oversight

Independence Community College's Administration of its Federal TRIO Projects.

Published by the Department of Education, Office of Inspector General on 2001-10-15.

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

    Audit of Independence Community College’s Administration
                   of its Federal TRIO Projects



                                  FINAL AUDIT REPORT




                                            ED-OIG/A07-A0006
                                              October 2001




Our mission is to promote the efficiency,                        U.S. Department of
Education
effectiveness, and integrity of the                              Office of Inspector General
Department’s programs and operations.                          Region VII - Kansas City
Office
                                     NOTICE
       Statements that management practices need improvement, as well as other
     conclusions and recommendations in this report, represent the opinions of the
   Office of Inspector General. Determination of corrective action to be taken will be
                 made by appropriate Department of Education officials.

In accordance with the Freedom of Information Act (5 U.S.C. Section 552), reports issued
      by the Office of Inspector General are 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.
       Audit of Independence Community College’s Administration
                       of its Federal TRIO Projects

                                                           Table of Contents


Executive Summary..........................................................................................................................1


Audit Results .....................................................................................................................................4

         Finding No. 1 – ICC Could Not Support Services To TRIO Participants ...............................4

         Finding No. 2 – ICC Did Not Follow Federal Cash Management Requirements .................10

         Finding No. 3 – Changes In Project Scope Were Not Approved by the Department ............12

         Finding No. 4 – Improvements In Management Controls Are Needed .................................16

Background.....................................................................................................................................20

Objectives, Scope and Methodology .............................................................................................21

Statement on Management Controls ............................................................................................23


Exhibit 1 – Definition of Eligible Services By Program.................................................................24

Exhibit 2 – Schedule of Upward Bound and Student Support Services Reductions to
Grant Award Amounts and Amounts to be Refunded by Independence Community College........25

Appendix A – Independence Community College Response Draft Audit Report..........................26

Appendix B – Action Memorandum, TRIO Projects at Independence Community College,
Kansas-Critical Financial and Administrative Deficiencies.............................................................27

Appendix C – U.S. Department of Education’s Response to Action Memorandum ......................28

Appendix D – Independence Community College’s Response to Preliminary Audit Results........29



                                                                   ED-OIG/A07-A0006
ED-OIG/A07-A0006
        Audit of Independence Community College’s Administration
                        of its Federal TRIO Projects


                                    Executive Summary


We found that Independence Community College (ICC) did not always administer its Federal
TRIO projects in accordance with Federal regulations. Specifically, ICC failed to assure that it:

?   Could support that services were rendered to the number of participants it was funded to
    serve by its Upward Bound and Student Support Services projects;

?   Filled, or filled timely, key positions in the administration of its TRIO projects in accordance
    with Federal regulations;

?   Obtained U.S. Department of Education (Department) approval before making changes in
    project scope, objectives, and key personnel;

?   Adhered to management controls in the areas of accounting for expenditures within the
    proper funding period, reconciling budgets to actual expenditures, documenting student
    citizenship, and inventory controls; and

?   Drew down only the amount of grant funds to meet immediate cash needs.

Based on our findings in these areas, we issued State and Local Action Memorandum No. 00-06
on September 29, 2000. We recommended that the Assistant Secretary for Postsecondary
Education suspend authorization for ICC to draw down funds from its TRIO grants until the
Department verifies, by on-site review, that these projects are viable. On April 19, 2001, the
Director of the Office of Federal TRIO Programs informed ICC that its TRIO projects had been
classified as “High Risk” projects. Further, the Director informed ICC that it must meet certain
conditions and requirements until TRIO officials could conduct the on-site review. In this report
we discuss our findings in greater detail and offer additional recommendations.

ICC was not able to provide adequate documentation of the services it administered to the
number of participants it was funded to serve in its Upward Bound and Student Support Services
projects during the 1999-2000 budget year. Further, ICC provided only a minimal level of


ED-OIG                                      A07-A0006                                      Page 1
services to the students who participated in these projects. We recommend that the Assistant
Secretary for Postsecondary Education reduce the amount awarded to ICC for its 1999-2000
Upward Bound and Student Support Services projects by $84,190. This amount is proportionate
to the number of participants for whom the College was funded but could not document having
provided required services. ICC should also be required to refund $105,217 of excess cash for
years prior to year 1999. This amount was received from its awards in excess of the amounts it
could support by documentation.

To ensure that ICC complies with Federal regulations and to improve the administration of its
current and future TRIO projects, we recommend that the Assistant Secretary for Postsecondary
Education require ICC to:

1. Develop and follow specific written policies and procedures for the administration of its
   TRIO projects, including policies and procedures to ensure that:

       ?   An individual’s participation in a project during the summer and academic year are
           properly documented.
       ?   Reports to the Department are supported by documentation maintained by ICC.
       ?   Only those students who participate for at least the minimum time required by
           Federal regulations are counted as participants.

2. Obtain approval from the Department before undertaking any of the following actions with
   regard to its TRIO projects:

       ?   Extending the project period of a grant beyond the project period end date specified in
           the most recent revision of the Grant Award Notification.
       ?   Carrying forward grant funds that the grantee has not obligated in a budget period.
       ?   Making cumulative transfers among direct-cost budget categories that exceed 10
           percent of the approved budget for an award period.

3. Improve its management controls to ensure that its TRIO personnel:

       ?   Reconcile actual expenditures and revenues to the project budgets on a monthly basis.
       ?   Properly document all eligibility elements to ensure that students participating in the
           TRIO projects meet all Federal requirements.
       ?   Establish and implement policies and procedures for safeguarding equipment
           purchased with Federal funds.



ED-OIG                                     A07-A0006                                     Page 2
       ?   Establish and implement policies and procedures for selling equipment that provide
           for competition to the extent practicable and result in the highest return.

4. Refund $15,215 for unallowable grant writing costs.

In addition, we recommend that the Assistant Secretary for Postsecondary Education monitor
ICC’s adherence to the requirement that it obtain Department approval before making changes to
the scope, objectives, or key personnel of its TRIO projects.

ICC generally disagreed with our findings and recommendations. We have summarized ICC’s
comments and our response at the end of the respective finding to which each relate and
provided the full text of ICC’s response as an Attachment to this report. We have not made
changes to our report as a result of ICC’s response.




ED-OIG                                    A07-A0006                                    Page 3
                                             Audit Results


We found that ICC did not always administer its Federal TRIO projects in accordance with
Federal regulations found in Title 34, Code of Federal Regulations (CFR). 1 ICC failed to assure
that it: (1) could support that services were rendered to the number of participants it was funded
to serve through its Upward Bound and Student Support Services grants; (2) filled, or filled
timely, key positions in the administration of its TRIO projects in accordance with Federal
regulations; (3) obtained Department approval before making changes in project scope,
objectives, and key personnel; (4) adhered to Federal cash management controls; and (5) adhered
to management controls in the areas of accounting for expenditures, reconciling budgets to actual
expenditures, documenting student citizenship, and inventory controls.




Finding No. 1 – ICC Could Not Support Services To TRIO Participants


Our analysis of a randomly selected sample of student files indicated that ICC did not document
that it had served the number of participants for which the projects had been funded for the 1999-
2000 budget year. We recommend that the Assistant Secretary for Postsecondary Education
reduce the amount awarded to ICC for its 1999-2000 Upward Bound and Student Support
Services projects by $84,190. This amount is proportionate to the numbers of participants for
whom the College was funded but could not document having provided required services for
budget year 1999-2000.

TRIO Regulations

Student Eligibility: Title 34 CFR §§645.3 (Upward Bound) and 646.3 (Student Support
Services) state that for an individual to be eligible to participate in a project, he or she must meet
citizenship or residency requirements. For Upward Bound projects, the individual must also: (1)
be a potential first-generation college student or a low-income individual; (2) have a need for
academic support in order to pursue successfully a program of education beyond high school;

1
 The regulations applicable to these programs are 34 CFR Part 645 - Upward Bound; and 34 CFR Part 646 - Student
Support Services.


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and (3) at the time of initial selection, have completed the eighth grade but not entered the
twelfth grade and be at least 13 years old but not older than 19.

Number of Students to be Served: According to program regulations, 34 CFR §645.43, an
Upward Bound project shall serve between 50 and 150 participants. ICC was funded to serve 60
students in 1999-2000, but it was granted a wavier for that budget period to serve 50 students.
The Student Support Services project was approved and funded to serve 180 students annually.

Participation Requirements: The Upward Bound program defines a participant as an individual
who is determined to be eligible (34 CFR §645.6). In addition, the individual must be “…
determined by the project director to be committed to the project, as evidenced by being allowed
to continue in the project for at least—(i) Ten days in a summer component if the individual first
enrolled in an Upward Bound project’s summer component; or (ii) Sixty days if the individual
first enrolled in an Upward Bound project’s academic year component.” The Student Support
Services program defines a participant as an individual who receives project services that the
grantee has determined to be sufficient to increase the individual’s chances for success in a
postsecondary educational program (34 CFR §646.7). According to TRIO program officials, this
Student Support Services requirement means that to be counted as a participant a student must
receive service at least twice in an award year.

Documentation Requirements: Program regulations require that student participation be
documented. A grantee institution must maintain records on each student participant that
includes, among other things, documentation of the services provided to the student (34 CFR
§§646.32(b) and 645.43(c)). Documents that support such services include attendance records,
counseling notes, field trip records, participant progress reports, and client contact forms.

Results of Sample Reviews

Student Support Services Program: For budget year 1999-2000, we randomly selected 75 of
180 students from a participant list for that year that was provided to us by ICC officials. Our
analysis of the files for these students indicated that many files did not contain documentation to
support participation in the project. Specifically, only 36 of the 75 student files we sampled
contained documentation of services received sufficient to meet the definition of a participant
(i.e., receiving service at least twice during the award period). Based on the sample results, we
estimate that ICC only had documentation supporting the participation of 86 students in the
project. Thus, ICC’s records do not support the number of participants that it was required to
serve per its approved grant (180).



ED-OIG                                      A07-A0006                                      Page 5
Upward Bound Program: For budget year 1999-2000, we selected all 35 students on the 1999-
2000 participant lists that were provided to us by ICC officials. Twenty-nine of the 35 student
files reviewed contained documentation of participation in the academic year sufficient to meet
the definition of a participant. Four student files reviewed contained documentation of
participation in the summer program sufficient to meet the definition of a participant. Therefore,
we found that ICC had documentation supporting the participation of 33 students in the project.
ICC was funded to serve 60 participants. However the Department granted a wavier for the
1999-2000 award year reducing that number to 50, which is the minimum number that Federal
regulations require to be served.

We also found that ICC provided only a minimal level of service to the students who participated
in its Upward Bound project. The approved plan for the Upward Bound project stated that
student progress is monitored 10 times throughout the academic year and summer components
(four times each semester and twice in the summer component). In addition, the approved plan
states that tutoring is offered twice a week for a possible total of four hours to all project
participants, and that each student is required to receive a minimum of one hour of tutoring each
week. However, ICC officials could only document that three students received tutoring during
the 1999-2000 academic year. Aside from this tutoring and a field trip for three senior-class
participants, the only documented service to Upward Bound participants during that period was
one seminar or field trip per month. We believe that changes ICC made in assigning personnel
to key positions in the project, which are discussed under Finding 3, may have contributed to its
inability to provide the level of service that was approved by the Department.

Since ICC provided only a minimal level of service to significantly fewer participants than it was
funded to serve and because of problems identified under the other findings of this report, we
asked the Assistant Secretary for Postsecondary Education to suspend authorization for ICC to
draw down funds from its TRIO grants until the Department verifies, by on-site review, that
these projects are viable. (See the September 29, 2000, Action Memorandum attached to this
report as Appendix A.) The Department addressed the findings and recommendations in our
Action Memorandum in a letter to ICC dated April 19, 2001 (see Appendix B). This letter
notified ICC that it would be placed on a monthly cash reimbursement plan for all TRIO project
expenditures and that the Department would conduct an on-site review of the projects, after
which it would consult with ICC about the conditions under which the projects may continue.

Based on our findings as detailed in this report, we concluded that the Department should take
several actions in addition to those identified in our Action Memorandum. For example, we
recommend that the Department reduce the amount awarded to ICC for its 1999-2000 Upward
Bound and Student Support Services projects by $84,190, an amount that is proportionate to the


ED-OIG                                     A07-A0006                                     Page 6
number of participants that ICC was funded to serve but could not document as having provided
required services. See Exhibit 2 for an explanation of how we derived this figure by taking into
account the amount of Upward Bound and Student Support Services funds not yet drawn down
by ICC.

Initial Response Provided by Independence Community College on Our Student
File Reviews

During the course of our work at ICC, we provided preliminary results of our student file
reviews to ICC. ICC officials responded on July 24, 2000, by providing us with information
indicating their position as to each student’s eligibility and receipt of services (Appendix C).
ICC’s July 24, 2000, response did not substantiate its position regarding the number of project
participants in the 1999-2000 budget year covered by our review. According to the response,
ICC officials counted some students as participants in the 1999-2000 Student Support Services
project who were identified in the response as only receiving services outside the period we
reviewed. Further, ICC officials, in their July 24, 2000, response, provided no documentation to
support their claims of project participation.

Recommendations

We recommend that the Assistant Secretary for Postsecondary Education:

1.1   Require ICC to refund $84,190, which represents the total of:

      ?   $76,161 for the Student Support Services budget year 1999-2000, the amount that is
          proportionate to the number of participants for whom the College was funded to serve
          but could not document having provided services, minus the amount not yet drawn
          down for this year; and

      ?   $8,029 for the Upward Bound budget year 1999-2000, the amount that is proportionate
          to the number of participants for whom the College was funded to serve but could not
          document having provided services, minus the amount not yet drawn down for this
          year.




ED-OIG                                     A07-A0006                                    Page 7
1.2   Require ICC to develop and follow specific written policies and procedures for the TRIO
      projects’administration, including policies and procedures to ensure that:

      ?   An individual’s participation in a project during the summer and academic year are
          properly documented;

      ?   Reports to the Department are supported by documentation maintained by ICC; and

      ?   Only those students who continue their participation for the minimum time required by
          Federal regulations are counted as participants.

ICC Response and Auditor Comments

ICC did not concur. Its July 31, 2001, response to the draft audit report states that yearly project
summaries for both the Student Support Services and Upward Bound grants were submitted to
the federal government since the projects were first funded. The ICC response further stated that
at no time since the 1996-97 funding has there been any response by the federal government that
these programs were not operating at the levels they were intended in regard to the number of
students, documentation of students, or services provided to students.

Regardless of responses by Department officials or the lack thereof, the grantee is responsible for
ensuring that it administers federal programs in accordance with applicable laws, regulations,
and directives issued by the Department. We question whether Department officials would be
able to determine from reports whether the grantee is maintaining required documentation
supporting the information it is providing. We found in our on-site review of grantee records
that ICC failed to administer its Upward Bound and Student Support Services projects in
accordance with federal requirements.

ICC’s response also states that it maintains for each student “currently in the Upward Bound
Program” a checklist indicating the required information the school has obtained. We found that
these checklists did not cover all required information (e.g., identification of the time period for
which the information was relevant and student citizenship information) and they were not
signed, which, if done, would have provided some evidence of the reliability of the information.

ICC’s response states that the draft report is inaccurate in its portrayal of Upward Bound students
served but provided no explanation or documentation to support the statement. It concurs with
our finding that the number of students it served was lower than anticipated and the level of
service was “not at the level specified.” It refers to attached summary reports that explain that


ED-OIG                                      A07-A0006                                      Page 8
the reduction in the scope of its Upward Bound project was due to difficulties in hiring tutors and
that the students who did participate in the project benefited from their participation.

ICC claims that the sample we pulled from the Student Support Services student files included
student files that spanned services in more than one year and skewed our projections on the total
population. During our audit, ICC officials provided for our review a list of students whom they
counted as Student Support Services participants in budget year 1999-2000. We pulled a sample
from the list to determine what proportion of the students listed should have been counted as
participants in that year. This list included students who received services in more than one year,
and in such cases we counted them as participants in 1999-2000 if they received project services
in that year. Some of the students listed, however, only received services outside of the 1999-
2000 budget year and we did not count such students as participants in that year. Our
methodology did not result in skewed projections since there was nothing in our sample selection
that would have given a student who did not participate in the project in 1999-2000 a greater or
lesser chance of being selected for the sample. The projection was correct to the population list
provided by ICC. The issue remains that ICC incorrectly claimed for its Student Support
Services project participant counts for the specified year (1999-2000) by including students
whom the projects had not served in that year.




ED-OIG                                     A07-A0006                                      Page 9
Finding No. 2 – ICC Did Not Follow Federal Cash Management Requirements


According to Education Department General Administrative Regulations (EDGAR),
34 CFR §§ 75.730(b) and 74.22(b)(2), grantees must keep records that fully show how they use
grant funds and must limit their drawdowns from grants to amounts needed for “actual,
immediate cash requirements.” Grantees are reminded of the latter requirement every time they
request payment under a grant in that they must certify that funds will be expended within three
business days of receipt of payment.

ICC Could Not Support its TRIO Drawdowns

We found that ICC did not maintain expenditure documentation to support the amounts drawn
down prior to January 2000, for its Student Support Services and Upward Bound grants.
Grantees are responsible for maintaining accurate records of funds and the overall fiscal
management of their federally funded projects. According to both the Department of Education
and ICC financial records, prior to budget period 1999-2000, the full authorized amounts for
both the Upward Bound and Student Support Services were received by the institution. In
reviewing ICC records we identified $105,217 as excess cash (cash on hand that was in excess of
immediate cash needs) as of October 6, 2000. We also noted that the Finance Officer typically
drew down funds twice a year, December and June, which created excess cash in that the funds
were not drawn down on an “as needed basis” or based on expenditure data. This practice is not
consistent with the Federal requirement cited above, that the grantee must disperse all Federal
monies drawn within three business days.

Recommendations

We recommend that the Assistant Secretary for Postsecondary Education:

2.     Require ICC to refund $105,217 found in excess of what its expenditure documentation
       supported.


ICC Response and Auditor Comments

ICC did not concur. The ICC response states that the draft report suggests that significant
differences between deposits (drawdown of Federal grant funds) and expenditures exist and that


ED-OIG                                     A07-A0006                                    Page 10
the conclusions drawn in the report did not coincide with the purpose of the examination of bank
records. The response goes on to state that subsequent requests for bank records have shown no
indication of receipted revenues suggested in the draft report. The only documentation ICC
submitted to support its position was an internal memorandum from its accounts receivable clerk,
dated July 31, 2001, stating that, upon her examination of ICC records, she found nothing to
indicate that excess funds were held at the college.

We do not agree with the ICC response. We informed the President of the College and the
Director of the TRIO programs of our concerns throughout the course of the audit. We held an
exit conference with ICC officials on October 17, 2000, to discuss our findings related to the ICC
TRIO grants. We provided these officials with our findings in writing at that conference and
informed them of their opportunity to respond. ICC officials did not provide any comments on
this finding at that time.

The college did not provide any documentation to substantiate its assertion that excess cash does
not exist. As discussed in this finding, ICC had a material amount of excess cash ($105,217)
related to its TRIO programs on October 6, 2000. The excess cash is the result of ICC’s having
drawn more cash ($2,245,522) than it had expended ($2,140,305) for the budget periods
1993/1994 through 1999/2000 for Student Support Services, and 1995/1996 through 1999/2000
for Upward Bound.




ED-OIG                                     A07-A0006                                     Page 11
Finding No. 3 - Changes in Project Scope Were Not Approved by the Department


Contrary to Federal regulations, ICC did not always obtain Department approval before making
changes to the scope, objectives, or key personnel of its TRIO projects. Although regulatory
changes reduced the administrative burden for grantees and provided more flexibility in planning
and implementing project activities, grantees are still required to obtain Department approval
prior to making changes in project scope, objectives, or key personnel (34 CFR §74.25).
Changes to key personnel may have been a contributing factor in ICC’s inability to serve the
number of students approved by the Department.

Expanded Authority Regulations

On July 28, 1997, the Department amended Part 75 of EDGAR to provide “Expanded
Authorities” to discretionary grant recipients. This amendment reduced regulatory and
administrative burden and allowed grantees more flexibility in planning and implementing
project activities. The new provisions permit grantees to do the following without seeking prior
Department approval:

?   Extend a grant at the end of its project period for a period of up to one year.
?   Carry funds over from one budget period to the next.
?   Obligate funds up to 90 days before the effective date of the grant award.
?   Transfer funds between direct-cost line items.

Nonetheless, grantees still must request prior approval for a number of program and budget
related changes. The regulations in 34 CFR §74.25 clarify that recipients must obtain prior
approval from the Department for the following:

?   Change in the scope or the objectives of a project (even if there is no associated budget
    revision requiring prior written approval).
?   Change in key personnel specified in the application or award document.
?   Absence by the approved project director or principal investigator for more than three
    months or a 25 percent reduction in time devoted to a project.

Further, 34 CFR §§645.43 (b)(1) and 646.32 (c)(1) state, “A grantee shall employ a full-time
project director unless... [the] Secretary waives the requirement… .”



ED-OIG                                       A07-A0006                                    Page 12
Key Personnel Changes Not Approved by the Department

ICC’s grant proposals, as approved by the Department, outlined key personnel positions for
implementation and oversight of its TRIO projects. However, the College initiated a
restructuring of these positions in budget year 1998-99 and, in all but one case, hired different
individuals to fill key positions during the following year. ICC submitted a request for the
restructuring to the Department’s TRIO officials, but implemented the new structure and hired
the new personnel without the Departmental approval required by 34 CFR §74.25. Department
officials did not approve these changes, which included a change in the director positions for the
two projects.

Under the original structure, approved by Department officials, each project had a full time
director, as required under program regulations found in 34 CFR §§645.43(b)(1) and
646.32(c)(1). Under the revised plan, a single director, at 60-percent-time, was given
responsibility for both the Upward Bound and Student Support Services projects. This new,
part-time TRIO director, who lived more than 140 miles from the College, was hired on October
1, 1999. Furthermore, the new part-time director informed us that she was not at the school on a
day-to-day basis. She formally resigned her position effective July 31, 2000.

Other changes were made in the personnel of both projects that may have affected their
performance. In Upward Bound, for example,
?   The Secretary position, which was budgeted and approved at 100-percent-time, was only
    filled at 50 percent for the period January 18, 1996, through December 31, 1998;

?   The Coordinator/Counselor position became vacant on December 31, 1998, and was not
    filled until November 17, 1999, which left the position vacant for 11 months; and
?   The Coordinator/Counselor position was again vacated on February 29, 2000, and was not
    refilled until May 1, 2000.

These last three vacancies left a 20-percent-time counselor and a secretary to provide whatever
services they could for half of budget year 1999-2000.

Student Support Services also experienced vacancies in key positions, most notably in the
position of Title IV Math Specialist, which was vacant from January 15, 1997, through October
1, 1997. As of August 1, 2000, only two of the five key positions that had been approved by the
Department remained filled.




ED-OIG                                     A07-A0006                                      Page 13
ED Should Restrict ICC’s Use of Expanded Authority

The unfilled key positions and significant changes in project scope in the 1999-2000 budget
period resulted in $101,844, or 23 percent of the total amount awarded, not being expended as of
October 6, 2000. If managed effectively, amounts of unexpended funding such as this could
mean the difference between academic failure and success for a large number of students.
Because of the problems identified regarding changes in key personnel and project scope, as well
as ICC’s inability to support that it provided services to the number of project participants that it
reported to the Department, we find that ICC should be restricted in its use of the Expanded
Authority provisions.

According to Attachment Z of Grants Policy Bulletin #19, issued by the Grants Policy and
Oversight Staff, on January 27, 1998, 2 the discretion provided to grantees under the Expanded
Authority provisions may be limited under certain circumstances. One such circumstance is:

           … where the ED has designated a grantee as ‘high-risk,’ or is making an award to
           a grantee that has historically exhibited great difficulty complying with statutory,
           regulatory, or administrative requirements. Some of the considerations that
           [discretionary grant] teams might take into account in making such a
           determination would include, but are not limited to, instances where a grantee:

           ?    Has frequent turnover in key personnel and/or the person(s) managing grant
                projects is (are) not familiar with federal statutes or ED regulations; [or]

           ?    Does not have a strong financial management system or a sound knowledge of
                cost principles and consistently proposes using grant funds for unallowable
                costs and activities…. [emphasis in the original text]

Recommendations

We recommend that the Assistant Secretary for Postsecondary Education:

3.1        Monitor ICC’s adherence to the requirement that it obtain Department approval before
           making changes to the scope, objectives, or key personnel of its TRIO projects.




2
    Grants Policy and Oversight Staff, Office of the Chief Financial Officer, U.S. Department of Education


ED-OIG                                               A07-A0006                                               Page 14
3.2    Restrict ICC’s use of the Expanded Authority provisions by requiring it to obtain
       approval from the Department before undertaking any of the following actions with
       regard to its TRIO projects:

       ?   Extending the project period of a grant beyond the project period end date specified in
           the most recent revision of the Grant Award Notification.

       ?   Carrying forward grant funds that the grantee has not obligated in a budget period.

       ?   Making cumulative transfers among direct-cost budget categories that exceed 10
           percent of the approved budget for an award period.

ICC Response and Auditor Comments

ICC did not agree with our findings. The response states that (1) the coordinator/counselor
position was vacant for only three and half months, not 11 months as stated in the draft report,
(2) the school has no control over employees who seek improved employment, and (3) a small
school can not sit idle while awaiting Departmental approval to fill positions.

The ICC response incorrectly confuses the Director position with the coordinator/counselor
position we discussed. The coordinator/counselor position for the Upward Bound program that
had been vacated on December 31, 1998, was filled approximately 11 months later, on
November 17, 1999.

ICC does not dispute that it has high turnover in its TRIO programs, rather it asserts that it has no
control over employees who seek other employment. The response ignores ICC’s contributory
role in the turnover of its TRIO staff. On January 13, 1999, ICC officials sent a memo to each
staff member of the Upward Bound and Student Support Services programs terminating their
employment. According to the memorandum the action taken by ICC officials was not the result
of “job performance, but to serve student need.” The ICC action to terminate the employment of
each TRIO staff member does not support ICC’s implication that its frequent staff turnover is the
result of employees seeking other employment.

We note that ICC submitted its initial request to restructure the personnel positions of both the
Upward Bound and Student Support Services programs on February 19, 1999. EDGAR requires
grantees to request prior approval for changes in key personnel. ICC submitted its request to
restructure its TRIO projects one month after it had already effectively restructured by
terminating the employment of each member of the TRIO staff, including key personnel.



ED-OIG                                      A07-A0006                                       Page 15
Finding No. 4 – Improvements in Management Controls Are Needed


We found that ICC did not always follow its own management controls in the areas of
accounting for expenditures, reconciling budgets to actual expenditures, documenting student
citizenship, and inventory controls. Internal management controls, when followed, help
safeguard assets, ensure the reliability of accounting data, promote efficient operations, and
ensure compliance with established policies.

Reconciliation of Budgets to Actual Expenditures
Would Improve Project Administration

Grantees are responsible for maintaining accurate records and the overall fiscal management of
their federally funded projects. Timely reconciliation of actual expenditures to project budgets
would provide an accurate picture of funds available for program improvements.

Our review of ICC’s accounting records showed that TRIO officials did not always follow sound
fiscal management practices. ICC’s grant proposals for these projects stated that the program
director would reconcile, on a monthly basis, TRIO expenditures and encumbrances to budget
line-item status. We found that ICC officials did not perform these monthly reconciliations. For
award years 1997, 1998 and 1999, we found no evidence of any reconciliation of expenditures to
budgeted amounts.

Student Citizenship Not Always Documented

In our review of student files, we found that student citizenship was not always documented. To
be eligible to participate in a Federal TRIO project, an individual must satisfy a citizenship
requirement. In our analysis we found that 30 of 35 Upward Bound student files reviewed from
1999-2000 did not document citizenship. All Student Support Services student files contained
adequate documentation of citizenship. Without properly documenting citizenship, ICC may be
serving ineligible students.




ED-OIG                                     A07-A0006                                     Page 16
Inventory Controls Should Be Followed to
Safeguard Equipment Purchased with Federal Funds

The TRIO projects did not have any policies or procedures for safeguarding equipment or
inventory, or for properly maintaining an accurate account of the equipment. According to
34 CFR §74.34(f), equipment records have to be maintained accurately, a physical inventory
must be taken and reconciled with the equipment records at least once every two years, and a
control system must be in effect to insure adequate safeguards to prevent loss, damage, or theft
of the equipment. School officials were unable to locate eight computers, one laptop, one
television and one VCR purchased with Federal Upward Bound funds and four computers, two
printers, two monitors, and one CPU, purchased with Federal Student Support Services funds.

ICC did not have policies and procedures for selling equipment or inventory purchased with
federal TRIO funds. According to 34 CFR §74.34(f)(6), when grantee institutions are authorized
or required to sell equipment, proper sales procedures must be established. The procedures must
provide for competition to the extent practicable and result in the highest return. According to
information provided by ICC, dated January 13, 2000, it sold five monitors, six keyboards, and
four hard drives, purchased with Federal TRIO funds.

Unallowable Cost for Grant Writing

We found that ICC inappropriately paid $15,215 from its Upward Bound grant funds for writing
proposals for Federal grants. This payment is not consistent with OMB Circular A-21, Section
J., item 34 Proposal costs, which states:

       Proposal costs are the costs of preparing bids or proposals on potential federally
       and non-federally-sponsored agreements or projects, including the development
       of data necessary to support the institution's bids or proposals. Proposal costs of
       the current accounting period of both successful and unsuccessful bids and
       proposals normally should be treated as F&A [Facilities and Administrative]
       costs and allocated currently to all activities of the institution, and no proposal
       costs of past accounting periods will be allocable to the current period.




ED-OIG                                     A07-A0006                                         Page 17
Recommendations

We recommend that the Assistant Secretary for Postsecondary Education require ICC to:

4.1   Reconcile actual expenditures and revenues to the project budgets on a monthly basis.

4.2   Properly document all eligibility elements to ensure students participating in the TRIO
      projects meet all Federal requirements.

4.3   Establish and implement policies and procedures for safeguarding equipment purchased
      with Federal funds to prevent loss, damage, and theft.

4.4   Establish and implement policies and procedures for selling equipment to provide for
      competition to the extent practicable and result in the highest return.

4.5   Refund $15,215 for unallowable grant writing costs.

ICC Response and Auditor Comments

ICC did not concur with all of our findings and recommendations. The ICC response states that
ICC has (1) established procedures for the sales and disposal of all equipment, including
equipment purchased with TRIO funds; (2) inventoried Student Support Services equipment as
early as January 19, 2000, and that it has inventoried and tagged all Upward Bound equipment;
and (3) complied with the requirements regarding the use of consultants. In addition, ICC stated:
“[T]here is no evidence that the staff and students experienced any change in the scope of the
programs during the time audited or since.” ICC did not comment on our findings that it had not
reconciled its TRIO budgets with actual expenditures and had not always documented student
citizenship.

The July 31, 2000, response to our draft report states that “[a]ll TRIO equipment determined to
be disposable is sold through college sales of all other used equipment advertised to the public.”
ICC provided a copy of the “College Procedures” to support its assertion regarding the disposal
and sale of equipment. The new College Procedures (2000-2001) identifies procedures for the
disposal and sale of equipment, and for maintaining an inventory list. The steps set out in the
ICC Control Procedures do not follow Federal guidance on maintaining information for accurate
equipment records, conducting a physical inventory and reconciling equipment records every
two years, and having a control system in place to safeguard equipment purchased with Federal
funds.


ED-OIG                                     A07-A0006                                     Page 18
ICC stated that an inventory listing is now being maintained. Had ICC conducted a physical
inventory and reconciled the equipment records at least once every two years as prescribed by
Federal regulations, ICC officials would have been aware that several pieces of equipment were
missing from both Student Support Services and the Upward Bound projects.

ICC cited 34 CFR § 75.515 to support the allowability of charging the grant writing costs
directly to the TRIO grants. This CFR section relates to the use of consultants, not the treatment
of costs as direct or indirect with respect to any particular grant. Grant writing costs are
normally treated as indirect costs. As discussed in the finding, OMB Circular A-21 provides that
the “…costs of preparing bids or proposals on potential federally and non-federally-sponsored
agreements or projects…normally should be treated as F&A [Facilities and Administrative] costs
and allocated currently to all activities of the institution, and no proposal costs of past accounting
periods will be allocable to the current period.” It is not allowable to charge these costs of
preparing the proposal directly to the TRIO program.




ED-OIG                                       A07-A0006                                      Page 19
                                         Background

ICC is a two-year community college located south of Independence, Kansas. Independence, a
city of 11,000 population located in southeastern Kansas, is the county seat of Montgomery
County. ICC is fully accredited by the Kansas State Department of Education and by the North
Central Association of Colleges and Schools. The Director of TRIO programs is responsible to
the President of the College for administration of its Federal TRIO projects, which include
Student Support Services and Upward Bound.

?   Student Support Services offers first generation, low income or disabled students academic,
    intervention, financial, counseling, cultural and support services. The Student Support
    Services project at ICC is known as the Academic Center for Excellence.

?   Upward Bound is an educational program designed to enhance its participants’ academic
    skills so that they can successfully complete high school and enroll in a postsecondary
    institution. ICC’s Upward Bound project is designed to assist area students in achieving the
    academic skills and personal growth necessary for the successful completion of high school,
    and for entry into a postsecondary institution. The project supplements a student’s high
    school experience and assists the student not only in academic preparation, but also in career
    exploration and self-development.




ED-OIG                                     A07-A0006                                      Page 20
                        Objectives, Scope and Methodology


The purpose of the audit was to determine whether ICC administered the Federal TRIO projects
in accordance with Federal regulations. The periods we covered varied as follows:

?   Student files for the most recent year, 1999-2000;
?   Expenditures for the three most recent budget periods, 1997-1998, 1998-1999 and 1999-
    2000; and
?   Only for the purpose of determining excess cash, budget periods covering 1993-1994 through
    1999-2000 for Student Support Services, and 1995-1996 through 1999-2000 for Upward
    Bound.

To accomplish our audit objectives we reviewed applicable Federal regulations and files related
to ICC at the Department of Education’s TRIO program office located in Washington, DC. We
conducted interviews with key personnel in each of ICC’s TRIO projects (Upward Bound and
Student Support Services) and obtained and analyzed documentation related to those projects.
We reviewed all student files for services received for the Upward Bound project and reviewed a
random sample of student files for the Student Support Services project.

We relied on Department of Education records in determining the amount of Federal funds
received by ICC. Further, we assessed the reliability of expenditure data at ICC. Based on our
assessments and tests, we concluded that the data used was sufficiently reliable for the purpose
of our audit. Our conclusion was based on testing the accuracy of the data by comparing
computer data to source records.

We visited the Department’s TRIO program office located in Washington, DC on May 18, 2000.
We conducted our initial fieldwork at the institution from January 10, 2000, through July 11,
2000. In addition we conducted an exit conference at the institution on October 17, 2000.

We issued State and Local Action Memorandum No. 00-06 on September 29, 2000. As ICC had
provided only a minimal level of service to significantly fewer participants than it had been
funded to serve and because of other problems identified early on in our audit, we recommended
that the Assistant Secretary for Postsecondary Education suspend authorization for ICC to draw
down funds from its TRIO grants until the Department verifies, by on-site review, that these




ED-OIG                                     A07-A0006                                     Page 21
  projects are viable. The Department addressed the findings and recommendations in our Action
  Memorandum in a letter to ICC dated April 19, 2001.

  Our audit was conducted in accordance with government auditing standards appropriate to the
  scope of review described above.


  Supplementary Statistical Information

  Determining compliance with reporting requirements for each project (Upward Bound and
  Student Support Services) involved selecting a sample from each project. The sample population
  for each project was a participant’s list provided by ICC from which we used a simple random
  sample to select the participants to review. Due to the small sample sizes and the small
  percentage of participants with documented services, the sample precision varied. The table
  below provides relevant statistical information related to our samples.

                              Table of Statistical Information

             Minimum        Population                                  Range for Which We Are 90%
Program &     Required     (Participants    Sample         Point         Confident That Services Are
Award Year   Per Award         List)         Size        Estimate (1)          Documented (2)
                                                                        Lower Limit     Upper Limit
                                           Upward Bound
1999-00          50             35         35 (100%)         33              33 (100% Review)

                                    Student Support Services
1999-00          180            180          75           86                 71             101



  1. Point estimate represents the number of student files we project as containing adequate
     documentation to support participation in the project.
  2. Using the Student Support Services award year as an example, we are 90% confident that 86
     student files contained adequate documentation. Using the sampling error, it could be as few
     as 71 student files but no more than 101 student files that contain adequate documentation to
     support participation in the project.




   ED-OIG                                   A07-A0006                                    Page 22
                         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 audit at ICC. 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 purpose of this report, we assessed and classified the significant management controls into
the following categories:

       ?   Participant services
       ?   Participant eligibility
       ?   Program record maintenance
       ?   Fiscal record keeping
       ?   Equipment inventory

Because of inherent limitations, a study and evaluation made for the limited purposes described
above would not necessarily disclose all material weaknesses in the control structure. However,
our assessment disclosed weaknesses at ICC related to the area of compliance with Federal
regulations, as well as with ICC’s internal policies and procedures. These weaknesses are
discussed in the Audit Results section of this report.




ED-OIG                                      A07-A0006                                      Page 23
                                                                                          Exhibit 1



                        Definition of Eligible Services by Program


Upward Bound: 34 CFR §§645.11 and 645.12 describe the type and extent of services that are
to be provided to project participants. Participants in an Upward Bound summer component
receive services such as academic instruction, tutoring, and career counseling at least five days a
week for six weeks. Participants in the academic year component receive such services on a
weekly basis. Section 645.11 describes the core curriculum for the Upward Bound project to
include instruction in “(1) Mathematics through pre-calculus; (2) Laboratory science; (3) Foreign
language; (4) Composition; and (5) Literature.” These projects may also include personal
counseling, academic advice and assistance in secondary school course selection, tutorial
services, exposure to cultural events, activities designed to acquaint youths with career options,
and mentoring projects.



Student Support Services: 34 CFR §646.4 identifies services a project may provide to
participants. These services include (1) instruction in subjects necessary for success beyond
secondary school; (2) personal counseling; (3) academic advice; (4) tutorial; (5) cultural events;
(6) activities designed to acquaint students with career options; (7) activities designed to secure
admission and financial assistance; (8) activities designed to assist students currently enrolled in
two-year institutions in securing admission and financial assistance for enrollment in a four-year
program of postsecondary education; and (9) mentoring programs.




ED-OIG                                      A07-A0006                                      Page 24
                                                                                                     Exhibit 2
    Schedule of Upward Bound and Student Support Services Reductions to Grant
     Award Amounts and Amounts to be Refunded by Independence Community
                                    College

                                        1999-2000
                                                 Student
                                   Upward
                                                 Support
                                   Bound         Services                        Totals
Award Amount                        $240,377               $199,734            $440,111
Amount Received @
                                   ($166,678)             ($171,589)           ($338,267)
October 6, 2000
Amount Not Drawn @
                                    $73,699                $28,145             $101,844
October 6,2000
Number of Participants
                                        33                     86                   -
–Services Supported 3
Number of Participants
                                        50                    180                   -
Proposed & Funded
Number of Participants -
                                        17                     94                   -
Services Not Supported
Percent Not Supported 4               34%                    52%                    -
Pro-Rata Over-Award
                                    $81,728                $104,306            $186,034
(Grant Award Reduction )
Recommended Amount
to be Refunded by
Independence
Community College                    $8,029                $76,161              $84,190
(Pro-Rata Over-Award
less Amount Not Drawn
@ October 6, 2000)




3
  The number of participants for the Upward Bound project for 1999/2000 is the number of participants supported
after reviewing all 35 Upward Bound participant files. The number of participants for the Student Support Services
project for 1999/2000 is a point estimate, as discussed in the report under Audit Scope and Methodology,
Supplementary Statistical Information.
4
  The Percent Not Supported has been rounded to the nearest whole percent for presentation purposes. The Pro-Rata
Over-Award has been calculated using the percent to the nearest one-hundredth of a percent.


 ED-OIG                                           A07-A0006                                            Page 25
                                       Appendix A
          Independence Community College Response Draft Audit Report




         NOTE: Personal identifiers have been removed.

         NOTE: ICC provided a large volume of attachments with its response. It is impractical
               to include this data with each report. These attachments are available upon
               request.




ED-OIG                                   A07-A0006                                   Page 26
                                Appendix B
                             Action Memorandum
TRIO Projects at Independence Community College, Kansas-Critical Financial and
                          Administrative Deficiencies




ED-OIG                            A07-A0006                            Page 27
                                Appendix C
         U.S. Department of Education’s Response to Action Memorandum




ED-OIG                            A07-A0006                             Page 28
                                     Appendix D
   Independence Community College Response to Preliminary Audit Results




  NOTE: Personal identifiers have been removed to protect the privacy rights of students.




ED-OIG                                 A07-A0006                                    Page 29