##### June 18, 2004

##### 

##### Richard Roybal, Executive Director

LULAC National Educational Service Centers, Inc.

2000 L Street NW, Suite 610

Washington, DC 20036

Dear Mr. Roybal:

This is our final audit report, Control Number ED-OIG/A07-D0024,
entitled Audit of the Talent Search (TS) program at LULAC National
Educational Service Centers, Inc. (LNESC).[^1] The objective of our
audit was to determine if LNESC administered the TS program in
accordance with the Higher Education Act (HEA) of 1965 and specific TS
regulations governing the documentation of participant eligibility. In
its May 10, 2004, response to our draft report, LNESC concurred with our
finding and recommendations, but did not agree with our summary
statement of audit results. We slightly modified this statement in this
final report. The full response is provided as an attachment to this
letter.

AUDIT RESULTS

We found that LNESC did not always administer its TS grant in accordance
with the law and TS regulations governing the documentation of
participant eligibility. As a result, LNESC overstated TS participants
served in its Annual Performance Report (APR) submitted to the
Department of Education (Department) for the September 1, 2001, through
August 31, 2002, budget period.

Finding - LNESC Overstated TS Participants in Its APR

We estimate that LNESC served approximately 13,610 eligible TS
participants for the September 1, 2001, through August 31, 2002, budget
period. While 13,610 participants exceed the 12,200 participants LNESC
was funded to serve, it is significantly less than the 15,228 LNESC
reported to have served in its APR for the budget period.

We found 23 confirmed duplications among the reported participants and
estimated, based on a statistical sample, that approximately 1,595 of
the 15,205 unduplicated participants reported did not meet both
conditions required for TS participants.[^2]

The Department uses the information provided in APRs to assess a
grantee's progress in meeting its approved goals and objectives, and to
determine a grantee's prior experience points. The data collected are
also aggregated to provide national information on project participants
and program outcomes. As a result of the error in LNESC's APR, the
Department may be making decisions based on an inflated count of
participants and services delivered.

## Duplicate Participants 

The LNESC Executive Director provided a listing of 15,228 participants
for the 2001-2002 budget period as reported in the APR. We determined
that 23 names on the listing were duplicates, as confirmed by the LNESC
TS Manager. The TS Manager had attempted to remove duplicates using a
manual process, which is particularly difficult for LNESC due to the
large number of reported participants. Although the number of duplicates
found was minimal, encouraging the use of unique ID numbers[^3] and
automated controls to prevent duplicates is particularly important
considering the dispersion of the LNESC centers across the country, the
variation that can occur in names, and the large volume of participants
tracked.

## Statistical Sample to Determine Whether Reported Students Met the Definition of a TS Participant

We selected a random sample of 200 participant names from the universe
of 15,205 unduplicated participants (15,228 -- 23 duplicates) to
determine whether they met both of the conditions defined in 34 C.F.R. §
643.7.

> \(b\) *Other definitions* . . . *Participant* means an individual
> who---
>
> \(1\) Is determined to be eligible to participate in the project under
> § 643.3; and
>
> \(2\) Receives project services designed for his or her age or grade
> level.

We found that 21 of the 200 sampled students did not meet one of the
requirements to be considered a TS participant. We reviewed student
files and all supplemental information supplied, but there was no
documentation of five students' eligibility or another 16 students'
services as required by 34 C.F.R. § 643.32.

> *(c) Recordkeeping.* For each participant, a grantee shall maintain a
> record of---
>
> \(1\) The basis for the grantee's determination that the participant
> is eligible to participate in the project under § 643.3 . . .
>
> \(3\) The services that are provided to the participant; . . . .

Based on the sample results, we estimate that LNESC served about
13,610[^4] eligible participants and that 1,595 should not have been
reported as TS participants.

# 

# Eligibility Was Not Documented 

LNESC served five students, neither citizens nor permanent residents,
without documenting evidence from the Immigration and Naturalization
Service (INS) of intent to become a permanent resident contrary to the
eligibility requirements found at 34 C.F.R. § 643.3.

> \(a\) An individual is eligible to participate in a Talent Search
> project if the individual . . . :
>
> (1)(i) Is a citizen or national of the United States; (ii) Is a
> permanent resident of the United States; (iii) Is in the United States
> for other than a temporary purpose and provides evidence from the
> Immigration and Naturalization Service of his or her intent to become
> a permanent resident; . . . .

The LNESC TS Manager reported that they started serving students who
were neither citizens nor permanent residents after attending a
presentation by a TRIO Educational Specialist at a TRIO Conference who
said "intent" was not defined in the regulation and was "open to
interpretation by the individual." The LNESC TS Manager concluded that,
"our Centers could (under our interpretation) prove 'intent' by simply
getting a family home address or showing that the student was enrolled
in a public school." The LNESC TS Manager continued, "Currently for . .
. 2003-2004, I have notified all Centers that students who do not
check US Citizen or Permanent Resident are not eligible for TS
services."

Although the specific definition of "intent" has not been specified, 34
C.F.R. § 643.3(a)(1)(iii) clearly requires evidence from the INS of an
individual's intent to become a permanent resident. Accordingly, the
five students without such documentation were not eligible to
participate in a TS project.

# An Eligible Service Was Not Documented 

The TS Manager confirmed that all contacts recorded for one student
reflected only mailings (not services), but asserted that 15 other
students actually received a service even though there was no record of
a valid service with adequate documentation (*e.g.,* sign-in sheets) to
support the delivery of a TS service.

LNESC's "Talent Search Handbook" is in compliance with the
record-keeping regulations cited above in that it requires the recording
of three eligible services before counting a participant and prescribes
retention of support documentation as a practice to be followed in all
of the center offices. The inappropriate recording of services and
failure to retain support documentation was the result of inconsistent
staff compliance with LNESC's "Talent Search Handbook."

#### Recommendations:

We recommend that the Chief Financial Officer (in collaboration with the
Assistant Secretary for Postsecondary Education) require LULAC National
Educational Service Centers to:

1.  Improve recording of TS participants using unique identifiers and
    automate identification of potential duplicates to reduce the
    reporting of duplicate participants.

2.  Train and monitor LNESC TS staff to ensure that established
    procedures are followed, only eligible students are counted as
    participants, only valid project services are recorded, and support
    documentation is retained.

BACKGROUND

Title IV of the Higher Education Act of 1965, as amended (20 U.S.C. §
1070a-11 and 12), authorizes the TS program, one of the Department's
TRIO programs. The TS 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.

The TS program provides grants to projects designed to (1) identify
qualified youths with potential for education at the postsecondary level
and encourage them to complete secondary school and undertake a program
of postsecondary education; (2) publicize the availability of student
financial assistance for persons who seek to pursue postsecondary
education; and (3) encourage persons who have not completed education
programs at the secondary or postsecondary level, but who have the
ability to do so, to reenter these programs (34 C.F.R. § 643.1).

The League of United Latin American Citizens (LULAC) was established in
1929 and is the oldest and largest Hispanic membership organization in
the United States. LULAC National Educational Service Centers (LNESC) is
a national not-for-profit community-based organization whose mission is
to better the educational condition of Hispanic and other low-income,
first-generation youth. LULAC established LNESC in 1973 to operate an
outreach counseling program to assist educationally disadvantaged and
economically poor high school youth to gain admission to college. LNESC
was established as a separately incorporated entity with its own
governing board and control of its program.

LNESC has operated a Talent Search program since 1978. During the period
of our review, the LNESC Talent Search program consisted of a network of
13 counseling centers around the nation and in Puerto Rico, managed by a
national office located in Washington, DC. LNESC was awarded a four-year
TS grant covering the performance period September 1, 1998, through
August 31, 2002 (P044A980663). For the 2001-2002 budget period, LNESC
was awarded \$2,961,438 to provide services to 12,200 participants and a
\$10,000 supplemental technology grant awarded to all TS projects.

AUDIT OBJECTIVE, SCOPE, AND METHODOLOGY

The objective of our audit was to determine if LNESC administered the TS
program in accordance with the law and TS regulations governing the
documentation of participant eligibility. Specifically, we sought to
determine whether participants met the twofold requirements of (1)
eligibility and (2) receipt of eligible services during the budget
period.

To accomplish our objective, we

-   reviewed applicable Federal law and regulations,

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-   reviewed files relating to the TS project at LNESC and at the
    Department's TRIO program office located in Washington, DC,

-   interviewed LNESC and Department of Education personnel,

-   determined whether the TRIO cluster had been audited by LNESC's
    Certified Public Accountants,

-   obtained and analyzed documents related to the TS project at LNESC
    (*e.g.*, organization chart, LNESC policies and procedures), and

-   randomly selected 200 TS participants from a universe of 15,205 to
    test documentation of participant eligibility, an eligible service,
    and low-income and first-generation status. Files for all
    participants selected in the sample were reviewed.

We relied upon the universe provided to us by the LNESC Executive
Director for drawing our sample. We tested the universe for accuracy and
completeness by comparing source records to the universe and the
universe to source records. Based on this test, we concluded the
population data was sufficiently reliable to be used for a sample
population in meeting the audit's objective.

The audit covered the 2001-2002 grant budget period (September 1, 2001,
through August 31, 2002). We visited the Department's TRIO program
offices located in Washington, DC (July 31, 2002, to August 2, 2002) and
conducted fieldwork at LNESC Headquarters in Washington, DC, (August 4,
2003, to August 8, 2003), at the Colorado Center (August 13, 2003), and
the Kansas City Center (August 19, 2003). We held an exit conference
with LNESC officials on November 19, 2003, at LNESC Headquarters in
Washington, DC. Our audit was conducted in accordance with generally
accepted government auditing standards appropriate to the scope of
review described above.

STATEMENT ON MANAGEMENT CONTROLS

As part of our review we assessed the system of management controls,
policies, procedures, and practices applicable to LNESC's administration
of the TS program. Our assessment was performed to determine the level
of control risk for determining the nature, extent, and timing of our
substantive tests to accomplish the audit objective.

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

-   Participant service,

-   Participant eligibility, and

-   Program record maintenance.

Because of inherent limitations, a study and evaluation made for the
limited purpose described above would not necessarily disclose all
material weaknesses in the management controls. However, our assessment
disclosed management control weaknesses, which adversely affected
LNESC's ability to administer the TS program. These weaknesses included
noncompliance with Federal regulations related to documentation of
student eligibility, documentation of participant services, and
deficient record maintenance procedures. These weakness and their
effects are fully discussed in the *Audit Results* section of this
report.

### ADMINISTRATIVE MATTERS

 

Statements that managerial practices need improvements, as well as other
conclusions and recommendations in this report represent the opinions of
the Office of Inspector General. Determinations of corrective action to
be taken will be made by the appropriate Department of Education
officials.

If you have any additional comments or information that you believe may
have a bearing on the resolution of this audit, you should send them
directly to the following Education Department official, who will
consider them before taking final Departmental action on this audit: 

> Jack Martin
>
> Chief Financial Officer
>
> Office of the Chief Financial Officer
>
> U.S. Department of Education
>
> 400 Maryland Avenue, SW
>
> Washington, DC 20202

 

It is the policy of the U.S. Department of Education to expedite the
resolution of audits by initiating timely action on the findings and
recommendations contained therein. Therefore, receipt of your comments
within 30 days would be appreciated.

 

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.

 

> Sincerely,
>
>  
>
> s/s  

##### Richard J. Dowd 

> Regional Inspector General for Audit

 

Attachment

 

cc: Jack Martin, Chief Financial Officer

Sally Stroup, Assistant Secretary, Office of Postsecondary Education

May 10, 2004

Janice D. Keeney

Assistant Regional Inspector General for Audit

U.S. Department of Education

Office of Inspector General

8930 Ward Parkway, Suite 2401

Kansas City, MO 64114-3302

Dear Ms. Keeney:

I recently received your Draft Audit Report (Control Number ED-

OIG/A07D0024) of the Educational Talent Search program administered by
the

LULAC National Education Service Centers, Inc. As requested, please find

attached our written response to the finding and recommendations offered
by the

OIG.

On behalf of the staff, administration and clients of the organization,
I would like

to extend our appreciation for this opportunity to review our program
and improve

it through close examination of all its components.

Please feel free to contact me with any further questions or comments.

Sincerely,

Richard L. Roybal

Executive Director

After reviewing the Draft Audit report (Control Number ED-OIG/A07D0024)
dated April 12, 2004, we offer the following response.

## Summary of Response 

We do not agree with the statement, "LNESC did not administer its TS
grant in accordance with the law and TS regulations governing the
documentation of participant eligibility."

We acknowledge that the auditors have estimated that LNESC serviced
13,610 eligible TS participants, which is less than the APR report of
15,228, but higher than the contracted 12,200.

We have taken corrective action to improve the quality of our
recordkeeping and to strengthen managerial controls.

## Elaboration of Response

#### Finding- LNESC Over Reported TS Participants in Its APR

Though LNESC's accordance with the law and TS regulations governing the
documentation of participant eligibility was not an area that OIG cited
in the audit report as a finding, we felt it necessary to clarify that
in fact LNESC successfully served the number it contracted to serve with
the Department of Education through the partnership agreement and
therefore was in accordance with the law and TS regulations governing
the documentation of participant eligibility.

Of the 15,205 unduplicated participants recorded in the LNESC 2001- 2002
APR, we acknowledge the auditors have estimated that 1,595 were
ineligible for participation in Talent Search leaving an estimated
13,610 eligible TS participants. Though this number is lower than the
15,228 reported in the APR, it far exceeds the 12,200 participants we
were contracted to serve. We believe that many if not the vast majority
of the 1,595 participants deemed ineligible did actually receive
services but were not documented completely.

Furthermore, LNESC believes that any decisions made by the Department
"based on an inflated count of participants and services delivered"
should be mindful of the fact that LNESC met and surpassed its
partnership agreement contract.

### 

### 

### Corrective Actions Taken to Improve Record Keeping

#### Duplicate Participants

In an effort further reduce the already minimal number of duplicate
participants reported in the APR, LNESC has taken steps to implement
within the database a unique automated serial number for each client
entered into our management information system.

The use of the automated serial numbers for each client record will
create uniformity in recordkeeping across the network.

#### Documentation of Eligibility

Although the eligibility requirements found 34 CFR §643.3 define who is
qualified for participation in the Talent Search program, the 34 CFR
§643.3(a)(1)(iii) is indeterminate as to what comprises "evidence from
the Immigration and Naturalization Service of... intent to become a
permanent resident."

Based on the 1982 Supreme Court Decision, *Plyer vs. Doe,* which ruled
the Fourteenth Amendment prohibits states from denying a free public
education to undocumented immigrant children regardless of their
immigrant status and emphatically declared that school systems are not
agents for enforcing immigration law, and determined that the burden
that undocumented aliens may place on school districts is not an
acceptable argument for excluding or denying educational service to any
student, LNESC believes documenting citizenship status places an undue
burden on the agency and forces LNESC staff to become de facto agents of
the INS. Both of which are far beyond the scope or intent of the Talent
Search program.

Additionally, LNESC has created new forms to be added to the Talent
Search Handbook to strengthen proof of Talent Search eligibility (e.g.
Verification of Income Form and Verification of First Generation
Status).

#### Documentation of Services

LNESC has taken several steps to improve the recording and retaining of
services and support documentation throughout the network including:

1)  All TS activity sign-in sheets will be photocopied and placed in the
    TS participant's file. The sign-in sheets will correspond to the
    dated written session report.

2)  Written session reports documenting services to a TS participant
    must clearly detail the service(s) provided.

3)  LNESC has created new forms to be added to the Talent Search
    handbook.

4)  LNESC has begun discussions to update our Talent Search Handbook and
    Personnel Policies and Procedures Manual.

## Response to Recommendations

#### Recommendation 1

LNESC agrees that it should improve the recording of TS participants
using unique identifiers and automated identification of potential
duplicates in order to reduce the reporting of duplicate records and has
already begun these processes.

#### Recommendation 2

LNESC agrees that TS staff must be further trained and monitored to
ensure that established procedures are followed, only eligible students
are counted as participants, only valid project services are recorded,
and support documentation is retained.

## Response to Statement on Managerial Controls 

We recognize that there are some minor weakness in our managerial
controls and have taken efforts to tighten the administration of the
Talent Search program. LNESC has begun a series of on-site trainings for
each Center providing Talent Search services. These trainings will
ensure that established procedures are followed, only eligible students
are counted as participants, only valid project services are recorded,
and support documentation is retained. Additionally, an updated version
of the database management system has been created and disseminated to
all LNESC Talent Search program sites. However, LNESC maintains that the
managerial controls already in place are sufficient to appropriately
meet and exceed the partnership agreement.

[^1]: LNESC is a national not-for-profit organization established by the
    League of United Latin American Citizens (LULAC) in 1973.

[^2]: We estimate that LNESC overstated the number of participants
    served for the 2001-2002 budget period by 1,618 (10.6 percent).

[^3]: We observed some database entries with SSN numbers, others with
    school ID numbers, and many that were blank or marked n/a.

[^4]: We are 90 percent confident that the participants receiving
    eligible services total 13,608 +/- 3.98 percent (rounded to 13,310
    for reporting purposes).