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**UNITED STATES DEPARTMENT OF EDUCATION**

> **OFFICE OF INSPECTOR GENERAL**

#  61 FORSYTH STREET, ROOM 18T71

**ATLANTA, GEORGIA 30303**

**Telephone: (404) 562-6470 Fax: (404) 562-6509**

September 23, 2004

**[MEMORANDUM]{.underline}**

TO: Theresa S. Shaw

Chief Operating Officer

Federal Student Aid

FROM: J. Wayne Bynum **J. Wayne Bynum**

Regional Inspector General for Audit

Office of Inspector General

SUBJECT: **FINAL AUDIT REPORT**

*Review of Student Enrollment and Professional Judgment Actions at*

*Tennessee Technology Center at Morristown, TN*

Control No. ED-OIG/A04-E0001

You have been designated as the action official for the resolution of
the findings and recommendations in the attached final report. We also
provided a copy to the auditee and to your audit liaison officer.

The Office of Inspector General is required to review and approve your
proposed Program Determination Letter (PDL) and the Audit Clearance
Document (ACD) before the PDL is forwarded to the auditee. Our review of
these documents will be handled through the Department's Audit
Accountability and Resolution Tracking System (AARTS).

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.

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.

If you have any questions, please contact me at 404‑562‑6477 or
Assistant Regional Inspector General Mary Allen at 404-562-6465.

Enclosure

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**UNITED STATES DEPARTMENT OF EDUCATION**

######## OFFICE OF INSPECTOR GENERAL

# 61 Forsyth Street, Room 18T71

# Atlanta, Georgia 30303

####### 

####### Telephone: (404) 562-6470 Fax: (404) 562-6509

####  September 23, 2004 

# Lynn Elkins

Director

# Tennessee Technology Center at Morristown

821 W. Louise Avenue

Morristown, TN 37813-2094

Dear Ms. Elkins:

This **Final Audit Report**, Control Number A04‑E0001, presents the
results of our *Review of Student Enrollment and Professional Judgment
Actions at Tennessee Technology Center at Morristown, TN* (TTC‑M). Audit
coverage included the period July 1, 2001, through June 30, 2003 (award
years 2001-2002 and 2002-2003).  Our objectives were to determine
(1) whether TTC‑M enrolled as regular students in its programs of study
persons who did not have a high school certificate or equivalent and/or
were under the age of compulsory school attendance and (2) whether
TTC‑M's use of professional judgment and dependency override to make
adjustments to estimated family contribution calculations resulted in
appropriate Federal Pell Grant Program (Pell) awards to students.

**AUDIT RESULTS**

>  

**FINDING No. 1 \-- TTC-M Enrolled Persons in Its Programs of Study Who
Did Not Have a High School Certificate or Equivalent and/or Were Under
the Age of Compulsory School Attendance**

We found that TTC‑M enrolled high school students in its programs of
study that lead to postsecondary certificates. This occurred because it
is the Tennessee Board of Regents' policy to allow secondary (high
school) students to attend the Tennessee Technology Centers and earn
both secondary and postsecondary education hours. As a result, TTC‑M is
not eligible to participate in the Title IV programs and improperly
disbursed over \$2.4 million in Title IV funds to postsecondary students
during award years 2001-2002 and 2002-2003.

Postsecondary institutions participating in the Title IV Student
Financial Assistance programs are only to admit as regular students
individuals who have a certificate of graduation from a high school, its
equivalent, or are beyond the age of compulsory school attendance. Under
Sections 101(a)(1) and 102(c)(1)(B) of the Higher Education Act of 1965,
as amended, in order to participate in the Title IV programs a
"postsecondary vocational institution" must, among other requirements,
admit "as regular students only persons having a certificate of
graduation from a school providing secondary education or the recognized
equivalent of such a certificate . . . ." Section 102(c)(2) further
provides that the "term 'postsecondary vocational institution' also
includes an educational institution in any State that, in lieu of the
requirement of paragraph (1) of Section 101(a), admits as regular
students persons who are beyond the age of compulsory school attendance
in the State in which the institution is located."

The regulations at 34 C.F.R. §600.2 (2002), in effect throughout the
audit period, defines a regular student as "A person who is enrolled or
accepted for enrollment at an institution for the purpose of obtaining a
degree, certificate, or other recognized educational credential offered
by that institution."

The Tennessee Department of Education Student Membership and Attendance
Accountability Procedures Manual, Section 49‑6‑3001(c)(1) (October 1999)
states that "Every parent . . . having control or charge of any child or
children between six (6) years of age and seventeen (17) years of age,
both inclusive, shall cause such child or children to attend public or
non‑public school . . . ."

According to the Tennessee Board of Regents Admission Policy
(2:03:00:00)(2000), all Tennessee Technology Centers are allowed to
admit secondary students into their postsecondary programs. This policy
states that applicants enrolled in high school are eligible for
admission provided that (1) an agreement authorizing such admission is
concluded between the Tennessee Technology Centers and the local school
boards and (2) enrollment is limited to one occupational area. Such
agreements are subject to the approval of the Chancellor or his/her
designee. We verified this policy with the Vice Chancellor for the
Tennessee Technology Centers. TTC‑M executed a number of agreements with
local school boards to allow area high school students to attend TTC-M.

We reviewed the written agreement between TTC‑M and the local school
boards. The agreement allowed high school students to attend TTC‑M
because the desired technical programs offered by TTC‑M were not
available to the students at the schools they were attending. The
agreement also provided that high school students enrolling at TTC‑M
would be interviewed and counseled for appropriate program placement.

We found that TTC‑M enrolled 170 high school students under the age of
18 during award years 2001-2002 and 2002-2003 (115 during 2001-2002 and
55 during 2002-2003). The high school students were enrolled in the same
programs and received the same instruction from the same instructors as
the postsecondary students. High school students also received the same
course credit as the postsecondary students. High school students who
completed the required TTC‑M curriculum received the same certificate as
postsecondary students.

The TTC‑M Director stated the following:

-   High school students are enrolled in regular programs at TTC‑M,
    provided there is a training contract in place with the
    corresponding school board.

-   High school students attend the same classrooms and labs as regular,
    adult students and receive the same instruction.

-   High school students are awarded certificates or diplomas if they
    achieve the competencies required.

-   One enrollment form is used for all students and there is a section
    on the form to indicate secondary school enrollment, which is marked
    "secondary" while high school students are dually enrolled in high
    school and TTC‑M.

-   Of the 117 high school students who enrolled during the audit
    period, about ten percent continued their postsecondary education at
    TTC‑M and only about one percent of those students obtained a
    certificate.

######### RECOMMENDATIONS

We recommend that the Chief Operating Officer for Federal Student Aid:

1.  Take immediate action under 34 C.F.R §600.41 to terminate TTC-M's
    participation in the Title IV programs as a result of it not being
    an eligible institution.

2.  Review TTC-M's enrollment practices prior to award year 2001-2002 to
    identify those periods in which it was not in compliance with the
    Title IV institutional eligibility provisions discussed in this
    report.

3.  Require TTC-M to return the amount of Title IV aid distributed to
    its students during award years 2001-2002 and 2002-2003
    (\$2,458,347), as well as the amount of such aid distributed during
    those periods in which it was not in compliance with the Title IV
    institutional eligibility provisions.

**TTC-M RESPONSE**

TTC‑M did not concur with Finding No. 1.  In its written response to the
draft report (see attachment), TTC‑M stated, in part, that --

-   Secondary students are not considered to be regular students.

-   TTC‑M follows the policies and guidelines set forth by the Tennessee
    Board of Regents.

-   Secondary students must be a junior or senior in high school.

-   Student's are interviewed and counseled for appropriate program
    placement.

-   The high school provides TTC‑M instructors with a grading scale and
    grade report sheets for recording credit/grades of secondary
    students.

-   A separate Secondary Student Enrollment Form has been developed that
    more easily identifies secondary students.

-   The primary objective of students enrolling at TTC‑M is to obtain
    high school credit that will count toward their graduation.

-   A secondary student may return to TTC‑M as a regular, postsecondary
    student upon high school completion. At that time, the student will
    receive articulated credit for the previous training he/she received
    as a secondary student, and he/she will receive a postsecondary
    diploma upon completion of the program.

A copy of TTC‑M's written response to the draft report is included in
this report. Due to the large volume of pages, we did not include the
attachments to TTC‑M's written response. The attachments are available
upon request.

**OIG COMMENTS**

Although TTC‑M's response indicates that the secondary students are
admitted under separate procedures, the response confirms that the
students are regular students for Title IV purposes. The secondary
students are enrolled in the same programs and receive the same
instruction from the same instructors; receive the same course credit as
the postsecondary students; and receive the same certificate as
postsecondary students upon completion of a program of study. The
agreement in place with the secondary school system indicates that
proficiency certificates and diplomas will be awarded by TTC‑M upon
completion of the course requirements.

**FINDING No. 2 \-- TTC-M Did Not Maintain Adequate Supporting
Documentation for Professional Judgment and Dependency Override Actions,
and Not All Professional Judgment Actions Were Reported**

TTC‑M did not maintain adequate documentation to support all
professional judgment and dependency override decisions. Some students
also received professional judgment actions, but their documentation was
not coded as having received such an action. This occurred due to a lack
of adequate policies and procedures for documenting professional
judgment and dependency override decisions. We statistically estimated
that documentation was inadequate to support about 216 of the 506
students that received professional judgment and dependency override
actions during award years 2001-2002 and 2002-2003. We also
statistically estimated that about 34 students received professional
judgment actions, but were not coded as having received such actions.

The Higher Education Act of 1965, as amended, Section 479(a) (1998)
states:

> Nothing in this part shall be interpreted as limiting the authority of
> the financial aid administrator, on the basis of adequate
> documentation, to make adjustments on a case-by-case basis to the cost
> of attendance or the values of the data items required to calculate
> the expected student or parent contribution (or both) to allow for
> treatment of an individual eligible applicant with special
> circumstances. However, this authority shall not be construed to
> permit aid administrators to deviate from the contributions expected
> in the absence of special circumstances . . . . Special circumstances
> shall be conditions that differentiate an individual student from a
> class of students rather than conditions that exist across a class of
> students. Adequate documentation for such adjustments shall
> substantiate such special circumstances of individual students.

The Higher Education Act of 1965, as amended, Section 480(d) (1998),
defines an independent student as someone who fits into one or more of
six specific categories. In addition, Section 480(d)(7) of the Act
states that a student who does not qualify as an independent student
under one of the six specific categories may be considered to be an
independent student if he or she is "a student for whom a financial aid
administrator makes a documented determination of independence by reason
of other unusual circumstances."

According to Dear Colleague Letter, GEN-03-07, issued in May 2003, a
student for whom a financial aid administrator makes a documented
determination of independent by reason of other unusual circumstances is
a "dependency override." The letter also states, "Third party written
documentation supporting a student's unusual circumstances is generally
required. However, we understand that there may be some instances where
the only documentation available to the financial aid administrator is a
statement by the student. In these limited cases, the student's
statement must include the facts related to the student's unusual
circumstances, and the institution must include any other pertinent
facts in writing."

## Reported Professional Judgment Actions

TTC-M reported that it used professional judgment and dependency
override actions to amend the estimated family contribution for 212[^1]
of its 710 Pell recipients (30 percent) during award year 2001-2002 and
294[^2] of its 783 Pell recipients (38 percent) during award year
2002-2003.

We randomly selected the financial aid files for 115 students who were
coded as having received professional judgment or dependency override
actions during award years 2001-2002 and 2002-2003. We reviewed these
files to determine if there was adequate documentation of the claimed
special circumstances and of a case-by-case determination that the
special circumstances justified deviating from the expected family
contribution. We found that the documentation in the files was not
adequate to support the professional judgment actions for 48 students.
We also found that the documentation in the file for one dependency
override decision was inadequate. The documentation in these files
generally contained a brief note regarding a change in the student's
financial condition. There was insufficient information in the files to
substantiate the reported conditions. For example, one note in the file
stated, "I am not employed at the moment and I'm receiving help from an
uncle." Tables 2.1 and 2.2 below provide additional information on the
results our student file reviews.

**Table 2.1 -- Professional Judgment and Dependency Override File Review
for 2001-2002**

+--------------------------------------------+--------+-------+-------+
| # Reaso                                    | **Stud | **Ade |       |
| ns for Professional Judgment (PJ) Decision | ents** | quate |       |
|                                            |        | Su    |       |
|                                            |        | pport |       |
|                                            |        | Maint |       |
|                                            |        | ained |       |
|                                            |        | in    |       |
|                                            |        | F     |       |
|                                            |        | ile** |       |
+--------------------------------------------+--------+-------+-------+
|                                            |        | ***Y  | ***   |
|                                            |        | ES*** | NO*** |
+--------------------------------------------+--------+-------+-------+
| Student laid off of job                    | 24     | 21    | 3     |
+--------------------------------------------+--------+-------+-------+
| Student had a reduction in earned income   | 7      | 0     | 7     |
+--------------------------------------------+--------+-------+-------+
| Student\'s spouse or parent laid off       | 3      | 2     | 1     |
+--------------------------------------------+--------+-------+-------+
| Student, spouse, or parent not employed    | 4      | 1     | 3     |
+--------------------------------------------+--------+-------+-------+
| Student or parent claimed financial        | 3      | 0     | 3     |
| hardship                                   |        |       |       |
+--------------------------------------------+--------+-------+-------+
| Parent unable to work due to medical       | 1      | 0     | 1     |
| illness                                    |        |       |       |
+--------------------------------------------+--------+-------+-------+
| Student requested a revaluation of Pell    | 1      | 0     | 1     |
| eligibility                                |        |       |       |
+--------------------------------------------+--------+-------+-------+
| Parent on disability                       | 1      | 1     | 0     |
+--------------------------------------------+--------+-------+-------+
| Students incorrectly coded as PJ           | 1      | 0     | 1     |
+--------------------------------------------+--------+-------+-------+
| **Reasons for Dependency Override (DO)     |        |       |       |
| Decision**                                 |        |       |       |
+--------------------------------------------+--------+-------+-------+
| DO Only                                    | 1      | 1     | 0     |
+--------------------------------------------+--------+-------+-------+
| No documentation in file for PJ or DO      | 3      | 1     | 2     |
| decision                                   |        |       |       |
+--------------------------------------------+--------+-------+-------+
| Student laid off job and coded PJ and DO   | 1[^3]  | 1     | 0     |
+--------------------------------------------+--------+-------+-------+
| **TOTAL**                                  | **50** | *     | *     |
|                                            |        | *28** | *22** |
+--------------------------------------------+--------+-------+-------+

Table 2.2 -- Professional Judgment and Dependency Override File Review
for 2002-2003

+--------------------------------------------+--------+------+--------+
| #########                                  | **Stud | **   |        |
|                                            | ents** | Adeq |        |
| **Reasons for Professional Judgment (PJ)   |        | uate |        |
| Decision**                                 |        | Sup  |        |
|                                            |        | port |        |
|                                            |        | Ma   |        |
|                                            |        | inta |        |
|                                            |        | ined |        |
|                                            |        | in   |        |
|                                            |        | Fi   |        |
|                                            |        | le** |        |
+--------------------------------------------+--------+------+--------+
|                                            |        | *    | **     |
|                                            |        | **YE | *NO*** |
|                                            |        | S*** |        |
+--------------------------------------------+--------+------+--------+
| Student laid off of job                    | 29     | 26   | 3      |
+--------------------------------------------+--------+------+--------+
| Student had a reduction in earned income   | 5      | 2    | 3      |
+--------------------------------------------+--------+------+--------+
| Student\'s spouse or parent laid off       | 4      | 1^3^ | 3      |
+--------------------------------------------+--------+------+--------+
| Student, spouse, or parent not employed    | 9      | 3    | 6      |
+--------------------------------------------+--------+------+--------+
| Student or Parent claimed financial        | 4      | 0    | 4      |
| hardship                                   |        |      |        |
+--------------------------------------------+--------+------+--------+
| Student claimed financial hardship and was | 1[^4]  | 1    | 0      |
| also coded DO                              |        |      |        |
+--------------------------------------------+--------+------+--------+
| Parent unable to work due to medical       | 1      | 0    | 1      |
| illness                                    |        |      |        |
+--------------------------------------------+--------+------+--------+
| Student quit job                           | 2      | 0    | 2      |
+--------------------------------------------+--------+------+--------+
| Student recently divorced                  | 1      | 1    | 0      |
+--------------------------------------------+--------+------+--------+
| Students incorrectly coded as PJ           | 3      | 0    | 3      |
+--------------------------------------------+--------+------+--------+
| No documentation in file for PJ decision   | 1      | 0    | 1      |
+--------------------------------------------+--------+------+--------+
| ######### Rea                              |        |      |        |
| sons for Dependency Override (DO) Decision |        |      |        |
+--------------------------------------------+--------+------+--------+
| DO Only                                    | 4      | 3    | 1      |
+--------------------------------------------+--------+------+--------+
| Student recently divorced and coded PJ and | 1[^5]  | 1    | 0      |
| DO                                         |        |      |        |
+--------------------------------------------+--------+------+--------+
| **TOTAL**                                  | **65** | **   | **27** |
|                                            |        | 38** |        |
+--------------------------------------------+--------+------+--------+

In summary, TTC-M did not maintain adequate supporting documentation for
49 of the 115 student files reviewed (43 percent). These 49 students
received \$80,100 in Pell Grant funds. We found that 37 of the students
were disbursed excessive Pell Grant funds as a result of the unsupported
professional judgment and dependency override actions. These 37 students
received \$48,712 in excessive Pell Grant disbursements.

Using statistical sampling techniques, we examined the professional
judgment and dependency override actions for award years 2001-2001 and
2002-2003, which totaled 506 actions and Pell Grant awards totaling
\$973,618. Our sample of 115 professional judgment and dependency
override actions that included Pell Grant awards totaling \$215,005 were
chosen randomly to test compliance with documentation regulations. All
student files selected for the sample were reviewed. Based on the sample
results, we estimated that about 216 professional judgment and
dependency override actions were not sufficiently documented for award
years 2001-2002 and 2002-2003.[^6] We also statistically projected that
these 216 professional judgment and dependency override actions resulted
in excessive Pell Grant awards to students totaling about \$215,000.[^7]

[Unreported Professional Judgment Actions]{.underline}

To determine if professional judgment and dependency override decisions
were applied, but not reported and identified as such, we reviewed files
for students who received Pell Grant funds and were [not]{.underline}
coded as having received professional judgment and dependency override
actions. We reviewed student files for 115 of the 987 Pell recipients
who were not coded as having received professional judgment actions
during award years 2001-2002 and 2002-2003. Our review found that four
student files contained evidence that professional judgment was applied.
As such, these four students should have been identified and reported
appropriately. There was sufficient documentation in the files to
support the professional judgment actions.

Using statistical sampling techniques, we examined Pell Grants for award
years 2001-2002 and 2002-2003, from a universe of 987 Pell recipients
who were not coded as receiving professional judgment actions. Our
sample of 115 student files was chosen randomly to test compliance with
regulations. All student files selected for the sample were reviewed.
Based on the sample results, we estimated that about 34 students
received professional judgment and dependency override actions, but were
not coded as such for award years 2001-2002 and 2002-2003.[^8]

[TTC-M Policies and Procedures]{.underline}

TTC-M's professional judgment policy consisted of a one-paragraph
statement that discussed the purpose of professional judgment, the
school's standard professional judgment request form, and the committee
responsible for approving those requests.

It was TTC-M's practice to initiate a professional judgment action after
a student submitted a standard form or letter, which was then reviewed
by the financial aid committee for approval. Once approved, the
financial aid administrator reduced the income of the student and/or
parent by the amount of the unusual expenses. TTC-M did not maintain a
record of the committee meetings or its reasons for granting
professional judgment actions. The Assistant Director and the Student
Services Coordinator, both of whom are committee members, stated that
the only way to recognize that professional judgment was approved for a
student was the presence of a check mark on the form. We found no
evidence that the committee members initialed the forms following
approval. We also did not find any written justification or reason by
TTC‑M for granting professional judgment on the forms or in the student
files. However, where we found adequate documentation of the special
circumstance and indication that a case-by-case determination had been
made, we did not question the aid disbursed.

The TTC-M Director stated that the documentation that was obtained from
students who requested professional judgment was, to the best of the
financial aid committee's knowledge, adequate based on their
interpretation of the rules.  The Director said the financial aid
department exercised its authority to perform professional judgment
decisions on a case-by-case basis.  The Director said the financial aid
committee reviewed each professional judgment request and made decisions
based on the written statements and no log of the meetings was
maintained. The Director said TTC‑M was under the impression that a
signed statement from the student was sufficient enough for requests.

The Director stated that TTC-M has written a new, more detailed policy
on professional judgment, and that the new policy will be published in
the student handbook and made available to all students. The Vice
Chancellor for Tennessee Technology Centers stated that the policy
developed by TTC‑M would be reviewed for implementation at all of the
technology centers.

 

**RECOMMENDATIONS**

We recommend that the Chief Operating Officer for Federal Student Aid:

2.1 Ensure that TTC‑M's revised professional judgment and dependency
override policies and procedures include controls that require the
financial aid office to maintain adequate support for each student that
substantiates the student's special circumstance and provides for
documentation of the reasons for the professional judgment and/or
dependency override decision.

2.  Require TTC-M to develop policies and procedures to ensure that all
    professional judgment actions are reported to the Central Processing
    System.

2.3 Require TTC-M to refund the \$48,712 in Pell Grants disbursed as a
result of inadequate documented professional judgment and dependency
override actions. (This recommended recovery amount is also included in
the amounts for Recommendation 1.3.)

3.  Require TTC-M to perform a 100 percent review of the professional
    judgment actions not included in our audit for award years 2001-2002
    and 2002-2003 through the current period and refund any additional
    Pell Grants disbursed as a result of inadequate support for
    professional judgment and dependency override actions granted. The
    Chief Operating Officer should require verification of this
    calculation by the appropriate Case Management Team.

**TTC-M RESPONSE**

TTC‑M did not concur with Finding No. 2. In its written response to the
draft report, TTC‑M stated, in part, that --

-   The Higher Education Act of 1965, as amended, Section 479(a) (1998)
    is broad and does not specify "acceptable documentation" to support
    professional judgment decisions.

-   TTC-M reviewed the Federal Student Aid Handbook for documentation
    acceptable for verification purposes and determined that a signed
    statement can be used in lieu of Internal Revenue Service (IRS)
    documentation. TTC‑M determined that the same documentation should
    be acceptable for professional judgment.

-   Students who requested professional judgment were either asked to
    fill out a standard professional judgment form or provide a written,
    signed statement outlining the special circumstances.

-   Many of the students who requested professional judgment were
    involved in plant closures where jobs were eliminated. TTC‑M
    participates in the Tennessee Department of Labor and Workforce
    Development's Rapid Response Team and helps students complete
    necessary applications for school admission and financial
    assistance. As a result of working closely with these students,
    representatives of TTC‑M did not require any documentation other
    than a signed statement.

-   When students requested professional judgment, they were reminded
    about step seven, paragraph two on the Free Application for Federal
    Student Aid (FAFSA) whereby the student agrees to provide
    information that will verify the accuracy of the completed FAFSA.

-   If the Department of Education allows up to \$4,050 to be
    distributed based on a student's signed statement on the FAFSA, it
    appears that students with unusual or special circumstances are
    being discriminated against by making them provide additional
    documentation.

-   Although the staff of TTC‑M was operating within their authority,
    TTC‑M and the Tennessee Board of Regents have developed and
    implemented a specific professional judgment guideline, which is
    included in the Tennessee Technology Centers' Financial Aid
    Handbook. Each Technology Center Director has been updated with the
    new guideline and they are implementing the guideline at each
    technology center.

-   The new professional judgment form will obtain all pertinent
    information necessary to prove the facts stated. Students who do not
    provide the necessary documentation will not be considered complete
    and will not be reviewed by the professional judgment committee.

-   The professional judgment committee will be made up of three to four
    staff members who do not have any prior knowledge of these students'
    circumstances; therefore, no predetermined opinions should exist,
    and each case will be reviewed without bias. An unbiased committee
    will help insure that professional judgment decisions are based
    solely on the documentation provided by the student. The committee
    will meet on an as‑needed basis and will maintain minutes of each
    meeting. These minutes will be logged and signed by each committee
    member; and the professional judgment form will be stamped to
    indicate approval status and initialed by the committee members. The
    Tennessee Technology Centers will include this written policy on
    professional judgment in their school's student handbook and make it
    available to anyone who requests it.

**OIG COMMENTS**

TTC-M\'s comments did not lead us to change our finding. TTC-M\'s
statement that the Federal Student Aid Handbook permits a signed
statement to be used in lieu of IRS documentation omitted the limited
circumstances in which such a statement can be used. The handbook and
the verification regulations provide that a signed statement can be used
only in prescribed, limited circumstances where verifiable documentation
filed with or from the IRS is unavailable. Section 479A of the HEA
prescribes that adequate documentation must \"substantiate\" the special
circumstances of individual students. In our review, we looked for
documentation to \"substantiate\" the circumstances of the student that
would allow a financial aid advisor, on a case-by-case basis, to
conclude that it was reasonable to \"deviate from the contributions
expected in the absence of special circumstances.\"

For the students involved in plant closures discussed in TTC-M\'s
comments, we questioned the documentation for only 6 of the 54 students
involved in job lay offs. In addition to a statement from the students,
we found that the files contained other documentation substantiating the
circumstances of the students. These files typically included
documentation of participation in other programs designed to assist
workers involved in plant closures.

For the 49 files in total where we found the documentation of
professional judgment or dependency overrides to be inadequate, the
documentation was generally limited to brief notes from the students.
The notes did not provide sufficient detail to substantiate his or her
circumstances. A typical example stated only that \"I am unemployed at
the moment and I\'m receiving assistance from an uncle.\" The file did
not otherwise contain information on the dates of unemployment, the
reason for the unemployment, any unemployment compensation, or the
prospects for additional employment.

The new documentation policy and procedures implemented by the Tennessee
Technology Centers should provide for adequate documentation of
professional judgment and dependency override actions.

BACKGROUND

TTC-M, established in 1966, is located in Morristown, TN, and is one of
27 technology centers strategically located throughout Tennessee. TTC-M
is a public, less than two-year institution that has an approximate
enrollment of 1,700 full-time and part-time students. TTC‑M is designed
to serve both youth and adults in specified geographic areas and is
governed by the Tennessee Board of Regents.

The Tennessee Technology Centers enrolled 3,162 high school students
during award years 2000-2001, 2001-2002, and 2002-2003. Not all
technology centers enrolled high school students during these three
award years. Table 1.2 below illustrates the number of high school
students enrolled and the number of technology centers that enrolled
high school students.

**Table 1.2 - High School Students Enrolled in Technology Centers**

  ------------------ ------------------------ ----------------------------
  **Award Year**     **Number of High School  **Number of Technology
                     Students Enrolled**      Centers that Enrolled High
                                              School Students**

  2000-2001          1,050                    20

  2001-2002          1,093                    21

  2002-2003          1,019                    22

  **TOTAL**          **3,162**                
  ------------------ ------------------------ ----------------------------

TTC-M is accredited by the Council of Occupational Education and offers
certificates in programs such as practical nursing, automotive
technology, computer electronics, welding, and others. TTC-M has a
Program Participation Agreement with the U.S. Department of Education
for eligible students to receive Title IV aid. As illustrated in the
table below, TTC‑M received over \$2.4 million in Title IV funds during
award years 2001-2002 and 2002-2003.

+--------------------+----------------+---------------+--------------+
| # Award Year       | **PELL**       | # FSEOG\*     | **FWS\*\***  |
+--------------------+----------------+---------------+--------------+
| 2001-2002          | \$1,072,438    | \$30,000      | \$35,000     |
+--------------------+----------------+---------------+--------------+
| 2002-2003          | 1,237,409      | 37,703        | 45,797       |
+--------------------+----------------+---------------+--------------+
| Total by Program   | 2,309,847      | 67,703        | 80,797       |
+--------------------+----------------+---------------+--------------+
| **Grand Total**    | *              |               |              |
|                    | *\$2,458,347** |               |              |
+--------------------+----------------+---------------+--------------+

\*Federal Supplemental Educational Opportunity Grant.

\*\* Federal Work Study Program.

OBJECTIVES, SCOPE, AND METHODOLOGY

Our audit objectives were to determine (1) whether TTC-M enrolled as
regular students in its programs of study persons who did not have a
high school certificate or equivalent and/or were under the age of
compulsory school attendance and (2) whether TTC‑M's use of professional
judgment and dependency override to make adjustments to estimated family
contribution calculations resulted in appropriate Pell Grant awards to
students. The scope of our audit included award years 2001-2002 and
2002-2003.

To evaluate institutional eligibility regarding the enrollment of high
school students, we-

-   Reviewed the Higher Education Act of 1965, as amended, and
    applicable Title IV regulations.

-   Reviewed State law regarding the age of compulsory school
    attendance.

-   Reviewed the academic files for selected high school students.

-   Reviewed TTC-M's policies and procedures regarding the enrollment of
    high school students.

-   Reviewed sample contracts between TTC-M and local school boards for
    the enrollment of high school students.

-   Interviewed TTC-M officials and the Vice Chancellor for Tennessee
    Technology Centers.

We randomly selected for review 69 of the 170 high school students'
files that TTC‑M identified as being enrolled at TTC‑M during the audit
period. We obtained and reviewed the documentation contained in the
academic files for the students in our sample.

To evaluate TTC-M's use of professional judgment and dependency override
adjustments, we:

-   Reviewed financial aid files, student ledger cards, and other
    supporting documentation relating to professional judgment and
    dependency override.

-   Reviewed Title IV of the Higher Education Act of 1965, as amended
    (particularly Sections 479A and 480(d)); the Department's Student
    Financial Assistance Handbook for the award years audited; and the
    Dear Colleague Letter of May 2003 (GEN-03-07).

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-   Reviewed the State of Tennessee's OMB Circular A‑133 audit report
    for the year ended 2002 and the Tennessee Comptroller of the
    Treasury's Financial and Compliance audit for Tennessee Technology
    Center at Morristown for the years ended 2000 and 2001.

-   Reviewed disbursement and other student related data from the
    Department's National Student Loan Data System and the Central
    Processing System.

-   Reviewed TTC-M's drawdown and disbursement data using the
    Department's Grants Payment Administration System.

-   Interviewed TTC-M officials involved in professional judgment and
    dependency override actions.

-   Interviewed staff at the Five Rivers Career Center, Tennessee
    Department of Labor.

-   Contacted staff from the Department's Office of Federal Student Aid,
    Case Management and Oversight offices in Atlanta, GA, and Kansas
    City, MO.

To evaluate the adequacy of documentation maintained to support
professional judgment and dependency override actions, we reviewed a
random sample of students who received Pell Grant awards and whose
Student Aid Report (SAR)/Institutional Student Information Record (ISIR)
reported comment code 027 (estimated family contribution adjustment) or
comment code 164 (dependency override). These codes indicated that
professional judgment or dependency override had been applied. We
identified a universe of 710 and 783 students who received Pell Grant
funds during award years 2001-2002 and 2002-2003, respectively. TTC-M
reported professional judgment and dependency override decisions for 212
of the 710 Pell recipients in award year 2001-2002 and 294 of the 783
Pell recipients in award year 2002-2003. Total Pell Grant awards
distributed to the students who received professional judgment and
dependency override actions was \$375,951 for award year 2001-2002 and
\$597,667 for award year 2002-2003. To evaluate TTC‑M's use of
professional judgment and dependency override actions, we selected a
random sample of 50 student files from award year 2001-2002 and 65
student files from award year 2002-2003 for review. Total Pell Grant
award distributed to the sampled students was \$95,855 for award year
2001-2002 and \$119,150 for award year 2002-2003.

To evaluate the risk that professional judgment or dependency override
was used, but not reported, we selected a random sample of students who
received Pell Grant awards during the audit period and whose SAR/ISIR
did not report the use of professional judgment or dependency override
(i.e., no comment code 027 or 164). We identified a universe of 498
students in award year 2001-2002 and 489 students in award year
2002-2003 who were not coded as receiving professional judgment or
dependency override. We selected a random sample of 50 students from
award year 2001-2002 and 65 students from award year 2002-2003 for
review.

During the audit, we relied in part on computer-processed data contained
in TTC-M's financial aid processing and disbursement systems. We tested
the accuracy and completeness of the data by comparing TTC‑M's records
to source documents and the data in the Department's systems. Based on
these tests and assessments, we concluded that the data was sufficiently
reliable for use in meeting the audit objectives.

Audit work was conducted during the period November 2003 though February
2004. An exit conference was held with TTC-M officials and the Vice
Chancellor for Tennessee Technology Centers on March 10, 2004. Our audit
was performed in accordance with generally accepted government auditing
standards appropriate to the scope of the review described above.

STATEMENT ON MANAGEMENT CONTROLS

We did not assess TTC-M's management control structure applicable to its
institutional eligibility for participation in Title IV programs because
it was not necessary to achieve our objective related to institutional
eligibility.

As part of our audit, we gained an understanding of the controls over
professional judgment and dependency override determinations. We did not
assess the adequacy of the management control structure applicable to
TTC‑M's use of professional judgment and dependency override to
determine the nature, extent, and timing of our testing. Instead, we
relied on substantive testing of financial aid and accounting records.
Our review of student files disclosed significant noncompliance with the
requirements for professional judgment and dependency override in the
Higher Education Act that led us to believe that material weaknesses
existed in TTC‑M's controls over professional judgment and dependency
override. These weaknesses and their effects are fully discussed in the
AUDIT RESULTS section of this report.

ADMINISTRATIVE MATTERS

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:

Theresa S. Shaw

Chief Operating Officer, Federal Student Aid

U.S. Department of Education

Union Center Plaza

830 First Street, NE, Room 112G1

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 greatly 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.

[]{.mark}

> Sincerely,

**J. Wayne Bynum**

> J. Wayne Bynum
>
> Regional Inspector General
>
> Region IV

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[^1]: Includes 10 students coded as dependency override, two of which
    were also coded as professional judgment.

[^2]: ^2^ Includes 13 students coded as dependency override, three of
    which were also coded as professional judgment.

[^3]: ^3^ Student was coded both professional judgment and dependency
    override. The documentation was inadequate for professional judgment
    and adequate for dependency override.

[^4]: ^4^ Student was coded both professional judgment and dependency
    override. The documentation was adequate for both decisions.

[^5]: ^5^ Student was coded both professional judgment and dependency
    override. The documentation was inadequate for professional judgment
    and adequate for dependency override.

[^6]: ^6^ We found that 49 of the 115 tested student files did not
    contain sufficient supporting documentation. Based on our
    statistical sample, we are 90 percent confident that the number of
    student files that did not contain sufficient supporting
    documentation totaled about 216 +/- 7.3 percent precision.

[^7]: ^7^ We found that 37 of the 115 students received excessive Pell
    Grant funds totaling \$48,712. Based on our statistical sample, we
    are 90 percent confident that the excessive Pell Grant awards
    provided to the estimated 216 students that did not have adequate
    supporting documentation totaled about \$215,753 +/- 24.14 percent
    precision (or +/- \$52,083). Note: It is OIG policy not to recommend
    recovery of statistically estimated dollars unless the precision is
    +/- 20 percent or smaller.

[^8]: ^8^ We found that 4 of the 115 tested student files received
    professional judgment actions. Based on our statistical sample, we
    are 90 percent confident that the number of students that received
    professional judgment actions and not coded as such totaled about 34
    +/- 4.0 percent precision.