CURRENT ACTIONS WITHIN ED/OIG AFFECTING NON-FEDERAL AUDITS ED TECHNICAL BULLETIN 92-1 SFA refund formula in A133 Compliance Supplement in error. Auditors should use formula set forth in Attachment D of ED Non- Federal Technical Bulletin 92-1 (9/92). Tech Bulletin 92-1 clarifies the calculation of the withdrawal rate formula. This clarification notes that the "Number of students at the end" is to represents number of students remaining in school at the end from the same student population at the beginning. New starts should not be included in the formula. Not-for-profits receiving only SFA funding which elect to do SFA vs A133 audit must include a certification to this effect in writing and submit with the SFA audit. SFA audits are to include audit coverage of activities carried out by Service Organizations. This can be accomplished by: 1. Institution auditor perform audit procedures at the Service Organization. 2. Use/take responsibility for work performed by other auditors. 3. Obtain an audit report prepared by the Service Organizations auditor. Submit along with SFA audit. (AICPA draft Service Organization SOP to be used for FY 92 audits where fieldwork began after October 92.) HIGHER ED REGULATIONS Expect new Education regulations as a result of passage of the Higher Education Reauthorization Act to be issued by the Department by 12/93. SFA Audits for FY 93 to follow 9/90 SFA Audit Guide as updated by ED Non-Federal Technical Bulletin 92-1. FY 94 SFA audits to be conducted on an annual basis and are to include an audit of the institutions entire financial condition and of the institution's compliance with Title IV requirements. NEW AUDIT REQUIREMENTS Guarantee Agency audits to be conducted annually vs biennially (if they currently conduct biennial audits and 2nd year starts before 7/24/92 biennial audit for those 2 years is permitted) (First annual audit to cover period that includes 7/23/92) Lenders (annual) - submitted within 6 months of end of audit period. (For Lenders FY's beginning after 7/23/92) Sec. Markets (annual) - covering servicing and collection transactions. Servicers (annual) - regarding contract with inst., guarantee agency, or lender for administering or servicing Title IV program. * Coverage under Single Audit will satisfy audit requirements for instutions, guarantee agencies, servicers, or secondary markets. New/Revised Audit Guides Lender Review Audit Guide Final Feb 95 SFA Audit Guide Draft Winter 95 Guarantee Agency Audit Guide Draft Spring 95 Servicer Audit Guide Not Yet Started Exceptional Performer Audit Guide Draft/Final Winter 95 Revisions To Compliance Supplements A133 Comp. Supp. (Guarantee Agencies Section) A133 Comp. Supp. (SFA Section) A128 Comp. Supp. (Major Revision - Multi-Agency Effort) Other Issues IPAs auditing without being properly licensed. Findings Not Properly Developed (IAW GAO Standards) to provide necessary information to audit resolution officials. Findings need to be presented in their proper perspective - # in universe, sample size, # exceptions found. Also, findings should include the elements of condition, criteria, cause (when possible), effect, and recommendation. Findings need to identify grant numbers and fiscal years. Changes to SFA Audit Guide will require separate transmission of student names/SSN's for violations noted. PCIE Report on Single Audits to recommend 3 levels of findings: Material - Included in report/Effect on I/C and/or Compliance reports. (Meet GAO Standards) Reportable - Included in report. (Meet GAO Standards) Minor - Report separately to management (In writing). Attached to SA report (Not required to meet GAO Standards). Findings where effect is under $2,000 or if not quantifiable, error rate is 2% or less. Significant Findings Reported by IG's in Recent Semi-Annual Report to Congress (Handouts) SFA PROGRAMS: ACN Nature of Finding Effect 02-10017 Unreasonable Credit Hours Assigned When Converting From Clock To Credit Hours $ 5.7m (SFA II-5) 02-20075 Students not meeting SAP standards $ 1.3m (SFA II-6, II-8) 02-21215 Lack of documentation: $ .73m - Loan applications (SFA II-8) - Student need (SFA II-7, IV-4) - Statements of Ed. Purpose (SFA II-6) 02-31009 Unauthorized use of PELL funds (SFA III-1) $ 2.3m Programs not licensed by ED (SFA II-5, TB pg 4) Attendance records not maintained (SFA VIII-5) Noninst. portion of PELL not paid 03-10002 Violations pertaining to: $ .8m - Administrative capability (SFA II-2) - Admission standards (TB pg 5) - SAP (SFA II-8) - Financial Aid Transcripts (SFA II-9) - Student eligibility (SFA II-6, V-2, TB pg 5) - Refunds not made (SFA II-10) 04-23223 Organization-wide costs charged direct $ .6m Costs not supported by time records (SFA II-4) Drawdowns after grant period 05-20006 Overstatment of program length (SFA II-5) $ 2.5m Excess cash balances/Refunds not made (SFA II-2,11) 05-21707 Student/Institutional Eligibility $ 2.1m (SFA II 5-7, III-2, TB pgs 3-5) Lack of documentation/SAP (SFA II-8) 06-20002 Overstating attendance costs (SFA II-7) $ 5.6m Ineligible students (SFA II-6, TB pg 5) Excessive withdrawal rates (SFA II-5, TB pg 4) 06-31030 Administrative capability (SFA II-7) TBD Perkins used for general oper. exp. (SFA V-1) Excessive default rate (53 %) ACN Nature of Finding Effect 07-10076 Disbursement requirements not met $ 4.3m (SFA II 9-10, III-3, V-3, VIII-3) SAP violations (SFA II-8) Excessive assignment of credit hours (SFA II-5) Misrepresentation to students High withdrawal/default rates (TB pg 4) 09-21330 Refunds not made (SFA II-11, VIII-5) $ .63m Unsupported costs (SFA II-7) Improper doc. of ATB testing (SFA II-6, TB pg 5) ELEMENTARY/SECONDARY/OTHER PROGRAMS: 01-20351 Fail to apply restricted indirect cost rate $ .96m 01-23148 Salaries not supported by CAP $ 1.0m 01-23237 Improper personnel charges $ 1.4m Expenditures not benefiting program MOE Violations for VE program Non-documented salary charges 02-23049 Overpayments to employees $ .98m 03-23136 Maintenance of effort violations $ 4.1m Undocumented enrollment data $ 2.3m 03-23212 Failure to document receipt/review $50m of subrecipient audits 03-23238 Failure to document receipt/review $50m of subrecipient audits 04-23147 Lack of documentation/records $ 1.2m Duties not related to Federal program 04-23165 Duties not related to Federal program $ .5m 04-23203 Drug Free Schools Program - Reallocation $ .61m of unobligated funds Excess drawdowns 04-23211 Drug Free Schools Program - I/C problems $ 4.5m Overcharge of Cost allocation plan 05-23444 Indirect costs improperly charged $ .8m Improper settlement costs Management Improvement Reports MIR 93-02 Guarantee Agency affiliations with organizations they are required to monitor MIR 93-03 Funds for postsecondary vocational education provide little assurance training will help students obtain employment (job availability) Inspections N-0020922 Promotions of financial aid. Improper administration of ATB testing. Incorrect payment periods. Refund violations. Excessive default rate. Improper Asset/ Liabilities ratio. N-0020925 Course length requirements. Lack of administrative capability N-0020926 Deficient ATB determiniations. Commissioned sales staff. Misrepresentations to students. Refund procedures. Program length. Administrative capability. N-0020927 Administrative capability. Unethical recruitment/ enrollment activities. Institutional eligibility. Refunds to students N-0020928 ATB determinations. Default reduction measures. Refund procedures. Calculation of awards. Student eligibiliity. Forged loan applications. Unethical recruiting. Enrollment/withdrawal records.