2022-022 Washington State University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. Assistance Listing Number and Title: 84.007 Federal Supplemental Educational Opportunity Grant 84.033 Federal Work-Study Program 84.038 Federal Perkins Loan Program 84.063 Federal Pell Grant Program 84.268 Federal Direct Student Loans 84.379 Teacher Education Assistance for College and Higher Education Grants Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: Various Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Special Tests and Provisions: Return of Title IV Funds Known Questioned Cost Amount: $2,582 Background As amended, Title IV of the Higher Education Act authorizes programs that provide financial assistance to students to pursue postsecondary education at eligible institutions of higher education. When students who receive Title IV grant or loan assistance withdraw from an institution during a payment period or period of enrollment, the institution must determine the amount of Title IV aid the students have earned as of their withdrawal date. Schools calculate this by determining the percentage of program funds the students have earned and applying that percentage to the total amount of assistance that was or could have been disbursed to students for the payment period or period of enrollment as of their withdrawal date. If the total amount of Title IV assistance earned by students is less than the amount that was disbursed to them as of their withdrawal date, the institution is required to return the difference to the U.S. Department of Education (Department), and it cannot make any additional disbursements to students for the payment period or period of enrollment. In fiscal year 2022, Washington State University disbursed more than $205 million in Title IV funds to students. Description of Condition The University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. We found the University had adequate internal controls over the return of Title IV funds, and it materially complied with the federal requirements. However, we identified questioned costs as the result of returns that were incorrectly calculated. We used a statistical sampling method to randomly select and examine 57 out of a total population of 873 students for which the University was required to calculate a return of Title IV funds. We found two students for whom the University incorrectly calculated the amount required to be returned to the Department. Specifically: ? One student had $489 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,801, resulting in a difference of $2,312. ? The second student had $2,590 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,860, resulting in a difference of $270. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The University returned incorrect amounts because it did not verify that the students were eligible for all funds within their student accounts before calculating amounts and returning the Title IV funds to the Department. Staff responsible for calculating the amounts to return did not verify that loans that were never disbursed were excluded from the University?s calculation of unearned aid. Effect of Condition and Questioned Costs We identified $2,582 in known federal questioned costs and $39,550 in likely federal questioned costs. We consider the $2,582 difference for the two students to be questioned costs because they had unearned financial aid still owed to the Department. At the time of the audit, the University had not processed a corrected return of funds for the two students. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the University: ? Verify student eligibility for all disbursed Title IV funds before calculating the amount of unearned aid required to be returned for students who have withdrawn from school ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid University?s Response Washington State University takes very seriously its responsibilities to ensure compliance with federal requirements. The University appreciates the auditor acknowledgement that the University?s internal controls over the Return of Title IV funds are adequate. The two (out of 57) records with noted exception were isolated and should not be a reflection on the whole of the program or the University?s management of federal funds. These exceptions were identified by management when the records were pulled for auditor testing. Management had not made correction yet only because the audit was still in progress. Upon finding the isolated issues, management performed a review of all 873 students that fell in the audit population, performing calculations of each record to determine if there were any other errors. No errors that needed to be submitted to the Department of Education, other than the two in the test population, were noted. The University is working with the sponsor to ensure return of the known questioned costs can be properly facilitated. Internal processes have been further strengthened to provide for independent quality checks. A report was developed to identify and isolate anomalies, like returning more funds than were actually disbursed. The return to Title IV requirements are very complex and internal controls over compliance are regularly reviewed to ensure improvement and continued adherence to the requirements. The University thanks the State Auditor for bringing this issue to the University?s attention. Auditor?s Remarks We thank the University for its cooperation and assistance throughout the audit. We will review the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.14 Program participation agreement, states in part: (b) By entering into a program participation agreement, an institution agrees that ? (24) It will comply with the requirements of ?668.22; Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.22 Treatment of title IV funds when a student withdraws, states in part: (a) General. (1) When a recipient of title IV grant or loan assistance withdraws from an institution during a payment period or period of enrollment in which the recipient began attendance, the institution must determine the amount of title IV grant or loan assistance that the student earned as of the student?s withdrawal date in accordance with paragraph e) of this section. (4) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is less than the amount of title IV grant or loan assistance that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew? (i) The difference between these amounts must be returned to the title IV programs in accordance with paragraphs (g) and (h) of this section in the order specified in paragraph (i) of this section; and (ii) No additional disbursements may be made to the student for the payment period or period of enrollment. (5) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is greater than the total amount of title IV grant or loan assistance, or both, that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew, the difference between these amounts must be treated as a post-withdrawal disbursement in accordance with paragraph (a)(6) of this section and ?668.164(i). (e) Calculation of the amount of title IV assistance earned by the student ? (1) General. The amount of title IV grant or loan assistance that is earned by the student is calculated by? (i) Determining the percentage of title IV grant or loan assistance that has been earned by the student, as described in paragraph (e)(2) of this section; and (ii) Applying this percentage to the total amount of title IV grant or loan assistance that was disbursed (and that could have been disbursed, as defined in paragraph (l)(1) of this section) to the student, or on the student?s behalf, for the payment period of period of enrollment as of the student?s withdrawal date. (2) Percentage earned. The percentage of title IV grant or loan assistance that has been earned by the student is? (iii) Equal to the percentage of the payment period or period of enrollment that the student completed (as determined in accordance with paragraph (f) of this section) as of the student?s withdrawal date, if this date occurs on or before? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program that is measured in clock hours; or (iv) 100 percent, if the student?s withdrawal date occurs after? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program measured in clock hours. (3) Percentage unearned. The percentage of title IV grant or loan assistance that has not been earned by the student is calculated by determining the complement of the percentage of title IV grant or loan assistance earned by the student as described in paragraph (e)(2) of this section. (4) Total amount of unearned title IV assistance to be returned. The unearned amount of title IV assistance to be returned is calculated by subtracting the amount of title IV assistance earned by the student as calculated under paragraph (e)(1) of this section from the amount of title IV aid that was disbursed to the student as of the date of the institution?s determination that the student withdrew. (g) Return of unearned aid, responsibility of the institution. (1) The institution must return, in the order specified in paragraph (i) of this section, the lesser of? (i) The total amount of unearned title IV assistance to be returned as calculated under paragraph (e)(4) of this section; or (ii) An amount equal to the total institutional charges incurred by the student for the payment period or period of enrollment multiplied by the percentage of title IV grant or loan assistance that has not been earned by the student, as described in paragraph (e)(3) of this section.
2022-022 Washington State University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. Assistance Listing Number and Title: 84.007 Federal Supplemental Educational Opportunity Grant 84.033 Federal Work-Study Program 84.038 Federal Perkins Loan Program 84.063 Federal Pell Grant Program 84.268 Federal Direct Student Loans 84.379 Teacher Education Assistance for College and Higher Education Grants Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: Various Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Special Tests and Provisions: Return of Title IV Funds Known Questioned Cost Amount: $2,582 Background As amended, Title IV of the Higher Education Act authorizes programs that provide financial assistance to students to pursue postsecondary education at eligible institutions of higher education. When students who receive Title IV grant or loan assistance withdraw from an institution during a payment period or period of enrollment, the institution must determine the amount of Title IV aid the students have earned as of their withdrawal date. Schools calculate this by determining the percentage of program funds the students have earned and applying that percentage to the total amount of assistance that was or could have been disbursed to students for the payment period or period of enrollment as of their withdrawal date. If the total amount of Title IV assistance earned by students is less than the amount that was disbursed to them as of their withdrawal date, the institution is required to return the difference to the U.S. Department of Education (Department), and it cannot make any additional disbursements to students for the payment period or period of enrollment. In fiscal year 2022, Washington State University disbursed more than $205 million in Title IV funds to students. Description of Condition The University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. We found the University had adequate internal controls over the return of Title IV funds, and it materially complied with the federal requirements. However, we identified questioned costs as the result of returns that were incorrectly calculated. We used a statistical sampling method to randomly select and examine 57 out of a total population of 873 students for which the University was required to calculate a return of Title IV funds. We found two students for whom the University incorrectly calculated the amount required to be returned to the Department. Specifically: ? One student had $489 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,801, resulting in a difference of $2,312. ? The second student had $2,590 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,860, resulting in a difference of $270. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The University returned incorrect amounts because it did not verify that the students were eligible for all funds within their student accounts before calculating amounts and returning the Title IV funds to the Department. Staff responsible for calculating the amounts to return did not verify that loans that were never disbursed were excluded from the University?s calculation of unearned aid. Effect of Condition and Questioned Costs We identified $2,582 in known federal questioned costs and $39,550 in likely federal questioned costs. We consider the $2,582 difference for the two students to be questioned costs because they had unearned financial aid still owed to the Department. At the time of the audit, the University had not processed a corrected return of funds for the two students. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the University: ? Verify student eligibility for all disbursed Title IV funds before calculating the amount of unearned aid required to be returned for students who have withdrawn from school ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid University?s Response Washington State University takes very seriously its responsibilities to ensure compliance with federal requirements. The University appreciates the auditor acknowledgement that the University?s internal controls over the Return of Title IV funds are adequate. The two (out of 57) records with noted exception were isolated and should not be a reflection on the whole of the program or the University?s management of federal funds. These exceptions were identified by management when the records were pulled for auditor testing. Management had not made correction yet only because the audit was still in progress. Upon finding the isolated issues, management performed a review of all 873 students that fell in the audit population, performing calculations of each record to determine if there were any other errors. No errors that needed to be submitted to the Department of Education, other than the two in the test population, were noted. The University is working with the sponsor to ensure return of the known questioned costs can be properly facilitated. Internal processes have been further strengthened to provide for independent quality checks. A report was developed to identify and isolate anomalies, like returning more funds than were actually disbursed. The return to Title IV requirements are very complex and internal controls over compliance are regularly reviewed to ensure improvement and continued adherence to the requirements. The University thanks the State Auditor for bringing this issue to the University?s attention. Auditor?s Remarks We thank the University for its cooperation and assistance throughout the audit. We will review the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.14 Program participation agreement, states in part: (b) By entering into a program participation agreement, an institution agrees that ? (24) It will comply with the requirements of ?668.22; Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.22 Treatment of title IV funds when a student withdraws, states in part: (a) General. (1) When a recipient of title IV grant or loan assistance withdraws from an institution during a payment period or period of enrollment in which the recipient began attendance, the institution must determine the amount of title IV grant or loan assistance that the student earned as of the student?s withdrawal date in accordance with paragraph e) of this section. (4) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is less than the amount of title IV grant or loan assistance that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew? (i) The difference between these amounts must be returned to the title IV programs in accordance with paragraphs (g) and (h) of this section in the order specified in paragraph (i) of this section; and (ii) No additional disbursements may be made to the student for the payment period or period of enrollment. (5) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is greater than the total amount of title IV grant or loan assistance, or both, that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew, the difference between these amounts must be treated as a post-withdrawal disbursement in accordance with paragraph (a)(6) of this section and ?668.164(i). (e) Calculation of the amount of title IV assistance earned by the student ? (1) General. The amount of title IV grant or loan assistance that is earned by the student is calculated by? (i) Determining the percentage of title IV grant or loan assistance that has been earned by the student, as described in paragraph (e)(2) of this section; and (ii) Applying this percentage to the total amount of title IV grant or loan assistance that was disbursed (and that could have been disbursed, as defined in paragraph (l)(1) of this section) to the student, or on the student?s behalf, for the payment period of period of enrollment as of the student?s withdrawal date. (2) Percentage earned. The percentage of title IV grant or loan assistance that has been earned by the student is? (iii) Equal to the percentage of the payment period or period of enrollment that the student completed (as determined in accordance with paragraph (f) of this section) as of the student?s withdrawal date, if this date occurs on or before? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program that is measured in clock hours; or (iv) 100 percent, if the student?s withdrawal date occurs after? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program measured in clock hours. (3) Percentage unearned. The percentage of title IV grant or loan assistance that has not been earned by the student is calculated by determining the complement of the percentage of title IV grant or loan assistance earned by the student as described in paragraph (e)(2) of this section. (4) Total amount of unearned title IV assistance to be returned. The unearned amount of title IV assistance to be returned is calculated by subtracting the amount of title IV assistance earned by the student as calculated under paragraph (e)(1) of this section from the amount of title IV aid that was disbursed to the student as of the date of the institution?s determination that the student withdrew. (g) Return of unearned aid, responsibility of the institution. (1) The institution must return, in the order specified in paragraph (i) of this section, the lesser of? (i) The total amount of unearned title IV assistance to be returned as calculated under paragraph (e)(4) of this section; or (ii) An amount equal to the total institutional charges incurred by the student for the payment period or period of enrollment multiplied by the percentage of title IV grant or loan assistance that has not been earned by the student, as described in paragraph (e)(3) of this section.
2022-022 Washington State University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. Assistance Listing Number and Title: 84.007 Federal Supplemental Educational Opportunity Grant 84.033 Federal Work-Study Program 84.038 Federal Perkins Loan Program 84.063 Federal Pell Grant Program 84.268 Federal Direct Student Loans 84.379 Teacher Education Assistance for College and Higher Education Grants Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: Various Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Special Tests and Provisions: Return of Title IV Funds Known Questioned Cost Amount: $2,582 Background As amended, Title IV of the Higher Education Act authorizes programs that provide financial assistance to students to pursue postsecondary education at eligible institutions of higher education. When students who receive Title IV grant or loan assistance withdraw from an institution during a payment period or period of enrollment, the institution must determine the amount of Title IV aid the students have earned as of their withdrawal date. Schools calculate this by determining the percentage of program funds the students have earned and applying that percentage to the total amount of assistance that was or could have been disbursed to students for the payment period or period of enrollment as of their withdrawal date. If the total amount of Title IV assistance earned by students is less than the amount that was disbursed to them as of their withdrawal date, the institution is required to return the difference to the U.S. Department of Education (Department), and it cannot make any additional disbursements to students for the payment period or period of enrollment. In fiscal year 2022, Washington State University disbursed more than $205 million in Title IV funds to students. Description of Condition The University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. We found the University had adequate internal controls over the return of Title IV funds, and it materially complied with the federal requirements. However, we identified questioned costs as the result of returns that were incorrectly calculated. We used a statistical sampling method to randomly select and examine 57 out of a total population of 873 students for which the University was required to calculate a return of Title IV funds. We found two students for whom the University incorrectly calculated the amount required to be returned to the Department. Specifically: ? One student had $489 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,801, resulting in a difference of $2,312. ? The second student had $2,590 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,860, resulting in a difference of $270. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The University returned incorrect amounts because it did not verify that the students were eligible for all funds within their student accounts before calculating amounts and returning the Title IV funds to the Department. Staff responsible for calculating the amounts to return did not verify that loans that were never disbursed were excluded from the University?s calculation of unearned aid. Effect of Condition and Questioned Costs We identified $2,582 in known federal questioned costs and $39,550 in likely federal questioned costs. We consider the $2,582 difference for the two students to be questioned costs because they had unearned financial aid still owed to the Department. At the time of the audit, the University had not processed a corrected return of funds for the two students. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the University: ? Verify student eligibility for all disbursed Title IV funds before calculating the amount of unearned aid required to be returned for students who have withdrawn from school ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid University?s Response Washington State University takes very seriously its responsibilities to ensure compliance with federal requirements. The University appreciates the auditor acknowledgement that the University?s internal controls over the Return of Title IV funds are adequate. The two (out of 57) records with noted exception were isolated and should not be a reflection on the whole of the program or the University?s management of federal funds. These exceptions were identified by management when the records were pulled for auditor testing. Management had not made correction yet only because the audit was still in progress. Upon finding the isolated issues, management performed a review of all 873 students that fell in the audit population, performing calculations of each record to determine if there were any other errors. No errors that needed to be submitted to the Department of Education, other than the two in the test population, were noted. The University is working with the sponsor to ensure return of the known questioned costs can be properly facilitated. Internal processes have been further strengthened to provide for independent quality checks. A report was developed to identify and isolate anomalies, like returning more funds than were actually disbursed. The return to Title IV requirements are very complex and internal controls over compliance are regularly reviewed to ensure improvement and continued adherence to the requirements. The University thanks the State Auditor for bringing this issue to the University?s attention. Auditor?s Remarks We thank the University for its cooperation and assistance throughout the audit. We will review the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.14 Program participation agreement, states in part: (b) By entering into a program participation agreement, an institution agrees that ? (24) It will comply with the requirements of ?668.22; Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.22 Treatment of title IV funds when a student withdraws, states in part: (a) General. (1) When a recipient of title IV grant or loan assistance withdraws from an institution during a payment period or period of enrollment in which the recipient began attendance, the institution must determine the amount of title IV grant or loan assistance that the student earned as of the student?s withdrawal date in accordance with paragraph e) of this section. (4) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is less than the amount of title IV grant or loan assistance that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew? (i) The difference between these amounts must be returned to the title IV programs in accordance with paragraphs (g) and (h) of this section in the order specified in paragraph (i) of this section; and (ii) No additional disbursements may be made to the student for the payment period or period of enrollment. (5) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is greater than the total amount of title IV grant or loan assistance, or both, that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew, the difference between these amounts must be treated as a post-withdrawal disbursement in accordance with paragraph (a)(6) of this section and ?668.164(i). (e) Calculation of the amount of title IV assistance earned by the student ? (1) General. The amount of title IV grant or loan assistance that is earned by the student is calculated by? (i) Determining the percentage of title IV grant or loan assistance that has been earned by the student, as described in paragraph (e)(2) of this section; and (ii) Applying this percentage to the total amount of title IV grant or loan assistance that was disbursed (and that could have been disbursed, as defined in paragraph (l)(1) of this section) to the student, or on the student?s behalf, for the payment period of period of enrollment as of the student?s withdrawal date. (2) Percentage earned. The percentage of title IV grant or loan assistance that has been earned by the student is? (iii) Equal to the percentage of the payment period or period of enrollment that the student completed (as determined in accordance with paragraph (f) of this section) as of the student?s withdrawal date, if this date occurs on or before? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program that is measured in clock hours; or (iv) 100 percent, if the student?s withdrawal date occurs after? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program measured in clock hours. (3) Percentage unearned. The percentage of title IV grant or loan assistance that has not been earned by the student is calculated by determining the complement of the percentage of title IV grant or loan assistance earned by the student as described in paragraph (e)(2) of this section. (4) Total amount of unearned title IV assistance to be returned. The unearned amount of title IV assistance to be returned is calculated by subtracting the amount of title IV assistance earned by the student as calculated under paragraph (e)(1) of this section from the amount of title IV aid that was disbursed to the student as of the date of the institution?s determination that the student withdrew. (g) Return of unearned aid, responsibility of the institution. (1) The institution must return, in the order specified in paragraph (i) of this section, the lesser of? (i) The total amount of unearned title IV assistance to be returned as calculated under paragraph (e)(4) of this section; or (ii) An amount equal to the total institutional charges incurred by the student for the payment period or period of enrollment multiplied by the percentage of title IV grant or loan assistance that has not been earned by the student, as described in paragraph (e)(3) of this section.
2022-022 Washington State University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. Assistance Listing Number and Title: 84.007 Federal Supplemental Educational Opportunity Grant 84.033 Federal Work-Study Program 84.038 Federal Perkins Loan Program 84.063 Federal Pell Grant Program 84.268 Federal Direct Student Loans 84.379 Teacher Education Assistance for College and Higher Education Grants Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: Various Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Special Tests and Provisions: Return of Title IV Funds Known Questioned Cost Amount: $2,582 Background As amended, Title IV of the Higher Education Act authorizes programs that provide financial assistance to students to pursue postsecondary education at eligible institutions of higher education. When students who receive Title IV grant or loan assistance withdraw from an institution during a payment period or period of enrollment, the institution must determine the amount of Title IV aid the students have earned as of their withdrawal date. Schools calculate this by determining the percentage of program funds the students have earned and applying that percentage to the total amount of assistance that was or could have been disbursed to students for the payment period or period of enrollment as of their withdrawal date. If the total amount of Title IV assistance earned by students is less than the amount that was disbursed to them as of their withdrawal date, the institution is required to return the difference to the U.S. Department of Education (Department), and it cannot make any additional disbursements to students for the payment period or period of enrollment. In fiscal year 2022, Washington State University disbursed more than $205 million in Title IV funds to students. Description of Condition The University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. We found the University had adequate internal controls over the return of Title IV funds, and it materially complied with the federal requirements. However, we identified questioned costs as the result of returns that were incorrectly calculated. We used a statistical sampling method to randomly select and examine 57 out of a total population of 873 students for which the University was required to calculate a return of Title IV funds. We found two students for whom the University incorrectly calculated the amount required to be returned to the Department. Specifically: ? One student had $489 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,801, resulting in a difference of $2,312. ? The second student had $2,590 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,860, resulting in a difference of $270. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The University returned incorrect amounts because it did not verify that the students were eligible for all funds within their student accounts before calculating amounts and returning the Title IV funds to the Department. Staff responsible for calculating the amounts to return did not verify that loans that were never disbursed were excluded from the University?s calculation of unearned aid. Effect of Condition and Questioned Costs We identified $2,582 in known federal questioned costs and $39,550 in likely federal questioned costs. We consider the $2,582 difference for the two students to be questioned costs because they had unearned financial aid still owed to the Department. At the time of the audit, the University had not processed a corrected return of funds for the two students. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the University: ? Verify student eligibility for all disbursed Title IV funds before calculating the amount of unearned aid required to be returned for students who have withdrawn from school ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid University?s Response Washington State University takes very seriously its responsibilities to ensure compliance with federal requirements. The University appreciates the auditor acknowledgement that the University?s internal controls over the Return of Title IV funds are adequate. The two (out of 57) records with noted exception were isolated and should not be a reflection on the whole of the program or the University?s management of federal funds. These exceptions were identified by management when the records were pulled for auditor testing. Management had not made correction yet only because the audit was still in progress. Upon finding the isolated issues, management performed a review of all 873 students that fell in the audit population, performing calculations of each record to determine if there were any other errors. No errors that needed to be submitted to the Department of Education, other than the two in the test population, were noted. The University is working with the sponsor to ensure return of the known questioned costs can be properly facilitated. Internal processes have been further strengthened to provide for independent quality checks. A report was developed to identify and isolate anomalies, like returning more funds than were actually disbursed. The return to Title IV requirements are very complex and internal controls over compliance are regularly reviewed to ensure improvement and continued adherence to the requirements. The University thanks the State Auditor for bringing this issue to the University?s attention. Auditor?s Remarks We thank the University for its cooperation and assistance throughout the audit. We will review the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.14 Program participation agreement, states in part: (b) By entering into a program participation agreement, an institution agrees that ? (24) It will comply with the requirements of ?668.22; Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.22 Treatment of title IV funds when a student withdraws, states in part: (a) General. (1) When a recipient of title IV grant or loan assistance withdraws from an institution during a payment period or period of enrollment in which the recipient began attendance, the institution must determine the amount of title IV grant or loan assistance that the student earned as of the student?s withdrawal date in accordance with paragraph e) of this section. (4) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is less than the amount of title IV grant or loan assistance that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew? (i) The difference between these amounts must be returned to the title IV programs in accordance with paragraphs (g) and (h) of this section in the order specified in paragraph (i) of this section; and (ii) No additional disbursements may be made to the student for the payment period or period of enrollment. (5) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is greater than the total amount of title IV grant or loan assistance, or both, that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew, the difference between these amounts must be treated as a post-withdrawal disbursement in accordance with paragraph (a)(6) of this section and ?668.164(i). (e) Calculation of the amount of title IV assistance earned by the student ? (1) General. The amount of title IV grant or loan assistance that is earned by the student is calculated by? (i) Determining the percentage of title IV grant or loan assistance that has been earned by the student, as described in paragraph (e)(2) of this section; and (ii) Applying this percentage to the total amount of title IV grant or loan assistance that was disbursed (and that could have been disbursed, as defined in paragraph (l)(1) of this section) to the student, or on the student?s behalf, for the payment period of period of enrollment as of the student?s withdrawal date. (2) Percentage earned. The percentage of title IV grant or loan assistance that has been earned by the student is? (iii) Equal to the percentage of the payment period or period of enrollment that the student completed (as determined in accordance with paragraph (f) of this section) as of the student?s withdrawal date, if this date occurs on or before? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program that is measured in clock hours; or (iv) 100 percent, if the student?s withdrawal date occurs after? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program measured in clock hours. (3) Percentage unearned. The percentage of title IV grant or loan assistance that has not been earned by the student is calculated by determining the complement of the percentage of title IV grant or loan assistance earned by the student as described in paragraph (e)(2) of this section. (4) Total amount of unearned title IV assistance to be returned. The unearned amount of title IV assistance to be returned is calculated by subtracting the amount of title IV assistance earned by the student as calculated under paragraph (e)(1) of this section from the amount of title IV aid that was disbursed to the student as of the date of the institution?s determination that the student withdrew. (g) Return of unearned aid, responsibility of the institution. (1) The institution must return, in the order specified in paragraph (i) of this section, the lesser of? (i) The total amount of unearned title IV assistance to be returned as calculated under paragraph (e)(4) of this section; or (ii) An amount equal to the total institutional charges incurred by the student for the payment period or period of enrollment multiplied by the percentage of title IV grant or loan assistance that has not been earned by the student, as described in paragraph (e)(3) of this section.
2022-022 Washington State University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. Assistance Listing Number and Title: 84.007 Federal Supplemental Educational Opportunity Grant 84.033 Federal Work-Study Program 84.038 Federal Perkins Loan Program 84.063 Federal Pell Grant Program 84.268 Federal Direct Student Loans 84.379 Teacher Education Assistance for College and Higher Education Grants Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: Various Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Special Tests and Provisions: Return of Title IV Funds Known Questioned Cost Amount: $2,582 Background As amended, Title IV of the Higher Education Act authorizes programs that provide financial assistance to students to pursue postsecondary education at eligible institutions of higher education. When students who receive Title IV grant or loan assistance withdraw from an institution during a payment period or period of enrollment, the institution must determine the amount of Title IV aid the students have earned as of their withdrawal date. Schools calculate this by determining the percentage of program funds the students have earned and applying that percentage to the total amount of assistance that was or could have been disbursed to students for the payment period or period of enrollment as of their withdrawal date. If the total amount of Title IV assistance earned by students is less than the amount that was disbursed to them as of their withdrawal date, the institution is required to return the difference to the U.S. Department of Education (Department), and it cannot make any additional disbursements to students for the payment period or period of enrollment. In fiscal year 2022, Washington State University disbursed more than $205 million in Title IV funds to students. Description of Condition The University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. We found the University had adequate internal controls over the return of Title IV funds, and it materially complied with the federal requirements. However, we identified questioned costs as the result of returns that were incorrectly calculated. We used a statistical sampling method to randomly select and examine 57 out of a total population of 873 students for which the University was required to calculate a return of Title IV funds. We found two students for whom the University incorrectly calculated the amount required to be returned to the Department. Specifically: ? One student had $489 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,801, resulting in a difference of $2,312. ? The second student had $2,590 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,860, resulting in a difference of $270. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The University returned incorrect amounts because it did not verify that the students were eligible for all funds within their student accounts before calculating amounts and returning the Title IV funds to the Department. Staff responsible for calculating the amounts to return did not verify that loans that were never disbursed were excluded from the University?s calculation of unearned aid. Effect of Condition and Questioned Costs We identified $2,582 in known federal questioned costs and $39,550 in likely federal questioned costs. We consider the $2,582 difference for the two students to be questioned costs because they had unearned financial aid still owed to the Department. At the time of the audit, the University had not processed a corrected return of funds for the two students. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the University: ? Verify student eligibility for all disbursed Title IV funds before calculating the amount of unearned aid required to be returned for students who have withdrawn from school ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid University?s Response Washington State University takes very seriously its responsibilities to ensure compliance with federal requirements. The University appreciates the auditor acknowledgement that the University?s internal controls over the Return of Title IV funds are adequate. The two (out of 57) records with noted exception were isolated and should not be a reflection on the whole of the program or the University?s management of federal funds. These exceptions were identified by management when the records were pulled for auditor testing. Management had not made correction yet only because the audit was still in progress. Upon finding the isolated issues, management performed a review of all 873 students that fell in the audit population, performing calculations of each record to determine if there were any other errors. No errors that needed to be submitted to the Department of Education, other than the two in the test population, were noted. The University is working with the sponsor to ensure return of the known questioned costs can be properly facilitated. Internal processes have been further strengthened to provide for independent quality checks. A report was developed to identify and isolate anomalies, like returning more funds than were actually disbursed. The return to Title IV requirements are very complex and internal controls over compliance are regularly reviewed to ensure improvement and continued adherence to the requirements. The University thanks the State Auditor for bringing this issue to the University?s attention. Auditor?s Remarks We thank the University for its cooperation and assistance throughout the audit. We will review the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.14 Program participation agreement, states in part: (b) By entering into a program participation agreement, an institution agrees that ? (24) It will comply with the requirements of ?668.22; Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.22 Treatment of title IV funds when a student withdraws, states in part: (a) General. (1) When a recipient of title IV grant or loan assistance withdraws from an institution during a payment period or period of enrollment in which the recipient began attendance, the institution must determine the amount of title IV grant or loan assistance that the student earned as of the student?s withdrawal date in accordance with paragraph e) of this section. (4) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is less than the amount of title IV grant or loan assistance that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew? (i) The difference between these amounts must be returned to the title IV programs in accordance with paragraphs (g) and (h) of this section in the order specified in paragraph (i) of this section; and (ii) No additional disbursements may be made to the student for the payment period or period of enrollment. (5) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is greater than the total amount of title IV grant or loan assistance, or both, that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew, the difference between these amounts must be treated as a post-withdrawal disbursement in accordance with paragraph (a)(6) of this section and ?668.164(i). (e) Calculation of the amount of title IV assistance earned by the student ? (1) General. The amount of title IV grant or loan assistance that is earned by the student is calculated by? (i) Determining the percentage of title IV grant or loan assistance that has been earned by the student, as described in paragraph (e)(2) of this section; and (ii) Applying this percentage to the total amount of title IV grant or loan assistance that was disbursed (and that could have been disbursed, as defined in paragraph (l)(1) of this section) to the student, or on the student?s behalf, for the payment period of period of enrollment as of the student?s withdrawal date. (2) Percentage earned. The percentage of title IV grant or loan assistance that has been earned by the student is? (iii) Equal to the percentage of the payment period or period of enrollment that the student completed (as determined in accordance with paragraph (f) of this section) as of the student?s withdrawal date, if this date occurs on or before? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program that is measured in clock hours; or (iv) 100 percent, if the student?s withdrawal date occurs after? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program measured in clock hours. (3) Percentage unearned. The percentage of title IV grant or loan assistance that has not been earned by the student is calculated by determining the complement of the percentage of title IV grant or loan assistance earned by the student as described in paragraph (e)(2) of this section. (4) Total amount of unearned title IV assistance to be returned. The unearned amount of title IV assistance to be returned is calculated by subtracting the amount of title IV assistance earned by the student as calculated under paragraph (e)(1) of this section from the amount of title IV aid that was disbursed to the student as of the date of the institution?s determination that the student withdrew. (g) Return of unearned aid, responsibility of the institution. (1) The institution must return, in the order specified in paragraph (i) of this section, the lesser of? (i) The total amount of unearned title IV assistance to be returned as calculated under paragraph (e)(4) of this section; or (ii) An amount equal to the total institutional charges incurred by the student for the payment period or period of enrollment multiplied by the percentage of title IV grant or loan assistance that has not been earned by the student, as described in paragraph (e)(3) of this section.
2022-022 Washington State University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. Assistance Listing Number and Title: 84.007 Federal Supplemental Educational Opportunity Grant 84.033 Federal Work-Study Program 84.038 Federal Perkins Loan Program 84.063 Federal Pell Grant Program 84.268 Federal Direct Student Loans 84.379 Teacher Education Assistance for College and Higher Education Grants Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: Various Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Special Tests and Provisions: Return of Title IV Funds Known Questioned Cost Amount: $2,582 Background As amended, Title IV of the Higher Education Act authorizes programs that provide financial assistance to students to pursue postsecondary education at eligible institutions of higher education. When students who receive Title IV grant or loan assistance withdraw from an institution during a payment period or period of enrollment, the institution must determine the amount of Title IV aid the students have earned as of their withdrawal date. Schools calculate this by determining the percentage of program funds the students have earned and applying that percentage to the total amount of assistance that was or could have been disbursed to students for the payment period or period of enrollment as of their withdrawal date. If the total amount of Title IV assistance earned by students is less than the amount that was disbursed to them as of their withdrawal date, the institution is required to return the difference to the U.S. Department of Education (Department), and it cannot make any additional disbursements to students for the payment period or period of enrollment. In fiscal year 2022, Washington State University disbursed more than $205 million in Title IV funds to students. Description of Condition The University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. We found the University had adequate internal controls over the return of Title IV funds, and it materially complied with the federal requirements. However, we identified questioned costs as the result of returns that were incorrectly calculated. We used a statistical sampling method to randomly select and examine 57 out of a total population of 873 students for which the University was required to calculate a return of Title IV funds. We found two students for whom the University incorrectly calculated the amount required to be returned to the Department. Specifically: ? One student had $489 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,801, resulting in a difference of $2,312. ? The second student had $2,590 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,860, resulting in a difference of $270. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The University returned incorrect amounts because it did not verify that the students were eligible for all funds within their student accounts before calculating amounts and returning the Title IV funds to the Department. Staff responsible for calculating the amounts to return did not verify that loans that were never disbursed were excluded from the University?s calculation of unearned aid. Effect of Condition and Questioned Costs We identified $2,582 in known federal questioned costs and $39,550 in likely federal questioned costs. We consider the $2,582 difference for the two students to be questioned costs because they had unearned financial aid still owed to the Department. At the time of the audit, the University had not processed a corrected return of funds for the two students. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the University: ? Verify student eligibility for all disbursed Title IV funds before calculating the amount of unearned aid required to be returned for students who have withdrawn from school ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid University?s Response Washington State University takes very seriously its responsibilities to ensure compliance with federal requirements. The University appreciates the auditor acknowledgement that the University?s internal controls over the Return of Title IV funds are adequate. The two (out of 57) records with noted exception were isolated and should not be a reflection on the whole of the program or the University?s management of federal funds. These exceptions were identified by management when the records were pulled for auditor testing. Management had not made correction yet only because the audit was still in progress. Upon finding the isolated issues, management performed a review of all 873 students that fell in the audit population, performing calculations of each record to determine if there were any other errors. No errors that needed to be submitted to the Department of Education, other than the two in the test population, were noted. The University is working with the sponsor to ensure return of the known questioned costs can be properly facilitated. Internal processes have been further strengthened to provide for independent quality checks. A report was developed to identify and isolate anomalies, like returning more funds than were actually disbursed. The return to Title IV requirements are very complex and internal controls over compliance are regularly reviewed to ensure improvement and continued adherence to the requirements. The University thanks the State Auditor for bringing this issue to the University?s attention. Auditor?s Remarks We thank the University for its cooperation and assistance throughout the audit. We will review the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.14 Program participation agreement, states in part: (b) By entering into a program participation agreement, an institution agrees that ? (24) It will comply with the requirements of ?668.22; Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.22 Treatment of title IV funds when a student withdraws, states in part: (a) General. (1) When a recipient of title IV grant or loan assistance withdraws from an institution during a payment period or period of enrollment in which the recipient began attendance, the institution must determine the amount of title IV grant or loan assistance that the student earned as of the student?s withdrawal date in accordance with paragraph e) of this section. (4) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is less than the amount of title IV grant or loan assistance that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew? (i) The difference between these amounts must be returned to the title IV programs in accordance with paragraphs (g) and (h) of this section in the order specified in paragraph (i) of this section; and (ii) No additional disbursements may be made to the student for the payment period or period of enrollment. (5) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is greater than the total amount of title IV grant or loan assistance, or both, that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew, the difference between these amounts must be treated as a post-withdrawal disbursement in accordance with paragraph (a)(6) of this section and ?668.164(i). (e) Calculation of the amount of title IV assistance earned by the student ? (1) General. The amount of title IV grant or loan assistance that is earned by the student is calculated by? (i) Determining the percentage of title IV grant or loan assistance that has been earned by the student, as described in paragraph (e)(2) of this section; and (ii) Applying this percentage to the total amount of title IV grant or loan assistance that was disbursed (and that could have been disbursed, as defined in paragraph (l)(1) of this section) to the student, or on the student?s behalf, for the payment period of period of enrollment as of the student?s withdrawal date. (2) Percentage earned. The percentage of title IV grant or loan assistance that has been earned by the student is? (iii) Equal to the percentage of the payment period or period of enrollment that the student completed (as determined in accordance with paragraph (f) of this section) as of the student?s withdrawal date, if this date occurs on or before? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program that is measured in clock hours; or (iv) 100 percent, if the student?s withdrawal date occurs after? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program measured in clock hours. (3) Percentage unearned. The percentage of title IV grant or loan assistance that has not been earned by the student is calculated by determining the complement of the percentage of title IV grant or loan assistance earned by the student as described in paragraph (e)(2) of this section. (4) Total amount of unearned title IV assistance to be returned. The unearned amount of title IV assistance to be returned is calculated by subtracting the amount of title IV assistance earned by the student as calculated under paragraph (e)(1) of this section from the amount of title IV aid that was disbursed to the student as of the date of the institution?s determination that the student withdrew. (g) Return of unearned aid, responsibility of the institution. (1) The institution must return, in the order specified in paragraph (i) of this section, the lesser of? (i) The total amount of unearned title IV assistance to be returned as calculated under paragraph (e)(4) of this section; or (ii) An amount equal to the total institutional charges incurred by the student for the payment period or period of enrollment multiplied by the percentage of title IV grant or loan assistance that has not been earned by the student, as described in paragraph (e)(3) of this section.
2022-022 Washington State University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. Assistance Listing Number and Title: 84.007 Federal Supplemental Educational Opportunity Grant 84.033 Federal Work-Study Program 84.038 Federal Perkins Loan Program 84.063 Federal Pell Grant Program 84.268 Federal Direct Student Loans 84.379 Teacher Education Assistance for College and Higher Education Grants Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: Various Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Special Tests and Provisions: Return of Title IV Funds Known Questioned Cost Amount: $2,582 Background As amended, Title IV of the Higher Education Act authorizes programs that provide financial assistance to students to pursue postsecondary education at eligible institutions of higher education. When students who receive Title IV grant or loan assistance withdraw from an institution during a payment period or period of enrollment, the institution must determine the amount of Title IV aid the students have earned as of their withdrawal date. Schools calculate this by determining the percentage of program funds the students have earned and applying that percentage to the total amount of assistance that was or could have been disbursed to students for the payment period or period of enrollment as of their withdrawal date. If the total amount of Title IV assistance earned by students is less than the amount that was disbursed to them as of their withdrawal date, the institution is required to return the difference to the U.S. Department of Education (Department), and it cannot make any additional disbursements to students for the payment period or period of enrollment. In fiscal year 2022, Washington State University disbursed more than $205 million in Title IV funds to students. Description of Condition The University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. We found the University had adequate internal controls over the return of Title IV funds, and it materially complied with the federal requirements. However, we identified questioned costs as the result of returns that were incorrectly calculated. We used a statistical sampling method to randomly select and examine 57 out of a total population of 873 students for which the University was required to calculate a return of Title IV funds. We found two students for whom the University incorrectly calculated the amount required to be returned to the Department. Specifically: ? One student had $489 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,801, resulting in a difference of $2,312. ? The second student had $2,590 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,860, resulting in a difference of $270. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The University returned incorrect amounts because it did not verify that the students were eligible for all funds within their student accounts before calculating amounts and returning the Title IV funds to the Department. Staff responsible for calculating the amounts to return did not verify that loans that were never disbursed were excluded from the University?s calculation of unearned aid. Effect of Condition and Questioned Costs We identified $2,582 in known federal questioned costs and $39,550 in likely federal questioned costs. We consider the $2,582 difference for the two students to be questioned costs because they had unearned financial aid still owed to the Department. At the time of the audit, the University had not processed a corrected return of funds for the two students. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the University: ? Verify student eligibility for all disbursed Title IV funds before calculating the amount of unearned aid required to be returned for students who have withdrawn from school ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid University?s Response Washington State University takes very seriously its responsibilities to ensure compliance with federal requirements. The University appreciates the auditor acknowledgement that the University?s internal controls over the Return of Title IV funds are adequate. The two (out of 57) records with noted exception were isolated and should not be a reflection on the whole of the program or the University?s management of federal funds. These exceptions were identified by management when the records were pulled for auditor testing. Management had not made correction yet only because the audit was still in progress. Upon finding the isolated issues, management performed a review of all 873 students that fell in the audit population, performing calculations of each record to determine if there were any other errors. No errors that needed to be submitted to the Department of Education, other than the two in the test population, were noted. The University is working with the sponsor to ensure return of the known questioned costs can be properly facilitated. Internal processes have been further strengthened to provide for independent quality checks. A report was developed to identify and isolate anomalies, like returning more funds than were actually disbursed. The return to Title IV requirements are very complex and internal controls over compliance are regularly reviewed to ensure improvement and continued adherence to the requirements. The University thanks the State Auditor for bringing this issue to the University?s attention. Auditor?s Remarks We thank the University for its cooperation and assistance throughout the audit. We will review the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.14 Program participation agreement, states in part: (b) By entering into a program participation agreement, an institution agrees that ? (24) It will comply with the requirements of ?668.22; Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.22 Treatment of title IV funds when a student withdraws, states in part: (a) General. (1) When a recipient of title IV grant or loan assistance withdraws from an institution during a payment period or period of enrollment in which the recipient began attendance, the institution must determine the amount of title IV grant or loan assistance that the student earned as of the student?s withdrawal date in accordance with paragraph e) of this section. (4) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is less than the amount of title IV grant or loan assistance that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew? (i) The difference between these amounts must be returned to the title IV programs in accordance with paragraphs (g) and (h) of this section in the order specified in paragraph (i) of this section; and (ii) No additional disbursements may be made to the student for the payment period or period of enrollment. (5) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is greater than the total amount of title IV grant or loan assistance, or both, that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew, the difference between these amounts must be treated as a post-withdrawal disbursement in accordance with paragraph (a)(6) of this section and ?668.164(i). (e) Calculation of the amount of title IV assistance earned by the student ? (1) General. The amount of title IV grant or loan assistance that is earned by the student is calculated by? (i) Determining the percentage of title IV grant or loan assistance that has been earned by the student, as described in paragraph (e)(2) of this section; and (ii) Applying this percentage to the total amount of title IV grant or loan assistance that was disbursed (and that could have been disbursed, as defined in paragraph (l)(1) of this section) to the student, or on the student?s behalf, for the payment period of period of enrollment as of the student?s withdrawal date. (2) Percentage earned. The percentage of title IV grant or loan assistance that has been earned by the student is? (iii) Equal to the percentage of the payment period or period of enrollment that the student completed (as determined in accordance with paragraph (f) of this section) as of the student?s withdrawal date, if this date occurs on or before? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program that is measured in clock hours; or (iv) 100 percent, if the student?s withdrawal date occurs after? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program measured in clock hours. (3) Percentage unearned. The percentage of title IV grant or loan assistance that has not been earned by the student is calculated by determining the complement of the percentage of title IV grant or loan assistance earned by the student as described in paragraph (e)(2) of this section. (4) Total amount of unearned title IV assistance to be returned. The unearned amount of title IV assistance to be returned is calculated by subtracting the amount of title IV assistance earned by the student as calculated under paragraph (e)(1) of this section from the amount of title IV aid that was disbursed to the student as of the date of the institution?s determination that the student withdrew. (g) Return of unearned aid, responsibility of the institution. (1) The institution must return, in the order specified in paragraph (i) of this section, the lesser of? (i) The total amount of unearned title IV assistance to be returned as calculated under paragraph (e)(4) of this section; or (ii) An amount equal to the total institutional charges incurred by the student for the payment period or period of enrollment multiplied by the percentage of title IV grant or loan assistance that has not been earned by the student, as described in paragraph (e)(3) of this section.
2022-022 Washington State University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. Assistance Listing Number and Title: 84.007 Federal Supplemental Educational Opportunity Grant 84.033 Federal Work-Study Program 84.038 Federal Perkins Loan Program 84.063 Federal Pell Grant Program 84.268 Federal Direct Student Loans 84.379 Teacher Education Assistance for College and Higher Education Grants Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: Various Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Special Tests and Provisions: Return of Title IV Funds Known Questioned Cost Amount: $2,582 Background As amended, Title IV of the Higher Education Act authorizes programs that provide financial assistance to students to pursue postsecondary education at eligible institutions of higher education. When students who receive Title IV grant or loan assistance withdraw from an institution during a payment period or period of enrollment, the institution must determine the amount of Title IV aid the students have earned as of their withdrawal date. Schools calculate this by determining the percentage of program funds the students have earned and applying that percentage to the total amount of assistance that was or could have been disbursed to students for the payment period or period of enrollment as of their withdrawal date. If the total amount of Title IV assistance earned by students is less than the amount that was disbursed to them as of their withdrawal date, the institution is required to return the difference to the U.S. Department of Education (Department), and it cannot make any additional disbursements to students for the payment period or period of enrollment. In fiscal year 2022, Washington State University disbursed more than $205 million in Title IV funds to students. Description of Condition The University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. We found the University had adequate internal controls over the return of Title IV funds, and it materially complied with the federal requirements. However, we identified questioned costs as the result of returns that were incorrectly calculated. We used a statistical sampling method to randomly select and examine 57 out of a total population of 873 students for which the University was required to calculate a return of Title IV funds. We found two students for whom the University incorrectly calculated the amount required to be returned to the Department. Specifically: ? One student had $489 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,801, resulting in a difference of $2,312. ? The second student had $2,590 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,860, resulting in a difference of $270. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The University returned incorrect amounts because it did not verify that the students were eligible for all funds within their student accounts before calculating amounts and returning the Title IV funds to the Department. Staff responsible for calculating the amounts to return did not verify that loans that were never disbursed were excluded from the University?s calculation of unearned aid. Effect of Condition and Questioned Costs We identified $2,582 in known federal questioned costs and $39,550 in likely federal questioned costs. We consider the $2,582 difference for the two students to be questioned costs because they had unearned financial aid still owed to the Department. At the time of the audit, the University had not processed a corrected return of funds for the two students. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the University: ? Verify student eligibility for all disbursed Title IV funds before calculating the amount of unearned aid required to be returned for students who have withdrawn from school ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid University?s Response Washington State University takes very seriously its responsibilities to ensure compliance with federal requirements. The University appreciates the auditor acknowledgement that the University?s internal controls over the Return of Title IV funds are adequate. The two (out of 57) records with noted exception were isolated and should not be a reflection on the whole of the program or the University?s management of federal funds. These exceptions were identified by management when the records were pulled for auditor testing. Management had not made correction yet only because the audit was still in progress. Upon finding the isolated issues, management performed a review of all 873 students that fell in the audit population, performing calculations of each record to determine if there were any other errors. No errors that needed to be submitted to the Department of Education, other than the two in the test population, were noted. The University is working with the sponsor to ensure return of the known questioned costs can be properly facilitated. Internal processes have been further strengthened to provide for independent quality checks. A report was developed to identify and isolate anomalies, like returning more funds than were actually disbursed. The return to Title IV requirements are very complex and internal controls over compliance are regularly reviewed to ensure improvement and continued adherence to the requirements. The University thanks the State Auditor for bringing this issue to the University?s attention. Auditor?s Remarks We thank the University for its cooperation and assistance throughout the audit. We will review the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.14 Program participation agreement, states in part: (b) By entering into a program participation agreement, an institution agrees that ? (24) It will comply with the requirements of ?668.22; Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.22 Treatment of title IV funds when a student withdraws, states in part: (a) General. (1) When a recipient of title IV grant or loan assistance withdraws from an institution during a payment period or period of enrollment in which the recipient began attendance, the institution must determine the amount of title IV grant or loan assistance that the student earned as of the student?s withdrawal date in accordance with paragraph e) of this section. (4) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is less than the amount of title IV grant or loan assistance that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew? (i) The difference between these amounts must be returned to the title IV programs in accordance with paragraphs (g) and (h) of this section in the order specified in paragraph (i) of this section; and (ii) No additional disbursements may be made to the student for the payment period or period of enrollment. (5) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is greater than the total amount of title IV grant or loan assistance, or both, that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew, the difference between these amounts must be treated as a post-withdrawal disbursement in accordance with paragraph (a)(6) of this section and ?668.164(i). (e) Calculation of the amount of title IV assistance earned by the student ? (1) General. The amount of title IV grant or loan assistance that is earned by the student is calculated by? (i) Determining the percentage of title IV grant or loan assistance that has been earned by the student, as described in paragraph (e)(2) of this section; and (ii) Applying this percentage to the total amount of title IV grant or loan assistance that was disbursed (and that could have been disbursed, as defined in paragraph (l)(1) of this section) to the student, or on the student?s behalf, for the payment period of period of enrollment as of the student?s withdrawal date. (2) Percentage earned. The percentage of title IV grant or loan assistance that has been earned by the student is? (iii) Equal to the percentage of the payment period or period of enrollment that the student completed (as determined in accordance with paragraph (f) of this section) as of the student?s withdrawal date, if this date occurs on or before? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program that is measured in clock hours; or (iv) 100 percent, if the student?s withdrawal date occurs after? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program measured in clock hours. (3) Percentage unearned. The percentage of title IV grant or loan assistance that has not been earned by the student is calculated by determining the complement of the percentage of title IV grant or loan assistance earned by the student as described in paragraph (e)(2) of this section. (4) Total amount of unearned title IV assistance to be returned. The unearned amount of title IV assistance to be returned is calculated by subtracting the amount of title IV assistance earned by the student as calculated under paragraph (e)(1) of this section from the amount of title IV aid that was disbursed to the student as of the date of the institution?s determination that the student withdrew. (g) Return of unearned aid, responsibility of the institution. (1) The institution must return, in the order specified in paragraph (i) of this section, the lesser of? (i) The total amount of unearned title IV assistance to be returned as calculated under paragraph (e)(4) of this section; or (ii) An amount equal to the total institutional charges incurred by the student for the payment period or period of enrollment multiplied by the percentage of title IV grant or loan assistance that has not been earned by the student, as described in paragraph (e)(3) of this section.
2022-022 Washington State University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. Assistance Listing Number and Title: 84.007 Federal Supplemental Educational Opportunity Grant 84.033 Federal Work-Study Program 84.038 Federal Perkins Loan Program 84.063 Federal Pell Grant Program 84.268 Federal Direct Student Loans 84.379 Teacher Education Assistance for College and Higher Education Grants Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: Various Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Special Tests and Provisions: Return of Title IV Funds Known Questioned Cost Amount: $2,582 Background As amended, Title IV of the Higher Education Act authorizes programs that provide financial assistance to students to pursue postsecondary education at eligible institutions of higher education. When students who receive Title IV grant or loan assistance withdraw from an institution during a payment period or period of enrollment, the institution must determine the amount of Title IV aid the students have earned as of their withdrawal date. Schools calculate this by determining the percentage of program funds the students have earned and applying that percentage to the total amount of assistance that was or could have been disbursed to students for the payment period or period of enrollment as of their withdrawal date. If the total amount of Title IV assistance earned by students is less than the amount that was disbursed to them as of their withdrawal date, the institution is required to return the difference to the U.S. Department of Education (Department), and it cannot make any additional disbursements to students for the payment period or period of enrollment. In fiscal year 2022, Washington State University disbursed more than $205 million in Title IV funds to students. Description of Condition The University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. We found the University had adequate internal controls over the return of Title IV funds, and it materially complied with the federal requirements. However, we identified questioned costs as the result of returns that were incorrectly calculated. We used a statistical sampling method to randomly select and examine 57 out of a total population of 873 students for which the University was required to calculate a return of Title IV funds. We found two students for whom the University incorrectly calculated the amount required to be returned to the Department. Specifically: ? One student had $489 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,801, resulting in a difference of $2,312. ? The second student had $2,590 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,860, resulting in a difference of $270. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The University returned incorrect amounts because it did not verify that the students were eligible for all funds within their student accounts before calculating amounts and returning the Title IV funds to the Department. Staff responsible for calculating the amounts to return did not verify that loans that were never disbursed were excluded from the University?s calculation of unearned aid. Effect of Condition and Questioned Costs We identified $2,582 in known federal questioned costs and $39,550 in likely federal questioned costs. We consider the $2,582 difference for the two students to be questioned costs because they had unearned financial aid still owed to the Department. At the time of the audit, the University had not processed a corrected return of funds for the two students. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the University: ? Verify student eligibility for all disbursed Title IV funds before calculating the amount of unearned aid required to be returned for students who have withdrawn from school ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid University?s Response Washington State University takes very seriously its responsibilities to ensure compliance with federal requirements. The University appreciates the auditor acknowledgement that the University?s internal controls over the Return of Title IV funds are adequate. The two (out of 57) records with noted exception were isolated and should not be a reflection on the whole of the program or the University?s management of federal funds. These exceptions were identified by management when the records were pulled for auditor testing. Management had not made correction yet only because the audit was still in progress. Upon finding the isolated issues, management performed a review of all 873 students that fell in the audit population, performing calculations of each record to determine if there were any other errors. No errors that needed to be submitted to the Department of Education, other than the two in the test population, were noted. The University is working with the sponsor to ensure return of the known questioned costs can be properly facilitated. Internal processes have been further strengthened to provide for independent quality checks. A report was developed to identify and isolate anomalies, like returning more funds than were actually disbursed. The return to Title IV requirements are very complex and internal controls over compliance are regularly reviewed to ensure improvement and continued adherence to the requirements. The University thanks the State Auditor for bringing this issue to the University?s attention. Auditor?s Remarks We thank the University for its cooperation and assistance throughout the audit. We will review the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.14 Program participation agreement, states in part: (b) By entering into a program participation agreement, an institution agrees that ? (24) It will comply with the requirements of ?668.22; Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.22 Treatment of title IV funds when a student withdraws, states in part: (a) General. (1) When a recipient of title IV grant or loan assistance withdraws from an institution during a payment period or period of enrollment in which the recipient began attendance, the institution must determine the amount of title IV grant or loan assistance that the student earned as of the student?s withdrawal date in accordance with paragraph e) of this section. (4) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is less than the amount of title IV grant or loan assistance that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew? (i) The difference between these amounts must be returned to the title IV programs in accordance with paragraphs (g) and (h) of this section in the order specified in paragraph (i) of this section; and (ii) No additional disbursements may be made to the student for the payment period or period of enrollment. (5) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is greater than the total amount of title IV grant or loan assistance, or both, that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew, the difference between these amounts must be treated as a post-withdrawal disbursement in accordance with paragraph (a)(6) of this section and ?668.164(i). (e) Calculation of the amount of title IV assistance earned by the student ? (1) General. The amount of title IV grant or loan assistance that is earned by the student is calculated by? (i) Determining the percentage of title IV grant or loan assistance that has been earned by the student, as described in paragraph (e)(2) of this section; and (ii) Applying this percentage to the total amount of title IV grant or loan assistance that was disbursed (and that could have been disbursed, as defined in paragraph (l)(1) of this section) to the student, or on the student?s behalf, for the payment period of period of enrollment as of the student?s withdrawal date. (2) Percentage earned. The percentage of title IV grant or loan assistance that has been earned by the student is? (iii) Equal to the percentage of the payment period or period of enrollment that the student completed (as determined in accordance with paragraph (f) of this section) as of the student?s withdrawal date, if this date occurs on or before? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program that is measured in clock hours; or (iv) 100 percent, if the student?s withdrawal date occurs after? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program measured in clock hours. (3) Percentage unearned. The percentage of title IV grant or loan assistance that has not been earned by the student is calculated by determining the complement of the percentage of title IV grant or loan assistance earned by the student as described in paragraph (e)(2) of this section. (4) Total amount of unearned title IV assistance to be returned. The unearned amount of title IV assistance to be returned is calculated by subtracting the amount of title IV assistance earned by the student as calculated under paragraph (e)(1) of this section from the amount of title IV aid that was disbursed to the student as of the date of the institution?s determination that the student withdrew. (g) Return of unearned aid, responsibility of the institution. (1) The institution must return, in the order specified in paragraph (i) of this section, the lesser of? (i) The total amount of unearned title IV assistance to be returned as calculated under paragraph (e)(4) of this section; or (ii) An amount equal to the total institutional charges incurred by the student for the payment period or period of enrollment multiplied by the percentage of title IV grant or loan assistance that has not been earned by the student, as described in paragraph (e)(3) of this section.
2022-022 Washington State University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. Assistance Listing Number and Title: 84.007 Federal Supplemental Educational Opportunity Grant 84.033 Federal Work-Study Program 84.038 Federal Perkins Loan Program 84.063 Federal Pell Grant Program 84.268 Federal Direct Student Loans 84.379 Teacher Education Assistance for College and Higher Education Grants Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: Various Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Special Tests and Provisions: Return of Title IV Funds Known Questioned Cost Amount: $2,582 Background As amended, Title IV of the Higher Education Act authorizes programs that provide financial assistance to students to pursue postsecondary education at eligible institutions of higher education. When students who receive Title IV grant or loan assistance withdraw from an institution during a payment period or period of enrollment, the institution must determine the amount of Title IV aid the students have earned as of their withdrawal date. Schools calculate this by determining the percentage of program funds the students have earned and applying that percentage to the total amount of assistance that was or could have been disbursed to students for the payment period or period of enrollment as of their withdrawal date. If the total amount of Title IV assistance earned by students is less than the amount that was disbursed to them as of their withdrawal date, the institution is required to return the difference to the U.S. Department of Education (Department), and it cannot make any additional disbursements to students for the payment period or period of enrollment. In fiscal year 2022, Washington State University disbursed more than $205 million in Title IV funds to students. Description of Condition The University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. We found the University had adequate internal controls over the return of Title IV funds, and it materially complied with the federal requirements. However, we identified questioned costs as the result of returns that were incorrectly calculated. We used a statistical sampling method to randomly select and examine 57 out of a total population of 873 students for which the University was required to calculate a return of Title IV funds. We found two students for whom the University incorrectly calculated the amount required to be returned to the Department. Specifically: ? One student had $489 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,801, resulting in a difference of $2,312. ? The second student had $2,590 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,860, resulting in a difference of $270. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The University returned incorrect amounts because it did not verify that the students were eligible for all funds within their student accounts before calculating amounts and returning the Title IV funds to the Department. Staff responsible for calculating the amounts to return did not verify that loans that were never disbursed were excluded from the University?s calculation of unearned aid. Effect of Condition and Questioned Costs We identified $2,582 in known federal questioned costs and $39,550 in likely federal questioned costs. We consider the $2,582 difference for the two students to be questioned costs because they had unearned financial aid still owed to the Department. At the time of the audit, the University had not processed a corrected return of funds for the two students. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the University: ? Verify student eligibility for all disbursed Title IV funds before calculating the amount of unearned aid required to be returned for students who have withdrawn from school ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid University?s Response Washington State University takes very seriously its responsibilities to ensure compliance with federal requirements. The University appreciates the auditor acknowledgement that the University?s internal controls over the Return of Title IV funds are adequate. The two (out of 57) records with noted exception were isolated and should not be a reflection on the whole of the program or the University?s management of federal funds. These exceptions were identified by management when the records were pulled for auditor testing. Management had not made correction yet only because the audit was still in progress. Upon finding the isolated issues, management performed a review of all 873 students that fell in the audit population, performing calculations of each record to determine if there were any other errors. No errors that needed to be submitted to the Department of Education, other than the two in the test population, were noted. The University is working with the sponsor to ensure return of the known questioned costs can be properly facilitated. Internal processes have been further strengthened to provide for independent quality checks. A report was developed to identify and isolate anomalies, like returning more funds than were actually disbursed. The return to Title IV requirements are very complex and internal controls over compliance are regularly reviewed to ensure improvement and continued adherence to the requirements. The University thanks the State Auditor for bringing this issue to the University?s attention. Auditor?s Remarks We thank the University for its cooperation and assistance throughout the audit. We will review the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.14 Program participation agreement, states in part: (b) By entering into a program participation agreement, an institution agrees that ? (24) It will comply with the requirements of ?668.22; Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.22 Treatment of title IV funds when a student withdraws, states in part: (a) General. (1) When a recipient of title IV grant or loan assistance withdraws from an institution during a payment period or period of enrollment in which the recipient began attendance, the institution must determine the amount of title IV grant or loan assistance that the student earned as of the student?s withdrawal date in accordance with paragraph e) of this section. (4) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is less than the amount of title IV grant or loan assistance that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew? (i) The difference between these amounts must be returned to the title IV programs in accordance with paragraphs (g) and (h) of this section in the order specified in paragraph (i) of this section; and (ii) No additional disbursements may be made to the student for the payment period or period of enrollment. (5) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is greater than the total amount of title IV grant or loan assistance, or both, that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew, the difference between these amounts must be treated as a post-withdrawal disbursement in accordance with paragraph (a)(6) of this section and ?668.164(i). (e) Calculation of the amount of title IV assistance earned by the student ? (1) General. The amount of title IV grant or loan assistance that is earned by the student is calculated by? (i) Determining the percentage of title IV grant or loan assistance that has been earned by the student, as described in paragraph (e)(2) of this section; and (ii) Applying this percentage to the total amount of title IV grant or loan assistance that was disbursed (and that could have been disbursed, as defined in paragraph (l)(1) of this section) to the student, or on the student?s behalf, for the payment period of period of enrollment as of the student?s withdrawal date. (2) Percentage earned. The percentage of title IV grant or loan assistance that has been earned by the student is? (iii) Equal to the percentage of the payment period or period of enrollment that the student completed (as determined in accordance with paragraph (f) of this section) as of the student?s withdrawal date, if this date occurs on or before? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program that is measured in clock hours; or (iv) 100 percent, if the student?s withdrawal date occurs after? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program measured in clock hours. (3) Percentage unearned. The percentage of title IV grant or loan assistance that has not been earned by the student is calculated by determining the complement of the percentage of title IV grant or loan assistance earned by the student as described in paragraph (e)(2) of this section. (4) Total amount of unearned title IV assistance to be returned. The unearned amount of title IV assistance to be returned is calculated by subtracting the amount of title IV assistance earned by the student as calculated under paragraph (e)(1) of this section from the amount of title IV aid that was disbursed to the student as of the date of the institution?s determination that the student withdrew. (g) Return of unearned aid, responsibility of the institution. (1) The institution must return, in the order specified in paragraph (i) of this section, the lesser of? (i) The total amount of unearned title IV assistance to be returned as calculated under paragraph (e)(4) of this section; or (ii) An amount equal to the total institutional charges incurred by the student for the payment period or period of enrollment multiplied by the percentage of title IV grant or loan assistance that has not been earned by the student, as described in paragraph (e)(3) of this section.
2022-022 Washington State University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. Assistance Listing Number and Title: 84.007 Federal Supplemental Educational Opportunity Grant 84.033 Federal Work-Study Program 84.038 Federal Perkins Loan Program 84.063 Federal Pell Grant Program 84.268 Federal Direct Student Loans 84.379 Teacher Education Assistance for College and Higher Education Grants Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: Various Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Special Tests and Provisions: Return of Title IV Funds Known Questioned Cost Amount: $2,582 Background As amended, Title IV of the Higher Education Act authorizes programs that provide financial assistance to students to pursue postsecondary education at eligible institutions of higher education. When students who receive Title IV grant or loan assistance withdraw from an institution during a payment period or period of enrollment, the institution must determine the amount of Title IV aid the students have earned as of their withdrawal date. Schools calculate this by determining the percentage of program funds the students have earned and applying that percentage to the total amount of assistance that was or could have been disbursed to students for the payment period or period of enrollment as of their withdrawal date. If the total amount of Title IV assistance earned by students is less than the amount that was disbursed to them as of their withdrawal date, the institution is required to return the difference to the U.S. Department of Education (Department), and it cannot make any additional disbursements to students for the payment period or period of enrollment. In fiscal year 2022, Washington State University disbursed more than $205 million in Title IV funds to students. Description of Condition The University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. We found the University had adequate internal controls over the return of Title IV funds, and it materially complied with the federal requirements. However, we identified questioned costs as the result of returns that were incorrectly calculated. We used a statistical sampling method to randomly select and examine 57 out of a total population of 873 students for which the University was required to calculate a return of Title IV funds. We found two students for whom the University incorrectly calculated the amount required to be returned to the Department. Specifically: ? One student had $489 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,801, resulting in a difference of $2,312. ? The second student had $2,590 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,860, resulting in a difference of $270. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The University returned incorrect amounts because it did not verify that the students were eligible for all funds within their student accounts before calculating amounts and returning the Title IV funds to the Department. Staff responsible for calculating the amounts to return did not verify that loans that were never disbursed were excluded from the University?s calculation of unearned aid. Effect of Condition and Questioned Costs We identified $2,582 in known federal questioned costs and $39,550 in likely federal questioned costs. We consider the $2,582 difference for the two students to be questioned costs because they had unearned financial aid still owed to the Department. At the time of the audit, the University had not processed a corrected return of funds for the two students. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the University: ? Verify student eligibility for all disbursed Title IV funds before calculating the amount of unearned aid required to be returned for students who have withdrawn from school ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid University?s Response Washington State University takes very seriously its responsibilities to ensure compliance with federal requirements. The University appreciates the auditor acknowledgement that the University?s internal controls over the Return of Title IV funds are adequate. The two (out of 57) records with noted exception were isolated and should not be a reflection on the whole of the program or the University?s management of federal funds. These exceptions were identified by management when the records were pulled for auditor testing. Management had not made correction yet only because the audit was still in progress. Upon finding the isolated issues, management performed a review of all 873 students that fell in the audit population, performing calculations of each record to determine if there were any other errors. No errors that needed to be submitted to the Department of Education, other than the two in the test population, were noted. The University is working with the sponsor to ensure return of the known questioned costs can be properly facilitated. Internal processes have been further strengthened to provide for independent quality checks. A report was developed to identify and isolate anomalies, like returning more funds than were actually disbursed. The return to Title IV requirements are very complex and internal controls over compliance are regularly reviewed to ensure improvement and continued adherence to the requirements. The University thanks the State Auditor for bringing this issue to the University?s attention. Auditor?s Remarks We thank the University for its cooperation and assistance throughout the audit. We will review the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.14 Program participation agreement, states in part: (b) By entering into a program participation agreement, an institution agrees that ? (24) It will comply with the requirements of ?668.22; Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.22 Treatment of title IV funds when a student withdraws, states in part: (a) General. (1) When a recipient of title IV grant or loan assistance withdraws from an institution during a payment period or period of enrollment in which the recipient began attendance, the institution must determine the amount of title IV grant or loan assistance that the student earned as of the student?s withdrawal date in accordance with paragraph e) of this section. (4) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is less than the amount of title IV grant or loan assistance that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew? (i) The difference between these amounts must be returned to the title IV programs in accordance with paragraphs (g) and (h) of this section in the order specified in paragraph (i) of this section; and (ii) No additional disbursements may be made to the student for the payment period or period of enrollment. (5) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is greater than the total amount of title IV grant or loan assistance, or both, that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew, the difference between these amounts must be treated as a post-withdrawal disbursement in accordance with paragraph (a)(6) of this section and ?668.164(i). (e) Calculation of the amount of title IV assistance earned by the student ? (1) General. The amount of title IV grant or loan assistance that is earned by the student is calculated by? (i) Determining the percentage of title IV grant or loan assistance that has been earned by the student, as described in paragraph (e)(2) of this section; and (ii) Applying this percentage to the total amount of title IV grant or loan assistance that was disbursed (and that could have been disbursed, as defined in paragraph (l)(1) of this section) to the student, or on the student?s behalf, for the payment period of period of enrollment as of the student?s withdrawal date. (2) Percentage earned. The percentage of title IV grant or loan assistance that has been earned by the student is? (iii) Equal to the percentage of the payment period or period of enrollment that the student completed (as determined in accordance with paragraph (f) of this section) as of the student?s withdrawal date, if this date occurs on or before? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program that is measured in clock hours; or (iv) 100 percent, if the student?s withdrawal date occurs after? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program measured in clock hours. (3) Percentage unearned. The percentage of title IV grant or loan assistance that has not been earned by the student is calculated by determining the complement of the percentage of title IV grant or loan assistance earned by the student as described in paragraph (e)(2) of this section. (4) Total amount of unearned title IV assistance to be returned. The unearned amount of title IV assistance to be returned is calculated by subtracting the amount of title IV assistance earned by the student as calculated under paragraph (e)(1) of this section from the amount of title IV aid that was disbursed to the student as of the date of the institution?s determination that the student withdrew. (g) Return of unearned aid, responsibility of the institution. (1) The institution must return, in the order specified in paragraph (i) of this section, the lesser of? (i) The total amount of unearned title IV assistance to be returned as calculated under paragraph (e)(4) of this section; or (ii) An amount equal to the total institutional charges incurred by the student for the payment period or period of enrollment multiplied by the percentage of title IV grant or loan assistance that has not been earned by the student, as described in paragraph (e)(3) of this section.
2022-022 Washington State University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. Assistance Listing Number and Title: 84.007 Federal Supplemental Educational Opportunity Grant 84.033 Federal Work-Study Program 84.038 Federal Perkins Loan Program 84.063 Federal Pell Grant Program 84.268 Federal Direct Student Loans 84.379 Teacher Education Assistance for College and Higher Education Grants Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: Various Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Special Tests and Provisions: Return of Title IV Funds Known Questioned Cost Amount: $2,582 Background As amended, Title IV of the Higher Education Act authorizes programs that provide financial assistance to students to pursue postsecondary education at eligible institutions of higher education. When students who receive Title IV grant or loan assistance withdraw from an institution during a payment period or period of enrollment, the institution must determine the amount of Title IV aid the students have earned as of their withdrawal date. Schools calculate this by determining the percentage of program funds the students have earned and applying that percentage to the total amount of assistance that was or could have been disbursed to students for the payment period or period of enrollment as of their withdrawal date. If the total amount of Title IV assistance earned by students is less than the amount that was disbursed to them as of their withdrawal date, the institution is required to return the difference to the U.S. Department of Education (Department), and it cannot make any additional disbursements to students for the payment period or period of enrollment. In fiscal year 2022, Washington State University disbursed more than $205 million in Title IV funds to students. Description of Condition The University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. We found the University had adequate internal controls over the return of Title IV funds, and it materially complied with the federal requirements. However, we identified questioned costs as the result of returns that were incorrectly calculated. We used a statistical sampling method to randomly select and examine 57 out of a total population of 873 students for which the University was required to calculate a return of Title IV funds. We found two students for whom the University incorrectly calculated the amount required to be returned to the Department. Specifically: ? One student had $489 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,801, resulting in a difference of $2,312. ? The second student had $2,590 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,860, resulting in a difference of $270. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The University returned incorrect amounts because it did not verify that the students were eligible for all funds within their student accounts before calculating amounts and returning the Title IV funds to the Department. Staff responsible for calculating the amounts to return did not verify that loans that were never disbursed were excluded from the University?s calculation of unearned aid. Effect of Condition and Questioned Costs We identified $2,582 in known federal questioned costs and $39,550 in likely federal questioned costs. We consider the $2,582 difference for the two students to be questioned costs because they had unearned financial aid still owed to the Department. At the time of the audit, the University had not processed a corrected return of funds for the two students. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the University: ? Verify student eligibility for all disbursed Title IV funds before calculating the amount of unearned aid required to be returned for students who have withdrawn from school ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid University?s Response Washington State University takes very seriously its responsibilities to ensure compliance with federal requirements. The University appreciates the auditor acknowledgement that the University?s internal controls over the Return of Title IV funds are adequate. The two (out of 57) records with noted exception were isolated and should not be a reflection on the whole of the program or the University?s management of federal funds. These exceptions were identified by management when the records were pulled for auditor testing. Management had not made correction yet only because the audit was still in progress. Upon finding the isolated issues, management performed a review of all 873 students that fell in the audit population, performing calculations of each record to determine if there were any other errors. No errors that needed to be submitted to the Department of Education, other than the two in the test population, were noted. The University is working with the sponsor to ensure return of the known questioned costs can be properly facilitated. Internal processes have been further strengthened to provide for independent quality checks. A report was developed to identify and isolate anomalies, like returning more funds than were actually disbursed. The return to Title IV requirements are very complex and internal controls over compliance are regularly reviewed to ensure improvement and continued adherence to the requirements. The University thanks the State Auditor for bringing this issue to the University?s attention. Auditor?s Remarks We thank the University for its cooperation and assistance throughout the audit. We will review the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.14 Program participation agreement, states in part: (b) By entering into a program participation agreement, an institution agrees that ? (24) It will comply with the requirements of ?668.22; Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.22 Treatment of title IV funds when a student withdraws, states in part: (a) General. (1) When a recipient of title IV grant or loan assistance withdraws from an institution during a payment period or period of enrollment in which the recipient began attendance, the institution must determine the amount of title IV grant or loan assistance that the student earned as of the student?s withdrawal date in accordance with paragraph e) of this section. (4) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is less than the amount of title IV grant or loan assistance that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew? (i) The difference between these amounts must be returned to the title IV programs in accordance with paragraphs (g) and (h) of this section in the order specified in paragraph (i) of this section; and (ii) No additional disbursements may be made to the student for the payment period or period of enrollment. (5) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is greater than the total amount of title IV grant or loan assistance, or both, that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew, the difference between these amounts must be treated as a post-withdrawal disbursement in accordance with paragraph (a)(6) of this section and ?668.164(i). (e) Calculation of the amount of title IV assistance earned by the student ? (1) General. The amount of title IV grant or loan assistance that is earned by the student is calculated by? (i) Determining the percentage of title IV grant or loan assistance that has been earned by the student, as described in paragraph (e)(2) of this section; and (ii) Applying this percentage to the total amount of title IV grant or loan assistance that was disbursed (and that could have been disbursed, as defined in paragraph (l)(1) of this section) to the student, or on the student?s behalf, for the payment period of period of enrollment as of the student?s withdrawal date. (2) Percentage earned. The percentage of title IV grant or loan assistance that has been earned by the student is? (iii) Equal to the percentage of the payment period or period of enrollment that the student completed (as determined in accordance with paragraph (f) of this section) as of the student?s withdrawal date, if this date occurs on or before? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program that is measured in clock hours; or (iv) 100 percent, if the student?s withdrawal date occurs after? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program measured in clock hours. (3) Percentage unearned. The percentage of title IV grant or loan assistance that has not been earned by the student is calculated by determining the complement of the percentage of title IV grant or loan assistance earned by the student as described in paragraph (e)(2) of this section. (4) Total amount of unearned title IV assistance to be returned. The unearned amount of title IV assistance to be returned is calculated by subtracting the amount of title IV assistance earned by the student as calculated under paragraph (e)(1) of this section from the amount of title IV aid that was disbursed to the student as of the date of the institution?s determination that the student withdrew. (g) Return of unearned aid, responsibility of the institution. (1) The institution must return, in the order specified in paragraph (i) of this section, the lesser of? (i) The total amount of unearned title IV assistance to be returned as calculated under paragraph (e)(4) of this section; or (ii) An amount equal to the total institutional charges incurred by the student for the payment period or period of enrollment multiplied by the percentage of title IV grant or loan assistance that has not been earned by the student, as described in paragraph (e)(3) of this section.
2022-022 Washington State University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. Assistance Listing Number and Title: 84.007 Federal Supplemental Educational Opportunity Grant 84.033 Federal Work-Study Program 84.038 Federal Perkins Loan Program 84.063 Federal Pell Grant Program 84.268 Federal Direct Student Loans 84.379 Teacher Education Assistance for College and Higher Education Grants Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: Various Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Special Tests and Provisions: Return of Title IV Funds Known Questioned Cost Amount: $2,582 Background As amended, Title IV of the Higher Education Act authorizes programs that provide financial assistance to students to pursue postsecondary education at eligible institutions of higher education. When students who receive Title IV grant or loan assistance withdraw from an institution during a payment period or period of enrollment, the institution must determine the amount of Title IV aid the students have earned as of their withdrawal date. Schools calculate this by determining the percentage of program funds the students have earned and applying that percentage to the total amount of assistance that was or could have been disbursed to students for the payment period or period of enrollment as of their withdrawal date. If the total amount of Title IV assistance earned by students is less than the amount that was disbursed to them as of their withdrawal date, the institution is required to return the difference to the U.S. Department of Education (Department), and it cannot make any additional disbursements to students for the payment period or period of enrollment. In fiscal year 2022, Washington State University disbursed more than $205 million in Title IV funds to students. Description of Condition The University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. We found the University had adequate internal controls over the return of Title IV funds, and it materially complied with the federal requirements. However, we identified questioned costs as the result of returns that were incorrectly calculated. We used a statistical sampling method to randomly select and examine 57 out of a total population of 873 students for which the University was required to calculate a return of Title IV funds. We found two students for whom the University incorrectly calculated the amount required to be returned to the Department. Specifically: ? One student had $489 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,801, resulting in a difference of $2,312. ? The second student had $2,590 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,860, resulting in a difference of $270. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The University returned incorrect amounts because it did not verify that the students were eligible for all funds within their student accounts before calculating amounts and returning the Title IV funds to the Department. Staff responsible for calculating the amounts to return did not verify that loans that were never disbursed were excluded from the University?s calculation of unearned aid. Effect of Condition and Questioned Costs We identified $2,582 in known federal questioned costs and $39,550 in likely federal questioned costs. We consider the $2,582 difference for the two students to be questioned costs because they had unearned financial aid still owed to the Department. At the time of the audit, the University had not processed a corrected return of funds for the two students. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the University: ? Verify student eligibility for all disbursed Title IV funds before calculating the amount of unearned aid required to be returned for students who have withdrawn from school ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid University?s Response Washington State University takes very seriously its responsibilities to ensure compliance with federal requirements. The University appreciates the auditor acknowledgement that the University?s internal controls over the Return of Title IV funds are adequate. The two (out of 57) records with noted exception were isolated and should not be a reflection on the whole of the program or the University?s management of federal funds. These exceptions were identified by management when the records were pulled for auditor testing. Management had not made correction yet only because the audit was still in progress. Upon finding the isolated issues, management performed a review of all 873 students that fell in the audit population, performing calculations of each record to determine if there were any other errors. No errors that needed to be submitted to the Department of Education, other than the two in the test population, were noted. The University is working with the sponsor to ensure return of the known questioned costs can be properly facilitated. Internal processes have been further strengthened to provide for independent quality checks. A report was developed to identify and isolate anomalies, like returning more funds than were actually disbursed. The return to Title IV requirements are very complex and internal controls over compliance are regularly reviewed to ensure improvement and continued adherence to the requirements. The University thanks the State Auditor for bringing this issue to the University?s attention. Auditor?s Remarks We thank the University for its cooperation and assistance throughout the audit. We will review the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.14 Program participation agreement, states in part: (b) By entering into a program participation agreement, an institution agrees that ? (24) It will comply with the requirements of ?668.22; Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.22 Treatment of title IV funds when a student withdraws, states in part: (a) General. (1) When a recipient of title IV grant or loan assistance withdraws from an institution during a payment period or period of enrollment in which the recipient began attendance, the institution must determine the amount of title IV grant or loan assistance that the student earned as of the student?s withdrawal date in accordance with paragraph e) of this section. (4) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is less than the amount of title IV grant or loan assistance that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew? (i) The difference between these amounts must be returned to the title IV programs in accordance with paragraphs (g) and (h) of this section in the order specified in paragraph (i) of this section; and (ii) No additional disbursements may be made to the student for the payment period or period of enrollment. (5) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is greater than the total amount of title IV grant or loan assistance, or both, that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew, the difference between these amounts must be treated as a post-withdrawal disbursement in accordance with paragraph (a)(6) of this section and ?668.164(i). (e) Calculation of the amount of title IV assistance earned by the student ? (1) General. The amount of title IV grant or loan assistance that is earned by the student is calculated by? (i) Determining the percentage of title IV grant or loan assistance that has been earned by the student, as described in paragraph (e)(2) of this section; and (ii) Applying this percentage to the total amount of title IV grant or loan assistance that was disbursed (and that could have been disbursed, as defined in paragraph (l)(1) of this section) to the student, or on the student?s behalf, for the payment period of period of enrollment as of the student?s withdrawal date. (2) Percentage earned. The percentage of title IV grant or loan assistance that has been earned by the student is? (iii) Equal to the percentage of the payment period or period of enrollment that the student completed (as determined in accordance with paragraph (f) of this section) as of the student?s withdrawal date, if this date occurs on or before? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program that is measured in clock hours; or (iv) 100 percent, if the student?s withdrawal date occurs after? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program measured in clock hours. (3) Percentage unearned. The percentage of title IV grant or loan assistance that has not been earned by the student is calculated by determining the complement of the percentage of title IV grant or loan assistance earned by the student as described in paragraph (e)(2) of this section. (4) Total amount of unearned title IV assistance to be returned. The unearned amount of title IV assistance to be returned is calculated by subtracting the amount of title IV assistance earned by the student as calculated under paragraph (e)(1) of this section from the amount of title IV aid that was disbursed to the student as of the date of the institution?s determination that the student withdrew. (g) Return of unearned aid, responsibility of the institution. (1) The institution must return, in the order specified in paragraph (i) of this section, the lesser of? (i) The total amount of unearned title IV assistance to be returned as calculated under paragraph (e)(4) of this section; or (ii) An amount equal to the total institutional charges incurred by the student for the payment period or period of enrollment multiplied by the percentage of title IV grant or loan assistance that has not been earned by the student, as described in paragraph (e)(3) of this section.
2022-022 Washington State University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. Assistance Listing Number and Title: 84.007 Federal Supplemental Educational Opportunity Grant 84.033 Federal Work-Study Program 84.038 Federal Perkins Loan Program 84.063 Federal Pell Grant Program 84.268 Federal Direct Student Loans 84.379 Teacher Education Assistance for College and Higher Education Grants Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: Various Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Special Tests and Provisions: Return of Title IV Funds Known Questioned Cost Amount: $2,582 Background As amended, Title IV of the Higher Education Act authorizes programs that provide financial assistance to students to pursue postsecondary education at eligible institutions of higher education. When students who receive Title IV grant or loan assistance withdraw from an institution during a payment period or period of enrollment, the institution must determine the amount of Title IV aid the students have earned as of their withdrawal date. Schools calculate this by determining the percentage of program funds the students have earned and applying that percentage to the total amount of assistance that was or could have been disbursed to students for the payment period or period of enrollment as of their withdrawal date. If the total amount of Title IV assistance earned by students is less than the amount that was disbursed to them as of their withdrawal date, the institution is required to return the difference to the U.S. Department of Education (Department), and it cannot make any additional disbursements to students for the payment period or period of enrollment. In fiscal year 2022, Washington State University disbursed more than $205 million in Title IV funds to students. Description of Condition The University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. We found the University had adequate internal controls over the return of Title IV funds, and it materially complied with the federal requirements. However, we identified questioned costs as the result of returns that were incorrectly calculated. We used a statistical sampling method to randomly select and examine 57 out of a total population of 873 students for which the University was required to calculate a return of Title IV funds. We found two students for whom the University incorrectly calculated the amount required to be returned to the Department. Specifically: ? One student had $489 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,801, resulting in a difference of $2,312. ? The second student had $2,590 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,860, resulting in a difference of $270. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The University returned incorrect amounts because it did not verify that the students were eligible for all funds within their student accounts before calculating amounts and returning the Title IV funds to the Department. Staff responsible for calculating the amounts to return did not verify that loans that were never disbursed were excluded from the University?s calculation of unearned aid. Effect of Condition and Questioned Costs We identified $2,582 in known federal questioned costs and $39,550 in likely federal questioned costs. We consider the $2,582 difference for the two students to be questioned costs because they had unearned financial aid still owed to the Department. At the time of the audit, the University had not processed a corrected return of funds for the two students. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the University: ? Verify student eligibility for all disbursed Title IV funds before calculating the amount of unearned aid required to be returned for students who have withdrawn from school ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid University?s Response Washington State University takes very seriously its responsibilities to ensure compliance with federal requirements. The University appreciates the auditor acknowledgement that the University?s internal controls over the Return of Title IV funds are adequate. The two (out of 57) records with noted exception were isolated and should not be a reflection on the whole of the program or the University?s management of federal funds. These exceptions were identified by management when the records were pulled for auditor testing. Management had not made correction yet only because the audit was still in progress. Upon finding the isolated issues, management performed a review of all 873 students that fell in the audit population, performing calculations of each record to determine if there were any other errors. No errors that needed to be submitted to the Department of Education, other than the two in the test population, were noted. The University is working with the sponsor to ensure return of the known questioned costs can be properly facilitated. Internal processes have been further strengthened to provide for independent quality checks. A report was developed to identify and isolate anomalies, like returning more funds than were actually disbursed. The return to Title IV requirements are very complex and internal controls over compliance are regularly reviewed to ensure improvement and continued adherence to the requirements. The University thanks the State Auditor for bringing this issue to the University?s attention. Auditor?s Remarks We thank the University for its cooperation and assistance throughout the audit. We will review the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.14 Program participation agreement, states in part: (b) By entering into a program participation agreement, an institution agrees that ? (24) It will comply with the requirements of ?668.22; Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.22 Treatment of title IV funds when a student withdraws, states in part: (a) General. (1) When a recipient of title IV grant or loan assistance withdraws from an institution during a payment period or period of enrollment in which the recipient began attendance, the institution must determine the amount of title IV grant or loan assistance that the student earned as of the student?s withdrawal date in accordance with paragraph e) of this section. (4) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is less than the amount of title IV grant or loan assistance that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew? (i) The difference between these amounts must be returned to the title IV programs in accordance with paragraphs (g) and (h) of this section in the order specified in paragraph (i) of this section; and (ii) No additional disbursements may be made to the student for the payment period or period of enrollment. (5) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is greater than the total amount of title IV grant or loan assistance, or both, that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew, the difference between these amounts must be treated as a post-withdrawal disbursement in accordance with paragraph (a)(6) of this section and ?668.164(i). (e) Calculation of the amount of title IV assistance earned by the student ? (1) General. The amount of title IV grant or loan assistance that is earned by the student is calculated by? (i) Determining the percentage of title IV grant or loan assistance that has been earned by the student, as described in paragraph (e)(2) of this section; and (ii) Applying this percentage to the total amount of title IV grant or loan assistance that was disbursed (and that could have been disbursed, as defined in paragraph (l)(1) of this section) to the student, or on the student?s behalf, for the payment period of period of enrollment as of the student?s withdrawal date. (2) Percentage earned. The percentage of title IV grant or loan assistance that has been earned by the student is? (iii) Equal to the percentage of the payment period or period of enrollment that the student completed (as determined in accordance with paragraph (f) of this section) as of the student?s withdrawal date, if this date occurs on or before? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program that is measured in clock hours; or (iv) 100 percent, if the student?s withdrawal date occurs after? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program measured in clock hours. (3) Percentage unearned. The percentage of title IV grant or loan assistance that has not been earned by the student is calculated by determining the complement of the percentage of title IV grant or loan assistance earned by the student as described in paragraph (e)(2) of this section. (4) Total amount of unearned title IV assistance to be returned. The unearned amount of title IV assistance to be returned is calculated by subtracting the amount of title IV assistance earned by the student as calculated under paragraph (e)(1) of this section from the amount of title IV aid that was disbursed to the student as of the date of the institution?s determination that the student withdrew. (g) Return of unearned aid, responsibility of the institution. (1) The institution must return, in the order specified in paragraph (i) of this section, the lesser of? (i) The total amount of unearned title IV assistance to be returned as calculated under paragraph (e)(4) of this section; or (ii) An amount equal to the total institutional charges incurred by the student for the payment period or period of enrollment multiplied by the percentage of title IV grant or loan assistance that has not been earned by the student, as described in paragraph (e)(3) of this section.
2022-022 Washington State University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. Assistance Listing Number and Title: 84.007 Federal Supplemental Educational Opportunity Grant 84.033 Federal Work-Study Program 84.038 Federal Perkins Loan Program 84.063 Federal Pell Grant Program 84.268 Federal Direct Student Loans 84.379 Teacher Education Assistance for College and Higher Education Grants Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: Various Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Special Tests and Provisions: Return of Title IV Funds Known Questioned Cost Amount: $2,582 Background As amended, Title IV of the Higher Education Act authorizes programs that provide financial assistance to students to pursue postsecondary education at eligible institutions of higher education. When students who receive Title IV grant or loan assistance withdraw from an institution during a payment period or period of enrollment, the institution must determine the amount of Title IV aid the students have earned as of their withdrawal date. Schools calculate this by determining the percentage of program funds the students have earned and applying that percentage to the total amount of assistance that was or could have been disbursed to students for the payment period or period of enrollment as of their withdrawal date. If the total amount of Title IV assistance earned by students is less than the amount that was disbursed to them as of their withdrawal date, the institution is required to return the difference to the U.S. Department of Education (Department), and it cannot make any additional disbursements to students for the payment period or period of enrollment. In fiscal year 2022, Washington State University disbursed more than $205 million in Title IV funds to students. Description of Condition The University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. We found the University had adequate internal controls over the return of Title IV funds, and it materially complied with the federal requirements. However, we identified questioned costs as the result of returns that were incorrectly calculated. We used a statistical sampling method to randomly select and examine 57 out of a total population of 873 students for which the University was required to calculate a return of Title IV funds. We found two students for whom the University incorrectly calculated the amount required to be returned to the Department. Specifically: ? One student had $489 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,801, resulting in a difference of $2,312. ? The second student had $2,590 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,860, resulting in a difference of $270. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The University returned incorrect amounts because it did not verify that the students were eligible for all funds within their student accounts before calculating amounts and returning the Title IV funds to the Department. Staff responsible for calculating the amounts to return did not verify that loans that were never disbursed were excluded from the University?s calculation of unearned aid. Effect of Condition and Questioned Costs We identified $2,582 in known federal questioned costs and $39,550 in likely federal questioned costs. We consider the $2,582 difference for the two students to be questioned costs because they had unearned financial aid still owed to the Department. At the time of the audit, the University had not processed a corrected return of funds for the two students. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the University: ? Verify student eligibility for all disbursed Title IV funds before calculating the amount of unearned aid required to be returned for students who have withdrawn from school ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid University?s Response Washington State University takes very seriously its responsibilities to ensure compliance with federal requirements. The University appreciates the auditor acknowledgement that the University?s internal controls over the Return of Title IV funds are adequate. The two (out of 57) records with noted exception were isolated and should not be a reflection on the whole of the program or the University?s management of federal funds. These exceptions were identified by management when the records were pulled for auditor testing. Management had not made correction yet only because the audit was still in progress. Upon finding the isolated issues, management performed a review of all 873 students that fell in the audit population, performing calculations of each record to determine if there were any other errors. No errors that needed to be submitted to the Department of Education, other than the two in the test population, were noted. The University is working with the sponsor to ensure return of the known questioned costs can be properly facilitated. Internal processes have been further strengthened to provide for independent quality checks. A report was developed to identify and isolate anomalies, like returning more funds than were actually disbursed. The return to Title IV requirements are very complex and internal controls over compliance are regularly reviewed to ensure improvement and continued adherence to the requirements. The University thanks the State Auditor for bringing this issue to the University?s attention. Auditor?s Remarks We thank the University for its cooperation and assistance throughout the audit. We will review the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.14 Program participation agreement, states in part: (b) By entering into a program participation agreement, an institution agrees that ? (24) It will comply with the requirements of ?668.22; Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.22 Treatment of title IV funds when a student withdraws, states in part: (a) General. (1) When a recipient of title IV grant or loan assistance withdraws from an institution during a payment period or period of enrollment in which the recipient began attendance, the institution must determine the amount of title IV grant or loan assistance that the student earned as of the student?s withdrawal date in accordance with paragraph e) of this section. (4) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is less than the amount of title IV grant or loan assistance that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew? (i) The difference between these amounts must be returned to the title IV programs in accordance with paragraphs (g) and (h) of this section in the order specified in paragraph (i) of this section; and (ii) No additional disbursements may be made to the student for the payment period or period of enrollment. (5) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is greater than the total amount of title IV grant or loan assistance, or both, that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew, the difference between these amounts must be treated as a post-withdrawal disbursement in accordance with paragraph (a)(6) of this section and ?668.164(i). (e) Calculation of the amount of title IV assistance earned by the student ? (1) General. The amount of title IV grant or loan assistance that is earned by the student is calculated by? (i) Determining the percentage of title IV grant or loan assistance that has been earned by the student, as described in paragraph (e)(2) of this section; and (ii) Applying this percentage to the total amount of title IV grant or loan assistance that was disbursed (and that could have been disbursed, as defined in paragraph (l)(1) of this section) to the student, or on the student?s behalf, for the payment period of period of enrollment as of the student?s withdrawal date. (2) Percentage earned. The percentage of title IV grant or loan assistance that has been earned by the student is? (iii) Equal to the percentage of the payment period or period of enrollment that the student completed (as determined in accordance with paragraph (f) of this section) as of the student?s withdrawal date, if this date occurs on or before? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program that is measured in clock hours; or (iv) 100 percent, if the student?s withdrawal date occurs after? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program measured in clock hours. (3) Percentage unearned. The percentage of title IV grant or loan assistance that has not been earned by the student is calculated by determining the complement of the percentage of title IV grant or loan assistance earned by the student as described in paragraph (e)(2) of this section. (4) Total amount of unearned title IV assistance to be returned. The unearned amount of title IV assistance to be returned is calculated by subtracting the amount of title IV assistance earned by the student as calculated under paragraph (e)(1) of this section from the amount of title IV aid that was disbursed to the student as of the date of the institution?s determination that the student withdrew. (g) Return of unearned aid, responsibility of the institution. (1) The institution must return, in the order specified in paragraph (i) of this section, the lesser of? (i) The total amount of unearned title IV assistance to be returned as calculated under paragraph (e)(4) of this section; or (ii) An amount equal to the total institutional charges incurred by the student for the payment period or period of enrollment multiplied by the percentage of title IV grant or loan assistance that has not been earned by the student, as described in paragraph (e)(3) of this section.
2022-022 Washington State University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. Assistance Listing Number and Title: 84.007 Federal Supplemental Educational Opportunity Grant 84.033 Federal Work-Study Program 84.038 Federal Perkins Loan Program 84.063 Federal Pell Grant Program 84.268 Federal Direct Student Loans 84.379 Teacher Education Assistance for College and Higher Education Grants Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: Various Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Special Tests and Provisions: Return of Title IV Funds Known Questioned Cost Amount: $2,582 Background As amended, Title IV of the Higher Education Act authorizes programs that provide financial assistance to students to pursue postsecondary education at eligible institutions of higher education. When students who receive Title IV grant or loan assistance withdraw from an institution during a payment period or period of enrollment, the institution must determine the amount of Title IV aid the students have earned as of their withdrawal date. Schools calculate this by determining the percentage of program funds the students have earned and applying that percentage to the total amount of assistance that was or could have been disbursed to students for the payment period or period of enrollment as of their withdrawal date. If the total amount of Title IV assistance earned by students is less than the amount that was disbursed to them as of their withdrawal date, the institution is required to return the difference to the U.S. Department of Education (Department), and it cannot make any additional disbursements to students for the payment period or period of enrollment. In fiscal year 2022, Washington State University disbursed more than $205 million in Title IV funds to students. Description of Condition The University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. We found the University had adequate internal controls over the return of Title IV funds, and it materially complied with the federal requirements. However, we identified questioned costs as the result of returns that were incorrectly calculated. We used a statistical sampling method to randomly select and examine 57 out of a total population of 873 students for which the University was required to calculate a return of Title IV funds. We found two students for whom the University incorrectly calculated the amount required to be returned to the Department. Specifically: ? One student had $489 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,801, resulting in a difference of $2,312. ? The second student had $2,590 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,860, resulting in a difference of $270. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The University returned incorrect amounts because it did not verify that the students were eligible for all funds within their student accounts before calculating amounts and returning the Title IV funds to the Department. Staff responsible for calculating the amounts to return did not verify that loans that were never disbursed were excluded from the University?s calculation of unearned aid. Effect of Condition and Questioned Costs We identified $2,582 in known federal questioned costs and $39,550 in likely federal questioned costs. We consider the $2,582 difference for the two students to be questioned costs because they had unearned financial aid still owed to the Department. At the time of the audit, the University had not processed a corrected return of funds for the two students. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the University: ? Verify student eligibility for all disbursed Title IV funds before calculating the amount of unearned aid required to be returned for students who have withdrawn from school ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid University?s Response Washington State University takes very seriously its responsibilities to ensure compliance with federal requirements. The University appreciates the auditor acknowledgement that the University?s internal controls over the Return of Title IV funds are adequate. The two (out of 57) records with noted exception were isolated and should not be a reflection on the whole of the program or the University?s management of federal funds. These exceptions were identified by management when the records were pulled for auditor testing. Management had not made correction yet only because the audit was still in progress. Upon finding the isolated issues, management performed a review of all 873 students that fell in the audit population, performing calculations of each record to determine if there were any other errors. No errors that needed to be submitted to the Department of Education, other than the two in the test population, were noted. The University is working with the sponsor to ensure return of the known questioned costs can be properly facilitated. Internal processes have been further strengthened to provide for independent quality checks. A report was developed to identify and isolate anomalies, like returning more funds than were actually disbursed. The return to Title IV requirements are very complex and internal controls over compliance are regularly reviewed to ensure improvement and continued adherence to the requirements. The University thanks the State Auditor for bringing this issue to the University?s attention. Auditor?s Remarks We thank the University for its cooperation and assistance throughout the audit. We will review the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.14 Program participation agreement, states in part: (b) By entering into a program participation agreement, an institution agrees that ? (24) It will comply with the requirements of ?668.22; Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.22 Treatment of title IV funds when a student withdraws, states in part: (a) General. (1) When a recipient of title IV grant or loan assistance withdraws from an institution during a payment period or period of enrollment in which the recipient began attendance, the institution must determine the amount of title IV grant or loan assistance that the student earned as of the student?s withdrawal date in accordance with paragraph e) of this section. (4) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is less than the amount of title IV grant or loan assistance that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew? (i) The difference between these amounts must be returned to the title IV programs in accordance with paragraphs (g) and (h) of this section in the order specified in paragraph (i) of this section; and (ii) No additional disbursements may be made to the student for the payment period or period of enrollment. (5) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is greater than the total amount of title IV grant or loan assistance, or both, that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew, the difference between these amounts must be treated as a post-withdrawal disbursement in accordance with paragraph (a)(6) of this section and ?668.164(i). (e) Calculation of the amount of title IV assistance earned by the student ? (1) General. The amount of title IV grant or loan assistance that is earned by the student is calculated by? (i) Determining the percentage of title IV grant or loan assistance that has been earned by the student, as described in paragraph (e)(2) of this section; and (ii) Applying this percentage to the total amount of title IV grant or loan assistance that was disbursed (and that could have been disbursed, as defined in paragraph (l)(1) of this section) to the student, or on the student?s behalf, for the payment period of period of enrollment as of the student?s withdrawal date. (2) Percentage earned. The percentage of title IV grant or loan assistance that has been earned by the student is? (iii) Equal to the percentage of the payment period or period of enrollment that the student completed (as determined in accordance with paragraph (f) of this section) as of the student?s withdrawal date, if this date occurs on or before? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program that is measured in clock hours; or (iv) 100 percent, if the student?s withdrawal date occurs after? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program measured in clock hours. (3) Percentage unearned. The percentage of title IV grant or loan assistance that has not been earned by the student is calculated by determining the complement of the percentage of title IV grant or loan assistance earned by the student as described in paragraph (e)(2) of this section. (4) Total amount of unearned title IV assistance to be returned. The unearned amount of title IV assistance to be returned is calculated by subtracting the amount of title IV assistance earned by the student as calculated under paragraph (e)(1) of this section from the amount of title IV aid that was disbursed to the student as of the date of the institution?s determination that the student withdrew. (g) Return of unearned aid, responsibility of the institution. (1) The institution must return, in the order specified in paragraph (i) of this section, the lesser of? (i) The total amount of unearned title IV assistance to be returned as calculated under paragraph (e)(4) of this section; or (ii) An amount equal to the total institutional charges incurred by the student for the payment period or period of enrollment multiplied by the percentage of title IV grant or loan assistance that has not been earned by the student, as described in paragraph (e)(3) of this section.
2022-022 Washington State University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. Assistance Listing Number and Title: 84.007 Federal Supplemental Educational Opportunity Grant 84.033 Federal Work-Study Program 84.038 Federal Perkins Loan Program 84.063 Federal Pell Grant Program 84.268 Federal Direct Student Loans 84.379 Teacher Education Assistance for College and Higher Education Grants Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: Various Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Special Tests and Provisions: Return of Title IV Funds Known Questioned Cost Amount: $2,582 Background As amended, Title IV of the Higher Education Act authorizes programs that provide financial assistance to students to pursue postsecondary education at eligible institutions of higher education. When students who receive Title IV grant or loan assistance withdraw from an institution during a payment period or period of enrollment, the institution must determine the amount of Title IV aid the students have earned as of their withdrawal date. Schools calculate this by determining the percentage of program funds the students have earned and applying that percentage to the total amount of assistance that was or could have been disbursed to students for the payment period or period of enrollment as of their withdrawal date. If the total amount of Title IV assistance earned by students is less than the amount that was disbursed to them as of their withdrawal date, the institution is required to return the difference to the U.S. Department of Education (Department), and it cannot make any additional disbursements to students for the payment period or period of enrollment. In fiscal year 2022, Washington State University disbursed more than $205 million in Title IV funds to students. Description of Condition The University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. We found the University had adequate internal controls over the return of Title IV funds, and it materially complied with the federal requirements. However, we identified questioned costs as the result of returns that were incorrectly calculated. We used a statistical sampling method to randomly select and examine 57 out of a total population of 873 students for which the University was required to calculate a return of Title IV funds. We found two students for whom the University incorrectly calculated the amount required to be returned to the Department. Specifically: ? One student had $489 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,801, resulting in a difference of $2,312. ? The second student had $2,590 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,860, resulting in a difference of $270. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The University returned incorrect amounts because it did not verify that the students were eligible for all funds within their student accounts before calculating amounts and returning the Title IV funds to the Department. Staff responsible for calculating the amounts to return did not verify that loans that were never disbursed were excluded from the University?s calculation of unearned aid. Effect of Condition and Questioned Costs We identified $2,582 in known federal questioned costs and $39,550 in likely federal questioned costs. We consider the $2,582 difference for the two students to be questioned costs because they had unearned financial aid still owed to the Department. At the time of the audit, the University had not processed a corrected return of funds for the two students. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the University: ? Verify student eligibility for all disbursed Title IV funds before calculating the amount of unearned aid required to be returned for students who have withdrawn from school ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid University?s Response Washington State University takes very seriously its responsibilities to ensure compliance with federal requirements. The University appreciates the auditor acknowledgement that the University?s internal controls over the Return of Title IV funds are adequate. The two (out of 57) records with noted exception were isolated and should not be a reflection on the whole of the program or the University?s management of federal funds. These exceptions were identified by management when the records were pulled for auditor testing. Management had not made correction yet only because the audit was still in progress. Upon finding the isolated issues, management performed a review of all 873 students that fell in the audit population, performing calculations of each record to determine if there were any other errors. No errors that needed to be submitted to the Department of Education, other than the two in the test population, were noted. The University is working with the sponsor to ensure return of the known questioned costs can be properly facilitated. Internal processes have been further strengthened to provide for independent quality checks. A report was developed to identify and isolate anomalies, like returning more funds than were actually disbursed. The return to Title IV requirements are very complex and internal controls over compliance are regularly reviewed to ensure improvement and continued adherence to the requirements. The University thanks the State Auditor for bringing this issue to the University?s attention. Auditor?s Remarks We thank the University for its cooperation and assistance throughout the audit. We will review the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.14 Program participation agreement, states in part: (b) By entering into a program participation agreement, an institution agrees that ? (24) It will comply with the requirements of ?668.22; Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.22 Treatment of title IV funds when a student withdraws, states in part: (a) General. (1) When a recipient of title IV grant or loan assistance withdraws from an institution during a payment period or period of enrollment in which the recipient began attendance, the institution must determine the amount of title IV grant or loan assistance that the student earned as of the student?s withdrawal date in accordance with paragraph e) of this section. (4) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is less than the amount of title IV grant or loan assistance that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew? (i) The difference between these amounts must be returned to the title IV programs in accordance with paragraphs (g) and (h) of this section in the order specified in paragraph (i) of this section; and (ii) No additional disbursements may be made to the student for the payment period or period of enrollment. (5) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is greater than the total amount of title IV grant or loan assistance, or both, that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew, the difference between these amounts must be treated as a post-withdrawal disbursement in accordance with paragraph (a)(6) of this section and ?668.164(i). (e) Calculation of the amount of title IV assistance earned by the student ? (1) General. The amount of title IV grant or loan assistance that is earned by the student is calculated by? (i) Determining the percentage of title IV grant or loan assistance that has been earned by the student, as described in paragraph (e)(2) of this section; and (ii) Applying this percentage to the total amount of title IV grant or loan assistance that was disbursed (and that could have been disbursed, as defined in paragraph (l)(1) of this section) to the student, or on the student?s behalf, for the payment period of period of enrollment as of the student?s withdrawal date. (2) Percentage earned. The percentage of title IV grant or loan assistance that has been earned by the student is? (iii) Equal to the percentage of the payment period or period of enrollment that the student completed (as determined in accordance with paragraph (f) of this section) as of the student?s withdrawal date, if this date occurs on or before? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program that is measured in clock hours; or (iv) 100 percent, if the student?s withdrawal date occurs after? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program measured in clock hours. (3) Percentage unearned. The percentage of title IV grant or loan assistance that has not been earned by the student is calculated by determining the complement of the percentage of title IV grant or loan assistance earned by the student as described in paragraph (e)(2) of this section. (4) Total amount of unearned title IV assistance to be returned. The unearned amount of title IV assistance to be returned is calculated by subtracting the amount of title IV assistance earned by the student as calculated under paragraph (e)(1) of this section from the amount of title IV aid that was disbursed to the student as of the date of the institution?s determination that the student withdrew. (g) Return of unearned aid, responsibility of the institution. (1) The institution must return, in the order specified in paragraph (i) of this section, the lesser of? (i) The total amount of unearned title IV assistance to be returned as calculated under paragraph (e)(4) of this section; or (ii) An amount equal to the total institutional charges incurred by the student for the payment period or period of enrollment multiplied by the percentage of title IV grant or loan assistance that has not been earned by the student, as described in paragraph (e)(3) of this section.
2022-022 Washington State University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. Assistance Listing Number and Title: 84.007 Federal Supplemental Educational Opportunity Grant 84.033 Federal Work-Study Program 84.038 Federal Perkins Loan Program 84.063 Federal Pell Grant Program 84.268 Federal Direct Student Loans 84.379 Teacher Education Assistance for College and Higher Education Grants Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: Various Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Special Tests and Provisions: Return of Title IV Funds Known Questioned Cost Amount: $2,582 Background As amended, Title IV of the Higher Education Act authorizes programs that provide financial assistance to students to pursue postsecondary education at eligible institutions of higher education. When students who receive Title IV grant or loan assistance withdraw from an institution during a payment period or period of enrollment, the institution must determine the amount of Title IV aid the students have earned as of their withdrawal date. Schools calculate this by determining the percentage of program funds the students have earned and applying that percentage to the total amount of assistance that was or could have been disbursed to students for the payment period or period of enrollment as of their withdrawal date. If the total amount of Title IV assistance earned by students is less than the amount that was disbursed to them as of their withdrawal date, the institution is required to return the difference to the U.S. Department of Education (Department), and it cannot make any additional disbursements to students for the payment period or period of enrollment. In fiscal year 2022, Washington State University disbursed more than $205 million in Title IV funds to students. Description of Condition The University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. We found the University had adequate internal controls over the return of Title IV funds, and it materially complied with the federal requirements. However, we identified questioned costs as the result of returns that were incorrectly calculated. We used a statistical sampling method to randomly select and examine 57 out of a total population of 873 students for which the University was required to calculate a return of Title IV funds. We found two students for whom the University incorrectly calculated the amount required to be returned to the Department. Specifically: ? One student had $489 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,801, resulting in a difference of $2,312. ? The second student had $2,590 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,860, resulting in a difference of $270. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The University returned incorrect amounts because it did not verify that the students were eligible for all funds within their student accounts before calculating amounts and returning the Title IV funds to the Department. Staff responsible for calculating the amounts to return did not verify that loans that were never disbursed were excluded from the University?s calculation of unearned aid. Effect of Condition and Questioned Costs We identified $2,582 in known federal questioned costs and $39,550 in likely federal questioned costs. We consider the $2,582 difference for the two students to be questioned costs because they had unearned financial aid still owed to the Department. At the time of the audit, the University had not processed a corrected return of funds for the two students. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the University: ? Verify student eligibility for all disbursed Title IV funds before calculating the amount of unearned aid required to be returned for students who have withdrawn from school ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid University?s Response Washington State University takes very seriously its responsibilities to ensure compliance with federal requirements. The University appreciates the auditor acknowledgement that the University?s internal controls over the Return of Title IV funds are adequate. The two (out of 57) records with noted exception were isolated and should not be a reflection on the whole of the program or the University?s management of federal funds. These exceptions were identified by management when the records were pulled for auditor testing. Management had not made correction yet only because the audit was still in progress. Upon finding the isolated issues, management performed a review of all 873 students that fell in the audit population, performing calculations of each record to determine if there were any other errors. No errors that needed to be submitted to the Department of Education, other than the two in the test population, were noted. The University is working with the sponsor to ensure return of the known questioned costs can be properly facilitated. Internal processes have been further strengthened to provide for independent quality checks. A report was developed to identify and isolate anomalies, like returning more funds than were actually disbursed. The return to Title IV requirements are very complex and internal controls over compliance are regularly reviewed to ensure improvement and continued adherence to the requirements. The University thanks the State Auditor for bringing this issue to the University?s attention. Auditor?s Remarks We thank the University for its cooperation and assistance throughout the audit. We will review the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.14 Program participation agreement, states in part: (b) By entering into a program participation agreement, an institution agrees that ? (24) It will comply with the requirements of ?668.22; Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.22 Treatment of title IV funds when a student withdraws, states in part: (a) General. (1) When a recipient of title IV grant or loan assistance withdraws from an institution during a payment period or period of enrollment in which the recipient began attendance, the institution must determine the amount of title IV grant or loan assistance that the student earned as of the student?s withdrawal date in accordance with paragraph e) of this section. (4) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is less than the amount of title IV grant or loan assistance that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew? (i) The difference between these amounts must be returned to the title IV programs in accordance with paragraphs (g) and (h) of this section in the order specified in paragraph (i) of this section; and (ii) No additional disbursements may be made to the student for the payment period or period of enrollment. (5) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is greater than the total amount of title IV grant or loan assistance, or both, that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew, the difference between these amounts must be treated as a post-withdrawal disbursement in accordance with paragraph (a)(6) of this section and ?668.164(i). (e) Calculation of the amount of title IV assistance earned by the student ? (1) General. The amount of title IV grant or loan assistance that is earned by the student is calculated by? (i) Determining the percentage of title IV grant or loan assistance that has been earned by the student, as described in paragraph (e)(2) of this section; and (ii) Applying this percentage to the total amount of title IV grant or loan assistance that was disbursed (and that could have been disbursed, as defined in paragraph (l)(1) of this section) to the student, or on the student?s behalf, for the payment period of period of enrollment as of the student?s withdrawal date. (2) Percentage earned. The percentage of title IV grant or loan assistance that has been earned by the student is? (iii) Equal to the percentage of the payment period or period of enrollment that the student completed (as determined in accordance with paragraph (f) of this section) as of the student?s withdrawal date, if this date occurs on or before? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program that is measured in clock hours; or (iv) 100 percent, if the student?s withdrawal date occurs after? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program measured in clock hours. (3) Percentage unearned. The percentage of title IV grant or loan assistance that has not been earned by the student is calculated by determining the complement of the percentage of title IV grant or loan assistance earned by the student as described in paragraph (e)(2) of this section. (4) Total amount of unearned title IV assistance to be returned. The unearned amount of title IV assistance to be returned is calculated by subtracting the amount of title IV assistance earned by the student as calculated under paragraph (e)(1) of this section from the amount of title IV aid that was disbursed to the student as of the date of the institution?s determination that the student withdrew. (g) Return of unearned aid, responsibility of the institution. (1) The institution must return, in the order specified in paragraph (i) of this section, the lesser of? (i) The total amount of unearned title IV assistance to be returned as calculated under paragraph (e)(4) of this section; or (ii) An amount equal to the total institutional charges incurred by the student for the payment period or period of enrollment multiplied by the percentage of title IV grant or loan assistance that has not been earned by the student, as described in paragraph (e)(3) of this section.
2022-022 Washington State University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. Assistance Listing Number and Title: 84.007 Federal Supplemental Educational Opportunity Grant 84.033 Federal Work-Study Program 84.038 Federal Perkins Loan Program 84.063 Federal Pell Grant Program 84.268 Federal Direct Student Loans 84.379 Teacher Education Assistance for College and Higher Education Grants Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: Various Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Special Tests and Provisions: Return of Title IV Funds Known Questioned Cost Amount: $2,582 Background As amended, Title IV of the Higher Education Act authorizes programs that provide financial assistance to students to pursue postsecondary education at eligible institutions of higher education. When students who receive Title IV grant or loan assistance withdraw from an institution during a payment period or period of enrollment, the institution must determine the amount of Title IV aid the students have earned as of their withdrawal date. Schools calculate this by determining the percentage of program funds the students have earned and applying that percentage to the total amount of assistance that was or could have been disbursed to students for the payment period or period of enrollment as of their withdrawal date. If the total amount of Title IV assistance earned by students is less than the amount that was disbursed to them as of their withdrawal date, the institution is required to return the difference to the U.S. Department of Education (Department), and it cannot make any additional disbursements to students for the payment period or period of enrollment. In fiscal year 2022, Washington State University disbursed more than $205 million in Title IV funds to students. Description of Condition The University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. We found the University had adequate internal controls over the return of Title IV funds, and it materially complied with the federal requirements. However, we identified questioned costs as the result of returns that were incorrectly calculated. We used a statistical sampling method to randomly select and examine 57 out of a total population of 873 students for which the University was required to calculate a return of Title IV funds. We found two students for whom the University incorrectly calculated the amount required to be returned to the Department. Specifically: ? One student had $489 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,801, resulting in a difference of $2,312. ? The second student had $2,590 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,860, resulting in a difference of $270. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The University returned incorrect amounts because it did not verify that the students were eligible for all funds within their student accounts before calculating amounts and returning the Title IV funds to the Department. Staff responsible for calculating the amounts to return did not verify that loans that were never disbursed were excluded from the University?s calculation of unearned aid. Effect of Condition and Questioned Costs We identified $2,582 in known federal questioned costs and $39,550 in likely federal questioned costs. We consider the $2,582 difference for the two students to be questioned costs because they had unearned financial aid still owed to the Department. At the time of the audit, the University had not processed a corrected return of funds for the two students. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the University: ? Verify student eligibility for all disbursed Title IV funds before calculating the amount of unearned aid required to be returned for students who have withdrawn from school ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid University?s Response Washington State University takes very seriously its responsibilities to ensure compliance with federal requirements. The University appreciates the auditor acknowledgement that the University?s internal controls over the Return of Title IV funds are adequate. The two (out of 57) records with noted exception were isolated and should not be a reflection on the whole of the program or the University?s management of federal funds. These exceptions were identified by management when the records were pulled for auditor testing. Management had not made correction yet only because the audit was still in progress. Upon finding the isolated issues, management performed a review of all 873 students that fell in the audit population, performing calculations of each record to determine if there were any other errors. No errors that needed to be submitted to the Department of Education, other than the two in the test population, were noted. The University is working with the sponsor to ensure return of the known questioned costs can be properly facilitated. Internal processes have been further strengthened to provide for independent quality checks. A report was developed to identify and isolate anomalies, like returning more funds than were actually disbursed. The return to Title IV requirements are very complex and internal controls over compliance are regularly reviewed to ensure improvement and continued adherence to the requirements. The University thanks the State Auditor for bringing this issue to the University?s attention. Auditor?s Remarks We thank the University for its cooperation and assistance throughout the audit. We will review the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.14 Program participation agreement, states in part: (b) By entering into a program participation agreement, an institution agrees that ? (24) It will comply with the requirements of ?668.22; Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.22 Treatment of title IV funds when a student withdraws, states in part: (a) General. (1) When a recipient of title IV grant or loan assistance withdraws from an institution during a payment period or period of enrollment in which the recipient began attendance, the institution must determine the amount of title IV grant or loan assistance that the student earned as of the student?s withdrawal date in accordance with paragraph e) of this section. (4) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is less than the amount of title IV grant or loan assistance that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew? (i) The difference between these amounts must be returned to the title IV programs in accordance with paragraphs (g) and (h) of this section in the order specified in paragraph (i) of this section; and (ii) No additional disbursements may be made to the student for the payment period or period of enrollment. (5) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is greater than the total amount of title IV grant or loan assistance, or both, that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew, the difference between these amounts must be treated as a post-withdrawal disbursement in accordance with paragraph (a)(6) of this section and ?668.164(i). (e) Calculation of the amount of title IV assistance earned by the student ? (1) General. The amount of title IV grant or loan assistance that is earned by the student is calculated by? (i) Determining the percentage of title IV grant or loan assistance that has been earned by the student, as described in paragraph (e)(2) of this section; and (ii) Applying this percentage to the total amount of title IV grant or loan assistance that was disbursed (and that could have been disbursed, as defined in paragraph (l)(1) of this section) to the student, or on the student?s behalf, for the payment period of period of enrollment as of the student?s withdrawal date. (2) Percentage earned. The percentage of title IV grant or loan assistance that has been earned by the student is? (iii) Equal to the percentage of the payment period or period of enrollment that the student completed (as determined in accordance with paragraph (f) of this section) as of the student?s withdrawal date, if this date occurs on or before? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program that is measured in clock hours; or (iv) 100 percent, if the student?s withdrawal date occurs after? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program measured in clock hours. (3) Percentage unearned. The percentage of title IV grant or loan assistance that has not been earned by the student is calculated by determining the complement of the percentage of title IV grant or loan assistance earned by the student as described in paragraph (e)(2) of this section. (4) Total amount of unearned title IV assistance to be returned. The unearned amount of title IV assistance to be returned is calculated by subtracting the amount of title IV assistance earned by the student as calculated under paragraph (e)(1) of this section from the amount of title IV aid that was disbursed to the student as of the date of the institution?s determination that the student withdrew. (g) Return of unearned aid, responsibility of the institution. (1) The institution must return, in the order specified in paragraph (i) of this section, the lesser of? (i) The total amount of unearned title IV assistance to be returned as calculated under paragraph (e)(4) of this section; or (ii) An amount equal to the total institutional charges incurred by the student for the payment period or period of enrollment multiplied by the percentage of title IV grant or loan assistance that has not been earned by the student, as described in paragraph (e)(3) of this section.
2022-022 Washington State University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. Assistance Listing Number and Title: 84.007 Federal Supplemental Educational Opportunity Grant 84.033 Federal Work-Study Program 84.038 Federal Perkins Loan Program 84.063 Federal Pell Grant Program 84.268 Federal Direct Student Loans 84.379 Teacher Education Assistance for College and Higher Education Grants Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: Various Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Special Tests and Provisions: Return of Title IV Funds Known Questioned Cost Amount: $2,582 Background As amended, Title IV of the Higher Education Act authorizes programs that provide financial assistance to students to pursue postsecondary education at eligible institutions of higher education. When students who receive Title IV grant or loan assistance withdraw from an institution during a payment period or period of enrollment, the institution must determine the amount of Title IV aid the students have earned as of their withdrawal date. Schools calculate this by determining the percentage of program funds the students have earned and applying that percentage to the total amount of assistance that was or could have been disbursed to students for the payment period or period of enrollment as of their withdrawal date. If the total amount of Title IV assistance earned by students is less than the amount that was disbursed to them as of their withdrawal date, the institution is required to return the difference to the U.S. Department of Education (Department), and it cannot make any additional disbursements to students for the payment period or period of enrollment. In fiscal year 2022, Washington State University disbursed more than $205 million in Title IV funds to students. Description of Condition The University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. We found the University had adequate internal controls over the return of Title IV funds, and it materially complied with the federal requirements. However, we identified questioned costs as the result of returns that were incorrectly calculated. We used a statistical sampling method to randomly select and examine 57 out of a total population of 873 students for which the University was required to calculate a return of Title IV funds. We found two students for whom the University incorrectly calculated the amount required to be returned to the Department. Specifically: ? One student had $489 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,801, resulting in a difference of $2,312. ? The second student had $2,590 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,860, resulting in a difference of $270. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The University returned incorrect amounts because it did not verify that the students were eligible for all funds within their student accounts before calculating amounts and returning the Title IV funds to the Department. Staff responsible for calculating the amounts to return did not verify that loans that were never disbursed were excluded from the University?s calculation of unearned aid. Effect of Condition and Questioned Costs We identified $2,582 in known federal questioned costs and $39,550 in likely federal questioned costs. We consider the $2,582 difference for the two students to be questioned costs because they had unearned financial aid still owed to the Department. At the time of the audit, the University had not processed a corrected return of funds for the two students. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the University: ? Verify student eligibility for all disbursed Title IV funds before calculating the amount of unearned aid required to be returned for students who have withdrawn from school ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid University?s Response Washington State University takes very seriously its responsibilities to ensure compliance with federal requirements. The University appreciates the auditor acknowledgement that the University?s internal controls over the Return of Title IV funds are adequate. The two (out of 57) records with noted exception were isolated and should not be a reflection on the whole of the program or the University?s management of federal funds. These exceptions were identified by management when the records were pulled for auditor testing. Management had not made correction yet only because the audit was still in progress. Upon finding the isolated issues, management performed a review of all 873 students that fell in the audit population, performing calculations of each record to determine if there were any other errors. No errors that needed to be submitted to the Department of Education, other than the two in the test population, were noted. The University is working with the sponsor to ensure return of the known questioned costs can be properly facilitated. Internal processes have been further strengthened to provide for independent quality checks. A report was developed to identify and isolate anomalies, like returning more funds than were actually disbursed. The return to Title IV requirements are very complex and internal controls over compliance are regularly reviewed to ensure improvement and continued adherence to the requirements. The University thanks the State Auditor for bringing this issue to the University?s attention. Auditor?s Remarks We thank the University for its cooperation and assistance throughout the audit. We will review the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.14 Program participation agreement, states in part: (b) By entering into a program participation agreement, an institution agrees that ? (24) It will comply with the requirements of ?668.22; Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.22 Treatment of title IV funds when a student withdraws, states in part: (a) General. (1) When a recipient of title IV grant or loan assistance withdraws from an institution during a payment period or period of enrollment in which the recipient began attendance, the institution must determine the amount of title IV grant or loan assistance that the student earned as of the student?s withdrawal date in accordance with paragraph e) of this section. (4) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is less than the amount of title IV grant or loan assistance that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew? (i) The difference between these amounts must be returned to the title IV programs in accordance with paragraphs (g) and (h) of this section in the order specified in paragraph (i) of this section; and (ii) No additional disbursements may be made to the student for the payment period or period of enrollment. (5) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is greater than the total amount of title IV grant or loan assistance, or both, that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew, the difference between these amounts must be treated as a post-withdrawal disbursement in accordance with paragraph (a)(6) of this section and ?668.164(i). (e) Calculation of the amount of title IV assistance earned by the student ? (1) General. The amount of title IV grant or loan assistance that is earned by the student is calculated by? (i) Determining the percentage of title IV grant or loan assistance that has been earned by the student, as described in paragraph (e)(2) of this section; and (ii) Applying this percentage to the total amount of title IV grant or loan assistance that was disbursed (and that could have been disbursed, as defined in paragraph (l)(1) of this section) to the student, or on the student?s behalf, for the payment period of period of enrollment as of the student?s withdrawal date. (2) Percentage earned. The percentage of title IV grant or loan assistance that has been earned by the student is? (iii) Equal to the percentage of the payment period or period of enrollment that the student completed (as determined in accordance with paragraph (f) of this section) as of the student?s withdrawal date, if this date occurs on or before? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program that is measured in clock hours; or (iv) 100 percent, if the student?s withdrawal date occurs after? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program measured in clock hours. (3) Percentage unearned. The percentage of title IV grant or loan assistance that has not been earned by the student is calculated by determining the complement of the percentage of title IV grant or loan assistance earned by the student as described in paragraph (e)(2) of this section. (4) Total amount of unearned title IV assistance to be returned. The unearned amount of title IV assistance to be returned is calculated by subtracting the amount of title IV assistance earned by the student as calculated under paragraph (e)(1) of this section from the amount of title IV aid that was disbursed to the student as of the date of the institution?s determination that the student withdrew. (g) Return of unearned aid, responsibility of the institution. (1) The institution must return, in the order specified in paragraph (i) of this section, the lesser of? (i) The total amount of unearned title IV assistance to be returned as calculated under paragraph (e)(4) of this section; or (ii) An amount equal to the total institutional charges incurred by the student for the payment period or period of enrollment multiplied by the percentage of title IV grant or loan assistance that has not been earned by the student, as described in paragraph (e)(3) of this section.
2022-022 Washington State University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. Assistance Listing Number and Title: 84.007 Federal Supplemental Educational Opportunity Grant 84.033 Federal Work-Study Program 84.038 Federal Perkins Loan Program 84.063 Federal Pell Grant Program 84.268 Federal Direct Student Loans 84.379 Teacher Education Assistance for College and Higher Education Grants Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: Various Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Special Tests and Provisions: Return of Title IV Funds Known Questioned Cost Amount: $2,582 Background As amended, Title IV of the Higher Education Act authorizes programs that provide financial assistance to students to pursue postsecondary education at eligible institutions of higher education. When students who receive Title IV grant or loan assistance withdraw from an institution during a payment period or period of enrollment, the institution must determine the amount of Title IV aid the students have earned as of their withdrawal date. Schools calculate this by determining the percentage of program funds the students have earned and applying that percentage to the total amount of assistance that was or could have been disbursed to students for the payment period or period of enrollment as of their withdrawal date. If the total amount of Title IV assistance earned by students is less than the amount that was disbursed to them as of their withdrawal date, the institution is required to return the difference to the U.S. Department of Education (Department), and it cannot make any additional disbursements to students for the payment period or period of enrollment. In fiscal year 2022, Washington State University disbursed more than $205 million in Title IV funds to students. Description of Condition The University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. We found the University had adequate internal controls over the return of Title IV funds, and it materially complied with the federal requirements. However, we identified questioned costs as the result of returns that were incorrectly calculated. We used a statistical sampling method to randomly select and examine 57 out of a total population of 873 students for which the University was required to calculate a return of Title IV funds. We found two students for whom the University incorrectly calculated the amount required to be returned to the Department. Specifically: ? One student had $489 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,801, resulting in a difference of $2,312. ? The second student had $2,590 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,860, resulting in a difference of $270. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The University returned incorrect amounts because it did not verify that the students were eligible for all funds within their student accounts before calculating amounts and returning the Title IV funds to the Department. Staff responsible for calculating the amounts to return did not verify that loans that were never disbursed were excluded from the University?s calculation of unearned aid. Effect of Condition and Questioned Costs We identified $2,582 in known federal questioned costs and $39,550 in likely federal questioned costs. We consider the $2,582 difference for the two students to be questioned costs because they had unearned financial aid still owed to the Department. At the time of the audit, the University had not processed a corrected return of funds for the two students. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the University: ? Verify student eligibility for all disbursed Title IV funds before calculating the amount of unearned aid required to be returned for students who have withdrawn from school ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid University?s Response Washington State University takes very seriously its responsibilities to ensure compliance with federal requirements. The University appreciates the auditor acknowledgement that the University?s internal controls over the Return of Title IV funds are adequate. The two (out of 57) records with noted exception were isolated and should not be a reflection on the whole of the program or the University?s management of federal funds. These exceptions were identified by management when the records were pulled for auditor testing. Management had not made correction yet only because the audit was still in progress. Upon finding the isolated issues, management performed a review of all 873 students that fell in the audit population, performing calculations of each record to determine if there were any other errors. No errors that needed to be submitted to the Department of Education, other than the two in the test population, were noted. The University is working with the sponsor to ensure return of the known questioned costs can be properly facilitated. Internal processes have been further strengthened to provide for independent quality checks. A report was developed to identify and isolate anomalies, like returning more funds than were actually disbursed. The return to Title IV requirements are very complex and internal controls over compliance are regularly reviewed to ensure improvement and continued adherence to the requirements. The University thanks the State Auditor for bringing this issue to the University?s attention. Auditor?s Remarks We thank the University for its cooperation and assistance throughout the audit. We will review the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.14 Program participation agreement, states in part: (b) By entering into a program participation agreement, an institution agrees that ? (24) It will comply with the requirements of ?668.22; Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.22 Treatment of title IV funds when a student withdraws, states in part: (a) General. (1) When a recipient of title IV grant or loan assistance withdraws from an institution during a payment period or period of enrollment in which the recipient began attendance, the institution must determine the amount of title IV grant or loan assistance that the student earned as of the student?s withdrawal date in accordance with paragraph e) of this section. (4) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is less than the amount of title IV grant or loan assistance that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew? (i) The difference between these amounts must be returned to the title IV programs in accordance with paragraphs (g) and (h) of this section in the order specified in paragraph (i) of this section; and (ii) No additional disbursements may be made to the student for the payment period or period of enrollment. (5) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is greater than the total amount of title IV grant or loan assistance, or both, that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew, the difference between these amounts must be treated as a post-withdrawal disbursement in accordance with paragraph (a)(6) of this section and ?668.164(i). (e) Calculation of the amount of title IV assistance earned by the student ? (1) General. The amount of title IV grant or loan assistance that is earned by the student is calculated by? (i) Determining the percentage of title IV grant or loan assistance that has been earned by the student, as described in paragraph (e)(2) of this section; and (ii) Applying this percentage to the total amount of title IV grant or loan assistance that was disbursed (and that could have been disbursed, as defined in paragraph (l)(1) of this section) to the student, or on the student?s behalf, for the payment period of period of enrollment as of the student?s withdrawal date. (2) Percentage earned. The percentage of title IV grant or loan assistance that has been earned by the student is? (iii) Equal to the percentage of the payment period or period of enrollment that the student completed (as determined in accordance with paragraph (f) of this section) as of the student?s withdrawal date, if this date occurs on or before? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program that is measured in clock hours; or (iv) 100 percent, if the student?s withdrawal date occurs after? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program measured in clock hours. (3) Percentage unearned. The percentage of title IV grant or loan assistance that has not been earned by the student is calculated by determining the complement of the percentage of title IV grant or loan assistance earned by the student as described in paragraph (e)(2) of this section. (4) Total amount of unearned title IV assistance to be returned. The unearned amount of title IV assistance to be returned is calculated by subtracting the amount of title IV assistance earned by the student as calculated under paragraph (e)(1) of this section from the amount of title IV aid that was disbursed to the student as of the date of the institution?s determination that the student withdrew. (g) Return of unearned aid, responsibility of the institution. (1) The institution must return, in the order specified in paragraph (i) of this section, the lesser of? (i) The total amount of unearned title IV assistance to be returned as calculated under paragraph (e)(4) of this section; or (ii) An amount equal to the total institutional charges incurred by the student for the payment period or period of enrollment multiplied by the percentage of title IV grant or loan assistance that has not been earned by the student, as described in paragraph (e)(3) of this section.
2022-022 Washington State University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. Assistance Listing Number and Title: 84.007 Federal Supplemental Educational Opportunity Grant 84.033 Federal Work-Study Program 84.038 Federal Perkins Loan Program 84.063 Federal Pell Grant Program 84.268 Federal Direct Student Loans 84.379 Teacher Education Assistance for College and Higher Education Grants Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: Various Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Special Tests and Provisions: Return of Title IV Funds Known Questioned Cost Amount: $2,582 Background As amended, Title IV of the Higher Education Act authorizes programs that provide financial assistance to students to pursue postsecondary education at eligible institutions of higher education. When students who receive Title IV grant or loan assistance withdraw from an institution during a payment period or period of enrollment, the institution must determine the amount of Title IV aid the students have earned as of their withdrawal date. Schools calculate this by determining the percentage of program funds the students have earned and applying that percentage to the total amount of assistance that was or could have been disbursed to students for the payment period or period of enrollment as of their withdrawal date. If the total amount of Title IV assistance earned by students is less than the amount that was disbursed to them as of their withdrawal date, the institution is required to return the difference to the U.S. Department of Education (Department), and it cannot make any additional disbursements to students for the payment period or period of enrollment. In fiscal year 2022, Washington State University disbursed more than $205 million in Title IV funds to students. Description of Condition The University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. We found the University had adequate internal controls over the return of Title IV funds, and it materially complied with the federal requirements. However, we identified questioned costs as the result of returns that were incorrectly calculated. We used a statistical sampling method to randomly select and examine 57 out of a total population of 873 students for which the University was required to calculate a return of Title IV funds. We found two students for whom the University incorrectly calculated the amount required to be returned to the Department. Specifically: ? One student had $489 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,801, resulting in a difference of $2,312. ? The second student had $2,590 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,860, resulting in a difference of $270. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The University returned incorrect amounts because it did not verify that the students were eligible for all funds within their student accounts before calculating amounts and returning the Title IV funds to the Department. Staff responsible for calculating the amounts to return did not verify that loans that were never disbursed were excluded from the University?s calculation of unearned aid. Effect of Condition and Questioned Costs We identified $2,582 in known federal questioned costs and $39,550 in likely federal questioned costs. We consider the $2,582 difference for the two students to be questioned costs because they had unearned financial aid still owed to the Department. At the time of the audit, the University had not processed a corrected return of funds for the two students. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the University: ? Verify student eligibility for all disbursed Title IV funds before calculating the amount of unearned aid required to be returned for students who have withdrawn from school ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid University?s Response Washington State University takes very seriously its responsibilities to ensure compliance with federal requirements. The University appreciates the auditor acknowledgement that the University?s internal controls over the Return of Title IV funds are adequate. The two (out of 57) records with noted exception were isolated and should not be a reflection on the whole of the program or the University?s management of federal funds. These exceptions were identified by management when the records were pulled for auditor testing. Management had not made correction yet only because the audit was still in progress. Upon finding the isolated issues, management performed a review of all 873 students that fell in the audit population, performing calculations of each record to determine if there were any other errors. No errors that needed to be submitted to the Department of Education, other than the two in the test population, were noted. The University is working with the sponsor to ensure return of the known questioned costs can be properly facilitated. Internal processes have been further strengthened to provide for independent quality checks. A report was developed to identify and isolate anomalies, like returning more funds than were actually disbursed. The return to Title IV requirements are very complex and internal controls over compliance are regularly reviewed to ensure improvement and continued adherence to the requirements. The University thanks the State Auditor for bringing this issue to the University?s attention. Auditor?s Remarks We thank the University for its cooperation and assistance throughout the audit. We will review the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.14 Program participation agreement, states in part: (b) By entering into a program participation agreement, an institution agrees that ? (24) It will comply with the requirements of ?668.22; Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.22 Treatment of title IV funds when a student withdraws, states in part: (a) General. (1) When a recipient of title IV grant or loan assistance withdraws from an institution during a payment period or period of enrollment in which the recipient began attendance, the institution must determine the amount of title IV grant or loan assistance that the student earned as of the student?s withdrawal date in accordance with paragraph e) of this section. (4) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is less than the amount of title IV grant or loan assistance that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew? (i) The difference between these amounts must be returned to the title IV programs in accordance with paragraphs (g) and (h) of this section in the order specified in paragraph (i) of this section; and (ii) No additional disbursements may be made to the student for the payment period or period of enrollment. (5) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is greater than the total amount of title IV grant or loan assistance, or both, that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew, the difference between these amounts must be treated as a post-withdrawal disbursement in accordance with paragraph (a)(6) of this section and ?668.164(i). (e) Calculation of the amount of title IV assistance earned by the student ? (1) General. The amount of title IV grant or loan assistance that is earned by the student is calculated by? (i) Determining the percentage of title IV grant or loan assistance that has been earned by the student, as described in paragraph (e)(2) of this section; and (ii) Applying this percentage to the total amount of title IV grant or loan assistance that was disbursed (and that could have been disbursed, as defined in paragraph (l)(1) of this section) to the student, or on the student?s behalf, for the payment period of period of enrollment as of the student?s withdrawal date. (2) Percentage earned. The percentage of title IV grant or loan assistance that has been earned by the student is? (iii) Equal to the percentage of the payment period or period of enrollment that the student completed (as determined in accordance with paragraph (f) of this section) as of the student?s withdrawal date, if this date occurs on or before? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program that is measured in clock hours; or (iv) 100 percent, if the student?s withdrawal date occurs after? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program measured in clock hours. (3) Percentage unearned. The percentage of title IV grant or loan assistance that has not been earned by the student is calculated by determining the complement of the percentage of title IV grant or loan assistance earned by the student as described in paragraph (e)(2) of this section. (4) Total amount of unearned title IV assistance to be returned. The unearned amount of title IV assistance to be returned is calculated by subtracting the amount of title IV assistance earned by the student as calculated under paragraph (e)(1) of this section from the amount of title IV aid that was disbursed to the student as of the date of the institution?s determination that the student withdrew. (g) Return of unearned aid, responsibility of the institution. (1) The institution must return, in the order specified in paragraph (i) of this section, the lesser of? (i) The total amount of unearned title IV assistance to be returned as calculated under paragraph (e)(4) of this section; or (ii) An amount equal to the total institutional charges incurred by the student for the payment period or period of enrollment multiplied by the percentage of title IV grant or loan assistance that has not been earned by the student, as described in paragraph (e)(3) of this section.
2022-022 Washington State University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. Assistance Listing Number and Title: 84.007 Federal Supplemental Educational Opportunity Grant 84.033 Federal Work-Study Program 84.038 Federal Perkins Loan Program 84.063 Federal Pell Grant Program 84.268 Federal Direct Student Loans 84.379 Teacher Education Assistance for College and Higher Education Grants Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: Various Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Special Tests and Provisions: Return of Title IV Funds Known Questioned Cost Amount: $2,582 Background As amended, Title IV of the Higher Education Act authorizes programs that provide financial assistance to students to pursue postsecondary education at eligible institutions of higher education. When students who receive Title IV grant or loan assistance withdraw from an institution during a payment period or period of enrollment, the institution must determine the amount of Title IV aid the students have earned as of their withdrawal date. Schools calculate this by determining the percentage of program funds the students have earned and applying that percentage to the total amount of assistance that was or could have been disbursed to students for the payment period or period of enrollment as of their withdrawal date. If the total amount of Title IV assistance earned by students is less than the amount that was disbursed to them as of their withdrawal date, the institution is required to return the difference to the U.S. Department of Education (Department), and it cannot make any additional disbursements to students for the payment period or period of enrollment. In fiscal year 2022, Washington State University disbursed more than $205 million in Title IV funds to students. Description of Condition The University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. We found the University had adequate internal controls over the return of Title IV funds, and it materially complied with the federal requirements. However, we identified questioned costs as the result of returns that were incorrectly calculated. We used a statistical sampling method to randomly select and examine 57 out of a total population of 873 students for which the University was required to calculate a return of Title IV funds. We found two students for whom the University incorrectly calculated the amount required to be returned to the Department. Specifically: ? One student had $489 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,801, resulting in a difference of $2,312. ? The second student had $2,590 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,860, resulting in a difference of $270. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The University returned incorrect amounts because it did not verify that the students were eligible for all funds within their student accounts before calculating amounts and returning the Title IV funds to the Department. Staff responsible for calculating the amounts to return did not verify that loans that were never disbursed were excluded from the University?s calculation of unearned aid. Effect of Condition and Questioned Costs We identified $2,582 in known federal questioned costs and $39,550 in likely federal questioned costs. We consider the $2,582 difference for the two students to be questioned costs because they had unearned financial aid still owed to the Department. At the time of the audit, the University had not processed a corrected return of funds for the two students. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the University: ? Verify student eligibility for all disbursed Title IV funds before calculating the amount of unearned aid required to be returned for students who have withdrawn from school ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid University?s Response Washington State University takes very seriously its responsibilities to ensure compliance with federal requirements. The University appreciates the auditor acknowledgement that the University?s internal controls over the Return of Title IV funds are adequate. The two (out of 57) records with noted exception were isolated and should not be a reflection on the whole of the program or the University?s management of federal funds. These exceptions were identified by management when the records were pulled for auditor testing. Management had not made correction yet only because the audit was still in progress. Upon finding the isolated issues, management performed a review of all 873 students that fell in the audit population, performing calculations of each record to determine if there were any other errors. No errors that needed to be submitted to the Department of Education, other than the two in the test population, were noted. The University is working with the sponsor to ensure return of the known questioned costs can be properly facilitated. Internal processes have been further strengthened to provide for independent quality checks. A report was developed to identify and isolate anomalies, like returning more funds than were actually disbursed. The return to Title IV requirements are very complex and internal controls over compliance are regularly reviewed to ensure improvement and continued adherence to the requirements. The University thanks the State Auditor for bringing this issue to the University?s attention. Auditor?s Remarks We thank the University for its cooperation and assistance throughout the audit. We will review the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.14 Program participation agreement, states in part: (b) By entering into a program participation agreement, an institution agrees that ? (24) It will comply with the requirements of ?668.22; Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.22 Treatment of title IV funds when a student withdraws, states in part: (a) General. (1) When a recipient of title IV grant or loan assistance withdraws from an institution during a payment period or period of enrollment in which the recipient began attendance, the institution must determine the amount of title IV grant or loan assistance that the student earned as of the student?s withdrawal date in accordance with paragraph e) of this section. (4) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is less than the amount of title IV grant or loan assistance that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew? (i) The difference between these amounts must be returned to the title IV programs in accordance with paragraphs (g) and (h) of this section in the order specified in paragraph (i) of this section; and (ii) No additional disbursements may be made to the student for the payment period or period of enrollment. (5) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is greater than the total amount of title IV grant or loan assistance, or both, that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew, the difference between these amounts must be treated as a post-withdrawal disbursement in accordance with paragraph (a)(6) of this section and ?668.164(i). (e) Calculation of the amount of title IV assistance earned by the student ? (1) General. The amount of title IV grant or loan assistance that is earned by the student is calculated by? (i) Determining the percentage of title IV grant or loan assistance that has been earned by the student, as described in paragraph (e)(2) of this section; and (ii) Applying this percentage to the total amount of title IV grant or loan assistance that was disbursed (and that could have been disbursed, as defined in paragraph (l)(1) of this section) to the student, or on the student?s behalf, for the payment period of period of enrollment as of the student?s withdrawal date. (2) Percentage earned. The percentage of title IV grant or loan assistance that has been earned by the student is? (iii) Equal to the percentage of the payment period or period of enrollment that the student completed (as determined in accordance with paragraph (f) of this section) as of the student?s withdrawal date, if this date occurs on or before? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program that is measured in clock hours; or (iv) 100 percent, if the student?s withdrawal date occurs after? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program measured in clock hours. (3) Percentage unearned. The percentage of title IV grant or loan assistance that has not been earned by the student is calculated by determining the complement of the percentage of title IV grant or loan assistance earned by the student as described in paragraph (e)(2) of this section. (4) Total amount of unearned title IV assistance to be returned. The unearned amount of title IV assistance to be returned is calculated by subtracting the amount of title IV assistance earned by the student as calculated under paragraph (e)(1) of this section from the amount of title IV aid that was disbursed to the student as of the date of the institution?s determination that the student withdrew. (g) Return of unearned aid, responsibility of the institution. (1) The institution must return, in the order specified in paragraph (i) of this section, the lesser of? (i) The total amount of unearned title IV assistance to be returned as calculated under paragraph (e)(4) of this section; or (ii) An amount equal to the total institutional charges incurred by the student for the payment period or period of enrollment multiplied by the percentage of title IV grant or loan assistance that has not been earned by the student, as described in paragraph (e)(3) of this section.
2022-022 Washington State University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. Assistance Listing Number and Title: 84.007 Federal Supplemental Educational Opportunity Grant 84.033 Federal Work-Study Program 84.038 Federal Perkins Loan Program 84.063 Federal Pell Grant Program 84.268 Federal Direct Student Loans 84.379 Teacher Education Assistance for College and Higher Education Grants Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: Various Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Special Tests and Provisions: Return of Title IV Funds Known Questioned Cost Amount: $2,582 Background As amended, Title IV of the Higher Education Act authorizes programs that provide financial assistance to students to pursue postsecondary education at eligible institutions of higher education. When students who receive Title IV grant or loan assistance withdraw from an institution during a payment period or period of enrollment, the institution must determine the amount of Title IV aid the students have earned as of their withdrawal date. Schools calculate this by determining the percentage of program funds the students have earned and applying that percentage to the total amount of assistance that was or could have been disbursed to students for the payment period or period of enrollment as of their withdrawal date. If the total amount of Title IV assistance earned by students is less than the amount that was disbursed to them as of their withdrawal date, the institution is required to return the difference to the U.S. Department of Education (Department), and it cannot make any additional disbursements to students for the payment period or period of enrollment. In fiscal year 2022, Washington State University disbursed more than $205 million in Title IV funds to students. Description of Condition The University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. We found the University had adequate internal controls over the return of Title IV funds, and it materially complied with the federal requirements. However, we identified questioned costs as the result of returns that were incorrectly calculated. We used a statistical sampling method to randomly select and examine 57 out of a total population of 873 students for which the University was required to calculate a return of Title IV funds. We found two students for whom the University incorrectly calculated the amount required to be returned to the Department. Specifically: ? One student had $489 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,801, resulting in a difference of $2,312. ? The second student had $2,590 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,860, resulting in a difference of $270. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The University returned incorrect amounts because it did not verify that the students were eligible for all funds within their student accounts before calculating amounts and returning the Title IV funds to the Department. Staff responsible for calculating the amounts to return did not verify that loans that were never disbursed were excluded from the University?s calculation of unearned aid. Effect of Condition and Questioned Costs We identified $2,582 in known federal questioned costs and $39,550 in likely federal questioned costs. We consider the $2,582 difference for the two students to be questioned costs because they had unearned financial aid still owed to the Department. At the time of the audit, the University had not processed a corrected return of funds for the two students. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the University: ? Verify student eligibility for all disbursed Title IV funds before calculating the amount of unearned aid required to be returned for students who have withdrawn from school ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid University?s Response Washington State University takes very seriously its responsibilities to ensure compliance with federal requirements. The University appreciates the auditor acknowledgement that the University?s internal controls over the Return of Title IV funds are adequate. The two (out of 57) records with noted exception were isolated and should not be a reflection on the whole of the program or the University?s management of federal funds. These exceptions were identified by management when the records were pulled for auditor testing. Management had not made correction yet only because the audit was still in progress. Upon finding the isolated issues, management performed a review of all 873 students that fell in the audit population, performing calculations of each record to determine if there were any other errors. No errors that needed to be submitted to the Department of Education, other than the two in the test population, were noted. The University is working with the sponsor to ensure return of the known questioned costs can be properly facilitated. Internal processes have been further strengthened to provide for independent quality checks. A report was developed to identify and isolate anomalies, like returning more funds than were actually disbursed. The return to Title IV requirements are very complex and internal controls over compliance are regularly reviewed to ensure improvement and continued adherence to the requirements. The University thanks the State Auditor for bringing this issue to the University?s attention. Auditor?s Remarks We thank the University for its cooperation and assistance throughout the audit. We will review the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.14 Program participation agreement, states in part: (b) By entering into a program participation agreement, an institution agrees that ? (24) It will comply with the requirements of ?668.22; Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.22 Treatment of title IV funds when a student withdraws, states in part: (a) General. (1) When a recipient of title IV grant or loan assistance withdraws from an institution during a payment period or period of enrollment in which the recipient began attendance, the institution must determine the amount of title IV grant or loan assistance that the student earned as of the student?s withdrawal date in accordance with paragraph e) of this section. (4) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is less than the amount of title IV grant or loan assistance that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew? (i) The difference between these amounts must be returned to the title IV programs in accordance with paragraphs (g) and (h) of this section in the order specified in paragraph (i) of this section; and (ii) No additional disbursements may be made to the student for the payment period or period of enrollment. (5) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is greater than the total amount of title IV grant or loan assistance, or both, that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew, the difference between these amounts must be treated as a post-withdrawal disbursement in accordance with paragraph (a)(6) of this section and ?668.164(i). (e) Calculation of the amount of title IV assistance earned by the student ? (1) General. The amount of title IV grant or loan assistance that is earned by the student is calculated by? (i) Determining the percentage of title IV grant or loan assistance that has been earned by the student, as described in paragraph (e)(2) of this section; and (ii) Applying this percentage to the total amount of title IV grant or loan assistance that was disbursed (and that could have been disbursed, as defined in paragraph (l)(1) of this section) to the student, or on the student?s behalf, for the payment period of period of enrollment as of the student?s withdrawal date. (2) Percentage earned. The percentage of title IV grant or loan assistance that has been earned by the student is? (iii) Equal to the percentage of the payment period or period of enrollment that the student completed (as determined in accordance with paragraph (f) of this section) as of the student?s withdrawal date, if this date occurs on or before? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program that is measured in clock hours; or (iv) 100 percent, if the student?s withdrawal date occurs after? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program measured in clock hours. (3) Percentage unearned. The percentage of title IV grant or loan assistance that has not been earned by the student is calculated by determining the complement of the percentage of title IV grant or loan assistance earned by the student as described in paragraph (e)(2) of this section. (4) Total amount of unearned title IV assistance to be returned. The unearned amount of title IV assistance to be returned is calculated by subtracting the amount of title IV assistance earned by the student as calculated under paragraph (e)(1) of this section from the amount of title IV aid that was disbursed to the student as of the date of the institution?s determination that the student withdrew. (g) Return of unearned aid, responsibility of the institution. (1) The institution must return, in the order specified in paragraph (i) of this section, the lesser of? (i) The total amount of unearned title IV assistance to be returned as calculated under paragraph (e)(4) of this section; or (ii) An amount equal to the total institutional charges incurred by the student for the payment period or period of enrollment multiplied by the percentage of title IV grant or loan assistance that has not been earned by the student, as described in paragraph (e)(3) of this section.
2022-022 Washington State University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. Assistance Listing Number and Title: 84.007 Federal Supplemental Educational Opportunity Grant 84.033 Federal Work-Study Program 84.038 Federal Perkins Loan Program 84.063 Federal Pell Grant Program 84.268 Federal Direct Student Loans 84.379 Teacher Education Assistance for College and Higher Education Grants Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: Various Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Special Tests and Provisions: Return of Title IV Funds Known Questioned Cost Amount: $2,582 Background As amended, Title IV of the Higher Education Act authorizes programs that provide financial assistance to students to pursue postsecondary education at eligible institutions of higher education. When students who receive Title IV grant or loan assistance withdraw from an institution during a payment period or period of enrollment, the institution must determine the amount of Title IV aid the students have earned as of their withdrawal date. Schools calculate this by determining the percentage of program funds the students have earned and applying that percentage to the total amount of assistance that was or could have been disbursed to students for the payment period or period of enrollment as of their withdrawal date. If the total amount of Title IV assistance earned by students is less than the amount that was disbursed to them as of their withdrawal date, the institution is required to return the difference to the U.S. Department of Education (Department), and it cannot make any additional disbursements to students for the payment period or period of enrollment. In fiscal year 2022, Washington State University disbursed more than $205 million in Title IV funds to students. Description of Condition The University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. We found the University had adequate internal controls over the return of Title IV funds, and it materially complied with the federal requirements. However, we identified questioned costs as the result of returns that were incorrectly calculated. We used a statistical sampling method to randomly select and examine 57 out of a total population of 873 students for which the University was required to calculate a return of Title IV funds. We found two students for whom the University incorrectly calculated the amount required to be returned to the Department. Specifically: ? One student had $489 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,801, resulting in a difference of $2,312. ? The second student had $2,590 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,860, resulting in a difference of $270. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The University returned incorrect amounts because it did not verify that the students were eligible for all funds within their student accounts before calculating amounts and returning the Title IV funds to the Department. Staff responsible for calculating the amounts to return did not verify that loans that were never disbursed were excluded from the University?s calculation of unearned aid. Effect of Condition and Questioned Costs We identified $2,582 in known federal questioned costs and $39,550 in likely federal questioned costs. We consider the $2,582 difference for the two students to be questioned costs because they had unearned financial aid still owed to the Department. At the time of the audit, the University had not processed a corrected return of funds for the two students. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the University: ? Verify student eligibility for all disbursed Title IV funds before calculating the amount of unearned aid required to be returned for students who have withdrawn from school ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid University?s Response Washington State University takes very seriously its responsibilities to ensure compliance with federal requirements. The University appreciates the auditor acknowledgement that the University?s internal controls over the Return of Title IV funds are adequate. The two (out of 57) records with noted exception were isolated and should not be a reflection on the whole of the program or the University?s management of federal funds. These exceptions were identified by management when the records were pulled for auditor testing. Management had not made correction yet only because the audit was still in progress. Upon finding the isolated issues, management performed a review of all 873 students that fell in the audit population, performing calculations of each record to determine if there were any other errors. No errors that needed to be submitted to the Department of Education, other than the two in the test population, were noted. The University is working with the sponsor to ensure return of the known questioned costs can be properly facilitated. Internal processes have been further strengthened to provide for independent quality checks. A report was developed to identify and isolate anomalies, like returning more funds than were actually disbursed. The return to Title IV requirements are very complex and internal controls over compliance are regularly reviewed to ensure improvement and continued adherence to the requirements. The University thanks the State Auditor for bringing this issue to the University?s attention. Auditor?s Remarks We thank the University for its cooperation and assistance throughout the audit. We will review the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.14 Program participation agreement, states in part: (b) By entering into a program participation agreement, an institution agrees that ? (24) It will comply with the requirements of ?668.22; Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.22 Treatment of title IV funds when a student withdraws, states in part: (a) General. (1) When a recipient of title IV grant or loan assistance withdraws from an institution during a payment period or period of enrollment in which the recipient began attendance, the institution must determine the amount of title IV grant or loan assistance that the student earned as of the student?s withdrawal date in accordance with paragraph e) of this section. (4) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is less than the amount of title IV grant or loan assistance that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew? (i) The difference between these amounts must be returned to the title IV programs in accordance with paragraphs (g) and (h) of this section in the order specified in paragraph (i) of this section; and (ii) No additional disbursements may be made to the student for the payment period or period of enrollment. (5) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is greater than the total amount of title IV grant or loan assistance, or both, that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew, the difference between these amounts must be treated as a post-withdrawal disbursement in accordance with paragraph (a)(6) of this section and ?668.164(i). (e) Calculation of the amount of title IV assistance earned by the student ? (1) General. The amount of title IV grant or loan assistance that is earned by the student is calculated by? (i) Determining the percentage of title IV grant or loan assistance that has been earned by the student, as described in paragraph (e)(2) of this section; and (ii) Applying this percentage to the total amount of title IV grant or loan assistance that was disbursed (and that could have been disbursed, as defined in paragraph (l)(1) of this section) to the student, or on the student?s behalf, for the payment period of period of enrollment as of the student?s withdrawal date. (2) Percentage earned. The percentage of title IV grant or loan assistance that has been earned by the student is? (iii) Equal to the percentage of the payment period or period of enrollment that the student completed (as determined in accordance with paragraph (f) of this section) as of the student?s withdrawal date, if this date occurs on or before? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program that is measured in clock hours; or (iv) 100 percent, if the student?s withdrawal date occurs after? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program measured in clock hours. (3) Percentage unearned. The percentage of title IV grant or loan assistance that has not been earned by the student is calculated by determining the complement of the percentage of title IV grant or loan assistance earned by the student as described in paragraph (e)(2) of this section. (4) Total amount of unearned title IV assistance to be returned. The unearned amount of title IV assistance to be returned is calculated by subtracting the amount of title IV assistance earned by the student as calculated under paragraph (e)(1) of this section from the amount of title IV aid that was disbursed to the student as of the date of the institution?s determination that the student withdrew. (g) Return of unearned aid, responsibility of the institution. (1) The institution must return, in the order specified in paragraph (i) of this section, the lesser of? (i) The total amount of unearned title IV assistance to be returned as calculated under paragraph (e)(4) of this section; or (ii) An amount equal to the total institutional charges incurred by the student for the payment period or period of enrollment multiplied by the percentage of title IV grant or loan assistance that has not been earned by the student, as described in paragraph (e)(3) of this section.
2022-022 Washington State University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. Assistance Listing Number and Title: 84.007 Federal Supplemental Educational Opportunity Grant 84.033 Federal Work-Study Program 84.038 Federal Perkins Loan Program 84.063 Federal Pell Grant Program 84.268 Federal Direct Student Loans 84.379 Teacher Education Assistance for College and Higher Education Grants Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: Various Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Special Tests and Provisions: Return of Title IV Funds Known Questioned Cost Amount: $2,582 Background As amended, Title IV of the Higher Education Act authorizes programs that provide financial assistance to students to pursue postsecondary education at eligible institutions of higher education. When students who receive Title IV grant or loan assistance withdraw from an institution during a payment period or period of enrollment, the institution must determine the amount of Title IV aid the students have earned as of their withdrawal date. Schools calculate this by determining the percentage of program funds the students have earned and applying that percentage to the total amount of assistance that was or could have been disbursed to students for the payment period or period of enrollment as of their withdrawal date. If the total amount of Title IV assistance earned by students is less than the amount that was disbursed to them as of their withdrawal date, the institution is required to return the difference to the U.S. Department of Education (Department), and it cannot make any additional disbursements to students for the payment period or period of enrollment. In fiscal year 2022, Washington State University disbursed more than $205 million in Title IV funds to students. Description of Condition The University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. We found the University had adequate internal controls over the return of Title IV funds, and it materially complied with the federal requirements. However, we identified questioned costs as the result of returns that were incorrectly calculated. We used a statistical sampling method to randomly select and examine 57 out of a total population of 873 students for which the University was required to calculate a return of Title IV funds. We found two students for whom the University incorrectly calculated the amount required to be returned to the Department. Specifically: ? One student had $489 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,801, resulting in a difference of $2,312. ? The second student had $2,590 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,860, resulting in a difference of $270. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The University returned incorrect amounts because it did not verify that the students were eligible for all funds within their student accounts before calculating amounts and returning the Title IV funds to the Department. Staff responsible for calculating the amounts to return did not verify that loans that were never disbursed were excluded from the University?s calculation of unearned aid. Effect of Condition and Questioned Costs We identified $2,582 in known federal questioned costs and $39,550 in likely federal questioned costs. We consider the $2,582 difference for the two students to be questioned costs because they had unearned financial aid still owed to the Department. At the time of the audit, the University had not processed a corrected return of funds for the two students. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the University: ? Verify student eligibility for all disbursed Title IV funds before calculating the amount of unearned aid required to be returned for students who have withdrawn from school ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid University?s Response Washington State University takes very seriously its responsibilities to ensure compliance with federal requirements. The University appreciates the auditor acknowledgement that the University?s internal controls over the Return of Title IV funds are adequate. The two (out of 57) records with noted exception were isolated and should not be a reflection on the whole of the program or the University?s management of federal funds. These exceptions were identified by management when the records were pulled for auditor testing. Management had not made correction yet only because the audit was still in progress. Upon finding the isolated issues, management performed a review of all 873 students that fell in the audit population, performing calculations of each record to determine if there were any other errors. No errors that needed to be submitted to the Department of Education, other than the two in the test population, were noted. The University is working with the sponsor to ensure return of the known questioned costs can be properly facilitated. Internal processes have been further strengthened to provide for independent quality checks. A report was developed to identify and isolate anomalies, like returning more funds than were actually disbursed. The return to Title IV requirements are very complex and internal controls over compliance are regularly reviewed to ensure improvement and continued adherence to the requirements. The University thanks the State Auditor for bringing this issue to the University?s attention. Auditor?s Remarks We thank the University for its cooperation and assistance throughout the audit. We will review the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.14 Program participation agreement, states in part: (b) By entering into a program participation agreement, an institution agrees that ? (24) It will comply with the requirements of ?668.22; Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.22 Treatment of title IV funds when a student withdraws, states in part: (a) General. (1) When a recipient of title IV grant or loan assistance withdraws from an institution during a payment period or period of enrollment in which the recipient began attendance, the institution must determine the amount of title IV grant or loan assistance that the student earned as of the student?s withdrawal date in accordance with paragraph e) of this section. (4) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is less than the amount of title IV grant or loan assistance that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew? (i) The difference between these amounts must be returned to the title IV programs in accordance with paragraphs (g) and (h) of this section in the order specified in paragraph (i) of this section; and (ii) No additional disbursements may be made to the student for the payment period or period of enrollment. (5) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is greater than the total amount of title IV grant or loan assistance, or both, that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew, the difference between these amounts must be treated as a post-withdrawal disbursement in accordance with paragraph (a)(6) of this section and ?668.164(i). (e) Calculation of the amount of title IV assistance earned by the student ? (1) General. The amount of title IV grant or loan assistance that is earned by the student is calculated by? (i) Determining the percentage of title IV grant or loan assistance that has been earned by the student, as described in paragraph (e)(2) of this section; and (ii) Applying this percentage to the total amount of title IV grant or loan assistance that was disbursed (and that could have been disbursed, as defined in paragraph (l)(1) of this section) to the student, or on the student?s behalf, for the payment period of period of enrollment as of the student?s withdrawal date. (2) Percentage earned. The percentage of title IV grant or loan assistance that has been earned by the student is? (iii) Equal to the percentage of the payment period or period of enrollment that the student completed (as determined in accordance with paragraph (f) of this section) as of the student?s withdrawal date, if this date occurs on or before? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program that is measured in clock hours; or (iv) 100 percent, if the student?s withdrawal date occurs after? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program measured in clock hours. (3) Percentage unearned. The percentage of title IV grant or loan assistance that has not been earned by the student is calculated by determining the complement of the percentage of title IV grant or loan assistance earned by the student as described in paragraph (e)(2) of this section. (4) Total amount of unearned title IV assistance to be returned. The unearned amount of title IV assistance to be returned is calculated by subtracting the amount of title IV assistance earned by the student as calculated under paragraph (e)(1) of this section from the amount of title IV aid that was disbursed to the student as of the date of the institution?s determination that the student withdrew. (g) Return of unearned aid, responsibility of the institution. (1) The institution must return, in the order specified in paragraph (i) of this section, the lesser of? (i) The total amount of unearned title IV assistance to be returned as calculated under paragraph (e)(4) of this section; or (ii) An amount equal to the total institutional charges incurred by the student for the payment period or period of enrollment multiplied by the percentage of title IV grant or loan assistance that has not been earned by the student, as described in paragraph (e)(3) of this section.
2022-022 Washington State University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. Assistance Listing Number and Title: 84.007 Federal Supplemental Educational Opportunity Grant 84.033 Federal Work-Study Program 84.038 Federal Perkins Loan Program 84.063 Federal Pell Grant Program 84.268 Federal Direct Student Loans 84.379 Teacher Education Assistance for College and Higher Education Grants Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: Various Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Special Tests and Provisions: Return of Title IV Funds Known Questioned Cost Amount: $2,582 Background As amended, Title IV of the Higher Education Act authorizes programs that provide financial assistance to students to pursue postsecondary education at eligible institutions of higher education. When students who receive Title IV grant or loan assistance withdraw from an institution during a payment period or period of enrollment, the institution must determine the amount of Title IV aid the students have earned as of their withdrawal date. Schools calculate this by determining the percentage of program funds the students have earned and applying that percentage to the total amount of assistance that was or could have been disbursed to students for the payment period or period of enrollment as of their withdrawal date. If the total amount of Title IV assistance earned by students is less than the amount that was disbursed to them as of their withdrawal date, the institution is required to return the difference to the U.S. Department of Education (Department), and it cannot make any additional disbursements to students for the payment period or period of enrollment. In fiscal year 2022, Washington State University disbursed more than $205 million in Title IV funds to students. Description of Condition The University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. We found the University had adequate internal controls over the return of Title IV funds, and it materially complied with the federal requirements. However, we identified questioned costs as the result of returns that were incorrectly calculated. We used a statistical sampling method to randomly select and examine 57 out of a total population of 873 students for which the University was required to calculate a return of Title IV funds. We found two students for whom the University incorrectly calculated the amount required to be returned to the Department. Specifically: ? One student had $489 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,801, resulting in a difference of $2,312. ? The second student had $2,590 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,860, resulting in a difference of $270. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The University returned incorrect amounts because it did not verify that the students were eligible for all funds within their student accounts before calculating amounts and returning the Title IV funds to the Department. Staff responsible for calculating the amounts to return did not verify that loans that were never disbursed were excluded from the University?s calculation of unearned aid. Effect of Condition and Questioned Costs We identified $2,582 in known federal questioned costs and $39,550 in likely federal questioned costs. We consider the $2,582 difference for the two students to be questioned costs because they had unearned financial aid still owed to the Department. At the time of the audit, the University had not processed a corrected return of funds for the two students. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the University: ? Verify student eligibility for all disbursed Title IV funds before calculating the amount of unearned aid required to be returned for students who have withdrawn from school ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid University?s Response Washington State University takes very seriously its responsibilities to ensure compliance with federal requirements. The University appreciates the auditor acknowledgement that the University?s internal controls over the Return of Title IV funds are adequate. The two (out of 57) records with noted exception were isolated and should not be a reflection on the whole of the program or the University?s management of federal funds. These exceptions were identified by management when the records were pulled for auditor testing. Management had not made correction yet only because the audit was still in progress. Upon finding the isolated issues, management performed a review of all 873 students that fell in the audit population, performing calculations of each record to determine if there were any other errors. No errors that needed to be submitted to the Department of Education, other than the two in the test population, were noted. The University is working with the sponsor to ensure return of the known questioned costs can be properly facilitated. Internal processes have been further strengthened to provide for independent quality checks. A report was developed to identify and isolate anomalies, like returning more funds than were actually disbursed. The return to Title IV requirements are very complex and internal controls over compliance are regularly reviewed to ensure improvement and continued adherence to the requirements. The University thanks the State Auditor for bringing this issue to the University?s attention. Auditor?s Remarks We thank the University for its cooperation and assistance throughout the audit. We will review the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.14 Program participation agreement, states in part: (b) By entering into a program participation agreement, an institution agrees that ? (24) It will comply with the requirements of ?668.22; Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.22 Treatment of title IV funds when a student withdraws, states in part: (a) General. (1) When a recipient of title IV grant or loan assistance withdraws from an institution during a payment period or period of enrollment in which the recipient began attendance, the institution must determine the amount of title IV grant or loan assistance that the student earned as of the student?s withdrawal date in accordance with paragraph e) of this section. (4) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is less than the amount of title IV grant or loan assistance that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew? (i) The difference between these amounts must be returned to the title IV programs in accordance with paragraphs (g) and (h) of this section in the order specified in paragraph (i) of this section; and (ii) No additional disbursements may be made to the student for the payment period or period of enrollment. (5) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is greater than the total amount of title IV grant or loan assistance, or both, that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew, the difference between these amounts must be treated as a post-withdrawal disbursement in accordance with paragraph (a)(6) of this section and ?668.164(i). (e) Calculation of the amount of title IV assistance earned by the student ? (1) General. The amount of title IV grant or loan assistance that is earned by the student is calculated by? (i) Determining the percentage of title IV grant or loan assistance that has been earned by the student, as described in paragraph (e)(2) of this section; and (ii) Applying this percentage to the total amount of title IV grant or loan assistance that was disbursed (and that could have been disbursed, as defined in paragraph (l)(1) of this section) to the student, or on the student?s behalf, for the payment period of period of enrollment as of the student?s withdrawal date. (2) Percentage earned. The percentage of title IV grant or loan assistance that has been earned by the student is? (iii) Equal to the percentage of the payment period or period of enrollment that the student completed (as determined in accordance with paragraph (f) of this section) as of the student?s withdrawal date, if this date occurs on or before? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program that is measured in clock hours; or (iv) 100 percent, if the student?s withdrawal date occurs after? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program measured in clock hours. (3) Percentage unearned. The percentage of title IV grant or loan assistance that has not been earned by the student is calculated by determining the complement of the percentage of title IV grant or loan assistance earned by the student as described in paragraph (e)(2) of this section. (4) Total amount of unearned title IV assistance to be returned. The unearned amount of title IV assistance to be returned is calculated by subtracting the amount of title IV assistance earned by the student as calculated under paragraph (e)(1) of this section from the amount of title IV aid that was disbursed to the student as of the date of the institution?s determination that the student withdrew. (g) Return of unearned aid, responsibility of the institution. (1) The institution must return, in the order specified in paragraph (i) of this section, the lesser of? (i) The total amount of unearned title IV assistance to be returned as calculated under paragraph (e)(4) of this section; or (ii) An amount equal to the total institutional charges incurred by the student for the payment period or period of enrollment multiplied by the percentage of title IV grant or loan assistance that has not been earned by the student, as described in paragraph (e)(3) of this section.
2022-022 Washington State University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. Assistance Listing Number and Title: 84.007 Federal Supplemental Educational Opportunity Grant 84.033 Federal Work-Study Program 84.038 Federal Perkins Loan Program 84.063 Federal Pell Grant Program 84.268 Federal Direct Student Loans 84.379 Teacher Education Assistance for College and Higher Education Grants Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: Various Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Special Tests and Provisions: Return of Title IV Funds Known Questioned Cost Amount: $2,582 Background As amended, Title IV of the Higher Education Act authorizes programs that provide financial assistance to students to pursue postsecondary education at eligible institutions of higher education. When students who receive Title IV grant or loan assistance withdraw from an institution during a payment period or period of enrollment, the institution must determine the amount of Title IV aid the students have earned as of their withdrawal date. Schools calculate this by determining the percentage of program funds the students have earned and applying that percentage to the total amount of assistance that was or could have been disbursed to students for the payment period or period of enrollment as of their withdrawal date. If the total amount of Title IV assistance earned by students is less than the amount that was disbursed to them as of their withdrawal date, the institution is required to return the difference to the U.S. Department of Education (Department), and it cannot make any additional disbursements to students for the payment period or period of enrollment. In fiscal year 2022, Washington State University disbursed more than $205 million in Title IV funds to students. Description of Condition The University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. We found the University had adequate internal controls over the return of Title IV funds, and it materially complied with the federal requirements. However, we identified questioned costs as the result of returns that were incorrectly calculated. We used a statistical sampling method to randomly select and examine 57 out of a total population of 873 students for which the University was required to calculate a return of Title IV funds. We found two students for whom the University incorrectly calculated the amount required to be returned to the Department. Specifically: ? One student had $489 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,801, resulting in a difference of $2,312. ? The second student had $2,590 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,860, resulting in a difference of $270. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The University returned incorrect amounts because it did not verify that the students were eligible for all funds within their student accounts before calculating amounts and returning the Title IV funds to the Department. Staff responsible for calculating the amounts to return did not verify that loans that were never disbursed were excluded from the University?s calculation of unearned aid. Effect of Condition and Questioned Costs We identified $2,582 in known federal questioned costs and $39,550 in likely federal questioned costs. We consider the $2,582 difference for the two students to be questioned costs because they had unearned financial aid still owed to the Department. At the time of the audit, the University had not processed a corrected return of funds for the two students. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the University: ? Verify student eligibility for all disbursed Title IV funds before calculating the amount of unearned aid required to be returned for students who have withdrawn from school ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid University?s Response Washington State University takes very seriously its responsibilities to ensure compliance with federal requirements. The University appreciates the auditor acknowledgement that the University?s internal controls over the Return of Title IV funds are adequate. The two (out of 57) records with noted exception were isolated and should not be a reflection on the whole of the program or the University?s management of federal funds. These exceptions were identified by management when the records were pulled for auditor testing. Management had not made correction yet only because the audit was still in progress. Upon finding the isolated issues, management performed a review of all 873 students that fell in the audit population, performing calculations of each record to determine if there were any other errors. No errors that needed to be submitted to the Department of Education, other than the two in the test population, were noted. The University is working with the sponsor to ensure return of the known questioned costs can be properly facilitated. Internal processes have been further strengthened to provide for independent quality checks. A report was developed to identify and isolate anomalies, like returning more funds than were actually disbursed. The return to Title IV requirements are very complex and internal controls over compliance are regularly reviewed to ensure improvement and continued adherence to the requirements. The University thanks the State Auditor for bringing this issue to the University?s attention. Auditor?s Remarks We thank the University for its cooperation and assistance throughout the audit. We will review the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.14 Program participation agreement, states in part: (b) By entering into a program participation agreement, an institution agrees that ? (24) It will comply with the requirements of ?668.22; Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.22 Treatment of title IV funds when a student withdraws, states in part: (a) General. (1) When a recipient of title IV grant or loan assistance withdraws from an institution during a payment period or period of enrollment in which the recipient began attendance, the institution must determine the amount of title IV grant or loan assistance that the student earned as of the student?s withdrawal date in accordance with paragraph e) of this section. (4) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is less than the amount of title IV grant or loan assistance that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew? (i) The difference between these amounts must be returned to the title IV programs in accordance with paragraphs (g) and (h) of this section in the order specified in paragraph (i) of this section; and (ii) No additional disbursements may be made to the student for the payment period or period of enrollment. (5) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is greater than the total amount of title IV grant or loan assistance, or both, that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew, the difference between these amounts must be treated as a post-withdrawal disbursement in accordance with paragraph (a)(6) of this section and ?668.164(i). (e) Calculation of the amount of title IV assistance earned by the student ? (1) General. The amount of title IV grant or loan assistance that is earned by the student is calculated by? (i) Determining the percentage of title IV grant or loan assistance that has been earned by the student, as described in paragraph (e)(2) of this section; and (ii) Applying this percentage to the total amount of title IV grant or loan assistance that was disbursed (and that could have been disbursed, as defined in paragraph (l)(1) of this section) to the student, or on the student?s behalf, for the payment period of period of enrollment as of the student?s withdrawal date. (2) Percentage earned. The percentage of title IV grant or loan assistance that has been earned by the student is? (iii) Equal to the percentage of the payment period or period of enrollment that the student completed (as determined in accordance with paragraph (f) of this section) as of the student?s withdrawal date, if this date occurs on or before? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program that is measured in clock hours; or (iv) 100 percent, if the student?s withdrawal date occurs after? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program measured in clock hours. (3) Percentage unearned. The percentage of title IV grant or loan assistance that has not been earned by the student is calculated by determining the complement of the percentage of title IV grant or loan assistance earned by the student as described in paragraph (e)(2) of this section. (4) Total amount of unearned title IV assistance to be returned. The unearned amount of title IV assistance to be returned is calculated by subtracting the amount of title IV assistance earned by the student as calculated under paragraph (e)(1) of this section from the amount of title IV aid that was disbursed to the student as of the date of the institution?s determination that the student withdrew. (g) Return of unearned aid, responsibility of the institution. (1) The institution must return, in the order specified in paragraph (i) of this section, the lesser of? (i) The total amount of unearned title IV assistance to be returned as calculated under paragraph (e)(4) of this section; or (ii) An amount equal to the total institutional charges incurred by the student for the payment period or period of enrollment multiplied by the percentage of title IV grant or loan assistance that has not been earned by the student, as described in paragraph (e)(3) of this section.
2022-022 Washington State University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. Assistance Listing Number and Title: 84.007 Federal Supplemental Educational Opportunity Grant 84.033 Federal Work-Study Program 84.038 Federal Perkins Loan Program 84.063 Federal Pell Grant Program 84.268 Federal Direct Student Loans 84.379 Teacher Education Assistance for College and Higher Education Grants Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: Various Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Special Tests and Provisions: Return of Title IV Funds Known Questioned Cost Amount: $2,582 Background As amended, Title IV of the Higher Education Act authorizes programs that provide financial assistance to students to pursue postsecondary education at eligible institutions of higher education. When students who receive Title IV grant or loan assistance withdraw from an institution during a payment period or period of enrollment, the institution must determine the amount of Title IV aid the students have earned as of their withdrawal date. Schools calculate this by determining the percentage of program funds the students have earned and applying that percentage to the total amount of assistance that was or could have been disbursed to students for the payment period or period of enrollment as of their withdrawal date. If the total amount of Title IV assistance earned by students is less than the amount that was disbursed to them as of their withdrawal date, the institution is required to return the difference to the U.S. Department of Education (Department), and it cannot make any additional disbursements to students for the payment period or period of enrollment. In fiscal year 2022, Washington State University disbursed more than $205 million in Title IV funds to students. Description of Condition The University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. We found the University had adequate internal controls over the return of Title IV funds, and it materially complied with the federal requirements. However, we identified questioned costs as the result of returns that were incorrectly calculated. We used a statistical sampling method to randomly select and examine 57 out of a total population of 873 students for which the University was required to calculate a return of Title IV funds. We found two students for whom the University incorrectly calculated the amount required to be returned to the Department. Specifically: ? One student had $489 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,801, resulting in a difference of $2,312. ? The second student had $2,590 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,860, resulting in a difference of $270. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The University returned incorrect amounts because it did not verify that the students were eligible for all funds within their student accounts before calculating amounts and returning the Title IV funds to the Department. Staff responsible for calculating the amounts to return did not verify that loans that were never disbursed were excluded from the University?s calculation of unearned aid. Effect of Condition and Questioned Costs We identified $2,582 in known federal questioned costs and $39,550 in likely federal questioned costs. We consider the $2,582 difference for the two students to be questioned costs because they had unearned financial aid still owed to the Department. At the time of the audit, the University had not processed a corrected return of funds for the two students. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the University: ? Verify student eligibility for all disbursed Title IV funds before calculating the amount of unearned aid required to be returned for students who have withdrawn from school ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid University?s Response Washington State University takes very seriously its responsibilities to ensure compliance with federal requirements. The University appreciates the auditor acknowledgement that the University?s internal controls over the Return of Title IV funds are adequate. The two (out of 57) records with noted exception were isolated and should not be a reflection on the whole of the program or the University?s management of federal funds. These exceptions were identified by management when the records were pulled for auditor testing. Management had not made correction yet only because the audit was still in progress. Upon finding the isolated issues, management performed a review of all 873 students that fell in the audit population, performing calculations of each record to determine if there were any other errors. No errors that needed to be submitted to the Department of Education, other than the two in the test population, were noted. The University is working with the sponsor to ensure return of the known questioned costs can be properly facilitated. Internal processes have been further strengthened to provide for independent quality checks. A report was developed to identify and isolate anomalies, like returning more funds than were actually disbursed. The return to Title IV requirements are very complex and internal controls over compliance are regularly reviewed to ensure improvement and continued adherence to the requirements. The University thanks the State Auditor for bringing this issue to the University?s attention. Auditor?s Remarks We thank the University for its cooperation and assistance throughout the audit. We will review the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.14 Program participation agreement, states in part: (b) By entering into a program participation agreement, an institution agrees that ? (24) It will comply with the requirements of ?668.22; Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.22 Treatment of title IV funds when a student withdraws, states in part: (a) General. (1) When a recipient of title IV grant or loan assistance withdraws from an institution during a payment period or period of enrollment in which the recipient began attendance, the institution must determine the amount of title IV grant or loan assistance that the student earned as of the student?s withdrawal date in accordance with paragraph e) of this section. (4) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is less than the amount of title IV grant or loan assistance that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew? (i) The difference between these amounts must be returned to the title IV programs in accordance with paragraphs (g) and (h) of this section in the order specified in paragraph (i) of this section; and (ii) No additional disbursements may be made to the student for the payment period or period of enrollment. (5) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is greater than the total amount of title IV grant or loan assistance, or both, that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew, the difference between these amounts must be treated as a post-withdrawal disbursement in accordance with paragraph (a)(6) of this section and ?668.164(i). (e) Calculation of the amount of title IV assistance earned by the student ? (1) General. The amount of title IV grant or loan assistance that is earned by the student is calculated by? (i) Determining the percentage of title IV grant or loan assistance that has been earned by the student, as described in paragraph (e)(2) of this section; and (ii) Applying this percentage to the total amount of title IV grant or loan assistance that was disbursed (and that could have been disbursed, as defined in paragraph (l)(1) of this section) to the student, or on the student?s behalf, for the payment period of period of enrollment as of the student?s withdrawal date. (2) Percentage earned. The percentage of title IV grant or loan assistance that has been earned by the student is? (iii) Equal to the percentage of the payment period or period of enrollment that the student completed (as determined in accordance with paragraph (f) of this section) as of the student?s withdrawal date, if this date occurs on or before? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program that is measured in clock hours; or (iv) 100 percent, if the student?s withdrawal date occurs after? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program measured in clock hours. (3) Percentage unearned. The percentage of title IV grant or loan assistance that has not been earned by the student is calculated by determining the complement of the percentage of title IV grant or loan assistance earned by the student as described in paragraph (e)(2) of this section. (4) Total amount of unearned title IV assistance to be returned. The unearned amount of title IV assistance to be returned is calculated by subtracting the amount of title IV assistance earned by the student as calculated under paragraph (e)(1) of this section from the amount of title IV aid that was disbursed to the student as of the date of the institution?s determination that the student withdrew. (g) Return of unearned aid, responsibility of the institution. (1) The institution must return, in the order specified in paragraph (i) of this section, the lesser of? (i) The total amount of unearned title IV assistance to be returned as calculated under paragraph (e)(4) of this section; or (ii) An amount equal to the total institutional charges incurred by the student for the payment period or period of enrollment multiplied by the percentage of title IV grant or loan assistance that has not been earned by the student, as described in paragraph (e)(3) of this section.
2022-022 Washington State University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. Assistance Listing Number and Title: 84.007 Federal Supplemental Educational Opportunity Grant 84.033 Federal Work-Study Program 84.038 Federal Perkins Loan Program 84.063 Federal Pell Grant Program 84.268 Federal Direct Student Loans 84.379 Teacher Education Assistance for College and Higher Education Grants Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: Various Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Special Tests and Provisions: Return of Title IV Funds Known Questioned Cost Amount: $2,582 Background As amended, Title IV of the Higher Education Act authorizes programs that provide financial assistance to students to pursue postsecondary education at eligible institutions of higher education. When students who receive Title IV grant or loan assistance withdraw from an institution during a payment period or period of enrollment, the institution must determine the amount of Title IV aid the students have earned as of their withdrawal date. Schools calculate this by determining the percentage of program funds the students have earned and applying that percentage to the total amount of assistance that was or could have been disbursed to students for the payment period or period of enrollment as of their withdrawal date. If the total amount of Title IV assistance earned by students is less than the amount that was disbursed to them as of their withdrawal date, the institution is required to return the difference to the U.S. Department of Education (Department), and it cannot make any additional disbursements to students for the payment period or period of enrollment. In fiscal year 2022, Washington State University disbursed more than $205 million in Title IV funds to students. Description of Condition The University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. We found the University had adequate internal controls over the return of Title IV funds, and it materially complied with the federal requirements. However, we identified questioned costs as the result of returns that were incorrectly calculated. We used a statistical sampling method to randomly select and examine 57 out of a total population of 873 students for which the University was required to calculate a return of Title IV funds. We found two students for whom the University incorrectly calculated the amount required to be returned to the Department. Specifically: ? One student had $489 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,801, resulting in a difference of $2,312. ? The second student had $2,590 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,860, resulting in a difference of $270. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The University returned incorrect amounts because it did not verify that the students were eligible for all funds within their student accounts before calculating amounts and returning the Title IV funds to the Department. Staff responsible for calculating the amounts to return did not verify that loans that were never disbursed were excluded from the University?s calculation of unearned aid. Effect of Condition and Questioned Costs We identified $2,582 in known federal questioned costs and $39,550 in likely federal questioned costs. We consider the $2,582 difference for the two students to be questioned costs because they had unearned financial aid still owed to the Department. At the time of the audit, the University had not processed a corrected return of funds for the two students. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the University: ? Verify student eligibility for all disbursed Title IV funds before calculating the amount of unearned aid required to be returned for students who have withdrawn from school ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid University?s Response Washington State University takes very seriously its responsibilities to ensure compliance with federal requirements. The University appreciates the auditor acknowledgement that the University?s internal controls over the Return of Title IV funds are adequate. The two (out of 57) records with noted exception were isolated and should not be a reflection on the whole of the program or the University?s management of federal funds. These exceptions were identified by management when the records were pulled for auditor testing. Management had not made correction yet only because the audit was still in progress. Upon finding the isolated issues, management performed a review of all 873 students that fell in the audit population, performing calculations of each record to determine if there were any other errors. No errors that needed to be submitted to the Department of Education, other than the two in the test population, were noted. The University is working with the sponsor to ensure return of the known questioned costs can be properly facilitated. Internal processes have been further strengthened to provide for independent quality checks. A report was developed to identify and isolate anomalies, like returning more funds than were actually disbursed. The return to Title IV requirements are very complex and internal controls over compliance are regularly reviewed to ensure improvement and continued adherence to the requirements. The University thanks the State Auditor for bringing this issue to the University?s attention. Auditor?s Remarks We thank the University for its cooperation and assistance throughout the audit. We will review the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.14 Program participation agreement, states in part: (b) By entering into a program participation agreement, an institution agrees that ? (24) It will comply with the requirements of ?668.22; Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.22 Treatment of title IV funds when a student withdraws, states in part: (a) General. (1) When a recipient of title IV grant or loan assistance withdraws from an institution during a payment period or period of enrollment in which the recipient began attendance, the institution must determine the amount of title IV grant or loan assistance that the student earned as of the student?s withdrawal date in accordance with paragraph e) of this section. (4) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is less than the amount of title IV grant or loan assistance that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew? (i) The difference between these amounts must be returned to the title IV programs in accordance with paragraphs (g) and (h) of this section in the order specified in paragraph (i) of this section; and (ii) No additional disbursements may be made to the student for the payment period or period of enrollment. (5) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is greater than the total amount of title IV grant or loan assistance, or both, that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew, the difference between these amounts must be treated as a post-withdrawal disbursement in accordance with paragraph (a)(6) of this section and ?668.164(i). (e) Calculation of the amount of title IV assistance earned by the student ? (1) General. The amount of title IV grant or loan assistance that is earned by the student is calculated by? (i) Determining the percentage of title IV grant or loan assistance that has been earned by the student, as described in paragraph (e)(2) of this section; and (ii) Applying this percentage to the total amount of title IV grant or loan assistance that was disbursed (and that could have been disbursed, as defined in paragraph (l)(1) of this section) to the student, or on the student?s behalf, for the payment period of period of enrollment as of the student?s withdrawal date. (2) Percentage earned. The percentage of title IV grant or loan assistance that has been earned by the student is? (iii) Equal to the percentage of the payment period or period of enrollment that the student completed (as determined in accordance with paragraph (f) of this section) as of the student?s withdrawal date, if this date occurs on or before? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program that is measured in clock hours; or (iv) 100 percent, if the student?s withdrawal date occurs after? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program measured in clock hours. (3) Percentage unearned. The percentage of title IV grant or loan assistance that has not been earned by the student is calculated by determining the complement of the percentage of title IV grant or loan assistance earned by the student as described in paragraph (e)(2) of this section. (4) Total amount of unearned title IV assistance to be returned. The unearned amount of title IV assistance to be returned is calculated by subtracting the amount of title IV assistance earned by the student as calculated under paragraph (e)(1) of this section from the amount of title IV aid that was disbursed to the student as of the date of the institution?s determination that the student withdrew. (g) Return of unearned aid, responsibility of the institution. (1) The institution must return, in the order specified in paragraph (i) of this section, the lesser of? (i) The total amount of unearned title IV assistance to be returned as calculated under paragraph (e)(4) of this section; or (ii) An amount equal to the total institutional charges incurred by the student for the payment period or period of enrollment multiplied by the percentage of title IV grant or loan assistance that has not been earned by the student, as described in paragraph (e)(3) of this section.
2022-022 Washington State University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. Assistance Listing Number and Title: 84.007 Federal Supplemental Educational Opportunity Grant 84.033 Federal Work-Study Program 84.038 Federal Perkins Loan Program 84.063 Federal Pell Grant Program 84.268 Federal Direct Student Loans 84.379 Teacher Education Assistance for College and Higher Education Grants Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: Various Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Special Tests and Provisions: Return of Title IV Funds Known Questioned Cost Amount: $2,582 Background As amended, Title IV of the Higher Education Act authorizes programs that provide financial assistance to students to pursue postsecondary education at eligible institutions of higher education. When students who receive Title IV grant or loan assistance withdraw from an institution during a payment period or period of enrollment, the institution must determine the amount of Title IV aid the students have earned as of their withdrawal date. Schools calculate this by determining the percentage of program funds the students have earned and applying that percentage to the total amount of assistance that was or could have been disbursed to students for the payment period or period of enrollment as of their withdrawal date. If the total amount of Title IV assistance earned by students is less than the amount that was disbursed to them as of their withdrawal date, the institution is required to return the difference to the U.S. Department of Education (Department), and it cannot make any additional disbursements to students for the payment period or period of enrollment. In fiscal year 2022, Washington State University disbursed more than $205 million in Title IV funds to students. Description of Condition The University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. We found the University had adequate internal controls over the return of Title IV funds, and it materially complied with the federal requirements. However, we identified questioned costs as the result of returns that were incorrectly calculated. We used a statistical sampling method to randomly select and examine 57 out of a total population of 873 students for which the University was required to calculate a return of Title IV funds. We found two students for whom the University incorrectly calculated the amount required to be returned to the Department. Specifically: ? One student had $489 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,801, resulting in a difference of $2,312. ? The second student had $2,590 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,860, resulting in a difference of $270. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The University returned incorrect amounts because it did not verify that the students were eligible for all funds within their student accounts before calculating amounts and returning the Title IV funds to the Department. Staff responsible for calculating the amounts to return did not verify that loans that were never disbursed were excluded from the University?s calculation of unearned aid. Effect of Condition and Questioned Costs We identified $2,582 in known federal questioned costs and $39,550 in likely federal questioned costs. We consider the $2,582 difference for the two students to be questioned costs because they had unearned financial aid still owed to the Department. At the time of the audit, the University had not processed a corrected return of funds for the two students. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the University: ? Verify student eligibility for all disbursed Title IV funds before calculating the amount of unearned aid required to be returned for students who have withdrawn from school ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid University?s Response Washington State University takes very seriously its responsibilities to ensure compliance with federal requirements. The University appreciates the auditor acknowledgement that the University?s internal controls over the Return of Title IV funds are adequate. The two (out of 57) records with noted exception were isolated and should not be a reflection on the whole of the program or the University?s management of federal funds. These exceptions were identified by management when the records were pulled for auditor testing. Management had not made correction yet only because the audit was still in progress. Upon finding the isolated issues, management performed a review of all 873 students that fell in the audit population, performing calculations of each record to determine if there were any other errors. No errors that needed to be submitted to the Department of Education, other than the two in the test population, were noted. The University is working with the sponsor to ensure return of the known questioned costs can be properly facilitated. Internal processes have been further strengthened to provide for independent quality checks. A report was developed to identify and isolate anomalies, like returning more funds than were actually disbursed. The return to Title IV requirements are very complex and internal controls over compliance are regularly reviewed to ensure improvement and continued adherence to the requirements. The University thanks the State Auditor for bringing this issue to the University?s attention. Auditor?s Remarks We thank the University for its cooperation and assistance throughout the audit. We will review the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.14 Program participation agreement, states in part: (b) By entering into a program participation agreement, an institution agrees that ? (24) It will comply with the requirements of ?668.22; Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.22 Treatment of title IV funds when a student withdraws, states in part: (a) General. (1) When a recipient of title IV grant or loan assistance withdraws from an institution during a payment period or period of enrollment in which the recipient began attendance, the institution must determine the amount of title IV grant or loan assistance that the student earned as of the student?s withdrawal date in accordance with paragraph e) of this section. (4) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is less than the amount of title IV grant or loan assistance that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew? (i) The difference between these amounts must be returned to the title IV programs in accordance with paragraphs (g) and (h) of this section in the order specified in paragraph (i) of this section; and (ii) No additional disbursements may be made to the student for the payment period or period of enrollment. (5) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is greater than the total amount of title IV grant or loan assistance, or both, that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew, the difference between these amounts must be treated as a post-withdrawal disbursement in accordance with paragraph (a)(6) of this section and ?668.164(i). (e) Calculation of the amount of title IV assistance earned by the student ? (1) General. The amount of title IV grant or loan assistance that is earned by the student is calculated by? (i) Determining the percentage of title IV grant or loan assistance that has been earned by the student, as described in paragraph (e)(2) of this section; and (ii) Applying this percentage to the total amount of title IV grant or loan assistance that was disbursed (and that could have been disbursed, as defined in paragraph (l)(1) of this section) to the student, or on the student?s behalf, for the payment period of period of enrollment as of the student?s withdrawal date. (2) Percentage earned. The percentage of title IV grant or loan assistance that has been earned by the student is? (iii) Equal to the percentage of the payment period or period of enrollment that the student completed (as determined in accordance with paragraph (f) of this section) as of the student?s withdrawal date, if this date occurs on or before? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program that is measured in clock hours; or (iv) 100 percent, if the student?s withdrawal date occurs after? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program measured in clock hours. (3) Percentage unearned. The percentage of title IV grant or loan assistance that has not been earned by the student is calculated by determining the complement of the percentage of title IV grant or loan assistance earned by the student as described in paragraph (e)(2) of this section. (4) Total amount of unearned title IV assistance to be returned. The unearned amount of title IV assistance to be returned is calculated by subtracting the amount of title IV assistance earned by the student as calculated under paragraph (e)(1) of this section from the amount of title IV aid that was disbursed to the student as of the date of the institution?s determination that the student withdrew. (g) Return of unearned aid, responsibility of the institution. (1) The institution must return, in the order specified in paragraph (i) of this section, the lesser of? (i) The total amount of unearned title IV assistance to be returned as calculated under paragraph (e)(4) of this section; or (ii) An amount equal to the total institutional charges incurred by the student for the payment period or period of enrollment multiplied by the percentage of title IV grant or loan assistance that has not been earned by the student, as described in paragraph (e)(3) of this section.
2022-022 Washington State University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. Assistance Listing Number and Title: 84.007 Federal Supplemental Educational Opportunity Grant 84.033 Federal Work-Study Program 84.038 Federal Perkins Loan Program 84.063 Federal Pell Grant Program 84.268 Federal Direct Student Loans 84.379 Teacher Education Assistance for College and Higher Education Grants Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: Various Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Special Tests and Provisions: Return of Title IV Funds Known Questioned Cost Amount: $2,582 Background As amended, Title IV of the Higher Education Act authorizes programs that provide financial assistance to students to pursue postsecondary education at eligible institutions of higher education. When students who receive Title IV grant or loan assistance withdraw from an institution during a payment period or period of enrollment, the institution must determine the amount of Title IV aid the students have earned as of their withdrawal date. Schools calculate this by determining the percentage of program funds the students have earned and applying that percentage to the total amount of assistance that was or could have been disbursed to students for the payment period or period of enrollment as of their withdrawal date. If the total amount of Title IV assistance earned by students is less than the amount that was disbursed to them as of their withdrawal date, the institution is required to return the difference to the U.S. Department of Education (Department), and it cannot make any additional disbursements to students for the payment period or period of enrollment. In fiscal year 2022, Washington State University disbursed more than $205 million in Title IV funds to students. Description of Condition The University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. We found the University had adequate internal controls over the return of Title IV funds, and it materially complied with the federal requirements. However, we identified questioned costs as the result of returns that were incorrectly calculated. We used a statistical sampling method to randomly select and examine 57 out of a total population of 873 students for which the University was required to calculate a return of Title IV funds. We found two students for whom the University incorrectly calculated the amount required to be returned to the Department. Specifically: ? One student had $489 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,801, resulting in a difference of $2,312. ? The second student had $2,590 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,860, resulting in a difference of $270. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The University returned incorrect amounts because it did not verify that the students were eligible for all funds within their student accounts before calculating amounts and returning the Title IV funds to the Department. Staff responsible for calculating the amounts to return did not verify that loans that were never disbursed were excluded from the University?s calculation of unearned aid. Effect of Condition and Questioned Costs We identified $2,582 in known federal questioned costs and $39,550 in likely federal questioned costs. We consider the $2,582 difference for the two students to be questioned costs because they had unearned financial aid still owed to the Department. At the time of the audit, the University had not processed a corrected return of funds for the two students. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the University: ? Verify student eligibility for all disbursed Title IV funds before calculating the amount of unearned aid required to be returned for students who have withdrawn from school ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid University?s Response Washington State University takes very seriously its responsibilities to ensure compliance with federal requirements. The University appreciates the auditor acknowledgement that the University?s internal controls over the Return of Title IV funds are adequate. The two (out of 57) records with noted exception were isolated and should not be a reflection on the whole of the program or the University?s management of federal funds. These exceptions were identified by management when the records were pulled for auditor testing. Management had not made correction yet only because the audit was still in progress. Upon finding the isolated issues, management performed a review of all 873 students that fell in the audit population, performing calculations of each record to determine if there were any other errors. No errors that needed to be submitted to the Department of Education, other than the two in the test population, were noted. The University is working with the sponsor to ensure return of the known questioned costs can be properly facilitated. Internal processes have been further strengthened to provide for independent quality checks. A report was developed to identify and isolate anomalies, like returning more funds than were actually disbursed. The return to Title IV requirements are very complex and internal controls over compliance are regularly reviewed to ensure improvement and continued adherence to the requirements. The University thanks the State Auditor for bringing this issue to the University?s attention. Auditor?s Remarks We thank the University for its cooperation and assistance throughout the audit. We will review the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.14 Program participation agreement, states in part: (b) By entering into a program participation agreement, an institution agrees that ? (24) It will comply with the requirements of ?668.22; Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.22 Treatment of title IV funds when a student withdraws, states in part: (a) General. (1) When a recipient of title IV grant or loan assistance withdraws from an institution during a payment period or period of enrollment in which the recipient began attendance, the institution must determine the amount of title IV grant or loan assistance that the student earned as of the student?s withdrawal date in accordance with paragraph e) of this section. (4) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is less than the amount of title IV grant or loan assistance that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew? (i) The difference between these amounts must be returned to the title IV programs in accordance with paragraphs (g) and (h) of this section in the order specified in paragraph (i) of this section; and (ii) No additional disbursements may be made to the student for the payment period or period of enrollment. (5) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is greater than the total amount of title IV grant or loan assistance, or both, that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew, the difference between these amounts must be treated as a post-withdrawal disbursement in accordance with paragraph (a)(6) of this section and ?668.164(i). (e) Calculation of the amount of title IV assistance earned by the student ? (1) General. The amount of title IV grant or loan assistance that is earned by the student is calculated by? (i) Determining the percentage of title IV grant or loan assistance that has been earned by the student, as described in paragraph (e)(2) of this section; and (ii) Applying this percentage to the total amount of title IV grant or loan assistance that was disbursed (and that could have been disbursed, as defined in paragraph (l)(1) of this section) to the student, or on the student?s behalf, for the payment period of period of enrollment as of the student?s withdrawal date. (2) Percentage earned. The percentage of title IV grant or loan assistance that has been earned by the student is? (iii) Equal to the percentage of the payment period or period of enrollment that the student completed (as determined in accordance with paragraph (f) of this section) as of the student?s withdrawal date, if this date occurs on or before? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program that is measured in clock hours; or (iv) 100 percent, if the student?s withdrawal date occurs after? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program measured in clock hours. (3) Percentage unearned. The percentage of title IV grant or loan assistance that has not been earned by the student is calculated by determining the complement of the percentage of title IV grant or loan assistance earned by the student as described in paragraph (e)(2) of this section. (4) Total amount of unearned title IV assistance to be returned. The unearned amount of title IV assistance to be returned is calculated by subtracting the amount of title IV assistance earned by the student as calculated under paragraph (e)(1) of this section from the amount of title IV aid that was disbursed to the student as of the date of the institution?s determination that the student withdrew. (g) Return of unearned aid, responsibility of the institution. (1) The institution must return, in the order specified in paragraph (i) of this section, the lesser of? (i) The total amount of unearned title IV assistance to be returned as calculated under paragraph (e)(4) of this section; or (ii) An amount equal to the total institutional charges incurred by the student for the payment period or period of enrollment multiplied by the percentage of title IV grant or loan assistance that has not been earned by the student, as described in paragraph (e)(3) of this section.
2022-022 Washington State University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. Assistance Listing Number and Title: 84.007 Federal Supplemental Educational Opportunity Grant 84.033 Federal Work-Study Program 84.038 Federal Perkins Loan Program 84.063 Federal Pell Grant Program 84.268 Federal Direct Student Loans 84.379 Teacher Education Assistance for College and Higher Education Grants Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: Various Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Special Tests and Provisions: Return of Title IV Funds Known Questioned Cost Amount: $2,582 Background As amended, Title IV of the Higher Education Act authorizes programs that provide financial assistance to students to pursue postsecondary education at eligible institutions of higher education. When students who receive Title IV grant or loan assistance withdraw from an institution during a payment period or period of enrollment, the institution must determine the amount of Title IV aid the students have earned as of their withdrawal date. Schools calculate this by determining the percentage of program funds the students have earned and applying that percentage to the total amount of assistance that was or could have been disbursed to students for the payment period or period of enrollment as of their withdrawal date. If the total amount of Title IV assistance earned by students is less than the amount that was disbursed to them as of their withdrawal date, the institution is required to return the difference to the U.S. Department of Education (Department), and it cannot make any additional disbursements to students for the payment period or period of enrollment. In fiscal year 2022, Washington State University disbursed more than $205 million in Title IV funds to students. Description of Condition The University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. We found the University had adequate internal controls over the return of Title IV funds, and it materially complied with the federal requirements. However, we identified questioned costs as the result of returns that were incorrectly calculated. We used a statistical sampling method to randomly select and examine 57 out of a total population of 873 students for which the University was required to calculate a return of Title IV funds. We found two students for whom the University incorrectly calculated the amount required to be returned to the Department. Specifically: ? One student had $489 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,801, resulting in a difference of $2,312. ? The second student had $2,590 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,860, resulting in a difference of $270. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The University returned incorrect amounts because it did not verify that the students were eligible for all funds within their student accounts before calculating amounts and returning the Title IV funds to the Department. Staff responsible for calculating the amounts to return did not verify that loans that were never disbursed were excluded from the University?s calculation of unearned aid. Effect of Condition and Questioned Costs We identified $2,582 in known federal questioned costs and $39,550 in likely federal questioned costs. We consider the $2,582 difference for the two students to be questioned costs because they had unearned financial aid still owed to the Department. At the time of the audit, the University had not processed a corrected return of funds for the two students. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the University: ? Verify student eligibility for all disbursed Title IV funds before calculating the amount of unearned aid required to be returned for students who have withdrawn from school ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid University?s Response Washington State University takes very seriously its responsibilities to ensure compliance with federal requirements. The University appreciates the auditor acknowledgement that the University?s internal controls over the Return of Title IV funds are adequate. The two (out of 57) records with noted exception were isolated and should not be a reflection on the whole of the program or the University?s management of federal funds. These exceptions were identified by management when the records were pulled for auditor testing. Management had not made correction yet only because the audit was still in progress. Upon finding the isolated issues, management performed a review of all 873 students that fell in the audit population, performing calculations of each record to determine if there were any other errors. No errors that needed to be submitted to the Department of Education, other than the two in the test population, were noted. The University is working with the sponsor to ensure return of the known questioned costs can be properly facilitated. Internal processes have been further strengthened to provide for independent quality checks. A report was developed to identify and isolate anomalies, like returning more funds than were actually disbursed. The return to Title IV requirements are very complex and internal controls over compliance are regularly reviewed to ensure improvement and continued adherence to the requirements. The University thanks the State Auditor for bringing this issue to the University?s attention. Auditor?s Remarks We thank the University for its cooperation and assistance throughout the audit. We will review the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.14 Program participation agreement, states in part: (b) By entering into a program participation agreement, an institution agrees that ? (24) It will comply with the requirements of ?668.22; Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.22 Treatment of title IV funds when a student withdraws, states in part: (a) General. (1) When a recipient of title IV grant or loan assistance withdraws from an institution during a payment period or period of enrollment in which the recipient began attendance, the institution must determine the amount of title IV grant or loan assistance that the student earned as of the student?s withdrawal date in accordance with paragraph e) of this section. (4) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is less than the amount of title IV grant or loan assistance that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew? (i) The difference between these amounts must be returned to the title IV programs in accordance with paragraphs (g) and (h) of this section in the order specified in paragraph (i) of this section; and (ii) No additional disbursements may be made to the student for the payment period or period of enrollment. (5) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is greater than the total amount of title IV grant or loan assistance, or both, that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew, the difference between these amounts must be treated as a post-withdrawal disbursement in accordance with paragraph (a)(6) of this section and ?668.164(i). (e) Calculation of the amount of title IV assistance earned by the student ? (1) General. The amount of title IV grant or loan assistance that is earned by the student is calculated by? (i) Determining the percentage of title IV grant or loan assistance that has been earned by the student, as described in paragraph (e)(2) of this section; and (ii) Applying this percentage to the total amount of title IV grant or loan assistance that was disbursed (and that could have been disbursed, as defined in paragraph (l)(1) of this section) to the student, or on the student?s behalf, for the payment period of period of enrollment as of the student?s withdrawal date. (2) Percentage earned. The percentage of title IV grant or loan assistance that has been earned by the student is? (iii) Equal to the percentage of the payment period or period of enrollment that the student completed (as determined in accordance with paragraph (f) of this section) as of the student?s withdrawal date, if this date occurs on or before? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program that is measured in clock hours; or (iv) 100 percent, if the student?s withdrawal date occurs after? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program measured in clock hours. (3) Percentage unearned. The percentage of title IV grant or loan assistance that has not been earned by the student is calculated by determining the complement of the percentage of title IV grant or loan assistance earned by the student as described in paragraph (e)(2) of this section. (4) Total amount of unearned title IV assistance to be returned. The unearned amount of title IV assistance to be returned is calculated by subtracting the amount of title IV assistance earned by the student as calculated under paragraph (e)(1) of this section from the amount of title IV aid that was disbursed to the student as of the date of the institution?s determination that the student withdrew. (g) Return of unearned aid, responsibility of the institution. (1) The institution must return, in the order specified in paragraph (i) of this section, the lesser of? (i) The total amount of unearned title IV assistance to be returned as calculated under paragraph (e)(4) of this section; or (ii) An amount equal to the total institutional charges incurred by the student for the payment period or period of enrollment multiplied by the percentage of title IV grant or loan assistance that has not been earned by the student, as described in paragraph (e)(3) of this section.
2022-022 Washington State University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. Assistance Listing Number and Title: 84.007 Federal Supplemental Educational Opportunity Grant 84.033 Federal Work-Study Program 84.038 Federal Perkins Loan Program 84.063 Federal Pell Grant Program 84.268 Federal Direct Student Loans 84.379 Teacher Education Assistance for College and Higher Education Grants Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: Various Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Special Tests and Provisions: Return of Title IV Funds Known Questioned Cost Amount: $2,582 Background As amended, Title IV of the Higher Education Act authorizes programs that provide financial assistance to students to pursue postsecondary education at eligible institutions of higher education. When students who receive Title IV grant or loan assistance withdraw from an institution during a payment period or period of enrollment, the institution must determine the amount of Title IV aid the students have earned as of their withdrawal date. Schools calculate this by determining the percentage of program funds the students have earned and applying that percentage to the total amount of assistance that was or could have been disbursed to students for the payment period or period of enrollment as of their withdrawal date. If the total amount of Title IV assistance earned by students is less than the amount that was disbursed to them as of their withdrawal date, the institution is required to return the difference to the U.S. Department of Education (Department), and it cannot make any additional disbursements to students for the payment period or period of enrollment. In fiscal year 2022, Washington State University disbursed more than $205 million in Title IV funds to students. Description of Condition The University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. We found the University had adequate internal controls over the return of Title IV funds, and it materially complied with the federal requirements. However, we identified questioned costs as the result of returns that were incorrectly calculated. We used a statistical sampling method to randomly select and examine 57 out of a total population of 873 students for which the University was required to calculate a return of Title IV funds. We found two students for whom the University incorrectly calculated the amount required to be returned to the Department. Specifically: ? One student had $489 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,801, resulting in a difference of $2,312. ? The second student had $2,590 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,860, resulting in a difference of $270. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The University returned incorrect amounts because it did not verify that the students were eligible for all funds within their student accounts before calculating amounts and returning the Title IV funds to the Department. Staff responsible for calculating the amounts to return did not verify that loans that were never disbursed were excluded from the University?s calculation of unearned aid. Effect of Condition and Questioned Costs We identified $2,582 in known federal questioned costs and $39,550 in likely federal questioned costs. We consider the $2,582 difference for the two students to be questioned costs because they had unearned financial aid still owed to the Department. At the time of the audit, the University had not processed a corrected return of funds for the two students. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the University: ? Verify student eligibility for all disbursed Title IV funds before calculating the amount of unearned aid required to be returned for students who have withdrawn from school ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid University?s Response Washington State University takes very seriously its responsibilities to ensure compliance with federal requirements. The University appreciates the auditor acknowledgement that the University?s internal controls over the Return of Title IV funds are adequate. The two (out of 57) records with noted exception were isolated and should not be a reflection on the whole of the program or the University?s management of federal funds. These exceptions were identified by management when the records were pulled for auditor testing. Management had not made correction yet only because the audit was still in progress. Upon finding the isolated issues, management performed a review of all 873 students that fell in the audit population, performing calculations of each record to determine if there were any other errors. No errors that needed to be submitted to the Department of Education, other than the two in the test population, were noted. The University is working with the sponsor to ensure return of the known questioned costs can be properly facilitated. Internal processes have been further strengthened to provide for independent quality checks. A report was developed to identify and isolate anomalies, like returning more funds than were actually disbursed. The return to Title IV requirements are very complex and internal controls over compliance are regularly reviewed to ensure improvement and continued adherence to the requirements. The University thanks the State Auditor for bringing this issue to the University?s attention. Auditor?s Remarks We thank the University for its cooperation and assistance throughout the audit. We will review the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.14 Program participation agreement, states in part: (b) By entering into a program participation agreement, an institution agrees that ? (24) It will comply with the requirements of ?668.22; Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.22 Treatment of title IV funds when a student withdraws, states in part: (a) General. (1) When a recipient of title IV grant or loan assistance withdraws from an institution during a payment period or period of enrollment in which the recipient began attendance, the institution must determine the amount of title IV grant or loan assistance that the student earned as of the student?s withdrawal date in accordance with paragraph e) of this section. (4) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is less than the amount of title IV grant or loan assistance that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew? (i) The difference between these amounts must be returned to the title IV programs in accordance with paragraphs (g) and (h) of this section in the order specified in paragraph (i) of this section; and (ii) No additional disbursements may be made to the student for the payment period or period of enrollment. (5) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is greater than the total amount of title IV grant or loan assistance, or both, that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew, the difference between these amounts must be treated as a post-withdrawal disbursement in accordance with paragraph (a)(6) of this section and ?668.164(i). (e) Calculation of the amount of title IV assistance earned by the student ? (1) General. The amount of title IV grant or loan assistance that is earned by the student is calculated by? (i) Determining the percentage of title IV grant or loan assistance that has been earned by the student, as described in paragraph (e)(2) of this section; and (ii) Applying this percentage to the total amount of title IV grant or loan assistance that was disbursed (and that could have been disbursed, as defined in paragraph (l)(1) of this section) to the student, or on the student?s behalf, for the payment period of period of enrollment as of the student?s withdrawal date. (2) Percentage earned. The percentage of title IV grant or loan assistance that has been earned by the student is? (iii) Equal to the percentage of the payment period or period of enrollment that the student completed (as determined in accordance with paragraph (f) of this section) as of the student?s withdrawal date, if this date occurs on or before? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program that is measured in clock hours; or (iv) 100 percent, if the student?s withdrawal date occurs after? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program measured in clock hours. (3) Percentage unearned. The percentage of title IV grant or loan assistance that has not been earned by the student is calculated by determining the complement of the percentage of title IV grant or loan assistance earned by the student as described in paragraph (e)(2) of this section. (4) Total amount of unearned title IV assistance to be returned. The unearned amount of title IV assistance to be returned is calculated by subtracting the amount of title IV assistance earned by the student as calculated under paragraph (e)(1) of this section from the amount of title IV aid that was disbursed to the student as of the date of the institution?s determination that the student withdrew. (g) Return of unearned aid, responsibility of the institution. (1) The institution must return, in the order specified in paragraph (i) of this section, the lesser of? (i) The total amount of unearned title IV assistance to be returned as calculated under paragraph (e)(4) of this section; or (ii) An amount equal to the total institutional charges incurred by the student for the payment period or period of enrollment multiplied by the percentage of title IV grant or loan assistance that has not been earned by the student, as described in paragraph (e)(3) of this section.
2022-022 Washington State University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. Assistance Listing Number and Title: 84.007 Federal Supplemental Educational Opportunity Grant 84.033 Federal Work-Study Program 84.038 Federal Perkins Loan Program 84.063 Federal Pell Grant Program 84.268 Federal Direct Student Loans 84.379 Teacher Education Assistance for College and Higher Education Grants Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: Various Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Special Tests and Provisions: Return of Title IV Funds Known Questioned Cost Amount: $2,582 Background As amended, Title IV of the Higher Education Act authorizes programs that provide financial assistance to students to pursue postsecondary education at eligible institutions of higher education. When students who receive Title IV grant or loan assistance withdraw from an institution during a payment period or period of enrollment, the institution must determine the amount of Title IV aid the students have earned as of their withdrawal date. Schools calculate this by determining the percentage of program funds the students have earned and applying that percentage to the total amount of assistance that was or could have been disbursed to students for the payment period or period of enrollment as of their withdrawal date. If the total amount of Title IV assistance earned by students is less than the amount that was disbursed to them as of their withdrawal date, the institution is required to return the difference to the U.S. Department of Education (Department), and it cannot make any additional disbursements to students for the payment period or period of enrollment. In fiscal year 2022, Washington State University disbursed more than $205 million in Title IV funds to students. Description of Condition The University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. We found the University had adequate internal controls over the return of Title IV funds, and it materially complied with the federal requirements. However, we identified questioned costs as the result of returns that were incorrectly calculated. We used a statistical sampling method to randomly select and examine 57 out of a total population of 873 students for which the University was required to calculate a return of Title IV funds. We found two students for whom the University incorrectly calculated the amount required to be returned to the Department. Specifically: ? One student had $489 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,801, resulting in a difference of $2,312. ? The second student had $2,590 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,860, resulting in a difference of $270. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The University returned incorrect amounts because it did not verify that the students were eligible for all funds within their student accounts before calculating amounts and returning the Title IV funds to the Department. Staff responsible for calculating the amounts to return did not verify that loans that were never disbursed were excluded from the University?s calculation of unearned aid. Effect of Condition and Questioned Costs We identified $2,582 in known federal questioned costs and $39,550 in likely federal questioned costs. We consider the $2,582 difference for the two students to be questioned costs because they had unearned financial aid still owed to the Department. At the time of the audit, the University had not processed a corrected return of funds for the two students. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the University: ? Verify student eligibility for all disbursed Title IV funds before calculating the amount of unearned aid required to be returned for students who have withdrawn from school ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid University?s Response Washington State University takes very seriously its responsibilities to ensure compliance with federal requirements. The University appreciates the auditor acknowledgement that the University?s internal controls over the Return of Title IV funds are adequate. The two (out of 57) records with noted exception were isolated and should not be a reflection on the whole of the program or the University?s management of federal funds. These exceptions were identified by management when the records were pulled for auditor testing. Management had not made correction yet only because the audit was still in progress. Upon finding the isolated issues, management performed a review of all 873 students that fell in the audit population, performing calculations of each record to determine if there were any other errors. No errors that needed to be submitted to the Department of Education, other than the two in the test population, were noted. The University is working with the sponsor to ensure return of the known questioned costs can be properly facilitated. Internal processes have been further strengthened to provide for independent quality checks. A report was developed to identify and isolate anomalies, like returning more funds than were actually disbursed. The return to Title IV requirements are very complex and internal controls over compliance are regularly reviewed to ensure improvement and continued adherence to the requirements. The University thanks the State Auditor for bringing this issue to the University?s attention. Auditor?s Remarks We thank the University for its cooperation and assistance throughout the audit. We will review the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.14 Program participation agreement, states in part: (b) By entering into a program participation agreement, an institution agrees that ? (24) It will comply with the requirements of ?668.22; Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.22 Treatment of title IV funds when a student withdraws, states in part: (a) General. (1) When a recipient of title IV grant or loan assistance withdraws from an institution during a payment period or period of enrollment in which the recipient began attendance, the institution must determine the amount of title IV grant or loan assistance that the student earned as of the student?s withdrawal date in accordance with paragraph e) of this section. (4) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is less than the amount of title IV grant or loan assistance that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew? (i) The difference between these amounts must be returned to the title IV programs in accordance with paragraphs (g) and (h) of this section in the order specified in paragraph (i) of this section; and (ii) No additional disbursements may be made to the student for the payment period or period of enrollment. (5) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is greater than the total amount of title IV grant or loan assistance, or both, that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew, the difference between these amounts must be treated as a post-withdrawal disbursement in accordance with paragraph (a)(6) of this section and ?668.164(i). (e) Calculation of the amount of title IV assistance earned by the student ? (1) General. The amount of title IV grant or loan assistance that is earned by the student is calculated by? (i) Determining the percentage of title IV grant or loan assistance that has been earned by the student, as described in paragraph (e)(2) of this section; and (ii) Applying this percentage to the total amount of title IV grant or loan assistance that was disbursed (and that could have been disbursed, as defined in paragraph (l)(1) of this section) to the student, or on the student?s behalf, for the payment period of period of enrollment as of the student?s withdrawal date. (2) Percentage earned. The percentage of title IV grant or loan assistance that has been earned by the student is? (iii) Equal to the percentage of the payment period or period of enrollment that the student completed (as determined in accordance with paragraph (f) of this section) as of the student?s withdrawal date, if this date occurs on or before? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program that is measured in clock hours; or (iv) 100 percent, if the student?s withdrawal date occurs after? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program measured in clock hours. (3) Percentage unearned. The percentage of title IV grant or loan assistance that has not been earned by the student is calculated by determining the complement of the percentage of title IV grant or loan assistance earned by the student as described in paragraph (e)(2) of this section. (4) Total amount of unearned title IV assistance to be returned. The unearned amount of title IV assistance to be returned is calculated by subtracting the amount of title IV assistance earned by the student as calculated under paragraph (e)(1) of this section from the amount of title IV aid that was disbursed to the student as of the date of the institution?s determination that the student withdrew. (g) Return of unearned aid, responsibility of the institution. (1) The institution must return, in the order specified in paragraph (i) of this section, the lesser of? (i) The total amount of unearned title IV assistance to be returned as calculated under paragraph (e)(4) of this section; or (ii) An amount equal to the total institutional charges incurred by the student for the payment period or period of enrollment multiplied by the percentage of title IV grant or loan assistance that has not been earned by the student, as described in paragraph (e)(3) of this section.
2022-022 Washington State University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. Assistance Listing Number and Title: 84.007 Federal Supplemental Educational Opportunity Grant 84.033 Federal Work-Study Program 84.038 Federal Perkins Loan Program 84.063 Federal Pell Grant Program 84.268 Federal Direct Student Loans 84.379 Teacher Education Assistance for College and Higher Education Grants Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: Various Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Special Tests and Provisions: Return of Title IV Funds Known Questioned Cost Amount: $2,582 Background As amended, Title IV of the Higher Education Act authorizes programs that provide financial assistance to students to pursue postsecondary education at eligible institutions of higher education. When students who receive Title IV grant or loan assistance withdraw from an institution during a payment period or period of enrollment, the institution must determine the amount of Title IV aid the students have earned as of their withdrawal date. Schools calculate this by determining the percentage of program funds the students have earned and applying that percentage to the total amount of assistance that was or could have been disbursed to students for the payment period or period of enrollment as of their withdrawal date. If the total amount of Title IV assistance earned by students is less than the amount that was disbursed to them as of their withdrawal date, the institution is required to return the difference to the U.S. Department of Education (Department), and it cannot make any additional disbursements to students for the payment period or period of enrollment. In fiscal year 2022, Washington State University disbursed more than $205 million in Title IV funds to students. Description of Condition The University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. We found the University had adequate internal controls over the return of Title IV funds, and it materially complied with the federal requirements. However, we identified questioned costs as the result of returns that were incorrectly calculated. We used a statistical sampling method to randomly select and examine 57 out of a total population of 873 students for which the University was required to calculate a return of Title IV funds. We found two students for whom the University incorrectly calculated the amount required to be returned to the Department. Specifically: ? One student had $489 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,801, resulting in a difference of $2,312. ? The second student had $2,590 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,860, resulting in a difference of $270. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The University returned incorrect amounts because it did not verify that the students were eligible for all funds within their student accounts before calculating amounts and returning the Title IV funds to the Department. Staff responsible for calculating the amounts to return did not verify that loans that were never disbursed were excluded from the University?s calculation of unearned aid. Effect of Condition and Questioned Costs We identified $2,582 in known federal questioned costs and $39,550 in likely federal questioned costs. We consider the $2,582 difference for the two students to be questioned costs because they had unearned financial aid still owed to the Department. At the time of the audit, the University had not processed a corrected return of funds for the two students. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the University: ? Verify student eligibility for all disbursed Title IV funds before calculating the amount of unearned aid required to be returned for students who have withdrawn from school ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid University?s Response Washington State University takes very seriously its responsibilities to ensure compliance with federal requirements. The University appreciates the auditor acknowledgement that the University?s internal controls over the Return of Title IV funds are adequate. The two (out of 57) records with noted exception were isolated and should not be a reflection on the whole of the program or the University?s management of federal funds. These exceptions were identified by management when the records were pulled for auditor testing. Management had not made correction yet only because the audit was still in progress. Upon finding the isolated issues, management performed a review of all 873 students that fell in the audit population, performing calculations of each record to determine if there were any other errors. No errors that needed to be submitted to the Department of Education, other than the two in the test population, were noted. The University is working with the sponsor to ensure return of the known questioned costs can be properly facilitated. Internal processes have been further strengthened to provide for independent quality checks. A report was developed to identify and isolate anomalies, like returning more funds than were actually disbursed. The return to Title IV requirements are very complex and internal controls over compliance are regularly reviewed to ensure improvement and continued adherence to the requirements. The University thanks the State Auditor for bringing this issue to the University?s attention. Auditor?s Remarks We thank the University for its cooperation and assistance throughout the audit. We will review the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.14 Program participation agreement, states in part: (b) By entering into a program participation agreement, an institution agrees that ? (24) It will comply with the requirements of ?668.22; Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.22 Treatment of title IV funds when a student withdraws, states in part: (a) General. (1) When a recipient of title IV grant or loan assistance withdraws from an institution during a payment period or period of enrollment in which the recipient began attendance, the institution must determine the amount of title IV grant or loan assistance that the student earned as of the student?s withdrawal date in accordance with paragraph e) of this section. (4) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is less than the amount of title IV grant or loan assistance that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew? (i) The difference between these amounts must be returned to the title IV programs in accordance with paragraphs (g) and (h) of this section in the order specified in paragraph (i) of this section; and (ii) No additional disbursements may be made to the student for the payment period or period of enrollment. (5) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is greater than the total amount of title IV grant or loan assistance, or both, that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew, the difference between these amounts must be treated as a post-withdrawal disbursement in accordance with paragraph (a)(6) of this section and ?668.164(i). (e) Calculation of the amount of title IV assistance earned by the student ? (1) General. The amount of title IV grant or loan assistance that is earned by the student is calculated by? (i) Determining the percentage of title IV grant or loan assistance that has been earned by the student, as described in paragraph (e)(2) of this section; and (ii) Applying this percentage to the total amount of title IV grant or loan assistance that was disbursed (and that could have been disbursed, as defined in paragraph (l)(1) of this section) to the student, or on the student?s behalf, for the payment period of period of enrollment as of the student?s withdrawal date. (2) Percentage earned. The percentage of title IV grant or loan assistance that has been earned by the student is? (iii) Equal to the percentage of the payment period or period of enrollment that the student completed (as determined in accordance with paragraph (f) of this section) as of the student?s withdrawal date, if this date occurs on or before? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program that is measured in clock hours; or (iv) 100 percent, if the student?s withdrawal date occurs after? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program measured in clock hours. (3) Percentage unearned. The percentage of title IV grant or loan assistance that has not been earned by the student is calculated by determining the complement of the percentage of title IV grant or loan assistance earned by the student as described in paragraph (e)(2) of this section. (4) Total amount of unearned title IV assistance to be returned. The unearned amount of title IV assistance to be returned is calculated by subtracting the amount of title IV assistance earned by the student as calculated under paragraph (e)(1) of this section from the amount of title IV aid that was disbursed to the student as of the date of the institution?s determination that the student withdrew. (g) Return of unearned aid, responsibility of the institution. (1) The institution must return, in the order specified in paragraph (i) of this section, the lesser of? (i) The total amount of unearned title IV assistance to be returned as calculated under paragraph (e)(4) of this section; or (ii) An amount equal to the total institutional charges incurred by the student for the payment period or period of enrollment multiplied by the percentage of title IV grant or loan assistance that has not been earned by the student, as described in paragraph (e)(3) of this section.
2022-022 Washington State University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. Assistance Listing Number and Title: 84.007 Federal Supplemental Educational Opportunity Grant 84.033 Federal Work-Study Program 84.038 Federal Perkins Loan Program 84.063 Federal Pell Grant Program 84.268 Federal Direct Student Loans 84.379 Teacher Education Assistance for College and Higher Education Grants Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: Various Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Special Tests and Provisions: Return of Title IV Funds Known Questioned Cost Amount: $2,582 Background As amended, Title IV of the Higher Education Act authorizes programs that provide financial assistance to students to pursue postsecondary education at eligible institutions of higher education. When students who receive Title IV grant or loan assistance withdraw from an institution during a payment period or period of enrollment, the institution must determine the amount of Title IV aid the students have earned as of their withdrawal date. Schools calculate this by determining the percentage of program funds the students have earned and applying that percentage to the total amount of assistance that was or could have been disbursed to students for the payment period or period of enrollment as of their withdrawal date. If the total amount of Title IV assistance earned by students is less than the amount that was disbursed to them as of their withdrawal date, the institution is required to return the difference to the U.S. Department of Education (Department), and it cannot make any additional disbursements to students for the payment period or period of enrollment. In fiscal year 2022, Washington State University disbursed more than $205 million in Title IV funds to students. Description of Condition The University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. We found the University had adequate internal controls over the return of Title IV funds, and it materially complied with the federal requirements. However, we identified questioned costs as the result of returns that were incorrectly calculated. We used a statistical sampling method to randomly select and examine 57 out of a total population of 873 students for which the University was required to calculate a return of Title IV funds. We found two students for whom the University incorrectly calculated the amount required to be returned to the Department. Specifically: ? One student had $489 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,801, resulting in a difference of $2,312. ? The second student had $2,590 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,860, resulting in a difference of $270. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The University returned incorrect amounts because it did not verify that the students were eligible for all funds within their student accounts before calculating amounts and returning the Title IV funds to the Department. Staff responsible for calculating the amounts to return did not verify that loans that were never disbursed were excluded from the University?s calculation of unearned aid. Effect of Condition and Questioned Costs We identified $2,582 in known federal questioned costs and $39,550 in likely federal questioned costs. We consider the $2,582 difference for the two students to be questioned costs because they had unearned financial aid still owed to the Department. At the time of the audit, the University had not processed a corrected return of funds for the two students. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the University: ? Verify student eligibility for all disbursed Title IV funds before calculating the amount of unearned aid required to be returned for students who have withdrawn from school ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid University?s Response Washington State University takes very seriously its responsibilities to ensure compliance with federal requirements. The University appreciates the auditor acknowledgement that the University?s internal controls over the Return of Title IV funds are adequate. The two (out of 57) records with noted exception were isolated and should not be a reflection on the whole of the program or the University?s management of federal funds. These exceptions were identified by management when the records were pulled for auditor testing. Management had not made correction yet only because the audit was still in progress. Upon finding the isolated issues, management performed a review of all 873 students that fell in the audit population, performing calculations of each record to determine if there were any other errors. No errors that needed to be submitted to the Department of Education, other than the two in the test population, were noted. The University is working with the sponsor to ensure return of the known questioned costs can be properly facilitated. Internal processes have been further strengthened to provide for independent quality checks. A report was developed to identify and isolate anomalies, like returning more funds than were actually disbursed. The return to Title IV requirements are very complex and internal controls over compliance are regularly reviewed to ensure improvement and continued adherence to the requirements. The University thanks the State Auditor for bringing this issue to the University?s attention. Auditor?s Remarks We thank the University for its cooperation and assistance throughout the audit. We will review the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.14 Program participation agreement, states in part: (b) By entering into a program participation agreement, an institution agrees that ? (24) It will comply with the requirements of ?668.22; Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.22 Treatment of title IV funds when a student withdraws, states in part: (a) General. (1) When a recipient of title IV grant or loan assistance withdraws from an institution during a payment period or period of enrollment in which the recipient began attendance, the institution must determine the amount of title IV grant or loan assistance that the student earned as of the student?s withdrawal date in accordance with paragraph e) of this section. (4) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is less than the amount of title IV grant or loan assistance that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew? (i) The difference between these amounts must be returned to the title IV programs in accordance with paragraphs (g) and (h) of this section in the order specified in paragraph (i) of this section; and (ii) No additional disbursements may be made to the student for the payment period or period of enrollment. (5) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is greater than the total amount of title IV grant or loan assistance, or both, that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew, the difference between these amounts must be treated as a post-withdrawal disbursement in accordance with paragraph (a)(6) of this section and ?668.164(i). (e) Calculation of the amount of title IV assistance earned by the student ? (1) General. The amount of title IV grant or loan assistance that is earned by the student is calculated by? (i) Determining the percentage of title IV grant or loan assistance that has been earned by the student, as described in paragraph (e)(2) of this section; and (ii) Applying this percentage to the total amount of title IV grant or loan assistance that was disbursed (and that could have been disbursed, as defined in paragraph (l)(1) of this section) to the student, or on the student?s behalf, for the payment period of period of enrollment as of the student?s withdrawal date. (2) Percentage earned. The percentage of title IV grant or loan assistance that has been earned by the student is? (iii) Equal to the percentage of the payment period or period of enrollment that the student completed (as determined in accordance with paragraph (f) of this section) as of the student?s withdrawal date, if this date occurs on or before? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program that is measured in clock hours; or (iv) 100 percent, if the student?s withdrawal date occurs after? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program measured in clock hours. (3) Percentage unearned. The percentage of title IV grant or loan assistance that has not been earned by the student is calculated by determining the complement of the percentage of title IV grant or loan assistance earned by the student as described in paragraph (e)(2) of this section. (4) Total amount of unearned title IV assistance to be returned. The unearned amount of title IV assistance to be returned is calculated by subtracting the amount of title IV assistance earned by the student as calculated under paragraph (e)(1) of this section from the amount of title IV aid that was disbursed to the student as of the date of the institution?s determination that the student withdrew. (g) Return of unearned aid, responsibility of the institution. (1) The institution must return, in the order specified in paragraph (i) of this section, the lesser of? (i) The total amount of unearned title IV assistance to be returned as calculated under paragraph (e)(4) of this section; or (ii) An amount equal to the total institutional charges incurred by the student for the payment period or period of enrollment multiplied by the percentage of title IV grant or loan assistance that has not been earned by the student, as described in paragraph (e)(3) of this section.
2022-022 Washington State University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. Assistance Listing Number and Title: 84.007 Federal Supplemental Educational Opportunity Grant 84.033 Federal Work-Study Program 84.038 Federal Perkins Loan Program 84.063 Federal Pell Grant Program 84.268 Federal Direct Student Loans 84.379 Teacher Education Assistance for College and Higher Education Grants Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: Various Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Special Tests and Provisions: Return of Title IV Funds Known Questioned Cost Amount: $2,582 Background As amended, Title IV of the Higher Education Act authorizes programs that provide financial assistance to students to pursue postsecondary education at eligible institutions of higher education. When students who receive Title IV grant or loan assistance withdraw from an institution during a payment period or period of enrollment, the institution must determine the amount of Title IV aid the students have earned as of their withdrawal date. Schools calculate this by determining the percentage of program funds the students have earned and applying that percentage to the total amount of assistance that was or could have been disbursed to students for the payment period or period of enrollment as of their withdrawal date. If the total amount of Title IV assistance earned by students is less than the amount that was disbursed to them as of their withdrawal date, the institution is required to return the difference to the U.S. Department of Education (Department), and it cannot make any additional disbursements to students for the payment period or period of enrollment. In fiscal year 2022, Washington State University disbursed more than $205 million in Title IV funds to students. Description of Condition The University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. We found the University had adequate internal controls over the return of Title IV funds, and it materially complied with the federal requirements. However, we identified questioned costs as the result of returns that were incorrectly calculated. We used a statistical sampling method to randomly select and examine 57 out of a total population of 873 students for which the University was required to calculate a return of Title IV funds. We found two students for whom the University incorrectly calculated the amount required to be returned to the Department. Specifically: ? One student had $489 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,801, resulting in a difference of $2,312. ? The second student had $2,590 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,860, resulting in a difference of $270. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The University returned incorrect amounts because it did not verify that the students were eligible for all funds within their student accounts before calculating amounts and returning the Title IV funds to the Department. Staff responsible for calculating the amounts to return did not verify that loans that were never disbursed were excluded from the University?s calculation of unearned aid. Effect of Condition and Questioned Costs We identified $2,582 in known federal questioned costs and $39,550 in likely federal questioned costs. We consider the $2,582 difference for the two students to be questioned costs because they had unearned financial aid still owed to the Department. At the time of the audit, the University had not processed a corrected return of funds for the two students. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the University: ? Verify student eligibility for all disbursed Title IV funds before calculating the amount of unearned aid required to be returned for students who have withdrawn from school ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid University?s Response Washington State University takes very seriously its responsibilities to ensure compliance with federal requirements. The University appreciates the auditor acknowledgement that the University?s internal controls over the Return of Title IV funds are adequate. The two (out of 57) records with noted exception were isolated and should not be a reflection on the whole of the program or the University?s management of federal funds. These exceptions were identified by management when the records were pulled for auditor testing. Management had not made correction yet only because the audit was still in progress. Upon finding the isolated issues, management performed a review of all 873 students that fell in the audit population, performing calculations of each record to determine if there were any other errors. No errors that needed to be submitted to the Department of Education, other than the two in the test population, were noted. The University is working with the sponsor to ensure return of the known questioned costs can be properly facilitated. Internal processes have been further strengthened to provide for independent quality checks. A report was developed to identify and isolate anomalies, like returning more funds than were actually disbursed. The return to Title IV requirements are very complex and internal controls over compliance are regularly reviewed to ensure improvement and continued adherence to the requirements. The University thanks the State Auditor for bringing this issue to the University?s attention. Auditor?s Remarks We thank the University for its cooperation and assistance throughout the audit. We will review the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.14 Program participation agreement, states in part: (b) By entering into a program participation agreement, an institution agrees that ? (24) It will comply with the requirements of ?668.22; Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.22 Treatment of title IV funds when a student withdraws, states in part: (a) General. (1) When a recipient of title IV grant or loan assistance withdraws from an institution during a payment period or period of enrollment in which the recipient began attendance, the institution must determine the amount of title IV grant or loan assistance that the student earned as of the student?s withdrawal date in accordance with paragraph e) of this section. (4) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is less than the amount of title IV grant or loan assistance that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew? (i) The difference between these amounts must be returned to the title IV programs in accordance with paragraphs (g) and (h) of this section in the order specified in paragraph (i) of this section; and (ii) No additional disbursements may be made to the student for the payment period or period of enrollment. (5) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is greater than the total amount of title IV grant or loan assistance, or both, that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew, the difference between these amounts must be treated as a post-withdrawal disbursement in accordance with paragraph (a)(6) of this section and ?668.164(i). (e) Calculation of the amount of title IV assistance earned by the student ? (1) General. The amount of title IV grant or loan assistance that is earned by the student is calculated by? (i) Determining the percentage of title IV grant or loan assistance that has been earned by the student, as described in paragraph (e)(2) of this section; and (ii) Applying this percentage to the total amount of title IV grant or loan assistance that was disbursed (and that could have been disbursed, as defined in paragraph (l)(1) of this section) to the student, or on the student?s behalf, for the payment period of period of enrollment as of the student?s withdrawal date. (2) Percentage earned. The percentage of title IV grant or loan assistance that has been earned by the student is? (iii) Equal to the percentage of the payment period or period of enrollment that the student completed (as determined in accordance with paragraph (f) of this section) as of the student?s withdrawal date, if this date occurs on or before? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program that is measured in clock hours; or (iv) 100 percent, if the student?s withdrawal date occurs after? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program measured in clock hours. (3) Percentage unearned. The percentage of title IV grant or loan assistance that has not been earned by the student is calculated by determining the complement of the percentage of title IV grant or loan assistance earned by the student as described in paragraph (e)(2) of this section. (4) Total amount of unearned title IV assistance to be returned. The unearned amount of title IV assistance to be returned is calculated by subtracting the amount of title IV assistance earned by the student as calculated under paragraph (e)(1) of this section from the amount of title IV aid that was disbursed to the student as of the date of the institution?s determination that the student withdrew. (g) Return of unearned aid, responsibility of the institution. (1) The institution must return, in the order specified in paragraph (i) of this section, the lesser of? (i) The total amount of unearned title IV assistance to be returned as calculated under paragraph (e)(4) of this section; or (ii) An amount equal to the total institutional charges incurred by the student for the payment period or period of enrollment multiplied by the percentage of title IV grant or loan assistance that has not been earned by the student, as described in paragraph (e)(3) of this section.
2022-022 Washington State University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. Assistance Listing Number and Title: 84.007 Federal Supplemental Educational Opportunity Grant 84.033 Federal Work-Study Program 84.038 Federal Perkins Loan Program 84.063 Federal Pell Grant Program 84.268 Federal Direct Student Loans 84.379 Teacher Education Assistance for College and Higher Education Grants Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: Various Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Special Tests and Provisions: Return of Title IV Funds Known Questioned Cost Amount: $2,582 Background As amended, Title IV of the Higher Education Act authorizes programs that provide financial assistance to students to pursue postsecondary education at eligible institutions of higher education. When students who receive Title IV grant or loan assistance withdraw from an institution during a payment period or period of enrollment, the institution must determine the amount of Title IV aid the students have earned as of their withdrawal date. Schools calculate this by determining the percentage of program funds the students have earned and applying that percentage to the total amount of assistance that was or could have been disbursed to students for the payment period or period of enrollment as of their withdrawal date. If the total amount of Title IV assistance earned by students is less than the amount that was disbursed to them as of their withdrawal date, the institution is required to return the difference to the U.S. Department of Education (Department), and it cannot make any additional disbursements to students for the payment period or period of enrollment. In fiscal year 2022, Washington State University disbursed more than $205 million in Title IV funds to students. Description of Condition The University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. We found the University had adequate internal controls over the return of Title IV funds, and it materially complied with the federal requirements. However, we identified questioned costs as the result of returns that were incorrectly calculated. We used a statistical sampling method to randomly select and examine 57 out of a total population of 873 students for which the University was required to calculate a return of Title IV funds. We found two students for whom the University incorrectly calculated the amount required to be returned to the Department. Specifically: ? One student had $489 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,801, resulting in a difference of $2,312. ? The second student had $2,590 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,860, resulting in a difference of $270. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The University returned incorrect amounts because it did not verify that the students were eligible for all funds within their student accounts before calculating amounts and returning the Title IV funds to the Department. Staff responsible for calculating the amounts to return did not verify that loans that were never disbursed were excluded from the University?s calculation of unearned aid. Effect of Condition and Questioned Costs We identified $2,582 in known federal questioned costs and $39,550 in likely federal questioned costs. We consider the $2,582 difference for the two students to be questioned costs because they had unearned financial aid still owed to the Department. At the time of the audit, the University had not processed a corrected return of funds for the two students. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the University: ? Verify student eligibility for all disbursed Title IV funds before calculating the amount of unearned aid required to be returned for students who have withdrawn from school ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid University?s Response Washington State University takes very seriously its responsibilities to ensure compliance with federal requirements. The University appreciates the auditor acknowledgement that the University?s internal controls over the Return of Title IV funds are adequate. The two (out of 57) records with noted exception were isolated and should not be a reflection on the whole of the program or the University?s management of federal funds. These exceptions were identified by management when the records were pulled for auditor testing. Management had not made correction yet only because the audit was still in progress. Upon finding the isolated issues, management performed a review of all 873 students that fell in the audit population, performing calculations of each record to determine if there were any other errors. No errors that needed to be submitted to the Department of Education, other than the two in the test population, were noted. The University is working with the sponsor to ensure return of the known questioned costs can be properly facilitated. Internal processes have been further strengthened to provide for independent quality checks. A report was developed to identify and isolate anomalies, like returning more funds than were actually disbursed. The return to Title IV requirements are very complex and internal controls over compliance are regularly reviewed to ensure improvement and continued adherence to the requirements. The University thanks the State Auditor for bringing this issue to the University?s attention. Auditor?s Remarks We thank the University for its cooperation and assistance throughout the audit. We will review the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.14 Program participation agreement, states in part: (b) By entering into a program participation agreement, an institution agrees that ? (24) It will comply with the requirements of ?668.22; Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.22 Treatment of title IV funds when a student withdraws, states in part: (a) General. (1) When a recipient of title IV grant or loan assistance withdraws from an institution during a payment period or period of enrollment in which the recipient began attendance, the institution must determine the amount of title IV grant or loan assistance that the student earned as of the student?s withdrawal date in accordance with paragraph e) of this section. (4) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is less than the amount of title IV grant or loan assistance that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew? (i) The difference between these amounts must be returned to the title IV programs in accordance with paragraphs (g) and (h) of this section in the order specified in paragraph (i) of this section; and (ii) No additional disbursements may be made to the student for the payment period or period of enrollment. (5) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is greater than the total amount of title IV grant or loan assistance, or both, that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew, the difference between these amounts must be treated as a post-withdrawal disbursement in accordance with paragraph (a)(6) of this section and ?668.164(i). (e) Calculation of the amount of title IV assistance earned by the student ? (1) General. The amount of title IV grant or loan assistance that is earned by the student is calculated by? (i) Determining the percentage of title IV grant or loan assistance that has been earned by the student, as described in paragraph (e)(2) of this section; and (ii) Applying this percentage to the total amount of title IV grant or loan assistance that was disbursed (and that could have been disbursed, as defined in paragraph (l)(1) of this section) to the student, or on the student?s behalf, for the payment period of period of enrollment as of the student?s withdrawal date. (2) Percentage earned. The percentage of title IV grant or loan assistance that has been earned by the student is? (iii) Equal to the percentage of the payment period or period of enrollment that the student completed (as determined in accordance with paragraph (f) of this section) as of the student?s withdrawal date, if this date occurs on or before? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program that is measured in clock hours; or (iv) 100 percent, if the student?s withdrawal date occurs after? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program measured in clock hours. (3) Percentage unearned. The percentage of title IV grant or loan assistance that has not been earned by the student is calculated by determining the complement of the percentage of title IV grant or loan assistance earned by the student as described in paragraph (e)(2) of this section. (4) Total amount of unearned title IV assistance to be returned. The unearned amount of title IV assistance to be returned is calculated by subtracting the amount of title IV assistance earned by the student as calculated under paragraph (e)(1) of this section from the amount of title IV aid that was disbursed to the student as of the date of the institution?s determination that the student withdrew. (g) Return of unearned aid, responsibility of the institution. (1) The institution must return, in the order specified in paragraph (i) of this section, the lesser of? (i) The total amount of unearned title IV assistance to be returned as calculated under paragraph (e)(4) of this section; or (ii) An amount equal to the total institutional charges incurred by the student for the payment period or period of enrollment multiplied by the percentage of title IV grant or loan assistance that has not been earned by the student, as described in paragraph (e)(3) of this section.
2022-022 Washington State University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. Assistance Listing Number and Title: 84.007 Federal Supplemental Educational Opportunity Grant 84.033 Federal Work-Study Program 84.038 Federal Perkins Loan Program 84.063 Federal Pell Grant Program 84.268 Federal Direct Student Loans 84.379 Teacher Education Assistance for College and Higher Education Grants Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: Various Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Special Tests and Provisions: Return of Title IV Funds Known Questioned Cost Amount: $2,582 Background As amended, Title IV of the Higher Education Act authorizes programs that provide financial assistance to students to pursue postsecondary education at eligible institutions of higher education. When students who receive Title IV grant or loan assistance withdraw from an institution during a payment period or period of enrollment, the institution must determine the amount of Title IV aid the students have earned as of their withdrawal date. Schools calculate this by determining the percentage of program funds the students have earned and applying that percentage to the total amount of assistance that was or could have been disbursed to students for the payment period or period of enrollment as of their withdrawal date. If the total amount of Title IV assistance earned by students is less than the amount that was disbursed to them as of their withdrawal date, the institution is required to return the difference to the U.S. Department of Education (Department), and it cannot make any additional disbursements to students for the payment period or period of enrollment. In fiscal year 2022, Washington State University disbursed more than $205 million in Title IV funds to students. Description of Condition The University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. We found the University had adequate internal controls over the return of Title IV funds, and it materially complied with the federal requirements. However, we identified questioned costs as the result of returns that were incorrectly calculated. We used a statistical sampling method to randomly select and examine 57 out of a total population of 873 students for which the University was required to calculate a return of Title IV funds. We found two students for whom the University incorrectly calculated the amount required to be returned to the Department. Specifically: ? One student had $489 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,801, resulting in a difference of $2,312. ? The second student had $2,590 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,860, resulting in a difference of $270. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The University returned incorrect amounts because it did not verify that the students were eligible for all funds within their student accounts before calculating amounts and returning the Title IV funds to the Department. Staff responsible for calculating the amounts to return did not verify that loans that were never disbursed were excluded from the University?s calculation of unearned aid. Effect of Condition and Questioned Costs We identified $2,582 in known federal questioned costs and $39,550 in likely federal questioned costs. We consider the $2,582 difference for the two students to be questioned costs because they had unearned financial aid still owed to the Department. At the time of the audit, the University had not processed a corrected return of funds for the two students. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the University: ? Verify student eligibility for all disbursed Title IV funds before calculating the amount of unearned aid required to be returned for students who have withdrawn from school ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid University?s Response Washington State University takes very seriously its responsibilities to ensure compliance with federal requirements. The University appreciates the auditor acknowledgement that the University?s internal controls over the Return of Title IV funds are adequate. The two (out of 57) records with noted exception were isolated and should not be a reflection on the whole of the program or the University?s management of federal funds. These exceptions were identified by management when the records were pulled for auditor testing. Management had not made correction yet only because the audit was still in progress. Upon finding the isolated issues, management performed a review of all 873 students that fell in the audit population, performing calculations of each record to determine if there were any other errors. No errors that needed to be submitted to the Department of Education, other than the two in the test population, were noted. The University is working with the sponsor to ensure return of the known questioned costs can be properly facilitated. Internal processes have been further strengthened to provide for independent quality checks. A report was developed to identify and isolate anomalies, like returning more funds than were actually disbursed. The return to Title IV requirements are very complex and internal controls over compliance are regularly reviewed to ensure improvement and continued adherence to the requirements. The University thanks the State Auditor for bringing this issue to the University?s attention. Auditor?s Remarks We thank the University for its cooperation and assistance throughout the audit. We will review the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.14 Program participation agreement, states in part: (b) By entering into a program participation agreement, an institution agrees that ? (24) It will comply with the requirements of ?668.22; Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.22 Treatment of title IV funds when a student withdraws, states in part: (a) General. (1) When a recipient of title IV grant or loan assistance withdraws from an institution during a payment period or period of enrollment in which the recipient began attendance, the institution must determine the amount of title IV grant or loan assistance that the student earned as of the student?s withdrawal date in accordance with paragraph e) of this section. (4) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is less than the amount of title IV grant or loan assistance that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew? (i) The difference between these amounts must be returned to the title IV programs in accordance with paragraphs (g) and (h) of this section in the order specified in paragraph (i) of this section; and (ii) No additional disbursements may be made to the student for the payment period or period of enrollment. (5) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is greater than the total amount of title IV grant or loan assistance, or both, that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew, the difference between these amounts must be treated as a post-withdrawal disbursement in accordance with paragraph (a)(6) of this section and ?668.164(i). (e) Calculation of the amount of title IV assistance earned by the student ? (1) General. The amount of title IV grant or loan assistance that is earned by the student is calculated by? (i) Determining the percentage of title IV grant or loan assistance that has been earned by the student, as described in paragraph (e)(2) of this section; and (ii) Applying this percentage to the total amount of title IV grant or loan assistance that was disbursed (and that could have been disbursed, as defined in paragraph (l)(1) of this section) to the student, or on the student?s behalf, for the payment period of period of enrollment as of the student?s withdrawal date. (2) Percentage earned. The percentage of title IV grant or loan assistance that has been earned by the student is? (iii) Equal to the percentage of the payment period or period of enrollment that the student completed (as determined in accordance with paragraph (f) of this section) as of the student?s withdrawal date, if this date occurs on or before? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program that is measured in clock hours; or (iv) 100 percent, if the student?s withdrawal date occurs after? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program measured in clock hours. (3) Percentage unearned. The percentage of title IV grant or loan assistance that has not been earned by the student is calculated by determining the complement of the percentage of title IV grant or loan assistance earned by the student as described in paragraph (e)(2) of this section. (4) Total amount of unearned title IV assistance to be returned. The unearned amount of title IV assistance to be returned is calculated by subtracting the amount of title IV assistance earned by the student as calculated under paragraph (e)(1) of this section from the amount of title IV aid that was disbursed to the student as of the date of the institution?s determination that the student withdrew. (g) Return of unearned aid, responsibility of the institution. (1) The institution must return, in the order specified in paragraph (i) of this section, the lesser of? (i) The total amount of unearned title IV assistance to be returned as calculated under paragraph (e)(4) of this section; or (ii) An amount equal to the total institutional charges incurred by the student for the payment period or period of enrollment multiplied by the percentage of title IV grant or loan assistance that has not been earned by the student, as described in paragraph (e)(3) of this section.
2022-022 Washington State University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. Assistance Listing Number and Title: 84.007 Federal Supplemental Educational Opportunity Grant 84.033 Federal Work-Study Program 84.038 Federal Perkins Loan Program 84.063 Federal Pell Grant Program 84.268 Federal Direct Student Loans 84.379 Teacher Education Assistance for College and Higher Education Grants Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: Various Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Special Tests and Provisions: Return of Title IV Funds Known Questioned Cost Amount: $2,582 Background As amended, Title IV of the Higher Education Act authorizes programs that provide financial assistance to students to pursue postsecondary education at eligible institutions of higher education. When students who receive Title IV grant or loan assistance withdraw from an institution during a payment period or period of enrollment, the institution must determine the amount of Title IV aid the students have earned as of their withdrawal date. Schools calculate this by determining the percentage of program funds the students have earned and applying that percentage to the total amount of assistance that was or could have been disbursed to students for the payment period or period of enrollment as of their withdrawal date. If the total amount of Title IV assistance earned by students is less than the amount that was disbursed to them as of their withdrawal date, the institution is required to return the difference to the U.S. Department of Education (Department), and it cannot make any additional disbursements to students for the payment period or period of enrollment. In fiscal year 2022, Washington State University disbursed more than $205 million in Title IV funds to students. Description of Condition The University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. We found the University had adequate internal controls over the return of Title IV funds, and it materially complied with the federal requirements. However, we identified questioned costs as the result of returns that were incorrectly calculated. We used a statistical sampling method to randomly select and examine 57 out of a total population of 873 students for which the University was required to calculate a return of Title IV funds. We found two students for whom the University incorrectly calculated the amount required to be returned to the Department. Specifically: ? One student had $489 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,801, resulting in a difference of $2,312. ? The second student had $2,590 returned to the Department. When recalculating the amount required to return, we found the University should have returned $2,860, resulting in a difference of $270. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The University returned incorrect amounts because it did not verify that the students were eligible for all funds within their student accounts before calculating amounts and returning the Title IV funds to the Department. Staff responsible for calculating the amounts to return did not verify that loans that were never disbursed were excluded from the University?s calculation of unearned aid. Effect of Condition and Questioned Costs We identified $2,582 in known federal questioned costs and $39,550 in likely federal questioned costs. We consider the $2,582 difference for the two students to be questioned costs because they had unearned financial aid still owed to the Department. At the time of the audit, the University had not processed a corrected return of funds for the two students. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the University: ? Verify student eligibility for all disbursed Title IV funds before calculating the amount of unearned aid required to be returned for students who have withdrawn from school ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid University?s Response Washington State University takes very seriously its responsibilities to ensure compliance with federal requirements. The University appreciates the auditor acknowledgement that the University?s internal controls over the Return of Title IV funds are adequate. The two (out of 57) records with noted exception were isolated and should not be a reflection on the whole of the program or the University?s management of federal funds. These exceptions were identified by management when the records were pulled for auditor testing. Management had not made correction yet only because the audit was still in progress. Upon finding the isolated issues, management performed a review of all 873 students that fell in the audit population, performing calculations of each record to determine if there were any other errors. No errors that needed to be submitted to the Department of Education, other than the two in the test population, were noted. The University is working with the sponsor to ensure return of the known questioned costs can be properly facilitated. Internal processes have been further strengthened to provide for independent quality checks. A report was developed to identify and isolate anomalies, like returning more funds than were actually disbursed. The return to Title IV requirements are very complex and internal controls over compliance are regularly reviewed to ensure improvement and continued adherence to the requirements. The University thanks the State Auditor for bringing this issue to the University?s attention. Auditor?s Remarks We thank the University for its cooperation and assistance throughout the audit. We will review the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.14 Program participation agreement, states in part: (b) By entering into a program participation agreement, an institution agrees that ? (24) It will comply with the requirements of ?668.22; Title 34 CFR Part 668, Student Financial Assistance General Provisions, Section 668.22 Treatment of title IV funds when a student withdraws, states in part: (a) General. (1) When a recipient of title IV grant or loan assistance withdraws from an institution during a payment period or period of enrollment in which the recipient began attendance, the institution must determine the amount of title IV grant or loan assistance that the student earned as of the student?s withdrawal date in accordance with paragraph e) of this section. (4) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is less than the amount of title IV grant or loan assistance that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew? (i) The difference between these amounts must be returned to the title IV programs in accordance with paragraphs (g) and (h) of this section in the order specified in paragraph (i) of this section; and (ii) No additional disbursements may be made to the student for the payment period or period of enrollment. (5) If the total amount of title IV grant or loan assistance, or both, that the student earned as calculated under paragraph (e)(1) of this section is greater than the total amount of title IV grant or loan assistance, or both, that was disbursed to the student or on behalf of the student in the case of a PLUS loan, as of the date of the institution?s determination that the student withdrew, the difference between these amounts must be treated as a post-withdrawal disbursement in accordance with paragraph (a)(6) of this section and ?668.164(i). (e) Calculation of the amount of title IV assistance earned by the student ? (1) General. The amount of title IV grant or loan assistance that is earned by the student is calculated by? (i) Determining the percentage of title IV grant or loan assistance that has been earned by the student, as described in paragraph (e)(2) of this section; and (ii) Applying this percentage to the total amount of title IV grant or loan assistance that was disbursed (and that could have been disbursed, as defined in paragraph (l)(1) of this section) to the student, or on the student?s behalf, for the payment period of period of enrollment as of the student?s withdrawal date. (2) Percentage earned. The percentage of title IV grant or loan assistance that has been earned by the student is? (iii) Equal to the percentage of the payment period or period of enrollment that the student completed (as determined in accordance with paragraph (f) of this section) as of the student?s withdrawal date, if this date occurs on or before? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program that is measured in clock hours; or (iv) 100 percent, if the student?s withdrawal date occurs after? (A) Completion of 60 percent of the payment period or period of enrollment for a program that is measured in credit hours; or (B) Sixty percent of the clock hours scheduled to be completed for the payment period or period of enrollment for a program measured in clock hours. (3) Percentage unearned. The percentage of title IV grant or loan assistance that has not been earned by the student is calculated by determining the complement of the percentage of title IV grant or loan assistance earned by the student as described in paragraph (e)(2) of this section. (4) Total amount of unearned title IV assistance to be returned. The unearned amount of title IV assistance to be returned is calculated by subtracting the amount of title IV assistance earned by the student as calculated under paragraph (e)(1) of this section from the amount of title IV aid that was disbursed to the student as of the date of the institution?s determination that the student withdrew. (g) Return of unearned aid, responsibility of the institution. (1) The institution must return, in the order specified in paragraph (i) of this section, the lesser of? (i) The total amount of unearned title IV assistance to be returned as calculated under paragraph (e)(4) of this section; or (ii) An amount equal to the total institutional charges incurred by the student for the payment period or period of enrollment multiplied by the percentage of title IV grant or loan assistance that has not been earned by the student, as described in paragraph (e)(3) of this section.
2022-036 The Department of Children, Youth, and Families did not have adequate internal controls over and did not comply with client eligibility requirements for child care services paid with the Child Care and Development Fund and Temporary Assistance for Needy Families funds. Assistance Listing Number and Title: 93.558, Temporary Assistance for Needy Families 93.575, Child Care and Development Block Grant 93.575, COVID-19 Child Care and Development Block Grant 93.596, Child Care Mandatory and Matching Funds of the Child Care and Development Fund Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: 2003WACCDF; 2103WACCDF; 2203WACCDF; 2003WACCC3; 2103WACDC6; 2103WACSC6; 2103WACCC5; 2103WACCDD; 2203WACCDD; 2101WATANF; 2201WATANF Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Eligibility Known Questioned Cost Amount: Temporary Assistance for Needy Families ? $5,689 Child Care and Development Fund ? $5,078 Background The Department of Children, Youth, and Families administers the federal Child Care and Development Fund (CCDF) grant to help eligible working families pay for child care. In fiscal year 2022, the Department spent $668.6 million in CCDF federal funding. The Department of Social and Health Services (DSHS) administers the Temporary Assistance for Needy Families (TANF) grant. To meet one of the program?s primary purposes of helping clients obtain employment, TANF grant funds may be used to pay clients? child care costs. If a client obtains employment and is no longer eligible for the program, TANF funds may still be used to pay child care costs to help the client maintain employment. In fiscal year 2022, the Department spent more than $260.5 million in CCDF and $67.7 million in TANF federal grant funds on child care subsidy payments to providers. Some payments made for child care are paid for by both the CCDF and TANF grants. While the two federal programs are separate, the requirements and policies in Washington for child care payments are consolidated under the Working Connections Child Care program. As of July 1, 2019, the responsibility for making and documenting child care eligibility determinations under the CCDF and TANF grants was transferred from DSHS to the Department. For a family to be eligible for child care assistance, state and federal rules require that at the time of application or reapplication, children must: ? Reside in Washington and be a citizen or legal resident of the United States; ? Be younger than 13 years, or if for verified special needs, be younger than 19 years; ? Reside with a parent(s) or guardian whose countable income does not exceed 200 percent of the federal poverty level at application or 220 percent at reapplication for July, August and September 2021 but in October 2021 changed to 60 percent of the state median income at application or 65 percent of the state median income at reapplication; ? Reside with a parent(s) or guardian who works or attends a job-training or education program, or needs to be receiving protective services. State rules describe the information clients must provide to the Department to verify their eligibility. The information must be accurate, complete, consistent and from a reliable source. This information includes, but is not limited to, employer and hourly wage information, proof of an approved activity under TANF, and family household size and composition. Once determined to be eligible for the program, a client is eligible for one year unless a change in income causes the client to exceed 85 percent of the state?s median income The Department requires that clients self-report such income changes. A written notice communicates the recipients? reporting requirement and the specific dollar threshold applicable to the household?s annual income. Once the client?s income exceeds this cutoff level, the Department terminates services. The Department has access to systems that contain wage and household benefit and composition data for some, but not all, child care recipients. The Department uses this information in part to determine program eligibility, benefit level, including client copayment, and the amount of child care the family is eligible to receive. If an ineligible client receives assistance, the payment made to the child care provider is not allowable and the client must repay the ineligible amount. The Department also uses household income to determine the amount families must contribute for their monthly copay to providers. Beginning July 1, 2021, monthly copayments were calculated using an updated schedule described in Washington Administrative Code 110-15-0075. Federal regulations require the Department to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. In the past 10 audits, we reported findings related to eligibility for the Working Connections Child Care program. In these prior audits, we reported the Department did not have adequate internal controls over the eligibility process for child care subsidy recipients. These were reported as finding numbers 2021-035, 2020-039, 2019-032, 2018-030, 2017-026, 2016-023, 2015-026, 2014-026, 2013-017 and 2012-30. Description of Condition The Department did not have adequate internal controls over and did not comply with client eligibility requirements for CCDF and TANF. During the audit period the Department determined 69,815 children were eligible for child care. We used a statistical sampling method to randomly select and examine 59 of these determinations. In four instances (6.8 percent), we found the Department made eligibility determinations improperly, did not obtain required documentation, incorrectly assessed copayment, or did not verify information before authorizing services. Specifically, we found: ? Two cases (3.4 percent) where the Department had incorrectly determined household composition and did not obtain sufficient data for all parents in the household to make an accurate eligibility determination. ? One case (1.7 percent) where the Department did not follow procedure for verifying employment, which led to an incorrect household income calculation. ? One case (1.7 percent) where the copay was incorrectly assessed, which resulted in an underpayment due to a system error. Though the Department has established internal controls, they were insufficient for ensuring material compliance with client eligibility requirements. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. Cause of Condition Department staff made eligibility determinations without obtaining sufficient supporting documentation to ensure households were eligible to receive assistance. This deviated from the standard policies and procedures the Department has established, and management did not monitor sufficiently to ensure staff made proper eligibility determinations. Further, the incorrect copay calculation was due to system error. Effect of Condition and Questioned Costs By not implementing adequate internal controls, the Department is at higher risk of paying providers for child care services when clients are ineligible. Of the four client eligibility determinations that had errors, three resulted in $10,767 of federal overpayments to providers. The Department used $5,078 in CCDF grant funds and $5,689 in TANF grant funds for these payments. Because we used a statistical sampling method to randomly select the payments examined in the audit, we estimate the amount of likely improper payments to be $6,008,693 for the CCDF grant and $6,731,953 for the TANF grant. Although we identified known and likely questioned costs, we do not have reasonable assurance that the payments in question are appropriately represented in the Department?s accounting records because of the grant management practice issue reported in findings 2022-035 and 2022-041. Additionally, the payments in question are duplicative of the costs already questioned in the aforementioned provider payment findings. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflects this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Department improve its internal controls over determining client eligibility to ensure it: ? Reviews eligibility determinations sufficiently to detect improper eligibility determinations ? Reviews sufficient support for clients? income and household composition information for accuracy We also recommend the Department consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid. Department`s Response The Department appreciates, acknowledges, and supports SAO?s mission, which is to hold state and local government accountable for the use of public resources. Further, we appreciate SAO?s work with us over the past year to strengthen the auditing process. Due to recent changes to CCSP directed by the Legislature, the Department anticipates continued reduction in eligibility determination errors. The Fair Start for Kids Act (FSKA) required the Department to make several changes that expanded eligibility during SFY 2022. The FSKA increased the State Median Income (SMI) threshold, allowing more two parent households to be eligible for child care subsidy. The FSKA also capped copayments to $115 for applicants and $215 for reapplicants, greatly reducing the copay amounts for typical two parent households. These changes are disincentives for fraud as struggling families receive needed benefits and are more likely to provide accurate and complete information. This is supported by the overall reduction in investigation requests submitted to the Office of Fraud and Accountability. In the federal fiscal year prior to the implementation of the FSKA, the Department submitted 1,405 requests for investigations. The year following FSKA implementation requests for investigations fell to 912. The Department continues to explore ways to remove the possibility for improper use of CCDF funds. The Department agrees with the SAO that there is a need to review household composition at application and reapplication to improve reliability of eligibility decisions. The Department accesses data across available state systems to confirm information, including household composition provided by clients. Unfortunately, there is no household composition verification system, and information provided to other state agencies is often provided by client self-attestation. The Department continues to balance verification requirements with providing timely benefit decisions to support family access to high quality child care. Eighty-six percent of households receiving child care subsidies are headed by single parents. Supporting these families with child care is essential for their continued participation in work, education, and other social service programs. The Department provides training for eligibility in the specific areas of household composition and income determination and improvements to training are ongoing. The Department recently made changes to the professional development and training process to improve staff skills and accuracy. Staff training is in a continuous improvement cycle and evolves with staff needs and changes in rule. The Department will continue to improve processes and internal controls and create and deliver staff training based on current data trends and patterns. Auditor?s Remarks We thank the Department for its cooperation and assistance throughout the audit. We will review the status of the Department?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Washington Administrative Code (WAC) 110-15-0015 ? Determining family size, states in part: (1) DCYF determines a consumer?s family size as follows: (a) For a single parent, including a minor parent living independently, DCYF counts the consumer and the consumer?s children; (b) For unmarried parents who have at least one mutual child, DCYF counts both parents and all of their children living in the household; (c) Unmarried parents who have no mutual children are counted as separate WCCC households, the unmarried parents and their respective children living in the household; (d) For married parents, DCYF counts both parents and all of their children living in the household; (e) For parents who are undocumented aliens as defined in WAC 388-424-0001, DCYF counts the parents and children, documented and undocumented, and all other family rules in this section apply. Children needing care must meet citizenship requirements described in WAC 110-15-0005; (f) For a legal guardian verified by a legal or court document, adult sibling or step-sibling, nephew, niece, aunt, uncle, grandparent, any of these relatives with the prefix ?great,? such as a ?great-nephew,? or an in loco parentis custodian who is not related to the child as described in WAC 110-15-0005, DCYF counts only the children and only the children?s income is counted; (g) For a parent who is out of the household because of employer requirements, such as training or military service, and expected to return to the household, DCYF counts the consumer, the absent parent, and the children; (h) For a parent who is voluntarily out of the household for reasons other than requirements of the employer, such as unapproved schooling and visiting family members, and is expected to return to the household, DCYF counts the consumer, the absent parent, and the children. WAC 110-15-0020 and all other family and household rules in this section apply; (i) For a parent who is out of the country and waiting for legal reentry in to the United States, DCYF counts only the consumer and children residing in the United States and all other family and household rules in this section apply; (j) An incarcerated parent is not part of the household count for determining income and eligibility. DCYF counts the remaining household members using all other family rules in this section; and (k) For a parent incarcerated at a Washington state correctional facility whose child lives with them at the facility, DCYF counts the parent and child as their own household. (2) When the household consists of the consumer?s own child and another child identified in subsection (1)(f) of this section, the household may be combined into one household or kept as distinct households for the benefit of the consumer. WAC 110-15-0065 ? Calculation of income, states in part: DSHS uses a consumer?s countable income when determining income eligibility and copayment. A consumer?s countable income is the sum of all income listed in WAC 110-15-0060 minus any child support paid out through a court order, division of child support administrative order, or tribal government order. (1) To determine a consumer?s income, DSHS either: (a) Calculates an average monthly income by: (i) Determining the number of months, weeks or pay periods it took the consumer?s WCCC household to earn the income; and dividing the income by the same number of months, weeks or pay periods. (ii) If the past wages are no longer reflective of the current income, DSHS may accept the employer?s statement of current, anticipated wages for future income determination. (b) When the consumer begins new employment and has less than three months of wages, DSHS uses the best available estimate of the consumer?s WCCC household?s current income: (i) As verified by the consumer?s employer; or (ii) As provided by the consumer through a verbal or written statement documenting the new employment at the time of application, reapplication or change reporting, and wage verification within sixty days of DSHS request. (2) If a consumer receives a lump sum payment (such as money from the sale of property or back child support payment) in the month of application or during the consumer?s WCCC eligibility: (a) DSHS calculates a monthly amount by dividing the lump sum payment by twelve; (b) DSHS adds the monthly amount to the consumer?s expected average monthly income: (i) For the month it was received; and (ii) For the remaining months of the current eligibility period; and (c) To remain eligible for WCCC the consumer must meet WCCC income guidelines after the lump sum payment is applied. WAC 110-15-0075 ? Determining income eligibility and copayment amounts, states (effective prior to October 1, 2021): (1) DCYF takes the following steps to determine a consumer?s eligibility and copayment, whether care is provided under a WCCC voucher or contract: (a) Determine the consumer?s family size (under WAC 110-15-0015); (b) Determine the consumer?s countable income (under WAC 110-15-0065). (2) DCYF calculates the consumer?s copayment as follows: If a consumer?s income is: Then the consumer?s copayment is: (a) At or below 82% of the federal poverty guidelines (FPG). $15 (b) Above 82% of the FPG up to 137.5% of the FPG. $65 (c) Above 137.5% of the FPG through 200% of the FPG. The dollar amount equal to subtracting 137.5% of the FPG from countable income, multiplying by 50%, then adding $65, up to a maximum of $115. (3) DCYF does not prorate the copayment when a consumer uses care for part of a month. (4) The FPG is updated every year. The WCCC eligibility level is updated at the same time every year to remain current with the FPG. WAC 110-15-0075 ? Determining income eligibility and copayment amounts, states (effective beginning October 1, 2021): (1) DCYF takes the following steps to determine consumers? eligibility and copayments, when care is provided under a WCCC voucher or contract: (a) Determine their family size as described in WAC 110-15-0015; and (b) Determine their countable income as described in WAC 110-15-0065. (2) DCYF calculates consumers? copayments as follows: If the household?s income is: Then the household?s maximum monthly copayment is: At or below 20 percent of the SMI Waived Above 20 percent and at or below 36 percent of the SMI $65 Above 36 percent and at or below 50 percent of the SMI $90 Above 50 percent and at or below 60 percent of the SMI $115 At reapplication, above 60 percent and at or below 65 percent of the SMI $215 (3) DCYF does not prorate copayments when consumers use care for only part of a month. (4) For parents age 21 years or younger who attend high school or are working towards completing a high school equivalency certificate, copayments are not required.
2022-036 The Department of Children, Youth, and Families did not have adequate internal controls over and did not comply with client eligibility requirements for child care services paid with the Child Care and Development Fund and Temporary Assistance for Needy Families funds. Assistance Listing Number and Title: 93.558, Temporary Assistance for Needy Families 93.575, Child Care and Development Block Grant 93.575, COVID-19 Child Care and Development Block Grant 93.596, Child Care Mandatory and Matching Funds of the Child Care and Development Fund Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: 2003WACCDF; 2103WACCDF; 2203WACCDF; 2003WACCC3; 2103WACDC6; 2103WACSC6; 2103WACCC5; 2103WACCDD; 2203WACCDD; 2101WATANF; 2201WATANF Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Eligibility Known Questioned Cost Amount: Temporary Assistance for Needy Families ? $5,689 Child Care and Development Fund ? $5,078 Background The Department of Children, Youth, and Families administers the federal Child Care and Development Fund (CCDF) grant to help eligible working families pay for child care. In fiscal year 2022, the Department spent $668.6 million in CCDF federal funding. The Department of Social and Health Services (DSHS) administers the Temporary Assistance for Needy Families (TANF) grant. To meet one of the program?s primary purposes of helping clients obtain employment, TANF grant funds may be used to pay clients? child care costs. If a client obtains employment and is no longer eligible for the program, TANF funds may still be used to pay child care costs to help the client maintain employment. In fiscal year 2022, the Department spent more than $260.5 million in CCDF and $67.7 million in TANF federal grant funds on child care subsidy payments to providers. Some payments made for child care are paid for by both the CCDF and TANF grants. While the two federal programs are separate, the requirements and policies in Washington for child care payments are consolidated under the Working Connections Child Care program. As of July 1, 2019, the responsibility for making and documenting child care eligibility determinations under the CCDF and TANF grants was transferred from DSHS to the Department. For a family to be eligible for child care assistance, state and federal rules require that at the time of application or reapplication, children must: ? Reside in Washington and be a citizen or legal resident of the United States; ? Be younger than 13 years, or if for verified special needs, be younger than 19 years; ? Reside with a parent(s) or guardian whose countable income does not exceed 200 percent of the federal poverty level at application or 220 percent at reapplication for July, August and September 2021 but in October 2021 changed to 60 percent of the state median income at application or 65 percent of the state median income at reapplication; ? Reside with a parent(s) or guardian who works or attends a job-training or education program, or needs to be receiving protective services. State rules describe the information clients must provide to the Department to verify their eligibility. The information must be accurate, complete, consistent and from a reliable source. This information includes, but is not limited to, employer and hourly wage information, proof of an approved activity under TANF, and family household size and composition. Once determined to be eligible for the program, a client is eligible for one year unless a change in income causes the client to exceed 85 percent of the state?s median income The Department requires that clients self-report such income changes. A written notice communicates the recipients? reporting requirement and the specific dollar threshold applicable to the household?s annual income. Once the client?s income exceeds this cutoff level, the Department terminates services. The Department has access to systems that contain wage and household benefit and composition data for some, but not all, child care recipients. The Department uses this information in part to determine program eligibility, benefit level, including client copayment, and the amount of child care the family is eligible to receive. If an ineligible client receives assistance, the payment made to the child care provider is not allowable and the client must repay the ineligible amount. The Department also uses household income to determine the amount families must contribute for their monthly copay to providers. Beginning July 1, 2021, monthly copayments were calculated using an updated schedule described in Washington Administrative Code 110-15-0075. Federal regulations require the Department to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. In the past 10 audits, we reported findings related to eligibility for the Working Connections Child Care program. In these prior audits, we reported the Department did not have adequate internal controls over the eligibility process for child care subsidy recipients. These were reported as finding numbers 2021-035, 2020-039, 2019-032, 2018-030, 2017-026, 2016-023, 2015-026, 2014-026, 2013-017 and 2012-30. Description of Condition The Department did not have adequate internal controls over and did not comply with client eligibility requirements for CCDF and TANF. During the audit period the Department determined 69,815 children were eligible for child care. We used a statistical sampling method to randomly select and examine 59 of these determinations. In four instances (6.8 percent), we found the Department made eligibility determinations improperly, did not obtain required documentation, incorrectly assessed copayment, or did not verify information before authorizing services. Specifically, we found: ? Two cases (3.4 percent) where the Department had incorrectly determined household composition and did not obtain sufficient data for all parents in the household to make an accurate eligibility determination. ? One case (1.7 percent) where the Department did not follow procedure for verifying employment, which led to an incorrect household income calculation. ? One case (1.7 percent) where the copay was incorrectly assessed, which resulted in an underpayment due to a system error. Though the Department has established internal controls, they were insufficient for ensuring material compliance with client eligibility requirements. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. Cause of Condition Department staff made eligibility determinations without obtaining sufficient supporting documentation to ensure households were eligible to receive assistance. This deviated from the standard policies and procedures the Department has established, and management did not monitor sufficiently to ensure staff made proper eligibility determinations. Further, the incorrect copay calculation was due to system error. Effect of Condition and Questioned Costs By not implementing adequate internal controls, the Department is at higher risk of paying providers for child care services when clients are ineligible. Of the four client eligibility determinations that had errors, three resulted in $10,767 of federal overpayments to providers. The Department used $5,078 in CCDF grant funds and $5,689 in TANF grant funds for these payments. Because we used a statistical sampling method to randomly select the payments examined in the audit, we estimate the amount of likely improper payments to be $6,008,693 for the CCDF grant and $6,731,953 for the TANF grant. Although we identified known and likely questioned costs, we do not have reasonable assurance that the payments in question are appropriately represented in the Department?s accounting records because of the grant management practice issue reported in findings 2022-035 and 2022-041. Additionally, the payments in question are duplicative of the costs already questioned in the aforementioned provider payment findings. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflects this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Department improve its internal controls over determining client eligibility to ensure it: ? Reviews eligibility determinations sufficiently to detect improper eligibility determinations ? Reviews sufficient support for clients? income and household composition information for accuracy We also recommend the Department consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid. Department`s Response The Department appreciates, acknowledges, and supports SAO?s mission, which is to hold state and local government accountable for the use of public resources. Further, we appreciate SAO?s work with us over the past year to strengthen the auditing process. Due to recent changes to CCSP directed by the Legislature, the Department anticipates continued reduction in eligibility determination errors. The Fair Start for Kids Act (FSKA) required the Department to make several changes that expanded eligibility during SFY 2022. The FSKA increased the State Median Income (SMI) threshold, allowing more two parent households to be eligible for child care subsidy. The FSKA also capped copayments to $115 for applicants and $215 for reapplicants, greatly reducing the copay amounts for typical two parent households. These changes are disincentives for fraud as struggling families receive needed benefits and are more likely to provide accurate and complete information. This is supported by the overall reduction in investigation requests submitted to the Office of Fraud and Accountability. In the federal fiscal year prior to the implementation of the FSKA, the Department submitted 1,405 requests for investigations. The year following FSKA implementation requests for investigations fell to 912. The Department continues to explore ways to remove the possibility for improper use of CCDF funds. The Department agrees with the SAO that there is a need to review household composition at application and reapplication to improve reliability of eligibility decisions. The Department accesses data across available state systems to confirm information, including household composition provided by clients. Unfortunately, there is no household composition verification system, and information provided to other state agencies is often provided by client self-attestation. The Department continues to balance verification requirements with providing timely benefit decisions to support family access to high quality child care. Eighty-six percent of households receiving child care subsidies are headed by single parents. Supporting these families with child care is essential for their continued participation in work, education, and other social service programs. The Department provides training for eligibility in the specific areas of household composition and income determination and improvements to training are ongoing. The Department recently made changes to the professional development and training process to improve staff skills and accuracy. Staff training is in a continuous improvement cycle and evolves with staff needs and changes in rule. The Department will continue to improve processes and internal controls and create and deliver staff training based on current data trends and patterns. Auditor?s Remarks We thank the Department for its cooperation and assistance throughout the audit. We will review the status of the Department?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Washington Administrative Code (WAC) 110-15-0015 ? Determining family size, states in part: (1) DCYF determines a consumer?s family size as follows: (a) For a single parent, including a minor parent living independently, DCYF counts the consumer and the consumer?s children; (b) For unmarried parents who have at least one mutual child, DCYF counts both parents and all of their children living in the household; (c) Unmarried parents who have no mutual children are counted as separate WCCC households, the unmarried parents and their respective children living in the household; (d) For married parents, DCYF counts both parents and all of their children living in the household; (e) For parents who are undocumented aliens as defined in WAC 388-424-0001, DCYF counts the parents and children, documented and undocumented, and all other family rules in this section apply. Children needing care must meet citizenship requirements described in WAC 110-15-0005; (f) For a legal guardian verified by a legal or court document, adult sibling or step-sibling, nephew, niece, aunt, uncle, grandparent, any of these relatives with the prefix ?great,? such as a ?great-nephew,? or an in loco parentis custodian who is not related to the child as described in WAC 110-15-0005, DCYF counts only the children and only the children?s income is counted; (g) For a parent who is out of the household because of employer requirements, such as training or military service, and expected to return to the household, DCYF counts the consumer, the absent parent, and the children; (h) For a parent who is voluntarily out of the household for reasons other than requirements of the employer, such as unapproved schooling and visiting family members, and is expected to return to the household, DCYF counts the consumer, the absent parent, and the children. WAC 110-15-0020 and all other family and household rules in this section apply; (i) For a parent who is out of the country and waiting for legal reentry in to the United States, DCYF counts only the consumer and children residing in the United States and all other family and household rules in this section apply; (j) An incarcerated parent is not part of the household count for determining income and eligibility. DCYF counts the remaining household members using all other family rules in this section; and (k) For a parent incarcerated at a Washington state correctional facility whose child lives with them at the facility, DCYF counts the parent and child as their own household. (2) When the household consists of the consumer?s own child and another child identified in subsection (1)(f) of this section, the household may be combined into one household or kept as distinct households for the benefit of the consumer. WAC 110-15-0065 ? Calculation of income, states in part: DSHS uses a consumer?s countable income when determining income eligibility and copayment. A consumer?s countable income is the sum of all income listed in WAC 110-15-0060 minus any child support paid out through a court order, division of child support administrative order, or tribal government order. (1) To determine a consumer?s income, DSHS either: (a) Calculates an average monthly income by: (i) Determining the number of months, weeks or pay periods it took the consumer?s WCCC household to earn the income; and dividing the income by the same number of months, weeks or pay periods. (ii) If the past wages are no longer reflective of the current income, DSHS may accept the employer?s statement of current, anticipated wages for future income determination. (b) When the consumer begins new employment and has less than three months of wages, DSHS uses the best available estimate of the consumer?s WCCC household?s current income: (i) As verified by the consumer?s employer; or (ii) As provided by the consumer through a verbal or written statement documenting the new employment at the time of application, reapplication or change reporting, and wage verification within sixty days of DSHS request. (2) If a consumer receives a lump sum payment (such as money from the sale of property or back child support payment) in the month of application or during the consumer?s WCCC eligibility: (a) DSHS calculates a monthly amount by dividing the lump sum payment by twelve; (b) DSHS adds the monthly amount to the consumer?s expected average monthly income: (i) For the month it was received; and (ii) For the remaining months of the current eligibility period; and (c) To remain eligible for WCCC the consumer must meet WCCC income guidelines after the lump sum payment is applied. WAC 110-15-0075 ? Determining income eligibility and copayment amounts, states (effective prior to October 1, 2021): (1) DCYF takes the following steps to determine a consumer?s eligibility and copayment, whether care is provided under a WCCC voucher or contract: (a) Determine the consumer?s family size (under WAC 110-15-0015); (b) Determine the consumer?s countable income (under WAC 110-15-0065). (2) DCYF calculates the consumer?s copayment as follows: If a consumer?s income is: Then the consumer?s copayment is: (a) At or below 82% of the federal poverty guidelines (FPG). $15 (b) Above 82% of the FPG up to 137.5% of the FPG. $65 (c) Above 137.5% of the FPG through 200% of the FPG. The dollar amount equal to subtracting 137.5% of the FPG from countable income, multiplying by 50%, then adding $65, up to a maximum of $115. (3) DCYF does not prorate the copayment when a consumer uses care for part of a month. (4) The FPG is updated every year. The WCCC eligibility level is updated at the same time every year to remain current with the FPG. WAC 110-15-0075 ? Determining income eligibility and copayment amounts, states (effective beginning October 1, 2021): (1) DCYF takes the following steps to determine consumers? eligibility and copayments, when care is provided under a WCCC voucher or contract: (a) Determine their family size as described in WAC 110-15-0015; and (b) Determine their countable income as described in WAC 110-15-0065. (2) DCYF calculates consumers? copayments as follows: If the household?s income is: Then the household?s maximum monthly copayment is: At or below 20 percent of the SMI Waived Above 20 percent and at or below 36 percent of the SMI $65 Above 36 percent and at or below 50 percent of the SMI $90 Above 50 percent and at or below 60 percent of the SMI $115 At reapplication, above 60 percent and at or below 65 percent of the SMI $215 (3) DCYF does not prorate copayments when consumers use care for only part of a month. (4) For parents age 21 years or younger who attend high school or are working towards completing a high school equivalency certificate, copayments are not required.
2022-036 The Department of Children, Youth, and Families did not have adequate internal controls over and did not comply with client eligibility requirements for child care services paid with the Child Care and Development Fund and Temporary Assistance for Needy Families funds. Assistance Listing Number and Title: 93.558, Temporary Assistance for Needy Families 93.575, Child Care and Development Block Grant 93.575, COVID-19 Child Care and Development Block Grant 93.596, Child Care Mandatory and Matching Funds of the Child Care and Development Fund Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: 2003WACCDF; 2103WACCDF; 2203WACCDF; 2003WACCC3; 2103WACDC6; 2103WACSC6; 2103WACCC5; 2103WACCDD; 2203WACCDD; 2101WATANF; 2201WATANF Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Eligibility Known Questioned Cost Amount: Temporary Assistance for Needy Families ? $5,689 Child Care and Development Fund ? $5,078 Background The Department of Children, Youth, and Families administers the federal Child Care and Development Fund (CCDF) grant to help eligible working families pay for child care. In fiscal year 2022, the Department spent $668.6 million in CCDF federal funding. The Department of Social and Health Services (DSHS) administers the Temporary Assistance for Needy Families (TANF) grant. To meet one of the program?s primary purposes of helping clients obtain employment, TANF grant funds may be used to pay clients? child care costs. If a client obtains employment and is no longer eligible for the program, TANF funds may still be used to pay child care costs to help the client maintain employment. In fiscal year 2022, the Department spent more than $260.5 million in CCDF and $67.7 million in TANF federal grant funds on child care subsidy payments to providers. Some payments made for child care are paid for by both the CCDF and TANF grants. While the two federal programs are separate, the requirements and policies in Washington for child care payments are consolidated under the Working Connections Child Care program. As of July 1, 2019, the responsibility for making and documenting child care eligibility determinations under the CCDF and TANF grants was transferred from DSHS to the Department. For a family to be eligible for child care assistance, state and federal rules require that at the time of application or reapplication, children must: ? Reside in Washington and be a citizen or legal resident of the United States; ? Be younger than 13 years, or if for verified special needs, be younger than 19 years; ? Reside with a parent(s) or guardian whose countable income does not exceed 200 percent of the federal poverty level at application or 220 percent at reapplication for July, August and September 2021 but in October 2021 changed to 60 percent of the state median income at application or 65 percent of the state median income at reapplication; ? Reside with a parent(s) or guardian who works or attends a job-training or education program, or needs to be receiving protective services. State rules describe the information clients must provide to the Department to verify their eligibility. The information must be accurate, complete, consistent and from a reliable source. This information includes, but is not limited to, employer and hourly wage information, proof of an approved activity under TANF, and family household size and composition. Once determined to be eligible for the program, a client is eligible for one year unless a change in income causes the client to exceed 85 percent of the state?s median income The Department requires that clients self-report such income changes. A written notice communicates the recipients? reporting requirement and the specific dollar threshold applicable to the household?s annual income. Once the client?s income exceeds this cutoff level, the Department terminates services. The Department has access to systems that contain wage and household benefit and composition data for some, but not all, child care recipients. The Department uses this information in part to determine program eligibility, benefit level, including client copayment, and the amount of child care the family is eligible to receive. If an ineligible client receives assistance, the payment made to the child care provider is not allowable and the client must repay the ineligible amount. The Department also uses household income to determine the amount families must contribute for their monthly copay to providers. Beginning July 1, 2021, monthly copayments were calculated using an updated schedule described in Washington Administrative Code 110-15-0075. Federal regulations require the Department to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. In the past 10 audits, we reported findings related to eligibility for the Working Connections Child Care program. In these prior audits, we reported the Department did not have adequate internal controls over the eligibility process for child care subsidy recipients. These were reported as finding numbers 2021-035, 2020-039, 2019-032, 2018-030, 2017-026, 2016-023, 2015-026, 2014-026, 2013-017 and 2012-30. Description of Condition The Department did not have adequate internal controls over and did not comply with client eligibility requirements for CCDF and TANF. During the audit period the Department determined 69,815 children were eligible for child care. We used a statistical sampling method to randomly select and examine 59 of these determinations. In four instances (6.8 percent), we found the Department made eligibility determinations improperly, did not obtain required documentation, incorrectly assessed copayment, or did not verify information before authorizing services. Specifically, we found: ? Two cases (3.4 percent) where the Department had incorrectly determined household composition and did not obtain sufficient data for all parents in the household to make an accurate eligibility determination. ? One case (1.7 percent) where the Department did not follow procedure for verifying employment, which led to an incorrect household income calculation. ? One case (1.7 percent) where the copay was incorrectly assessed, which resulted in an underpayment due to a system error. Though the Department has established internal controls, they were insufficient for ensuring material compliance with client eligibility requirements. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. Cause of Condition Department staff made eligibility determinations without obtaining sufficient supporting documentation to ensure households were eligible to receive assistance. This deviated from the standard policies and procedures the Department has established, and management did not monitor sufficiently to ensure staff made proper eligibility determinations. Further, the incorrect copay calculation was due to system error. Effect of Condition and Questioned Costs By not implementing adequate internal controls, the Department is at higher risk of paying providers for child care services when clients are ineligible. Of the four client eligibility determinations that had errors, three resulted in $10,767 of federal overpayments to providers. The Department used $5,078 in CCDF grant funds and $5,689 in TANF grant funds for these payments. Because we used a statistical sampling method to randomly select the payments examined in the audit, we estimate the amount of likely improper payments to be $6,008,693 for the CCDF grant and $6,731,953 for the TANF grant. Although we identified known and likely questioned costs, we do not have reasonable assurance that the payments in question are appropriately represented in the Department?s accounting records because of the grant management practice issue reported in findings 2022-035 and 2022-041. Additionally, the payments in question are duplicative of the costs already questioned in the aforementioned provider payment findings. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflects this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Department improve its internal controls over determining client eligibility to ensure it: ? Reviews eligibility determinations sufficiently to detect improper eligibility determinations ? Reviews sufficient support for clients? income and household composition information for accuracy We also recommend the Department consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid. Department`s Response The Department appreciates, acknowledges, and supports SAO?s mission, which is to hold state and local government accountable for the use of public resources. Further, we appreciate SAO?s work with us over the past year to strengthen the auditing process. Due to recent changes to CCSP directed by the Legislature, the Department anticipates continued reduction in eligibility determination errors. The Fair Start for Kids Act (FSKA) required the Department to make several changes that expanded eligibility during SFY 2022. The FSKA increased the State Median Income (SMI) threshold, allowing more two parent households to be eligible for child care subsidy. The FSKA also capped copayments to $115 for applicants and $215 for reapplicants, greatly reducing the copay amounts for typical two parent households. These changes are disincentives for fraud as struggling families receive needed benefits and are more likely to provide accurate and complete information. This is supported by the overall reduction in investigation requests submitted to the Office of Fraud and Accountability. In the federal fiscal year prior to the implementation of the FSKA, the Department submitted 1,405 requests for investigations. The year following FSKA implementation requests for investigations fell to 912. The Department continues to explore ways to remove the possibility for improper use of CCDF funds. The Department agrees with the SAO that there is a need to review household composition at application and reapplication to improve reliability of eligibility decisions. The Department accesses data across available state systems to confirm information, including household composition provided by clients. Unfortunately, there is no household composition verification system, and information provided to other state agencies is often provided by client self-attestation. The Department continues to balance verification requirements with providing timely benefit decisions to support family access to high quality child care. Eighty-six percent of households receiving child care subsidies are headed by single parents. Supporting these families with child care is essential for their continued participation in work, education, and other social service programs. The Department provides training for eligibility in the specific areas of household composition and income determination and improvements to training are ongoing. The Department recently made changes to the professional development and training process to improve staff skills and accuracy. Staff training is in a continuous improvement cycle and evolves with staff needs and changes in rule. The Department will continue to improve processes and internal controls and create and deliver staff training based on current data trends and patterns. Auditor?s Remarks We thank the Department for its cooperation and assistance throughout the audit. We will review the status of the Department?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Washington Administrative Code (WAC) 110-15-0015 ? Determining family size, states in part: (1) DCYF determines a consumer?s family size as follows: (a) For a single parent, including a minor parent living independently, DCYF counts the consumer and the consumer?s children; (b) For unmarried parents who have at least one mutual child, DCYF counts both parents and all of their children living in the household; (c) Unmarried parents who have no mutual children are counted as separate WCCC households, the unmarried parents and their respective children living in the household; (d) For married parents, DCYF counts both parents and all of their children living in the household; (e) For parents who are undocumented aliens as defined in WAC 388-424-0001, DCYF counts the parents and children, documented and undocumented, and all other family rules in this section apply. Children needing care must meet citizenship requirements described in WAC 110-15-0005; (f) For a legal guardian verified by a legal or court document, adult sibling or step-sibling, nephew, niece, aunt, uncle, grandparent, any of these relatives with the prefix ?great,? such as a ?great-nephew,? or an in loco parentis custodian who is not related to the child as described in WAC 110-15-0005, DCYF counts only the children and only the children?s income is counted; (g) For a parent who is out of the household because of employer requirements, such as training or military service, and expected to return to the household, DCYF counts the consumer, the absent parent, and the children; (h) For a parent who is voluntarily out of the household for reasons other than requirements of the employer, such as unapproved schooling and visiting family members, and is expected to return to the household, DCYF counts the consumer, the absent parent, and the children. WAC 110-15-0020 and all other family and household rules in this section apply; (i) For a parent who is out of the country and waiting for legal reentry in to the United States, DCYF counts only the consumer and children residing in the United States and all other family and household rules in this section apply; (j) An incarcerated parent is not part of the household count for determining income and eligibility. DCYF counts the remaining household members using all other family rules in this section; and (k) For a parent incarcerated at a Washington state correctional facility whose child lives with them at the facility, DCYF counts the parent and child as their own household. (2) When the household consists of the consumer?s own child and another child identified in subsection (1)(f) of this section, the household may be combined into one household or kept as distinct households for the benefit of the consumer. WAC 110-15-0065 ? Calculation of income, states in part: DSHS uses a consumer?s countable income when determining income eligibility and copayment. A consumer?s countable income is the sum of all income listed in WAC 110-15-0060 minus any child support paid out through a court order, division of child support administrative order, or tribal government order. (1) To determine a consumer?s income, DSHS either: (a) Calculates an average monthly income by: (i) Determining the number of months, weeks or pay periods it took the consumer?s WCCC household to earn the income; and dividing the income by the same number of months, weeks or pay periods. (ii) If the past wages are no longer reflective of the current income, DSHS may accept the employer?s statement of current, anticipated wages for future income determination. (b) When the consumer begins new employment and has less than three months of wages, DSHS uses the best available estimate of the consumer?s WCCC household?s current income: (i) As verified by the consumer?s employer; or (ii) As provided by the consumer through a verbal or written statement documenting the new employment at the time of application, reapplication or change reporting, and wage verification within sixty days of DSHS request. (2) If a consumer receives a lump sum payment (such as money from the sale of property or back child support payment) in the month of application or during the consumer?s WCCC eligibility: (a) DSHS calculates a monthly amount by dividing the lump sum payment by twelve; (b) DSHS adds the monthly amount to the consumer?s expected average monthly income: (i) For the month it was received; and (ii) For the remaining months of the current eligibility period; and (c) To remain eligible for WCCC the consumer must meet WCCC income guidelines after the lump sum payment is applied. WAC 110-15-0075 ? Determining income eligibility and copayment amounts, states (effective prior to October 1, 2021): (1) DCYF takes the following steps to determine a consumer?s eligibility and copayment, whether care is provided under a WCCC voucher or contract: (a) Determine the consumer?s family size (under WAC 110-15-0015); (b) Determine the consumer?s countable income (under WAC 110-15-0065). (2) DCYF calculates the consumer?s copayment as follows: If a consumer?s income is: Then the consumer?s copayment is: (a) At or below 82% of the federal poverty guidelines (FPG). $15 (b) Above 82% of the FPG up to 137.5% of the FPG. $65 (c) Above 137.5% of the FPG through 200% of the FPG. The dollar amount equal to subtracting 137.5% of the FPG from countable income, multiplying by 50%, then adding $65, up to a maximum of $115. (3) DCYF does not prorate the copayment when a consumer uses care for part of a month. (4) The FPG is updated every year. The WCCC eligibility level is updated at the same time every year to remain current with the FPG. WAC 110-15-0075 ? Determining income eligibility and copayment amounts, states (effective beginning October 1, 2021): (1) DCYF takes the following steps to determine consumers? eligibility and copayments, when care is provided under a WCCC voucher or contract: (a) Determine their family size as described in WAC 110-15-0015; and (b) Determine their countable income as described in WAC 110-15-0065. (2) DCYF calculates consumers? copayments as follows: If the household?s income is: Then the household?s maximum monthly copayment is: At or below 20 percent of the SMI Waived Above 20 percent and at or below 36 percent of the SMI $65 Above 36 percent and at or below 50 percent of the SMI $90 Above 50 percent and at or below 60 percent of the SMI $115 At reapplication, above 60 percent and at or below 65 percent of the SMI $215 (3) DCYF does not prorate copayments when consumers use care for only part of a month. (4) For parents age 21 years or younger who attend high school or are working towards completing a high school equivalency certificate, copayments are not required.
2022-036 The Department of Children, Youth, and Families did not have adequate internal controls over and did not comply with client eligibility requirements for child care services paid with the Child Care and Development Fund and Temporary Assistance for Needy Families funds. Assistance Listing Number and Title: 93.558, Temporary Assistance for Needy Families 93.575, Child Care and Development Block Grant 93.575, COVID-19 Child Care and Development Block Grant 93.596, Child Care Mandatory and Matching Funds of the Child Care and Development Fund Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: 2003WACCDF; 2103WACCDF; 2203WACCDF; 2003WACCC3; 2103WACDC6; 2103WACSC6; 2103WACCC5; 2103WACCDD; 2203WACCDD; 2101WATANF; 2201WATANF Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Eligibility Known Questioned Cost Amount: Temporary Assistance for Needy Families ? $5,689 Child Care and Development Fund ? $5,078 Background The Department of Children, Youth, and Families administers the federal Child Care and Development Fund (CCDF) grant to help eligible working families pay for child care. In fiscal year 2022, the Department spent $668.6 million in CCDF federal funding. The Department of Social and Health Services (DSHS) administers the Temporary Assistance for Needy Families (TANF) grant. To meet one of the program?s primary purposes of helping clients obtain employment, TANF grant funds may be used to pay clients? child care costs. If a client obtains employment and is no longer eligible for the program, TANF funds may still be used to pay child care costs to help the client maintain employment. In fiscal year 2022, the Department spent more than $260.5 million in CCDF and $67.7 million in TANF federal grant funds on child care subsidy payments to providers. Some payments made for child care are paid for by both the CCDF and TANF grants. While the two federal programs are separate, the requirements and policies in Washington for child care payments are consolidated under the Working Connections Child Care program. As of July 1, 2019, the responsibility for making and documenting child care eligibility determinations under the CCDF and TANF grants was transferred from DSHS to the Department. For a family to be eligible for child care assistance, state and federal rules require that at the time of application or reapplication, children must: ? Reside in Washington and be a citizen or legal resident of the United States; ? Be younger than 13 years, or if for verified special needs, be younger than 19 years; ? Reside with a parent(s) or guardian whose countable income does not exceed 200 percent of the federal poverty level at application or 220 percent at reapplication for July, August and September 2021 but in October 2021 changed to 60 percent of the state median income at application or 65 percent of the state median income at reapplication; ? Reside with a parent(s) or guardian who works or attends a job-training or education program, or needs to be receiving protective services. State rules describe the information clients must provide to the Department to verify their eligibility. The information must be accurate, complete, consistent and from a reliable source. This information includes, but is not limited to, employer and hourly wage information, proof of an approved activity under TANF, and family household size and composition. Once determined to be eligible for the program, a client is eligible for one year unless a change in income causes the client to exceed 85 percent of the state?s median income The Department requires that clients self-report such income changes. A written notice communicates the recipients? reporting requirement and the specific dollar threshold applicable to the household?s annual income. Once the client?s income exceeds this cutoff level, the Department terminates services. The Department has access to systems that contain wage and household benefit and composition data for some, but not all, child care recipients. The Department uses this information in part to determine program eligibility, benefit level, including client copayment, and the amount of child care the family is eligible to receive. If an ineligible client receives assistance, the payment made to the child care provider is not allowable and the client must repay the ineligible amount. The Department also uses household income to determine the amount families must contribute for their monthly copay to providers. Beginning July 1, 2021, monthly copayments were calculated using an updated schedule described in Washington Administrative Code 110-15-0075. Federal regulations require the Department to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. In the past 10 audits, we reported findings related to eligibility for the Working Connections Child Care program. In these prior audits, we reported the Department did not have adequate internal controls over the eligibility process for child care subsidy recipients. These were reported as finding numbers 2021-035, 2020-039, 2019-032, 2018-030, 2017-026, 2016-023, 2015-026, 2014-026, 2013-017 and 2012-30. Description of Condition The Department did not have adequate internal controls over and did not comply with client eligibility requirements for CCDF and TANF. During the audit period the Department determined 69,815 children were eligible for child care. We used a statistical sampling method to randomly select and examine 59 of these determinations. In four instances (6.8 percent), we found the Department made eligibility determinations improperly, did not obtain required documentation, incorrectly assessed copayment, or did not verify information before authorizing services. Specifically, we found: ? Two cases (3.4 percent) where the Department had incorrectly determined household composition and did not obtain sufficient data for all parents in the household to make an accurate eligibility determination. ? One case (1.7 percent) where the Department did not follow procedure for verifying employment, which led to an incorrect household income calculation. ? One case (1.7 percent) where the copay was incorrectly assessed, which resulted in an underpayment due to a system error. Though the Department has established internal controls, they were insufficient for ensuring material compliance with client eligibility requirements. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. Cause of Condition Department staff made eligibility determinations without obtaining sufficient supporting documentation to ensure households were eligible to receive assistance. This deviated from the standard policies and procedures the Department has established, and management did not monitor sufficiently to ensure staff made proper eligibility determinations. Further, the incorrect copay calculation was due to system error. Effect of Condition and Questioned Costs By not implementing adequate internal controls, the Department is at higher risk of paying providers for child care services when clients are ineligible. Of the four client eligibility determinations that had errors, three resulted in $10,767 of federal overpayments to providers. The Department used $5,078 in CCDF grant funds and $5,689 in TANF grant funds for these payments. Because we used a statistical sampling method to randomly select the payments examined in the audit, we estimate the amount of likely improper payments to be $6,008,693 for the CCDF grant and $6,731,953 for the TANF grant. Although we identified known and likely questioned costs, we do not have reasonable assurance that the payments in question are appropriately represented in the Department?s accounting records because of the grant management practice issue reported in findings 2022-035 and 2022-041. Additionally, the payments in question are duplicative of the costs already questioned in the aforementioned provider payment findings. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflects this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Department improve its internal controls over determining client eligibility to ensure it: ? Reviews eligibility determinations sufficiently to detect improper eligibility determinations ? Reviews sufficient support for clients? income and household composition information for accuracy We also recommend the Department consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid. Department`s Response The Department appreciates, acknowledges, and supports SAO?s mission, which is to hold state and local government accountable for the use of public resources. Further, we appreciate SAO?s work with us over the past year to strengthen the auditing process. Due to recent changes to CCSP directed by the Legislature, the Department anticipates continued reduction in eligibility determination errors. The Fair Start for Kids Act (FSKA) required the Department to make several changes that expanded eligibility during SFY 2022. The FSKA increased the State Median Income (SMI) threshold, allowing more two parent households to be eligible for child care subsidy. The FSKA also capped copayments to $115 for applicants and $215 for reapplicants, greatly reducing the copay amounts for typical two parent households. These changes are disincentives for fraud as struggling families receive needed benefits and are more likely to provide accurate and complete information. This is supported by the overall reduction in investigation requests submitted to the Office of Fraud and Accountability. In the federal fiscal year prior to the implementation of the FSKA, the Department submitted 1,405 requests for investigations. The year following FSKA implementation requests for investigations fell to 912. The Department continues to explore ways to remove the possibility for improper use of CCDF funds. The Department agrees with the SAO that there is a need to review household composition at application and reapplication to improve reliability of eligibility decisions. The Department accesses data across available state systems to confirm information, including household composition provided by clients. Unfortunately, there is no household composition verification system, and information provided to other state agencies is often provided by client self-attestation. The Department continues to balance verification requirements with providing timely benefit decisions to support family access to high quality child care. Eighty-six percent of households receiving child care subsidies are headed by single parents. Supporting these families with child care is essential for their continued participation in work, education, and other social service programs. The Department provides training for eligibility in the specific areas of household composition and income determination and improvements to training are ongoing. The Department recently made changes to the professional development and training process to improve staff skills and accuracy. Staff training is in a continuous improvement cycle and evolves with staff needs and changes in rule. The Department will continue to improve processes and internal controls and create and deliver staff training based on current data trends and patterns. Auditor?s Remarks We thank the Department for its cooperation and assistance throughout the audit. We will review the status of the Department?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Washington Administrative Code (WAC) 110-15-0015 ? Determining family size, states in part: (1) DCYF determines a consumer?s family size as follows: (a) For a single parent, including a minor parent living independently, DCYF counts the consumer and the consumer?s children; (b) For unmarried parents who have at least one mutual child, DCYF counts both parents and all of their children living in the household; (c) Unmarried parents who have no mutual children are counted as separate WCCC households, the unmarried parents and their respective children living in the household; (d) For married parents, DCYF counts both parents and all of their children living in the household; (e) For parents who are undocumented aliens as defined in WAC 388-424-0001, DCYF counts the parents and children, documented and undocumented, and all other family rules in this section apply. Children needing care must meet citizenship requirements described in WAC 110-15-0005; (f) For a legal guardian verified by a legal or court document, adult sibling or step-sibling, nephew, niece, aunt, uncle, grandparent, any of these relatives with the prefix ?great,? such as a ?great-nephew,? or an in loco parentis custodian who is not related to the child as described in WAC 110-15-0005, DCYF counts only the children and only the children?s income is counted; (g) For a parent who is out of the household because of employer requirements, such as training or military service, and expected to return to the household, DCYF counts the consumer, the absent parent, and the children; (h) For a parent who is voluntarily out of the household for reasons other than requirements of the employer, such as unapproved schooling and visiting family members, and is expected to return to the household, DCYF counts the consumer, the absent parent, and the children. WAC 110-15-0020 and all other family and household rules in this section apply; (i) For a parent who is out of the country and waiting for legal reentry in to the United States, DCYF counts only the consumer and children residing in the United States and all other family and household rules in this section apply; (j) An incarcerated parent is not part of the household count for determining income and eligibility. DCYF counts the remaining household members using all other family rules in this section; and (k) For a parent incarcerated at a Washington state correctional facility whose child lives with them at the facility, DCYF counts the parent and child as their own household. (2) When the household consists of the consumer?s own child and another child identified in subsection (1)(f) of this section, the household may be combined into one household or kept as distinct households for the benefit of the consumer. WAC 110-15-0065 ? Calculation of income, states in part: DSHS uses a consumer?s countable income when determining income eligibility and copayment. A consumer?s countable income is the sum of all income listed in WAC 110-15-0060 minus any child support paid out through a court order, division of child support administrative order, or tribal government order. (1) To determine a consumer?s income, DSHS either: (a) Calculates an average monthly income by: (i) Determining the number of months, weeks or pay periods it took the consumer?s WCCC household to earn the income; and dividing the income by the same number of months, weeks or pay periods. (ii) If the past wages are no longer reflective of the current income, DSHS may accept the employer?s statement of current, anticipated wages for future income determination. (b) When the consumer begins new employment and has less than three months of wages, DSHS uses the best available estimate of the consumer?s WCCC household?s current income: (i) As verified by the consumer?s employer; or (ii) As provided by the consumer through a verbal or written statement documenting the new employment at the time of application, reapplication or change reporting, and wage verification within sixty days of DSHS request. (2) If a consumer receives a lump sum payment (such as money from the sale of property or back child support payment) in the month of application or during the consumer?s WCCC eligibility: (a) DSHS calculates a monthly amount by dividing the lump sum payment by twelve; (b) DSHS adds the monthly amount to the consumer?s expected average monthly income: (i) For the month it was received; and (ii) For the remaining months of the current eligibility period; and (c) To remain eligible for WCCC the consumer must meet WCCC income guidelines after the lump sum payment is applied. WAC 110-15-0075 ? Determining income eligibility and copayment amounts, states (effective prior to October 1, 2021): (1) DCYF takes the following steps to determine a consumer?s eligibility and copayment, whether care is provided under a WCCC voucher or contract: (a) Determine the consumer?s family size (under WAC 110-15-0015); (b) Determine the consumer?s countable income (under WAC 110-15-0065). (2) DCYF calculates the consumer?s copayment as follows: If a consumer?s income is: Then the consumer?s copayment is: (a) At or below 82% of the federal poverty guidelines (FPG). $15 (b) Above 82% of the FPG up to 137.5% of the FPG. $65 (c) Above 137.5% of the FPG through 200% of the FPG. The dollar amount equal to subtracting 137.5% of the FPG from countable income, multiplying by 50%, then adding $65, up to a maximum of $115. (3) DCYF does not prorate the copayment when a consumer uses care for part of a month. (4) The FPG is updated every year. The WCCC eligibility level is updated at the same time every year to remain current with the FPG. WAC 110-15-0075 ? Determining income eligibility and copayment amounts, states (effective beginning October 1, 2021): (1) DCYF takes the following steps to determine consumers? eligibility and copayments, when care is provided under a WCCC voucher or contract: (a) Determine their family size as described in WAC 110-15-0015; and (b) Determine their countable income as described in WAC 110-15-0065. (2) DCYF calculates consumers? copayments as follows: If the household?s income is: Then the household?s maximum monthly copayment is: At or below 20 percent of the SMI Waived Above 20 percent and at or below 36 percent of the SMI $65 Above 36 percent and at or below 50 percent of the SMI $90 Above 50 percent and at or below 60 percent of the SMI $115 At reapplication, above 60 percent and at or below 65 percent of the SMI $215 (3) DCYF does not prorate copayments when consumers use care for only part of a month. (4) For parents age 21 years or younger who attend high school or are working towards completing a high school equivalency certificate, copayments are not required.
2022-036 The Department of Children, Youth, and Families did not have adequate internal controls over and did not comply with client eligibility requirements for child care services paid with the Child Care and Development Fund and Temporary Assistance for Needy Families funds. Assistance Listing Number and Title: 93.558, Temporary Assistance for Needy Families 93.575, Child Care and Development Block Grant 93.575, COVID-19 Child Care and Development Block Grant 93.596, Child Care Mandatory and Matching Funds of the Child Care and Development Fund Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: 2003WACCDF; 2103WACCDF; 2203WACCDF; 2003WACCC3; 2103WACDC6; 2103WACSC6; 2103WACCC5; 2103WACCDD; 2203WACCDD; 2101WATANF; 2201WATANF Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Eligibility Known Questioned Cost Amount: Temporary Assistance for Needy Families ? $5,689 Child Care and Development Fund ? $5,078 Background The Department of Children, Youth, and Families administers the federal Child Care and Development Fund (CCDF) grant to help eligible working families pay for child care. In fiscal year 2022, the Department spent $668.6 million in CCDF federal funding. The Department of Social and Health Services (DSHS) administers the Temporary Assistance for Needy Families (TANF) grant. To meet one of the program?s primary purposes of helping clients obtain employment, TANF grant funds may be used to pay clients? child care costs. If a client obtains employment and is no longer eligible for the program, TANF funds may still be used to pay child care costs to help the client maintain employment. In fiscal year 2022, the Department spent more than $260.5 million in CCDF and $67.7 million in TANF federal grant funds on child care subsidy payments to providers. Some payments made for child care are paid for by both the CCDF and TANF grants. While the two federal programs are separate, the requirements and policies in Washington for child care payments are consolidated under the Working Connections Child Care program. As of July 1, 2019, the responsibility for making and documenting child care eligibility determinations under the CCDF and TANF grants was transferred from DSHS to the Department. For a family to be eligible for child care assistance, state and federal rules require that at the time of application or reapplication, children must: ? Reside in Washington and be a citizen or legal resident of the United States; ? Be younger than 13 years, or if for verified special needs, be younger than 19 years; ? Reside with a parent(s) or guardian whose countable income does not exceed 200 percent of the federal poverty level at application or 220 percent at reapplication for July, August and September 2021 but in October 2021 changed to 60 percent of the state median income at application or 65 percent of the state median income at reapplication; ? Reside with a parent(s) or guardian who works or attends a job-training or education program, or needs to be receiving protective services. State rules describe the information clients must provide to the Department to verify their eligibility. The information must be accurate, complete, consistent and from a reliable source. This information includes, but is not limited to, employer and hourly wage information, proof of an approved activity under TANF, and family household size and composition. Once determined to be eligible for the program, a client is eligible for one year unless a change in income causes the client to exceed 85 percent of the state?s median income The Department requires that clients self-report such income changes. A written notice communicates the recipients? reporting requirement and the specific dollar threshold applicable to the household?s annual income. Once the client?s income exceeds this cutoff level, the Department terminates services. The Department has access to systems that contain wage and household benefit and composition data for some, but not all, child care recipients. The Department uses this information in part to determine program eligibility, benefit level, including client copayment, and the amount of child care the family is eligible to receive. If an ineligible client receives assistance, the payment made to the child care provider is not allowable and the client must repay the ineligible amount. The Department also uses household income to determine the amount families must contribute for their monthly copay to providers. Beginning July 1, 2021, monthly copayments were calculated using an updated schedule described in Washington Administrative Code 110-15-0075. Federal regulations require the Department to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. In the past 10 audits, we reported findings related to eligibility for the Working Connections Child Care program. In these prior audits, we reported the Department did not have adequate internal controls over the eligibility process for child care subsidy recipients. These were reported as finding numbers 2021-035, 2020-039, 2019-032, 2018-030, 2017-026, 2016-023, 2015-026, 2014-026, 2013-017 and 2012-30. Description of Condition The Department did not have adequate internal controls over and did not comply with client eligibility requirements for CCDF and TANF. During the audit period the Department determined 69,815 children were eligible for child care. We used a statistical sampling method to randomly select and examine 59 of these determinations. In four instances (6.8 percent), we found the Department made eligibility determinations improperly, did not obtain required documentation, incorrectly assessed copayment, or did not verify information before authorizing services. Specifically, we found: ? Two cases (3.4 percent) where the Department had incorrectly determined household composition and did not obtain sufficient data for all parents in the household to make an accurate eligibility determination. ? One case (1.7 percent) where the Department did not follow procedure for verifying employment, which led to an incorrect household income calculation. ? One case (1.7 percent) where the copay was incorrectly assessed, which resulted in an underpayment due to a system error. Though the Department has established internal controls, they were insufficient for ensuring material compliance with client eligibility requirements. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. Cause of Condition Department staff made eligibility determinations without obtaining sufficient supporting documentation to ensure households were eligible to receive assistance. This deviated from the standard policies and procedures the Department has established, and management did not monitor sufficiently to ensure staff made proper eligibility determinations. Further, the incorrect copay calculation was due to system error. Effect of Condition and Questioned Costs By not implementing adequate internal controls, the Department is at higher risk of paying providers for child care services when clients are ineligible. Of the four client eligibility determinations that had errors, three resulted in $10,767 of federal overpayments to providers. The Department used $5,078 in CCDF grant funds and $5,689 in TANF grant funds for these payments. Because we used a statistical sampling method to randomly select the payments examined in the audit, we estimate the amount of likely improper payments to be $6,008,693 for the CCDF grant and $6,731,953 for the TANF grant. Although we identified known and likely questioned costs, we do not have reasonable assurance that the payments in question are appropriately represented in the Department?s accounting records because of the grant management practice issue reported in findings 2022-035 and 2022-041. Additionally, the payments in question are duplicative of the costs already questioned in the aforementioned provider payment findings. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflects this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Department improve its internal controls over determining client eligibility to ensure it: ? Reviews eligibility determinations sufficiently to detect improper eligibility determinations ? Reviews sufficient support for clients? income and household composition information for accuracy We also recommend the Department consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid. Department`s Response The Department appreciates, acknowledges, and supports SAO?s mission, which is to hold state and local government accountable for the use of public resources. Further, we appreciate SAO?s work with us over the past year to strengthen the auditing process. Due to recent changes to CCSP directed by the Legislature, the Department anticipates continued reduction in eligibility determination errors. The Fair Start for Kids Act (FSKA) required the Department to make several changes that expanded eligibility during SFY 2022. The FSKA increased the State Median Income (SMI) threshold, allowing more two parent households to be eligible for child care subsidy. The FSKA also capped copayments to $115 for applicants and $215 for reapplicants, greatly reducing the copay amounts for typical two parent households. These changes are disincentives for fraud as struggling families receive needed benefits and are more likely to provide accurate and complete information. This is supported by the overall reduction in investigation requests submitted to the Office of Fraud and Accountability. In the federal fiscal year prior to the implementation of the FSKA, the Department submitted 1,405 requests for investigations. The year following FSKA implementation requests for investigations fell to 912. The Department continues to explore ways to remove the possibility for improper use of CCDF funds. The Department agrees with the SAO that there is a need to review household composition at application and reapplication to improve reliability of eligibility decisions. The Department accesses data across available state systems to confirm information, including household composition provided by clients. Unfortunately, there is no household composition verification system, and information provided to other state agencies is often provided by client self-attestation. The Department continues to balance verification requirements with providing timely benefit decisions to support family access to high quality child care. Eighty-six percent of households receiving child care subsidies are headed by single parents. Supporting these families with child care is essential for their continued participation in work, education, and other social service programs. The Department provides training for eligibility in the specific areas of household composition and income determination and improvements to training are ongoing. The Department recently made changes to the professional development and training process to improve staff skills and accuracy. Staff training is in a continuous improvement cycle and evolves with staff needs and changes in rule. The Department will continue to improve processes and internal controls and create and deliver staff training based on current data trends and patterns. Auditor?s Remarks We thank the Department for its cooperation and assistance throughout the audit. We will review the status of the Department?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Washington Administrative Code (WAC) 110-15-0015 ? Determining family size, states in part: (1) DCYF determines a consumer?s family size as follows: (a) For a single parent, including a minor parent living independently, DCYF counts the consumer and the consumer?s children; (b) For unmarried parents who have at least one mutual child, DCYF counts both parents and all of their children living in the household; (c) Unmarried parents who have no mutual children are counted as separate WCCC households, the unmarried parents and their respective children living in the household; (d) For married parents, DCYF counts both parents and all of their children living in the household; (e) For parents who are undocumented aliens as defined in WAC 388-424-0001, DCYF counts the parents and children, documented and undocumented, and all other family rules in this section apply. Children needing care must meet citizenship requirements described in WAC 110-15-0005; (f) For a legal guardian verified by a legal or court document, adult sibling or step-sibling, nephew, niece, aunt, uncle, grandparent, any of these relatives with the prefix ?great,? such as a ?great-nephew,? or an in loco parentis custodian who is not related to the child as described in WAC 110-15-0005, DCYF counts only the children and only the children?s income is counted; (g) For a parent who is out of the household because of employer requirements, such as training or military service, and expected to return to the household, DCYF counts the consumer, the absent parent, and the children; (h) For a parent who is voluntarily out of the household for reasons other than requirements of the employer, such as unapproved schooling and visiting family members, and is expected to return to the household, DCYF counts the consumer, the absent parent, and the children. WAC 110-15-0020 and all other family and household rules in this section apply; (i) For a parent who is out of the country and waiting for legal reentry in to the United States, DCYF counts only the consumer and children residing in the United States and all other family and household rules in this section apply; (j) An incarcerated parent is not part of the household count for determining income and eligibility. DCYF counts the remaining household members using all other family rules in this section; and (k) For a parent incarcerated at a Washington state correctional facility whose child lives with them at the facility, DCYF counts the parent and child as their own household. (2) When the household consists of the consumer?s own child and another child identified in subsection (1)(f) of this section, the household may be combined into one household or kept as distinct households for the benefit of the consumer. WAC 110-15-0065 ? Calculation of income, states in part: DSHS uses a consumer?s countable income when determining income eligibility and copayment. A consumer?s countable income is the sum of all income listed in WAC 110-15-0060 minus any child support paid out through a court order, division of child support administrative order, or tribal government order. (1) To determine a consumer?s income, DSHS either: (a) Calculates an average monthly income by: (i) Determining the number of months, weeks or pay periods it took the consumer?s WCCC household to earn the income; and dividing the income by the same number of months, weeks or pay periods. (ii) If the past wages are no longer reflective of the current income, DSHS may accept the employer?s statement of current, anticipated wages for future income determination. (b) When the consumer begins new employment and has less than three months of wages, DSHS uses the best available estimate of the consumer?s WCCC household?s current income: (i) As verified by the consumer?s employer; or (ii) As provided by the consumer through a verbal or written statement documenting the new employment at the time of application, reapplication or change reporting, and wage verification within sixty days of DSHS request. (2) If a consumer receives a lump sum payment (such as money from the sale of property or back child support payment) in the month of application or during the consumer?s WCCC eligibility: (a) DSHS calculates a monthly amount by dividing the lump sum payment by twelve; (b) DSHS adds the monthly amount to the consumer?s expected average monthly income: (i) For the month it was received; and (ii) For the remaining months of the current eligibility period; and (c) To remain eligible for WCCC the consumer must meet WCCC income guidelines after the lump sum payment is applied. WAC 110-15-0075 ? Determining income eligibility and copayment amounts, states (effective prior to October 1, 2021): (1) DCYF takes the following steps to determine a consumer?s eligibility and copayment, whether care is provided under a WCCC voucher or contract: (a) Determine the consumer?s family size (under WAC 110-15-0015); (b) Determine the consumer?s countable income (under WAC 110-15-0065). (2) DCYF calculates the consumer?s copayment as follows: If a consumer?s income is: Then the consumer?s copayment is: (a) At or below 82% of the federal poverty guidelines (FPG). $15 (b) Above 82% of the FPG up to 137.5% of the FPG. $65 (c) Above 137.5% of the FPG through 200% of the FPG. The dollar amount equal to subtracting 137.5% of the FPG from countable income, multiplying by 50%, then adding $65, up to a maximum of $115. (3) DCYF does not prorate the copayment when a consumer uses care for part of a month. (4) The FPG is updated every year. The WCCC eligibility level is updated at the same time every year to remain current with the FPG. WAC 110-15-0075 ? Determining income eligibility and copayment amounts, states (effective beginning October 1, 2021): (1) DCYF takes the following steps to determine consumers? eligibility and copayments, when care is provided under a WCCC voucher or contract: (a) Determine their family size as described in WAC 110-15-0015; and (b) Determine their countable income as described in WAC 110-15-0065. (2) DCYF calculates consumers? copayments as follows: If the household?s income is: Then the household?s maximum monthly copayment is: At or below 20 percent of the SMI Waived Above 20 percent and at or below 36 percent of the SMI $65 Above 36 percent and at or below 50 percent of the SMI $90 Above 50 percent and at or below 60 percent of the SMI $115 At reapplication, above 60 percent and at or below 65 percent of the SMI $215 (3) DCYF does not prorate copayments when consumers use care for only part of a month. (4) For parents age 21 years or younger who attend high school or are working towards completing a high school equivalency certificate, copayments are not required.
2022-036 The Department of Children, Youth, and Families did not have adequate internal controls over and did not comply with client eligibility requirements for child care services paid with the Child Care and Development Fund and Temporary Assistance for Needy Families funds. Assistance Listing Number and Title: 93.558, Temporary Assistance for Needy Families 93.575, Child Care and Development Block Grant 93.575, COVID-19 Child Care and Development Block Grant 93.596, Child Care Mandatory and Matching Funds of the Child Care and Development Fund Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: 2003WACCDF; 2103WACCDF; 2203WACCDF; 2003WACCC3; 2103WACDC6; 2103WACSC6; 2103WACCC5; 2103WACCDD; 2203WACCDD; 2101WATANF; 2201WATANF Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Eligibility Known Questioned Cost Amount: Temporary Assistance for Needy Families ? $5,689 Child Care and Development Fund ? $5,078 Background The Department of Children, Youth, and Families administers the federal Child Care and Development Fund (CCDF) grant to help eligible working families pay for child care. In fiscal year 2022, the Department spent $668.6 million in CCDF federal funding. The Department of Social and Health Services (DSHS) administers the Temporary Assistance for Needy Families (TANF) grant. To meet one of the program?s primary purposes of helping clients obtain employment, TANF grant funds may be used to pay clients? child care costs. If a client obtains employment and is no longer eligible for the program, TANF funds may still be used to pay child care costs to help the client maintain employment. In fiscal year 2022, the Department spent more than $260.5 million in CCDF and $67.7 million in TANF federal grant funds on child care subsidy payments to providers. Some payments made for child care are paid for by both the CCDF and TANF grants. While the two federal programs are separate, the requirements and policies in Washington for child care payments are consolidated under the Working Connections Child Care program. As of July 1, 2019, the responsibility for making and documenting child care eligibility determinations under the CCDF and TANF grants was transferred from DSHS to the Department. For a family to be eligible for child care assistance, state and federal rules require that at the time of application or reapplication, children must: ? Reside in Washington and be a citizen or legal resident of the United States; ? Be younger than 13 years, or if for verified special needs, be younger than 19 years; ? Reside with a parent(s) or guardian whose countable income does not exceed 200 percent of the federal poverty level at application or 220 percent at reapplication for July, August and September 2021 but in October 2021 changed to 60 percent of the state median income at application or 65 percent of the state median income at reapplication; ? Reside with a parent(s) or guardian who works or attends a job-training or education program, or needs to be receiving protective services. State rules describe the information clients must provide to the Department to verify their eligibility. The information must be accurate, complete, consistent and from a reliable source. This information includes, but is not limited to, employer and hourly wage information, proof of an approved activity under TANF, and family household size and composition. Once determined to be eligible for the program, a client is eligible for one year unless a change in income causes the client to exceed 85 percent of the state?s median income The Department requires that clients self-report such income changes. A written notice communicates the recipients? reporting requirement and the specific dollar threshold applicable to the household?s annual income. Once the client?s income exceeds this cutoff level, the Department terminates services. The Department has access to systems that contain wage and household benefit and composition data for some, but not all, child care recipients. The Department uses this information in part to determine program eligibility, benefit level, including client copayment, and the amount of child care the family is eligible to receive. If an ineligible client receives assistance, the payment made to the child care provider is not allowable and the client must repay the ineligible amount. The Department also uses household income to determine the amount families must contribute for their monthly copay to providers. Beginning July 1, 2021, monthly copayments were calculated using an updated schedule described in Washington Administrative Code 110-15-0075. Federal regulations require the Department to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. In the past 10 audits, we reported findings related to eligibility for the Working Connections Child Care program. In these prior audits, we reported the Department did not have adequate internal controls over the eligibility process for child care subsidy recipients. These were reported as finding numbers 2021-035, 2020-039, 2019-032, 2018-030, 2017-026, 2016-023, 2015-026, 2014-026, 2013-017 and 2012-30. Description of Condition The Department did not have adequate internal controls over and did not comply with client eligibility requirements for CCDF and TANF. During the audit period the Department determined 69,815 children were eligible for child care. We used a statistical sampling method to randomly select and examine 59 of these determinations. In four instances (6.8 percent), we found the Department made eligibility determinations improperly, did not obtain required documentation, incorrectly assessed copayment, or did not verify information before authorizing services. Specifically, we found: ? Two cases (3.4 percent) where the Department had incorrectly determined household composition and did not obtain sufficient data for all parents in the household to make an accurate eligibility determination. ? One case (1.7 percent) where the Department did not follow procedure for verifying employment, which led to an incorrect household income calculation. ? One case (1.7 percent) where the copay was incorrectly assessed, which resulted in an underpayment due to a system error. Though the Department has established internal controls, they were insufficient for ensuring material compliance with client eligibility requirements. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. Cause of Condition Department staff made eligibility determinations without obtaining sufficient supporting documentation to ensure households were eligible to receive assistance. This deviated from the standard policies and procedures the Department has established, and management did not monitor sufficiently to ensure staff made proper eligibility determinations. Further, the incorrect copay calculation was due to system error. Effect of Condition and Questioned Costs By not implementing adequate internal controls, the Department is at higher risk of paying providers for child care services when clients are ineligible. Of the four client eligibility determinations that had errors, three resulted in $10,767 of federal overpayments to providers. The Department used $5,078 in CCDF grant funds and $5,689 in TANF grant funds for these payments. Because we used a statistical sampling method to randomly select the payments examined in the audit, we estimate the amount of likely improper payments to be $6,008,693 for the CCDF grant and $6,731,953 for the TANF grant. Although we identified known and likely questioned costs, we do not have reasonable assurance that the payments in question are appropriately represented in the Department?s accounting records because of the grant management practice issue reported in findings 2022-035 and 2022-041. Additionally, the payments in question are duplicative of the costs already questioned in the aforementioned provider payment findings. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflects this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Department improve its internal controls over determining client eligibility to ensure it: ? Reviews eligibility determinations sufficiently to detect improper eligibility determinations ? Reviews sufficient support for clients? income and household composition information for accuracy We also recommend the Department consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid. Department`s Response The Department appreciates, acknowledges, and supports SAO?s mission, which is to hold state and local government accountable for the use of public resources. Further, we appreciate SAO?s work with us over the past year to strengthen the auditing process. Due to recent changes to CCSP directed by the Legislature, the Department anticipates continued reduction in eligibility determination errors. The Fair Start for Kids Act (FSKA) required the Department to make several changes that expanded eligibility during SFY 2022. The FSKA increased the State Median Income (SMI) threshold, allowing more two parent households to be eligible for child care subsidy. The FSKA also capped copayments to $115 for applicants and $215 for reapplicants, greatly reducing the copay amounts for typical two parent households. These changes are disincentives for fraud as struggling families receive needed benefits and are more likely to provide accurate and complete information. This is supported by the overall reduction in investigation requests submitted to the Office of Fraud and Accountability. In the federal fiscal year prior to the implementation of the FSKA, the Department submitted 1,405 requests for investigations. The year following FSKA implementation requests for investigations fell to 912. The Department continues to explore ways to remove the possibility for improper use of CCDF funds. The Department agrees with the SAO that there is a need to review household composition at application and reapplication to improve reliability of eligibility decisions. The Department accesses data across available state systems to confirm information, including household composition provided by clients. Unfortunately, there is no household composition verification system, and information provided to other state agencies is often provided by client self-attestation. The Department continues to balance verification requirements with providing timely benefit decisions to support family access to high quality child care. Eighty-six percent of households receiving child care subsidies are headed by single parents. Supporting these families with child care is essential for their continued participation in work, education, and other social service programs. The Department provides training for eligibility in the specific areas of household composition and income determination and improvements to training are ongoing. The Department recently made changes to the professional development and training process to improve staff skills and accuracy. Staff training is in a continuous improvement cycle and evolves with staff needs and changes in rule. The Department will continue to improve processes and internal controls and create and deliver staff training based on current data trends and patterns. Auditor?s Remarks We thank the Department for its cooperation and assistance throughout the audit. We will review the status of the Department?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Washington Administrative Code (WAC) 110-15-0015 ? Determining family size, states in part: (1) DCYF determines a consumer?s family size as follows: (a) For a single parent, including a minor parent living independently, DCYF counts the consumer and the consumer?s children; (b) For unmarried parents who have at least one mutual child, DCYF counts both parents and all of their children living in the household; (c) Unmarried parents who have no mutual children are counted as separate WCCC households, the unmarried parents and their respective children living in the household; (d) For married parents, DCYF counts both parents and all of their children living in the household; (e) For parents who are undocumented aliens as defined in WAC 388-424-0001, DCYF counts the parents and children, documented and undocumented, and all other family rules in this section apply. Children needing care must meet citizenship requirements described in WAC 110-15-0005; (f) For a legal guardian verified by a legal or court document, adult sibling or step-sibling, nephew, niece, aunt, uncle, grandparent, any of these relatives with the prefix ?great,? such as a ?great-nephew,? or an in loco parentis custodian who is not related to the child as described in WAC 110-15-0005, DCYF counts only the children and only the children?s income is counted; (g) For a parent who is out of the household because of employer requirements, such as training or military service, and expected to return to the household, DCYF counts the consumer, the absent parent, and the children; (h) For a parent who is voluntarily out of the household for reasons other than requirements of the employer, such as unapproved schooling and visiting family members, and is expected to return to the household, DCYF counts the consumer, the absent parent, and the children. WAC 110-15-0020 and all other family and household rules in this section apply; (i) For a parent who is out of the country and waiting for legal reentry in to the United States, DCYF counts only the consumer and children residing in the United States and all other family and household rules in this section apply; (j) An incarcerated parent is not part of the household count for determining income and eligibility. DCYF counts the remaining household members using all other family rules in this section; and (k) For a parent incarcerated at a Washington state correctional facility whose child lives with them at the facility, DCYF counts the parent and child as their own household. (2) When the household consists of the consumer?s own child and another child identified in subsection (1)(f) of this section, the household may be combined into one household or kept as distinct households for the benefit of the consumer. WAC 110-15-0065 ? Calculation of income, states in part: DSHS uses a consumer?s countable income when determining income eligibility and copayment. A consumer?s countable income is the sum of all income listed in WAC 110-15-0060 minus any child support paid out through a court order, division of child support administrative order, or tribal government order. (1) To determine a consumer?s income, DSHS either: (a) Calculates an average monthly income by: (i) Determining the number of months, weeks or pay periods it took the consumer?s WCCC household to earn the income; and dividing the income by the same number of months, weeks or pay periods. (ii) If the past wages are no longer reflective of the current income, DSHS may accept the employer?s statement of current, anticipated wages for future income determination. (b) When the consumer begins new employment and has less than three months of wages, DSHS uses the best available estimate of the consumer?s WCCC household?s current income: (i) As verified by the consumer?s employer; or (ii) As provided by the consumer through a verbal or written statement documenting the new employment at the time of application, reapplication or change reporting, and wage verification within sixty days of DSHS request. (2) If a consumer receives a lump sum payment (such as money from the sale of property or back child support payment) in the month of application or during the consumer?s WCCC eligibility: (a) DSHS calculates a monthly amount by dividing the lump sum payment by twelve; (b) DSHS adds the monthly amount to the consumer?s expected average monthly income: (i) For the month it was received; and (ii) For the remaining months of the current eligibility period; and (c) To remain eligible for WCCC the consumer must meet WCCC income guidelines after the lump sum payment is applied. WAC 110-15-0075 ? Determining income eligibility and copayment amounts, states (effective prior to October 1, 2021): (1) DCYF takes the following steps to determine a consumer?s eligibility and copayment, whether care is provided under a WCCC voucher or contract: (a) Determine the consumer?s family size (under WAC 110-15-0015); (b) Determine the consumer?s countable income (under WAC 110-15-0065). (2) DCYF calculates the consumer?s copayment as follows: If a consumer?s income is: Then the consumer?s copayment is: (a) At or below 82% of the federal poverty guidelines (FPG). $15 (b) Above 82% of the FPG up to 137.5% of the FPG. $65 (c) Above 137.5% of the FPG through 200% of the FPG. The dollar amount equal to subtracting 137.5% of the FPG from countable income, multiplying by 50%, then adding $65, up to a maximum of $115. (3) DCYF does not prorate the copayment when a consumer uses care for part of a month. (4) The FPG is updated every year. The WCCC eligibility level is updated at the same time every year to remain current with the FPG. WAC 110-15-0075 ? Determining income eligibility and copayment amounts, states (effective beginning October 1, 2021): (1) DCYF takes the following steps to determine consumers? eligibility and copayments, when care is provided under a WCCC voucher or contract: (a) Determine their family size as described in WAC 110-15-0015; and (b) Determine their countable income as described in WAC 110-15-0065. (2) DCYF calculates consumers? copayments as follows: If the household?s income is: Then the household?s maximum monthly copayment is: At or below 20 percent of the SMI Waived Above 20 percent and at or below 36 percent of the SMI $65 Above 36 percent and at or below 50 percent of the SMI $90 Above 50 percent and at or below 60 percent of the SMI $115 At reapplication, above 60 percent and at or below 65 percent of the SMI $215 (3) DCYF does not prorate copayments when consumers use care for only part of a month. (4) For parents age 21 years or younger who attend high school or are working towards completing a high school equivalency certificate, copayments are not required.
2022-036 The Department of Children, Youth, and Families did not have adequate internal controls over and did not comply with client eligibility requirements for child care services paid with the Child Care and Development Fund and Temporary Assistance for Needy Families funds. Assistance Listing Number and Title: 93.558, Temporary Assistance for Needy Families 93.575, Child Care and Development Block Grant 93.575, COVID-19 Child Care and Development Block Grant 93.596, Child Care Mandatory and Matching Funds of the Child Care and Development Fund Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: 2003WACCDF; 2103WACCDF; 2203WACCDF; 2003WACCC3; 2103WACDC6; 2103WACSC6; 2103WACCC5; 2103WACCDD; 2203WACCDD; 2101WATANF; 2201WATANF Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Eligibility Known Questioned Cost Amount: Temporary Assistance for Needy Families ? $5,689 Child Care and Development Fund ? $5,078 Background The Department of Children, Youth, and Families administers the federal Child Care and Development Fund (CCDF) grant to help eligible working families pay for child care. In fiscal year 2022, the Department spent $668.6 million in CCDF federal funding. The Department of Social and Health Services (DSHS) administers the Temporary Assistance for Needy Families (TANF) grant. To meet one of the program?s primary purposes of helping clients obtain employment, TANF grant funds may be used to pay clients? child care costs. If a client obtains employment and is no longer eligible for the program, TANF funds may still be used to pay child care costs to help the client maintain employment. In fiscal year 2022, the Department spent more than $260.5 million in CCDF and $67.7 million in TANF federal grant funds on child care subsidy payments to providers. Some payments made for child care are paid for by both the CCDF and TANF grants. While the two federal programs are separate, the requirements and policies in Washington for child care payments are consolidated under the Working Connections Child Care program. As of July 1, 2019, the responsibility for making and documenting child care eligibility determinations under the CCDF and TANF grants was transferred from DSHS to the Department. For a family to be eligible for child care assistance, state and federal rules require that at the time of application or reapplication, children must: ? Reside in Washington and be a citizen or legal resident of the United States; ? Be younger than 13 years, or if for verified special needs, be younger than 19 years; ? Reside with a parent(s) or guardian whose countable income does not exceed 200 percent of the federal poverty level at application or 220 percent at reapplication for July, August and September 2021 but in October 2021 changed to 60 percent of the state median income at application or 65 percent of the state median income at reapplication; ? Reside with a parent(s) or guardian who works or attends a job-training or education program, or needs to be receiving protective services. State rules describe the information clients must provide to the Department to verify their eligibility. The information must be accurate, complete, consistent and from a reliable source. This information includes, but is not limited to, employer and hourly wage information, proof of an approved activity under TANF, and family household size and composition. Once determined to be eligible for the program, a client is eligible for one year unless a change in income causes the client to exceed 85 percent of the state?s median income The Department requires that clients self-report such income changes. A written notice communicates the recipients? reporting requirement and the specific dollar threshold applicable to the household?s annual income. Once the client?s income exceeds this cutoff level, the Department terminates services. The Department has access to systems that contain wage and household benefit and composition data for some, but not all, child care recipients. The Department uses this information in part to determine program eligibility, benefit level, including client copayment, and the amount of child care the family is eligible to receive. If an ineligible client receives assistance, the payment made to the child care provider is not allowable and the client must repay the ineligible amount. The Department also uses household income to determine the amount families must contribute for their monthly copay to providers. Beginning July 1, 2021, monthly copayments were calculated using an updated schedule described in Washington Administrative Code 110-15-0075. Federal regulations require the Department to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. In the past 10 audits, we reported findings related to eligibility for the Working Connections Child Care program. In these prior audits, we reported the Department did not have adequate internal controls over the eligibility process for child care subsidy recipients. These were reported as finding numbers 2021-035, 2020-039, 2019-032, 2018-030, 2017-026, 2016-023, 2015-026, 2014-026, 2013-017 and 2012-30. Description of Condition The Department did not have adequate internal controls over and did not comply with client eligibility requirements for CCDF and TANF. During the audit period the Department determined 69,815 children were eligible for child care. We used a statistical sampling method to randomly select and examine 59 of these determinations. In four instances (6.8 percent), we found the Department made eligibility determinations improperly, did not obtain required documentation, incorrectly assessed copayment, or did not verify information before authorizing services. Specifically, we found: ? Two cases (3.4 percent) where the Department had incorrectly determined household composition and did not obtain sufficient data for all parents in the household to make an accurate eligibility determination. ? One case (1.7 percent) where the Department did not follow procedure for verifying employment, which led to an incorrect household income calculation. ? One case (1.7 percent) where the copay was incorrectly assessed, which resulted in an underpayment due to a system error. Though the Department has established internal controls, they were insufficient for ensuring material compliance with client eligibility requirements. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. Cause of Condition Department staff made eligibility determinations without obtaining sufficient supporting documentation to ensure households were eligible to receive assistance. This deviated from the standard policies and procedures the Department has established, and management did not monitor sufficiently to ensure staff made proper eligibility determinations. Further, the incorrect copay calculation was due to system error. Effect of Condition and Questioned Costs By not implementing adequate internal controls, the Department is at higher risk of paying providers for child care services when clients are ineligible. Of the four client eligibility determinations that had errors, three resulted in $10,767 of federal overpayments to providers. The Department used $5,078 in CCDF grant funds and $5,689 in TANF grant funds for these payments. Because we used a statistical sampling method to randomly select the payments examined in the audit, we estimate the amount of likely improper payments to be $6,008,693 for the CCDF grant and $6,731,953 for the TANF grant. Although we identified known and likely questioned costs, we do not have reasonable assurance that the payments in question are appropriately represented in the Department?s accounting records because of the grant management practice issue reported in findings 2022-035 and 2022-041. Additionally, the payments in question are duplicative of the costs already questioned in the aforementioned provider payment findings. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflects this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Department improve its internal controls over determining client eligibility to ensure it: ? Reviews eligibility determinations sufficiently to detect improper eligibility determinations ? Reviews sufficient support for clients? income and household composition information for accuracy We also recommend the Department consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid. Department`s Response The Department appreciates, acknowledges, and supports SAO?s mission, which is to hold state and local government accountable for the use of public resources. Further, we appreciate SAO?s work with us over the past year to strengthen the auditing process. Due to recent changes to CCSP directed by the Legislature, the Department anticipates continued reduction in eligibility determination errors. The Fair Start for Kids Act (FSKA) required the Department to make several changes that expanded eligibility during SFY 2022. The FSKA increased the State Median Income (SMI) threshold, allowing more two parent households to be eligible for child care subsidy. The FSKA also capped copayments to $115 for applicants and $215 for reapplicants, greatly reducing the copay amounts for typical two parent households. These changes are disincentives for fraud as struggling families receive needed benefits and are more likely to provide accurate and complete information. This is supported by the overall reduction in investigation requests submitted to the Office of Fraud and Accountability. In the federal fiscal year prior to the implementation of the FSKA, the Department submitted 1,405 requests for investigations. The year following FSKA implementation requests for investigations fell to 912. The Department continues to explore ways to remove the possibility for improper use of CCDF funds. The Department agrees with the SAO that there is a need to review household composition at application and reapplication to improve reliability of eligibility decisions. The Department accesses data across available state systems to confirm information, including household composition provided by clients. Unfortunately, there is no household composition verification system, and information provided to other state agencies is often provided by client self-attestation. The Department continues to balance verification requirements with providing timely benefit decisions to support family access to high quality child care. Eighty-six percent of households receiving child care subsidies are headed by single parents. Supporting these families with child care is essential for their continued participation in work, education, and other social service programs. The Department provides training for eligibility in the specific areas of household composition and income determination and improvements to training are ongoing. The Department recently made changes to the professional development and training process to improve staff skills and accuracy. Staff training is in a continuous improvement cycle and evolves with staff needs and changes in rule. The Department will continue to improve processes and internal controls and create and deliver staff training based on current data trends and patterns. Auditor?s Remarks We thank the Department for its cooperation and assistance throughout the audit. We will review the status of the Department?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Washington Administrative Code (WAC) 110-15-0015 ? Determining family size, states in part: (1) DCYF determines a consumer?s family size as follows: (a) For a single parent, including a minor parent living independently, DCYF counts the consumer and the consumer?s children; (b) For unmarried parents who have at least one mutual child, DCYF counts both parents and all of their children living in the household; (c) Unmarried parents who have no mutual children are counted as separate WCCC households, the unmarried parents and their respective children living in the household; (d) For married parents, DCYF counts both parents and all of their children living in the household; (e) For parents who are undocumented aliens as defined in WAC 388-424-0001, DCYF counts the parents and children, documented and undocumented, and all other family rules in this section apply. Children needing care must meet citizenship requirements described in WAC 110-15-0005; (f) For a legal guardian verified by a legal or court document, adult sibling or step-sibling, nephew, niece, aunt, uncle, grandparent, any of these relatives with the prefix ?great,? such as a ?great-nephew,? or an in loco parentis custodian who is not related to the child as described in WAC 110-15-0005, DCYF counts only the children and only the children?s income is counted; (g) For a parent who is out of the household because of employer requirements, such as training or military service, and expected to return to the household, DCYF counts the consumer, the absent parent, and the children; (h) For a parent who is voluntarily out of the household for reasons other than requirements of the employer, such as unapproved schooling and visiting family members, and is expected to return to the household, DCYF counts the consumer, the absent parent, and the children. WAC 110-15-0020 and all other family and household rules in this section apply; (i) For a parent who is out of the country and waiting for legal reentry in to the United States, DCYF counts only the consumer and children residing in the United States and all other family and household rules in this section apply; (j) An incarcerated parent is not part of the household count for determining income and eligibility. DCYF counts the remaining household members using all other family rules in this section; and (k) For a parent incarcerated at a Washington state correctional facility whose child lives with them at the facility, DCYF counts the parent and child as their own household. (2) When the household consists of the consumer?s own child and another child identified in subsection (1)(f) of this section, the household may be combined into one household or kept as distinct households for the benefit of the consumer. WAC 110-15-0065 ? Calculation of income, states in part: DSHS uses a consumer?s countable income when determining income eligibility and copayment. A consumer?s countable income is the sum of all income listed in WAC 110-15-0060 minus any child support paid out through a court order, division of child support administrative order, or tribal government order. (1) To determine a consumer?s income, DSHS either: (a) Calculates an average monthly income by: (i) Determining the number of months, weeks or pay periods it took the consumer?s WCCC household to earn the income; and dividing the income by the same number of months, weeks or pay periods. (ii) If the past wages are no longer reflective of the current income, DSHS may accept the employer?s statement of current, anticipated wages for future income determination. (b) When the consumer begins new employment and has less than three months of wages, DSHS uses the best available estimate of the consumer?s WCCC household?s current income: (i) As verified by the consumer?s employer; or (ii) As provided by the consumer through a verbal or written statement documenting the new employment at the time of application, reapplication or change reporting, and wage verification within sixty days of DSHS request. (2) If a consumer receives a lump sum payment (such as money from the sale of property or back child support payment) in the month of application or during the consumer?s WCCC eligibility: (a) DSHS calculates a monthly amount by dividing the lump sum payment by twelve; (b) DSHS adds the monthly amount to the consumer?s expected average monthly income: (i) For the month it was received; and (ii) For the remaining months of the current eligibility period; and (c) To remain eligible for WCCC the consumer must meet WCCC income guidelines after the lump sum payment is applied. WAC 110-15-0075 ? Determining income eligibility and copayment amounts, states (effective prior to October 1, 2021): (1) DCYF takes the following steps to determine a consumer?s eligibility and copayment, whether care is provided under a WCCC voucher or contract: (a) Determine the consumer?s family size (under WAC 110-15-0015); (b) Determine the consumer?s countable income (under WAC 110-15-0065). (2) DCYF calculates the consumer?s copayment as follows: If a consumer?s income is: Then the consumer?s copayment is: (a) At or below 82% of the federal poverty guidelines (FPG). $15 (b) Above 82% of the FPG up to 137.5% of the FPG. $65 (c) Above 137.5% of the FPG through 200% of the FPG. The dollar amount equal to subtracting 137.5% of the FPG from countable income, multiplying by 50%, then adding $65, up to a maximum of $115. (3) DCYF does not prorate the copayment when a consumer uses care for part of a month. (4) The FPG is updated every year. The WCCC eligibility level is updated at the same time every year to remain current with the FPG. WAC 110-15-0075 ? Determining income eligibility and copayment amounts, states (effective beginning October 1, 2021): (1) DCYF takes the following steps to determine consumers? eligibility and copayments, when care is provided under a WCCC voucher or contract: (a) Determine their family size as described in WAC 110-15-0015; and (b) Determine their countable income as described in WAC 110-15-0065. (2) DCYF calculates consumers? copayments as follows: If the household?s income is: Then the household?s maximum monthly copayment is: At or below 20 percent of the SMI Waived Above 20 percent and at or below 36 percent of the SMI $65 Above 36 percent and at or below 50 percent of the SMI $90 Above 50 percent and at or below 60 percent of the SMI $115 At reapplication, above 60 percent and at or below 65 percent of the SMI $215 (3) DCYF does not prorate copayments when consumers use care for only part of a month. (4) For parents age 21 years or younger who attend high school or are working towards completing a high school equivalency certificate, copayments are not required.
2022-036 The Department of Children, Youth, and Families did not have adequate internal controls over and did not comply with client eligibility requirements for child care services paid with the Child Care and Development Fund and Temporary Assistance for Needy Families funds. Assistance Listing Number and Title: 93.558, Temporary Assistance for Needy Families 93.575, Child Care and Development Block Grant 93.575, COVID-19 Child Care and Development Block Grant 93.596, Child Care Mandatory and Matching Funds of the Child Care and Development Fund Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: 2003WACCDF; 2103WACCDF; 2203WACCDF; 2003WACCC3; 2103WACDC6; 2103WACSC6; 2103WACCC5; 2103WACCDD; 2203WACCDD; 2101WATANF; 2201WATANF Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Eligibility Known Questioned Cost Amount: Temporary Assistance for Needy Families ? $5,689 Child Care and Development Fund ? $5,078 Background The Department of Children, Youth, and Families administers the federal Child Care and Development Fund (CCDF) grant to help eligible working families pay for child care. In fiscal year 2022, the Department spent $668.6 million in CCDF federal funding. The Department of Social and Health Services (DSHS) administers the Temporary Assistance for Needy Families (TANF) grant. To meet one of the program?s primary purposes of helping clients obtain employment, TANF grant funds may be used to pay clients? child care costs. If a client obtains employment and is no longer eligible for the program, TANF funds may still be used to pay child care costs to help the client maintain employment. In fiscal year 2022, the Department spent more than $260.5 million in CCDF and $67.7 million in TANF federal grant funds on child care subsidy payments to providers. Some payments made for child care are paid for by both the CCDF and TANF grants. While the two federal programs are separate, the requirements and policies in Washington for child care payments are consolidated under the Working Connections Child Care program. As of July 1, 2019, the responsibility for making and documenting child care eligibility determinations under the CCDF and TANF grants was transferred from DSHS to the Department. For a family to be eligible for child care assistance, state and federal rules require that at the time of application or reapplication, children must: ? Reside in Washington and be a citizen or legal resident of the United States; ? Be younger than 13 years, or if for verified special needs, be younger than 19 years; ? Reside with a parent(s) or guardian whose countable income does not exceed 200 percent of the federal poverty level at application or 220 percent at reapplication for July, August and September 2021 but in October 2021 changed to 60 percent of the state median income at application or 65 percent of the state median income at reapplication; ? Reside with a parent(s) or guardian who works or attends a job-training or education program, or needs to be receiving protective services. State rules describe the information clients must provide to the Department to verify their eligibility. The information must be accurate, complete, consistent and from a reliable source. This information includes, but is not limited to, employer and hourly wage information, proof of an approved activity under TANF, and family household size and composition. Once determined to be eligible for the program, a client is eligible for one year unless a change in income causes the client to exceed 85 percent of the state?s median income The Department requires that clients self-report such income changes. A written notice communicates the recipients? reporting requirement and the specific dollar threshold applicable to the household?s annual income. Once the client?s income exceeds this cutoff level, the Department terminates services. The Department has access to systems that contain wage and household benefit and composition data for some, but not all, child care recipients. The Department uses this information in part to determine program eligibility, benefit level, including client copayment, and the amount of child care the family is eligible to receive. If an ineligible client receives assistance, the payment made to the child care provider is not allowable and the client must repay the ineligible amount. The Department also uses household income to determine the amount families must contribute for their monthly copay to providers. Beginning July 1, 2021, monthly copayments were calculated using an updated schedule described in Washington Administrative Code 110-15-0075. Federal regulations require the Department to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. In the past 10 audits, we reported findings related to eligibility for the Working Connections Child Care program. In these prior audits, we reported the Department did not have adequate internal controls over the eligibility process for child care subsidy recipients. These were reported as finding numbers 2021-035, 2020-039, 2019-032, 2018-030, 2017-026, 2016-023, 2015-026, 2014-026, 2013-017 and 2012-30. Description of Condition The Department did not have adequate internal controls over and did not comply with client eligibility requirements for CCDF and TANF. During the audit period the Department determined 69,815 children were eligible for child care. We used a statistical sampling method to randomly select and examine 59 of these determinations. In four instances (6.8 percent), we found the Department made eligibility determinations improperly, did not obtain required documentation, incorrectly assessed copayment, or did not verify information before authorizing services. Specifically, we found: ? Two cases (3.4 percent) where the Department had incorrectly determined household composition and did not obtain sufficient data for all parents in the household to make an accurate eligibility determination. ? One case (1.7 percent) where the Department did not follow procedure for verifying employment, which led to an incorrect household income calculation. ? One case (1.7 percent) where the copay was incorrectly assessed, which resulted in an underpayment due to a system error. Though the Department has established internal controls, they were insufficient for ensuring material compliance with client eligibility requirements. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. Cause of Condition Department staff made eligibility determinations without obtaining sufficient supporting documentation to ensure households were eligible to receive assistance. This deviated from the standard policies and procedures the Department has established, and management did not monitor sufficiently to ensure staff made proper eligibility determinations. Further, the incorrect copay calculation was due to system error. Effect of Condition and Questioned Costs By not implementing adequate internal controls, the Department is at higher risk of paying providers for child care services when clients are ineligible. Of the four client eligibility determinations that had errors, three resulted in $10,767 of federal overpayments to providers. The Department used $5,078 in CCDF grant funds and $5,689 in TANF grant funds for these payments. Because we used a statistical sampling method to randomly select the payments examined in the audit, we estimate the amount of likely improper payments to be $6,008,693 for the CCDF grant and $6,731,953 for the TANF grant. Although we identified known and likely questioned costs, we do not have reasonable assurance that the payments in question are appropriately represented in the Department?s accounting records because of the grant management practice issue reported in findings 2022-035 and 2022-041. Additionally, the payments in question are duplicative of the costs already questioned in the aforementioned provider payment findings. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflects this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Department improve its internal controls over determining client eligibility to ensure it: ? Reviews eligibility determinations sufficiently to detect improper eligibility determinations ? Reviews sufficient support for clients? income and household composition information for accuracy We also recommend the Department consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid. Department`s Response The Department appreciates, acknowledges, and supports SAO?s mission, which is to hold state and local government accountable for the use of public resources. Further, we appreciate SAO?s work with us over the past year to strengthen the auditing process. Due to recent changes to CCSP directed by the Legislature, the Department anticipates continued reduction in eligibility determination errors. The Fair Start for Kids Act (FSKA) required the Department to make several changes that expanded eligibility during SFY 2022. The FSKA increased the State Median Income (SMI) threshold, allowing more two parent households to be eligible for child care subsidy. The FSKA also capped copayments to $115 for applicants and $215 for reapplicants, greatly reducing the copay amounts for typical two parent households. These changes are disincentives for fraud as struggling families receive needed benefits and are more likely to provide accurate and complete information. This is supported by the overall reduction in investigation requests submitted to the Office of Fraud and Accountability. In the federal fiscal year prior to the implementation of the FSKA, the Department submitted 1,405 requests for investigations. The year following FSKA implementation requests for investigations fell to 912. The Department continues to explore ways to remove the possibility for improper use of CCDF funds. The Department agrees with the SAO that there is a need to review household composition at application and reapplication to improve reliability of eligibility decisions. The Department accesses data across available state systems to confirm information, including household composition provided by clients. Unfortunately, there is no household composition verification system, and information provided to other state agencies is often provided by client self-attestation. The Department continues to balance verification requirements with providing timely benefit decisions to support family access to high quality child care. Eighty-six percent of households receiving child care subsidies are headed by single parents. Supporting these families with child care is essential for their continued participation in work, education, and other social service programs. The Department provides training for eligibility in the specific areas of household composition and income determination and improvements to training are ongoing. The Department recently made changes to the professional development and training process to improve staff skills and accuracy. Staff training is in a continuous improvement cycle and evolves with staff needs and changes in rule. The Department will continue to improve processes and internal controls and create and deliver staff training based on current data trends and patterns. Auditor?s Remarks We thank the Department for its cooperation and assistance throughout the audit. We will review the status of the Department?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Washington Administrative Code (WAC) 110-15-0015 ? Determining family size, states in part: (1) DCYF determines a consumer?s family size as follows: (a) For a single parent, including a minor parent living independently, DCYF counts the consumer and the consumer?s children; (b) For unmarried parents who have at least one mutual child, DCYF counts both parents and all of their children living in the household; (c) Unmarried parents who have no mutual children are counted as separate WCCC households, the unmarried parents and their respective children living in the household; (d) For married parents, DCYF counts both parents and all of their children living in the household; (e) For parents who are undocumented aliens as defined in WAC 388-424-0001, DCYF counts the parents and children, documented and undocumented, and all other family rules in this section apply. Children needing care must meet citizenship requirements described in WAC 110-15-0005; (f) For a legal guardian verified by a legal or court document, adult sibling or step-sibling, nephew, niece, aunt, uncle, grandparent, any of these relatives with the prefix ?great,? such as a ?great-nephew,? or an in loco parentis custodian who is not related to the child as described in WAC 110-15-0005, DCYF counts only the children and only the children?s income is counted; (g) For a parent who is out of the household because of employer requirements, such as training or military service, and expected to return to the household, DCYF counts the consumer, the absent parent, and the children; (h) For a parent who is voluntarily out of the household for reasons other than requirements of the employer, such as unapproved schooling and visiting family members, and is expected to return to the household, DCYF counts the consumer, the absent parent, and the children. WAC 110-15-0020 and all other family and household rules in this section apply; (i) For a parent who is out of the country and waiting for legal reentry in to the United States, DCYF counts only the consumer and children residing in the United States and all other family and household rules in this section apply; (j) An incarcerated parent is not part of the household count for determining income and eligibility. DCYF counts the remaining household members using all other family rules in this section; and (k) For a parent incarcerated at a Washington state correctional facility whose child lives with them at the facility, DCYF counts the parent and child as their own household. (2) When the household consists of the consumer?s own child and another child identified in subsection (1)(f) of this section, the household may be combined into one household or kept as distinct households for the benefit of the consumer. WAC 110-15-0065 ? Calculation of income, states in part: DSHS uses a consumer?s countable income when determining income eligibility and copayment. A consumer?s countable income is the sum of all income listed in WAC 110-15-0060 minus any child support paid out through a court order, division of child support administrative order, or tribal government order. (1) To determine a consumer?s income, DSHS either: (a) Calculates an average monthly income by: (i) Determining the number of months, weeks or pay periods it took the consumer?s WCCC household to earn the income; and dividing the income by the same number of months, weeks or pay periods. (ii) If the past wages are no longer reflective of the current income, DSHS may accept the employer?s statement of current, anticipated wages for future income determination. (b) When the consumer begins new employment and has less than three months of wages, DSHS uses the best available estimate of the consumer?s WCCC household?s current income: (i) As verified by the consumer?s employer; or (ii) As provided by the consumer through a verbal or written statement documenting the new employment at the time of application, reapplication or change reporting, and wage verification within sixty days of DSHS request. (2) If a consumer receives a lump sum payment (such as money from the sale of property or back child support payment) in the month of application or during the consumer?s WCCC eligibility: (a) DSHS calculates a monthly amount by dividing the lump sum payment by twelve; (b) DSHS adds the monthly amount to the consumer?s expected average monthly income: (i) For the month it was received; and (ii) For the remaining months of the current eligibility period; and (c) To remain eligible for WCCC the consumer must meet WCCC income guidelines after the lump sum payment is applied. WAC 110-15-0075 ? Determining income eligibility and copayment amounts, states (effective prior to October 1, 2021): (1) DCYF takes the following steps to determine a consumer?s eligibility and copayment, whether care is provided under a WCCC voucher or contract: (a) Determine the consumer?s family size (under WAC 110-15-0015); (b) Determine the consumer?s countable income (under WAC 110-15-0065). (2) DCYF calculates the consumer?s copayment as follows: If a consumer?s income is: Then the consumer?s copayment is: (a) At or below 82% of the federal poverty guidelines (FPG). $15 (b) Above 82% of the FPG up to 137.5% of the FPG. $65 (c) Above 137.5% of the FPG through 200% of the FPG. The dollar amount equal to subtracting 137.5% of the FPG from countable income, multiplying by 50%, then adding $65, up to a maximum of $115. (3) DCYF does not prorate the copayment when a consumer uses care for part of a month. (4) The FPG is updated every year. The WCCC eligibility level is updated at the same time every year to remain current with the FPG. WAC 110-15-0075 ? Determining income eligibility and copayment amounts, states (effective beginning October 1, 2021): (1) DCYF takes the following steps to determine consumers? eligibility and copayments, when care is provided under a WCCC voucher or contract: (a) Determine their family size as described in WAC 110-15-0015; and (b) Determine their countable income as described in WAC 110-15-0065. (2) DCYF calculates consumers? copayments as follows: If the household?s income is: Then the household?s maximum monthly copayment is: At or below 20 percent of the SMI Waived Above 20 percent and at or below 36 percent of the SMI $65 Above 36 percent and at or below 50 percent of the SMI $90 Above 50 percent and at or below 60 percent of the SMI $115 At reapplication, above 60 percent and at or below 65 percent of the SMI $215 (3) DCYF does not prorate copayments when consumers use care for only part of a month. (4) For parents age 21 years or younger who attend high school or are working towards completing a high school equivalency certificate, copayments are not required.
2022-036 The Department of Children, Youth, and Families did not have adequate internal controls over and did not comply with client eligibility requirements for child care services paid with the Child Care and Development Fund and Temporary Assistance for Needy Families funds. Assistance Listing Number and Title: 93.558, Temporary Assistance for Needy Families 93.575, Child Care and Development Block Grant 93.575, COVID-19 Child Care and Development Block Grant 93.596, Child Care Mandatory and Matching Funds of the Child Care and Development Fund Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: 2003WACCDF; 2103WACCDF; 2203WACCDF; 2003WACCC3; 2103WACDC6; 2103WACSC6; 2103WACCC5; 2103WACCDD; 2203WACCDD; 2101WATANF; 2201WATANF Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Eligibility Known Questioned Cost Amount: Temporary Assistance for Needy Families ? $5,689 Child Care and Development Fund ? $5,078 Background The Department of Children, Youth, and Families administers the federal Child Care and Development Fund (CCDF) grant to help eligible working families pay for child care. In fiscal year 2022, the Department spent $668.6 million in CCDF federal funding. The Department of Social and Health Services (DSHS) administers the Temporary Assistance for Needy Families (TANF) grant. To meet one of the program?s primary purposes of helping clients obtain employment, TANF grant funds may be used to pay clients? child care costs. If a client obtains employment and is no longer eligible for the program, TANF funds may still be used to pay child care costs to help the client maintain employment. In fiscal year 2022, the Department spent more than $260.5 million in CCDF and $67.7 million in TANF federal grant funds on child care subsidy payments to providers. Some payments made for child care are paid for by both the CCDF and TANF grants. While the two federal programs are separate, the requirements and policies in Washington for child care payments are consolidated under the Working Connections Child Care program. As of July 1, 2019, the responsibility for making and documenting child care eligibility determinations under the CCDF and TANF grants was transferred from DSHS to the Department. For a family to be eligible for child care assistance, state and federal rules require that at the time of application or reapplication, children must: ? Reside in Washington and be a citizen or legal resident of the United States; ? Be younger than 13 years, or if for verified special needs, be younger than 19 years; ? Reside with a parent(s) or guardian whose countable income does not exceed 200 percent of the federal poverty level at application or 220 percent at reapplication for July, August and September 2021 but in October 2021 changed to 60 percent of the state median income at application or 65 percent of the state median income at reapplication; ? Reside with a parent(s) or guardian who works or attends a job-training or education program, or needs to be receiving protective services. State rules describe the information clients must provide to the Department to verify their eligibility. The information must be accurate, complete, consistent and from a reliable source. This information includes, but is not limited to, employer and hourly wage information, proof of an approved activity under TANF, and family household size and composition. Once determined to be eligible for the program, a client is eligible for one year unless a change in income causes the client to exceed 85 percent of the state?s median income The Department requires that clients self-report such income changes. A written notice communicates the recipients? reporting requirement and the specific dollar threshold applicable to the household?s annual income. Once the client?s income exceeds this cutoff level, the Department terminates services. The Department has access to systems that contain wage and household benefit and composition data for some, but not all, child care recipients. The Department uses this information in part to determine program eligibility, benefit level, including client copayment, and the amount of child care the family is eligible to receive. If an ineligible client receives assistance, the payment made to the child care provider is not allowable and the client must repay the ineligible amount. The Department also uses household income to determine the amount families must contribute for their monthly copay to providers. Beginning July 1, 2021, monthly copayments were calculated using an updated schedule described in Washington Administrative Code 110-15-0075. Federal regulations require the Department to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. In the past 10 audits, we reported findings related to eligibility for the Working Connections Child Care program. In these prior audits, we reported the Department did not have adequate internal controls over the eligibility process for child care subsidy recipients. These were reported as finding numbers 2021-035, 2020-039, 2019-032, 2018-030, 2017-026, 2016-023, 2015-026, 2014-026, 2013-017 and 2012-30. Description of Condition The Department did not have adequate internal controls over and did not comply with client eligibility requirements for CCDF and TANF. During the audit period the Department determined 69,815 children were eligible for child care. We used a statistical sampling method to randomly select and examine 59 of these determinations. In four instances (6.8 percent), we found the Department made eligibility determinations improperly, did not obtain required documentation, incorrectly assessed copayment, or did not verify information before authorizing services. Specifically, we found: ? Two cases (3.4 percent) where the Department had incorrectly determined household composition and did not obtain sufficient data for all parents in the household to make an accurate eligibility determination. ? One case (1.7 percent) where the Department did not follow procedure for verifying employment, which led to an incorrect household income calculation. ? One case (1.7 percent) where the copay was incorrectly assessed, which resulted in an underpayment due to a system error. Though the Department has established internal controls, they were insufficient for ensuring material compliance with client eligibility requirements. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. Cause of Condition Department staff made eligibility determinations without obtaining sufficient supporting documentation to ensure households were eligible to receive assistance. This deviated from the standard policies and procedures the Department has established, and management did not monitor sufficiently to ensure staff made proper eligibility determinations. Further, the incorrect copay calculation was due to system error. Effect of Condition and Questioned Costs By not implementing adequate internal controls, the Department is at higher risk of paying providers for child care services when clients are ineligible. Of the four client eligibility determinations that had errors, three resulted in $10,767 of federal overpayments to providers. The Department used $5,078 in CCDF grant funds and $5,689 in TANF grant funds for these payments. Because we used a statistical sampling method to randomly select the payments examined in the audit, we estimate the amount of likely improper payments to be $6,008,693 for the CCDF grant and $6,731,953 for the TANF grant. Although we identified known and likely questioned costs, we do not have reasonable assurance that the payments in question are appropriately represented in the Department?s accounting records because of the grant management practice issue reported in findings 2022-035 and 2022-041. Additionally, the payments in question are duplicative of the costs already questioned in the aforementioned provider payment findings. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflects this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Department improve its internal controls over determining client eligibility to ensure it: ? Reviews eligibility determinations sufficiently to detect improper eligibility determinations ? Reviews sufficient support for clients? income and household composition information for accuracy We also recommend the Department consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid. Department`s Response The Department appreciates, acknowledges, and supports SAO?s mission, which is to hold state and local government accountable for the use of public resources. Further, we appreciate SAO?s work with us over the past year to strengthen the auditing process. Due to recent changes to CCSP directed by the Legislature, the Department anticipates continued reduction in eligibility determination errors. The Fair Start for Kids Act (FSKA) required the Department to make several changes that expanded eligibility during SFY 2022. The FSKA increased the State Median Income (SMI) threshold, allowing more two parent households to be eligible for child care subsidy. The FSKA also capped copayments to $115 for applicants and $215 for reapplicants, greatly reducing the copay amounts for typical two parent households. These changes are disincentives for fraud as struggling families receive needed benefits and are more likely to provide accurate and complete information. This is supported by the overall reduction in investigation requests submitted to the Office of Fraud and Accountability. In the federal fiscal year prior to the implementation of the FSKA, the Department submitted 1,405 requests for investigations. The year following FSKA implementation requests for investigations fell to 912. The Department continues to explore ways to remove the possibility for improper use of CCDF funds. The Department agrees with the SAO that there is a need to review household composition at application and reapplication to improve reliability of eligibility decisions. The Department accesses data across available state systems to confirm information, including household composition provided by clients. Unfortunately, there is no household composition verification system, and information provided to other state agencies is often provided by client self-attestation. The Department continues to balance verification requirements with providing timely benefit decisions to support family access to high quality child care. Eighty-six percent of households receiving child care subsidies are headed by single parents. Supporting these families with child care is essential for their continued participation in work, education, and other social service programs. The Department provides training for eligibility in the specific areas of household composition and income determination and improvements to training are ongoing. The Department recently made changes to the professional development and training process to improve staff skills and accuracy. Staff training is in a continuous improvement cycle and evolves with staff needs and changes in rule. The Department will continue to improve processes and internal controls and create and deliver staff training based on current data trends and patterns. Auditor?s Remarks We thank the Department for its cooperation and assistance throughout the audit. We will review the status of the Department?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Washington Administrative Code (WAC) 110-15-0015 ? Determining family size, states in part: (1) DCYF determines a consumer?s family size as follows: (a) For a single parent, including a minor parent living independently, DCYF counts the consumer and the consumer?s children; (b) For unmarried parents who have at least one mutual child, DCYF counts both parents and all of their children living in the household; (c) Unmarried parents who have no mutual children are counted as separate WCCC households, the unmarried parents and their respective children living in the household; (d) For married parents, DCYF counts both parents and all of their children living in the household; (e) For parents who are undocumented aliens as defined in WAC 388-424-0001, DCYF counts the parents and children, documented and undocumented, and all other family rules in this section apply. Children needing care must meet citizenship requirements described in WAC 110-15-0005; (f) For a legal guardian verified by a legal or court document, adult sibling or step-sibling, nephew, niece, aunt, uncle, grandparent, any of these relatives with the prefix ?great,? such as a ?great-nephew,? or an in loco parentis custodian who is not related to the child as described in WAC 110-15-0005, DCYF counts only the children and only the children?s income is counted; (g) For a parent who is out of the household because of employer requirements, such as training or military service, and expected to return to the household, DCYF counts the consumer, the absent parent, and the children; (h) For a parent who is voluntarily out of the household for reasons other than requirements of the employer, such as unapproved schooling and visiting family members, and is expected to return to the household, DCYF counts the consumer, the absent parent, and the children. WAC 110-15-0020 and all other family and household rules in this section apply; (i) For a parent who is out of the country and waiting for legal reentry in to the United States, DCYF counts only the consumer and children residing in the United States and all other family and household rules in this section apply; (j) An incarcerated parent is not part of the household count for determining income and eligibility. DCYF counts the remaining household members using all other family rules in this section; and (k) For a parent incarcerated at a Washington state correctional facility whose child lives with them at the facility, DCYF counts the parent and child as their own household. (2) When the household consists of the consumer?s own child and another child identified in subsection (1)(f) of this section, the household may be combined into one household or kept as distinct households for the benefit of the consumer. WAC 110-15-0065 ? Calculation of income, states in part: DSHS uses a consumer?s countable income when determining income eligibility and copayment. A consumer?s countable income is the sum of all income listed in WAC 110-15-0060 minus any child support paid out through a court order, division of child support administrative order, or tribal government order. (1) To determine a consumer?s income, DSHS either: (a) Calculates an average monthly income by: (i) Determining the number of months, weeks or pay periods it took the consumer?s WCCC household to earn the income; and dividing the income by the same number of months, weeks or pay periods. (ii) If the past wages are no longer reflective of the current income, DSHS may accept the employer?s statement of current, anticipated wages for future income determination. (b) When the consumer begins new employment and has less than three months of wages, DSHS uses the best available estimate of the consumer?s WCCC household?s current income: (i) As verified by the consumer?s employer; or (ii) As provided by the consumer through a verbal or written statement documenting the new employment at the time of application, reapplication or change reporting, and wage verification within sixty days of DSHS request. (2) If a consumer receives a lump sum payment (such as money from the sale of property or back child support payment) in the month of application or during the consumer?s WCCC eligibility: (a) DSHS calculates a monthly amount by dividing the lump sum payment by twelve; (b) DSHS adds the monthly amount to the consumer?s expected average monthly income: (i) For the month it was received; and (ii) For the remaining months of the current eligibility period; and (c) To remain eligible for WCCC the consumer must meet WCCC income guidelines after the lump sum payment is applied. WAC 110-15-0075 ? Determining income eligibility and copayment amounts, states (effective prior to October 1, 2021): (1) DCYF takes the following steps to determine a consumer?s eligibility and copayment, whether care is provided under a WCCC voucher or contract: (a) Determine the consumer?s family size (under WAC 110-15-0015); (b) Determine the consumer?s countable income (under WAC 110-15-0065). (2) DCYF calculates the consumer?s copayment as follows: If a consumer?s income is: Then the consumer?s copayment is: (a) At or below 82% of the federal poverty guidelines (FPG). $15 (b) Above 82% of the FPG up to 137.5% of the FPG. $65 (c) Above 137.5% of the FPG through 200% of the FPG. The dollar amount equal to subtracting 137.5% of the FPG from countable income, multiplying by 50%, then adding $65, up to a maximum of $115. (3) DCYF does not prorate the copayment when a consumer uses care for part of a month. (4) The FPG is updated every year. The WCCC eligibility level is updated at the same time every year to remain current with the FPG. WAC 110-15-0075 ? Determining income eligibility and copayment amounts, states (effective beginning October 1, 2021): (1) DCYF takes the following steps to determine consumers? eligibility and copayments, when care is provided under a WCCC voucher or contract: (a) Determine their family size as described in WAC 110-15-0015; and (b) Determine their countable income as described in WAC 110-15-0065. (2) DCYF calculates consumers? copayments as follows: If the household?s income is: Then the household?s maximum monthly copayment is: At or below 20 percent of the SMI Waived Above 20 percent and at or below 36 percent of the SMI $65 Above 36 percent and at or below 50 percent of the SMI $90 Above 50 percent and at or below 60 percent of the SMI $115 At reapplication, above 60 percent and at or below 65 percent of the SMI $215 (3) DCYF does not prorate copayments when consumers use care for only part of a month. (4) For parents age 21 years or younger who attend high school or are working towards completing a high school equivalency certificate, copayments are not required.