OIG Report Finds Issues With FSA's Oversight of Institutions' Compliance With SAP

By Joelle Fredman, NASFAA Staff Reporter

The Department of Education's (ED) Office of the Inspector General (OIG) released a report last week detailing issues with the Office of Federal Student Aid's (FSA) oversight of institutions' compliance with Satisfactory Academic Progress (SAP) regulations, such as a lack of control over FSA contractors and systems that manage foreign school audit compliance reporting.  

OIG conducted the report after ED discovered that noncompliance with SAP was "a root cause" of improper payments of Pell Grant and Direct Loan funds between fiscal years 2012 and 2018. OIG also noted that FSA included SAP-related issues in its list of the top 10 program review findings from 2013 through 2018. 

OIG looked at compliance audits and program reviews between October 2015 and September 2017, and selected a sample of 27 compliance audits and 21 program reviews with at least one SAP finding for its report. OIG wrote that FSA did not follow up to ensure corrective actions were completed by institutions in four of the 15 compliance audits that were classified as deficient, and in one of the 21 program reviews. 

"As a result, schools may have repeated SAP findings, ineligible students may receive Title IV program funds, noncompliant schools may continue to participate in Title IV programs, and FSA may not establish liabilities payable from schools that disbursed Title IV program funds to students that did not meet SAP requirements," OIG wrote.

However, in response to concerns from FSA that issues in selected reports pointed to individual problems and not systematic failures, OIG noted that the findings from these samples "cannot be projected because we included judgmentally selected items and used auditor judgment to determine the count of randomly selected items." 

With regard to the compliance audits, OIG found that "FSA's program compliance office did not always perform the required resolution activities or address all SAP-related findings in the final determination letters." For example, in one of the final audit letters for an institution found to be noncompliant with SAP for two years, OIG wrote that it was missing the unmet SAP requirements, the institution's response, and what corrective actions the school should implement. The audit resolution specialist responded that the letter did not mention SAP violations due to time constraints and because the issue only arose twice.

OIG also found seven instances in which an institution's compliance audit was erroneously classified as non-deficient. These audits were all conducted at foreign schools and tracked using the Postsecondary Education Participants System (PEPS), which is used for schools outside the country. In three of those reports, the FSA contractor correctly entered the code into PEPS that signals a repeat finding of noncompliance, yet the system incorrectly filed the reports. In the remaining four reports, the FSA contractor incorrectly entered the repeat finding code, causing OIG to note that "FSA has no controls to ensure that the contractor enters accurate and complete data into PEPS." 

"Due to the lack of controls, it is likely that foreign school compliance audits that were not included in this review could also have been incorrectly classified as non-deficient, and therefore were not subject to the program compliance office's audit resolution process to address SAP related findings and other significant findings," OIG wrote. 

In the one program review OIG took issue with, an FSA specialist prematurely closed a case in which a school was required to repay federal funds after being found to be noncompliant with SAP because she erroneously thought that the fact that the school closed negated the need for further action.

OIG recommended that FSA ensure that audit resolution specialists know that they must include all repeat findings in final audit determination letters, and are familiar with "the policies and procedures for requesting additional documentation when it is needed to determine students' eligibility for Title IV program funds and assessing liabilities in instances when (a) SAP violations result in Title IV program funds being disbursed to ineligible students and (b) a school closes before it completes a required file review."

OIG also recommended that FSA fix PEPS to ensure that audits with repeat findings are identified as deficient, and "develop and implement controls to prevent and detect errors in the program compliance office's process for identifying deficient foreign school compliance audits for audit resolution."

FSA agreed with all four of OIG's recommendations, and responded that it was not aware of the issue with PEPS reporting. FSA added that it has revised its system logic in PEPS, and plans to create a quality control process to oversee FSA contractors' work.  

OIG also noted that FSA took a number of proactive actions to help schools comply with SAP reporting, such as providing in-person and online training, assistance targeted at new schools, a tool to determine SAP compliance, and the FSA Handbook, which discusses SAP requirements.


Publication Date: 7/23/2019

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