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

OFFICE OF INSPECTOR GENERAL

AUDIT SERVICES

Chicago/Kansas City/Dallas Audit Region

July 03, 2008

> **Control Number**
>
> **ED-OIG/A05I0009**

Dr. Lloyd W. Benjamin III

President

Indiana State University\
Condit House\
Room 101\
Terre Haute, IN 47809

Dear Dr. Benjamin:

This **Final Audit Report**, entitled *Indiana State University's
Compliance with Selected Provisions of Law and Regulations for the
Upward Bound and Upward Bound Math-Science Programs*, presents the
results of our audit. The objective of our audit was to determine
whether Indiana State University complied with selected provisions of
law and regulations governing the administration of its Upward Bound
(UB) and Upward Bound-Math Science (UBMS) projects during the 2006-2007
grant year. The 2006-2007 grant year was June 1, 2006, through May 31,
2007, for UB, and September 1, 2006, through August 31, 2007, for UBMS.

BACKGROUND

Indiana State University (University), founded in 1865, is a public,
co-educational university located in Terre Haute, Indiana. The
University was awarded \$370,112 for its 2006-2007 UB project and
\$222,916 for its 2006-2007 UBMS project. The 2006-2007 grant year was
the last year the U.S. Department of Education (Department) funded the
University's UBMS project.

UB and UBMS are two of eight federal TRIO programs authorized by the
Higher Education Act of 1965, as amended (HEA), and administered by the
Office of Postsecondary Education (OPE).[^1] The purpose of both UB and
UBMS is to provide opportunities for participants who come from
low-income or disadvantaged backgrounds to succeed in their pre-college
performance and in their higher education pursuits. Both programs award
grants to eligible applicants to provide academic instructional
programs, personal and academic counseling, career guidance, tutoring,
and exposure to cultural events and academic programs not usually
available to disadvantaged youths. The programs serve high school
students from low-income families and high school students from families
in which neither parent holds a bachelor's degree. The specific purpose
of UBMS is to strengthen the math and science skills of participating
students.

AUDIT RESULTS

The University did not always comply with selected provisions of law and
regulations governing the administration of its UB and UBMS projects.
During the 2006-2007 grant year, the University (1) did not serve the
minimum number of participants required to be considered an eligible UB
project and (2) did not always maintain effective control over its UB
and UBMS grant funds. The University's UB project served only 42
participants, 8 less than the required minimum of 50. In addition, the
University did not always follow the requirements for identifying and
documenting participant eligibility and participant eligibility for
stipends, did not always follow its established procedures for payroll,
and did not always follow its established procedures for transportation
expenditures.

In its comments to the draft report, Indiana State University concurred
with our findings but did not concur with one of our recommendations.
The comments are summarized at the end of each finding. The full text of
Indiana State University's comments on the draft report is included as
an Attachment to the report.

FINDING NO. 1 -- The University's UB Project Was Not An Eligible Project

During the 2006-2007 grant year, the University did not serve the
minimum number of 50 UB participants required by federal regulations. In
its 2006-2007 Annual Performance Report (APR) to the Department, the
University reported that it served only 42 participants. Because it did
not serve the minimum number of participants, the project was not an
eligible UB project, and the University was not eligible for the
\$337,076.95 in UB funds that it received for its 2006-2007 grant year.

Pursuant to 34 C.F.R. § 645.43(a)(1), regular UB projects must serve
between 50 and 150 participants in each budget period. Also, according
to the 2006-2007 grant awards, which are posted on the Department's
website, the University's UB grant project was to serve 74 participants.

The UB grant is a competitive grant, and the Department considers the
institution's grant proposal, including the number of participants to be
served, in making its decision to award. Inaccurate estimates in the
grant proposal may result in the Department denying other institutions
funding and awarding grants to institutions that are not able to meet
the objectives stated in their grant proposals.

This was a repeat finding for the UB project. The State Board of
Accounts, in its 2005-2006

A-133 Single Audit report, reported that both the UB and UBMS programs
did not serve the minimum number of students. The auditor verified the
University served only 36 UB and 45 UBMS[^2] participants. In its
2006-2007 UBMS APR, the University reported it served 52 participants,
though we found one student was not eligible for the project.[^3] By
serving 51 participants, the University met the UBMS project's minimum
participant requirement in 2006-2007.

The University explained that it had gone through a change in the
administrative structure of reporting lines for the grant and many staff
members resigned in September 2006.  As a result, various activities for
recruiting new participants and retaining former ones were not carried
out as effectively as they should have been. The University also
informed us that the 2007-2008 UB project is serving 71 students.

## Recommendation  {#recommendation .RptSubcaption}

We recommend that the Chief Financial Officer, in conjunction with the
Assistant Secretary for OPE, require the University to

1.  Return to the Department the \$337,076.95 in UB funds expended
    during the 2006-2007 grant year and closeout period.

## University's Comments {#universitys-comments .RptSubcaption}

Indiana State University concurred with the finding but did not concur
with the recommendation. The University maintained that the grant
application for the 2006-2007 year was submitted in good faith, and 42
participants were served. The University believes that it made a
meaningful difference in the lives of the students served and that it
satisfied the purpose of the UB program. The University stated that it
drew down only \$308,111, not \$370,112. Based on \$5,001 per
participant, 42 of the proposed 74 participants equals \$210,063 of
legitimate expenditures. The University believes that it should only
return \$98,048 to the Department.

## OIG Response {#oig-response .RptSubcaption}

> Although the University served 42 UB participants, it still failed to
> serve the minimum number of participants required by federal law. As a
> result, the University's UB project was not an eligible project. We do
> not agree with the University's calculation of \$308,111 in UB funds
> drawn down. We determined that the University drew down \$323,025.78
> in UB funds for 2006-2007 grant year expenses and an additional
> \$14,051.17 during the 90 day closeout period of the grant, for a
> total of \$337,076.95. We revised recommendation 1.1 to state that the
> University should return \$337,076.95 drawn down instead of \$370,112
> (funds awarded).

FINDING NO. 2 -- The University Did Not Always Maintain Effective
Control Over Grant Funds

The University did not always maintain effective control over its UB and
UBMS grant funds. The University did not always follow program
requirements for identifying and documenting the eligibility of project
participants, which resulted in UBMS expenditures, including
expenditures for stipends, for ineligible participants. The University
also did not always follow its established procedures for payroll, which
resulted in time and effort documentation being submitted to payroll
that lacked the proper approval signatures and, in one case, was not
accurate. Finally, the University did not always follow its established
procedures for transportation expenditures, which resulted in employees
using University vehicles for periods other than those that were
initially requested and/or approved.

Pursuant to 34 C.F.R. 74.21(b)(3), discretionary grant recipients are
required to maintain financial management systems which provide
effective control over grant funds and other assets to ensure that they
are used solely for authorized purposes.

[The University Provided UBMS Services to Ineligible
Students]{.underline}

The University provided UBMS services and/or paid stipends to six
ineligible students. The following table shows the reason each of the
six students was ineligible for the UBMS services and/or stipends they
received during the 2006-2007 grant year.

+---+---------------------+---------+------------------------------------+
| S |                     |         |                                    |
| i |                     |         |                                    |
| x |                     |         |                                    |
| I |                     |         |                                    |
| n |                     |         |                                    |
| e |                     |         |                                    |
| l |                     |         |                                    |
| i |                     |         |                                    |
| g |                     |         |                                    |
| i |                     |         |                                    |
| b |                     |         |                                    |
| l |                     |         |                                    |
| e |                     |         |                                    |
| S |                     |         |                                    |
| t |                     |         |                                    |
| u |                     |         |                                    |
| d |                     |         |                                    |
| e |                     |         |                                    |
| n |                     |         |                                    |
| t |                     |         |                                    |
| s |                     |         |                                    |
| w |                     |         |                                    |
| h |                     |         |                                    |
| o |                     |         |                                    |
| r |                     |         |                                    |
| e |                     |         |                                    |
| c |                     |         |                                    |
| e |                     |         |                                    |
| i |                     |         |                                    |
| v |                     |         |                                    |
| e |                     |         |                                    |
| d |                     |         |                                    |
| U |                     |         |                                    |
| B |                     |         |                                    |
| M |                     |         |                                    |
| S |                     |         |                                    |
| S |                     |         |                                    |
| t |                     |         |                                    |
| i |                     |         |                                    |
| p |                     |         |                                    |
| e |                     |         |                                    |
| n |                     |         |                                    |
| d |                     |         |                                    |
| s |                     |         |                                    |
| a |                     |         |                                    |
| n |                     |         |                                    |
| d |                     |         |                                    |
| S |                     |         |                                    |
| e |                     |         |                                    |
| r |                     |         |                                    |
| v |                     |         |                                    |
| i |                     |         |                                    |
| c |                     |         |                                    |
| e |                     |         |                                    |
| s |                     |         |                                    |
+---+---------------------+---------+------------------------------------+
| \ | Reason Ineligible   | Unal    | Eligibility Criteria               |
| # |                     | lowable |                                    |
|   |                     | S       |                                    |
|   |                     | tipends |                                    |
|   |                     | and     |                                    |
|   |                     | S       |                                    |
|   |                     | ervices |                                    |
+---+---------------------+---------+------------------------------------+
| 1 | In 12^th^ grade at  | \$1,310 | To be eligible for enrollment in a |
|   | the time of the     |         | UBMS project, a student must have  |
|   | student's initial   |         | completed the 8^th^ grade but not  |
|   | selection.          |         | entered the 12^th^ grade (34       |
|   |                     |         | C.F.R. § 645.3(d)). The University |
|   |                     |         | documented participants' meeting   |
|   |                     |         | this and other criteria through    |
|   |                     |         | the students' applications for     |
|   |                     |         | enrollment in the project          |
|   |                     |         |                                    |
|   |                     |         | (34 C.F.R. § 645.43(c)).           |
+---+---------------------+---------+------------------------------------+
| 2 | Graduated high      | \$1,577 |                                    |
|   | school.             |         |                                    |
+---+---------------------+---------+------------------------------------+
| 3 | No application in   | \$2,076 |                                    |
|   | the participant     |         |                                    |
|   | file.               |         |                                    |
+---+---------------------+---------+------------------------------------+
| 4 | No participant      | \$336   |                                    |
|   | file.               |         |                                    |
+---+---------------------+---------+------------------------------------+
| 5 | Resided outside of  | \$1,716 | UBMS participants must reside      |
|   | the UBMS service    |         | within the grantee's target area   |
|   | area.               |         | (34 C.F.R. § 645.6                 |
|   |                     |         | ("participant")).                  |
+---+---------------------+---------+------------------------------------+
| 6 | In "bridge          | \$1,449 | UBMS Centers may include a summer  |
|   | component" but had  |         | bridge component consisting of     |
|   | not graduated high  |         | math and science related           |
|   | school.             |         | coursework for those participants  |
|   |                     |         | who have graduated from high       |
|   |                     |         | school and intend on enrolling in  |
|   |                     |         | an institution of higher education |
|   |                     |         | in the following fall term (34     |
|   |                     |         | C.F.R § 645.13(b)(1)).             |
+---+---------------------+---------+------------------------------------+
|   | Total               | \$8,464 |                                    |
+---+---------------------+---------+------------------------------------+

The findings pertaining to the UB and UBMS projects contained in the
University's 2005-2006 A-133 Single Audit prompted the University's
Internal Audit Department to audit both projects. The University also
reviewed all participants' files to ensure that the necessary
eligibility documentation was maintained for each participant. The file
review identified students 2, 5, and 6 listed in the above table as
ineligible for services; however, the ineligible participants already
had received stipends and/or participated in UBMS field trips.

We identified student 1 during our review of 11 of 52[^4] reported
recipients. We identified students 3 and 4 during our testing of stipend
payments after we noted payments to students not included on the
participant list or identified during the University's file review.

The University's written policy for determining participant eligibility
did not contain specific guidelines for the determination of participant
eligibility. The written policy stated only that the grant administrator
is responsible for determining participant eligibility. There were no
written policies for the maintenance of eligibility documentation. In
addition to the turnover in the position of TRIO Coordinator during the
audit period, the lack of specific written policies contributed to
services being provided to ineligible students.

Providing services to ineligible students is a misuse of grant funds and
results in less grant funding being available to provide essential
services to eligible participants. The University provided an accounting
of the unallowable stipend payments and services (\$8,464). The
University later provided print screens from its Banner system,[^5]
which showed that it credited the UBMS project the \$8,464 for the
stipends and services that were provided to the six ineligible students.
(See table on page 4 of this report.)

[The University Did Not Always Follow Its Established Procedures for
Payroll]{.underline}

University personnel did not always follow established procedures for
maintaining effective control over payroll:

-   The *Recap Time Sheets*[^6] for salaried UB staff for the period
    November 21, 2006, through February 20, 2007, were not signed by the
    department head.

-   One UB staff member neglected to turn in a leave slip for 1 day of
    vacation, and the leave day was not subtracted from the employee\'s
    leave bank.

-   Three of 8 UB leave slips, for the period November 21, 2006, through
    February 20, 2007, were not signed by the director. Two of these 8
    leave slips were not signed by the staff member.

-   Two of 54 UB and UBMS *Support Staff Time and Attendance Reports*
    for the payroll periods beginning May 20, 2006, through May 19,
    2007, and August 26, 2006, through August 25, 2007, respectively,
    were not signed by the supervisor. In these 2 cases, the TRIO
    Coordinator allowed administrative staff to sign each others'
    timesheets instead of requiring them to obtain a supervisor's
    signature.[^7]

The distribution of salaries and wages, whether treated as direct or
facilities and administration costs, must be based on payrolls
documented in accordance with the generally accepted practices of the
grantee (Office of Management and Budget (OMB) Circular A-21, Subsection
J.10.b(1)(a)). Payroll costs are allowable only to the extent that the
total compensation to individual employees conforms to the established
policies of the grantee and to federal requirements. The University\'s
Payroll Office requires the designated timekeeper in each department to
post the use of paid and unpaid leave time for salaried staff on a
monthly *Recap Time Sheet*, which is to be signed by the department
head. In the event the department head is unable to sign the *Recap Time
Sheet*, the next level supervisor must sign.  Faculty and staff are
obligated to report any absences to the appropriate department head. 
Department heads are responsible for the accuracy of reported absences.
In addition, support staff are required to sign the *Support Staff Time
and Attendance Report* and submit it to the appropriate supervisor for
review and approval.

The University stated that the requirement for department heads to sign
the *Recap Time Sheets* is a change in procedure, which has been
difficult to implement. One factor that has made implementation
difficult is the design of the *Recap Time Sheet* has not been modified
to fit the new procedure. The *Recap Time Sheet* still has a place only
for the signature of the person completing the form.

Not always maintaining established internal control over payroll
expenses increases the risk that grant funds may be misused. This could
result in less grant funding being available to carry out the grant
objectives stated in the University\'s grant proposals.

[The University Did Not Follow Its Established Procedures for
Transportation Expenditures]{.underline}

During the 2006-2007 grant year, the University did not complete vehicle
permits for the correct number of days for five of the eight
transportation transactions we examined.  In one case, the permit
indicated that the vehicle would be out only one day, but the staff
member kept the vehicle for four days.  The UBMS grant was charged for
all four days that the vehicle was out.  The five transactions had a
total dollar value of \$362.

The University also used an expired travel authorization to reserve a
vehicle for three of the eight transportation transactions we
examined.[^8]  The UB and UBMS grants used blanket travel
authorizations, which covered several months at a time, for
transportation expenditures.  In this case, the vehicle permits for the
three transactions, which all occurred in August and September 2006,
referenced a travel authorization for the period June 1, 2006, through
July 28, 2006. These three transactions, which were outside of the
period of the authorization, had a total dollar value of \$274.

The accounting practices of individual colleges and universities must
provide for adequate documentation to support costs charged to sponsored
agreements (OMB Circular A-21, Subsection A.2.e.). Also, University
travel policies dictate that a travel authorization must be completed
and filed with the Office of the Controller and funds encumbered in
order to rent a vehicle.  A University vehicle permit form must be
prepared with the travel authorization number when using University
vehicles out of the motor pool fleet.  In order to facilitate
scheduling, all vehicles must be returned at the time indicated.

Under University policy, after a traveler returns a vehicle to the motor
pool, motor pool personnel enter the date the vehicle was returned, as
well as time-in, mileage-in, and total miles. The vehicle permit is then
sent directly to Financial Accounting and is not forwarded to the
Principal Investigator. Thus, the Principal Investigator would not know
if a vehicle for which the grant was being charged was kept out longer
than indicated on the vehicle permit.

Inadequate controls over transportation could result in employees using
University vehicles for unauthorized purposes.  If the grant is charged
for unallowable costs, less grant funding will be available to
accomplish the grant objectives stated in the University\'s grant
proposal.

**Recommendations**

We recommend that the Chief Financial Officer, in conjunction with the
Assistant Secretary for OPE, require the University to

1.  Ensure that UB staff members receive training on grant requirements
    for participant eligibility verification and document retention; and

2.2 Ensure that staff members charged with administering the UB grant
understand and adhere to established payroll and transportation
policies.

## University's Comments {#universitys-comments-1 .RptSubcaption}

The University concurred with the finding and recommendations. The UB
Director, along with the UB staff, will conduct a self audit of
participant files on at least a quarterly basis. Participant files will
be reviewed for documentation of participant eligibility according to
the written policies and procedures the University developed for the
verification of UB participant eligibility and maintenance of
eligibility documentation. The University revised its transportation
policies. A vehicle permit addendum will be used to change dates or add
expenditures to an original vehicle permit. Documentation of travel will
include: purpose of trip, destination, participant contacts, and sign-in
sheets. The University strengthened its payroll policies. Time sheets
without the signature of the appropriate supervisor will not be
processed, and *Recap Time Sheets* for all programs must be signed by
the person completing the form, then by the program coordinator or
director, and then by the Student Academic Services Center director or
the director's designee.

**OIG Response**

The written policies and procedures the University developed for the
verification of UB participant eligibility and the maintenance of
eligibility documentation are adequate. Therefore, we amended the report
to remove draft recommendation 2.1 that the University develop
comprehensive written policies and procedures for the verification of UB
participant eligibility and the maintenance of eligibility
documentation. The revisions the University made to its transportation
policies are sufficient to ensure that documentation reflects the actual
dates University vehicles are used and supports that vehicles are used
only for allowable grant activities. Again, we amended the report to
remove draft recommendation 2.3 that the University revise its
transportation policies. Our remaining recommendations were renumbered.

OTHER MATTERS

Salary costs for a University official to prepare the UBMS APR and
conduct a file review of UBMS and UB participant files from August 2007
through January 2008 were charged to Student Support Services, Talent
Search, and UB. The University mistakenly thought that salaries could
not be charged to the UBMS program during the grant's close out period.
Paying the employee from these other three TRIO programs for the work
done on the UBMS grant resulted in less grant funding being available to
carry out the grant objectives stated in the University\'s grant
proposals for the other programs.

OBJECTIVE, SCOPE, AND METHODOLOGY

The objective of our audit was to determine whether the University
complied with selected provisions of law and regulations governing the
administration of its UB and UBMS projects during the 2006-2007 grant
year. The 2006-2007 grant year was June 1, 2006, through May 31, 2007,
for UB, and September 1, 2006, through August 31, 2007, for UBMS.

To achieve our objective, we performed the following procedures:

1.  Reviewed selected provisions of the HEA, regulations, and OMB
    Circulars, and determined which were applicable to the audit
    objective.

2.  Gained an understanding of the University's history, organization,
    and structure; identified key University personnel responsible for
    administration of its UB and UBMS projects and determined the scope
    of their authority; identified the services that the University's UB
    and UBMS projects are providing; and gained an understanding of its
    UB and UBMS projects in general.

3.  Reviewed the University's UB and UBMS approved grant proposals,
    grant award notifications, and APRs, which covered the period June
    1, 2006, through May 31, 2007, (UB) and September 1, 2006, through
    August 31, 2007 (UBMS).

4.  Obtained the University's accounting records and identified all UB
    and UBMS grant funds expended during the period June 1, 2006,
    through May 31, 2007 (UB), and September 1, 2006, through August 31,
    2007 (UBMS).

5.  Obtained and reviewed the A-133 Single Audit report for the
    2005-2006 fiscal year prepared by the State Board of Accounts and
    also reviewed an internal audit of the UB and UBMS projects that the
    University completed.

6.  Gained an understanding of the University's internal control
    structure, policies, procedures, and practices applicable to the
    administration of the UB and UBMS grants through interviews and
    review of written policies.

7.  Judgmentally selected two field trip transactions (one for UB and
    one for UBMS) and reviewed supporting documentation to determine
    whether the trips were allowable and properly supported. These trips
    occurred in December 2006 and in June 2007, respectively. (See table
    below for percentage sampled.)

  ----------- ------------------ ------------------- ---------------------
  Field Trip                                         
  Sample                                             

  Project     Value of Sample    Value of Population Percentage Sampled

  UB          \$3,713            \$12,779            29

  UBMS        \$27,750           \$37,755            72

  Total       \$30,963           \$50,534            
  ----------- ------------------ ------------------- ---------------------

8\. Judgmentally selected six UB and three UBMS transportation
transactions and reviewed supporting documentation to determine whether
the transportation expenditures were allowable and properly supported.
These transactions occurred between June 2006 and November 2006. (See
table below for percentage sampled.)

  ---------------- ------------------ ------------------- ---------------------
  Transportation                                          
  Sample                                                  

  Project          Value of Sample    Value of Population Percentage Sampled

  UB               \$427              \$3,017             14

  UBMS             \$144              \$2,683             5

  Total            \$571              \$5,600             
  ---------------- ------------------ ------------------- ---------------------

9\. Obtained the monthly *Recap Time Sheets* and leave slips for UB
staff for the months of December 2006, January 2007, and February 2007
and reviewed them to ensure that all leave taken was properly recorded
on the recap reports.

10\. Obtained the semi-annual certifications and *Support Staff Time and
Attendance Reports* for all UB and UBMS staff whose salaries and fringe
benefits for the 2006-2007 grant year were charged entirely to the UB
and UBMS grants.

11\. Obtained the names of the 52 UBMS students the University reported
as served during the 2006-2007 grant year from the University. Obtained
and reviewed 11 UBMS participant files to determine whether each student
was eligible for the project. One participant file was judgmentally
selected and 10 were randomly selected using statistical sampling
software.

12\. Compared the names of the UBMS students recorded in the
University's accounting records as receiving stipends payments to ensure
that only the 52 students reported as served received stipends.

13\. Obtained the names of the 42 UB students the University reported as
served during the 2006-2007 grant year from the University. Obtained and
reviewed 11 UB participant files to determine whether each student was
eligible for the project. One participant file was judgmentally selected
and 10 were randomly selected using statistical sampling software.[^9]

14\. Compared the names of the UB students recorded in the University's
accounting records as receiving stipends payments to ensure that only
the 42 students reported as served received stipends.

We relied, in part, on payroll and expenditure data provided to us by
the University from its Banner system. We reviewed the data for
completeness to determine if the University could account for all funds
drawn down. We also reviewed the records for relevance to ensure they
included only personnel and non-personnel costs for our audit period. We
further reviewed non-personnel costs and personnel costs for accuracy
and reliability by tracing them to supporting records such as travel
authorizations, vehicle permits, vendor invoices, leave slips, and other
information on documents maintained by the University. Based on these
comparisons, we concluded that the data the University provided for
personnel and non-personnel costs were sufficiently reliable for the
purposes of our audit.

We conducted our audit from December 2007 through March 2008 at the
University's administrative offices in Terre Haute, Indiana, and at our
offices. We discussed the results of our audit with University officials
on April 3, 2008. We performed our audit in accordance with generally
accepted government auditing standards appropriate to the scope of the
audit described above.

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 Department of Education officials, who will
consider them before taking final Departmental action on this audit:

> Lawrence A. Warder

Chief Financial Officer

Office of the Chief Financial Officer

U.S. Department of Education

400 Maryland Avenue, SW

Washington, D.C. 20202

Sara Martinez Tucker

Under Secretary

U.S. Department of Education

1990 K Street, N.W.

Washington, D.C. 20006

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/
>
> Gary D. Whitman
>
> Regional Inspector General Audit

Attachment

Indiana State University's Response to Draft Report

![](media/image2.wmf){width="6.498611111111111in"
height="0.5729166666666666in"}

![](media/image3.pct){width="1.4479166666666667in"
height="0.5208333333333334in"}

June 18, 2008

Mr. Gary D. Whitman

Regional Inspector General for Audit

United States Department of Education

Office of Inspector General

500 west Madison Street, Suite 1414

Chicago, IL 60661

Dear Mr. Whitman:

We are very appreciative of the review you recently conducted of the
Indiana State University ("ISU") TRIO programs. The review will assist
us more effectively in improving the services we provide to our project
participants. We are also pleased that you extended to us the
opportunity to review and respond to your preliminary findings.

Our TRIO projects always strive to work within the purview of current
federal law and the policies and procedures of Indiana State University.
This response to your preliminary findings is based on relevant law,
regulations, and comments and answers by the Secretary of the Department
of Education located within the Code of Federal Regulations which
pertain to the Federal TRIO programs.

The preliminary audit results reflected findings in two main categories:
First, that the university's Upward Bound ("UB") project served an
insufficient number of participants. Second, that inadequate controls
affected stipends paid, the processing of payroll, and transportation
expenditures.

**Inadequate Number of UB Participants**

Indiana State University has a long history of successful administration
of TRIO programs. The socio-economic attributes of the population in the
target counties served by the ISU UB grant proposal reflects the
attributes of persons the TRIO programs were designed to serve.

Unfortunately, ISU has recently employed two directors of the TRIO
programs who, despite significant training opportunities, failed to
appropriately administer the TRIO grants. Once the university discovered
this fact, each director was dismissed.

The challenge faced by any institution in this situation is that since
audits are conducted in arrears, once a problem is discovered, the
program has usually progressed a year or more. By the time the issues
set forth in the draft audit findings were discovered, the UB project
was midway through the 2007-2008 program year. ISU takes the findings in
the draft audit report very seriously and has taken drastic steps to
rectify the deficiencies found in the administration of this program.

ISU agrees with the draft audit report in its determination that 42
participants were served. It agrees that the grant application
anticipated service of 74 participants and that the regulations set
forth a minimum of 50 participants. However, ISU believes that the
appropriate recommendation is to return to the Department of Education
\$98,048.

The grant application for the 2006-2007 year was submitted by ISU in
good faith. Although ISU did not meet its service goal of 74, the fact
remains that 42 legitimate participants were served during the grant
year here in issue. The Department's argument that funding eligibility
begins at 50 participants is well-taken. However, again, 42 legitimate
participants were, in fact, served, and the program received a benefit
to this extent, ISU having provided strong academic instructors and
mentors, and undertaken other programming that makes a meaningful
difference in the lives of the students served and that satisfy the
purpose of the UB program.

The draft audit findings recommended that ISU return to the Department
\$370,112. However, ISU did not draw down this amount. ISU drew down
only \$308,111. Based on \$5,001 per participant, 42 of the proposed 74
participants equals \$210,063 of legitimate expenditures. The remaining
\$98,048 equals \$5,001 per participant for the 32 participants by which
ISU fell short. This \$98,048 is the amount ISU believes it appropriate
to return to the Department.

ISU is taking extraordinary steps to rectify shortcomings in the
administration of the UB program. Dr. Rita Worrall, a long-time ISU
employee with years of successful administration of federal programs,
has stepped up to direct the ISU TRIO programs so that they get back on
track. The reporting structure of the UB program has been modified so
that Dr. Worrall will report directly to Assistant Vice President for
Academic Affairs, Mark Green. This new structure removes a reporting
level and brings the Provost and Vice President for Academic Affairs
closer to the UB program.

Further, intense scrutiny at critical times in the administration of the
grant will be undertaken by the university's internal auditor. The
university believes that taking steps on the front end of these grant
cycles to ensure participant data is robust will operate to ensure
future grant compliance in this regard. As was stated above, the
university realizes that at this juncture, we cannot allow any lag in
the feedback that waiting for a regular audit will cause. The university
will monitor program administration on a monthly basis.

**Effective Controls over Grant Funds**

With regard to controls over grant funds, ISU agrees with the
recommendations set forth in the draft report. To this end, attached are
the following: Travel Procedures, Upward Bound Policies and Procedures,
and Payroll Procedures. The university will be pleased to receive your
feedback after you have had the opportunity to review this information.
Certainly any modifications you believe are in order to ensure
compliance with the UB program will be added.

**Conclusion**

In conclusion, ISU has taken actions that it believes will ensure future
compliance with the TRIO programs in general, and the UB program in
particular. Despite a long history of successful administration of these
programs, shortcomings that were discovered during regular, annual audit
cycles became more pronounced due to the lag in timing of the discovery
of those shortcomings.

In addition to the attached policies and procedures that have been
implemented to ensure compliance with regard to the second set of
Findings, the university has taken drastic steps to ensure compliance
with the first Finding. These drastic steps include assignment of Dr.
Worrall to direct the program, a change in the reporting structure of
the UB program, and very close ongoing scrutiny by the ISU internal
auditor to ensure ongoing compliance.

We respectfully assert that based on the fact that the ISU grant
application setting forth 74 expected participants was made in good
faith and that 42 legitimate participants were actually served, that ISU
return only that portion of the actual draw down that did not confer a
benefit, or \$98,048.

To the extent that our policies and procedures require updating to
ensure their completeness, we are pleased to do so.

I will be pleased to answer any questions you may have regarding this
matter or to receive your comments.

Sincerely,

Melony A. Sacopulos

General Counsel

Finding #2 Corrective Action (2.1)

Proposed Procedures for July 1, 2008

The UB Director is responsible for ensuring the verification of UB
participant eligibility and the maintenance of eligibility
documentation. The UB Director, along with the UB staff, will conduct a
self audit of participant files on at least a quarterly basis.
Participant files will be reviewed for documentation of participant
eligibility according to the following policies and procedures:

UPWARD BOUND POLICIES AND PROCEDURES

Upward Bound Intake/Application Process

I.  Pre-application

> The purpose of the pre-application is to gather contact information
> from students as part of the recruiting process due to students being
> minors who cannot enter into a contract with the program on their own.
> Pre-applications are reviewed and screened by the UB professional
> staff for recommendation to the UB Director prior to completion of
> official UB applications by potential participants.

II. Application

> The UB application must be completed and [signed]{.underline} by both
> parent (s) and student prior to a participant receiving any services
> from the UB project. The application includes information on family
> income and first generation status of parents. Application information
> must be accompanied by documentation in the participant file.
> Applications are approved by the UB Project Director. (See
> documentation criteria IV below)

III. Participant Eligibility Criteria

     A.  An individual is eligible to participate in an Upward Bound
         project if the individual meets **all** of the following
         requirements:

         1.  Is a citizen of the United States

         2.  Is a permanent resident of the United States

         3.  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.

         4.  Is a permanent resident of Guam, the Northern Mariana
             Islands, or the Trust Territory of the Pacific Islands.

         5.  Is a resident of the Freely Associated States --the
             Federated States of Micronesia, the Republic of the
             Marshall Islands, or the Republic of Palau.

B. Is:

1.  A potential first-generation college student; or

2.  A low-income individual.

> C. Has a need for academic support, as determined by the grantee, in
> order to
>
> pursue successfully a program of education beyond high school.
>
> (See Academic Need Form)

D.  At the time of initial selection, has completed the eighth grade but
    has not

> entered the twelfth grade and is a least 13 years old but not older
> than 19, although the Secretary may waive the age requirement if the
> applicant demonstrates that the limitation would defeat the purpose of
> the Upward Bound Program. However, a veteran defined in 645.6,
> regardless of age, is eligible to participate in an Upward Bound
> Project if he or she satisfies the eligibility requirements in
> paragraphs A, B, C of this section.

IV. Documentation Criteria

> \(a\) At least two-thirds of the eligible participants a grantee
> serves must at the time of initial selection qualify as both
> low-income individuals and potential first-generation college
> students. The remaining participants must at the time of initial
> selection qualify as either low-income individuals or potential first
> generation college students.
>
> \(b\) For purposes of documenting a participant\'s low-income status
> the following applies:
>
> \(1\) In the case of a student who is **not an independent student**,
> an institution shall document that the student is a low-income
> individual by obtaining and maintaining---
>
> \(i\) **A signed statement from the student\'s parent or legal
> guardian regarding family income;**
>
> **(ii) Verification of family income from another governmental
> source;**
>
> **(iii) A signed financial aid application; or**
>
> **(iv) A signed United States or Puerto Rican income tax return.**
>
> \(2\) In the case of a student who is an **independent student**, an
> institution shall document that the student is a low-income individual
> by obtaining and maintaining---
>
> \(i\) A signed statement from the student regarding family income;
>
> \(ii\) Verification of family income from another governmental source;
>
> \(iii\) A signed financial aid application; or
>
> \(iv\) A signed United States or Puerto Rican income tax return.
>
> \(c\) For purposes of documenting potential first generation college
> student status, documentation consists of a signed statement from a
> dependent participant\'s parent, or a signed statement from an
> independent participant.
>
> \(d\) A grantee does not have to revalidate a participant\'s
> eligibility after the participant\'s initial selection.

V.  Maintenance of Eligibility Documentation

> A review process has been implemented to ensure eligibility
> documentation is complete according to CFR 646 for the UB project. The
> UB Director is responsible for reviewing eligibility documentation of
> each participant file and completing a an eligibility documentation
> checklist placed in each participant file. Participant files are kept
> in a lock file cabinet. The UB administrative assistant maintains a
> file folder of documentation for each event and service provided.

TRIO Program Travel Procedures

Travel Authorizations

-   TA's for operational travel are completed monthly for each
    Administrative staff member. Operational being Study Tables,
    Saturday Sessions and Recruitment.

-   TA's for Field trips are done at least two weeks in advance of the
    field trip.

-   TA's are signed by the traveling staff member, the Project Director,
    the SASC Director, the V.P. and the Grants Office, before going to
    the Travel Account Specialist.

**Vehicle Permits**

-   A vehicle permit is completed after a TA# has been placed on banner
    for any TA.

-   Operational vehicle permits for Study Tables and Saturday Sessions
    will have the dates needed and details of purpose attached to them.

-   The permit is copied and kept in the UB records.

-   The permit is signed by the Project Director and SASC Director.

-   The permit is then copied for SASC records, faxed to Catherine
    Procarione in the controller's office and the original is put in
    campus mail to travel in the controller's office.

**Vehicle Permit Addendums**

-   A vehicle permit addendum to be used to change dates or add
    expenditures to original Vehicle Permit.

-   A vehicle permit addendum must have prior approval before use.

-   A detail of purpose and description of reason for addition or change
    is completed on each addendum.

-   The addendum must correspond to a particular TA with the TA number.

-   The addendum is signed by the Project Director and SASC Director.

-   Copies are kept in the UB and SASC office records

-   The Addendum is delivered to Catharine Procarione, Office of the
    Controller

**Documentation of Travel**

-   Documentation should support the following per trip:

    1.  Purpose

    2.  Destination

    3.  Participant Contacts

    4.  Sign in sheets

    5.  Must correspond to activity/event file documentation

**PAYROLL, TIMESHEET, AND RECAP PROCESSES IN THE SASC**

**(Includes TRIO Program Administration)**

1.  All time sheets must be signed by the employee and submitted to the
    appropriate supervisor for signature and then submitted to Judy
    Elslager on time; those received late will not be processed until
    the next pay period. Time sheets without the signature of the
    appropriate supervisor will not be processed at all.

2.  In the event of the absence of the appropriate supervisor, the next
    higher supervisor will sign the time sheet.

3.  All recaps for all programs must be signed by the person completing
    the form, then by the program coordinator or director, and then by
    the SASC director or the director's designee. This includes all
    recaps for all programs within the Center.

4.  In the event of the absence of the SASC director, the SASC
    administrative assistant, Judy Elslager, will sign and initial the
    document.

5.  All recaps are picked up on Fridays. They are not due back to
    payroll until Monday at 11 a.m. If appropriate supervisors are not
    available on Fridays or will not be available on Mondays,
    arrangements must be made for signatures when those persons are
    available.

6.  The processing of timesheets and recaps at the last possible minute
    when it is not possible to obtain appropriate signatures is not an
    option.

[^1]: The eight federal TRIO programs administered by OPE are
    Educational Opportunity Centers, Ronald E. McNair Postbaccalaureate
    Achievement, Student Support Services, Talent Search, TRIO
    Dissemination Partnership Program, Training Program for Federal TRIO
    Programs Staff, UB, and UBMS.

[^2]: UBMS also requires a minimum of 50 participants for an eligible
    project.

[^3]: One student was in twelfth grade (see Finding No 2).

[^4]: We determined that one of the 52 reported UBMS recipients was in
    12^th^ grade when admitted to the project and, therefore, ineligible
    for the services received. Thus, the number of eligible UBMS
    recipients in 2006-2007 was, at most, 51.

[^5]: The University uses Banner as its information technology tool for
    accounting services for financial, payroll, and student systems.

[^6]: The *Recap Time Sheets* are designed to provide the University's
    Payroll Office with a summary of reportable hours for each salaried
    employee by department and provide efficiency in the data entry of
    hours into the payroll system.  Support staff complete *Support
    Staff Time and Attendance Reports*.

[^7]: The grants' Principal Investigator, who has oversight
    responsibility for the grants, was not aware that the TRIO
    Coordinator permitted this deviation from the Payroll Office's
    policy.

[^8]: These three transportation transactions were also among the five
    transportation transactions, noted in the preceding paragraph, that
    were not for the correct number of days, as indicated on the vehicle
    permits.

[^9]: We randomly selected the 10 participant files from a list of 41 UB
    participants that the University provided. The University later
    stated that one student had been inadvertently left off the list, so
    the list should have contained 42 names.