> ![](media/image1.pct)**UNITED STATES DEPARTMENT OF EDUCATION**

OFFICE OF INSPECTOR GENERAL

DATE: August 30, 2007

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# CPA-07-01

SUBJECT: Amendment to January 2000 Audit Guide, *Audits of Federal
Student Financial Assistance Programs at Participating Institutions and
Institution Servicers* -- Mandatory Procedures for Auditing Academic
Competitiveness Grants (AGC) and National Science and Mathematics Access
to Retain Talent (SMART) Grants at For-Profit Postsecondary Institutions

Dear Certified Public Accountant:

Since the publication of the January 2000 Audit Guide, *Audits of
Federal Student Financial Assistance Programs at Participating
Institutions and Institution Servicers* (Audit Guide)*,* two new
financial aid programs have been authorized. They are the Academic
Competitiveness Grant (ACG) Program, and the National Science and
Mathematics Access to Retain Talent Grant (National SMART Grant)
Program. We are currently in the process of preparing a revised Audit
Guide to reflect changes in the Federal Student Aid (FSA) programs, but
are issuing this interim guidance to ensure audit coverage of these two
new programs before the complete revised Audit Guide is issued.

The required procedures included below are mandatory for all audits
conducted using the January 2000 Audit Guide for audits with field work
starting on or after (or still being conducted) 15 calendar days after
the date of this amendment, if the client institution participated, or
should have participated, in either of these programs in audit periods
ending after June 30, 2006. The third and fourth required procedures are
also applicable for audits of servicers who service schools
participating in these two new programs.

**Background**

The ACG Program provides eligible first- and second-year full-time
undergraduates, who have completed a rigorous course of study in high
school, with need-based grant assistance to help meet educational
expenses (34 C.F.R. § 691.1(a)).

The National SMART Grant Program provides eligible third- and
fourth-year full-time undergraduates, who major in certain designated
technical fields or foreign languages, with need-based grant assistance
to help meet educational expenses (34 C.F.R. § 691.1(b)). Students must
be full-time regular students in an eligible program at an eligible
institution of higher education and making satisfactory academic
progress (34 C.F.R. § 691.15(c)). For each award year, the Secretary
will identify the eligible majors (34 C.F.R. § 691.17).

These programs were authorized by Section 8003 of the Higher Education
Reconciliation Act of 2005 (P.L. 109-171), enacted February 8, 2006,
which amended the Higher Education Act of 1965, as amended (HEA), by
adding a new section 401A (20 USC 1070a-1). The U.S. Department of
Education (ED) issued interim final regulations on July 3, 2006 (71 FR
37989) to provide requirements for these programs for the 2006-2007
award year, that began on July 1, 2006. They may be accessed at:
(<http://www.ifap.ed.gov/fregisters/FR07032006.html>)

Final regulations were published on November 1, 2006 (71 FR 64402). In
response to comments on the interim final regulations, ED revised 34
C.F.R. Part 691. The final regulations will be effective for the
2007-2008 award year, beginning July 1, 2007; however, institutions had
the option implementing all of the provisions of the final regulations
on or after November 1, 2006, including for the 2006-2007 award year.
The final regulations are incorporated into the Electronic Code of
Federal Regulations which may be accessed at:

[http://ecfr.gpoaccess.gov](http://ecfr.gpoaccess.gov/)

The Federal Register notice publishing the final regulations may be
found at: <http://www.ifap.ed.gov/fregisters/attachments/FR11012006.pdf>

**Compliance Requirements**

The regulations for eligibility to receive a grant are at 34 C.F.R. §
691.15.

ED Regulation 34 C.F.R. § 691.62 contains provisions relating to the
calculation of and maximum ACG and SMART grants.

ED also has internet pages with overviews of each Grant, including
information regarding the 2006-2007 and 2007-2008 award years:

-   ACG
    <http://studentaid.ed.gov/PORTALSWebApp/students/english/AcademicGrants.jsp?tab=funding>
    with an additional link for more information on recognized rigorous
    secondary school programs of study for the Academic Competitiveness
    Grant program by State.

( <http://www.ed.gov/admins/finaid/about/ac-smart/state-programs.html> )

-   SMART
    <http://studentaid.ed.gov/PORTALSWebApp/students/english/SmartGrants.jsp?tab=funding>
    with an additional link for the eligible fields of study as of
    August 25, 2006
    (<http://www.ifap.ed.gov/dpcletters/attachments/GEN0606A.pdf> )

Institutions that offer one or more eligible academic programs and offer
Pell grants must participate in the ACG/National SMART Grant programs.
(34 C.F.R. § 691.7) An eligible program for the ACG is one that leads to
an associate\'s degree or a bachelor\'s degree; is a two-academic-year
program acceptable for full credit toward a bachelor\'s degree; or is a
graduate degree program that includes at least 3 academic years of
undergraduate education. An eligible program for the National SMART
Grant is a program that leads to a bachelor\'s degree in an eligible
major or is a graduate degree program in an eligible major that includes
at least 3 academic years of undergraduate education. (34 C.F.R. §
691.2)

**[Required Procedures:]{.underline}**

1.  Determine if the institution offers eligible programs to participate
    in the ACG and/or National SMART Grant programs. If so, review the
    institution's policies to determine student eligibility for the
    programs and determine that the policies match the program
    regulations.

2.  If the institution participates in the Pell Grant program but does
    not participate in the ACG and National SMART Grant programs,
    determine if the institution has students who would otherwise be
    eligible for the ACG and/or National SMART Grant programs, and
    report as a finding if the institution should be participating in
    ACG and/or National SMART Grant programs.

3.  Using the sample selected in accordance with the "Sampling
    Methodology" on Pages I-14 and I-15 of the Audit Guide, determine if
    students who participated in the ACG and National SMART Grant
    programs were eligible in accordance with the regulations for
    eligibility cited above for the period audited.

4.  Procedure No. c. 8 on page II-19 of the January 2000 Audit Guide
    provides that the auditor determine that the student has total
    financial assistance that does not exceed financial need, and grant
    and loan limits. Upon performing this procedure, the auditor must
    also consider AGC and National SMART grants.

Questions pertaining to this letter may be directed to Kevin Winicker,
Assistant Director, Non-Federal Audits by e-mail sent to
kevin.winicker@ed.gov, or may be faxed to Mr. Winicker at 202-245-7088.

> Sincerely,

/s/

> George Rippey
>
> Acting Assistant Inspector General
>
> for Audit