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
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)