oversight

Public Inquiry Contracts - National Computer Systems, Iowa City, IA.

Published by the Department of Education, Office of Inspector General on 1998-11-30.

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

                                     U.S. Department of Education
                                            Office of Inspector General
                               10220 N. Executive Hills Blvd – Room 200, Kansas City, MO 64153
                                         (816) 880-4024            (816) 891-0815 Fax

                                                              ED Audit Control Number 07-80017
                                                              November 30, 1998


Richard Schwab, Vice President & General Manager
National Computer Systems
2510 North Dodge Street
Iowa City, IA 52245

Dear Mr. Schwab:

Enclosed is our report entitled “Audit of Public Inquiry Contract.” Since there are no findings that
require resolution, you are not required to respond to this audit report. However, if you wish to
comment on any items in this report, please contact the following persons directly:

Contracting Matters:                                  Program Matters:
Donald Rappaport                                      Diane Rogers, Acting Chief Operating Officer
Chief Financial and Chief Information Officer         Office of Student Financial Assistance Programs
U.S. Department of Education                          U.S. Department of Education
Federal Building No. 10, Room 4366                    Regional Office Building, Room 4004
600 Independence Avenue, SW                           7th and D Streets
Washington, DC 20202-4300                             Washington, DC 20202-5132

In accordance with the Freedom of Information Act (Public Law 90-23), reports issued to the
Department’s grantees and contractors are made available, if requested, to members of the press and
general public to the extent information contained therein is not subject to exemptions in the Act.

Please refer to the above audit control number in all correspondence relating to this report.


                                                      Sincerely,



                                                      William Allen
                                                      Regional Inspector General for Audit
                        Audit of Public Inquiry Contract
                   National Computer Systems, Iowa City, IA




                                   FINAL AUDIT REPORT




                                    Audit Control Number 07-80017
                                           November 1998




Our mission is to promote the efficient                        U.S. Department of Education
and effective use of taxpayer dollars                          Office of Inspector General
in support of American education                               Kansas City, MO
                                NOTICE
Statements that financial and/or managerial practices need improvement or
recommendations that costs questioned be refunded or unsupported costs be
adequately supported, and recommendations for the better use of funds, as well as
conclusions and recommendations in this report, represent the opinions of the
Office of Inspector General. Determinations on these matters will be made by
appropriate Education Department officials.
                               U.S. Department of Education
                                      Office of Inspector General
                         10220 N. Executive Hills Blvd – Room 200, Kansas City, MO 64153
                                   (816) 880-4024            (816) 891-0815 Fax


                                                     November 30, 1998

Donald Rappaport
Chief Financial and Chief Information Officer
U.S. Department of Education
Federal Building No. 10, Room 4366
600 Independence Avenue, SW
Washington, DC 20202-4300

Diane Rogers, Acting Chief Operating Officer
Office of Student Financial Assistance Programs
U.S. Department of Education
Regional Office Building, Room 4004
7th and D Streets
Washington, DC 20202-5132

Subject :      FINAL AUDIT REPORT
               Audit of National Computer Systems Public Inquiry Contract
               Audit Control No. 07-80017

We have completed our audit of the Public Inquiry Contract held by National Computer Systems.
The objective of our review was to determine the accuracy and reasonableness of costs incurred
for products and services provided. Our audit was conducted in accordance with government
auditing standards appropriate to the scope of the review.

As discussed in the Audit Results section of the report, we found that the costs incurred for
products and services provided under the contract were accurate and reasonable. This report is
provided for your information. No response is required. If you have any questions or wish to
discuss the contents of this report, please contact me at (816) 880-4020.

                                                     Sincerely,



                                                     William Allen
                                                     Regional Inspector General for Audit
                                                 Table of Contents




Audit Results..........................................................................................................1


Background............................................................................................................2


Objective, Scope and Methodology ........................................................................2


Statement on Management Controls .......................................................................4


Report Distribution List..........................................................................................5
                                      Audit Results

We reviewed the Public Inquiry Contract held by National Computer Systems to determine the
accuracy and reasonableness of costs incurred for products and services provided. To satisfy our
audit objective, we reviewed the following specific areas:

• Contract performance oversight and payment authorization – We conducted interviews with
  Department and contractor staff to determine their roles in the monitoring process. We
  reviewed contract documentation and correspondence, and validated invoice payments.
• Key personnel – We reviewed changes in key personnel, time dedicated by key personnel to
  the contract, and validated labor charges by key and non-key personnel back to source
  documents.
• Billing procedures – We reviewed internal controls over the billing process at the contractor
  and validated a sample of invoice line items to source documents.
• Contract modifications – We reviewed the appropriateness of contract modifications.
• Quality control – We reviewed the quality control plan and reports generated.
• Type and structure of the contract – We evaluated the appropriateness of the type and
  structure of the contract.

We found that the costs incurred for products and services provided under the contract were
accurate and reasonable. This audit was conducted as part an ongoing review of Student
Financial Assistance contracts. Results from this review will also be included with the results of
our work on all other contracts reviewed and issued in a consolidated report to the Department
of Education at a later date.




ED OIG                                ACN: 07-80017                                      Page 1
                                        Background
National Computer Systems (NCS) currently holds three major Student Financial Assistance
(SFA) contracts. The subject of this audit is the Public Inquiry Contract (PIC). NCS provides
the following major services under this contract:

• Operating toll-free and commercial Federal student aid information lines (1-800-4FED-AID),
• Developing responses to correspondence on a wide variety of topics related to Title IV
  student aid programs, and
• Providing related editorial services and miscellaneous ancillary services.

NCS also provides many of these same services to the Department’s Debt Collection Service. The
operator functions for the toll-free information line is located in Lawrence, KS. All other contract
operations are located in Iowa City, IA. This contract was awarded on January 28, 1994, and
has been extended through March 31, 1999. As of February 28, 1998, over $35 million has been
obligated for this contract.


                       Objective, Scope and Methodology
The objective of our audit was to determine the accuracy and reasonableness of costs incurred
for products and services provided. Our review included the following areas – contract
performance oversight and payment authorization, key personnel, billing procedures, contract
modifications, monitoring staff coordination and independence, quality control, and the type and
structure of the contract. To accomplish our audit objectives, we reviewed applicable Federal
regulations and Department policies, contractor policies and procedures, Department and NCS
contract, correspondence files and accounting records. In addition, we reviewed available reports
from the contractor’s internal and external auditors. We also interviewed Department and
contractor staff responsible for PIC operations.

We sampled both workload data and labor charges under the contract. We reviewed a
judgmental sample of invoice line items, validated workload volume claimed to supporting
documentation and prices used to contract terms. We also reviewed a judgmental sample of labor
charges for all key personnel, and a random sample of labor charges for non-key personnel, and
validated the hours to staff timesheets.

We relied extensively on computer-processed data contained in contractor accounting records.
We assessed the reliability of this data, including the relevant general and application controls at
NCS. Based on our assessments and tests, we concluded that the data used was sufficiently
reliable to meet our audit objective. Our conclusion was based on testing the accuracy,
authenticity, and completeness of data by comparing source records to computer data, computer
data to source records, and by comparing computer data from the Department with that from the
contractor.




ED OIG                                 ACN: 07-80017                                       Page 2
Our review of contract operations covered the period January 28, 1994, through May 31, 1998.
We performed fieldwork June 23 and 24, 1998, at the Department’s offices in Washington, DC.
We performed fieldwork July 20, 1998, through July 31, 1998, at NCS’ location in Iowa City,
IA. Our audit was conducted in accordance with government auditing standards appropriate to
the scope of the review described above.




ED OIG                              ACN: 07-80017                                   Page 3
                      Statement on Management Controls
As part of our audit, we assessed the management control structure, policies, procedures, and
practices applicable to the scope of our review. The purpose of our review was to assess the level
of control risk for determining the nature, extent, and timing of substantive tests. For the
purposes of this report, we assessed and classified the significant controls into the following
categories:

       C       Billing
       C       Timekeeping
       C       Quality Control

In performing this assessment, we also considered work performed by internal and external
auditors.

Because of inherent limitations, a study and evaluation made for the limited purpose described
above would not necessarily disclose all material weaknesses in the control structure. Our review
did not identify any material weaknesses with respect to these controls for this contract.




ED OIG                                ACN: 07-80017                                      Page 4
                          Report Distribution List
                       Audit Control Number 07-80017
                                                                No. of
Auditee                                                         Copies

Richard Schwab, Vice President & General Manager            1
National Computer Systems
2510 North Dodge Street
Iowa City, IA 52245

Action Officials
Donald Rappaport                                                   4
Chief Financial and Chief Information Officer
U.S. Department of Education
Federal Building No. 10, Room 4366
600 Independence Avenue, SW
Washington, DC 20202-4300

Diane Rogers, Acting Chief Operating Officer                       4
Office of Student Financial Assistance Programs
U.S. Department of Education
Regional Office Building, Room 4004
7th and D Streets
Washington, DC 20202-5132

Other ED Offices
Director Contracts and Purchasing Operations                       1
Assistant Secretary, Office of Postsecondary Education             1
Director Training and Program Information Division          1
Director Programs Systems Service                                  1
Director Accounting and Financial Management Service               1
Office of the General Counsel                               1
Office of Public Affairs                                           1

Office of Inspector General
Inspector General                                                  1
Acting Deputy Inspector General                                    1
Acting Assistant Inspector General for Audit                1
Assistant Inspector General for Investigation                      1
Assistant Inspector General for Operations - Western Area          1
Assistant Inspector General for Operations - Eastern Area          1
Planning, Analysis, & Management Services (electronic)             1
Postsecondary Education Advisory and Assistance Director           1
Area Managers for Audit, Regions II, III, IV, V, VI, IX            6



ED OIG                              ACN: 07-80017                        Page 5
    OIG AUDIT TEAM

        Audit Staff:

 Nancy Brown, CPA, CGFM
   Rebecca Grogan, CPA
     Peggy Montgomery
  Beverly Cornelison-Mines

       Bill Allen, CPA


Information Technology Staff:

  Jan Keeney, CPA, CISA


Advisory & Assistance Staff:

 Ken Luhring, CPA, CGFM