oversight

Followup Process for External Audits in the Office of the Chief Financial Officer

Published by the Department of Education, Office of Inspector General on 2015-09-28.

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

                          UNITED STATES DEPARTMENT OF EDUCATION
                                      OFFICE OF INSPECTOR GENERAL

                                                                                                            AUDIT SERVICES


                                                September 28, 2015
                                                                                             Control Number
                                                                                             ED-OIG/A19P0004

Thomas Skelly
Delegated to Perform Functions and Duties of the Chief Financial Officer
Office of the Chief Financial Officer
U.S. Department of Education
400 Maryland Avenue, S.W.
Washington, DC 20202

Dear Mr. Skelly:

This Final Audit Report, titled Audit of the Followup Process for External Audits in the Office
of the Chief Financial Officer, presents the results of our audit. This audit was part of a review
of the audit followup process for Office of Inspector General (OIG) external audits being
performed in several principal offices. The objective of the audit was to evaluate the
effectiveness of the Department of Education’s (Department) process to ensure that external
auditees implement corrective actions as a result of OIG audits. A summary report will be
provided to the Chief Financial Officer (CFO), the Department’s audit followup official, upon
completion of the audits in individual principal offices.



                                                BACKGROUND


Office of Management and Budget (OMB) Circular A-50, “Audit Followup,” provides the
requirements for establishing systems to assure prompt and proper resolution and
implementation of audit recommendations. The Circular provides that audit followup is an
integral part of good management, a shared responsibility of agency management officials and
auditors, and management’s corrective action on resolved findings and recommendations is
essential to improving the Government’s effectiveness and efficiency. Agencies are responsible
for establishing systems that provide a complete record of actions taken on findings and
recommendations to assure that audit recommendations are promptly and properly resolved.

The Department established the “Handbook for the Post Audit Process” (OCFO-01), dated
June 22, 2007 (Handbook), to provide policies and procedures for the resolution and followup
of internal and external audits of Department programs, activities, and functions. External
audits are of external entities that receive funding from the Department, such as State
educational agencies, local educational agencies, institutions of higher education, contractors,
and nonprofit organizations. External OIG audit reports generally include recommendations
for Department management to require the external entity to take corrective action. These

                              400 MARYLAND AVENUE, S.W., WASHINGTON, DC 20202-1510

              Promoting the efficiency, effectiveness, and integrity of the Department’s programs and operations.
Final Audit Report
ED-OIG/A19P0004                                                                                       Page 2 of 11

recommendations may be either monetary, which recommend that the entity return funds to the
Department, or nonmonetary, which recommend that the entity improve operations, systems, or
internal controls. The audit resolution process begins with the issuance of a final audit report.

An external audit is considered resolved when the Department issues a program determination
letter to the external entity that is agreed to by the OIG. Upon resolution, the Department is
responsible for followup to ensure that corrective actions are actually taken. An audit is
considered closed when the Department ensures that all corrective actions have been
implemented including funds repaid or settlement made.

The Handbook provides that Assistant Secretaries (or equivalent office head) with
cooperative audit resolution or related responsibilities must ensure that the overall
cooperative audit resolution process operates efficiently and consistently. An Assistant
Secretary may delegate in writing part or all of the cooperative audit resolution
responsibilities to an Action Official(s) (AO) within the Assistant Secretary's
organization.

The Handbook notes specific responsibilities of the Assistant Secretaries or designated AOs that
include:

    •    Determining the action to be taken and the financial adjustments to be made in resolving
         findings in audit reports concerning respective program areas of responsibility,
    •    Monitoring auditee actions in order to ensure implementation of recommendations
         sustained in program determinations, and
    •    Maintaining formal, documented systems of cooperative audit resolution and followup.

The Handbook specifies that accurate records must be kept of all audit followup activities,
including all correspondence, documentation and analysis of documentation. The Department’s
Audit Accountability and Resolution Tracking System (AARTS) is a web-based application
designed to assist Department management with audit followup and closure.



                                            AUDIT RESULTS


We found that OCFO’s audit followup process was not always effective. Specifically, we found
that OCFO did not close audits timely and did not adequately maintain documentation of audit
followup activities. Between October 1, 2008 and September 30, 2013, OCFO closed
29 external OIG audits. 1 Of the 29 closed audits, 18 (62 percent) were closed more than
2 years after resolution, 10 (34 percent) were closed more than 5 years after resolution, and
5 audits (17 percent) were not closed for more than 7 years after resolution. The total of the
monetary recommendations associated with the 29 audits was $57,320,188.



1
 OCFO is assigned responsibility for external audits covering discretionary grants, contract matters for other than
Federal Student Aid contracts, and audits that have only excess cash or misuse of Federal advance findings.
Final Audit Report
ED-OIG/A19P0004                                                                      Page 3 of 11

Further, we found that OCFO did not always adequately maintain documentation of audit
followup activities. This includes not maintaining supporting documentation of corrective
actions in the official audit file as well as not maintaining documentation that supported that
requested corrective actions were actually taken prior to audit closure. We reviewed audit
followup activities for a nonstatistical sample of four external OIG audits of OCFO programs.
For these 4 audits, OCFO determined that 15 recommendations required corrective actions, to
include $1.1 million in monetary corrective actions. OCFO was unable to provide support that
corrective action was taken for 7 out of the 15 recommendations (47 percent), to include support
documenting the amount of and rationale for a reduction of an established liability.

Not ensuring that corrective actions are taken as quickly as possible allows identified
deficiencies to continue to exist. By not obtaining or maintaining appropriate documentation to
show requested corrective actions were completed, OCFO did not have assurance that identified
deficiencies were corrected. As such, the risk remains that related programs are not effectively
managed and funds are not being used as intended.

In its response to the draft audit report, OCFO agreed with the finding and recommendations.
OCFO noted that in recent years it has made significant progress improving the timeliness and
documentation with respect to the resolution of audit findings but agreed that it can continue to
improve documentation of corrective actions and audit followup activities. OCFO noted it
recently implemented new features in AARTS to enhance electronic recordkeeping, is in the
process of modifying its policies and procedures that address how OIG external audits are
closed, and is considering enhancements to monthly audit dashboards to help program offices
better manage and close audits timely. OCFO also noted it closed a substantially larger number
of audits than what was reflected in Table 2 of our report and provided comments on what it felt
was a more appropriate measure of the Department’s timeliness of audit closure.

OCFO’s comments are summarized at the end of the finding. As a result of OCFO’s comments,
we did not make any changes to the audit finding, Table 2, or the related recommendations. The
full text of OCFO’s response is included as Attachment 3 to this report.

FINDING NO. 1 – The Office of the Chief Financial Officer’s Audit Followup
                Process Was Not Always Effective

We found that improvements are needed in OCFO’s audit followup process. Specifically, we
found that OCFO did not close audits timely and did not adequately maintain documentation of
audit followup activities.

Timeliness of Audit Closure

We reviewed the Department’s AARTS data to determine the number of external OIG audits that
were closed between October 1, 2008 and September 30, 2013. We noted that OCFO closed
29 audits during this time period. Of the 29 closed audits, 18 (62 percent) were closed more than
2 years after resolution, 10 (34 percent) were closed more than 5 years after resolution, and
5 audits (17 percent) were not closed for more than 7 years after resolution. The total of the
monetary recommendations associated with the 29 audits was $57,320,188 as depicted in
Table 1 below.
Final Audit Report
ED-OIG/A19P0004                                                                                  Page 4 of 11

        Table 1. Count and Percentage of OCFO Closed Audits by Elapsed Time Between
                                   Resolution and Closure

Elapsed Time                   Number         Percentage of        Total of Monetary         Percentage of
                               of Audits         Audits            Recommendations            Monetary
                                                                                           Recommendations
Greater than 84                     5               17%                 $1,055,827                2%
months
73 to 84 months                     2                7%                     $0                   0%
61 to 72 months                     3               10%                  $658,766                1%
49 to 60 months                     2                7%                 $6,150,871              11%
37 to 48 months                     6               21%                 $7,951,088              14%
25 to 36 months                     0                0%                     $0                   0%
Less than 25 months                11               38%                $41,503,636              72%
Total                              29                                  $57,320,188

Documentation of Audit Followup Activities

We found that OCFO did not always adequately maintain documentation of audit followup
activities. This included not maintaining supporting documentation of corrective actions in the
official audit file as well as not maintaining documentation that supported that requested
corrective actions were actually taken prior to audit closure. We reviewed audit followup
activities for a nonstatistical sample of 4 of the 29 audits noted above. 2 For these 4 audits,
OCFO determined that 15 recommendations required corrective actions, to include $1.1 million
in monetary corrective actions. We found that OCFO files did not adequately maintain
documentation for 7 out of 15 recommendations (47 percent) included in our sample for which
corrective actions were required as noted below.

ACN A09-H0019: Los Angeles Unified School District’s (LAUSD) Procedures for Calculating
and Remitting Interest Earned on Federal Cash Advances, issued December 2008.

           Recommendation 1.3: Instruct LAUSD to recalculate the estimated interest earned on
           Federal cash balances for the fourth quarter of FY (fiscal year) 1995 through FY 2007
           and later using the actual School Rates for the fourth quarter, and remit any additional
           amounts due to CDE (California Department of Education) and other grantors, as
           permitted under Federal law.

           Recommendation 2.2: Remit to CDE and other grantor agencies, as permitted under
           Federal law, the $1,484,622 ($887,792 + $596,830) that was identified as not included in
           LAUSD's estimated interest earnings due to grantor agencies because of the use of
           netting in its calculations.




2
    We selected all audits with monetary recommendations totaling $5 million or greater.
Final Audit Report
ED-OIG/A19P0004                                                                                   Page 5 of 11

        Recommendation 2.3: Identify other amounts of interest earned on Federal cash
        advances that were not remitted to CDE and other grantor agencies due to the use of
        netting in FY 1995 through FY 2007 and later, and remit the amounts to the agencies, as
        permitted under Federal law. For FY 1995 through FY 2003, the auditors estimated that
        about $2.58 million may have not been remitted due to LAUSD's use of quarterly and
        fiscal year netting.

The Program Determination Letter (PDL) for this audit established a liability of $1.1 million
related to the above recommendations unless the auditee could document that this amount should
be reduced. We found the supporting documentation noted that less than this amount was
actually remitted. According to OCFO officials, the information it had available from LAUSD
to calculate interest due when it issued the PDL was incomplete. OCFO stated it established an
audit liability, but knew that the amount would have to be adjusted after the PDL was
issued. OCFO indicated that LAUSD subsequently determined, and OCFO agreed, that the
liability would be reduced by $220,587 due to the statute of limitations. OCFO accepted the
payment but did not include support in the file that documented the amount of and reason for the
reduced liability.

ACN A02-H0003: Teach for America, Inc. (TFA), Review of the U.S. Department of Education
Discretionary Grant Awards, issued June 2008

        Recommendation 1.3: Provide evidence that TFA implemented a professional
        accounting system that would enable TFA to support, properly document, and monitor its
        ED grant expenditures as required by Federal laws and regulations.

        Recommendation 1.4: Provide evidence that TFA established and implemented adequate
        written policies and procedures for its accounting and specific fiscal internal control
        processes within its organization.

        Recommendation 1.5: Maintain required supporting documentation for costs charged to
        ED’s discretionary grants.

The PDL supported the recommendations and required applicable corrective actions. We noted
that OCFO relied upon annual site visits conducted by the Office of Innovation and Improvement
(OII) 3 between 2008 and 2013 and A-133 audits covering FY 2010-2012 as support for
completed corrective actions. Our review of these reports found insufficient evidence to support
completion of the recommended actions, as follows:

Recommendation 1.3. In the 2008 and 2009 site visits OII noted that TFA was still in the
process of implementing improvements to the accounting system. For example, the 2009 site
visit report noted that TFA used a number of systems, including the grants systems, financial
management system, and payroll system, to account for the sources and uses of Federal funds.
OII found that each system had the capability to record and report the required data but the
systems were not seamlessly integrated. Further, OII noted that the process for coding
obligations in the TFA systems required a significant amount of manual input and thus could be

3
 OII is the office that awarded the grants to TFA. However, OCFO has primary responsibility for resolving and
closing all audits of discretionary grants.
Final Audit Report
ED-OIG/A19P0004                                                                         Page 6 of 11

prone to human error. In the 2013 site visit report, OII noted a number of observations related to
accounting for grant funds, including issues with transactions related to payroll, and goods and
services, which would indicate that corrective actions were outstanding.

Recommendation 1.4. Starting in 2010, and also in 2011, OII found “continued noncompliance
with the TFA policy requiring employee and management/supervisor attention to payroll
procedures prior to processing and payment.” In the 2012 site visit, OII observed, “Documented
TFA policies, procedures, and controls at both site visit locations appeared to be adequate and
consistently applied during the period reviewed.” However, there was no explicit statement in
the site visit reports indicating these actions addressed the required corrective actions specific to
the types of policies and procedures noted in the recommendation.

Recommendation 1.5. In the 2008 site visit report, OII noted that continued followup was
required with regard to supporting documentation of the grantee's expenditures. Between
FY 2009 and 2012, it appeared that site visits continued to examine documentation for
expenditures TFA charged to the grant. However, it was never clear from the reports whether
supporting documentation provided by TFA was adequate. In the FY 2013 site visit report, OII
noted that invoices of payments did not adequately document charges for travel and other direct
costs, which would indicate that corrective action had not been completed.

Additionally, we noted that the A-133 audits did not address prior audit findings and provided no
information to suggest that corrective actions had taken place.

ACN A06-H0002: Review of Project GRAD USA’s Administration of Fund for the Improvement
of Education Grants, issued July 2008

       Recommendation 4.1: Complete the LSVs [Learning and Support Visits] as soon as
       possible, ensuring financial aspects of the reports are addressed.

According to the PDL, OCFO determined that Project GRAD USA completed LSVs for
Houston, Columbus, and Los Angeles in September 2004, October 2007, and December 2007,
respectively. The PDL required that Project GRAD USA submit documentation on two missing
LSVs - Atlanta and Roosevelt. We found no documentation in the audit file to support the
completion of these LSVs. OCFO officials stated that subsequent to the issuance of the PDL,
OCFO determined that corrective action was not required because the auditee was no longer
receiving Federal funding from the Department and was no longer contracting for grant related
work. We found no evidence in the audit file of this determination.

OMB Circular A-50, “Audit Followup,” states that each agency shall establish systems to assure
the prompt and proper resolution and implementation of audit recommendations. These systems
shall provide for a complete record of action taken on both monetary and nonmonetary findings
and recommendations. It further states that corrective action is essential to improving the
effectiveness and efficiency of Government operations and should proceed as rapidly as possible.

The Department’s “Audit Resolution and Followup” (OCFO 1-106), dated January 29, 2013,
states that principal offices are subject to OMB A-50 and are responsible for conducting audit
followup responsibilities for external audits, including monitoring, ensuring implementation of
corrective actions, and requesting audit closure.
Final Audit Report
ED-OIG/A19P0004                                                                      Page 7 of 11

The Handbook, Section III, Chapter 5, Part B, places primary responsibility for following up on
nonmonetary determinations with AOs, who must have systems in place to ensure that
recommended corrective actions are implemented by auditees. Primary responsibility for
following up on monetary determinations rests with OCFO but with assistance from AOs. The
AO is responsible for maintaining an effective system that is documented with written
procedures for following up on corrective actions. The system must include procedures for
ensuring that auditees respond to requests for documentation used to determine whether
appropriate corrective action has been taken, analyzing documentation received from auditees to
determine whether corrective action has been taken, and following up with auditees until all
appropriate corrective action has been taken.

Further, the Handbook requires AOs to establish an official file folder for each audit report that
contains accurate records of all audit followup activities, including all correspondence,
documentation from the auditee substantiating the corrective action taken, results of monitoring
visits, and relevant information from the next year’s audit that reports whether appropriate
corrective action was taken on a prior year finding. Each official file should also contain
documented evaluations or conclusions of the AO that support the adequacy of the corrective
actions taken by the auditee, if not already included in the PDL and/or occurring after the PDL is
issued.

Reasons for Ineffective Audit Followup Process

With regard to timeliness, OCFO stated that there has been an emphasis on the resolution of
audits rather than the followup and closure of audits. Further, OCFO stated that the complexity
of an audit and the appeals process can prolong audit closures. Based upon our review of
information contained in AARTS, we did not find information noting that any of the audit
determinations were appealed or any other explanation for delays to audit closure for the
18 audits included in our scope period that were closed more than 2 years after resolution.

During the exit conference, OCFO officials stated that they have improved their audit closure
processes and that their office is now closing audits more timely. We subsequently reviewed
AARTS data from FY 2009 through FY 2015. 4 We found no evidence that OCFO is closing
audits more timely now versus at the start of our audit period as depicted in Table 2 below.




4
    No audits had been closed in FY 2015 as of June 11, 2015.
Final Audit Report
ED-OIG/A19P0004                                                                        Page 8 of 11

 Table 2. Median Days Between Resolution and Closure for OCFO Audits by Fiscal Year

                                                    Median Number
                        Fiscal Year of Number of of Days Between
                        Audit Closure Closed Audits Audit Resolution
                                                      and Closure

                             2009                5               1,855
                             2010                3                 69
                             2011                3                611
                             2012                6               1,856
                             2013               12               1,429
                             2014                5               1,767

With regard to the lack of supporting documentation for sampled audits, it appears that OCFO
staff did not adequately follow the Department’s policies and procedures requiring
documentation of followup activities. In the case of LAUSD, OCFO acknowledged that in
retrospect, it would have been helpful to include in the audit file more information relevant to the
corrective action, including a copy of correspondence explaining the difference between the PDL
and the actual liability collected. OCFO added that the Department’s Debt and Payment
Management Group was aware of the actual liability required.

In the case of TFA, OCFO stated that OII was assigned to resolve the nonmonetary findings for
the audit. OII conducted the site visits over multiple years as a result of special conditions
placed on TFA. However, according to OCFO, during the course of the site visits, the scope of
OII’s reviews broadened to include more than the OIG recommendations, making it difficult to
determine whether specific corrective actions were taken. OCFO determined that based upon the
information it had, the auditee had taken enough steps to address the corrective actions required
to close the audit.

As stated in the Department’s Handbook, “The effectiveness of the post audit process depends
upon taking appropriate, timely action to resolve audit findings and their underlying causes, as
well as providing an effective system for audit close-out, record maintenance, and followup on
corrective actions.” Not ensuring that corrective actions are taken as quickly as possible allows
identified deficiencies to continue to exist. By not obtaining or maintaining appropriate
documentation to show requested corrective actions were completed, to include any changes to
required corrective actions after PDL issuance, OCFO did not have assurance that identified
deficiencies were corrected. As such, the risk remains that related programs are not effectively
managed and funds are not being used as intended.
Final Audit Report
ED-OIG/A19P0004                                                                        Page 9 of 11

Recommendations

We recommend that the CFO:

1.1    Ensure that staff obtain and maintain adequate documentation to support completion of
       corrective actions and audit followup activities, to include changes to required corrective
       actions after PDL issuance, in accordance with the Department’s external audit
       documentation and file requirements.

1.2    Ensure that staff are following up with auditees until all appropriate corrective actions
       have been taken and that audits are being closed timely.

OCFO Comments

In its response to the draft audit report, OCFO agreed with the finding and recommendations.
OCFO noted that in recent years it has made significant progress improving the timeliness and
documentation with respect to the resolution of audit findings but agreed that it can continue to
improve documentation of corrective actions and audit followup activities. OCFO stated it
recently implemented new features in AARTS to enhance electronic recordkeeping and is in the
process of modifying its policies and procedures that address how OIG external audits are
closed. It noted that the system enhancements and new policies and procedures will enable
OCFO to exercise stronger internal controls, including greater oversight to reasonably ensure
audit findings are corrected.

With respect to timely audit closure, OCFO stated it has taken noteworthy steps to eliminate the
large backlog of open audits and lay the framework for more timely performance moving
forward. It noted it has closed a substantially larger number of audits than reflected in Table 2 of
OIG’s report and provided its own analysis of this activity. It further noted that despite this
progress, it acknowledges the need to ensure more timely closure moving forward and it is in the
process of considering enhancements to monthly audit dashboards to help all Department offices
better manage and close audits timely.

Lastly, OCFO noted that while the median or average number of days from resolution to closure
is an important metric for assessing how rapidly grantees implement correction, this period of
time may last years when a grantee is slow to address significant challenges or return a large sum
of money. It believes a more appropriate measure of the Department’s timeliness for closing
audits is the average number of days from final correction to closure because this part of the
followup process is within the Department’s control.

OIG Response

We appreciate the efforts noted by OCFO to improve the audit followup process, to include
maintaining documentation of corrective actions taken and ensuring timeliness of audit closure.
With regard to the information included in Table 2 of the report, our analysis included only those
audits where OCFO was identified in AARTS as the lead or primary office, as the office
designated as such is responsible for requesting and obtaining approval for audit closure. We
found that the substantial difference noted by OCFO with regard to the number of audits closed
was due to OCFO’s analysis including audits to which it was assigned but to which another
Final Audit Report
ED-OIG/A19P0004                                                                      Page 10 of 11

Department office was assigned as the lead or primary office. With regard to the measure used
to determine timeliness of audit closure, agencies are required to establish a system to ensure the
prompt and proper implementation of audit recommendations. While progress towards
completion of corrective actions is not entirely within the control of the Department, timely and
appropriate followup activities conducted by Department staff can help ensure that auditees are
held accountable for completing corrective actions in a timely manner.

As a result of OCFO’s comments, we did not make any changes to the audit finding or the
related recommendations.



                         OBJECTIVE, SCOPE, AND METHODOLOGY


The objective of our audit was to evaluate the effectiveness of the Department’s process to
ensure that external auditees implement corrective actions as a result of OIG audits. To
accomplish our objective, we gained an understanding of the Department’s and OCFO’s
followup and closure processes for external OIG audits. We reviewed applicable laws and
regulations and Department and OCFO policies and procedures including OMB Circular A-50
and the Department’s Handbook for the Post Audit Process, dated June 22, 2007. We also
reviewed prior OIG audit reports relevant to our audit objective. We conducted interviews with
OCFO staff responsible for following up and closing corrective actions for the audits selected.
We reviewed documentation provided by OCFO staff to support the corrective actions taken for
the recommendations included in our review as identified in the PDL.

The scope of our audit included OIG audits of programs at external entities with monetary or
nonmonetary findings that were assigned to OCFO for resolution and followup and reported by
the Department’s AARTS and the OIG’s Audit Tracking System (ATS) as closed during the
period October 1, 2008 to September 30, 2013.

Overall, we identified a total of 29 closed audits in the universe. We selected a nonstatistical
sample of four audits for our review. The four audits consisted of all audits that had monetary
findings of $5 million or more. We excluded any internal and non-sustained recommendations
included in these audits from our review. Overall, the four audits in our review included a total
of 40 recommendations. A complete listing of the selected audits is included as Attachment 2 to
this report. Because there is no assurance that the nonstatistical sample used in this audit is
representative of the respective universe, the results should not be projected over the unsampled
audits.

As a result of discussions with OCFO during the exit conference, we obtained a listing from
AARTS of audits closed by OCFO between October 1, 2013 and June 11, 2015, subsequent to
our audit scope period. We conducted a limited analysis of these audits to determine the
timeliness of audits closed during this more current time period. 5



5
    See page 7 for the results of this review.
Final Audit Report
ED-OIG/A19P0004                                                                      Page 11 of 11

We relied on computer-processed data obtained from the Department’s AARTS and OIG’s ATS
to identify OIG external audits closed during the scope period. We reconciled the data in these
two systems to ensure that we captured all audits closed during this period. Based on this
assessment, we determined that the computer-processed data were sufficiently reliable for the
purpose of this audit.

We conducted fieldwork at Department offices in Washington, DC, during the period
February 2014 through June 2015. We provided our audit results to Department officials during
an exit conference conducted on June 2, 2015.

We conducted this performance audit in accordance with generally accepted government
auditing standards. Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions
based on our audit objectives. We believe that the evidence obtained provides a reasonable basis
for our findings and conclusions based on our audit objective.



                            ADMINISTRATIVE MATTERS


Corrective actions proposed (resolution phase) and implemented (closure phase) by your office
will be monitored and tracked through the Department’s AARTS. Department policy requires
that you develop a final corrective action plan (CAP) for our review in the automated system
within 30 days of the issuance of this report. The CAP should set forth the specific action items,
and targeted completion dates, necessary to implement final corrective actions on the finding and
recommendations contained in this final audit report.

In accordance with the Inspector General Act of 1978, as amended, the OIG is required to report
to Congress twice a year on the audits that remain unresolved after 6 months from the date of
issuance.

In accordance with the Freedom of Information Act (5 U.S.C. § 552), reports issued by the OIG
are available to members of the press and general public to the extent information contained
therein is not subject to exemptions in the Act.

We appreciate the cooperation given us during this review. If you have any questions, please
call Michele Weaver-Dugan at (202) 245-6941.

                                             Sincerely,


                                             Patrick J. Howard /s/
                                             Assistant Inspector General for Audit
                                                                       Attachment 1

             Acronyms/Abbreviations/Short Forms Used in this Report

AARTS            Audit Accountability and Resolution Tracking System

ALO              Audit Liaison Officer

AO               Action Official

ATS              Audit Tracking System

CAP              Corrective Action Plan

CDE              California Department of Education

CFO              Chief Financial Officer

Department       U.S. Department of Education

FY               Fiscal Year

Handbook         Handbook for the Post Audit Process

LAUSD            Los Angeles Unified School District

LSV              Learning and Support Visit

OCFO             Office of the Chief Financial Officer

OIG              Office of Inspector General

OII              Office of Innovation and Improvement

OMB              Office of Management and Budget

PDL              Program Determination Letter

TFA              Teach for America, Inc.
                                                                           Attachment 2

                      OCFO Audits Included in This Review

  Audit
 Control
 Number                            Audit Report Title
A02H0003   Teach for America, Inc., Review of the U.S. Department of Education
           Discretionary Grant Awards
A09H0019   Los Angeles Unified School District’s Procedures for Calculating and Remitting
           Interest Earned on Federal Cash Advances
A02E0008   U.S. Department of Education Funds Disbursed for New York City Department
           of Education Telecommunication Services
A06H0002   Review of Project GRAD USA’s Administration of Fund for the Improvement of
           Education Grants
                                       OCFO Response to Draft Report                                      Attachment 3


                           UNITED STATES DEPARTMENT OF EDUCATION
                                       OFFICE OF TilE CHIEF FI NANCIAL OFFICER




                                                           SEP 0 8 2015
Michele Weaver-Dugan, Director
Operations Internal Audit Team
U.S. Department of Education
Office of the Inspector General
400 Maryland Avenue, S.W.
Washington, DC 20202- 1500

Dear Director Weaver-Dugan:

Thank you fo r the opportunity to respond and provide comments to the Draft Audit Report, Audit
ofthe Follow-up Process for External Audits in the Office ofthe ChiefFiJ?ancial Officer. The
audit report contained one findin g and two recommendations. We agree with the audit finding
and recommendations.

OCFO is continuously looking for ways to improve our operations, specifically the resolution
and closure of ED-O IG external audits. In recent years, OCFO made significant progress
improving timeliness and documentation, especially with respect to the resolution of audit
findings. Despite thi s progress, we agree that OCFO can continue to improve documentation of
corrective actions and audit follow-up activities. OCFO recently implemented new features in
the Audit Accountabi lity and Resolution Tracking System that enable electronic recordkeeping.
Based on your review, we al so arc in the process of modifying our policies and procedures that
address how ED-OIG external aud its are closed. This will help ensure complete and
comprehensive documentation is maintained in the audit file to support resolution of the audit
finding and verification of corrective action. The system enhancements and new po li cies and
procedures will enable OCFO to exercise stronger internal controls, including greater oversight
to reasonably ensure audit findings are corrected.

With respect to timely audit closure, OC FO has taken noteworthy steps to e liminate the large
backlog of open audits and lay the framework for more timely performance moving forward.
Over the last few years, OCFO has closed a substantia lly larger number of audits than refl ected
on Table 2, page 8 of the draft report. Our analysis indicates that OCFO closed the fo llowing 32
ED-OIG audits from the start ofFY 20 13 through June 11 , 20 15:




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  The Department of Edum tion 's mission is to promote student achievement and preparation fo r g lobal competitiveness by
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Page 2 - Di rector Weaver-Dugan



                    ACN           Audit Issue Date   Closed Date
                 A05D0028           11/ 19/2003      11 12012012
                 A05E001 l            6/4/2004       11/20/2012
                 A07G00 13          11 / 16/2006     11 /20/2012
                  A09J0004           2/26/20 10       1/10/20 13
                  A04J0009          12/14/2009        1111/2013
                  A04J0004          I 1/ 13/2009      I118/20 13
                 A06H00 17          613012009         1/29/20 13
                 A05 0004 1         12/20/2004        6/26/2013
                 A05E0002           12/ 15/2004       6/26/2013
                 A05E00 18          12/ 17/2004       6/26/20 13
                  A0910010          I l/20/2009        7/3/20 13
                 A09F0010            3/1 7/2006      8/29/2013
                 A09H0019            12/212008        9/12/2013
                 A02H0003             6/5/2008        9/25/20 13
                 A0900015           12/ 19/2003       9/27/2013
                 A03K0003           12/2 l/20 I 0    11 /20/20 13
                 /\06C0034            7/8/2003         2/4/20 14
                 A04 K0007          2/ 15/20 12      2/ 11/20 14
                 A04K0005           4/20/201 1       2/12/20 14
                 A02J0009           2/ 19/20 l 0     2/ 18/2014
                 A06H0002            7/2 1/2008      3/26/20 14
                 A09HOO l 4         12/ 18/2007      3/31 /2014
                 A0510009             7/3/2008       3/31 /20 14
                 A09F0020           2/24/2006        3/3 1/20 14
                 A05H0025           11 /25/2008      7/3 0/2014
                 /\0310010          3115/20 10       7/30/20 14
                 A04B0015           912612002        10/30/20 14
                 A07K0002            6/7/2011        2110/2015
                 A05J001 I           1/ 14/20 10     5/ 15/2015
                 A05J0012           2/23/20 10       5/ 15/2015
                 A05K0005            6/9/201 1       5/15/2015
                 A09K000 1          5/13/20 11       5115120 I 5
Page 3 - Director Weaver-Dugan

Despite our progress closing the backlog of open audits, we acknowledge the need to ensure
timely closure moving forward. OCFO is in the process of considering enhancements to our
monthly audit dashboards to help all Department offices better manage and close audits timely.
We note that the closure of an audit cannot occur until the final corrective action has been taken,
which may include the collection of funds, or a decision on an appeal by the grantee. While the
median or average number of days from resolution to closure is an important metric for assessing
how rapidly grantees implement correction, this period of time may last years when a grantee is
slow to address significant challenges or return a large sum of money. We believe a more
appropriate measure of the Departments timeliness is the average number of days from
documented final correction to closure. because this part of the audit follow-up process is within
the Department's control.

Again, we would like to thank you for allowing us to respond to the Draft Audit Report. We
look forward to working with you on making improvements, including establishing new
processes to measure and ensure timely documentation and closure of audits.



                                      Sincerely,




                                    ~":
                                      Director
                                      Financial Improvement Operations