analysis.

On June 29, 2000, the Office of Student Financial Assistance, now known as Federal Student
Aid (FSA), appealed the decision to the Secretary. According to the Office of Student Financial
Assistance (SFA), the decision wrongly interpreted the HEA and is not legally supportable. As
of the date of this report, the Secretary had not ruled on the appeal.
ED-OIG/A06-D0018                                                                      Page 3 of 14


                                     AUDIT RESULTS


Finding 1 – Failure to Adequately Document Professional Judgment Decisions

The University’s use of professional judgment resulted in $1,458,584 in Pell Grant funds being
inappropriately over awarded to students during award years 2000-2001, 2001-2002, and 2002-
2003. The over awards for award years 2000-2001 and 2001-2002 totaled $1,453,959 based on
information provided to us by the University, and $4,625 in award year 2002-2003. Specifically,
for award years 2000-2001 and 2001-2002, we found that none of the 50 student files reviewed
contained third-party evidence substantiating the requested adjustments and a written statement
by the counselor documenting the basis for their decisions and explaining why the requested
adjustments represented a special circumstance for each student on a case-by-case basis. For
award year 2002-2003, 13 of the 18 student files reviewed were adequately documented or the
professional judgment actions had no effect on the amount of Pell funds disbursed. However,
4 of the 18 files did not contain adequate documentation to identify the basis for the professional
judgment decision, and the remaining student received a Pell over award as a result of a clerical
error.

The Pell over awards occurred because the University’s Policies and Procedures did not require
the counselors to prepare a written statement of their determinations and did not require third-
party documentation substantiating the claimed adjustments, or the documentation did not
adequately document that the professional judgment decision represented a special circumstance.
The counselors said they believed the input of the adjustment amounts accepted by them, their
initials indicating who had accepted the adjustment, and the date the amount was accepted into
the school’s financial aid program adequately documented their professional judgment decision.
However, in our opinion, this level of documentation was not adequate to support that the
professional judgment decisions represented special circumstances.


HEA and Departmental Guidance Require Documentation to Support the Counselors’
Professional Judgment Decisions

Section 479A of the HEA states:

       (a) IN GENERAL. —Nothing in this part shall be interpreted as limiting the
           authority of the financial aid administrator, on the basis of adequate
           documentation, to make adjustments on a case-by-case basis to the cost of
           attendance or the values of the data items required to calculate the expected
           student or parent contribution (or both) to allow for treatment of an individual
           eligible applicant with special circumstances. However, this authority shall
           not be construed to permit aid administrators to deviate from the contributions
           expected in the absence of special circumstances. Special circumstances may
           include tuition expenses at an elementary or secondary school, medical or
           dental expenses not covered by insurance, unusually high child care cost,
ED-OIG/A06-D0018                                                                       Page 4 of 14


           recent unemployment of a family member, the number of parents enrolled at
           least half-time in a degree, certificate, or other program leading to a
           recognized educational credential at an institution with a program
           participation agreement under section 487, or other changes in a family’s
           income, a family’s assets, or a student’s status. Special circumstances shall be
           conditions that differentiate an individual student from a class of students
           rather than conditions that exist across a class of students. Adequate
           documentation for such adjustments shall substantiate such special
           circumstances of individual students. In addition, nothing in this title
           shall be interpreted as limiting the authority of the student financial aid
           administrator in such cases to request and use supplementary
           information about the financial status or personal circumstances of
           eligible applicants in selecting recipients and determining the amount of
           awards under this title. No student or parent shall be charged a fee for
           collecting, processing, or delivering such supplementary information.
           (Emphasis added)

       (b) ADJUSTMENTS TO ASSETS TAKEN INTO ACCOUNT. –A student
       financial aid administrator shall be considered to be making a necessary
       adjustment in accordance with subsection (a) if-
       (1) the administrator makes adjustments excluding from family income any
           proceeds of a sale of farm or business assets of a family if such sale results
           from a voluntary or involuntary foreclosure, forfeiture, or bankruptcy or an
           involuntary liquidation; or
       (2) the administrator makes adjustments in the award level of a student with a
           disability so as to take into consideration the additional costs such student
           incurs as a result of such student’s disability.

Section 478(a) of the HEA provides, in part, that the Secretary shall not have the authority to
prescribe regulations to carry out Part F of the HEA. Part F is the Needs Analysis provisions and
includes Section 479A above.

The Department’s 2000-2001 Student Financial Aid Handbook and its 2001-2002 and 2002-
2003 Application and Verification Guides state that occasionally aid administrators have made
decisions contrary to the professional judgment provision’s intent. Further, the Handbook and
Guide state that the aid administrator must make “reasonable” decisions that support the intent of
the provision. The Handbook and Guides also state the school is held accountable for all
professional judgment decisions and for fully documenting each decision. They specifically
state the reason for an adjustment of the data elements used to calculate a student’s Expected
Family Contribution (EFC) must be documented in the student’s file, and it must relate to the
student’s special circumstances.
ED-OIG/A06-D0018                                                                    Page 5 of 14


The Department reiterated the documentation requirements in its Dear Colleague Letter GEN-
03-07, published May 2003, and titled “Dependency Overrides.” In part, the letter states:

       After reviewing all relevant documentation related to a student’s assertion that
       there are unusual circumstances that support why he or she should be considered
       to be independent rather than dependent, the financial aid administrator must
       make a specific determination for the student. Upon making such a determination
       that a dependency override is warranted, the financial aid administrator must
       prepare a written statement of that determination, including the identification of
       the specific unusual circumstance upon which the financial aid administrator
       based his or her determination. The institution must maintain this documentation
       and the supporting documentation used to make each determination.


The University Did Not Adequately Document Professional Judgment

For award years 2000-2001 and 2001-2002, we reviewed a random sample of 50 students
identified as Pell Grant recipients that were coded as having had professional judgment exercised
on their behalf. We found that none of the 50 student files reviewed contained third-party
evidence substantiating the requested adjustments and a written statement by the counselor
documenting the basis for their decisions and explaining why the requested adjustments
represented a special circumstance for each student on a case-by-case basis. Based on the lack of
written statements and other third-party documentation justifying a deviation from the family
contribution expected under the statutory aid formula, we believe that no files for award years
2000-2001 and 2001-2002 contain the required documentation. As a result, we are questioning
all Pell received due to professional judgment actions.

At the University’s request, we expanded our scope to include the award year ended June 30,
2003. We reviewed a random sample of 18 students identified as having had professional
judgment exercised on their behalf during 2002-2003. As noted below, the University’s 2002-
2003 professional judgment policies and procedures improved, and included a requirement that
parents and students requesting professional judgment on the basis of expenses, such as medical
and tuition expenses, detail the financial hardship caused by those expenses. While there was
substantial improvement in the documentation obtained by the University in 2002-2003, we
could not identify the basis for the decision to depart from the EFC for four students who
requested adjustments on the basis of claimed expenses. The four files questioned included
families with adjusted gross incomes ranging from $73,564 and five family members, to $39,053
and three family members; and EFCs ranging from 1766 to 6982. All of the adjusted gross
incomes and EFCs were prior to professional judgment being exercised. Although the expenses
were documented, the requests did not detail the financial hardships caused by the expenses, as
required by the University’s policies and procedures. Therefore, we could not determine the
basis for any determination that the claimed expenses constituted a special circumstance. For an
additional file, we found that in performing the aid recalculation, the counselor omitted a
significant source of family income. With the income included, the professional judgment would
have had no effect and the additional Pell Grant funds would not have been awarded.
ED-OIG/A06-D0018                                                                       Page 6 of 14


University’s 2000-2001 Professional Judgment Policies and Procedures Did Not Require
Adequate Documentation

The University’s 2000-2001 Review/Evaluation/Processing Policies and Procedures (P&Ps)
directs its counselors to review the student/parent requested adjustments and the Free
Application for Federal Student Aid (FAFSA) data when considering whether to exercise
professional judgment. Adjustments are primarily requested by students/parents on a Form 9.
The Form 9, titled “Special Conditions - Unusual Circumstances Financial Statement,” is a form
developed by the University.

The 2000-2001 Form 9 states it is an optional form and that it is not required to be completed by
the student/parent, but, if applicable, the student/parent should complete the form. The Form 9
states that it gives the student/parents the ability to detail and document any unique, special or
unusual financial conditions or circumstances which negatively impact on their ability to
contribute to the student’s cost of attendance. The Form 9 gives 11 examples of possible unique,
special, unusual financial conditions or circumstances and directs the student/parent with the
following statement, “If applicable to you, please provide your information per numbered
example.” The 11 examples included items such as elementary and high school tuition, medical
and dental insurance premiums or uninsured expenses, excessive debt repayment, taxable non-
cash income, and one-time or temporary increases in income.

With respect to the listed examples, the Form 9 does not ask for nor require the student/parent to
submit any comments or documents supporting the claimed expenses or income or why the
examples represent a special circumstance for that student. For the 11 examples listed, the Form
9 only provides room for the student/parent to enter dollar amounts. A note on the Form 9
informs the student/parent that if there are any other unique, special, or unusual financial
conditions or circumstances, they should attach additional sheets describing in detail what makes
each unique, special and unusual. The Form 9 requires the student/parent’s signature certifying
to the truth and accuracy of the information that has been provided and agreeing to provide
proof/verification of the provided information if so requested.

The 2000-2001 P&Ps state that if the data submitted on the Form 9 is excessive or illogical in
relation to reported income or assets or is inconsistent with prior year data, the counselor should
contact the student/parent. In addition, the P&Ps state that each contact with the student/parent
must be fully documented on “screen 048” or on a signed, dated sheet detailing the date of the
contact, the reason for the contact, and the outcome (clarification/verification) of the contact.


University’s 2001-2002 Professional Judgment Policies and Procedures Did Not Require
Adequate Documentation

The 2001-2002 P&Ps provide essentially the same instructions as the 2000-2001 P&Ps. A
significant change is that the P&Ps explain that if the counselor-approved expense amount from
the Form 9 is greater than $0, the Student Information System program automatically computes
an adjusted amount to be used to adjust the student/parent’s Adjusted Gross Income (AGI). The
adjusted amount is the counselor-approved amount that exceeds the appropriate portion of the
ED-OIG/A06-D0018                                                                      Page 7 of 14


IPA, for example, 11% of the appropriate IPA for medical expenses. The 2001-2002 Form 9 no
longer refers to the items on the Form 9 as examples but refers to them as “possible Financial
Special Conditions – Unusual Circumstances.” The 2001-2002 Form 9 lists nine possibilities,
and the student/parent is instructed to explain the circumstances of these expenses in the space
provided for four of the nine possibilities. No space for an explanation is provided for tuition
expenses, medical insurance premiums or uninsured medical expenses. For one category,
“income not received in the form of cash,” the student/parent is instructed to submit “a signed
copy of your 2000 federal tax return(s), including all schedules and W-2s.”

There is nothing in the 2000-2001 or 2001-2002 P&Ps directing counselors to obtain third-party
documentation to substantiate the expenses claimed on the Form 9s nor instructions requiring the
counselors to document the basis for their decisions and explain why the requested adjustments
represented a special circumstance for each student on a case-by-case basis. The P&Ps did state
that counselors should review and clarify information to ensure the existence of an unusual
special circumstance that negatively impacts the student’s/parent’s ability to contribute to their
cost of attendance. The P&Ps did not direct the counselors to document their professional
judgment decisions on a case-by-case basis based solely on the merits of the particular
circumstance that justified deviating from the expected family contribution. The P&Ps directed
the counselors to document their professional judgment decisions by entering the rejected and
approved data into the University’s computer system.


University’s 2002-2003 Professional Judgment Policies and Procedures Improved, but Did
Not Require Adequate Documentation

The 2002-2003 P&Ps required the counselor to contact the student/parent when reported
expenses were considerably greater than 15% of the student/parent’s IPA amount, or appeared
excessive in reference to their income or for the number of non-parent/non-college family
members. The counselors were also required to contact the student/parent to further investigate,
resolve, document, and evaluate the Form 9 reported expenses when the “required
documentation” was insufficient or not descriptive enough.

The 2002/2003 Form 9 does not refer to examples of or possible “Financial Special Conditions –
Unusual Circumstances.” The Form 9 states, “The following are the Saint Louis University
Financial Special Conditions - Unusual Circumstances that will be evaluated in combination with
your FAFSA information.” The 2002/2003 Form 9 lists five “Financial Special Conditions –
Unusual Circumstances,” and it requires the student/parent to submit documentation with the
Form 9 supporting the reported expenses. The Form 9 instructions state, “ . . . the expense or
income must be significant, 15% or greater of your 2002-2003 FAFSA total income, must have
been an essential expense, and the expense must have caused a significant, financial hardship to
the student’s parent(s), and/or student/spouse.”

The required documentation for 2002-2003 Form 9 expenses is substantial and includes such
items as signed third-party statements, receipts, federal income tax returns, and check stubs. For
example, the documentation required for:
ED-OIG/A06-D0018 	                                                                   Page 8 of 14


        (1) Tuition Expenses - is, “A Statement on the school’s letterhead detailing: The
student’s name, the person’s full name that paid the 2001 private tuition, and the 2001 paid
private tuition amount. In addition, detail below the following: Why these private tuition
expenses were essential and the financial hardship(s) caused by these expenses to the parent(s)
and/or student/spouse.”

        (2) Medical/Dental Insurance Premiums and/or Uninsured Medical/Dental Expenses – is,
“A signed copy of the parents’ and student’s/spouse’s 2001 federal income tax returns (all 2001
federal tax return pages and schedules), along with receipts or official documents (check stubs,
third party affidavits, etc.) that detail, verify, and clearly indicate the paid 2001 insurance
premiums and/or uninsured medical/dental expenses. In addition, detail below the following:
Why these medical/dental premium and/or uninsured medical/dental expenses were essential and
the financial hardship(s) caused by these expenses to the parent(s) and/or student/spouse.”

The 2002-2003 P&Ps included the instruction that upon completion of the professional judgment
decision, the student’s computer and paper source document files are documented regarding the
counselor’s review, evaluation, resolution, and professional judgment decision regarding each
reported expense. However, the counselor’s documentation consists of the counselor’s initials,
along with the amounts accepted, and the date of the acceptance into the school’s financial aid
program. Although the documentation required of students/parents to substantiate the “Financial
Special Conditions – Unusual Circumstances Statement” amounts requested increased
substantially from 2000-2001 until 2002-2003, the University’s P&Ps did not require the
counselors to adequately document the basis for their professional judgment decisions and that
the amounts requested as adjustments represented a financial hardship and special circumstances
for students on a case-by-case basis.


                                 RECOMMENDATIONS

We recommend that the Chief Operating Officer for Federal Student Aid require the University
to—

   1.1 	 Refund $1,458,584 of Pell Grant funds over awarded to students based on the exercise
         of professional judgment for award years 2000-2001, 2001-2002, and 2002-2003, or
         provide contemporaneous supporting documentation for why a request from a student
         or parent represented a special circumstance and how the decision to grant the request
         was done on a case-by-case basis; and

   1.2 	 Implement procedures to adequately document all professional judgment actions, which
         should include documentation to show that decisions are made on a case-by-case basis
         and that the requested adjustments actually represent a special circumstance for the
         student requesting professional judgment.
ED-OIG/A06-D0018                                                                       Page 9 of 14


                   UNIVERSITY’S COMMENTS TO FINDING 1


The University did not concur with our finding or the recommendations and stated that its
exercise of professional judgment was performed consistent with the requirements of HEA
Section 479A. The University further stated that the Department, in the case In re Saint Louis
University, Docket Number 99-29-SA (May 25, 2000), expressly rejected the OIG’s position.
Acknowledging that the case is on appeal, the University points out that the decision by the chief
administrative judge, in that case, currently stands as the applicable law governing this issue.

In addition, the University stated that since the Department is prohibited from issuing regulations
regulating the exercise of professional judgment, there is not, and there cannot be, any regulation
that supports the position taken by the OIG; and, thus, the guidance discussed in the draft report
concerning dependency overrides is not applicable to the exercise of professional judgment
pursuant to HEA Section 479A.

Regarding Recommendation 1.1, the University believes its policies and documentation collected
and completed by the financial aid office satisfies the requirements of HEA Section 479A and
the administrative judge’s decision, therefore, no liability should exist. However, the University
does agree a liability exists for the one student who received a Pell Grant over award as a result
of a clerical error.

The University did not concur with Recommendation 1.2 because the University believes that its
policies, practices and procedures are in compliance with the applicable requirements of law.


                                     OIG’S RESPONSE

The University did not provide us with any information to cause revision to this finding. Until
the Secretary rules on FSA’s appeal of the administrative judge’s opinion on our previous audit,
the opinion is not a final determination of the Department’s position for this issue. In its appeal
to the Secretary in that case, FSA requested “that the Secretary reverse [the administrative
judge’s] initial decision, because the decision is not legally supportable and would render
superfluous the comprehensive and detailed statutory formulas enacted by Congress for
calculating expected family contributions. Moreover, if not reversed, the decision would
fundamentally alter the Federal Pell Grant Program.”

The HEA provides two requirements for the use of professional judgment. The decision must be
based on adequate documentation of a special circumstance and any decision must be made on a
case-by-case basis. The HEA also states that “[a]dequate documentation for such adjustments
shall substantiate such special circumstances of individual students.” The University did not
have documentation to substantiate the special circumstances for individual students.
ED-OIG/A06-D0018                                                                   Page 10 of 14


Both dependency overrides and the use of professional judgment allow financial aid
administrators to deviate from the statutory formulas, reducing a student’s EFC and increasing
the amount of Pell Grant funds for which a student is eligible. The HEA requires documentation
for both types of deviation from the statutory formulas. Because of the similarity between
dependency overrides and professional judgment, we found the guidance on dependency
overrides to be instructive as to what documentation a financial aid administrator should be
expected to provide under a reasonable interpretation of the statutory requirement.


Finding 2 - Under-Reporting of Professional Judgment Actions

The University under-reported the number of professional judgment actions taken during award
years 2000-2001 and 2001-2002. As a result, the University was not in compliance with the
administrative capability requirement contained in 34 C.F.R. §668.16 to report accurately to the
Secretary, and the Department was not aware of the true number of professional judgment
adjustments taking place at the University.

The HEA requires that to begin and to continue to participate in any Title IV, HEA program, an
institution shall demonstrate to the Secretary that the institution is capable of adequately
administering that program under each of the standards established in this section. The Secretary
considers an institution to have that administrative capability if the institution has written
procedures for or written information indicating the responsibilities of the various offices with
respect to the approval, disbursement, and delivery of Title IV, HEA program assistance and the
preparation and submission of reports to the Secretary (34 C.F.R. §668.16). An institution must
also establish and maintain records required under individual Title IV, HEA program regulations.
The Application and Verification Guide provides instructions to institutions on how to report
adjustments or overrides affecting the EFC.

For award years 2000-2001 and 2001-2002, we reviewed 30 student files from a universe of 85
students whose records did not indicate a professional judgment action (a Code 27 or Code 164
on the student’s Institutional Student Information Record [ISIR]) had been exercised and showed
a decrease of 3,000 or more in their EFC. However, we found that 12 of the 30 students had 13
professional judgment actions exercised on their behalf during the two years. This also means
that the number of professional judgment decisions reported to the Department was understated.

The University’s 2000-2001 P&Ps do not mention the professional judgment flags. The 2001-
2002 and 2002-2003 P&Ps states that for the Form 9 income and/or expense approved
adjustment amount entered in the University’s Student Information System, the program
automatically reduces the AGI, computes the professional judgment EFC, and sets the
professional judgment flag to “Y”.

For award year 2001-2002 and beyond, the University’s Student Information System program
automatically sets the professional judgment flag to “Y” when Form 9 information was used to
reduce AGI. However, if a Form 9F was used, the University counselors were required to
manually set the professional judgment flag within their Student Information System program.
ED-OIG/A06-D0018 	                                                                     Page 11 of 14


The University did not have procedures in place to ensure that the professional judgment flag
was manually set when a Form 9F was used.

After reviewing the 30 student files, University officials stated they concur that there were 12
students for whom the professional judgment flag was not set to "Y," and, therefore, not
communicated to the Department's CPS. The University stated that these 12 cases all reflected
adjustments to income that required setting the professional judgment flag to "Y" manually.
University officials believe these instances of professional judgment were duly documented in
the students' files, and stated they initiated a quality control process on July 1, 2003 designed to
ensure that all professional judgment flags are set to “Y” in the future.


                                  RECOMMENDATIONS

We recommend that the Chief Operating Officer for Federal Student Aid —

   2.1 	 Require the University to undertake a file review for all students not identified as
         having received professional judgment for our audit period, and determine whether a
         professional judgment action was taken for those students and not reported. For those
         students identified as having received a professional judgment action, require the
         University to evaluate the student files to determine whether there is sufficient
         documentation in the files to support the decisions. The appropriate Case Management
         Team should evaluate the file review for accuracy and reliability.

   2.2 	 Require the University to return any Pell Grant funds that were disbursed in excess of
         amounts that the University can support.

   2.3 	 Pursuant to 34 C.F.R. §668.84, take administrative action to fine the University for its
         failure to report all professional judgment actions accurately to the Secretary.

   2.4 	 Require a FSA Case Management Team to review the University’s procedures to
         ensure that all professional judgment actions are reported to the Secretary.


                   UNIVERSITY’S COMMENTS TO FINDING 2

The University stated that it does not concur with our finding or any of the recommendations.
The University acknowledged that a computer system deficiency in 2000-2001 prevented a CPS
flag from being set in some cases, but stated that all cases involving the exercise of professional
judgment were performed under the same procedures, which in all cases were adequate and
appropriate under the applicable requirements of the HEA. Additionally, the University stated
the system error has been corrected and that procedures have been implemented to ensure all
changes are correctly coded on the student information system.
ED-OIG/A06-D0018                                                                    Page 12 of 14


Based on their comments to Finding 1 above, the University does not believe Recommendation
2.1 is necessary. For the same reasons, the University does not concur with Recommendation
2.2 and believes that Pell Grant funds were disbursed in accordance with HEA provisions.
Additionally, the University believes that a system error in 2000-2001, which has been corrected,
does not warrant any adverse action and thus it does not concur with Recommendation 2.3.

Regarding Recommendation 2.4, the University stated it has long had policies and procedures in
place to code all changes made based on professional judgment and has implemented procedures
to ensure that all professional judgment actions are reported to the Secretary. The procedures
include a weekly variance report of any professional judgment decision without the CPS flags
and an additional review by a supervisor to ensure all changes are correctly coded on the student
information system.


                                    OIG’S RESPONSE

The University did not provide us with any information to cause revision to this finding. We
believe Recommendations 2.1, 2.2, and 2.3 remain valid. Since the University stated that it has
implemented procedures to ensure all changes are correctly coded on the student information
system, we changed Recommendation 2.4 to have FSA verify that the new procedures are
effective.


                  OBJECTIVE, SCOPE, AND METHODOLOGY

The objective of our audit was to determine whether the University’s use of professional
judgment resulted in appropriate Pell Grant awards in accordance with Section 479A of the
HEA, and the guidance outlined in Dear Colleague Letter GEN-03-07, published in May 2003.

Our original audit period was award years 2000-2001 and 2001-2002. At the request of the
University’s Financial Aid Director, we expanded our audit period to include award year 2002-
2003. To achieve our audit objective, we (1) reviewed the professional judgment provisions of
the HEA of 1965, as amended, guidance the Department provided in the Student Financial Aid
Handbook, and the Dear Colleague Letter GEN-03-07 published in May 2003; (2) reviewed the
University’s policies and procedures for the three years of our audit period; (3) conducted three
random samples and concluded that the computer-processed data was sufficiently reliable for the
purpose of meeting audit objective; (4) reviewed sampled student files; and (5) interviewed
University officials.

In the first random sample, we reviewed 50 students’ files from the combined 2000-2001 and
2001-2002 award year-universe of 1,046 University students. Our sampling universe was
identified as students who received a Pell Grant and were identified in the CPS as having
received a professional judgment code of either 164 (dependency override) or 027 (adjustments
to one or more of the elements that are used to calculate the student’s EFC) during either 2000-
ED-OIG/A06-D0018                                                                   Page 13 of 14


2001 or 2001-2002 award years. The 50 student files reviewed contained no written statements
and other third-party documentation justifying a deviation from the EFC, and we believe that no
files for award years 2000-2001 and 2001-2002 contained this documentation. Therefore, we
questioned all Pell received ($1,453,959) during award years 2000-2001 and 2001-2002 as a
result of professional judgment actions based on the attribute of inadequate documentation.

The second random sample consisted of reviewing 18 students’ files from a University-identified
universe of 122 students who had professional judgment exercised on their behalf during the
award year. We compared Pell Grant disbursement information for award years 2000-2001 and
2001-2002 contained in the National Student Loan Database System to the Pell Grant
disbursement information provided by the University. Based on this comparison, we determined
that the University-provided data was sufficiently reliable for our purposes. For award year
2002-2003, we questioned $4,625 because four of the 18 files reviewed contained inadequate
documentation, and we questioned the Pell Grant funding received by one student as a result of a
clerical error.

Our third random sample was conducted to test the completeness and authenticity of the
professional judgment information maintained by the CPS relative to the University’s records.
In this sample, we reviewed 30 students’ files from a universe of 85 students for the award years
2000-2001 and 2001-2002 who received a Pell Grant, the CPS showed a decrease of 3,000 or
more in EFC between successive ISIR transactions within an award year, and who did not have
either professional judgment code 164 or 027 listed on their ISIR transactions. We found that 12
of the 30 (40%) student files reviewed had professional judgment actions taken during the two
years. Based on our review, we concluded the professional judgment information maintained by
the CPS relative to the University’s students was not complete but was sufficiently reliable for
our purposes (see Finding 2).

We performed fieldwork May 12 through July 31, 2003, at the University’s St. Louis, Missouri
campus. On February 12, 2004, we provided the University with point sheets and spreadsheets
that outlined our findings and provided specific details on each student file reviewed. The
University’s response to the point sheets indicated they disagreed with Finding 1 and agreed with
Finding 2. Subsequent to providing the point sheets, we conducted an exit conference and
discussed the results of our audit with University officials on September 1, 2004. Our audit was
conducted in accordance with generally accepted government auditing standards appropriate to
the scope described above.
ED-OIG/A06-D0018                                                                     Page 14 of 14


                    STATEMENT ON INTERNAL CONTROLS


As part of our audit, we gained an understanding of internal controls, policies, procedures, and
practices applicable to the University’s use of professional judgment. Our testing identified
weaknesses that adversely affected the University’s ability to administer professional judgment
within the Title IV, HEA programs. These weaknesses are fully discussed in the AUDIT
RESULTS section of this report.


                            ADMINISTRATIVE MATTERS

If you 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 U.S. Department of
Education official, who will consider them before taking final Departmental action on this audit:

               Ms. Theresa S. Shaw, Chief Operating Officer 

               Federal Student Aid       

               U.S. Department of Education       

               Union Center Plaza, Rm. 112G1 

               830 First Street, NE 

               Washington, DC 20202         


It is the policy of the U.S. Department of Education 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 to members of the press and general public to the extent
information contained therein is not subject to exemptions in the Act.

If you have any questions or wish to discuss the contents of this report, please contact me, at
214-880-3031. Please refer to the control number in all correspondence related to this report.

                                                     Sincerely,


                                                     /s/
                                                     Sherri L. Demmel
                                                     Regional Inspector General
                                                       for Audit

Attachment
                                                                                            221 North Grand BonIevard

                                                                                            St. Louis, MO 63103

                                                                                            Phone: 314-977-2350

                                                                                            Fax: 314-977-3437



SAINT LOUIS                                                                                 Office of Scholarship/Financial Aid
UNIVERSITY

     January 14,2005


     Ms. Sherri L. Demmel 

     Regional Inspector General for Audit 

     U. S. Department of Education 

     Office of Inspector General 

     1999 Bryan Street, Suite 2630 

     Dallas, TX 75201-6817 


     Dear Ms. Demmel:

     This is Saint Louis University's response to the Office of Inspector General Draft Audit Report (Control
     Number ED-OIG/A06-DOOI8). The Draft Audit Report was received on December 2, 2004 and an
     extension to the response date was confirmed via email from Jim Kucholtz on December 27,2004.

     Finding 1 - Failure to Adequately Document Professional Judgment Decisions

     Recommendation 1.1: Refund $1,458,584 of Pell grant funds over awarded to students based on the
     exercise of professional judgment for award years 2000-2001, 2001-2002, and 2002-2003, or provide
     contemporaneous supporting documentation for why a request from a student or parent represented a
     special circumstance and how the decision to grant the request was done on a case-by-case basis.

     Response: Saint Louis University does not concur with this finding and recommendation. It is the
     position of the University that the exercise of professional judgment resulting in the referenced
     adjustments, and the documentation supporting such exercise on a case-by-case basis, was performed
     consistently with the requirements of Section 479A of the Higher Education Act of 1965, as amended (20
     U .S.c. Sec. 1087tt). Section 479A contains very broad language authorizing financial aid administrators
     to exercise their professional judgment in adjusting the data elements that go into the calculation of
     expected family contribution, stating "Nothing in this part shall be interpreted as limiting the authority of
     the financial aid administrator .... "

             The position taken by the Inspector General in the Draft Audit Report has been expressly rejected
     by the Department of Education in the case In re Saint Louis University, Dkt. No. 99-29-SA (May 25,
     2000). That decision of the chief administrative judge, while appealed by the Office of Federal Student
     Aid, currently stands as the applicable law governing this issue. Further, as the Draft Audit Report
     acknowledges, the Higher Education Act also provides that the Department of Education is prohibited
     from issuing regulations regulating this exercise of professional judgment by financial aid administrators.
     Thus, there is not, and there cannot be, any regulation that supports the position taken by the OIG in the
     Draft Audit Report. The guidance concerning dependency overrides (Dear Colleague Letter GEN-03-07),
     referenced in the Draft Audit Report, is not applicable to the exercise of professional judgment pursuant
     to HEA Sec. 479A.
                                                                                       Attachment
Ms. Sherri L. Demrnel
January 14,2005
Page 2

        The University's professional judgment policies and the documentation collected and completed
by the financial aid office satisfy the requirements of Section 479A of the REA and the administrative
judge's decision, and therefore, the University disputes the ~IG's recommended liability. The only
portion of the recommended liability that the University agrees with is the one student in the 2002-2003
award year who received a Pell Grant over award as a result of a clerical error. The University has not
been able to identify the student in question and asks that you identify that student.



Recommendation 1.2: Implement procedures to adequately document all professional judgment actions,
which should include documentation to show that decisions are made on a case-by-case basis and that the
requested adjustments actually represent a special circumstance for the student requesting professional
judgment.

Response: Saint Louis University does not concur with this recommendation. The University believes
that its policies, practices and procedures are in compliance with the applicable requirements oflaw.



Finding 2 - Under-Reporting of Professional Judgment Actions

Recommendation 2.1: Require the University to undertake a file review for all students not identified as
having received professional judgment for our audit period, and determine whether a professional
judgment action was taken for those students and not reported. For those students identified as having
received professional judgment, require the University to evaluate the student files to determine whether
there is sufficient documentation in the files to support the decisions. The appropriate Case Management
Team should evaluate the file review for accuracy and reliability.

Response:      Saint Louis University does not concur with this finding and recommendation.
Notwithstanding a regrettable computer system deficiency in 2000-01 that prevented a CPS Flag from
being set in some cases, all cases involving the exercise of professional judgment were performed under
the same procedures, which in all cases are adequate and appropriate under the applicable requirements of
the REA. Based on the University's response to Finding 1 above, we believe Recommendation 2.1 IS
unnecessary .



Recommendation 2.2: Require the University to return any Pell Grant funds that were disbursed in excess
of amounts that the University can support.

Response: Saint Louis University does not concur with this recommendation. For the reasons given
above in response to Finding 1, the University believes that the Pell Grant funds were disbursed in
accordance with the REA provisions, and thus that no repayment is warranted.



Recommendation 2.3: Pursuant to 34 CFR 668.84, take administrative action to fine the University for its
failure to report all professional judgment actions accurately to the Secretary.

 Response: Saint Louis University does not concur with this recommendation. The system error that
 occurred in 2000-01 has been corrected and does not warrant any adverse action against the University.
                                                                                         Attachment
Ms. Sherri L. Demmel
January 14, 2005
Page 3




Recommendation 2.4: Require the University to implement procedures to ensure that all professional
judgment actions are reported to the Secretary.

Response: Saint Louis University has long had policies and procedures in place to code all changes made
based on professional judgment. However, as noted in the Draft Audit Report, due to manual actions
some of the indicators did not trigger a flag notifying CPS a change had occurred based on professional
judgment. Corrective actions have been taken to correct records. A weekly variance report of any
professional judgment decisions without the CPS flags coded is part of the compliance review. (Note:
Deadlines to submit changes for years 2000-01 and 2001-02 had passed.) The University also
implemented a procedure whereby all professional judgment decisions are reviewed by a supervisor, to
ensure all changes are correctly coded on the student information system.



Please contact me ifthe University can provide any further information.

Very truly yours,


        ~1Y~
Cari Wickliffe
Director of Student Financial Services

cc: 	   Lawrence Biondi, S.1., President
        William Kauffman, General Counsel
                                                          Attachment
                                                                                  221 North Grand Boulevard

                                                                                  St. Louis, MO 63103

                                                                                  Phone: 314-977-2350

                                                                                  Fax: 314-977-3437



SAINT LOUIS                                                                       Office of Scholarship/Financial Aid
UNIVERSITY


       February 2, 2005

       Ms. Sherri L. Demmel 

       Regional Inspector General for Audit 

       u.s. Department of Education 

       Office ofInspector General 

       1999 Bryan Street, Suite 2630 

       Dallas, TX 75201-6817 


       Re: Addendum to Saint Louis University Response to Audit ED-OIGIA06-D0018

       Dear Ms. Demmel:

       I am writing to provide this addendum to my January 14, 2005, letter to you concerning
       your Draft Audit Report concerning Saint Louis University.

       On page two of my'letter I indicated in the University's response to Finding 1 "the
       University agrees [that there was] one student in the 2002-2003 award year who received
       a Pell Grant over award as a result of a clerical error. The University has not been able to
       identify the student in question and asks that you identify that student." Subsequent to
       my letter, Mr. Jon Kucholtz of your staff identified the student. The University has
       verified this occurrence and submits this addendum to its initial response.

       Saint Louis University concurs with the portion of the recommended liability that the
       University repay a $1450 Pell Grant over award resulting from a clerical error. The
       student has been identified in the sample as student #6, year 03.

       Please contact me if you have further questions.

       Very truly yours,
                                 ,

           ~tr~
        Cari Wickliffe 

        Director of Student Financial Services 


        cc: 	   Lawrence Biondi, S.J., President 

                William Kauffinan, General Counsel