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.
2022-055 The Health Care Authority did not have adequate internal controls over and did not comply with federal provider eligibility requirements for the Medicaid and Children?s Health Insurance Program. Assistance Listing Number and Title: 93.767 Children?s Health Insurance Program 93.767 COVID-19 Children?s Health Insurance Program 93.775 State Medicaid Fraud Control Units 93.777 State Survey and Certification of Health Care Providers and Suppliers 93.777 COVID-19 State Survey and Certification of Health Care Providers and Suppliers 93.778 Medical Assistance Program 93.778 COVID-19 Medical Assistance Program Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: 2005WA5021; 2105WAINCT; 2105WAIMPL; 2105WA5MAP; 2105WA5ADM; 1905WA5021; 2105WA5021; 2205WA5021; 2205WA5MAP; 2205WA5ADM Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Special Tests and Provisions ? Provider Eligibility (Screening and Enrollment) Known Questioned Cost Amount: $612,277 Background The Health Care Authority administers both Medicaid and the Children?s Health Insurance Program (CHIP). Medicaid is a jointly funded state and federal partnership providing coverage for about 2.3 million eligible low-income Washington residents who otherwise might go without medical care. Medicaid is Washington?s largest public assistance program and usually accounts for about one third of the state?s federal expenditures. CHIP provides health coverage for almost 90,000 children and pregnant people in families with incomes too high to qualify for Medicaid. During fiscal year 2022, the Medicaid program spent more than $17.6 billion in federal and state funds, and CHIP spent more than $229 million in federal and state funds. The Authority ensures medical providers for both programs are eligible to provide services for clients. Providers must continue to meet eligibility requirements to receive payments under the programs. Washington had more than 127,000 participating providers in fiscal year 2022. During that time, the Authority paid more than $6.6 billion to providers for direct client services under the programs. The Authority is responsible for performing screening measures appropriate for the provider type at application and initial enrollment. Federal regulations require state Medicaid agencies to revalidate the enrollment of all Medicaid and CHIP providers at least every five years. To meet this requirement, the Authority has implemented an automated revalidation notification process that is supposed to send a letter to providers in time for them to be revalidated before the end of the five-year period. Federal law also requires state Medicaid agencies to check federal databases at least monthly to confirm the identity and exclusion status of providers, as well as any person with ownership, controlling interest, or acting as an agent or managing employee of the provider. The provider enrollment and revalidation processes are similar. The first step in both processes is to determine the provider?s screening risk level. A provider can be designated as one of three risk levels: limited, moderate or high. Each risk level requires progressively greater scrutiny of the provider before it can be enrolled or revalidated. For providers enrolled with both Medicare and Medicaid, state Medicaid agencies must assign them to the same or higher risk category applicable under Medicare. Additionally, certain provider behaviors require them to be moved to a higher screening level. The following are the required screening procedures for all risk types: ? Verify that the provider meets applicable federal regulations or state requirements for the provider type before making an enrollment determination ? Conduct license verifications, including for licenses in states other than where the provider is enrolling ? Conduct database checks to ensure providers continue to meet the enrollment criteria for their provider type. Such database checks include the National Plan and Provider Enumeration System, List of Excluded Individuals/Entities, Excluded Parties List System, and Death Master File index. If state Medicaid agencies assess providers at a moderate or high risk, they are required to conduct onsite visits for those that did not have one as part of their Medicare enrollment. Federal regulations require a high-risk provider, or a person with a 5 percent or more direct or indirect ownership in the provider, to receive a fingerprint-based criminal background check. The deadline to fully implement a fingerprint-based criminal background check was July 1, 2018. The Authority is also responsible for ensuring that providers obtain the proper signed attestations and disclosures. For servicing only providers, a direct link must be made to a billing provider that has an active Core Provider Agreement (CPA) on file. A CPA contains the required attestation and disclosures of the billing provider to allow for the payment of medical claims. To ensure the Authority has completed all applicable screening and enrollment or revalidation steps before enrolling or revalidating providers, staff members use checklists for each enrollment and revalidation. The staff member signs and dates the checklist to indicate the provider is eligible to render services and receive payments. In response to the COVID-19 pandemic, the Authority obtained flexibilities under blanket waivers approved by the Centers for Medicare and Medicaid Services (CMS), which were effective March 1, 2020, through the end of the emergency declaration period. These included the waiving of provider application fees and fingerprint-based criminal background checks. The CMS waivers also allowed for expedited processing of any new or pending provider applications, as well as the postponement of all revalidation actions until November 1, 2020. Also in response to the COVID-19 pandemic, the Authority?s Chief Medical Officer approved a blanket waiver for the backdating of all providers effective dates, as allowed by CMS and Washington Administrative Code. This waiver allows providers to submit claims for services provided before their enrollment and revalidation applications are approved. Federal regulations require recipients 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 prior audits, we reported the Authority did not have adequate internal controls over and did not comply with requirements to ensure it revalidated providers every five years and met screening requirements. The prior finding numbers were 2021-047, 2020-046, 2019-048, 2018-042, 2017-033, and 2016-035. Description of Condition The Authority did not have adequate internal controls over and did not comply with federal provider eligibility requirements for the Medicaid and CHIP programs. During the audit period, the Authority processed 10,959 new provider enrollments and was required to perform ongoing eligibility determinations for 114,427 active providers. We used a statistical sampling method to randomly select and examine 59 newly enrolled providers and 59 active providers to determine if the Authority properly screened them based on their enrollment status and correctly determined their eligibility status. Of the 118 providers examined, we found seven instances for six providers (5 percent) when the Authority did not take the appropriate actions to ensure providers met eligibility requirements. Specifically, we found: ? Staff enrolled three providers without a valid CPA on file. Because the providers were not covered by a CPA, they were improperly enrolled. ? Staff did not conduct a proper license check for three providers. A proper license check for these providers would have led staff to identify that their license was either expired or did not cover the enrollment period, and, therefore, were ineligible. ? Staff did not properly screen one provider based on a moderate risk level. The improper screening checklist was used and the risk level was not properly addressed. To determine if the Authority had revalidated providers every five years or had taken actions to deactivate providers, we used computer-assisted audit techniques to analyze the entire population of 2,049 providers that should have been revalidated or deactivated during the fiscal year. We found the Authority?s internal controls were insufficient and resulted in none of the 2,049 providers (100 percent) being revalidated before the due date. We determined 648 providers were subsequently revalidated, and the Authority backdated them. We also determined 1,242 providers were deactivated, but the Authority did not process the deactivation until at least 30 days after the eligibility end date. There were an additional 159 providers that should have been deactivated, but the Authority did not take actions to deactivate or revalidate them. Federal law requires the Authority to check federal databases at least monthly to confirm the identity and exclusion status of providers. However, the automated system that performs these checks and notifies the Authority of possible problems with providers was not operating correctly, and it frequently provided incorrect information. Management decided to ignore this information and stopped performing the monthly database checks. The Authority did review the results of the check once during the fiscal year, in July of 2021. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. Cause of Condition Although the Authority has established internal controls over screening and enrolling providers, they were ineffective for preventing or detecting noncompliance. Management also did not ensure staff consistently followed the procedures in place. Additionally, the automated revalidation notification was inadequate for ensuring the Authority complied with the five-year revalidation requirement. To comply with this requirement, the Authority should notify providers about their revalidations and ensure they are started and completed before the due date. Our audit found that the Authority?s automated system is designed to notify providers of their revalidations one day after the due date. Due to this inadequate system design, all provider revalidations were completed after their due dates. Although management directed staff to stop performing the monthly database checks because of issues with the automated system, they did not reinstate the procedures used before the system was implemented so staff could continue verifying providers? identity and exclusion status. Effect of Condition and Questioned Costs By not conducting required licensing, screening, and enrollment processes in a timely manner, the Authority is at risk of not detecting or preventing ineligible providers from providing services to clients and receiving federal Medicaid and CHIP funds. Payments to providers who are ineligible are unallowable, and the Authority could be required to repay the grantor for these payments. We identified the following payments made to ineligible providers: Audit Area Known questioned costs (state and federal) Known questioned costs (federal portion only) Likely improper payments (state and federal) Likely improper payments (federal portion only) New Providers $7,092 $3,985 $1,317,224 $740,280 Deactivated Providers $302,372 $292,051 $399,999 $351,698 Not Revalidated or Deactivated $509,702 $316,241 Total $819,166 $612,277 $1,717,223 $1,091,978 In addition to the questioned costs in the table above, we also identified $26,148,599 in costs at risk for those providers whose revalidations were backdated. If the providers had not been revalidated, these costs would also be considered questioned costs. 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 Authority: ? Strengthen internal controls to ensure providers are adequately screened, licensed, enrolled, and eligible to provide and bill for services ? Implement internal controls designed to bring it into material compliance with the provider revalidation process Authority?s Response The Authority partially concurs with the finding. The Authority agrees that ProviderOne sends revalidation notifications one day after the due date rather than before the due date to allow time for the revalidation process. A system revision is in process, and we expect this issue to be resolved by the beginning of 2024. The Authority does not concur with the remainder of the auditor?s findings. The auditor provided the final exceptions and this finding at the close of the audit. The document with the final exceptions did not contain enough information for the Authority to adequately review the results of the auditor?s testing or the methodology used to calculate questioned costs. The time allotted to the Authority to review the testing results, seek clarification, and provide an agency response was not sufficient to analyze the results and provide an informed response. Due to the lack of complete information and time provided, the Authority is unable to agree or disagree with the results of the audit. Finally, on March 19, 2020, the Centers for Medicare & Medicaid Services (CMS) approved Washington?s request for an 1135 COVID-19 Emergency Declaration Blanket Waiver for Health Care Providers, effective through the end of the federal Public Health Emergency. This waiver temporarily suspended provider enrollment and revalidation requirements. Should the Authority agree with any or all of the results from the audit, it would not concur that questioned costs be returned because provider enrollment and revalidations requirements were temporarily suspended by CMS. Auditor?s Remarks We provided the Authority with preliminary exceptions on December 20, 2022 for ?Not Revalidated or Deactivated Providers? and on December 30, 2022 for ?New Providers?, ?Active Providers?, and ?Deactivated Providers?. The Authority provided additional information on January 31, 2023 that cleared some of the exceptions. We provided final exceptions on March 3, 2023 which included the unique transaction identifier for each exception. The Authority requested that we perform additional testing for the ?Deactivated Providers? on March 15th. The draft finding was provided to the Authority on April 14, 2023 and the Authority provided their response on May 3rd. Despite several years of the known system weaknesses, the Authority has not updated the system or implemented compensating processes to ensure providers are eligible to provide Medicaid and Chip services. Regarding the 1135 COVID-19 Emergency Declaration Blanket Waiver, the Authority informed us that beginning October 1, 2020, Authority management had reinstated the majority of provider eligibility requirements that had been waived. We reaffirm our finding with questioned costs and will follow up on the status of the Authority?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 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 CFR Part 200, Uniform Guidance, section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. 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 42 CFR Part 433, State Fiscal Administration, Subpart F ? Refunding of Federal Share of Medicaid Overpayments to Providers, describes the requirements for identifying, reporting, collecting, and remitting Medicaid overpayments. Title 42 CFR section 438 subpart H ? Additional Program Integrity Safeguards, states in part: Section 438.602 State responsibilities. (a) Monitoring contractor compliance. Consistent with ? 438.66, the State must monitor the MCO?s, PIHP?s, PAHP?s, PCCM?s or PCCM entity?s compliance, as applicable, with ?? 438.604, 438.606, 438.608, 438.610, 438.230, and 438.808. (b) Screening and enrollment and revalidation of providers. (1) The State must screen and enroll, and periodically revalidate, all network providers of MCOs, PIHPs, and PAHPs, in accordance with the requirements of part 455, subparts B and E of this chapter. This requirement extends to PCCMs and PCCM entities to the extent the primary care case manager is not otherwise enrolled with the State to provide services to FFS beneficiaries. This provision does not require the network provider to render services to FFS beneficiaries. (2) MCOs, PIHPs, and PAHPs may execute network provider agreements pending the outcome of the process in paragraph (b)(1) of this section of up to 120 days, but must terminate a network provider immediately upon notification from the State that the network provider cannot be enrolled, or the expiration of one 120 day period without enrollment of the provider, and notify affected enrollees. (c) Ownership and control information. The State must review the ownership and control disclosures submitted by the MCO, PIHP, PAHP, PCCM or PCCM entity, and any subcontractors as required in ? 438.608(c). (d) Federal database checks. Consistent with the requirements at ? 455.436 of this chapter, the State must confirm the identity and determine the exclusion status of the MCO, PIHP, PAHP, PCCM or PCCM entity, any subcontractor, as well as any person with an ownership or control interest, or who is an agent or managing employee of the MCO, PIHP, PAHP, PCCM or PCCM entity through routine checks of Federal databases. This includes the Social Security Administration?s Death Master File, the National Plan and Provider Enumeration System (NPPES), the List of Excluded Individuals/Entities (LEIE), the System for Award Management (SAM), and any other databases as the State or Secretary may prescribe. These databases must be consulted upon contracting and no less frequently than monthly thereafter. If the State finds a party that is excluded, it must promptly notify the MCO, PIHP, PAHP, PCCM, or PCCM entity and take action consistent with ? 438.610(c). Title 42 CFR section 455 Subpart B ? Disclosure of Information by Providers and Fiscal Agents, states in part: Section 455.104 Disclosure by Medicaid providers and fiscal agents: Information on ownership and control. (a) Who must provide disclosures. The Medicaid agency must obtain disclosures from disclosing entities, fiscal agents, and managed care entities. (b) What disclosures must be provided. The Medicaid agency must require that disclosing entities, fiscal agents, and managed care entities provide the following disclosures: (1) (i) The name and address of any person (individual or corporation) with an ownership or control interest in the disclosing entity, fiscal agent, or managed care entity. The address for corporate entities must include as applicable primary business address, every business location, and P.O. Box address. (ii) Date of birth and Social Security Number (in the case of an individual). (iii) Other tax identification number (in the case of a corporation) with an ownership or control interest in the disclosing entity (or fiscal agent or managed care entity) or in any subcontractor in which the disclosing entity (or fiscal agent or managed care entity) has a 5 percent or more interest. (2) Whether the person (individual or corporation) with an ownership or control interest in the disclosing entity (or fiscal agent or managed care entity) is related to another person with ownership or control interest in the disclosing entity as a spouse, parent, child, or sibling; or whether the person (individual or corporation) with an ownership or control interest in any subcontractor in which the disclosing entity (or fiscal agent or managed care entity) has a 5 percent or more interest is related to another person with ownership or control interest in the disclosing entity as a spouse, parent, child, or sibling. (3) The name of any other disclosing entity (or fiscal agent or managed care entity) in which an owner of the disclosing entity (or fiscal agent or managed care entity) has an ownership or control interest. (4) The name, address, date of birth, and Social Security Number of any managing employee of the disclosing entity (or fiscal agent or managed care entity). (c) When the disclosures must be provided ? (1) Disclosures from providers or disclosing entities. Disclosure from any provider or disclosing entity is due at any of the following times: (i) Upon the provider or disclosing entity submitting the provider application. (ii) Upon the provider or disclosing entity executing the provider agreement. (iii) Upon request of the Medicaid agency during the re-validation of enrollment process under ? 455.414. (iv) Within 35 days after any change in ownership of the disclosing entity. (2) Disclosures from fiscal agents. Disclosures from fiscal agents are due at any of the following times: (i) Upon the fiscal agent submitting the proposal in accordance with the State?s procurement process. (ii) Upon the fiscal agent executing the contract with the State. (iii) Upon renewal or extension of the contract. (iv) Within 35 days after any change in ownership of the fiscal agent. (3) Disclosures from managed care entities. Disclosures from managed care entities (MCOs, PIHPs, PAHPs, and HIOs), except PCCMs are due at any of the following times: (i) Upon the managed care entity submitting the proposal in accordance with the State?s procurement process. (ii) Upon the managed care entity executing the contract with the State. (iii) Upon renewal or extension of the contract. (iv) Within 35 days after any change in ownership of the managed care entity. (4) Disclosures from PCCMs. PCCMs will comply with disclosure requirements under paragraph (c)(1) of this section. (d) To whom must the disclosures be provided. All disclosures must be provided to the Medicaid agency. (e) Consequences for failure to provide required disclosures. Federal financial participation (FFP) is not available in payments made to a disclosing entity that fails to disclose ownership or control information as required by this section. Title 42 CFR section 455 Subpart E ? Provider Screening and Enrollment, states in part: Section 455.410 Enrollment and screening of providers (a) The State Medicaid agency must require all enrolled providers to be screened under to this subpart. (b) The State Medicaid agency must require all ordering or referring physicians or other professionals providing services under the State plan or under a waiver of the plan to be enrolled as participating providers. (c) The State Medicaid agency may rely on the results of the provider screening performed by any of the following: (1) Medicare contractors. (2) Medicaid agencies or Children?s Health Insurance Programs of other States. Section 455.412 Verification of provider licenses The State Medicaid agency must ? (a) Have a method for verifying that any provider purporting to be licensed in accordance with the laws of any State is licensed by such State. (b) Confirm that the provider?s license has not expired and that there are no current limitations on the provider?s license. Section 455.414 Revalidation of enrollment The State Medicaid agency must revalidate the enrollment of all providers regardless of provider type at least every 5 years. Section 455.436 Federal database checks The State Medicaid agency must do all of the following: (a) Confirm the identity and determine the exclusion status of providers and any person with an ownership or control interest or who is an agent or managing employee of the provider through routine checks of Federal databases. (b) Check the Social Security Administration?s Death Master File, the National Plan and Provider Enumeration System (NPPES), the List of Excluded Individuals/Entities (LEIE), the Excluded Parties List System (EPLS), and any such other databases as the Secretary may prescribe. (c) (1) Consult appropriate databases to confirm identity upon enrollment and reenrollment; and (2) Check the LEIE and EPLS no less frequently than monthly. Section 455.450 Screening levels for Medicaid providers. A State Medicaid agency must screen all initial applications, including applications for a new practice location, and any applications received in response to a re-enrollment or revalidation of enrollment request based on a categorical risk level of ?limited,? ?moderate,? or ?high.? If a provider could fit within more than one risk level described in this section, the highest level of screening is applicable. (a) Screening for providers designated as limited categorical risk. When the State Medicaid agency designates a provider as a limited categorical risk, the State Medicaid agency must do all of the following: (1) Verify that a provider meets any applicable Federal regulations, or State requirements for the provider type prior to making an enrollment determination. (2) Conduct license verifications, including State licensure verifications in States other than where the provider is enrolling, in accordance with ? 455.412. (3) Conduct database checks on a pre- and post-enrollment basis to ensure that providers continue to meet the enrollment criteria for their provider type, in accordance with ? 455.436. (b) Screening for providers designated as moderate categorical risk. When the State Medicaid agency designates a provider as a ?moderate? categorical risk, a State Medicaid agency must do both of the following: (1) Perform the ?limited? screening requirements described in paragraph (a) of this section. (2) Conduct on-site visits in accordance with ? 455.432. (c) Screening for providers designated as high categorical risk. When the State Medicaid agency designates a provider as a ?high? categorical risk, a State Medicaid agency must do both of the following: (1) Perform the ?limited? and ?moderate? screening requirements described in paragraphs (a) and (b) of this section. (2) (i) Conduct a criminal background check; and (ii) Require the submission of a set of fingerprints in accordance with ? 455.434. (d) Denial or termination of enrollment. A provider, or any person with 5 percent or greater direct or indirect ownership in the provider, who is required by the State Medicaid agency or CMS to submit a set of fingerprints and fails to do so may have its - (1) Application denied under ? 455.434; or (2) Enrollment terminated under ? 455.416. (e) Adjustment of risk level. The State agency must adjust the categorical risk level from ?limited? or ?moderate? to ?high? when any of the following occurs: (1) The State Medicaid agency imposes a payment suspension on a provider based on credible allegation of fraud, waste or abuse, the provider has an existing Medicaid overpayment, or the provider has been excluded by the OIG or another State?s Medicaid program within the previous 10 years. (2) The State Medicaid agency or CMS in the previous 6 months lifted a temporary moratorium for the particular provider type and a provider that was prevented from enrolling based on the moratorium applies for enrollment as a provider at any time within 6 months from the date the moratorium was lifted. Medicaid Provider Enrollment Compendium (MPEC) B. Enrolled Provider?s Payment Eligibility for Retroactive Dates of Service The practice of ?backdating? enrollment involves approving an enrollment with a retroactive billing date. This practice allows a provider, once enrolled, to submit claims for services dated prior to the date upon which the SMA approved the enrollment. As discussed earlier, provider screening enables states to identify ineligible parties before they are able to enroll and start billing. Components of provider screening include database and licensure checks, and may also include site visits and FCBCs. To the extent a SMA approves the enrollment of a new provider and permits the provider to bill for services dated prior to applicable screening(s), this practice creates risk. For example, if a newly enrolling provider is subject to a site visit, and the SMA completes a site visit for the provider but nonetheless permits the provider to bill for services dated prior to the date on which the site visit occurred, there is risk the prov
2022-062 The Health Care Authority did not have adequate internal controls over and did not comply with requirements to report recoveries of fraudulent overpayments on the CMS-64 report. Assistance Listing Number and Title: 93.775 State Medicaid Fraud Control Units 93.777 State Survey and Certification of Health Care Providers and Suppliers 93.777 COVID-19 ? State Survey and Certification of Health Care Providers and Suppliers 93.778 Medical Assistance Program 93.778 COVID-19 ? Medical Assistance Program Federal Grantor Name: U. S. Department of Health and Human Services Federal Award Number: 2105WAINCT; 2105WAIMPL; 2105WA5MAP; 2105WA5ADM; 2205WA5MAP; 2205WA5ADM Pass-through Entity: None Pass-through Award/Contract Number: None Applicable Compliance Component: Special Test and Provisions: Medicaid Fraud Control Unit (MFCU) Known Questioned Cost Amount: $977,613 Background Medicaid is a jointly funded state and federal partnership providing coverage for about 2.3 million eligible low-income Washington residents who otherwise might go without medical care. Medicaid is Washington?s largest public assistance program and usually accounts for about one-third of the State?s federal expenditures. During fiscal year 2022, the program spent about $17.6 billion in federal and state funds. The Health Care Authority is required to refer suspected fraud or other criminal violations to the Medicaid Fraud Control Division (MFCD) for investigation and prosecution. The Authority reports any overpayment recoveries resulting from MFCD actions on the CMS-64 report. The CMS-64 report is the quarterly statement of Medicaid Program expenditures that agencies use to report the actual program benefit costs and administrative expenses to the Centers for Medicare & Medicaid Services (CMS). CMS uses this information to compute the federal financial participation for the state?s Medicaid Program costs. When MFCD completes an investigation, it sends the final results over to the Authority for management review and signature. After a final judgement is made on an overpayment resulting from fraud, the State has 30 days to refund the entire federal share. Once the Authority receives the outcome, a Journal Voucher (JV) is created to move the federal portion of the overpayment over to state-only funding, which creates a credit on the CMS-64 report. Federal regulations require recipients 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 prior audits, we reported the Authority did not have adequate internal controls over and did not comply with requirements to report MCFD overpayment recoveries on the CMS-64 report. The prior finding numbers were 2021-052 and 2020-050. Description of Condition The Authority did not have adequate internal controls over and did not comply with requirements to report recoveries of fraudulent overpayments on the CMS-64 report. Our audit found the Authority did not create JVs to move the entire federal portion of the two final judgments resulting from fraud over to state-only funding or report the entire overpayment on the CMS-64 report as a credit. Instead, the Authority only created JVs of the payments as they were made to the State. Additionally, the Authority did not have policies and procedures in place that described the process staff should follow for creating the JV or for reporting the MFCD overpayments on the CMS-64 report. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. Cause of Condition Management did not implement sufficient internal controls to ensure the Authority returned recoveries of fraudulent overpayments to the grantor in a timely manner. Additionally, the MFCD inadvertently did not notify the Authority at the time of final filing for one judgement resolution. Effect of Condition and Questioned Costs For fiscal year 2022, two final judgements were made totaling $2,792,013 in overpayments resulting from fraud. The Authority created JVs and reported $139,718 on the CMS-64 report dated June 30, 2022. JVs for the entire federal portion should have been processed and reported on the June 30, 2022 CMS-64 report. We are questioning the costs of $977,613 that the Authority did not report on the CMS-64 report or return to CMS, as federal regulations require. 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 Authority: ? Establish a formal process to ensure it properly reports recoveries of fraudulent overpayments on the quarterly CMS-64 report ? Consult with the federal grantor about whether or not the questioned costs identified in the finding should be repaid Authority?s Response The Authority partially concurs with the finding. It has documented the processes and procedures staff will follow to acknowledge and comply with the applicable federal rules and regulations concerning the timely return of federal revenue associated with fraudulent overpayments. The authority does not concur with repayment of $976,580 questioned costs related to one of the fraud referrals. The provider in this case was out of business and its business license expired May 2017, and then became inactive October 2017. The State pursued assets through available means and through the court. Final court rulings were made in June 2022, and in April 2023, within one year of the final rulings, the Attorney General?s Office certified that the defaulted corporation had no identifiable assets. In accordance with 42 CFR 433.318 (d) the provider is out of business and the Authority is not required to refund overpayment to CMS. The Authority will work with the Centers for Medicaid & Medicare Services to coordinate the return of the remaining $1,032 in identified questioned costs. Auditor?s Remarks The Authority states that the $976,580 in questioned costs is not required to be returned due to the corporation having no identifiable assets. While this may be the case since the Attorney General?s Office certified the corporation had no assets on April 13th, 2023, which was outside of our audit scope, the summary judgement order for this case was issued on May 2, 2022, and the overpayments were required to be returned within 30 days of that ruling. We reaffirm our finding and will follow up on the status of the Authority?s corrective action during our next audit. Applicable Laws and Regulations Title 42 U.S. Code of Federal Regulations (CFR) Part 433, State Fiscal Administration, Subpart F ? Refunding of Federal Share of Medicaid Overpayments to Providers, describes the requirements for identifying, reporting, collecting, and remitting Medicaid overpayments. 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. Title 2 CFR Part 200, Uniform Guidance, section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. 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 42 CFR Part 433, State Fiscal Administration, Subpart F ? Refunding of Federal Share of Medicaid Overpayments to Providers states in part: Section 433.300 Basis. This subpart implements - (a) Section 1903(d)(2)(A) of the Act, which directs that quarterly Federal payments to the States under title XIX (Medicaid) of the Act are to be reduced or increased to make adjustment for prior overpayments or underpayments that the Secretary determines have been made. (b) Section 1903(d)(2)(C) and (D) of the Act, which provides that a State has 1 year from discovery of an overpayment for Medicaid services to recover or attempt to recover the overpayment from the provider before adjustment in the Federal Medicaid payment to the State is made; and that adjustment will be made at the end of the 1-year period, whether or not recovery is made, unless the State is unable to recover from a provider because the overpayment is a debt that has been discharged in bankruptcy or is otherwise uncollectable. (c) Section 1903(d)(3) of the Act, which provides that the Secretary will consider the pro rata Federal share of the net amount recovered by a State during any quarter to be an overpayment. Section 433.312 Basic requirements for refunds. (a) Basic rules. (1) Except as provided in paragraph (b) of this section, the State Medicaid agency has 1 year from the date of discovery of an overpayment to a provider to recover or seek to recover the overpayment before the Federal share must be refunded to CMS. (2) The State Medicaid agency must refund the Federal share of overpayments at the end of the 1-year period following discovery in accordance with the requirements of this subpart, whether or not the State has recovered the overpayment from the provider. (b) Exception. The agency is not required to refund the Federal share of an overpayment made to a provider when the State is unable to recover the overpayment amount because the provider has been determined bankrupt or out of business in accordance with ? 433.318. Section 433.316 When discovery of overpayment occurs and its significance. (a) General rule. The date on which an overpayment is discovered is the beginning date of the 1-year period allowed for a State to recover or seek to recover an overpayment before a refund of the Federal share of an overpayment must be made to CMS. (b) Requirements for notification. Unless a State official or fiscal agent of the State chooses to initiate a formal recoupment action against a provider without first giving written notification of its intent, a State Medicaid agency official or other State official must notify the provider in writing of any overpayment it discovers in accordance with State agency policies and procedures and must take reasonable actions to attempt to recover the overpayment in accordance with State law and procedures. (c) Overpayments resulting from situations other than fraud. An overpayment resulting from a situation other than fraud is discovered on the earliest of - - (1) The date on which any Medicaid agency official or other State official first notifies a provider in writing of an overpayment and specifies a dollar amount that is subject to recovery; (2) The date on which a provider initially acknowledges a specific overpaid amount in writing to the medicaid agency; or (3) The date on which any State official or fiscal agent of the State initiates a formal action to recoup a specific overpaid amount from a provider without having first notified the provider in writing. (d) Overpayments resulting from fraud. (1) An overpayment that results from fraud is discovered on the date of the final written notice (as defined in ? 433.304 of this subchapter) of the State's overpayment determination. (2) When the State is unable to recover a debt which represents an overpayment (or any portion thereof) resulting from fraud within 1 year of discovery because no final determination of the amount of the overpayment has been made under an administrative or judicial process (as applicable), including as a result of a judgment being under appeal, no adjustment shall be made in the Federal payment to such State on account of such overpayment (or any portion thereof) until 30 days after the date on which a final judgment (including, if applicable, a final determination on an appeal) is made. (3) The Medicaid agency may treat an overpayment made to a Medicaid provider as resulting from fraud under subsection (d) of this section only if it has referred a provider's case to the Medicaid fraud control unit, or appropriate law enforcement agency in States with no certified Medicaid fraud control unit, as required by ? 455.15, ? 455.21, or ? 455.23 of this chapter, and the Medicaid fraud control unit or appropriate law enforcement agency has provided the Medicaid agency with written notification of acceptance of the case; or if the Medicaid fraud control unit or appropriate law enforcement agency has filed a civil or criminal action against a provider and has notified the State Medicaid agency. (e) Overpayments identified through Federal reviews. If a Federal review at any time indicates that a State has failed to identify an overpayment or a State has identified an overpayment but has failed to either send written notice of the overpayment to the provider that specified a dollar amount subject to recovery or initiate a formal recoupment from the provider without having first notified the provider in writing, CMS will consider the overpayment as discovered on the date that the Federal official first notifies the State in writing of the overpayment and specifies a dollar amount subject to recovery. (f) Effect of changes in overpayment amount. Any adjustment in the amount of an overpayment during the 1-year period following discovery (made in accordance with the approved State plan, Federal law and regulations governing Medicaid, and the appeals resolution process specified in State administrative policies and procedures) has the following effect on the 1-year recovery period: (1) A downward adjustment in the amount of an overpayment subject to recovery that occurs after discovery does not change the original 1-year recovery period for the outstanding balance. (2) An upward adjustment in the amount of an overpayment subject to recovery that occurs during the 1-year period following discovery does not change the 1-year recovery period for the original overpayment amount. A new 1-year period begins for the incremental amount only, beginning with the date of the State's written notification to the provider regarding the upward adjustment. (g) Effect of partial collection by State. A partial collection of an overpayment amount by the State from a provider during the 1-year period following discovery does not change the 1-year recovery period for the balance of the original overpayment amount due to CMS. (h) Effect of administrative or judicial appeals. Any appeal rights extended to a provider do not extend Section 433.320 Procedures for Refunds to CMS. (a) Basic requirements. (1) The agency must refund the Federal share of overpayments that are subject to recovery to CMS through a credit on its Quarterly Statement of Expenditures (Form CMS-64). (2) The agency must credit CMS with the Federal share of overpayments subject to recovery on the earlier of - (i) The Form CMS-64 submission due to CMS for the quarter in which the State recovers the overpayment from the provider; or (ii) The Form CMS-64 due to CMS for the quarter in which the 1-year period following discovery, established in accordance with ? 433.316, ends. (3) A credit on the Form CMS-64 must be made whether or not the overpayment has been recovered by the State from the provider. (4) If the State does not refund the Federal share of such overpayment as indicated in paragraph (a)(2) of this section, the State will be liable for interest on the amount equal to the Federal share of the non-recovered, nonrefunded overpayment amount. Interest during this period will be at the Current Value of Funds Rate (CVFR), and will accrue beginning on the day after the end of the 1-year period following discovery until the last day of the quarter for which the State submits a CMS-64 report refunding the Federal share of the overpayment.
2022-055 The Health Care Authority did not have adequate internal controls over and did not comply with federal provider eligibility requirements for the Medicaid and Children?s Health Insurance Program. Assistance Listing Number and Title: 93.767 Children?s Health Insurance Program 93.767 COVID-19 Children?s Health Insurance Program 93.775 State Medicaid Fraud Control Units 93.777 State Survey and Certification of Health Care Providers and Suppliers 93.777 COVID-19 State Survey and Certification of Health Care Providers and Suppliers 93.778 Medical Assistance Program 93.778 COVID-19 Medical Assistance Program Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: 2005WA5021; 2105WAINCT; 2105WAIMPL; 2105WA5MAP; 2105WA5ADM; 1905WA5021; 2105WA5021; 2205WA5021; 2205WA5MAP; 2205WA5ADM Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Special Tests and Provisions ? Provider Eligibility (Screening and Enrollment) Known Questioned Cost Amount: $612,277 Background The Health Care Authority administers both Medicaid and the Children?s Health Insurance Program (CHIP). Medicaid is a jointly funded state and federal partnership providing coverage for about 2.3 million eligible low-income Washington residents who otherwise might go without medical care. Medicaid is Washington?s largest public assistance program and usually accounts for about one third of the state?s federal expenditures. CHIP provides health coverage for almost 90,000 children and pregnant people in families with incomes too high to qualify for Medicaid. During fiscal year 2022, the Medicaid program spent more than $17.6 billion in federal and state funds, and CHIP spent more than $229 million in federal and state funds. The Authority ensures medical providers for both programs are eligible to provide services for clients. Providers must continue to meet eligibility requirements to receive payments under the programs. Washington had more than 127,000 participating providers in fiscal year 2022. During that time, the Authority paid more than $6.6 billion to providers for direct client services under the programs. The Authority is responsible for performing screening measures appropriate for the provider type at application and initial enrollment. Federal regulations require state Medicaid agencies to revalidate the enrollment of all Medicaid and CHIP providers at least every five years. To meet this requirement, the Authority has implemented an automated revalidation notification process that is supposed to send a letter to providers in time for them to be revalidated before the end of the five-year period. Federal law also requires state Medicaid agencies to check federal databases at least monthly to confirm the identity and exclusion status of providers, as well as any person with ownership, controlling interest, or acting as an agent or managing employee of the provider. The provider enrollment and revalidation processes are similar. The first step in both processes is to determine the provider?s screening risk level. A provider can be designated as one of three risk levels: limited, moderate or high. Each risk level requires progressively greater scrutiny of the provider before it can be enrolled or revalidated. For providers enrolled with both Medicare and Medicaid, state Medicaid agencies must assign them to the same or higher risk category applicable under Medicare. Additionally, certain provider behaviors require them to be moved to a higher screening level. The following are the required screening procedures for all risk types: ? Verify that the provider meets applicable federal regulations or state requirements for the provider type before making an enrollment determination ? Conduct license verifications, including for licenses in states other than where the provider is enrolling ? Conduct database checks to ensure providers continue to meet the enrollment criteria for their provider type. Such database checks include the National Plan and Provider Enumeration System, List of Excluded Individuals/Entities, Excluded Parties List System, and Death Master File index. If state Medicaid agencies assess providers at a moderate or high risk, they are required to conduct onsite visits for those that did not have one as part of their Medicare enrollment. Federal regulations require a high-risk provider, or a person with a 5 percent or more direct or indirect ownership in the provider, to receive a fingerprint-based criminal background check. The deadline to fully implement a fingerprint-based criminal background check was July 1, 2018. The Authority is also responsible for ensuring that providers obtain the proper signed attestations and disclosures. For servicing only providers, a direct link must be made to a billing provider that has an active Core Provider Agreement (CPA) on file. A CPA contains the required attestation and disclosures of the billing provider to allow for the payment of medical claims. To ensure the Authority has completed all applicable screening and enrollment or revalidation steps before enrolling or revalidating providers, staff members use checklists for each enrollment and revalidation. The staff member signs and dates the checklist to indicate the provider is eligible to render services and receive payments. In response to the COVID-19 pandemic, the Authority obtained flexibilities under blanket waivers approved by the Centers for Medicare and Medicaid Services (CMS), which were effective March 1, 2020, through the end of the emergency declaration period. These included the waiving of provider application fees and fingerprint-based criminal background checks. The CMS waivers also allowed for expedited processing of any new or pending provider applications, as well as the postponement of all revalidation actions until November 1, 2020. Also in response to the COVID-19 pandemic, the Authority?s Chief Medical Officer approved a blanket waiver for the backdating of all providers effective dates, as allowed by CMS and Washington Administrative Code. This waiver allows providers to submit claims for services provided before their enrollment and revalidation applications are approved. Federal regulations require recipients 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 prior audits, we reported the Authority did not have adequate internal controls over and did not comply with requirements to ensure it revalidated providers every five years and met screening requirements. The prior finding numbers were 2021-047, 2020-046, 2019-048, 2018-042, 2017-033, and 2016-035. Description of Condition The Authority did not have adequate internal controls over and did not comply with federal provider eligibility requirements for the Medicaid and CHIP programs. During the audit period, the Authority processed 10,959 new provider enrollments and was required to perform ongoing eligibility determinations for 114,427 active providers. We used a statistical sampling method to randomly select and examine 59 newly enrolled providers and 59 active providers to determine if the Authority properly screened them based on their enrollment status and correctly determined their eligibility status. Of the 118 providers examined, we found seven instances for six providers (5 percent) when the Authority did not take the appropriate actions to ensure providers met eligibility requirements. Specifically, we found: ? Staff enrolled three providers without a valid CPA on file. Because the providers were not covered by a CPA, they were improperly enrolled. ? Staff did not conduct a proper license check for three providers. A proper license check for these providers would have led staff to identify that their license was either expired or did not cover the enrollment period, and, therefore, were ineligible. ? Staff did not properly screen one provider based on a moderate risk level. The improper screening checklist was used and the risk level was not properly addressed. To determine if the Authority had revalidated providers every five years or had taken actions to deactivate providers, we used computer-assisted audit techniques to analyze the entire population of 2,049 providers that should have been revalidated or deactivated during the fiscal year. We found the Authority?s internal controls were insufficient and resulted in none of the 2,049 providers (100 percent) being revalidated before the due date. We determined 648 providers were subsequently revalidated, and the Authority backdated them. We also determined 1,242 providers were deactivated, but the Authority did not process the deactivation until at least 30 days after the eligibility end date. There were an additional 159 providers that should have been deactivated, but the Authority did not take actions to deactivate or revalidate them. Federal law requires the Authority to check federal databases at least monthly to confirm the identity and exclusion status of providers. However, the automated system that performs these checks and notifies the Authority of possible problems with providers was not operating correctly, and it frequently provided incorrect information. Management decided to ignore this information and stopped performing the monthly database checks. The Authority did review the results of the check once during the fiscal year, in July of 2021. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. Cause of Condition Although the Authority has established internal controls over screening and enrolling providers, they were ineffective for preventing or detecting noncompliance. Management also did not ensure staff consistently followed the procedures in place. Additionally, the automated revalidation notification was inadequate for ensuring the Authority complied with the five-year revalidation requirement. To comply with this requirement, the Authority should notify providers about their revalidations and ensure they are started and completed before the due date. Our audit found that the Authority?s automated system is designed to notify providers of their revalidations one day after the due date. Due to this inadequate system design, all provider revalidations were completed after their due dates. Although management directed staff to stop performing the monthly database checks because of issues with the automated system, they did not reinstate the procedures used before the system was implemented so staff could continue verifying providers? identity and exclusion status. Effect of Condition and Questioned Costs By not conducting required licensing, screening, and enrollment processes in a timely manner, the Authority is at risk of not detecting or preventing ineligible providers from providing services to clients and receiving federal Medicaid and CHIP funds. Payments to providers who are ineligible are unallowable, and the Authority could be required to repay the grantor for these payments. We identified the following payments made to ineligible providers: Audit Area Known questioned costs (state and federal) Known questioned costs (federal portion only) Likely improper payments (state and federal) Likely improper payments (federal portion only) New Providers $7,092 $3,985 $1,317,224 $740,280 Deactivated Providers $302,372 $292,051 $399,999 $351,698 Not Revalidated or Deactivated $509,702 $316,241 Total $819,166 $612,277 $1,717,223 $1,091,978 In addition to the questioned costs in the table above, we also identified $26,148,599 in costs at risk for those providers whose revalidations were backdated. If the providers had not been revalidated, these costs would also be considered questioned costs. 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 Authority: ? Strengthen internal controls to ensure providers are adequately screened, licensed, enrolled, and eligible to provide and bill for services ? Implement internal controls designed to bring it into material compliance with the provider revalidation process Authority?s Response The Authority partially concurs with the finding. The Authority agrees that ProviderOne sends revalidation notifications one day after the due date rather than before the due date to allow time for the revalidation process. A system revision is in process, and we expect this issue to be resolved by the beginning of 2024. The Authority does not concur with the remainder of the auditor?s findings. The auditor provided the final exceptions and this finding at the close of the audit. The document with the final exceptions did not contain enough information for the Authority to adequately review the results of the auditor?s testing or the methodology used to calculate questioned costs. The time allotted to the Authority to review the testing results, seek clarification, and provide an agency response was not sufficient to analyze the results and provide an informed response. Due to the lack of complete information and time provided, the Authority is unable to agree or disagree with the results of the audit. Finally, on March 19, 2020, the Centers for Medicare & Medicaid Services (CMS) approved Washington?s request for an 1135 COVID-19 Emergency Declaration Blanket Waiver for Health Care Providers, effective through the end of the federal Public Health Emergency. This waiver temporarily suspended provider enrollment and revalidation requirements. Should the Authority agree with any or all of the results from the audit, it would not concur that questioned costs be returned because provider enrollment and revalidations requirements were temporarily suspended by CMS. Auditor?s Remarks We provided the Authority with preliminary exceptions on December 20, 2022 for ?Not Revalidated or Deactivated Providers? and on December 30, 2022 for ?New Providers?, ?Active Providers?, and ?Deactivated Providers?. The Authority provided additional information on January 31, 2023 that cleared some of the exceptions. We provided final exceptions on March 3, 2023 which included the unique transaction identifier for each exception. The Authority requested that we perform additional testing for the ?Deactivated Providers? on March 15th. The draft finding was provided to the Authority on April 14, 2023 and the Authority provided their response on May 3rd. Despite several years of the known system weaknesses, the Authority has not updated the system or implemented compensating processes to ensure providers are eligible to provide Medicaid and Chip services. Regarding the 1135 COVID-19 Emergency Declaration Blanket Waiver, the Authority informed us that beginning October 1, 2020, Authority management had reinstated the majority of provider eligibility requirements that had been waived. We reaffirm our finding with questioned costs and will follow up on the status of the Authority?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 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 CFR Part 200, Uniform Guidance, section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. 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 42 CFR Part 433, State Fiscal Administration, Subpart F ? Refunding of Federal Share of Medicaid Overpayments to Providers, describes the requirements for identifying, reporting, collecting, and remitting Medicaid overpayments. Title 42 CFR section 438 subpart H ? Additional Program Integrity Safeguards, states in part: Section 438.602 State responsibilities. (a) Monitoring contractor compliance. Consistent with ? 438.66, the State must monitor the MCO?s, PIHP?s, PAHP?s, PCCM?s or PCCM entity?s compliance, as applicable, with ?? 438.604, 438.606, 438.608, 438.610, 438.230, and 438.808. (b) Screening and enrollment and revalidation of providers. (1) The State must screen and enroll, and periodically revalidate, all network providers of MCOs, PIHPs, and PAHPs, in accordance with the requirements of part 455, subparts B and E of this chapter. This requirement extends to PCCMs and PCCM entities to the extent the primary care case manager is not otherwise enrolled with the State to provide services to FFS beneficiaries. This provision does not require the network provider to render services to FFS beneficiaries. (2) MCOs, PIHPs, and PAHPs may execute network provider agreements pending the outcome of the process in paragraph (b)(1) of this section of up to 120 days, but must terminate a network provider immediately upon notification from the State that the network provider cannot be enrolled, or the expiration of one 120 day period without enrollment of the provider, and notify affected enrollees. (c) Ownership and control information. The State must review the ownership and control disclosures submitted by the MCO, PIHP, PAHP, PCCM or PCCM entity, and any subcontractors as required in ? 438.608(c). (d) Federal database checks. Consistent with the requirements at ? 455.436 of this chapter, the State must confirm the identity and determine the exclusion status of the MCO, PIHP, PAHP, PCCM or PCCM entity, any subcontractor, as well as any person with an ownership or control interest, or who is an agent or managing employee of the MCO, PIHP, PAHP, PCCM or PCCM entity through routine checks of Federal databases. This includes the Social Security Administration?s Death Master File, the National Plan and Provider Enumeration System (NPPES), the List of Excluded Individuals/Entities (LEIE), the System for Award Management (SAM), and any other databases as the State or Secretary may prescribe. These databases must be consulted upon contracting and no less frequently than monthly thereafter. If the State finds a party that is excluded, it must promptly notify the MCO, PIHP, PAHP, PCCM, or PCCM entity and take action consistent with ? 438.610(c). Title 42 CFR section 455 Subpart B ? Disclosure of Information by Providers and Fiscal Agents, states in part: Section 455.104 Disclosure by Medicaid providers and fiscal agents: Information on ownership and control. (a) Who must provide disclosures. The Medicaid agency must obtain disclosures from disclosing entities, fiscal agents, and managed care entities. (b) What disclosures must be provided. The Medicaid agency must require that disclosing entities, fiscal agents, and managed care entities provide the following disclosures: (1) (i) The name and address of any person (individual or corporation) with an ownership or control interest in the disclosing entity, fiscal agent, or managed care entity. The address for corporate entities must include as applicable primary business address, every business location, and P.O. Box address. (ii) Date of birth and Social Security Number (in the case of an individual). (iii) Other tax identification number (in the case of a corporation) with an ownership or control interest in the disclosing entity (or fiscal agent or managed care entity) or in any subcontractor in which the disclosing entity (or fiscal agent or managed care entity) has a 5 percent or more interest. (2) Whether the person (individual or corporation) with an ownership or control interest in the disclosing entity (or fiscal agent or managed care entity) is related to another person with ownership or control interest in the disclosing entity as a spouse, parent, child, or sibling; or whether the person (individual or corporation) with an ownership or control interest in any subcontractor in which the disclosing entity (or fiscal agent or managed care entity) has a 5 percent or more interest is related to another person with ownership or control interest in the disclosing entity as a spouse, parent, child, or sibling. (3) The name of any other disclosing entity (or fiscal agent or managed care entity) in which an owner of the disclosing entity (or fiscal agent or managed care entity) has an ownership or control interest. (4) The name, address, date of birth, and Social Security Number of any managing employee of the disclosing entity (or fiscal agent or managed care entity). (c) When the disclosures must be provided ? (1) Disclosures from providers or disclosing entities. Disclosure from any provider or disclosing entity is due at any of the following times: (i) Upon the provider or disclosing entity submitting the provider application. (ii) Upon the provider or disclosing entity executing the provider agreement. (iii) Upon request of the Medicaid agency during the re-validation of enrollment process under ? 455.414. (iv) Within 35 days after any change in ownership of the disclosing entity. (2) Disclosures from fiscal agents. Disclosures from fiscal agents are due at any of the following times: (i) Upon the fiscal agent submitting the proposal in accordance with the State?s procurement process. (ii) Upon the fiscal agent executing the contract with the State. (iii) Upon renewal or extension of the contract. (iv) Within 35 days after any change in ownership of the fiscal agent. (3) Disclosures from managed care entities. Disclosures from managed care entities (MCOs, PIHPs, PAHPs, and HIOs), except PCCMs are due at any of the following times: (i) Upon the managed care entity submitting the proposal in accordance with the State?s procurement process. (ii) Upon the managed care entity executing the contract with the State. (iii) Upon renewal or extension of the contract. (iv) Within 35 days after any change in ownership of the managed care entity. (4) Disclosures from PCCMs. PCCMs will comply with disclosure requirements under paragraph (c)(1) of this section. (d) To whom must the disclosures be provided. All disclosures must be provided to the Medicaid agency. (e) Consequences for failure to provide required disclosures. Federal financial participation (FFP) is not available in payments made to a disclosing entity that fails to disclose ownership or control information as required by this section. Title 42 CFR section 455 Subpart E ? Provider Screening and Enrollment, states in part: Section 455.410 Enrollment and screening of providers (a) The State Medicaid agency must require all enrolled providers to be screened under to this subpart. (b) The State Medicaid agency must require all ordering or referring physicians or other professionals providing services under the State plan or under a waiver of the plan to be enrolled as participating providers. (c) The State Medicaid agency may rely on the results of the provider screening performed by any of the following: (1) Medicare contractors. (2) Medicaid agencies or Children?s Health Insurance Programs of other States. Section 455.412 Verification of provider licenses The State Medicaid agency must ? (a) Have a method for verifying that any provider purporting to be licensed in accordance with the laws of any State is licensed by such State. (b) Confirm that the provider?s license has not expired and that there are no current limitations on the provider?s license. Section 455.414 Revalidation of enrollment The State Medicaid agency must revalidate the enrollment of all providers regardless of provider type at least every 5 years. Section 455.436 Federal database checks The State Medicaid agency must do all of the following: (a) Confirm the identity and determine the exclusion status of providers and any person with an ownership or control interest or who is an agent or managing employee of the provider through routine checks of Federal databases. (b) Check the Social Security Administration?s Death Master File, the National Plan and Provider Enumeration System (NPPES), the List of Excluded Individuals/Entities (LEIE), the Excluded Parties List System (EPLS), and any such other databases as the Secretary may prescribe. (c) (1) Consult appropriate databases to confirm identity upon enrollment and reenrollment; and (2) Check the LEIE and EPLS no less frequently than monthly. Section 455.450 Screening levels for Medicaid providers. A State Medicaid agency must screen all initial applications, including applications for a new practice location, and any applications received in response to a re-enrollment or revalidation of enrollment request based on a categorical risk level of ?limited,? ?moderate,? or ?high.? If a provider could fit within more than one risk level described in this section, the highest level of screening is applicable. (a) Screening for providers designated as limited categorical risk. When the State Medicaid agency designates a provider as a limited categorical risk, the State Medicaid agency must do all of the following: (1) Verify that a provider meets any applicable Federal regulations, or State requirements for the provider type prior to making an enrollment determination. (2) Conduct license verifications, including State licensure verifications in States other than where the provider is enrolling, in accordance with ? 455.412. (3) Conduct database checks on a pre- and post-enrollment basis to ensure that providers continue to meet the enrollment criteria for their provider type, in accordance with ? 455.436. (b) Screening for providers designated as moderate categorical risk. When the State Medicaid agency designates a provider as a ?moderate? categorical risk, a State Medicaid agency must do both of the following: (1) Perform the ?limited? screening requirements described in paragraph (a) of this section. (2) Conduct on-site visits in accordance with ? 455.432. (c) Screening for providers designated as high categorical risk. When the State Medicaid agency designates a provider as a ?high? categorical risk, a State Medicaid agency must do both of the following: (1) Perform the ?limited? and ?moderate? screening requirements described in paragraphs (a) and (b) of this section. (2) (i) Conduct a criminal background check; and (ii) Require the submission of a set of fingerprints in accordance with ? 455.434. (d) Denial or termination of enrollment. A provider, or any person with 5 percent or greater direct or indirect ownership in the provider, who is required by the State Medicaid agency or CMS to submit a set of fingerprints and fails to do so may have its - (1) Application denied under ? 455.434; or (2) Enrollment terminated under ? 455.416. (e) Adjustment of risk level. The State agency must adjust the categorical risk level from ?limited? or ?moderate? to ?high? when any of the following occurs: (1) The State Medicaid agency imposes a payment suspension on a provider based on credible allegation of fraud, waste or abuse, the provider has an existing Medicaid overpayment, or the provider has been excluded by the OIG or another State?s Medicaid program within the previous 10 years. (2) The State Medicaid agency or CMS in the previous 6 months lifted a temporary moratorium for the particular provider type and a provider that was prevented from enrolling based on the moratorium applies for enrollment as a provider at any time within 6 months from the date the moratorium was lifted. Medicaid Provider Enrollment Compendium (MPEC) B. Enrolled Provider?s Payment Eligibility for Retroactive Dates of Service The practice of ?backdating? enrollment involves approving an enrollment with a retroactive billing date. This practice allows a provider, once enrolled, to submit claims for services dated prior to the date upon which the SMA approved the enrollment. As discussed earlier, provider screening enables states to identify ineligible parties before they are able to enroll and start billing. Components of provider screening include database and licensure checks, and may also include site visits and FCBCs. To the extent a SMA approves the enrollment of a new provider and permits the provider to bill for services dated prior to applicable screening(s), this practice creates risk. For example, if a newly enrolling provider is subject to a site visit, and the SMA completes a site visit for the provider but nonetheless permits the provider to bill for services dated prior to the date on which the site visit occurred, there is risk the prov
2022-062 The Health Care Authority did not have adequate internal controls over and did not comply with requirements to report recoveries of fraudulent overpayments on the CMS-64 report. Assistance Listing Number and Title: 93.775 State Medicaid Fraud Control Units 93.777 State Survey and Certification of Health Care Providers and Suppliers 93.777 COVID-19 ? State Survey and Certification of Health Care Providers and Suppliers 93.778 Medical Assistance Program 93.778 COVID-19 ? Medical Assistance Program Federal Grantor Name: U. S. Department of Health and Human Services Federal Award Number: 2105WAINCT; 2105WAIMPL; 2105WA5MAP; 2105WA5ADM; 2205WA5MAP; 2205WA5ADM Pass-through Entity: None Pass-through Award/Contract Number: None Applicable Compliance Component: Special Test and Provisions: Medicaid Fraud Control Unit (MFCU) Known Questioned Cost Amount: $977,613 Background Medicaid is a jointly funded state and federal partnership providing coverage for about 2.3 million eligible low-income Washington residents who otherwise might go without medical care. Medicaid is Washington?s largest public assistance program and usually accounts for about one-third of the State?s federal expenditures. During fiscal year 2022, the program spent about $17.6 billion in federal and state funds. The Health Care Authority is required to refer suspected fraud or other criminal violations to the Medicaid Fraud Control Division (MFCD) for investigation and prosecution. The Authority reports any overpayment recoveries resulting from MFCD actions on the CMS-64 report. The CMS-64 report is the quarterly statement of Medicaid Program expenditures that agencies use to report the actual program benefit costs and administrative expenses to the Centers for Medicare & Medicaid Services (CMS). CMS uses this information to compute the federal financial participation for the state?s Medicaid Program costs. When MFCD completes an investigation, it sends the final results over to the Authority for management review and signature. After a final judgement is made on an overpayment resulting from fraud, the State has 30 days to refund the entire federal share. Once the Authority receives the outcome, a Journal Voucher (JV) is created to move the federal portion of the overpayment over to state-only funding, which creates a credit on the CMS-64 report. Federal regulations require recipients 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 prior audits, we reported the Authority did not have adequate internal controls over and did not comply with requirements to report MCFD overpayment recoveries on the CMS-64 report. The prior finding numbers were 2021-052 and 2020-050. Description of Condition The Authority did not have adequate internal controls over and did not comply with requirements to report recoveries of fraudulent overpayments on the CMS-64 report. Our audit found the Authority did not create JVs to move the entire federal portion of the two final judgments resulting from fraud over to state-only funding or report the entire overpayment on the CMS-64 report as a credit. Instead, the Authority only created JVs of the payments as they were made to the State. Additionally, the Authority did not have policies and procedures in place that described the process staff should follow for creating the JV or for reporting the MFCD overpayments on the CMS-64 report. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. Cause of Condition Management did not implement sufficient internal controls to ensure the Authority returned recoveries of fraudulent overpayments to the grantor in a timely manner. Additionally, the MFCD inadvertently did not notify the Authority at the time of final filing for one judgement resolution. Effect of Condition and Questioned Costs For fiscal year 2022, two final judgements were made totaling $2,792,013 in overpayments resulting from fraud. The Authority created JVs and reported $139,718 on the CMS-64 report dated June 30, 2022. JVs for the entire federal portion should have been processed and reported on the June 30, 2022 CMS-64 report. We are questioning the costs of $977,613 that the Authority did not report on the CMS-64 report or return to CMS, as federal regulations require. 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 Authority: ? Establish a formal process to ensure it properly reports recoveries of fraudulent overpayments on the quarterly CMS-64 report ? Consult with the federal grantor about whether or not the questioned costs identified in the finding should be repaid Authority?s Response The Authority partially concurs with the finding. It has documented the processes and procedures staff will follow to acknowledge and comply with the applicable federal rules and regulations concerning the timely return of federal revenue associated with fraudulent overpayments. The authority does not concur with repayment of $976,580 questioned costs related to one of the fraud referrals. The provider in this case was out of business and its business license expired May 2017, and then became inactive October 2017. The State pursued assets through available means and through the court. Final court rulings were made in June 2022, and in April 2023, within one year of the final rulings, the Attorney General?s Office certified that the defaulted corporation had no identifiable assets. In accordance with 42 CFR 433.318 (d) the provider is out of business and the Authority is not required to refund overpayment to CMS. The Authority will work with the Centers for Medicaid & Medicare Services to coordinate the return of the remaining $1,032 in identified questioned costs. Auditor?s Remarks The Authority states that the $976,580 in questioned costs is not required to be returned due to the corporation having no identifiable assets. While this may be the case since the Attorney General?s Office certified the corporation had no assets on April 13th, 2023, which was outside of our audit scope, the summary judgement order for this case was issued on May 2, 2022, and the overpayments were required to be returned within 30 days of that ruling. We reaffirm our finding and will follow up on the status of the Authority?s corrective action during our next audit. Applicable Laws and Regulations Title 42 U.S. Code of Federal Regulations (CFR) Part 433, State Fiscal Administration, Subpart F ? Refunding of Federal Share of Medicaid Overpayments to Providers, describes the requirements for identifying, reporting, collecting, and remitting Medicaid overpayments. 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. Title 2 CFR Part 200, Uniform Guidance, section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. 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 42 CFR Part 433, State Fiscal Administration, Subpart F ? Refunding of Federal Share of Medicaid Overpayments to Providers states in part: Section 433.300 Basis. This subpart implements - (a) Section 1903(d)(2)(A) of the Act, which directs that quarterly Federal payments to the States under title XIX (Medicaid) of the Act are to be reduced or increased to make adjustment for prior overpayments or underpayments that the Secretary determines have been made. (b) Section 1903(d)(2)(C) and (D) of the Act, which provides that a State has 1 year from discovery of an overpayment for Medicaid services to recover or attempt to recover the overpayment from the provider before adjustment in the Federal Medicaid payment to the State is made; and that adjustment will be made at the end of the 1-year period, whether or not recovery is made, unless the State is unable to recover from a provider because the overpayment is a debt that has been discharged in bankruptcy or is otherwise uncollectable. (c) Section 1903(d)(3) of the Act, which provides that the Secretary will consider the pro rata Federal share of the net amount recovered by a State during any quarter to be an overpayment. Section 433.312 Basic requirements for refunds. (a) Basic rules. (1) Except as provided in paragraph (b) of this section, the State Medicaid agency has 1 year from the date of discovery of an overpayment to a provider to recover or seek to recover the overpayment before the Federal share must be refunded to CMS. (2) The State Medicaid agency must refund the Federal share of overpayments at the end of the 1-year period following discovery in accordance with the requirements of this subpart, whether or not the State has recovered the overpayment from the provider. (b) Exception. The agency is not required to refund the Federal share of an overpayment made to a provider when the State is unable to recover the overpayment amount because the provider has been determined bankrupt or out of business in accordance with ? 433.318. Section 433.316 When discovery of overpayment occurs and its significance. (a) General rule. The date on which an overpayment is discovered is the beginning date of the 1-year period allowed for a State to recover or seek to recover an overpayment before a refund of the Federal share of an overpayment must be made to CMS. (b) Requirements for notification. Unless a State official or fiscal agent of the State chooses to initiate a formal recoupment action against a provider without first giving written notification of its intent, a State Medicaid agency official or other State official must notify the provider in writing of any overpayment it discovers in accordance with State agency policies and procedures and must take reasonable actions to attempt to recover the overpayment in accordance with State law and procedures. (c) Overpayments resulting from situations other than fraud. An overpayment resulting from a situation other than fraud is discovered on the earliest of - - (1) The date on which any Medicaid agency official or other State official first notifies a provider in writing of an overpayment and specifies a dollar amount that is subject to recovery; (2) The date on which a provider initially acknowledges a specific overpaid amount in writing to the medicaid agency; or (3) The date on which any State official or fiscal agent of the State initiates a formal action to recoup a specific overpaid amount from a provider without having first notified the provider in writing. (d) Overpayments resulting from fraud. (1) An overpayment that results from fraud is discovered on the date of the final written notice (as defined in ? 433.304 of this subchapter) of the State's overpayment determination. (2) When the State is unable to recover a debt which represents an overpayment (or any portion thereof) resulting from fraud within 1 year of discovery because no final determination of the amount of the overpayment has been made under an administrative or judicial process (as applicable), including as a result of a judgment being under appeal, no adjustment shall be made in the Federal payment to such State on account of such overpayment (or any portion thereof) until 30 days after the date on which a final judgment (including, if applicable, a final determination on an appeal) is made. (3) The Medicaid agency may treat an overpayment made to a Medicaid provider as resulting from fraud under subsection (d) of this section only if it has referred a provider's case to the Medicaid fraud control unit, or appropriate law enforcement agency in States with no certified Medicaid fraud control unit, as required by ? 455.15, ? 455.21, or ? 455.23 of this chapter, and the Medicaid fraud control unit or appropriate law enforcement agency has provided the Medicaid agency with written notification of acceptance of the case; or if the Medicaid fraud control unit or appropriate law enforcement agency has filed a civil or criminal action against a provider and has notified the State Medicaid agency. (e) Overpayments identified through Federal reviews. If a Federal review at any time indicates that a State has failed to identify an overpayment or a State has identified an overpayment but has failed to either send written notice of the overpayment to the provider that specified a dollar amount subject to recovery or initiate a formal recoupment from the provider without having first notified the provider in writing, CMS will consider the overpayment as discovered on the date that the Federal official first notifies the State in writing of the overpayment and specifies a dollar amount subject to recovery. (f) Effect of changes in overpayment amount. Any adjustment in the amount of an overpayment during the 1-year period following discovery (made in accordance with the approved State plan, Federal law and regulations governing Medicaid, and the appeals resolution process specified in State administrative policies and procedures) has the following effect on the 1-year recovery period: (1) A downward adjustment in the amount of an overpayment subject to recovery that occurs after discovery does not change the original 1-year recovery period for the outstanding balance. (2) An upward adjustment in the amount of an overpayment subject to recovery that occurs during the 1-year period following discovery does not change the 1-year recovery period for the original overpayment amount. A new 1-year period begins for the incremental amount only, beginning with the date of the State's written notification to the provider regarding the upward adjustment. (g) Effect of partial collection by State. A partial collection of an overpayment amount by the State from a provider during the 1-year period following discovery does not change the 1-year recovery period for the balance of the original overpayment amount due to CMS. (h) Effect of administrative or judicial appeals. Any appeal rights extended to a provider do not extend Section 433.320 Procedures for Refunds to CMS. (a) Basic requirements. (1) The agency must refund the Federal share of overpayments that are subject to recovery to CMS through a credit on its Quarterly Statement of Expenditures (Form CMS-64). (2) The agency must credit CMS with the Federal share of overpayments subject to recovery on the earlier of - (i) The Form CMS-64 submission due to CMS for the quarter in which the State recovers the overpayment from the provider; or (ii) The Form CMS-64 due to CMS for the quarter in which the 1-year period following discovery, established in accordance with ? 433.316, ends. (3) A credit on the Form CMS-64 must be made whether or not the overpayment has been recovered by the State from the provider. (4) If the State does not refund the Federal share of such overpayment as indicated in paragraph (a)(2) of this section, the State will be liable for interest on the amount equal to the Federal share of the non-recovered, nonrefunded overpayment amount. Interest during this period will be at the Current Value of Funds Rate (CVFR), and will accrue beginning on the day after the end of the 1-year period following discovery until the last day of the quarter for which the State submits a CMS-64 report refunding the Federal share of the overpayment.
2022-055 The Health Care Authority did not have adequate internal controls over and did not comply with federal provider eligibility requirements for the Medicaid and Children?s Health Insurance Program. Assistance Listing Number and Title: 93.767 Children?s Health Insurance Program 93.767 COVID-19 Children?s Health Insurance Program 93.775 State Medicaid Fraud Control Units 93.777 State Survey and Certification of Health Care Providers and Suppliers 93.777 COVID-19 State Survey and Certification of Health Care Providers and Suppliers 93.778 Medical Assistance Program 93.778 COVID-19 Medical Assistance Program Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: 2005WA5021; 2105WAINCT; 2105WAIMPL; 2105WA5MAP; 2105WA5ADM; 1905WA5021; 2105WA5021; 2205WA5021; 2205WA5MAP; 2205WA5ADM Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Special Tests and Provisions ? Provider Eligibility (Screening and Enrollment) Known Questioned Cost Amount: $612,277 Background The Health Care Authority administers both Medicaid and the Children?s Health Insurance Program (CHIP). Medicaid is a jointly funded state and federal partnership providing coverage for about 2.3 million eligible low-income Washington residents who otherwise might go without medical care. Medicaid is Washington?s largest public assistance program and usually accounts for about one third of the state?s federal expenditures. CHIP provides health coverage for almost 90,000 children and pregnant people in families with incomes too high to qualify for Medicaid. During fiscal year 2022, the Medicaid program spent more than $17.6 billion in federal and state funds, and CHIP spent more than $229 million in federal and state funds. The Authority ensures medical providers for both programs are eligible to provide services for clients. Providers must continue to meet eligibility requirements to receive payments under the programs. Washington had more than 127,000 participating providers in fiscal year 2022. During that time, the Authority paid more than $6.6 billion to providers for direct client services under the programs. The Authority is responsible for performing screening measures appropriate for the provider type at application and initial enrollment. Federal regulations require state Medicaid agencies to revalidate the enrollment of all Medicaid and CHIP providers at least every five years. To meet this requirement, the Authority has implemented an automated revalidation notification process that is supposed to send a letter to providers in time for them to be revalidated before the end of the five-year period. Federal law also requires state Medicaid agencies to check federal databases at least monthly to confirm the identity and exclusion status of providers, as well as any person with ownership, controlling interest, or acting as an agent or managing employee of the provider. The provider enrollment and revalidation processes are similar. The first step in both processes is to determine the provider?s screening risk level. A provider can be designated as one of three risk levels: limited, moderate or high. Each risk level requires progressively greater scrutiny of the provider before it can be enrolled or revalidated. For providers enrolled with both Medicare and Medicaid, state Medicaid agencies must assign them to the same or higher risk category applicable under Medicare. Additionally, certain provider behaviors require them to be moved to a higher screening level. The following are the required screening procedures for all risk types: ? Verify that the provider meets applicable federal regulations or state requirements for the provider type before making an enrollment determination ? Conduct license verifications, including for licenses in states other than where the provider is enrolling ? Conduct database checks to ensure providers continue to meet the enrollment criteria for their provider type. Such database checks include the National Plan and Provider Enumeration System, List of Excluded Individuals/Entities, Excluded Parties List System, and Death Master File index. If state Medicaid agencies assess providers at a moderate or high risk, they are required to conduct onsite visits for those that did not have one as part of their Medicare enrollment. Federal regulations require a high-risk provider, or a person with a 5 percent or more direct or indirect ownership in the provider, to receive a fingerprint-based criminal background check. The deadline to fully implement a fingerprint-based criminal background check was July 1, 2018. The Authority is also responsible for ensuring that providers obtain the proper signed attestations and disclosures. For servicing only providers, a direct link must be made to a billing provider that has an active Core Provider Agreement (CPA) on file. A CPA contains the required attestation and disclosures of the billing provider to allow for the payment of medical claims. To ensure the Authority has completed all applicable screening and enrollment or revalidation steps before enrolling or revalidating providers, staff members use checklists for each enrollment and revalidation. The staff member signs and dates the checklist to indicate the provider is eligible to render services and receive payments. In response to the COVID-19 pandemic, the Authority obtained flexibilities under blanket waivers approved by the Centers for Medicare and Medicaid Services (CMS), which were effective March 1, 2020, through the end of the emergency declaration period. These included the waiving of provider application fees and fingerprint-based criminal background checks. The CMS waivers also allowed for expedited processing of any new or pending provider applications, as well as the postponement of all revalidation actions until November 1, 2020. Also in response to the COVID-19 pandemic, the Authority?s Chief Medical Officer approved a blanket waiver for the backdating of all providers effective dates, as allowed by CMS and Washington Administrative Code. This waiver allows providers to submit claims for services provided before their enrollment and revalidation applications are approved. Federal regulations require recipients 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 prior audits, we reported the Authority did not have adequate internal controls over and did not comply with requirements to ensure it revalidated providers every five years and met screening requirements. The prior finding numbers were 2021-047, 2020-046, 2019-048, 2018-042, 2017-033, and 2016-035. Description of Condition The Authority did not have adequate internal controls over and did not comply with federal provider eligibility requirements for the Medicaid and CHIP programs. During the audit period, the Authority processed 10,959 new provider enrollments and was required to perform ongoing eligibility determinations for 114,427 active providers. We used a statistical sampling method to randomly select and examine 59 newly enrolled providers and 59 active providers to determine if the Authority properly screened them based on their enrollment status and correctly determined their eligibility status. Of the 118 providers examined, we found seven instances for six providers (5 percent) when the Authority did not take the appropriate actions to ensure providers met eligibility requirements. Specifically, we found: ? Staff enrolled three providers without a valid CPA on file. Because the providers were not covered by a CPA, they were improperly enrolled. ? Staff did not conduct a proper license check for three providers. A proper license check for these providers would have led staff to identify that their license was either expired or did not cover the enrollment period, and, therefore, were ineligible. ? Staff did not properly screen one provider based on a moderate risk level. The improper screening checklist was used and the risk level was not properly addressed. To determine if the Authority had revalidated providers every five years or had taken actions to deactivate providers, we used computer-assisted audit techniques to analyze the entire population of 2,049 providers that should have been revalidated or deactivated during the fiscal year. We found the Authority?s internal controls were insufficient and resulted in none of the 2,049 providers (100 percent) being revalidated before the due date. We determined 648 providers were subsequently revalidated, and the Authority backdated them. We also determined 1,242 providers were deactivated, but the Authority did not process the deactivation until at least 30 days after the eligibility end date. There were an additional 159 providers that should have been deactivated, but the Authority did not take actions to deactivate or revalidate them. Federal law requires the Authority to check federal databases at least monthly to confirm the identity and exclusion status of providers. However, the automated system that performs these checks and notifies the Authority of possible problems with providers was not operating correctly, and it frequently provided incorrect information. Management decided to ignore this information and stopped performing the monthly database checks. The Authority did review the results of the check once during the fiscal year, in July of 2021. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. Cause of Condition Although the Authority has established internal controls over screening and enrolling providers, they were ineffective for preventing or detecting noncompliance. Management also did not ensure staff consistently followed the procedures in place. Additionally, the automated revalidation notification was inadequate for ensuring the Authority complied with the five-year revalidation requirement. To comply with this requirement, the Authority should notify providers about their revalidations and ensure they are started and completed before the due date. Our audit found that the Authority?s automated system is designed to notify providers of their revalidations one day after the due date. Due to this inadequate system design, all provider revalidations were completed after their due dates. Although management directed staff to stop performing the monthly database checks because of issues with the automated system, they did not reinstate the procedures used before the system was implemented so staff could continue verifying providers? identity and exclusion status. Effect of Condition and Questioned Costs By not conducting required licensing, screening, and enrollment processes in a timely manner, the Authority is at risk of not detecting or preventing ineligible providers from providing services to clients and receiving federal Medicaid and CHIP funds. Payments to providers who are ineligible are unallowable, and the Authority could be required to repay the grantor for these payments. We identified the following payments made to ineligible providers: Audit Area Known questioned costs (state and federal) Known questioned costs (federal portion only) Likely improper payments (state and federal) Likely improper payments (federal portion only) New Providers $7,092 $3,985 $1,317,224 $740,280 Deactivated Providers $302,372 $292,051 $399,999 $351,698 Not Revalidated or Deactivated $509,702 $316,241 Total $819,166 $612,277 $1,717,223 $1,091,978 In addition to the questioned costs in the table above, we also identified $26,148,599 in costs at risk for those providers whose revalidations were backdated. If the providers had not been revalidated, these costs would also be considered questioned costs. 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 Authority: ? Strengthen internal controls to ensure providers are adequately screened, licensed, enrolled, and eligible to provide and bill for services ? Implement internal controls designed to bring it into material compliance with the provider revalidation process Authority?s Response The Authority partially concurs with the finding. The Authority agrees that ProviderOne sends revalidation notifications one day after the due date rather than before the due date to allow time for the revalidation process. A system revision is in process, and we expect this issue to be resolved by the beginning of 2024. The Authority does not concur with the remainder of the auditor?s findings. The auditor provided the final exceptions and this finding at the close of the audit. The document with the final exceptions did not contain enough information for the Authority to adequately review the results of the auditor?s testing or the methodology used to calculate questioned costs. The time allotted to the Authority to review the testing results, seek clarification, and provide an agency response was not sufficient to analyze the results and provide an informed response. Due to the lack of complete information and time provided, the Authority is unable to agree or disagree with the results of the audit. Finally, on March 19, 2020, the Centers for Medicare & Medicaid Services (CMS) approved Washington?s request for an 1135 COVID-19 Emergency Declaration Blanket Waiver for Health Care Providers, effective through the end of the federal Public Health Emergency. This waiver temporarily suspended provider enrollment and revalidation requirements. Should the Authority agree with any or all of the results from the audit, it would not concur that questioned costs be returned because provider enrollment and revalidations requirements were temporarily suspended by CMS. Auditor?s Remarks We provided the Authority with preliminary exceptions on December 20, 2022 for ?Not Revalidated or Deactivated Providers? and on December 30, 2022 for ?New Providers?, ?Active Providers?, and ?Deactivated Providers?. The Authority provided additional information on January 31, 2023 that cleared some of the exceptions. We provided final exceptions on March 3, 2023 which included the unique transaction identifier for each exception. The Authority requested that we perform additional testing for the ?Deactivated Providers? on March 15th. The draft finding was provided to the Authority on April 14, 2023 and the Authority provided their response on May 3rd. Despite several years of the known system weaknesses, the Authority has not updated the system or implemented compensating processes to ensure providers are eligible to provide Medicaid and Chip services. Regarding the 1135 COVID-19 Emergency Declaration Blanket Waiver, the Authority informed us that beginning October 1, 2020, Authority management had reinstated the majority of provider eligibility requirements that had been waived. We reaffirm our finding with questioned costs and will follow up on the status of the Authority?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 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 CFR Part 200, Uniform Guidance, section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. 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 42 CFR Part 433, State Fiscal Administration, Subpart F ? Refunding of Federal Share of Medicaid Overpayments to Providers, describes the requirements for identifying, reporting, collecting, and remitting Medicaid overpayments. Title 42 CFR section 438 subpart H ? Additional Program Integrity Safeguards, states in part: Section 438.602 State responsibilities. (a) Monitoring contractor compliance. Consistent with ? 438.66, the State must monitor the MCO?s, PIHP?s, PAHP?s, PCCM?s or PCCM entity?s compliance, as applicable, with ?? 438.604, 438.606, 438.608, 438.610, 438.230, and 438.808. (b) Screening and enrollment and revalidation of providers. (1) The State must screen and enroll, and periodically revalidate, all network providers of MCOs, PIHPs, and PAHPs, in accordance with the requirements of part 455, subparts B and E of this chapter. This requirement extends to PCCMs and PCCM entities to the extent the primary care case manager is not otherwise enrolled with the State to provide services to FFS beneficiaries. This provision does not require the network provider to render services to FFS beneficiaries. (2) MCOs, PIHPs, and PAHPs may execute network provider agreements pending the outcome of the process in paragraph (b)(1) of this section of up to 120 days, but must terminate a network provider immediately upon notification from the State that the network provider cannot be enrolled, or the expiration of one 120 day period without enrollment of the provider, and notify affected enrollees. (c) Ownership and control information. The State must review the ownership and control disclosures submitted by the MCO, PIHP, PAHP, PCCM or PCCM entity, and any subcontractors as required in ? 438.608(c). (d) Federal database checks. Consistent with the requirements at ? 455.436 of this chapter, the State must confirm the identity and determine the exclusion status of the MCO, PIHP, PAHP, PCCM or PCCM entity, any subcontractor, as well as any person with an ownership or control interest, or who is an agent or managing employee of the MCO, PIHP, PAHP, PCCM or PCCM entity through routine checks of Federal databases. This includes the Social Security Administration?s Death Master File, the National Plan and Provider Enumeration System (NPPES), the List of Excluded Individuals/Entities (LEIE), the System for Award Management (SAM), and any other databases as the State or Secretary may prescribe. These databases must be consulted upon contracting and no less frequently than monthly thereafter. If the State finds a party that is excluded, it must promptly notify the MCO, PIHP, PAHP, PCCM, or PCCM entity and take action consistent with ? 438.610(c). Title 42 CFR section 455 Subpart B ? Disclosure of Information by Providers and Fiscal Agents, states in part: Section 455.104 Disclosure by Medicaid providers and fiscal agents: Information on ownership and control. (a) Who must provide disclosures. The Medicaid agency must obtain disclosures from disclosing entities, fiscal agents, and managed care entities. (b) What disclosures must be provided. The Medicaid agency must require that disclosing entities, fiscal agents, and managed care entities provide the following disclosures: (1) (i) The name and address of any person (individual or corporation) with an ownership or control interest in the disclosing entity, fiscal agent, or managed care entity. The address for corporate entities must include as applicable primary business address, every business location, and P.O. Box address. (ii) Date of birth and Social Security Number (in the case of an individual). (iii) Other tax identification number (in the case of a corporation) with an ownership or control interest in the disclosing entity (or fiscal agent or managed care entity) or in any subcontractor in which the disclosing entity (or fiscal agent or managed care entity) has a 5 percent or more interest. (2) Whether the person (individual or corporation) with an ownership or control interest in the disclosing entity (or fiscal agent or managed care entity) is related to another person with ownership or control interest in the disclosing entity as a spouse, parent, child, or sibling; or whether the person (individual or corporation) with an ownership or control interest in any subcontractor in which the disclosing entity (or fiscal agent or managed care entity) has a 5 percent or more interest is related to another person with ownership or control interest in the disclosing entity as a spouse, parent, child, or sibling. (3) The name of any other disclosing entity (or fiscal agent or managed care entity) in which an owner of the disclosing entity (or fiscal agent or managed care entity) has an ownership or control interest. (4) The name, address, date of birth, and Social Security Number of any managing employee of the disclosing entity (or fiscal agent or managed care entity). (c) When the disclosures must be provided ? (1) Disclosures from providers or disclosing entities. Disclosure from any provider or disclosing entity is due at any of the following times: (i) Upon the provider or disclosing entity submitting the provider application. (ii) Upon the provider or disclosing entity executing the provider agreement. (iii) Upon request of the Medicaid agency during the re-validation of enrollment process under ? 455.414. (iv) Within 35 days after any change in ownership of the disclosing entity. (2) Disclosures from fiscal agents. Disclosures from fiscal agents are due at any of the following times: (i) Upon the fiscal agent submitting the proposal in accordance with the State?s procurement process. (ii) Upon the fiscal agent executing the contract with the State. (iii) Upon renewal or extension of the contract. (iv) Within 35 days after any change in ownership of the fiscal agent. (3) Disclosures from managed care entities. Disclosures from managed care entities (MCOs, PIHPs, PAHPs, and HIOs), except PCCMs are due at any of the following times: (i) Upon the managed care entity submitting the proposal in accordance with the State?s procurement process. (ii) Upon the managed care entity executing the contract with the State. (iii) Upon renewal or extension of the contract. (iv) Within 35 days after any change in ownership of the managed care entity. (4) Disclosures from PCCMs. PCCMs will comply with disclosure requirements under paragraph (c)(1) of this section. (d) To whom must the disclosures be provided. All disclosures must be provided to the Medicaid agency. (e) Consequences for failure to provide required disclosures. Federal financial participation (FFP) is not available in payments made to a disclosing entity that fails to disclose ownership or control information as required by this section. Title 42 CFR section 455 Subpart E ? Provider Screening and Enrollment, states in part: Section 455.410 Enrollment and screening of providers (a) The State Medicaid agency must require all enrolled providers to be screened under to this subpart. (b) The State Medicaid agency must require all ordering or referring physicians or other professionals providing services under the State plan or under a waiver of the plan to be enrolled as participating providers. (c) The State Medicaid agency may rely on the results of the provider screening performed by any of the following: (1) Medicare contractors. (2) Medicaid agencies or Children?s Health Insurance Programs of other States. Section 455.412 Verification of provider licenses The State Medicaid agency must ? (a) Have a method for verifying that any provider purporting to be licensed in accordance with the laws of any State is licensed by such State. (b) Confirm that the provider?s license has not expired and that there are no current limitations on the provider?s license. Section 455.414 Revalidation of enrollment The State Medicaid agency must revalidate the enrollment of all providers regardless of provider type at least every 5 years. Section 455.436 Federal database checks The State Medicaid agency must do all of the following: (a) Confirm the identity and determine the exclusion status of providers and any person with an ownership or control interest or who is an agent or managing employee of the provider through routine checks of Federal databases. (b) Check the Social Security Administration?s Death Master File, the National Plan and Provider Enumeration System (NPPES), the List of Excluded Individuals/Entities (LEIE), the Excluded Parties List System (EPLS), and any such other databases as the Secretary may prescribe. (c) (1) Consult appropriate databases to confirm identity upon enrollment and reenrollment; and (2) Check the LEIE and EPLS no less frequently than monthly. Section 455.450 Screening levels for Medicaid providers. A State Medicaid agency must screen all initial applications, including applications for a new practice location, and any applications received in response to a re-enrollment or revalidation of enrollment request based on a categorical risk level of ?limited,? ?moderate,? or ?high.? If a provider could fit within more than one risk level described in this section, the highest level of screening is applicable. (a) Screening for providers designated as limited categorical risk. When the State Medicaid agency designates a provider as a limited categorical risk, the State Medicaid agency must do all of the following: (1) Verify that a provider meets any applicable Federal regulations, or State requirements for the provider type prior to making an enrollment determination. (2) Conduct license verifications, including State licensure verifications in States other than where the provider is enrolling, in accordance with ? 455.412. (3) Conduct database checks on a pre- and post-enrollment basis to ensure that providers continue to meet the enrollment criteria for their provider type, in accordance with ? 455.436. (b) Screening for providers designated as moderate categorical risk. When the State Medicaid agency designates a provider as a ?moderate? categorical risk, a State Medicaid agency must do both of the following: (1) Perform the ?limited? screening requirements described in paragraph (a) of this section. (2) Conduct on-site visits in accordance with ? 455.432. (c) Screening for providers designated as high categorical risk. When the State Medicaid agency designates a provider as a ?high? categorical risk, a State Medicaid agency must do both of the following: (1) Perform the ?limited? and ?moderate? screening requirements described in paragraphs (a) and (b) of this section. (2) (i) Conduct a criminal background check; and (ii) Require the submission of a set of fingerprints in accordance with ? 455.434. (d) Denial or termination of enrollment. A provider, or any person with 5 percent or greater direct or indirect ownership in the provider, who is required by the State Medicaid agency or CMS to submit a set of fingerprints and fails to do so may have its - (1) Application denied under ? 455.434; or (2) Enrollment terminated under ? 455.416. (e) Adjustment of risk level. The State agency must adjust the categorical risk level from ?limited? or ?moderate? to ?high? when any of the following occurs: (1) The State Medicaid agency imposes a payment suspension on a provider based on credible allegation of fraud, waste or abuse, the provider has an existing Medicaid overpayment, or the provider has been excluded by the OIG or another State?s Medicaid program within the previous 10 years. (2) The State Medicaid agency or CMS in the previous 6 months lifted a temporary moratorium for the particular provider type and a provider that was prevented from enrolling based on the moratorium applies for enrollment as a provider at any time within 6 months from the date the moratorium was lifted. Medicaid Provider Enrollment Compendium (MPEC) B. Enrolled Provider?s Payment Eligibility for Retroactive Dates of Service The practice of ?backdating? enrollment involves approving an enrollment with a retroactive billing date. This practice allows a provider, once enrolled, to submit claims for services dated prior to the date upon which the SMA approved the enrollment. As discussed earlier, provider screening enables states to identify ineligible parties before they are able to enroll and start billing. Components of provider screening include database and licensure checks, and may also include site visits and FCBCs. To the extent a SMA approves the enrollment of a new provider and permits the provider to bill for services dated prior to applicable screening(s), this practice creates risk. For example, if a newly enrolling provider is subject to a site visit, and the SMA completes a site visit for the provider but nonetheless permits the provider to bill for services dated prior to the date on which the site visit occurred, there is risk the prov
2022-062 The Health Care Authority did not have adequate internal controls over and did not comply with requirements to report recoveries of fraudulent overpayments on the CMS-64 report. Assistance Listing Number and Title: 93.775 State Medicaid Fraud Control Units 93.777 State Survey and Certification of Health Care Providers and Suppliers 93.777 COVID-19 ? State Survey and Certification of Health Care Providers and Suppliers 93.778 Medical Assistance Program 93.778 COVID-19 ? Medical Assistance Program Federal Grantor Name: U. S. Department of Health and Human Services Federal Award Number: 2105WAINCT; 2105WAIMPL; 2105WA5MAP; 2105WA5ADM; 2205WA5MAP; 2205WA5ADM Pass-through Entity: None Pass-through Award/Contract Number: None Applicable Compliance Component: Special Test and Provisions: Medicaid Fraud Control Unit (MFCU) Known Questioned Cost Amount: $977,613 Background Medicaid is a jointly funded state and federal partnership providing coverage for about 2.3 million eligible low-income Washington residents who otherwise might go without medical care. Medicaid is Washington?s largest public assistance program and usually accounts for about one-third of the State?s federal expenditures. During fiscal year 2022, the program spent about $17.6 billion in federal and state funds. The Health Care Authority is required to refer suspected fraud or other criminal violations to the Medicaid Fraud Control Division (MFCD) for investigation and prosecution. The Authority reports any overpayment recoveries resulting from MFCD actions on the CMS-64 report. The CMS-64 report is the quarterly statement of Medicaid Program expenditures that agencies use to report the actual program benefit costs and administrative expenses to the Centers for Medicare & Medicaid Services (CMS). CMS uses this information to compute the federal financial participation for the state?s Medicaid Program costs. When MFCD completes an investigation, it sends the final results over to the Authority for management review and signature. After a final judgement is made on an overpayment resulting from fraud, the State has 30 days to refund the entire federal share. Once the Authority receives the outcome, a Journal Voucher (JV) is created to move the federal portion of the overpayment over to state-only funding, which creates a credit on the CMS-64 report. Federal regulations require recipients 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 prior audits, we reported the Authority did not have adequate internal controls over and did not comply with requirements to report MCFD overpayment recoveries on the CMS-64 report. The prior finding numbers were 2021-052 and 2020-050. Description of Condition The Authority did not have adequate internal controls over and did not comply with requirements to report recoveries of fraudulent overpayments on the CMS-64 report. Our audit found the Authority did not create JVs to move the entire federal portion of the two final judgments resulting from fraud over to state-only funding or report the entire overpayment on the CMS-64 report as a credit. Instead, the Authority only created JVs of the payments as they were made to the State. Additionally, the Authority did not have policies and procedures in place that described the process staff should follow for creating the JV or for reporting the MFCD overpayments on the CMS-64 report. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. Cause of Condition Management did not implement sufficient internal controls to ensure the Authority returned recoveries of fraudulent overpayments to the grantor in a timely manner. Additionally, the MFCD inadvertently did not notify the Authority at the time of final filing for one judgement resolution. Effect of Condition and Questioned Costs For fiscal year 2022, two final judgements were made totaling $2,792,013 in overpayments resulting from fraud. The Authority created JVs and reported $139,718 on the CMS-64 report dated June 30, 2022. JVs for the entire federal portion should have been processed and reported on the June 30, 2022 CMS-64 report. We are questioning the costs of $977,613 that the Authority did not report on the CMS-64 report or return to CMS, as federal regulations require. 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 Authority: ? Establish a formal process to ensure it properly reports recoveries of fraudulent overpayments on the quarterly CMS-64 report ? Consult with the federal grantor about whether or not the questioned costs identified in the finding should be repaid Authority?s Response The Authority partially concurs with the finding. It has documented the processes and procedures staff will follow to acknowledge and comply with the applicable federal rules and regulations concerning the timely return of federal revenue associated with fraudulent overpayments. The authority does not concur with repayment of $976,580 questioned costs related to one of the fraud referrals. The provider in this case was out of business and its business license expired May 2017, and then became inactive October 2017. The State pursued assets through available means and through the court. Final court rulings were made in June 2022, and in April 2023, within one year of the final rulings, the Attorney General?s Office certified that the defaulted corporation had no identifiable assets. In accordance with 42 CFR 433.318 (d) the provider is out of business and the Authority is not required to refund overpayment to CMS. The Authority will work with the Centers for Medicaid & Medicare Services to coordinate the return of the remaining $1,032 in identified questioned costs. Auditor?s Remarks The Authority states that the $976,580 in questioned costs is not required to be returned due to the corporation having no identifiable assets. While this may be the case since the Attorney General?s Office certified the corporation had no assets on April 13th, 2023, which was outside of our audit scope, the summary judgement order for this case was issued on May 2, 2022, and the overpayments were required to be returned within 30 days of that ruling. We reaffirm our finding and will follow up on the status of the Authority?s corrective action during our next audit. Applicable Laws and Regulations Title 42 U.S. Code of Federal Regulations (CFR) Part 433, State Fiscal Administration, Subpart F ? Refunding of Federal Share of Medicaid Overpayments to Providers, describes the requirements for identifying, reporting, collecting, and remitting Medicaid overpayments. 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. Title 2 CFR Part 200, Uniform Guidance, section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. 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 42 CFR Part 433, State Fiscal Administration, Subpart F ? Refunding of Federal Share of Medicaid Overpayments to Providers states in part: Section 433.300 Basis. This subpart implements - (a) Section 1903(d)(2)(A) of the Act, which directs that quarterly Federal payments to the States under title XIX (Medicaid) of the Act are to be reduced or increased to make adjustment for prior overpayments or underpayments that the Secretary determines have been made. (b) Section 1903(d)(2)(C) and (D) of the Act, which provides that a State has 1 year from discovery of an overpayment for Medicaid services to recover or attempt to recover the overpayment from the provider before adjustment in the Federal Medicaid payment to the State is made; and that adjustment will be made at the end of the 1-year period, whether or not recovery is made, unless the State is unable to recover from a provider because the overpayment is a debt that has been discharged in bankruptcy or is otherwise uncollectable. (c) Section 1903(d)(3) of the Act, which provides that the Secretary will consider the pro rata Federal share of the net amount recovered by a State during any quarter to be an overpayment. Section 433.312 Basic requirements for refunds. (a) Basic rules. (1) Except as provided in paragraph (b) of this section, the State Medicaid agency has 1 year from the date of discovery of an overpayment to a provider to recover or seek to recover the overpayment before the Federal share must be refunded to CMS. (2) The State Medicaid agency must refund the Federal share of overpayments at the end of the 1-year period following discovery in accordance with the requirements of this subpart, whether or not the State has recovered the overpayment from the provider. (b) Exception. The agency is not required to refund the Federal share of an overpayment made to a provider when the State is unable to recover the overpayment amount because the provider has been determined bankrupt or out of business in accordance with ? 433.318. Section 433.316 When discovery of overpayment occurs and its significance. (a) General rule. The date on which an overpayment is discovered is the beginning date of the 1-year period allowed for a State to recover or seek to recover an overpayment before a refund of the Federal share of an overpayment must be made to CMS. (b) Requirements for notification. Unless a State official or fiscal agent of the State chooses to initiate a formal recoupment action against a provider without first giving written notification of its intent, a State Medicaid agency official or other State official must notify the provider in writing of any overpayment it discovers in accordance with State agency policies and procedures and must take reasonable actions to attempt to recover the overpayment in accordance with State law and procedures. (c) Overpayments resulting from situations other than fraud. An overpayment resulting from a situation other than fraud is discovered on the earliest of - - (1) The date on which any Medicaid agency official or other State official first notifies a provider in writing of an overpayment and specifies a dollar amount that is subject to recovery; (2) The date on which a provider initially acknowledges a specific overpaid amount in writing to the medicaid agency; or (3) The date on which any State official or fiscal agent of the State initiates a formal action to recoup a specific overpaid amount from a provider without having first notified the provider in writing. (d) Overpayments resulting from fraud. (1) An overpayment that results from fraud is discovered on the date of the final written notice (as defined in ? 433.304 of this subchapter) of the State's overpayment determination. (2) When the State is unable to recover a debt which represents an overpayment (or any portion thereof) resulting from fraud within 1 year of discovery because no final determination of the amount of the overpayment has been made under an administrative or judicial process (as applicable), including as a result of a judgment being under appeal, no adjustment shall be made in the Federal payment to such State on account of such overpayment (or any portion thereof) until 30 days after the date on which a final judgment (including, if applicable, a final determination on an appeal) is made. (3) The Medicaid agency may treat an overpayment made to a Medicaid provider as resulting from fraud under subsection (d) of this section only if it has referred a provider's case to the Medicaid fraud control unit, or appropriate law enforcement agency in States with no certified Medicaid fraud control unit, as required by ? 455.15, ? 455.21, or ? 455.23 of this chapter, and the Medicaid fraud control unit or appropriate law enforcement agency has provided the Medicaid agency with written notification of acceptance of the case; or if the Medicaid fraud control unit or appropriate law enforcement agency has filed a civil or criminal action against a provider and has notified the State Medicaid agency. (e) Overpayments identified through Federal reviews. If a Federal review at any time indicates that a State has failed to identify an overpayment or a State has identified an overpayment but has failed to either send written notice of the overpayment to the provider that specified a dollar amount subject to recovery or initiate a formal recoupment from the provider without having first notified the provider in writing, CMS will consider the overpayment as discovered on the date that the Federal official first notifies the State in writing of the overpayment and specifies a dollar amount subject to recovery. (f) Effect of changes in overpayment amount. Any adjustment in the amount of an overpayment during the 1-year period following discovery (made in accordance with the approved State plan, Federal law and regulations governing Medicaid, and the appeals resolution process specified in State administrative policies and procedures) has the following effect on the 1-year recovery period: (1) A downward adjustment in the amount of an overpayment subject to recovery that occurs after discovery does not change the original 1-year recovery period for the outstanding balance. (2) An upward adjustment in the amount of an overpayment subject to recovery that occurs during the 1-year period following discovery does not change the 1-year recovery period for the original overpayment amount. A new 1-year period begins for the incremental amount only, beginning with the date of the State's written notification to the provider regarding the upward adjustment. (g) Effect of partial collection by State. A partial collection of an overpayment amount by the State from a provider during the 1-year period following discovery does not change the 1-year recovery period for the balance of the original overpayment amount due to CMS. (h) Effect of administrative or judicial appeals. Any appeal rights extended to a provider do not extend Section 433.320 Procedures for Refunds to CMS. (a) Basic requirements. (1) The agency must refund the Federal share of overpayments that are subject to recovery to CMS through a credit on its Quarterly Statement of Expenditures (Form CMS-64). (2) The agency must credit CMS with the Federal share of overpayments subject to recovery on the earlier of - (i) The Form CMS-64 submission due to CMS for the quarter in which the State recovers the overpayment from the provider; or (ii) The Form CMS-64 due to CMS for the quarter in which the 1-year period following discovery, established in accordance with ? 433.316, ends. (3) A credit on the Form CMS-64 must be made whether or not the overpayment has been recovered by the State from the provider. (4) If the State does not refund the Federal share of such overpayment as indicated in paragraph (a)(2) of this section, the State will be liable for interest on the amount equal to the Federal share of the non-recovered, nonrefunded overpayment amount. Interest during this period will be at the Current Value of Funds Rate (CVFR), and will accrue beginning on the day after the end of the 1-year period following discovery until the last day of the quarter for which the State submits a CMS-64 report refunding the Federal share of the overpayment.