District of Columbia: Financial and Program Management
Improvements Needed for Tuition Assistance Grant Program
(28-OCT-05, GAO-06-14).
Congress created the District of Columbia Tuition Assistance
Grant (DCTAG) program in 1999 to provide D.C. college-bound
residents with greater choices among institutions of higher
education by affording them the benefits of in-state tuition at
state colleges and universities outside the District of Columbia.
Congress appropriated $17 million annually for fiscal years 2000
through 2004 and $25.6 million for fiscal year 2005. GAO was
asked to assess whether (1) adequate controls exist over the use
of federal funds, including processes to determine institution
and student eligibility, manage the cash needs of the program,
and pay administrative expenses; (2) funds for the DCTAG program
are accounted for separately from the District's general fund;
and (3) administrative expenses for the program charged against
federal funds are within the 7 percent limit of the total amount
appropriated for the program.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-06-14
ACCNO: A40683
TITLE: District of Columbia: Financial and Program Management
Improvements Needed for Tuition Assistance Grant Program
DATE: 10/28/2005
SUBJECT: Administrative costs
Aid for education
Appropriated funds
College students
Colleges and universities
Education or training costs
Education program evaluation
Eligibility determinations
Federal funds
Funds management
Higher education
Internal controls
Municipal governments
Program evaluation
Program management
Students
Appropriation limitations
Program costs
D.C. Tuition Assistance Grant Program
******************************************************************
** This file contains an ASCII representation of the text of a **
** GAO Product. **
** **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced. Tables are included, but **
** may not resemble those in the printed version. **
** **
** Please see the PDF (Portable Document Format) file, when **
** available, for a complete electronic file of the printed **
** document's contents. **
** **
******************************************************************
GAO-06-14
* Report to Congressional Committees
* October 2005
* District of Columbia
* Financial and Program Management Improvements Needed for Tuition
Assistance Grant Program
* Contents
* Results in Brief
* Background
* Controls over Determining Institution Eligibility Were Generally
Operating Effectively, but Controls over Student Eligibility Need
Improvement
* Controls over Institution Eligibility and Payments Are
Generally Effective
* Controls over Refund Processing Are Generally Effective
* The SEO Did Not Have Sufficient Documentation to Show
Whether Internal Controls over Student Eligibility Are
Operating Effectively
* Lack of Social Security Number Verification
* Required Documents Proving District Domicile Were Not
Available for Many DCTAG Participants
* How the SEO Determined Eligibility Was Unclear for
Applicants with Unusual Circumstances
* High Management Turnover at SEO Affected the Control
Environment and Program Operations
* DCTAG Funds Are Being Accounted for Separately, but Routine Bank
Reconciliations Are Needed
* DCTAG Funds Accounted for in Dedicated Accounts
* Reconciliations Not Performed
* The SEO's Forecasting Method to Project Future Funding Needs Has
Not Been Reviewed for Methodological Soundness
* Total Amount of the Administrative Expenses for the DCTAG Program
Unknown
* Conclusions
* Recommendations for Executive Action
* Agency Comments and Our Evaluation
* Scope and Methodology
* Comments from the Mayor of the District of Columbia
* Comments from the Chief Financial Officer of the District of Columbia
* GAO Contact and Staff Acknowledgments
United States Government Accountability Office
Report to Congressional Committees
GAO
October 2005
DISTRICT OF COLUMBIA
Financial and Program Management Improvements Needed for Tuition Assistance
Grant Program
On November 2, 2005, this report was reposted to the Web because a
correction was made in the title of Appendix II.
a
DISTRICT OF COLUMBIA
Financial and Program Management Improvements Needed for Tuition
Assistance Grant Program
What GAO Found
The District's State Education Office (SEO) has taken actions to put
program and financial management procedures in place, but DCTAG is at risk
in the areas of student eligibility and program budgeting. The District of
Columbia Tuition Assistance Grant program has effective controls for
determining the eligibility of higher education institutions to
participate in the program and for processing institutions' invoices for
payment. Other controls, however, were less effective. SEO did not have
sufficient documentation to demonstrate that some students approved for
DCTAG program funds were eligible because documents required to be
submitted by applicants were not available. The most commonly missing
documents were those intended to establish domicile in the District.
Moreover, SEO officials were not verifying applicants' Social Security
numbers, which should be used to establish citizenship. Furthermore, SEO
did not have documentation or procedures for determining the eligibility
of applicants with special circumstances. The SEO has experienced
significant turnover at the top management levels since it was created by
legislation in 2000. High management turnover affects an organization's
control environment and its ability to plan, direct, and control
operations to effectively and strategically achieve its mission.
The District established dedicated cash accounts for the DCTAG program,
separate from the District's general fund, as required by law.
Reconciliations between these dedicated bank accounts and the District's
financial management system, however, had not been performed prior to our
review. At our request, the Office of Finance and Resource Management
reconciled the dedicated bank accounts and discovered that the District's
general fund had not been reimbursed for approximately $8.3 million for
prior-period cash expenditures made from the District's general fund on
behalf of the DCTAG program. Also, about $2.7 million in interest earned
since the DCTAG-dedicated accounts were established had not been recorded
as funds available for the program.
The District's forecasting method to project the number of students
eligible to receive DCTAG funds in current and future years has not been
reviewed for methodological soundness. While projections are based on the
numbers of students that apply for the first time and those who submit
renewal applications during a fiscal year, these projections have not been
measured against actual results to include the historical experience of
the program.
While the District reported that it used 5.3 percent ($0.9 million) of the
federal funds during fiscal year 2004 for DCTAG program administrative
expenses, the District does not track the full amount of administrative
expenses incurred for the program. District officials estimate that
operating the DCTAG program costs more than the 7 percent legislatively
set limit, and these additional costs were absorbed using District funds.
United States Government Accountability Office
Contents
Letter 1
Results in Brief 4 Background 7 Controls over Determining Institution
Eligibility Were Generally
Operating Effectively, but Controls over Student Eligibility Need
Improvement 10 DCTAG Funds Are Being Accounted for Separately, but Routine
Bank Reconciliations Are Needed 19 The SEO's Forecasting Method to Project
Future Funding Needs Has
Not Been Reviewed for Methodological Soundness 22 Total Amount of the
Administrative Expenses for the DCTAG
Program Unknown 23 Conclusions 24 Recommendations for Executive Action 24
Agency Comments and Our Evaluation 25
Appendixes
Appendix I: Scope and Methodology 29 Appendix II: Comments from the Mayor
of the District of Columbia 33 Appendix III: Comments from the Chief
Financial Officer of the District of Columbia 38 Appendix IV: GAO Contact
and Staff Acknowledgments 41
Table 1: DCTAG Funds Available and Expended by Fiscal Year
Table
(Dollars in millions)
Figure 1: Number and Percentage of DCTAG Students by Ward for
Figures
Academic Year 2004-2005 8 Figure 2: DCTAG Payments Made during Academic
Year 2004-2005
by Type of Institution 9
This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed in
its entirety without further permission from GAO. However, because this
work may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this material
separately.
A
United States Government Accountability Office Washington, D.C. 20548
October 28, 2005
The Honorable Sam Brownback Chairman The Honorable Mary Landrieu Ranking
Minority Member Subcommittee on the District of Columbia Committee on
Appropriations United States Senate
The Honorable Joe Knollenberg Chairman The Honorable John W. Olver Ranking
Minority Member Subcommittee on Transportation, Treasury,
and Housing and Urban Development, The Judiciary,
District of Columbia and Independent Agencies Committee on Appropriations
House of Representatives
The District of Columbia College Access Act of 1999 (1999 Act), as amended
by the District of Columbia College Access Improvement Act of 2002 (2002
Amendment),1 established a program to provide eligible college-bound
students who are domiciled in the District of Columbia with greater
choices among institutions of higher education. The program was
established under the administrative control of the Mayor of the District
of Columbia and is commonly referred to as the District of Columbia
Tuition Assistance Grant (DCTAG) program. Day-to-day DCTAG program
operations are carried out through the District of Columbia government's
State Education Office (SEO).2
The DCTAG program is funded by the "Federal Payment for Resident Tuition
Support" to the District of Columbia that, beginning with fiscal year
2000, has been included in the annual District of Columbia appropriations
1Pub. L. No. 106-98, 113 Stat. 1323 (Nov. 12, 1999), as amended by Pub. L.
No. 107-157, 116 Stat. 118 (Apr. 4, 2002), D.C. Code, S:S: 38-2701 through
38-2706 (2001 Ed., 2005 Pocket Part). Policies and procedures for the
administration of the DCTAG program are set forth in D.C. Mun. Regs. tit.
29, ch. 70.
2See generally, D.C. Code, S:S: 38-2601 through 38-2602, (2001 Ed.),
relating to the responsibilities of the State Education Office.
act. The federal payment remains available until expended. For fiscal
years 2000 through 2004, $17 million in federal payments were appropriated
annually for the DCTAG program.3 The amount of the federal payment was
increased to $25.6 million for fiscal year 2005.
Under the DCTAG program, the District pays the difference between instate
and out-of-state tuition, within certain capped amounts. The District also
provides grants for students to attend private Historically Black Colleges
and Universities (HBCU) nationwide as well as private institutions in the
District of Columbia metropolitan area. As provided in the DCTAG
legislation, students attending a participating public institution can
receive a tuition grant of up to $10,000 per year (calculated as the
difference between in-state and out-of-state tuition rates), with a total
lifetime cap of $50,000 per student. D.C. residents attending private
colleges and universities, including HBCUs, may receive an annual grant
award of up to $2,500 annually, with a total lifetime cap of $12,500 per
student.
The House Committee on Appropriations directed that we review the DCTAG
program.4 As agreed to with your office, our specific objectives were to
assess whether (1) adequate controls exist over the use of federal funds,
including processes to determine institution and student eligibility,5
manage the cash needs of the program, and pay administrative expenses;
(2) funds for the DCTAG program are accounted for separately from the
District's general fund in dedicated cash accounts;6 and (3)
administrative expenses charged against federal funds for the program are
within the 7 percent limit of the total amount of federal funds
appropriated for the
3Before rescission.
4See, H.R. Rep. No. 108-214, at 10 (2003) and H.R. Rep. No. 108-401, at
647 (2003).
5Eligible institutions include public institutions, public and private
Historically Black Colleges and Universities nationwide, and private
institutions in the District of Columbia metropolitan area. Eligible
institutions may participate in the DCTAG program only if the institution
has formally signed a Program Participation Agreement (PPA), which is also
signed by the Mayor of the District of Columbia.
6The 2002 Amendment requires that a dedicated account be established for
the DCTAG program consisting of (1) federal funds appropriated to carry
out the program, (2) District of Columbia appropriated funds for the
program, (3) any unobligated balances from amounts made available to the
DCTAG program from previous fiscal years, and (4) interest earned on the
balances in the dedicated account. D.C. Code, S: 38-2705 (h) (2001 Ed.,
2005 Pocket Part).
DCTAG program. We also reviewed projections for future program funding
requirements and the methodologies used to formulate those projections.
To determine whether adequate controls were in place over the use of
federal funds, we identified the internal controls built into the
processes through interviews, reviews of policies and procedures, and
walk-throughs of transactions. In addition, we selected statistical
samples of tuition assistance payments made during fiscal year 2004 to
test internal controls over the processes in place to test institution and
student eligibility, as defined by the legislation and regulations, and
the related disbursements.7 To review the District's accounting for DCTAG
program funds, we reviewed the procedures for (1) maintaining the
dedicated cash accounts for the DCTAG program and (2) reimbursing the
District's general fund for disbursements made on behalf of the program.
We also inquired about the frequency of reconciliations performed and
reviewed the differences identified as a result of the District's
first-ever reconciliation of the dedicated DCTAG bank accounts to the
balances shown in the District's financial management system. To assess
whether administrative expenses charged against federal funds for the
program were within the established 7 percent limit of the total amount of
federal funds appropriated for the DCTAG program, we obtained information
concerning the types and amounts of administrative expenses incurred to
operate the DCTAG program, and reviewed the procedures followed by the
District intended to provide safeguards that the 7 percent limit on these
expenses was not exceeded. We took several steps to assess the reliability
and reasonableness of the DCTAG program disbursement transactions for
fiscal year 2004, in the District's financial management system, System of
Accounting and Reporting (SOAR).8 Overall, we found the disbursement
transaction data to be sufficiently complete and reliable for the purpose
of testing the controls over institution and student eligibility and for
documenting the total amount of DCTAG program administrative expenses paid
with federal funds for fiscal year 2004. We conducted our work from March
2004 through June 2004 and from February 2005 through July 2005 in
accordance with U.S. generally accepted government auditing standards. See
appendix I for more details on our scope and methodology.
7See appendix I for statistical sampling details. 8See appendix I for
details on data reliability procedures.
Page 3 GAO-06-14 District of Columbia
Results in Brief
The SEO has taken actions to put program and financial management
procedures in place, but DCTAG is at risk in the areas of student
eligibility and program budgeting. Internal controls for determining
whether applicants are eligible for program funds are not adequately
designed and are not operating as prescribed in the DCTAG legislation and
regulations. SEO's controls for determining the eligibility of
institutions to participate in the DCTAG program and its procedures for
processing invoices submitted by institutions for payment and handling
refunds received by the District were operating effectively. Other
controls, however, were less effective.
We found that (1) institutions receiving DCTAG program funds were eligible
to participate and had signed Program Participation Agreements (PPA) and
(2) SEO's procedures for processing invoices submitted by the institutions
for payment and recording refunds received were effective for verifying
that payments were based on adequate information and that students were
not exceeding the annual or lifetime maximum amounts established by
legislation. However, it was unclear whether SEO had obtained sufficient
documentation to establish that some students approved for DCTAG program
funds were in fact eligible because required documents to be submitted by
applicants were not in the student files at the time of our review. On the
basis of the results of our work, we estimated that documentation for 35.6
percent of the 3,094 students receiving DCTAG funds was inadequate to
demonstrate their eligibility to participate in the DCTAG program.9 The
most commonly missing documents were those intended to establish that the
student was a resident of the District. Without adequate documentation in
the applicants' files, we could not determine whether some students
receiving tuition assistance were eligible to receive DCTAG program funds.
Moreover, SEO officials are not verifying applicants' Social Security
numbers, which are used to establish citizenship-as required by the 2002
Amendment.10 SEO also did not have an established procedure for
determining and documenting the
9On the basis of the results of our work, we estimate at the 95 percent
confidence level that the documentation for 35.6 percent of the 3,094
students receiving DCTAG payments was inadequate to demonstrate
eligibility to participate in the program, with the range of estimates of
student files lacking such documentation falling between 21.8 percent and
51.3 percent.
10D.C. Code S:38-2702 (c) (2) (C) (2001 Ed., 2005 Pocket Part).
Page 4 GAO-06-14 District of Columbia
eligibility of applicants with special circumstances-those who were unable
to submit the required documents with their application.11
The SEO has experienced significant turnover at the top management levels
since it was created by legislation in 2000. Since the inception of the
DCTAG program, there have been four individuals serving as directors of
the program and two directors of the SEO. High management turnover affects
an organization's control environment by disrupting management's ability
to plan, direct, and control operations to effectively and strategically
achieve its mission.
The District has established dedicated cash accounts to segregate DCTAG
program amounts from other District funds as required by law. However, we
found that reconciliations were not being done between the balances in
these bank accounts and the balance for the DCTAG program as recorded in
SOAR. Reconciliations are a key internal control and are necessary to
safeguard assets and track the expenditure of federal funds. Given the
District's procedures for reimbursing the District's general fund
periodically for disbursements made on behalf of the DCTAG program,
reconciliations are particularly crucial to ensuring that the reimbursed
amounts are correct. At our request, officials in the District's Office of
Finance and Resource Management (OFRM), which falls under the Office of
the Chief Financial Officer, performed a reconciliation of the balances in
the dedicated bank accounts with the balances as recorded in SOAR. In
doing this reconciliation, they discovered that the District's general
fund had not been reimbursed for about $8.3 million from the DCTAG bank
accounts and that approximately $2.7 million in interest earned since the
DCTAG-dedicated bank accounts were established had not yet been budgeted
as funds available for the program.
On a related matter, the District's forecasting method to estimate the
number of students and the average cost per student for those
participating in the DCTAG program each year is based on assumptions that
have not been reviewed against historical experience or tested against
available information, such as the numbers of students in D.C. high
schools. While SEO officials recognize the need to develop a sound
methodology for
11D.C. Mun. Regs tit. 29, S:7002.7 addresses situations in which
applicants with special circumstances (e.g., another person exercises
parental responsibilities for an applicant) and provides that the District
may determine whether the applicant meets domicile requirements on a
case-by-case basis.
Page 5 GAO-06-14 District of Columbia
making these projections, their focus has been on the recruitment of
students and colleges and universities to participate in the program. They
told us that they have not yet had an opportunity to develop the
methodology necessary to project current and future funding needs based on
District statistics, such as the numbers of students in D.C. high schools,
the historical experience rates of numbers of students that continue on to
college, and the rate at which students return to college following their
freshman year. With the development of a sound methodology for projecting
the numbers of eligible applicants applying for DCTAG program funds, both
Congress and the District will be able to make more informed decisions
about funding needs for the program and how to best use available
resources.
While the District reported that it used 5.3 percent ($0.9 million) of its
federally appropriated funds during fiscal year 2004 for DCTAG program
administrative expenses, the District does not track the full amount of
administrative expenses incurred for the program. District officials
estimate that operating the DCTAG program costs more than the 7 percent
legislatively set limit,12 and these additional costs are absorbed using
District funds. During our review of DCTAG expenditures for fiscal year
2004, we identified nine transactions amounting to $34,510 of non-DCTAG
expenditures for fiscal year 2004 that had been charged to the program in
error. Once these errors were identified, District officials made
correcting entries for these expenses in SOAR.
The Mayor and Chief Financial Officer generally agreed with our findings
and recommendations and explained actions completed, underway, and planned
for implementing them. The "Agency Comments and Our Evaluation" section at
the end of this report discusses the program office's views that many of
the reported problems were start-up issues and have been largely resolved.
We offer a different perspective in that these are ongoing issues for
which the eligibility of students in their second, third, or fourth year
of participating in the program is not fully documented. The written
comments are reprinted in appendixes II and III, respectively.
12The 2002 Amendment provides that the District may not use more than 7
percent of the total amount of federal funds appropriated for the DCTAG
program since enactment of the 1999 Act for administrative expenses. D.C.
Code, S:S: 38-2705 (b) (1) (2001 Ed., 2005 Pocket Part).
Page 6 GAO-06-14 District of Columbia
Background
The 1999 Act, as amended, establishes a program to provide college-bound
students domiciled in the District of Columbia with greater choices among
institutions of higher education by affording them the benefits of
in-state tuition at state colleges and universities outside the District
of Columbia. The District is authorized to use the federal payment for
residential tuition support to pay institutions the difference between
in-state and out-of-state tuition on behalf of eligible students, within
certain capped amounts.13 The District also provides grants for eligible
students to attend private HBCUs nationwide as well as private
institutions in the District of Columbia metropolitan area. The University
of the District of Columbia (UDC)14 is not eligible to participate in the
DCTAG program because in-state tuition rates are already available for
D.C. residents attending that institution. For academic year 2004-2005,
4,731 students participated in the DCTAG program, attending about 650
different public or private colleges and universities. Figure 1 shows the
distribution of DCTAG-approved applicants for the academic year 2004-2005
by ward in the District of Columbia. The District disbursed about $28.6
million in DCTAG funds for academic year 2004-2005 to public and private
colleges and universities. Figure 2 shows the distribution of DCTAG
program payments for the 20042005 academic year by type of institution.
13There are annual and lifetime caps on grant funds available to D.C.
residents, depending on whether they attend public or private universities
and colleges.
14The District of Columbia has only one postsecondary institution, the
University of the District of Columbia (UDC), which was created in 1977
when the D.C. Teacher's College, the Federal City College, and the
Washington Technical Institute were combined into a single institution.
UDC currently offers certificates, 2-year, 4-year, and graduate degree
programs.
Page 7 GAO-06-14 District of Columbia
Figure 1: Number and Percentage of DCTAG Students by Ward for Academic
Year 2004-2005
Source: GAO based on data from the District of ColumbiaState Education Office.
Figure 2: DCTAG Payments Made during Academic Year 2004-2005 by Type of
Institution
$1.1 million (3.8%) - Private, non-profit
$1.3 million (4.5%) - Private, non-profit HBCU
$11.2 million (39.2%) - Public, HBCU
$15.0 million (52.5%) - Public
Source: GAO, based on data provided by the District of ColumbiaState
Education Office.
D.C. students attending a participating public college or university15 can
receive tuition assistance of up to $10,000 per year (calculated as the
difference between in-state and out-of-state tuition rates), with a total
cap of $50,000 per student. D.C. residents attending private institutions
in the District of Columbia metropolitan area and private HBCUs
nationwide16 may receive an annual grant award of up to $2,500 per year,
with a total cap of $12,500 per student. DCTAG program funds can be
applied only to a student's tuition and fee costs and must not supplant
other grant funding that otherwise would be provided to eligible students.
As a result, DCTAG program funds are considered as the final or "last
dollar" that is added to a student's financial aid package. Because this
assistance can be applied only to tuition and fees, other costs associated
with college attendance, such as room and board fees, books, and
transportation costs, must be paid by other means.
15An eligible institution may participate in the grant program only if the
institution has formally signed a Program Participation Agreement (PPA),
which is also signed by the Mayor of the District of Columbia.
16The 2002 Amendment expanded the range of private HBCUs that District of
Columbia residents could attend from those located in Maryland and
Virginia to nationwide. DC Code S: 38-2704 (c) (1) (B) (2001 Ed., 2005
Pocket Part).
Page 9 GAO-06-14 District of Columbia
For fiscal years 2000-2004, Congress appropriated $17 million annually for
the DCTAG program and appropriated $25.6 million for fiscal year 2005.17
This funding remains available until expended. Table 1 shows the amount of
funds available and the use of those funds for grants and administrative
expenses.
Table 1: DCTAG Funds Available and Expended by Fiscal Year (Dollars in millions)
Fiscal year 2000 2001 2002 2003 2004 2005a
Funds available
Federal appropriation amount $17.0 $17.0 $17.0 $17.0 $17.0 $25.6
Less rescission amount -0.1 0.0 0.0 -0.1 -0.1 -0.2
Carryover from prior year 0.0 16.3 22.7 23.2 17.0 5.5
Cumulative interest earnedb - - - - - 2.7
Total funds available $16.9 $33.3 $39.7 $40.1 $33.9 $33.6
Funds expended
Grant disbursements 0.0 9.1 15.4 22.0 27.5 23.0
Administrative expenses 0.6 1.5 1.1 1.1 0.9 0.6
Total funds expended $0.6 $10.6 $16.5 $23.1 $28.4 $23.6
Funds remaining at year-end $16.3 $22.7 $23.2 $17.0 $5.5 $10.0
Controls over Determining Institution Eligibility Were Generally Operating
Effectively, but Controls over Student Eligibility Need Improvement
Source: GAO based on data from the District of Columbia Office of Finance
and Resource Management. a2005 figures are as of June30, 2005. bThe
District did not recognize interest earned as funds available for the
program until 2005.
On the basis of our detailed reviews of processes and supporting
documentation, we concluded that SEO's controls over determining
institution eligibility were generally operating effectively. Institutions
that we tested that had received DCTAG program funds met eligibility
requirements and had signed PPAs. In addition, these institutions were
providing the required information to SEO along with their invoices. We
also found that SEO reviewed the accompanying student information prior to
approving the invoices for payment. However, we found that SEO's controls
over determining student eligibility were less effective because some of
the documents required to determine if applicants were eligible were not
in the files. Missing paperwork included required documents,
17Before rescission.
Controls over Institution Eligibility and Payments Are Generally Effective
such as photocopies of Social Security cards and documents proving
domicile in the District of Columbia. Moreover, even when photocopies of
Social Security cards were provided, we found that SEO officials were not
taking steps to ensure the validity of applicants' Social Security
numbers. Furthermore, we found that SEO had no process in place to
document how eligibility determinations were made for those applicants
with unusual or extraordinary circumstances that precluded them from
providing the required documents. We also found that the high management
turnover that occurred at the SEO since the DCTAG program's inception
affected the organization's control environment and program operations.
On the basis of our detailed review of processes and supporting
documentation of college and university invoices paid by the District with
DCTAG program funds, we concluded that (1) the billing institutions were
eligible to participate in the DCTAG program and (2) the required
information was provided with the invoices. To test specific controls at
SEO and OFRM, we selected a statistical sample of payment transactions
made during fiscal year 2004 totaling about $11 million from DCTAG
disbursement transactions of approximately $28 million.18
As mentioned, institutions eligible to participate in the DCTAG program
include public colleges and universities as well as public and private
HBCUs nationwide, and private colleges and universities in the District of
Columbia metropolitan area. An eligible institution must have signed a
PPA, which is also signed by the Mayor of the District of Columbia, to
participate in the DCTAG program.19 The PPA states that the institution
must follow the DCTAG program regulations and all provisions of the
legislation that established the program. Once the SEO has a signed PPA on
file, the District makes grant payments directly to that institution for
the approved applicants in the DCTAG program attending that institution.
Payments for each academic period are based on invoices submitted by the
institutions to the SEO. Each payment period, institutions must submit a
roster of eligible students for payment containing (1) the institution's
Tax Information number and Dun and Bradstreet number; (2) the student's
18See appendix I for statistical sampling details.
19For students interested in attending an eligible institution that has
not yet signed a Program Participation Agreement (PPA), SEO officials will
contact the school and request a signed PPA.
Page 11 GAO-06-14 District of Columbia
Controls over Refund Processing Are Generally Effective
name, Social Security number, permanent address, enrollment status, amount
of financial aid received, amount of tuition and fees charged for the
payment period, the amount that would be charged to an in-state student
for the payment period, and the award amount that should be paid to the
institution for the payment period for each student on the roster. When
the SEO receives an invoice, it verifies that both the institution
submitting the invoice and all students listed on the roster are eligible
for the DCTAG program funds, before payment of the invoice. In addition,
the SEO determines the maximum payment allowed to each student considering
program annual and lifetime limits. Invoices are then processed for
payment by the District's Office of Finance and Resource Management (OFRM)
and recorded in SOAR.
We reviewed the supporting documentation to assess whether (1) the
institution met the criteria for an eligible institution as defined in the
law and regulations, (2) the SEO had a signed and dated PPA on file for
that institution at the time of the payment, (3) the information on the
invoice submitted by the institution agreed with the information on the
approved invoice sent to OFRM for payment, (4) payment of the invoice was
authorized and dated by an appropriate individual in OFRM, and (5) all
information shown on the paid invoice agreed with the transaction amount
and information recorded in SOAR. We did not note any exceptions or
discrepancies for these tests, and as a result, concluded that the SEO has
effective controls for determining institution eligibility and processing
payments to those institutions for the DCTAG program.20
Occasionally, the SEO receives refunds of DCTAG grant funds from
institutions due to student withdrawals from college or other factors,
such as a reduction in a student's course load below half-time. When
refunding all or part of a tuition grant, institutions are required to
submit certain information with the refund check, including the students'
names, Social Security numbers, brief explanations for the refunds, and
the academic periods to which the refunds relate. We examined the
documentation relating to 16 refunds, which represented the entire
population of refunds, received by the District during fiscal year 2004.
In reviewing this documentation, we verified that (1) all of the required
information was
20On the basis of the results of our tests, we are 95 percent confident
that the net upper error limit overstatement of improper/incorrect
disbursements approved for payment is not more than $1.38 million. See
appendix I for statistical sampling details.
Page 12 GAO-06-14 District of Columbia
The SEO Did Not Have Sufficient Documentation to Show Whether Internal
Controls over Student Eligibility Are Operating Effectively
submitted with the refund check and the paperwork was signed and dated,
(2) the receipt of the refund was posted to the student's account in SEO's
Automated Information System (AIS) so that the student's annual and
lifetime totals were correct, and (3) the refund amounts shown on the
paperwork from the institutions agreed with the total refund amount21
deposited back to the District's general fund and recorded in SOAR by
OFRM.22 For these 16 transactions, we found that all the required
information was submitted and the refunds were properly recorded in SOAR.
We also found that students' accounts were correctly adjusted for the
refunded amounts. We did not audit to determine whether all refunds due
the District were paid. Refunds are initiated solely by the participating
institutions unless the SEO receives information indicating that a program
participant was not entitled to some or all of the tuition assistance
received.
The SEO did not have sufficient documentation in the applicants' files we
reviewed to demonstrate that applicants approved for DCTAG funds met the
criteria in the DCTAG legislation and program regulations. On the basis of
the results of our work, we estimated that documentation for 35.6 percent
of the 3,094 students receiving DCTAG funds was inadequate to demonstrate
their eligibility to participate in the DCTAG program.23 For example, we
noted that some first-time applicants did not include a photocopy of their
Social Security card with their application as required by DCTAG program
regulations. We also found that the SEO was not verifying the Social
Security numbers of DCTAG applicants which is used to establish
citizenship, as required by the 2002 Amendment. In addition, we found that
some applicants' files did not contain records sufficient to establish
that the applicant was domiciled in the District of Columbia. Without
adequate documentation in the applicants' files, we could not
21In reviewing the refund paperwork, we found that several institutions
had issued refunds covering multiple students.
22Refunds are recorded as credits against DCTAG program expenditures. When
the District's general fund is reimbursed for payments made for the DCTAG
program, the refunded amounts are netted against the program expenditures
for that period.
23On the basis of the results of our work, we estimate at the 95 percent
confidence level that the documentation for 35.6 percent of the 3,094
students receiving DCTAG payments was inadequate to demonstrate
eligibility to participate in the program, with the range of estimates of
student files lacking such documentation falling between 21.8 percent and
51.3 percent.
determine whether some students were eligible to receive DCTAG tuition
grants.
We selected a random sample of students who received DCTAG funds during
fiscal year 2004 from the population of students that were included in the
grant payment transactions that we tested.24 For each of the students, we
reviewed the application submitted for the academic year, which was
indicated on the institutional invoice for that student. If that
application was a renewal application, we also reviewed that applicant's
initial application for DCTAG funds as well because the initial
application would have been required to include key documents as evidence
of the applicant's identity and domicile in the District. Using the
relevant application for each year, we tested whether the (1) applications
were completed properly, (2) applications were signed and dated, and
(3) required documents were in the file with the application. From the
student files we reviewed, we noted 16 exceptions.25 More specifically, we
determined that 14 of the 45 sample files were missing required
documentation-such as photocopies of Social Security cards and utility
bills demonstrating domicile in the District of Columbia. We also found 1
of the 45 sample files where a student's application for academic year
20022003 was missing and another file where a student had not signed the
affirmation statement on the renewal application for academic year
20032004 as required. In addition, we found that SEO officials did not
have procedures to verify Social Security numbers-which provide a key
verification for eligibility to receive federal funds for education. We
could not determine whether the applicants had not provided all the
requisite documentation or whether they had done so and SEO had not
retained it in the relevant files.
24See appendix I for statistical sampling details.
25On the basis of the results of our work, we estimate at the 95 percent
confidence level that the documentation for 35.6 percent of the 3,094
students receiving DCTAG payments was inadequate to demonstrate
eligibility to participate in the program, with the range of estimates of
student files lacking such documentation falling between 21.8 percent and
51.3 percent. See appendix I for statistical sampling details.
Page 14 GAO-06-14 District of Columbia
Lack of Social Security Number Verification
The required photocopy of the Social Security card is intended to
establish the applicant's identity and citizenship.26 While several
applicants can have the exact same name, the Social Security number is a
unique identifier that does not change. We also found that for those
applicants that submitted a photocopy of their Social Security card, the
SEO did not verify the validity of the Social Security number.
DCTAG program regulations require applicants to provide a copy of their
signed Social Security card for identification purposes with their initial
application for DCTAG funds. Furthermore, GAO's Standards for Internal
Control in the Federal Government require that all transactions and other
significant events be clearly documented, and that the documentation be
readily available for examination.27 During our testing of student
eligibility for DCTAG funds, we checked students' applications to
determine if the initial application submitted was accompanied by a signed
copy of the applicant's Social Security card. We found that for 5 of the
45 student files we reviewed, there was no record of receipt of a
photocopy of the applicants' Social Security card. According to SEO
officials, either the photocopy of the Social Security card was not
received from these applicants or the SEO did not retain the copy
received. SEO officials stated that during the 9-month period after the
DCTAG program was started, they focused more on creating awareness of the
program than adhering to established policies and procedures. However, we
did find that two of the five student files missing Social Security card
documentation occurred in the 2002-2003 academic year, after the initial
start-up year of the DCTAG program had passed. SEO officials informed us
that while they have resolved this internal control issue by having the
staff verify the applicants' Social Security numbers against those
recorded on the District of Columbia Individual Income Tax return, Form
D-40, or the public income source documents required for domicile
verification, they recognize that the program remains vulnerable. The
SEO's failure to collect or maintain proper documentation of applicants'
Social Security cards prior to the disbursement of funds is a violation of
its own procedures. Moreover, the
26The 2002 Amendment provided that DCTAG applicants must meet the same
citizenship and immigration status requirements as are needed to receive
federal student assistance as described in section 484(a)(5) of the Higher
Education Act of 1965 (20 U.S.C. 1091 (a) (5)). Thus, applicants must be a
U.S. citizen or eligible noncitizen to qualify for the DCTAG program.
27GAO, Standards for Internal Control in the Federal Government,
GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999).
Required Documents Proving District Domicile Were Not Available for Many
DCTAG Participants
District is at increased risk that individuals not meeting DCTAG program
requirements, including citizenship, are receiving DCTAG funds, or
individuals are receiving DCTAG funds through the use of fraudulent Social
Security numbers and may not be eligible for these funds.
For the 40 applications that did have documentation of the applicants'
Social Security card, we found that the SEO did not take steps to ensure
the validity of the student's Social Security number. According to SEO
officials, they have not implemented a policy calling for verification of
applicants' citizenship. For other federal financial aid, applicants are
required to file a Free Application for Federal Student Aid (FAFSA)
form.28 We were told that some applicants and their families do not see
the need to complete or submit this form to apply for DCTAG funds because
the DCTAG program is not need or merit based. However, if the SEO required
all DCTAG program applicants to submit the FAFSA form through the U.S.
Department of Education, applicant citizenship and identity would then be
verified through the normal process for providing federal student
assistance.29 The Social Security Administration (SSA) matches information
provided on FAFSA forms with information on file to verify name, date of
birth, U.S. citizenship status, Social Security number, and possible date
of death. After these matches are completed, applicants receive Student
Aid Reports (SAR). Without procedures to verify identity and citizenship,
and by not requiring applicants to submit SARs, the SEO is at risk of
disbursing DCTAG funds to ineligible individuals.
DCTAG program regulations require applicants to submit sufficient
documents demonstrating domicile in the District of Columbia for at least
12 consecutive months prior to the start of their freshman year in
college.30 The DCTAG program regulations define domicile as the current
fixed place of residence to which the applicant returns following
temporary absences
28To apply for Title IV federal student aid programs, students submit a
Free Application for Federal Student Aid on which they report their own
and/or their families' income, assets, and federal income tax expenses.
29The U.S. Department of Education reviews the Free Application for
Federal Student Aid forms submitted by students and issues Student Aid
Reports that notify students of their eligibility to receive federal
student aid for postsecondary education.
30D.C. Mun. Regs tit. 29, S:7003.2.
and where the applicant intends to reside indefinitely.31 Applicants are
to submit such documentation with their initial application, and must
include sufficient evidence of continued domicile in the District of
Columbia with each renewal application. SEO accepts copies of domicile
documentation and does not authenticate the validity of documents
provided. If the student is a dependent,32 the DCTAG application
(first-time D.C. private-school graduates and renewals) must include a
copy of the certified33 Form D-40, filed by the applicant's parent(s),
guardian, or spouse from the most recent tax year. The certified copy of
the tax return must include Schedule S of the Form D-40, showing the
applicant as a dependent. Independent applicants are required to provide a
certified copy of their own tax return for the most recent tax year with
their applications. In cases where District taxes are not required to be
filed (for example, receipt of public assistance, unemployment,
retirement, or disability payments), copies of official agency letters
showing receipt of these types of income may be filed with the DCTAG
application in lieu of tax returns.
In addition, applicants are to submit copies of two current utility bills
or copies of two earnings and leave statements (pay stubs). Copies of
utility bills submitted must not be older than 45 days from the date of
the application and should have the name and address of the parent(s),
guardian, or spouse for dependent students. For independent applicants,
the name and address of the student must be on the utility bill. Utilities
that meet the criteria are those for residential service only and
available from gas, electric, water, telephone, or cable providers. For
situations in which utility costs are included in monthly rent payments,
the SEO will accept a notarized letter from the rental/leasing agency
verifying this arrangement. Alternatively, applicants may submit two pay
stubs that must be for different pay periods. For applicants who are
dependents, the copies of the pay stubs must have the name and address of
a parent, guardian, or
31D.C. Mun. Regs tit. 29, S:7001.1.
32The domicile of a dependent applicant is the domicile of the minor's
parents or legal guardian. For purposes of the DCTAG program, an applicant
is a dependent student if his or her parent or guardian has not
surrendered the right to the applicant's care, custody, and earnings.
Dependent applicants are also those who receive over 50 percent of annual
financial support from a parent, guardian, spouse, or other person.
33A certified copy of a D-40 tax return bears the stamp and staff
signature of the District of Columbia's Office of Tax and Revenue (OTR). A
D-40 tax return that is stamped and signed indicates that OTR has
completed the review and processing of the tax return.
How the SEO Determined Eligibility Was Unclear for Applicants with Unusual
Circumstances
spouse. Pay stubs submitted for an independent applicant must have the
applicant's name and address.
In testing to determine if students were eligible for DCTAG program funds,
we found 9 of the 45 student files we reviewed lacked sufficient proof of
domicile in the District of Columbia. For these 9 students, we found that
either applicants did not provide the required documents or the documents
filed did not provide sufficient evidence of domicile in the District of
Columbia. According to SEO officials, this lack of sufficient
documentation was caused by the creation of a new program and the time
needed to firmly establish procedures for reviewing applications. These
officials explained that most of the weaknesses in documentation occurred
during the DCTAG program's first year in operation. However, 6 of the 9
instances we identified were exceptions relating to academic years after
2000-2001, which was the first year of operation for the program. Without
the required proof of domicile documentation, the District is at increased
risk that individuals who are not domiciled in the District of Columbia
are receiving DCTAG program funds.
While reviewing student applications for eligibility, we encountered
several cases where applicants were not able to provide the prescribed
documents due to unusual or special circumstances. For example, a D.C.
resident who is a ward of the court may not have all of the documents
required to demonstrate domicile in the District of Columbia. A ward of
the court is a person 21 years of age or younger who is in the custodial
care of the District's foster care system due to the absence of parents or
a legal guardian. Once a ward of the court turns the age of 22, they are
technically no longer in the District's foster care system. Therefore,
these applicants may not be able to produce the typical documents to
demonstrate domicile in the District of Columbia, such as certified D-40
tax returns and recent utility bills with a District of Columbia address.
In these extraordinary situations, DCTAG program regulations allow the SEO
to determine on a case-by-case basis the domicile of applicants based on
the particular facts and circumstances. In our review, we could not tell
how SEO officials made these case-by-case determinations for those
applicants with unusual circumstance because the SEO had no process in
place to document how eligibility determinations are to be made for those
applicants. Without a uniform procedure to document the facts and
circumstances for each applicant, there is no way to tell how SEO
officials satisfied themselves that the students were eligible for DCTAG
funds.
High Management Turnover at SEO Affected the Control Environment and Program
Operations
The DCTAG program has experienced significant management turnover since
its beginning in 2000. Four individuals have held the position of DCTAG
director. In addition, there have been changes in management positions
providing oversight for the DCTAG program-two individuals have held the
position of director of the SEO and there have also been changes in the
position of director of higher education financial services at the SEO.
The director of higher education financial services oversees the DCTAG
program as well as other college assistance programs within the SEO. The
effect of increased turnover of personnel and the lack of consistent
leadership within the SEO was also identified by the District of Columbia
Auditor in a report about the performance of the District's special
nutrition and commodities distribution program, for which the SEO also has
responsibility for administering.34 According to the Standards for
Internal Control in the Federal Government,35 a positive control
environment is the foundation for all of the other internal control
standards, providing discipline and structure as well as the climate that
influences the quality of internal control. The management of an
organization has a tremendous influence over an entity's control
environment. For example, management influences the control environment by
(1) setting and maintaining an organization's ethical tone,
(2)
ensuring employees have the proper knowledge and training, and
(3)
creating the philosophy and operating style of the organization.
Without consistent leadership, the control environment of DCTAG
was unstable, changing with each shift in management. This
inconsistency created a challenge for the program when attempting
to develop an effective and efficient control environment.
DCTAG Funds Are Being Accounted for Separately, but Routine Bank
Reconciliations Are Needed
While the District had established dedicated bank accounts for the DCTAG
program as required by law, reconciliations were not being done between
these bank accounts and the account balances for the DCTAG program in
SOAR. When District officials performed a reconciliation in May 2005 at
our request, they discovered a difference of approximately $11 million
that had not been reconciled-$8.3 million of which should have been
transferred from the DCTAG-dedicated bank accounts to the District's
34Office of the District of Columbia Auditor, Effectiveness of the Special
Nutrition and Commodities Distribution Program Was Hindered by Lax
Management and Inadequate Oversight by Other Agencies (Washington, D.C.:
Sept. 22, 2004).
35GAO/AIMD-00-21.3.1.
Page 19 GAO-06-14 District of Columbia
DCTAG Funds Accounted for in Dedicated Accounts
general fund and $2.7 million of which was interest that had been earned
in the dedicated bank accounts since these accounts were established.
The District has established two dedicated accounts for the DCTAG
program-one for funds to be expended in the short term (within the next 90
days) and the other for longer-term needs.36 The 2002 Amendment requires
that the District government establish a dedicated account that is
available solely for the DCTAG program and consists of the following
amounts: (1) federal funds appropriated to carry out the program,
(2) District-appropriated funds for the program, (3) any unobligated
balances from amounts made available to the DCTAG program from previous
fiscal years, and (4) interest earned on the balances in the dedicated or
separate accounts.37 When the District receives the annual federal payment
amount from the federal government for the DCTAG program, the funds are
deposited directly in the short- and longer-term dedicated accounts.
Payments made from DCTAG program funds to institutions for tuition grants
and to vendors for administrative expenses are recorded in SOAR and paid
with funds from the District's general fund. On the basis of the pattern
of grant payments, OFRM regularly initiates transactions to transfer funds
from the DCTAG-dedicated accounts to reimburse the District's general fund
for disbursements made on behalf of the program based on transactions
recorded in SOAR.
Reconciliations Not According to our Standards for Internal Control in the
Federal
Performed Government,38 internal control should generally be designed to
ensure that ongoing monitoring occurs in the course of normal operations.
Ongoing monitoring includes reconciliations of cash balances against the
amounts recorded in the financial management system. A reconciliation
process is a
36This second account was established to earn a higher rate of return on
deposited funds by investing in securities with longer maturities.
37D.C. Code, S: 38-2705 (h) (2001 Ed., 2005 Pocket Part). This provision
of the law stemmed from a report issued by the Department of Education,
Office of the Inspector General, which reported that because DCTAG federal
funds were being maintained in the District's general fund, the District
was retaining the interest earned on those funds and using the interest
for unrelated purposes. U.S. Department of Education, Office of Inspector
General, Audit of the Implementation of the District of Columbia College
Access Act of 1999, ED-OIG/A03-B0003 (Philadelphia, Pa.: August 2001).
38GAO/AIMD-00-21.3.1.
necessary and valuable part of a sound system of financial management
controls. The District has a process in place for disbursement of DCTAG
funds structured so that actual disbursements of tuition grants and
program administrative expenses are paid out of the District's general
fund and then funds are transferred from the DCTAG-dedicated bank accounts
to reimburse the general fund. Periodically, OFRM calculates the amount of
expenditures that have been paid out of the general fund and transfers
funds from the dedicated bank accounts to the general fund via wire
transfer. However, these calculations are not based on a reconciliation of
DCTAG fund activity. As a result of the reconciliation performed by OFRM,
we also found that a significant amount of expenditures, $8.3 million, had
not been captured in OFRM's calculations of the amount to be reimbursed to
the District's general fund, and had not been transferred from the
DCTAG-dedicated bank accounts to the District's general fund. According to
District officials, the transactions were year-end accruals that
subsequently became expenditures in succeeding fiscal years and were paid
from the District's general fund on behalf of the DCTAG program, and it
was an oversight by OFRM to not have included them in its calculations of
the amount of funds to be transferred from the DCTAG-dedicated accounts to
the general fund. In July 2005, District officials told us that they had
electronically transferred the $8.3 million from the DCTAG-dedicated
accounts to the general fund to reimburse the general fund for these
expenditures.
The other part of the unreconciled difference of $11 million discussed
above, $2.7 million, was identified by District officials as interest
earned on funds from the time the dedicated bank accounts were established
in 2001 through June 30, 2005. Although these interest earnings appeared
on the bank statements, District officials informed us that the $2.7
million had not been recorded as available funds for expenditure for the
DCTAG program. District officials told us that the interest earned is
considered to be an integral part of the long-term planning and available
budget for the DCTAG program; however, budget authority for the interest
earned on DCTAG program funds had not been requested. The interest earned
was not included as funds available for the DCTAG program in quarterly
reports provided to congressional staff. They explained that up until
2005, there had been a carryover of funds from one year to the next for
the DCTAG program. Due to the successful outreach of the program, District
officials stated that they have reached the point where the carryover has
been nearly exhausted. District officials also stated that based on their
analysis of cost drivers that affect the program, such as the number of
students and
The SEO's Forecasting Method to Project Future Funding Needs Has Not Been
Reviewed for Methodological Soundness
cost of tuition, it would be prudent for the District to budget the earned
interest during fiscal year 2006.
Without routine reconciliations between DCTAG-dedicated bank accounts and
SOAR, errors that occur can go undetected. Errors that result in the
failure to reimburse the District general fund for DCTAG program
disbursements paid can affect the District's cash flow and could
potentially contribute to the need for the District to borrow to cover
short-term needs. Moreover, these errors could result in the
understatement or overstatement of DCTAG program expenditures as well as
the amount of funds available to be expended. Reconciliations are most
effective when they are done soon after the close of the month when
differences can still be researched easily.
The District's forecasting method to estimate the number of students and
the average cost per student for those participating in the DCTAG program
each year for future years is based on assumptions that have not been
reviewed against historical experience or developed using other available
information. The SEO's projections for fiscal years 2007 through 2010 are
based on a flat 6 percent increase in the number of students in the
program each year and an annual increase of 10 percent in the average cost
per student to attend college. SEO officials do not have documentation or
analysis supporting the appropriateness of these percentages for
estimation purposes. According to SEO officials, the DCTAG program is
unique because no other city in the United States has this type of program
and, therefore, information already available on the numbers of high
school graduates continuing on to college in other states or jurisdictions
is not applicable. SEO officials stated that they recognize the need to
develop a sound methodology for making these projections, but the focus
has been on recruitment of students and colleges and universities to
participate in the program. The officials explained that they have not yet
had an opportunity to develop such a methodology or obtain the historical
data needed to project current and future needs based on District
information. This would require capturing, among other information,
tuition rates at DCTAG participating institutions as well as historical
graduation data from the District's public schools, 54 charter schools,
and D.C.'s private high schools, and keeping statistics on the number of
high school graduates that continue on to college and remain in college in
subsequent years. With the development of a sound methodology for
projecting the numbers of eligible applicants applying for DCTAG program
funds, both Congress and the
Total Amount of the Administrative Expenses for the DCTAG Program Unknown
District will be able to make more informed funding and budgeting
decisions necessary to sustain the program.
While the District reported that it used 5.3 percent ($0.9 million) of the
$17 million of federal funds appropriated in fiscal year 2004 appropriated
funds, less the rescission,39 the District does not track the full amount
of administrative expenses incurred for the program. The SEO does not
allocate indirect costs by program, thereby likely undercharging the DCTAG
program for administrative expenses incurred. District officials
acknowledged that they did not know how much the total administrative
costs were, but estimated that operating the DCTAG program costs more than
the 7 percent legislatively set limit for federal funding. They explained
that these additional costs are absorbed using District funds. According
to SEO officials, they are working on a cost allocation process so that
they can more fully track administrative expenses.
The 2002 Amendment provides that the DCTAG program may not use more than 7
percent of the total amount appropriated for the program since November
12, 1999, for administrative expenses.40 Administrative expenses are
defined as any program costs other than tuition grants, and generally
include such things as payroll, supplies, materials, and utilities as well
as SEO overhead costs. As noted, the District used 5.3 percent of the
DCTAG federal payment for administrative expenses for fiscal year 2004.
For fiscal year 2004 we reviewed, but did not audit, the administrative
expense information included in the quarterly expenditure reports
submitted to the Senate and House appropriations committees. The amount of
DCTAG administrative expenses reported for fiscal year 2004 may not be the
full amount of those expenses. District officials told us that they
estimate the cost of administrative expenses for the DCTAG program based
on the established limit of 7 percent, and explained that they do not have
a process where they can accumulate and assign administrative costs to the
SEO's various programs, including DCTAG. Also, during our review
39Consolidated Appropriations Act, 2004, Pub. L. No. 108-199, Div. H, S:
168, 118 Stat. 457 (January 23, 2004), included a provision for an
across-the-board 0.59 percent rescission to be deducted from the budget
authority provided for any discretionary accounting in the act.
40We note that the federal payment for fiscal year 2005 provides that not
more than $1.2 million of the total amount appropriated for this program
may be used for administrative expenses. The law applies to the period
subsequent to the period we reviewed. Pub. L. No. 108-335, 118 Stat. 1322
(Oct. 18, 2004).
Conclusions
of fiscal year 2004 expenditures, we identified nine transactions
amounting to $34,510 of non-DCTAG expenditures for fiscal year 2004 that
had been charged to the program in error. These expenditures were for
administrative expenses incurred by the District's Tuition Assistance
Program Initiative for Temporary Assistance for Needy Families. Once we
notified the District of these improperly recorded transactions, District
officials made the correcting entries in SOAR. District officials informed
us that steps would be taken to implement routine reviews of expense
allocations to ensure the accuracy of each transaction, including the
assignment of expense to the appropriate SEO program.
The SEO has taken actions to put program and financial management
procedures in place, but DCTAG is at risk in the areas of student
eligibility and program budgeting. Internal controls for determining
whether applicants are eligible for program funds are not adequately
designed and are not operating as prescribed in the DCTAG legislation and
regulations. The District needs well-designed and executed internal
controls to provide reasonable assurance that DCTAG program objectives
will be met and that only District residents meeting the eligibility
criteria are awarded these tuition grants. These controls are crucial for
the credibility of the program and the appropriate use of federal funding.
To address the challenges of a growing program, the SEO will need
continuity of leadership going forward to plan, direct, and control
operations to effectively and strategically achieve the goals of the DCTAG
program. Moreover, SEO and OFRM officials must closely monitor DCTAG
program funds to ensure that accurate records are maintained, account
reconciliations are performed and documented, and that sufficient funds
are available to meet current and future financial needs. To ensure that
the District has the resources to meet the demand for DCTAG tuition
grants, the District needs projections of both the short-term and
long-term financial needs of the program based on a sound analytical
methodology. It is also important for the District to be able to
accurately measure the administrative costs of the DCTAG program so that
total operational costs can be determined. As the program continues to
grow, monitoring of DCTAG program funds will become more crucial.
We recommend that the Mayor of the District of Columbia direct the head
Recommendations for
of the State Education Office to
Agency Comments and Our Evaluation
o require applicants for DCTAG program funds to provide a valid Student
Aid Report or other document with similar information with their
applications so that applicants' identities and citizenship will have
been verified by the federal government before the District receives
the information,
o establish and implement procedures to ensure that sufficient evidence
is obtained and maintained to demonstrate that applicants are actually
domiciled in the District prior to providing participants with DCTAG
funding,
o develop and retain documentation that clearly shows how eligibility
decisions are reached when it reviews applications submitted by
students with unusual circumstances,
o develop a sound methodology for forecasting (1) numbers of students in
the program and (2) funds needed for future fiscal years,
o coordinate with OFRM and the Office of Budget and Planning to ensure
that interest earned on DCTAG-dedicated bank accounts is made
available to be expended for the DCTAG program, and
* refine the current mechanisms for identifying and recording the
actual costs of administering the DCTAG program, in coordination
with the Office of the Chief Financial Officer and OFRM.
* We recommend that the Chief Financial Officer of the District of
Columbia direct the Office of Finance and Resource Management to
o routinely conduct reconciliations and document the reconciliations
performed between the DCTAG bank accounts and financial data in SOAR
and
o establish and implement procedures to ensure that reimbursements that
are due the District's general fund for all expenditures made on
behalf of the DCTAG program are executed timely for the correct
amounts.
We received written comments on a draft of this report from the Mayor of
the District of Columbia and the District's Chief Financial Officer. The
Mayor and Chief Financial Officer generally agreed with our findings and
recommendations and provided additional discussion about the issues
Page 25 GAO-06-14 District of Columbia
raised in the report. Their written comments are reprinted in appendixes
II and III, respectively.
In his October 14, 2005, letter (see app. II), the Mayor generally agreed
with our findings and recommendations, stating that the SEO will or has
already implemented the six recommendations. In his comments, the Mayor
characterized the findings in the draft report as stemming from weaknesses
existing in the program's start-up years versus more currently. However,
as described in our scope and methodology (see app. I), our testing was
based on a sample of payments from all fiscal year 2004 expenditure
transactions for the DCTAG program. These expenditure transactions for
fiscal year 2004 included payment transactions for students receiving
grants for both the 2003-2004 and 2004-2005 school years. Students
receiving payments during that time period may have submitted their
original applications during previous years depending on the year in which
they entered the program. In order to test the sufficiency of
documentation to obtain assurances on student eligibility, we reviewed the
initial application submitted by each student, as well as the application
submitted for fiscal year 2004. Our report identified a total of 16
exceptions that occurred as follows: 6 in the initial year of the program
(2000-2001); 1 during academic year 2001-2002; 4 for academic year
2002-2003; and 5 during academic year 2003-2004. Thus, weaknesses in
assessing eligibility in the early years can impact the use of DCTAG
program payments in subsequent years.
The Mayor stated that appropriate internal controls are currently in place
to ensure that the errors of the past are not replicated. The Mayor also
stated that SEO agrees with or has already implemented the recommendations
made by GAO. The Mayor also had the following specific responses to our
recommendations:
The Mayor stated that the SEO will modify its OneApp (application for
financial assistance) and will add the Student Aid Report, as criteria for
eligibility for the 2006-2007 school year application, to address our
recommendation that students' Social Security numbers be verified.
o The Mayor agreed that it is critical that domicile information be
verified and maintained, and stated that the SEO is confident that its
current approach satisfies our recommendation to establish and
implement procedures to verify that applicants are domiciled in the
District.
o The Mayor stated that a "letter to the file" is prepared for each
applicant with unusual or special circumstances. However, at the time
of our
review, none of the applicant files where special case-by-case
determinations were made contained a letter to the file or any other
written evidence documenting how eligibility decisions were made for
applicants with unusual or special circumstances.
o The Mayor also stated that SEO is in the process of developing
comprehensive District of Columbia high school graduation and college
retention data to further improve its ability to forecast student
participation in the DCTAG program and related costs. In responding to
the related recommendation, the Mayor noted that SEO will improve upon
its current forecasting methodology through additional analysis of
District of Columbia high school graduation data as well as college
retention data.
o The Mayor noted that SEO, OFRM, and the Office of Budget and Planning
have coordinated as we recommended in the draft report and the
interest earned on the funds in the dedicated accounts has been
budgeted for fiscal year 2006. According to the Mayor, SEO and OFRM
have also worked together to improve the recording of actual
administrative costs incurred in operating the DCTAG program.
In commenting on a draft of this report, the CFO expressed his
appreciation for our assessment and recommendations for the DCTAG program.
According to the CFO, the District is required to reconcile all bank
accounts to verify that the balances in the District's financial system
(SOAR) correspond with bank account balances each quarter and at yearend.
The CFO added that these reconciliations were performed timely. However,
we found that the reconciliations had not been performed prior to our
review. The CFO explained that the District's procedure is to use its own
funds to pay DCTAG expenditures, including tuition payments, and then be
reimbursed with federal funds maintained in the DCTAG-dedicated bank
accounts. The CFO added that when GAO made the request, the District's
general fund had not been fully reimbursed for all DCTAG expenditures. The
CFO also noted that going forward the District will reimburse the general
fund for all DCTAG expenditures on a monthly basis and reconcile
quarterly.
The CFO agreed that the earned interest in the dedicated bank accounts had
not been included in budget authority. While the CFO stated that the
earned interest was reflected in the annual budget submissions to
Congress, our review of information provided by the Office of Budget and
Planning shows that the earned interest was not included in the budget
request submissions. According to the CFO, the interest had not been
budgeted because in the early years of the DCTAG program, the yearly
congressional appropriation was more than sufficient to meet total
expenditures. However, the CFO has concluded that budgeting the earned
interest during fiscal year 2006 would be prudent, as the program growth
has resulted in nearly exhausting the carry-forward of funds from previous
years.
In his comments, the CFO stated that the District is absorbing some of the
indirect costs that might otherwise be charged to the DCTAG program, while
using federal funds to pay direct costs to the program. However, the CFO
agreed that it is important to assess the total administrative cost of the
DCTAG program. The CFO added that a methodology will be developed to
document this information.
We will send copies of this report to the Mayor of the District of
Columbia, the Chief Financial Officer of the District of Columbia, and the
Director of the SEO. We are also sending copies of this report to the
Chairman and Ranking Minority Members of the Subcommittee on Oversight of
Government Management, the Federal Workforce, and the District of
Columbia, Senate Committee on Homeland Security and Governmental Affairs;
the House Committee on Government Reform; appropriate congressional
committees; and other interested parties. We will also make copies of this
report available to others on request. In addition, the report will be
available at no charge on GAO's Web site at http://www.gao.gov.
If you or your staff have any questions about this report, please contact
Jeanette M. Franzel, Director, Financial Management and Assurance, at
(202) 512-9471 or [email protected]. Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last page
of this report. GAO staff that made major contributions to this report are
listed in appendix IV.
Jeanette M. Franzel Director Financial Management and Assurance Appendix I
Scope and Methodology
To understand the processing of the District's Tuition Assistance Grant
(DCTAG) program transactions, we reviewed reports issued by the Office of
the Inspector General, U.S. Department of Education, and the Office of the
District of Columbia Auditor. We interviewed District officials within the
Office of the Chief Financial Officer (OCFO), the Office of Finance and
Resource Management (OFRM), and the State Education Office (SEO) and
reviewed documents to understand how DCTAG appropriated funds are
recorded, monitored, and expended. We received an overview of the
processing of DCTAG transactions and conducted walk-throughs of all
processes at the SEO and OFRM to identify the internal controls built into
these processes. We interviewed SEO officials to obtain an understanding
of how institution and student eligibility for participation in the DCTAG
program is determined and conducted walk-throughs of the steps taken to
reach eligibility decisions.
We assessed the reliability of the District's DCTAG financial data by
(1)
reviewing existing documentation related to data sources, (2)
analyzing the data to identify obvious problems with completeness
or accuracy,
(3)
interviewing knowledgeable agency officials about the data, and
(4)
reviewing reports to identify known data reliability issues
affecting the District financial management system, System of
Accounting and Reporting (SOAR). We determined that the data were
sufficiently reliable for purposes of this report.
In addition, we reviewed supporting documentation and reconciled the
totals of disbursement transactions as recorded in SOAR with similar
information provided in the quarterly reports that the District submitted
to the Senate and House appropriations committees for fiscal year 2004. We
also reviewed the disbursement transactions to identify any duplicate or
missing amounts. Overall, we found the disbursement transaction data to be
sufficiently complete and reliable for the purpose of testing the controls
over determining institution and student eligibility and for documenting
the total DCTAG program administrative expenses paid through SOAR for
fiscal year 2004.
To test whether the data used to test student and institution eligibility
were complete and accurate, we obtained a database of all fiscal year 2004
expenditure transactions from SOAR, and sorted the expenditures by object
class. Each object class total was compared to the quarterly expenditure
report compiled by OFRM in order to verify the completeness and accuracy
of the population against actual expenditures. We analyzed the data to
identify any duplicate or improperly classified transactions. We
Appendix I Scope and Methodology
identified all refund transactions in the database provided to us and
found that 16 refunds were posted during fiscal year 2004. We tested 100
percent of the refund transactions and verified that (1) all of the
required information was submitted with the refund check and the paperwork
was signed and dated, (2) the receipt of the refund was posted to the
student's account in the SEO's Automated Information System (AIS) so that
the student's annual and lifetime totals were correct, and (3) the refund
amounts shown on the paperwork from the institutions agreed with the total
refund amount1 deposited for that transaction.
To test controls over institutional payment transactions, we selected a
dollar unit sample2 of 58 tuition assistance payments made to institutions
during fiscal year 2004,3 totaling about $11.3 million from payments
totaling about $27.7 million.4 We tested the tuition grant payments made
to institutions to determine whether the institutions were eligible to
receive DCTAG payments. Eligible institutions in this context were those
institutions that met the criteria specified in the DCTAG legislation and
executed signed Program Participation Agreements, which had also been
signed by the Mayor of the District of Columbia.
In testing the selected payments to institutions, we verified that the
billing institutions were eligible to participate in the DCTAG program and
that the required information was provided with the invoices.
Specifically, we determined whether (1) the institution met the criteria
for an eligible institution as defined in the law and regulations, (2) the
SEO had a signed and dated PPA on file for that institution, (3) the
information on the invoice submitted by the institution agreed with the
documentation that was forwarded to OFRM for payment processing, (4)
payment of the invoice was authorized and dated by an appropriate
individual in OFRM, and (5) all information shown on the paid invoice
agreed with the transaction as recorded in SOAR.
1In reviewing the refund paperwork, we found that refunds for several
students from multiple institutions were grouped together to comprise one
refund transaction.
2The sample was selected based on a dollar-unit sampling methodology which
by its nature will tend to select large dollar unit items.
3The sample was selected from the fiscal year 2004 population of 1,580
tuition grant disbursement transactions.
4We are 95 percent confident that the net upper error limit of ineligible
institutions receiving DCTAG payments is no more than $1.382 million.
Appendix I Scope and Methodology
To test controls over the SEO's processes to determine student eligibility
for DCTAG program funds, we selected a random sample of 45 transactions
from 3,094 individual payments made on behalf of students that were
identified on the invoices from institutions that were selected in the
dollar-unit sample discussed above.5 For each student selected, we
reviewed the initial application submitted by that student as well as the
application submitted for fiscal year 2004. We also reviewed applicant
files to ensure that (1) all of the documents required to be submitted
with the application were present, (2) the required documents provided
were reviewed by the SEO, and (3) on the basis of that information,
whether the students were eligible to receive DCTAG funds.
To assess whether funds for the DCTAG program were being accounted for
separately in dedicated accounts, we reviewed District procedures for
maintaining the dedicated accounts for the DCTAG program and for
reimbursing the District's general fund for disbursements made on behalf
of the program. We requested and reviewed (1) bank statements from the two
dedicated bank accounts for fiscal year 2004 and June 2005 and
(2) documentation showing the calculation of reimbursements to the
District's general fund. We reconciled the bank statements to reports from
SOAR, the District's financial management system. We also inquired about
the frequency of reconciliations performed between the DCTAG bank accounts
and the account balances in SOAR, and reviewed the results of two
reconciliations performed by OFRM staff between the dedicated bank account
balances and the balances recorded in SOAR.
To determine whether administrative expenses charged against federal funds
are within the 7 percent limit of the total amount of federal funds
appropriated for the DCTAG program, we obtained and reviewed information
on the types and amounts of administrative expenses incurred to operate
the DCTAG program. We reviewed the policies and procedures followed by the
District intended to provide safeguards that the 7 percent limit on these
expenses is not exceeded. To ensure that the administrative expense data
we reviewed were complete and accurate, we obtained a database of all
fiscal year 2004 expenditure transactions from SOAR, and sorted the
expenditures by object class. We compared each object class
5On the basis of the results of our work, we estimate at the 95 percent
confidence level that the documentation for 35.6 percent of the 3,094
students receiving DCTAG payments was inadequate to demonstrate
eligibility to participate in the program, with the range of estimates of
student files lacking such documentation falling between 21.8 percent and
51.3 percent.
Page 31 GAO-06-14 District of Columbia Appendix I Scope and Methodology
total to the quarterly expenditure report compiled by OFRM in order to
verify the completeness and accuracy of the population. We analyzed the
data to identify any duplicate or improperly classified transactions that
existed. We requested a breakdown of administrative expenses incurred
during fiscal year 2004 by each program under the SEO's responsibility,
however, the SEO was unable to provide us this information.
We conducted our work from March 2004 through June 2004 and from February
2005 through July 2005 in accordance with U.S. generally accepted
government auditing standards.
Appendix II
Comments from the Mayor of the District of Columbia
Appendix II Comments from the Mayor of the District of Columbia Appendix
II Comments from the Mayor of the District of Columbia Appendix II
Comments from the Mayor of the District of Columbia Appendix II Comments
from the Mayor of the District of Columbia
Appendix III
Comments from the Chief Financial Officer of the District of Columbia
Appendix III Comments from the Chief Financial Officer of the District of
Columbia Appendix III Comments from the Chief Financial Officer of the
District of Columbia
Appendix IV
GAO Contact and Staff Acknowledgments
Jeanette M. Franzel at (202) 512-9471 or [email protected]
GAO Contact
The following individuals also made important contributions to this
report:
Acknowledgments
Norma Samuel, Sharon Byrd; Richard Cambosos; Lisa Crye; Katelin Carnahan;
James Maziasz; Philip Reiff; John Saylor; Sandra Silzer; Christopher
Spain; and Sabrina Springfield.
GAO's Mission
The Government Accountability Office, the audit, evaluation and
investigative arm of Congress, exists to support Congress in meeting its
constitutional responsibilities and to help improve the performance and
accountability of the federal government for the American people. GAO
examines the use of public funds; evaluates federal programs and policies;
and provides analyses, recommendations, and other assistance to help
Congress make informed oversight, policy, and funding decisions. GAO's
commitment to good government is reflected in its core values of
accountability, integrity, and reliability.
The fastest and easiest way to obtain copies of GAO documents at no cost
is through GAO's Web site (www.gao.gov). Each weekday, GAO posts GAO
Reports and newly released reports, testimony, and correspondence on its
Web site. To
have GAO e-mail you a list of newly posted products every afternoon, go to
www.gao.gov and select "Subscribe to Updates."
Order by Mail or Phone
The first copy of each printed report is free. Additional copies are $2
each. A check or money order should be made out to the Superintendent of
Documents. GAO also accepts VISA and Mastercard. Orders for 100 or more
copies mailed to a single address are discounted 25 percent. Orders should
be sent to:
U.S. Government Accountability Office 441 G Street NW, Room LM Washington,
D.C. 20548
To order by Phone: Voice: (202) 512-6000 TDD: (202) 512-2537 Fax: (202)
512-6061
Contact:
To Report Fraud, Web site: www.gao.gov/fraudnet/fraudnet.htm
E-mail: [email protected]
Federal Programs Automated answering system: (800) 424-5454 or (202)
512-7470
Gloria Jarmon, Managing Director, [email protected] (202) 512-4400 U.S.
Government Accountability Office, 441 G Street NW, Room 7125 Relations
Washington, D.C. 20548
Paul Anderson, Managing Director, [email protected] (202) 512-4800
Public Affairs
U.S. Government Accountability Office, 441 G Street NW, Room 7149
Washington, D.C. 20548
*** End of document. ***