February 16, 2005

Sally L. Stroup

Assistant Secretary

Office of Postsecondary Education

1990 K Street NW

Room 7115

Washington, DC 20006

Dear Ms. Stroup:

This final audit report, Control Number ED-OIG/A07-E0009, presents the
results of our audit of the Talent Search program at the U.S. Department
of Education (Department). The objective of our audit was to determine,
through audits of a nationwide sample of Talent Search projects, whether
the practice of overstating the funded target population is widespread.
This report is a compilation of work conducted at the Federal TRIO
Office (TRIO Office), as well as issues identified from six Talent
Search project audits listed in Attachment 1.

We determined that the TRIO Office did not maintain sufficient internal
control over Talent Search participant numbers because it did not (i)
properly maintain the records and procedures needed to readily determine
the correct number of participants planned or (ii) provide the
monitoring and policy guidance needed to insure accurate reporting of
participants served. We conclude that the practice of overstating the
funded target population could be widespread.[^1] As a result, the
Department may be using overstated Talent Search participant numbers for
assessing grant performances and reporting to Congress and the general
public. We recommend changes to the grant award process and improvements
in record-keeping as well as enhanced monitoring and policy guidance to
improve the accuracy of Talent Search participant numbers.

We provided the Department with the draft of this report on November 2,
2004. In its response dated January 3, 2005, the Department indicated
that action has been taken to address each of the recommendations
(response attached in full in Attachment 2). Based on the Department's
response, minor edits were made to the finding. We also provided more
information on the sample selection methodology and results.

**AUDIT RESULTS**

[Talent Search Participants, Both Planned And Served, Were Overstated\
]{.underline}

Planned Talent Search participants posted on the TRIO website were
overstated for half of the projects audited and Talent Search
participants served were over-reported for all the projects audited.
Differences in the Talent Search participant numbers, both planned and
served, were noted from various Department sources for the six audited
projects. These sources are the basis for the participant numbers the
Department may use for monitoring, generating reports, and providing
information to Congress and the general public. Participants planned
were overstated due in part to the reduction of initial numbers through
negotiations between the Department and applicants. The differences in
the stated number of planned participants often occurred because the
reduced numbers were not reflected on the Department\'s internal
database or the official TRIO website. In addition, poor maintenance of
official grant files further contributed to the inconsistent numbers.
Participants served were overstated because grantees often reported
participants for whom they could not document eligibility and/or at
least one eligible service.

+-------------------------+---------+------+-------+-------+---------+
| # Differences           |         |      |       |       |         |
|  In Talent Search Parti |         |      |       |       |         |
| cipant Numbers From Var |         |      |       |       |         |
| ious Department Sources |         |      |       |       |         |
+-------------------------+---------+------+-------+-------+---------+
| **2001--2002 Award      | **PL    |      |       | **SER |         |
| Year**                  | ANNED** |      |       | VED** |         |
+-------------------------+---------+------+-------+-------+---------+
| **Grantee**             | **Grant | **   | **A   | **    | **Pr    |
|                         | Applic  | TRIO | ctual | Repor | ojected |
|                         | ation** | W    | Ne    | ted** | \***    |
|                         |         | ebsi | gotia |       |         |
|                         |         | te** | ted** |       |         |
+-------------------------+---------+------+-------+-------+---------+
| Luther College          | 900     | 850  | 625   | 610   | 363     |
+-------------------------+---------+------+-------+-------+---------+
| University of New       | 1,350   | 1    | 1,150 | 1,207 | 1,089   |
| Hampshire               |         | ,200 |       |       |         |
+-------------------------+---------+------+-------+-------+---------+
| Case Western Reserve    | 800     | 600  | 600   | 605   | 399     |
| University              |         |      |       |       |         |
+-------------------------+---------+------+-------+-------+---------+
| Wahupa Educational      | 2,665   | 2    | 2,300 | 2,584 | 2,381   |
| Services                |         | ,300 |       |       |         |
+-------------------------+---------+------+-------+-------+---------+
| Communities in Schools  | 700     | 600  | 600   | 604   | 481     |
| of San Antonio          |         |      |       |       |         |
+-------------------------+---------+------+-------+-------+---------+
| LULAC National          | 20,300  | 14   | 1     | 1     | 13,608  |
| Educational Service     |         | ,700 | 2,200 | 5,228 |         |
| Centers, Inc.           |         |      |       |       |         |
+-------------------------+---------+------+-------+-------+---------+
| \*The number of         |         |      |       |       |         |
| participants served are |         |      |       |       |         |
| point estimates based   |         |      |       |       |         |
| on our statistical      |         |      |       |       |         |
| samples.                |         |      |       |       |         |
+-------------------------+---------+------+-------+-------+---------+

[Participants Planned Were Routinely Reduced and Grant Records Were Not
Well Maintained]{.underline}. According to TRIO officials, Talent Search
applicants often proposed larger projects than could be realistically
funded. For the six projects audited, the Department reduced the
ultimate award amount, which resulted in a lower participant number.
Once projects were selected, TRIO officials developed an initial list of
all funded Talent Search projects for the award period. This funded list
was used as the basis for the TRIO Office internal management database
and posted on the Talent Search website. However, prior to the 2003-2004
award year, it was common practice for the Department to continue to
negotiate the participant number through a partnership agreement. The
partnership agreement often contained another revised participant
number, but the database and website were not always updated with the
revised number.

The handbook for discretionary grants[^2] requires program staff to
create and maintain an official grant file for each application selected
for funding. Program specialists are also responsible for updating
participant numbers by reporting all changes of information to the
Program Management and Development Team Leader. However, discussions
with program staff indicated that file maintenance is a low priority and
TRIO Office management has not developed specific guidance for program
specialists to assure timely and accurate updates to the website.

For three of the six projects audited, the TRIO Office had difficulty
determining the exact number of participants these projects planned to
serve because the grant file for one project was missing, and proposed
revisions to the 1998--1999 partnership agreements were incomplete for
all three. In addition, we found three grantees had further reductions
that had not been updated on the TRIO website.

+--------------------------------+---------+------+---------+---------+
| **Differences in Talent Search |         |      |         |         |
| Participants Planned 2001-2002 |         |      |         |         |
| Award Year**                   |         |      |         |         |
+--------------------------------+---------+------+---------+---------+
| **Grantee**                    | **Grant | **   | *       | **Overs |
|                                | Applic  | TRIO | *Actual | tated** |
|                                | ation** | W    | Negoti  |         |
|                                |         | ebsi | ation** |         |
|                                |         | te** |         |         |
+--------------------------------+---------+------+---------+---------+
| Luther College^1^              | 900     | 850  | 625     | 225     |
+--------------------------------+---------+------+---------+---------+
| University of New Hampshire    | 1,350   | 1    | 1,150   | 50      |
|                                |         | ,200 |         |         |
+--------------------------------+---------+------+---------+---------+
| Case Western Reserve           | 800     | 600  | 600     | 0       |
| University                     |         |      |         |         |
+--------------------------------+---------+------+---------+---------+
| Wahupa Educational Services^2^ | 2,665   | 2    | 2,300   | 0       |
|                                |         | ,300 |         |         |
+--------------------------------+---------+------+---------+---------+
| Communities in Schools of San  | 700     | 600  | 600     | 0       |
| Antonio                        |         |      |         |         |
+--------------------------------+---------+------+---------+---------+
| LULAC National Educational     | 20,300  | 14   | 12,200  | 2,400   |
| Service Centers, Inc.^3^       |         | ,700 |         |         |
+--------------------------------+---------+------+---------+---------+
| Notes: 1. Partnership          |         |      |         |         |
| agreement in file was 850,     |         |      |         |         |
| however in 1999 the grantee    |         |      |         |         |
| requested to reduce the        |         |      |         |         |
| participant number to 625. The |         |      |         |         |
| program specialist sent a      |         |      |         |         |
| letter dated September 4,      |         |      |         |         |
| 2002, while we were on site    |         |      |         |         |
| doing audit work, approving    |         |      |         |         |
| the 625 participants           |         |      |         |         |
| retroactively to 1998.         |         |      |         |         |
|                                |         |      |         |         |
| > 2\. Missing File, grantee    |         |      |         |         |
| > did not have a partnership   |         |      |         |         |
| > agreement.                   |         |      |         |         |
| >                              |         |      |         |         |
| > 3\. Approved participant     |         |      |         |         |
| > number change not in grant   |         |      |         |         |
| > file, but obtained from      |         |      |         |         |
| > auditee.                     |         |      |         |         |
+--------------------------------+---------+------+---------+---------+

It may be difficult for the TRIO Office to determine the agreed upon
numbers of Talent Search participants funded for monitoring or reporting
purposes, since neither the award database nor the official grant files
were complete for the six audited projects. In addition, during the
course of our audit work, we found no evidence that the Department had
conducted on-site monitoring of the six individual projects.

The Federal TRIO Director told us that the uncertainty about the number
of participants funded no longer exists, because partnership agreements
were discontinued in the 2003-2004 award year, and grantees will be held
to the original grant application. Grantees received a letter informing
them of this action. The letter requested a statement declaring the
number of participants to be served in 2003-2004; however, it was
unclear whether that number needed to be approved by a program
specialist. To test the effect of the discontinuation of the partnership
agreements, we randomly selected 89 of the 471 2003-2004 Talent Search
projects. Although one grant file was missing, only 52 of the remaining
88 files contained a statement on the number of participants the grantee
would serve.[^3] Again we noted differences from the grant application
and differences in the website list, with no documentation supporting
the change. We noted some program specialists stamped approved on the
participant statement, but for statements missing from the program file,
or having no notation, the number of participants funded remains
questionable. Management's change in policy implemented during the
2003-2004 grant award period did not establish an effective internal
control to provide certainty as to the number of Talent Search
participants funded.

####### [Participants Served Were Overstated by Grantees]{.underline}. None of the six grantees audited could provide sufficient reliable documentation to support the number of participants reported to the Department as served for the 2001-2002 award period. 

+--------------------------------------+--------+------+------+-------+
| # T                                  |        |      |      |       |
| alent Search Participants Served Fro |        |      |      |       |
| m Audits of 2001-2002 Grant Projects |        |      |      |       |
+--------------------------------------+--------+------+------+-------+
| **Grantee**                          | **Repo | **Se | **   |       |
|                                      | rted** | rved | Over |       |
|                                      |        | \*** | stat |       |
|                                      |        |      | ed** |       |
+--------------------------------------+--------+------+------+-------+
|                                      |        |      | **   | **%** |
|                                      |        |      | Numb |       |
|                                      |        |      | er** |       |
+--------------------------------------+--------+------+------+-------+
| Luther College                       | 610    | 363  | 247  | 40 %  |
+--------------------------------------+--------+------+------+-------+
| University of New Hampshire          | 1,207  | 1    | 118  | 10 %  |
|                                      |        | ,089 |      |       |
+--------------------------------------+--------+------+------+-------+
| Case Western Reserve University      | 605    | 399  | 206  | 34 %  |
+--------------------------------------+--------+------+------+-------+
| Wahupa Educational Services          | 2,584  | 2    | 203  | 8 %   |
|                                      |        | ,381 |      |       |
+--------------------------------------+--------+------+------+-------+
| Communities in Schools of San        | 604    | 481  | 120  | 20 %  |
| Antonio                              |        |      |      |       |
+--------------------------------------+--------+------+------+-------+
| LULAC National Educational Service   | 15,228 | 13   | 1    | 11 %  |
| Centers, Inc.                        |        | ,608 | ,620 |       |
+--------------------------------------+--------+------+------+-------+
| \*The numbers served are point       |        |      |      |       |
| estimates based on audit statistical |        |      |      |       |
| samples of reported participants.    |        |      |      |       |
+--------------------------------------+--------+------+------+-------+

In part, the lack of quality data is due to the Department not providing
clear, concise, and consistent guidance necessary to ensure that
grantees understand and comply with Federal regulations. Consequently,
grantees reported ineligible project services; undocumented project
services; undocumented citizenship; and served non-participants, prior
to determination of participant eligibility.

Additional Departmental guidance suggested by grantee officials included

-   sample forms,

-   a data library for directors,

-   examples of best practices,

-   clarification of allowable and unallowable project services, and

-   clarification of adequate documentation for eligibility, i.e.,
    project services, citizenship, and first generation status.

The following are two examples of inconsistent guidance the Department
provided to a grantee and the OIG.

-   One grantee stated that it began serving students who were neither
    citizens nor permanent residents after attending a presentation
    where a TRIO Educational Specialist at a TRIO Conference said
    "intent" was not defined in the regulation and was "open to
    interpretation by the individual." The grantee concluded that under
    its interpretation, "intent" was simply getting a family's home
    address or showing that the student was enrolled in a public school.
    However, the regulation states that an individual is eligible to
    participate in a Talent Search project if the individual is in the
    United States for other than a temporary purpose and provides
    evidence from the Immigration and Naturalization Service (INS) of
    his or her intent to become a permanent resident (34 C.F.R. §
    643.3(a)). The regulation clearly states that evidence must be
    provided from the INS to show the individual's intent to become a
    permanent resident.

-   In February 2003, during one of our Talent Search audits, we sought
    official guidance from the TRIO Office on accepting information on
    first generation status from a minor child. A TRIO official provided
    a written response stating that first generation status should be
    verified by the parent or other knowledgeable adult. In March 2004,
    while we were continuing our audit work, the Federal TRIO Director
    informed us that the Department had reversed its position and would
    now accept information provided by the minor with no further
    verification.

[The Department's Participant Numbers May Be Overstated in Its Reports
to Congress and the General Public]{.underline}. The TRIO Office uses
Talent Search participant numbers to monitor the program, generate
reports, and provide information to Congress and the general public.
Based on the results of our work, these participant numbers may be
overstated. Unless the TRIO Office provides consistent and reliable
guidance to grantees, and makes monitoring a priority, overstated
participant numbers may continue. Participant numbers are reported both
within and outside the Department:

-   To respond to Congressional requests.

-   To produce a TRIO profile report.

-   To assess a grantee's progress in meeting its approved goals and
    objectives.

-   To determine if a grantee should receive prior experience points for
    a new grant or continuation of an existing grant.

-   To provide national information on project participants and program
    outcomes, i.e., Council for Opportunity in Education (COE), TRIO
    website.

-   To calculate the average cost per participant.

-   To report information on the Program Assessment Rating Tool (PART).

***Recommendations:***

We recommend that the Assistant Secretary of the Office of Postsecondary
Education

1.  Modify the application process by

-   requiring grantees to propose realistic participant numbers in the
    grant application, and

-   discontinuing the practice of revising planned participant numbers
    after the Talent Search grant has been awarded.

    1.  Ensure that program staff follow policies and procedures in

```{=html}
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-   maintaining official grant files in accordance with internal
    guidelines,

-   prescribing specific procedures for updating grant information to
    senior program staff, and

-   documenting justification for any deviation from the approved grant
    application, including a change in planned participant numbers.

    1.  Make monitoring a higher priority by conducting on-site reviews
        focusing on grantees that

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```
-   are designated high-risk,

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```
-   have not submitted required reports, i.e., single audit, annual
    performance reports, or

-   have not met program objectives, including serving the funded
    participant number.

    1.  Establish a mechanism for publishing specific, accessible, and
        consistent policy guidance that enables grantees to effectively
        administer their project. Guidance may include examples of forms
        and best practices, and should address important questions such
        as:

```{=html}
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```
-   What is an acceptable project service?

-   When do you count an individual as a participant? and

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```
-   What is sufficient reliable documentation to establish individual
    participant eligibility?

## Auditee Response 

The Department's response noted that, upon Office of Postsecondary
Education (OPE) and the Office of Chief Financial Officer review, some
of the OIG's recommendations, contained in the six audits this report
was based on, were modified or not sustained and four have been
resolved.

In addition, OPE expressed an overall concern with the methodology used
to demonstrate a widespread programmatic practice because the audits did
not constitute either a true random sample or a sample with the
statistical power to extrapolate to the entire population of grantees.
OPE stated that it was improper to combine a purposively selected
largest project with a random sample of other projects and that a proper
"nationwide sample" should be selected by grouping auditees into size
categories for sample selection.

OPE reported that, based on the six issued audits, the Federal TRIO
Director had already implemented policy and procedural guidance to
ensure that grantees do not overstate participant populations, but
acknowledged that there were some weaknesses in implementing the
changes. OPE is establishing the following additional policy and
procedural improvements in response to the specific recommendations.

[Responses to Specific Recommendations\
]{.underline}

1.  Talent Search applicants will be required to propose realistic
    participant numbers in their grant applications and be required to
    meet the proposed goals and objectives based on funding guidelines
    to be published. In Spring 2004, a letter to current grantees
    informed them that they will be held to participant numbers
    previously established.

2.  Steps have already been taken that would ensure program staff
    maintain official grant files in accordance with internal guidelines
    including staff training and inclusion in revised EDPAS agreements.
    In addition program staff must obtain approval from the Team Leader
    to reduce a grantees participant numbers. If approval is granted, it
    is the program specialist's responsibility to document the action in
    the grant file and ensure that the database is updated.

3.  The Department pointed out that monitoring has and will continue to
    be a high priority for the TRIO Program Office and there are
    currently no grantees designated as "high risk."

4.  The Department responded that the TRIO program office has several
    mechanisms in place to disseminate information to the TRIO
    community, such as the Training Program for Federal TRIO Programs, a
    recently established TRIO newsletter, and the TRIO Website.

### OIG Comments

While the Department either modified or did not sustain some of the
recommendations for the four resolved audit reports, it did concur that
the Talent Search participant numbers reported by the grantees to the
Department were not fully supported, and therefore overstated. Of the
four audits resolved, the Department fully sustained the findings and
recommendations for two audits. For the third, the Department fully
sustained the finding that participants were over-reported, but did not
sustain the monetary refund because the entity provided additional
post-audit documentation. The Department partially sustained the number
of over-reported participants on the fourth, yet chose to assess a
pro-rata monetary recovery even though it agreed that the reported
participants were overstated by approximately 11 percent, and that the
project failed to meet the minimum program size by that same percentage.

[]{.mark}

We disagree that the sample did not represent a "nationwide sample" and
that the results did not support our audit objective. Our sample,
representative of all Talent Search projects, was randomly selected from
a stratified universe of all funded Talent Search projects for the
2001-2002 award year, just as suggested in OPE's response. The largest
project was not selected purposively, but was selected because it was
the only project in its stratum. A chart showing the detail of each of
the strata has been added to the Audit Objective, Scope, and Methodology
section of this report (page 10). To further explain the audit results,
we have added a footnote to page 1 of this report to explain, that while
the sample was too small to project the total number of participants
overstated (a variable sample), it was sufficient to conclude that the
existence of projects with overstated participant numbers (an attribute
sample) was widespread.

#### Specific recommendations

1.  We agree with the action taken by the Department.

2.  We agree with the action taken by the Department.

3.  We commend the TRIO Program Office for the number of TRIO site
    visits conducted over the last two years, and for providing program
    staff the necessary training to conduct on-site monitoring and
    fiscal reviews. However, it is not clear how many site visits were
    conducted at Talent Search projects. Monitoring and on-site reviews
    of Talent Search projects is crucial to ensure that the information
    submitted by grantees is complete and reliable. As shown in this
    report, four of the six projects audited failed to meet their funded
    participant number, and three of the six projects failed to serve
    the required minimum of 600 participants. Therefore, the Department
    should continue to make monitoring and on-site reviews a priority
    focusing on grantees that have not met their program objectives,
    which includes serving the funded participant number.

4.  The Department listed five priorities to be covered through its
    Training Program for Federal TRIO Programs. However, the Department
    does not have control over what particular topics or materials the
    grantees of the Training Program offer the TRIO community. Further,
    we noted the TRIO newsletters (Fall and Winter) and the TRIO Website
    contained general information about the TRIO programs. We did not
    find information in relation to the findings or recommendations from
    the OIG Talent Search audits, the Department's program site reviews,
    or suggestions made by grantees, such as providing examples of best
    practices, a data library for directors, or sample forms. Providing
    specific information to grantees may help reduce or eliminate these
    types of findings in the future.

**OTHER MATTERS**

***Talent Search Participant Numbers Fall Below the Minimum 600
Participant Requirement***

According to 34 C.F.R. § 643.32(b), Talent Search grantees are required
to serve a minimum of 600 participants each budget period. Three of the
six grantees failed to serve 600 participants for the budget period
reviewed. If the Department is not monitoring participant numbers and is
not enforcing the regulatory requirement that grantees meet the current
minimum participant number, then the regulation is meaningless and the
Office of Postsecondary Education (OPE) should consider a regulatory
change to establish a more appropriate minimum number of participants
required for an eligible Talent Search project.

***Talent Search Projects Provide Services to Uncounted and Often
Ineligible Students***

In two of our six audits, we identified instances where services were
routinely provided simultaneously with the collection of Intake forms
(participant application) without verifying information or obtaining
necessary documentation for participant eligibility, resulting in
services being provided to ineligible individuals. OPE should consider a
regulatory change to require grantees to determine eligibility prior to
providing services to individuals. This would avoid diluting the
services to eligible individuals.

###### BACKGROUND

Title IV of the Higher Education Act of 1965, as amended (20 U.S.C. §
1070a-11 and 12), authorizes the Talent Search program. The Talent
Search program is governed by the regulations in 34 C.F.R. Part 643. All
regulatory citations in the report are to the regulations in effect as
of July 1, 2001, for our work on the six individual audits, and July 1,
2003, for our work at the Federal TRIO office.

In 1965, Talent Search was created as part of the Higher Education Act.
It is one of nine TRIO outreach and support programs. The goal of Talent
Search is to increase the number of youths from disadvantaged
backgrounds who complete high school and enroll in postsecondary
education. The Talent Search program identifies and assists individuals
from disadvantaged backgrounds who have the potential to succeed in
higher education. The program provides academic, career, and financial
counseling to its participants and encourages them to graduate from high
school and continue on to the postsecondary institution of their choice.
Talent Search also serves high school dropouts by encouraging them to
re-enter the educational system and complete their education.

Talent Search projects may be sponsored by institutions of higher
education, public and private agencies or organizations, a combination
of these, and in exceptional cases, secondary schools. Students must be
between the ages of 11 and 27 and have completed the fifth grade. In any
given project, at least two-thirds of the participants must be
low-income individuals and potential first-generation college students.
A veteran, regardless of age, may participate if otherwise eligible.

The Department awarded 360 Talent Search projects in the 2001-2002 award
year with appropriations totaling \$109,960,406. In the 2003-2004 award
year, the Department reports 471 Talent Search projects were awarded
with appropriations totaling \$144,810,906.

**AUDIT OBJECTIVE, SCOPE, AND METHODOLOGY\
**

The objective of our audit was to determine, through audits of a
nationwide sample of Talent Search projects, whether the practice of
overstating the funded target population is widespread. Our review
focused on the Department's procedures to assure the accuracy of
participant numbers. We considered the results of each of the six
2001-2002 individual audits. (See Attachment 1.) In addition, we
randomly selected 89 of 471 2003-2004 Talent Search grant files for
review.

To achieve our overall audit objective we:

-   reviewed applicable laws and regulations governing the Talent Search
    program;

-   conducted interviews with program officials and staff in the Talent
    Search office located in Washington, DC;

-   reviewed a sample of the Department's current Talent Search grant
    files;

-   obtained and analyzed documentation related to Talent Search
    projects; and

-   audited six Talent Search projects.

We established four strata for the 360 Talent Search projects from the
TRIO website based on the number of participants reported ranging from
480 to 14,700. We selected the largest project (in its own stratum) and
randomly selected the remaining five projects from the remaining three
strata.

  --------------------- -------------------------- ----------------------
  **Population Count**  **Number of Projects       **Number of Projects
                        (Based on Talent Search    Selected from each
                        Website)**                 Strata for Sample**

  14,700                1                          1

  1,001 -- 2,500        64                         2

  700 -- 1,000          166                        1

  \< 700                129                        2
  --------------------- -------------------------- ----------------------

The primary objective for each of the individual audits was to
determine, through a random sample of participants from each project, if
each grantee had administered its Talent Search grant in accordance with
the law and Talent Search regulations governing the documentation of
participant eligibility (34 C.F.R. § 643.32). A secondary objective was
to determine if each of the individual grantees met the two-thirds
assurance requirement for serving low-income and first-generation
participants. The Office of Inspector General (OIG) issued individual
audit reports to each Talent Search grantee. (See Attachment 1 for
details.)

We relied on computerized records to determine the number of Talent
Search projects funded for the 2003-2004 award year. Based on our
assessments, we concluded that the data used was sufficiently reliable
for the purpose of our audit.

An entrance conference was held at the Federal TRIO Office located in
Washington, DC on November 19, 2003. Fieldwork was conducted during the
weeks of November 17-21, 2003, and May 3-7, 2004. An exit conference was
held on September 28, 2004, with Office of Postsecondary Education
officials, including Federal Talent Search officials.

This audit and each of the six individual audits were conducted in
accordance with generally accepted government auditing standards
appropriate to the scope of each audit.

**STATEMENT ON INTERNAL CONTROLS**

As part of our review we assessed the system of internal controls,
policies, procedures, and practices applicable to the Department's
administration of the Talent Search program relevant to the scope of our
review. Our assessment included a determination of whether the Federal
TRIO Office provided a reasonable level of assurance that the number of
Talent Search program participants funded and served is being
appropriately recorded and reported.

For the purpose of this report, we assessed and classified the
significant controls into the following categories:

 Participant numbers funded during the 2001-2002 and 2003-2004 award
periods; and

 Participant numbers reported as served during the 2001-2002 award
period.

Because of inherent limitations, a study and evaluation made for the
limited purpose described above would not necessarily disclose all
material weaknesses in internal control. However, our assessment
disclosed significant internal control weaknesses, which adversely
affected the Talent Search program office's ability to record and report
accurate Talent Search participant numbers for the periods of our
review. These weaknesses and their effects are fully discussed in the
AUDIT RESULTS section of this report.

**ADMINISTRATIVE MATTERS**

> Corrective actions proposed and implemented by your office will be
> monitored and tracked through the Department's Audit Accountability
> and Resolution Tracking System (AARTS). Department policy requires
> that you develop a final corrective action plan (CAP) for our review
> in the automated system within 30 days of the issuance of this report.
> The CAP should set forth the specific action items, and targeted
> completion dates, necessary to implement final corrective actions on
> the findings and recommendations contained in this final audit report.

In accordance with the Inspector General Act of 1978, as amended, the
Office of Inspector General is required to report to Congress twice a
year on the audits that remain unresolved after six months from the date
of issuance.

[]{.mark}

In accordance with the Freedom of Information Act (5 U.S.C. § 552),
reports issued by the Office of Inspector General are available to
members of the press and general public to the extent information
contained therein is not subject to exemptions in the Act.

We appreciate the cooperation given us during this review. If you have
any questions, please call Janice Keeney, Assistant Regional Inspector
General for Audit, at 816-268-0500 or Richard J. Dowd, Regional
Inspector General for Audit, at 312-886-6503.

> Sincerely,

s/s

> Helen Lew
>
> Assistant Inspector General
>
> for Audit Services

Attachments

**Attachment 1**

+-------+-------------------------------------------+---------+------+
| **OIG |                                           |         |      |
| RE    |                                           |         |      |
| PORTS |                                           |         |      |
| FOR   |                                           |         |      |
| T     |                                           |         |      |
| ALENT |                                           |         |      |
| S     |                                           |         |      |
| EARCH |                                           |         |      |
| PRO   |                                           |         |      |
| JECTS |                                           |         |      |
| AU    |                                           |         |      |
| DITED |                                           |         |      |
| WITH  |                                           |         |      |
| SU    |                                           |         |      |
| MMARY |                                           |         |      |
| OF    |                                           |         |      |
| AUDIT |                                           |         |      |
| FI    |                                           |         |      |
| NDING |                                           |         |      |
| ISS   |                                           |         |      |
| UES** |                                           |         |      |
+-------+-------------------------------------------+---------+------+
| **    | **Auditee**                               | **OIG   | **Fi |
| Audit |                                           | Final** | ndin |
| Cont  |                                           |         | gs** |
| rol** |                                           | *       |      |
|       |                                           | *Report |      |
| **Num |                                           | I       |      |
| ber** |                                           | ssued** |      |
+-------+-------------------------------------------+---------+------+
| A07-  | Luther College                            | March   | a,   |
| C0031 |                                           | 28,     | b,   |
|       | <http://www.ed.gov/about/of               | 2003    | d, e |
|       | fices/list/oig/auditreports/a07c0031.pdf> |         |      |
+-------+-------------------------------------------+---------+------+
| A07-  | University of New Hampshire               | January | a,   |
| D0001 |                                           | 15,     | d, e |
|       | <http://www.ed.gov/about/of               | 2004    |      |
|       | fices/list/oig/auditreports/a07d0001.pdf> |         |      |
+-------+-------------------------------------------+---------+------+
| A07-  | Case Western Reserve University           | July    | a,   |
| D0002 |                                           | 11,     | b,   |
|       | <http://www.ed.gov/about/of               | 2003    | c,   |
|       | fices/list/oig/auditreports/a07d0002.pdf> |         | d,   |
|       |                                           |         | e,   |
|       |                                           |         | f, i |
+-------+-------------------------------------------+---------+------+
| A07-  | Wahupa Educational Services               | N       | a,   |
| D0009 |                                           | ovember | c,   |
|       | <http://www.ed.gov/about/of               | 25,     | d,   |
|       | fices/list/oig/auditreports/a07d0009.pdf> | 2003    | e, h |
+-------+-------------------------------------------+---------+------+
| A07-  | Communities in Schools of San Antonio     | January | a,   |
| D0015 |                                           | 29,     | b,   |
|       | <http://www.ed.gov/about/of               | 2004    | c,   |
|       | fices/list/oig/auditreports/a07d0015.pdf> |         | d, e |
+-------+-------------------------------------------+---------+------+
| A07-  | LULAC National Educational Service        | June    | a,   |
| D0024 | Centers, Inc.                             | 18,     | c,   |
|       | <http://www.ed.gov/about/of               | 2004    | d,   |
|       | fices/list/oig/auditreports/a07d0024.pdf> |         | e, g |
+-------+-------------------------------------------+---------+------+
| **[L  |                                           |         |      |
| egend |                                           |         |      |
| --    |                                           |         |      |
| Fin   |                                           |         |      |
| dings |                                           |         |      |
| ]{.un |                                           |         |      |
| derli |                                           |         |      |
| ne}** |                                           |         |      |
|       |                                           |         |      |
| a:    |                                           |         |      |
| Rep   |                                           |         |      |
| orted |                                           |         |      |
| p     |                                           |         |      |
| artic |                                           |         |      |
| ipant |                                           |         |      |
| nu    |                                           |         |      |
| mbers |                                           |         |      |
| were  |                                           |         |      |
| o     |                                           |         |      |
| verst |                                           |         |      |
| ated. |                                           |         |      |
|       |                                           |         |      |
| b:    |                                           |         |      |
| Did   |                                           |         |      |
| not   |                                           |         |      |
| meet  |                                           |         |      |
| the   |                                           |         |      |
| mi    |                                           |         |      |
| nimum |                                           |         |      |
| (600) |                                           |         |      |
| p     |                                           |         |      |
| artic |                                           |         |      |
| ipant |                                           |         |      |
| nu    |                                           |         |      |
| mber. |                                           |         |      |
|       |                                           |         |      |
| c:    |                                           |         |      |
| Did   |                                           |         |      |
| not   |                                           |         |      |
| adequ |                                           |         |      |
| ately |                                           |         |      |
| doc   |                                           |         |      |
| ument |                                           |         |      |
| c     |                                           |         |      |
| itize |                                           |         |      |
| nship |                                           |         |      |
| st    |                                           |         |      |
| atus, |                                           |         |      |
| i.e., |                                           |         |      |
| ineli |                                           |         |      |
| gible |                                           |         |      |
| pa    |                                           |         |      |
| rtici |                                           |         |      |
| pant. |                                           |         |      |
|       |                                           |         |      |
| d:    |                                           |         |      |
| Did   |                                           |         |      |
| not   |                                           |         |      |
| adequ |                                           |         |      |
| ately |                                           |         |      |
| doc   |                                           |         |      |
| ument |                                           |         |      |
| pr    |                                           |         |      |
| oject |                                           |         |      |
| serv  |                                           |         |      |
| ices. |                                           |         |      |
|       |                                           |         |      |
| e:    |                                           |         |      |
| Co    |                                           |         |      |
| unted |                                           |         |      |
| ineli |                                           |         |      |
| gible |                                           |         |      |
| pr    |                                           |         |      |
| oject |                                           |         |      |
| serv  |                                           |         |      |
| ices, |                                           |         |      |
| i.e., |                                           |         |      |
| mail  |                                           |         |      |
| ings, |                                           |         |      |
| ne    |                                           |         |      |
| wslet |                                           |         |      |
| ters, |                                           |         |      |
| admi  |                                           |         |      |
| nistr |                                           |         |      |
| ative |                                           |         |      |
| acti  |                                           |         |      |
| vity. |                                           |         |      |
|       |                                           |         |      |
| f:    |                                           |         |      |
| Prior |                                           |         |      |
| p     |                                           |         |      |
| eriod |                                           |         |      |
| p     |                                           |         |      |
| artic |                                           |         |      |
| ipant |                                           |         |      |
| -- no |                                           |         |      |
| ser   |                                           |         |      |
| vices |                                           |         |      |
| in    |                                           |         |      |
| 2     |                                           |         |      |
| 001-- |                                           |         |      |
| 2002. |                                           |         |      |
|       |                                           |         |      |
| g:    |                                           |         |      |
| Co    |                                           |         |      |
| unted |                                           |         |      |
| dupl  |                                           |         |      |
| icate |                                           |         |      |
| par   |                                           |         |      |
| ticip |                                           |         |      |
| ants. |                                           |         |      |
|       |                                           |         |      |
| h:    |                                           |         |      |
| Did   |                                           |         |      |
| not   |                                           |         |      |
| meet  |                                           |         |      |
| two-t |                                           |         |      |
| hirds |                                           |         |      |
| assu  |                                           |         |      |
| rance |                                           |         |      |
| re    |                                           |         |      |
| quire |                                           |         |      |
| ment. |                                           |         |      |
|       |                                           |         |      |
| i: No |                                           |         |      |
| wr    |                                           |         |      |
| itten |                                           |         |      |
| pol   |                                           |         |      |
| icies |                                           |         |      |
| and   |                                           |         |      |
| p     |                                           |         |      |
| roced |                                           |         |      |
| ures. |                                           |         |      |
+-------+-------------------------------------------+---------+------+

**Attachment 2**

MEMORANDUM

DATE: January 3, 2005

TO: Richard J. Dowd

Regional Inspector General for Audit

FROM: Sally L. Stroup s/s

SUBJECT: Comments on Draft Audit Report of the Talent Search Program
(Control Number ED-OIG/A07-E0009)

We have reviewed the draft audit report of the Talent Search Program at
the U.S. Department of Education (Department). The primary objective of
the audit was to determine, through audits of a nationwide sample of
Talent Search projects, whether the practice of overstating the target
population was widespread.

This draft audit report is based on six audits of 2001-02 Talent Search
grants, the first of which was completed in April of 2003 and the last
in June of 2004. The Office of Postsecondary Education has previously
responded to the findings in each of these audits. It is important to
note that, upon OPE and the Office of Chief Financial Officer review,
some of the Office of Inspector General's (OIG's) recommendations were
modified or not sustained. In fact, four of the audits have already been
resolved. Further, based on the information the OIG previously provided
to OPE, some corrective actions have already been taken on a
program-wide scale and further program improvements are planned.

While OPE's comments to the individual findings and recommendation of
this draft audit report are provided below, we wanted to bring to your
attention our overall concern with the methodology used for the stated
objective of this audit. The OIG has attempted to determine whether a
programmatic practice is widespread using a group of audits that do not
constitute either a true random sample or a sample with the statistical
power to extrapolate to the entire population of grantees. The report
states that "a nationwide sample" was used. This wording does not
provide any statistical information and will likely be misleading to the
general population, in that it implies there is validity in applying the
sample to the national program. Actually, given the methodology used,
the audit objective is not attainable. In general, it appears that the
determinations in this audit provide little value, if any, beyond what
has already been achieved through the original six audit reports.

If the OIG intends to publish the audit anyway, it should expand upon
stated limitations of the methodology and do this at the very beginning
of the report. The draft audit report now states that \"Due to the small
number of projects audited, we cannot combine the results of our audits
to reliably estimate the total overstatement of Talent Search
participants reported as planned or served.\" We believe that the reader
should be advised of the following:

-   The six audits do not constitute a sampling that is reflective of
    the programs' grantees as a whole. The OIG audited the largest
    Talent Search project, along with 5 other randomly selected projects
    from the 360 projects funded in 2001-02 (less than 2 percent of the
    Talent Search projects). It is not appropriate to combine the
    findings from the largest Talent Search project with the findings
    from the 5 randomly selected projects. The largest project was
    purposively selected, while the others are a random sample. A truly
    random sample cannot include any purposively selected projects.

```{=html}
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```
-   Talent Search projects vary considerably in size. A sample of 5 does
    not provide the statistical power to allow one to extrapolate to the
    entire universe of projects. A stronger sampling methodology would
    be to carefully examine the universe of projects and group them into
    appropriate size categories. For example, if a large proportion of
    projects serve 1,000-5,000 participants, that would be one size
    category from which to select a sample of projects to audit.

Given the weaknesses with this audit methodology, OPE strongly questions
the validity of including the section of this draft report entitled:
"The Department's Numbers May Be Overstated in Its Reports to Congress
and the General Public." This section provides a listing of uses for the
TRIO information reported. Given that the OIG has not clearly identified
and documented that there is currently any program-wide abuse, the logic
for this section is questionable.

# FINDING NO. 1: Talent Search Participants, Both Planned And Served, Were Overstated 

The Office of the Inspector General (OIG) states that planned Talent
Search participants numbers posted on the TRIO Web site were overstated
for half (three) of the projects audited (a total of six) and that the
number of Talent Search participants actually served were over-reported
for all of the projects audited. The OIG further states that the TRIO
Office did not maintain sufficient internal control over Talent Search
participant numbers because it did not (1) properly maintain the records
and procedures needed to readily determine the correct number of
participants to be served, or (2) provide grantees with monitoring and
policy guidance needed to insure accurate reporting of the number of
participants served. The OIG concluded that the practice of overstating
could be widespread. (For reasons stated above, this last statement is
speculative rather than based on sound statistical methodology.)

Prior to the drafting of this audit report, the Federal TRIO Director
had already implemented policy and procedural guidance to ensure that
grantees do not overstate the participant population, as follows:

-   First, he discontinued partnership agreements in the 2003-2004 Award
    Year. Partnership agreements allowed the Department to continue to
    negotiate student participant numbers during the grant period.

-   Second, the Federal TRIO Director has established an internal
    process that now holds grantees accountable based on the number of
    participants specified in the original grant application.

-   Third, the grantee community has been informed of these changes.

The OIG did identify some weaknesses in implementing these changes.
However, it is not unusual for programmatic and procedural changes to
encounter some problems in the first stage of implementation. The TRIO
Program Office is currently establishing additional policy and
procedural improvements to ensure that grantees provide accurate
participant numbers. We elaborate further on these actions in our
responses to specific recommendations.

As a result of its audits, the OIG recommended changes to the grant
award process and improvements in recordkeeping, as well as enhanced
monitoring and policy guidance to improve the accuracy of Talent Search
participant numbers.

# 

# RECOMMENDATION 

1.1 The OIG recommended that Assistant Secretary for the Office of
Postsecondary Education modify the application process by:

-   Requiring grantees to propose realistic participant numbers in the
    grant application, and

-   Discontinuing the practice of revising planned participant numbers
    after the Talent Search grant has been awarded.

## RESPONSE

1.  The TRIO Program Office will require Talent Search applicants to
    propose realistic participant numbers in their Talent Search grant
    application. The Department has already begun planning for the
    upcoming competition for grants with a projected application due
    date of late summer or early fall. Applicants will be required to
    meet the goals and objectives they propose in their application
    based on funding guidelines to be published in the Federal Register
    notice inviting applications. Current grantees will be informed that
    they will receive no more than a fixed percentage over their prior
    year's award amount. New applicants will be informed of the maximum
    award amounts and the minimum number of participants they must
    serve.

> In addition the TRIO Program Office has taken steps to ensure that
> current grantees meet their participant numbers. For example, in the
> spring of 2004, a letter was mailed to grantees with continuation
> grant awards informing them that the project will be held to
> participant numbers previously established for the grant period. Also,
> the TRIO Program Office has implemented a policy that will deny Prior
> Experience points to grantees that have failed to meet their planned
> participant numbers.

**RECOMMENDATION**

1.2 The OIG recommended that Assistant Secretary for the Office of
Postsecondary Education ensure that program staff follow policies and
procedures in:

-   Maintaining official grant files in accordance with internal
    guidelines,

-   Prescribing specific procedures for updating grant information to
    senior staff, and

-   Documenting justification for any deviation from the approved grant
    application, including a change in planned participant numbers.

### RESPONSE 

1.  The TRIO Program Office has already taken the following steps to
    ensure that program staff will maintain grant files in accordance
    with internal guidelines:

-   In the spring of 2004, the team responsible for administering the
    Talent Search Program was trained on the proper procedures for
    maintaining grant files. The training was based on the Grants Policy
    and Oversight (GPOS) Bulletin #2, "Organization of the Official File
    Folder." Each member of the staff was provided with a one-page
    handout titled, "Official Grant File Organization Guide."

-   The EDPAS agreements for staff have been revised to include language
    regarding grant file maintenance. The Team Leader and the Director
    have advised staff regarding the importance of keeping files
    up-to-date. It is anticipated that the e-Monitoring system will also
    be a tool for assisting staff in the efficient maintenance of
    project files.

-   The staff has been informed that any request to reduce participant
    numbers must be approved by the Team Leader. The Team Leader will
    follow the Director's guidance regarding grantee requests to revise
    participant numbers. If a grantee received approval to revise the
    participant numbers, the assigned program specialist must document
    the action in the grant file and ensure the database is updated.

**RECOMMENDATION**

1.3 The OIG recommended that Assistant Secretary for the Office of
Postsecondary Education make monitoring a high priority by conducting
on-site reviews focusing on grantees that:

-   Are designated high risk,

-   Have not submitted required reports, single audit, annual
    performance reports, or

-   Have not met program objectives, including serving the funded
    participant number.

### RESPONSE

###  

1.3 Monitoring has been and will continue to be a high priority for the
TRIO Program Office. In the last year, TRIO program staff and Program
Oversight Staff (POS) conducted approximately 100 site visits. Many of
the visits were to non-profit agencies that administer Talent Search
projects. In the prior year, TRIO and POS staff conducted approximately
100 site visits of TRIO grantees. In addition, in November 2003, TRIO
program staff participated in training for on-site monitoring and fiscal
review techniques. OPE developed a reference manual for the fiscal
review of grant projects and updated monitoring guides for several of
the TRIO Programs including Talent Search.

Currently, no Talent Search grantees are designated as "high risk" in
accordance with the standards published in 34 CFR 74.14 of the Education
Department General Administrative Regulations (EDGAR). However, the TRIO
Program Office uses a variety of indicators to determine whether the
Federal funds awarded to a particular grantee may be "at risk." The
indicators include referrals from the Office of the Inspector General,
complaints with merit, failure to submit required performance and other
reports, "problem" audits, and poor performance. All relevant factors
are considered in determining which grantees may require increased
monitoring and/or a site visit.

**RECOMMENDATION**

1.4 The OIG recommended that Assistant Secretary for the Office of
Postsecondary Education establish a mechanism for publishing specific,
accessible, and consistent policy guidance that enables grantees to
effectively administer their projects. Guidance may include examples of
forms and best practices, and answer questions such as:

-   What is an acceptable project service?

-   When do you count an individual as a participant?

-   What is sufficient reliable documentation to establish individual
    participant eligibility?

## RESPONSE

1.4 The TRIO Program Office already has several such mechanisms in
place. One of the mechanisms for disseminating information to TRIO staff
is through the Training Program for Federal TRIO Programs. This program
provides training and policy guidance to staff and leadership personnel
employed in or preparing for employment in projects funded under the
Federal TRIO Programs. In fiscal year 2004, 13 new Training Program
grants were awarded to train an estimated 3,688 staff in the following
five areas:

-   Priority 1: Training to improve: budget management, recordkeeping
    and reporting student and project performance and the evaluation of
    project performance.

-   Priority 2: Training on: the legislative and regulatory requirements
    for operation of the Federal TRIO programs; personnel management;
    and student aid.

-   Priority 3: Training on: counseling, and retention and graduation
    strategies.

-   Priority 4: Training to coordinate project activities with other
    available resources and activities, and training to design and
    operate a model TRIO project.

-   Priority 5: Training in the use of educational technology.

Additionally, in the fall of 2004, the TRIO Program Office established a
quarterly newsletter for the purpose of sharing information and
providing program guidance. The Winter 2004 issue of the TRIO newsletter
discusses, among other things, the Training Program for TRIO Programs,
reiterates the five training priorities, and announces the new
recipients of the Training Program grants along with contact
information.

Finally, the TRIO Web site provides a wealth of information on the TRIO
programs and is the primary mechanism for providing information about
each of the TRIO programs including: program and funding requirements;
regulations; law; performance reports; and other information. For
example, the Talent Search Home Page lists the services that can be
provided under the Talent Search Program and provides links to the
program statute, regulations, etc.

> It is also important to note that senior TRIO staff routinely
> participate in policy seminars, state, regional, and national meetings
> hosted by grantees for the purpose of providing program information
> and policy guidance to grantees.

Thank you for the opportunity to review and comment on this draft audit
report. If you have questions about any of our comments, feel free to
contact Larry Oxendine, Director, Federal TRIO Programs at (202)
502-7600 or <Larry.Oxendine@ed.gov>.

[^1]: Due to the small number of projects audited, we cannot combine the
    results of our audits to reliably estimate the total overstatement
    of Talent Search participants reported as planned or served.
    However, we are 90 percent confident that participant numbers were
    overstated in some amount for reported participants planned (in at
    least 20 percent of projects) and participants served (in at least
    68 percent of the projects).

[^2]: Handbook for the Discretionary Grant Process, Handbook OCFO-04, §
    5.12.

[^3]: Although files were incomplete, program specialists were able to
    locate statements for many grants.