a

GAO

United States Government Accountability Office

Report to Congressional Committees

October 2005 DISTRICT OF 

COLUMBIA

Financial and Program 

Management 

Improvements Needed 

for Tuition Assistance 

Grant Program

GAO-06-14
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

www.gao.gov/cgi-bin/getrpt?GAO-06-14.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Jeanette 

Franzel at (202) 512-9471 or 

franzelj@gao.gov. 

Highlights of GAO-06-14, a report to 

congressional committees 

October 2005

DISTRICT OF COLUMBIA 

Financial and Program Management 

Improvements Needed for Tuition 

Assistance Grant Program 

The District’s State Education Office (SEO) has taken actions to put program 

and financial management procedures in place, but DCTAG is at risk in the areas 

of student eligibility and program budgeting. The District of Columbia Tuition 

Assistance Grant program has effective controls for determining the eligibility of 

higher education institutions to participate in the program and for processing 

institutions’ invoices for payment. Other controls, however, were less effective. 

SEO did not have sufficient documentation to demonstrate that some students 

approved for DCTAG program funds were eligible because documents required 

to be submitted by applicants were not available. The most commonly missing 

documents were those intended to establish domicile in the District. Moreover, 

SEO officials were not verifying applicants’ Social Security numbers, which 

should be used to establish citizenship. Furthermore, SEO did not have 

documentation or procedures for determining the eligibility of applicants with 

special circumstances. The SEO has experienced significant turnover at the top 

management levels since it was created by legislation in 2000. High management 

turnover affects an organization’s control environment and its ability to plan, 

direct, and control operations to effectively and strategically achieve its mission.

The District established dedicated cash accounts for the DCTAG program, 

separate from the District’s general fund, as required by law. Reconciliations 

between these dedicated bank accounts and the District’s financial management 

system, however, had not been performed prior to our review. At our request, 

the Office of Finance and Resource Management reconciled the dedicated bank 

accounts and discovered that the District’s general fund had not been 

reimbursed for approximately $8.3 million for prior-period cash expenditures 

made from the District’s general fund on behalf of the DCTAG program. Also, 

about $2.7 million in interest earned since the DCTAG-dedicated accounts were 

established had not been recorded as funds available for the program. 

The District’s forecasting method to project the number of students eligible to 

receive DCTAG funds in current and future years has not been reviewed for 

methodological soundness. While projections are based on the numbers of 

students that apply for the first time and those who submit renewal applications 

during a fiscal year, these projections have not been measured against actual 

results to include the historical experience of the program. 

While the District reported that it used 5.3 percent ($0.9 million) of the federal 

funds during fiscal year 2004 for DCTAG program administrative expenses, the 

District does not track the full amount of administrative expenses incurred for 

the program. District officials estimate that operating the DCTAG program costs 

more than the 7 percent legislatively set limit, and these additional costs were 

absorbed using District funds. 

Congress created the District of 

Columbia Tuition Assistance Grant 

(DCTAG) program in 1999 to 

provide D.C. college-bound 

residents with greater choices 

among institutions of higher 

education by affording them the 

benefits of in-state tuition at state 

colleges and universities outside 

the District of Columbia. Congress 

appropriated $17 million annually 

for fiscal years 2000 through 2004 

and $25.6 million for fiscal year 

2005. GAO was asked to assess 

whether (1) adequate controls exist 

over the use of federal funds, 

including processes to determine 

institution and student eligibility, 

manage the cash needs of the 

program, and pay administrative 

expenses; (2) funds for the DCTAG 

program are accounted for 

separately from the District’s 

general fund; and 

(3) administrative expenses for the 

program charged against federal 

funds are within the 7 percent limit 

of the total amount appropriated 

for the program. 

What GAO Recommends

GAO recommends actions to 

improve internal controls over 

determining student eligibility, 

retaining required documents, 

routinely conducting 

reconciliations, and ensuring 

reimbursements are timely made. 

The Mayor and Chief Financial 

Officer generally agreed with our 

findings and recommendations and 

explained actions completed, 

underway, and planned. 
Page i GAO-06-14 District of Columbia

Contents

Letter 1

Results in Brief 4

Background 7

Controls over Determining Institution Eligibility Were Generally 

Operating Effectively, but Controls over Student Eligibility Need 

Improvement 10

DCTAG Funds Are Being Accounted for Separately, but Routine 

Bank Reconciliations Are Needed 19

The SEO’s Forecasting Method to Project Future Funding Needs Has 

Not Been Reviewed for Methodological Soundness 22

Total Amount of the Administrative Expenses for the DCTAG 

Program Unknown 23

Conclusions 24

Recommendations for Executive Action 24

Agency Comments and Our Evaluation 25

Appendixes

Appendix I: Scope and Methodology 29

Appendix II: Comments from the Mayor of the District of Columbia 33

Appendix III: Comments from the Chief Financial Officer of the District of 

Columbia 38

Appendix IV: GAO Contact and Staff Acknowledgments 41

Table Table 1: DCTAG Funds Available and Expended by Fiscal Year 

(Dollars in millions) 10

Figures Figure 1: Number and Percentage of DCTAG Students by Ward for 

Academic Year 2004-2005 8

Figure 2: DCTAG Payments Made during Academic Year 2004-2005 

by Type of Institution 9

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Page 1 GAO-06-14 District of Columbia

United States Government Accountability Office

Washington, D.C. 20548

A

October 28, 2005 Letr

The Honorable Sam Brownback

Chairman

The Honorable Mary Landrieu

Ranking Minority Member

Subcommittee on the District of Columbia

Committee on Appropriations

United States Senate

The Honorable Joe Knollenberg 

Chairman

The Honorable John W. Olver 

Ranking Minority Member

Subcommittee on Transportation, Treasury, 

and Housing and Urban Development, The Judiciary, 

District of Columbia and Independent Agencies

Committee on Appropriations

House of Representatives

The District of Columbia College Access Act of 1999 (1999 Act), as 

amended by the District of Columbia College Access Improvement Act of 

2002 (2002 Amendment),1

 established a program to provide eligible collegebound students who are domiciled in the District of Columbia with greater 

choices among institutions of higher education. The program was 

established under the administrative control of the Mayor of the District of 

Columbia and is commonly referred to as the District of Columbia Tuition 

Assistance Grant (DCTAG) program. Day-to-day DCTAG program 

operations are carried out through the District of Columbia government’s 

State Education Office (SEO).2

 

The DCTAG program is funded by the “Federal Payment for Resident 

Tuition Support” to the District of Columbia that, beginning with fiscal year 

2000, has been included in the annual District of Columbia appropriations 

1

Pub. L. No. 106-98, 113 Stat. 1323 (Nov. 12, 1999), as amended by Pub. L. No. 107-157, 116 

Stat. 118 (Apr. 4, 2002), D.C. Code, §§ 38-2701 through 38-2706 (2001 Ed., 2005 Pocket Part). 

Policies and procedures for the administration of the DCTAG program are set forth in D.C. 

Mun. Regs. tit. 29, ch. 70.

2

See generally, D.C. Code, §§ 38-2601 through 38-2602, (2001 Ed.), relating to the 

responsibilities of the State Education Office.
Page 2 GAO-06-14 District of Columbia

act. The federal payment remains available until expended. For fiscal years 

2000 through 2004, $17 million in federal payments were appropriated 

annually for the DCTAG program.3

 The amount of the federal payment was 

increased to $25.6 million for fiscal year 2005. 

Under the DCTAG program, the District pays the difference between instate and out-of-state tuition, within certain capped amounts. The District 

also provides grants for students to attend private Historically Black 

Colleges and Universities (HBCU) nationwide as well as private institutions 

in the District of Columbia metropolitan area. As provided in the DCTAG 

legislation, students attending a participating public institution can receive 

a tuition grant of up to $10,000 per year (calculated as the difference 

between in-state and out-of-state tuition rates), with a total lifetime cap of 

$50,000 per student. D.C. residents attending private colleges and 

universities, including HBCUs, may receive an annual grant award of up to 

$2,500 annually, with a total lifetime cap of $12,500 per student.

The House Committee on Appropriations directed that we review the 

DCTAG program.4

 As agreed to with your office, our specific objectives 

were to assess whether (1) adequate controls exist over the use of federal 

funds, including processes to determine institution and student eligibility,5

manage the cash needs of the program, and pay administrative expenses; 

(2) funds for the DCTAG program are accounted for separately from the 

District’s general fund in dedicated cash accounts;6

 and (3) administrative 

expenses charged against federal funds for the program are within the 

7 percent limit of the total amount of federal funds appropriated for the 

3

Before rescission. 

4

See, H.R. Rep. No. 108-214, at 10 (2003) and H.R. Rep. No. 108-401, at 647 (2003).

5

Eligible institutions include public institutions, public and private Historically Black 

Colleges and Universities nationwide, and private institutions in the District of Columbia 

metropolitan area. Eligible institutions may participate in the DCTAG program only if the 

institution has formally signed a Program Participation Agreement (PPA), which is also 

signed by the Mayor of the District of Columbia.

6

The 2002 Amendment requires that a dedicated account be established for the DCTAG 

program consisting of (1) federal funds appropriated to carry out the program, (2) District 

of Columbia appropriated funds for the program, (3) any unobligated balances from 

amounts made available to the DCTAG program from previous fiscal years, and (4) interest 

earned on the balances in the dedicated account. D.C. Code, § 38-2705 (h) (2001 Ed., 2005 

Pocket Part).
Page 3 GAO-06-14 District of Columbia

DCTAG program. We also reviewed projections for future program funding 

requirements and the methodologies used to formulate those projections.

To determine whether adequate controls were in place over the use of 

federal funds, we identified the internal controls built into the processes 

through interviews, reviews of policies and procedures, and walk-throughs 

of transactions. In addition, we selected statistical samples of tuition 

assistance payments made during fiscal year 2004 to test internal controls 

over the processes in place to test institution and student eligibility, as 

defined by the legislation and regulations, and the related disbursements.7

 

To review the District’s accounting for DCTAG program funds, we reviewed 

the procedures for (1) maintaining the dedicated cash accounts for the 

DCTAG program and (2) reimbursing the District’s general fund for 

disbursements made on behalf of the program. We also inquired about the 

frequency of reconciliations performed and reviewed the differences 

identified as a result of the District’s first-ever reconciliation of the 

dedicated DCTAG bank accounts to the balances shown in the District’s 

financial management system. To assess whether administrative expenses 

charged against federal funds for the program were within the established 

7 percent limit of the total amount of federal funds appropriated for the 

DCTAG program, we obtained information concerning the types and 

amounts of administrative expenses incurred to operate the DCTAG 

program, and reviewed the procedures followed by the District intended to 

provide safeguards that the 7 percent limit on these expenses was not 

exceeded. We took several steps to assess the reliability and 

reasonableness of the DCTAG program disbursement transactions for 

fiscal year 2004, in the District’s financial management system, System of 

Accounting and Reporting (SOAR).8

 Overall, we found the disbursement 

transaction data to be sufficiently complete and reliable for the purpose of 

testing the controls over institution and student eligibility and for 

documenting the total amount of DCTAG program administrative expenses 

paid with federal funds for fiscal year 2004. We conducted our work from 

March 2004 through June 2004 and from February 2005 through July 2005 in 

accordance with U.S. generally accepted government auditing standards. 

See appendix I for more details on our scope and methodology.

7

See appendix I for statistical sampling details. 

8

See appendix I for details on data reliability procedures.
Page 4 GAO-06-14 District of Columbia

Results in Brief The SEO has taken actions to put program and financial management 

procedures in place, but DCTAG is at risk in the areas of student eligibility 

and program budgeting. Internal controls for determining whether 

applicants are eligible for program funds are not adequately designed and 

are not operating as prescribed in the DCTAG legislation and regulations. 

SEO’s controls for determining the eligibility of institutions to participate in 

the DCTAG program and its procedures for processing invoices submitted 

by institutions for payment and handling refunds received by the District 

were operating effectively. Other controls, however, were less effective.

We found that (1) institutions receiving DCTAG program funds were 

eligible to participate and had signed Program Participation Agreements 

(PPA) and (2) SEO’s procedures for processing invoices submitted by the 

institutions for payment and recording refunds received were effective for 

verifying that payments were based on adequate information and that 

students were not exceeding the annual or lifetime maximum amounts 

established by legislation. However, it was unclear whether SEO had 

obtained sufficient documentation to establish that some students 

approved for DCTAG program funds were in fact eligible because required 

documents to be submitted by applicants were not in the student files at 

the time of our review. On the basis of the results of our work, we 

estimated that documentation for 35.6 percent of the 3,094 students 

receiving DCTAG funds was inadequate to demonstrate their eligibility to 

participate in the DCTAG program.9

 The most commonly missing 

documents were those intended to establish that the student was a resident 

of the District. Without adequate documentation in the applicants’ files, we 

could not determine whether some students receiving tuition assistance 

were eligible to receive DCTAG program funds. Moreover, SEO officials 

are not verifying applicants’ Social Security numbers, which are used to 

establish citizenship—as required by the 2002 Amendment.10 SEO also did 

not have an established procedure for determining and documenting the

9

On the basis of the results of our work, we estimate at the 95 percent confidence level that 

the documentation for 35.6 percent of the 3,094 students receiving DCTAG payments was 

inadequate to demonstrate eligibility to participate in the program, with the range of 

estimates of student files lacking such documentation falling between 21.8 percent and 51.3 

percent.

10D.C. Code §38-2702 (c) (2) (C) (2001 Ed., 2005 Pocket Part).
Page 5 GAO-06-14 District of Columbia

eligibility of applicants with special circumstances—those who were 

unable to submit the required documents with their application.11

The SEO has experienced significant turnover at the top management 

levels since it was created by legislation in 2000. Since the inception of the 

DCTAG program, there have been four individuals serving as directors of 

the program and two directors of the SEO. High management turnover 

affects an organization’s control environment by disrupting management’s 

ability to plan, direct, and control operations to effectively and strategically 

achieve its mission. 

The District has established dedicated cash accounts to segregate DCTAG 

program amounts from other District funds as required by law. However, 

we found that reconciliations were not being done between the balances in 

these bank accounts and the balance for the DCTAG program as recorded 

in SOAR. Reconciliations are a key internal control and are necessary to 

safeguard assets and track the expenditure of federal funds. Given the 

District’s procedures for reimbursing the District’s general fund 

periodically for disbursements made on behalf of the DCTAG program, 

reconciliations are particularly crucial to ensuring that the reimbursed 

amounts are correct. At our request, officials in the District’s Office of 

Finance and Resource Management (OFRM), which falls under the Office 

of the Chief Financial Officer, performed a reconciliation of the balances in 

the dedicated bank accounts with the balances as recorded in SOAR. In 

doing this reconciliation, they discovered that the District’s general fund 

had not been reimbursed for about $8.3 million from the DCTAG bank 

accounts and that approximately $2.7 million in interest earned since the 

DCTAG-dedicated bank accounts were established had not yet been 

budgeted as funds available for the program.

On a related matter, the District’s forecasting method to estimate the 

number of students and the average cost per student for those participating 

in the DCTAG program each year is based on assumptions that have not 

been reviewed against historical experience or tested against available 

information, such as the numbers of students in D.C. high schools. While 

SEO officials recognize the need to develop a sound methodology for 

11D.C. Mun. Regs tit. 29, §7002.7 addresses situations in which applicants with special 

circumstances (e.g., another person exercises parental responsibilities for an applicant) and 

provides that the District may determine whether the applicant meets domicile 

requirements on a case-by-case basis. 
Page 6 GAO-06-14 District of Columbia

making these projections, their focus has been on the recruitment of 

students and colleges and universities to participate in the program. They 

told us that they have not yet had an opportunity to develop the 

methodology necessary to project current and future funding needs based 

on District statistics, such as the numbers of students in D.C. high schools, 

the historical experience rates of numbers of students that continue on to 

college, and the rate at which students return to college following their 

freshman year. With the development of a sound methodology for 

projecting the numbers of eligible applicants applying for DCTAG program 

funds, both Congress and the District will be able to make more informed 

decisions about funding needs for the program and how to best use 

available resources.

While the District reported that it used 5.3 percent ($0.9 million) of its 

federally appropriated funds during fiscal year 2004 for DCTAG program 

administrative expenses, the District does not track the full amount of 

administrative expenses incurred for the program. District officials 

estimate that operating the DCTAG program costs more than the 7 percent 

legislatively set limit,12 and these additional costs are absorbed using 

District funds. During our review of DCTAG expenditures for fiscal year 

2004, we identified nine transactions amounting to $34,510 of non-DCTAG 

expenditures for fiscal year 2004 that had been charged to the program in 

error. Once these errors were identified, District officials made correcting 

entries for these expenses in SOAR.

The Mayor and Chief Financial Officer generally agreed with our findings 

and recommendations and explained actions completed, underway, and 

planned for implementing them. The “Agency Comments and Our 

Evaluation” section at the end of this report discusses the program office’s 

views that many of the reported problems were start-up issues and have 

been largely resolved. We offer a different perspective in that these are 

ongoing issues for which the eligibility of students in their second, third, or 

fourth year of participating in the program is not fully documented. The 

written comments are reprinted in appendixes II and III, respectively. 

12The 2002 Amendment provides that the District may not use more than 7 percent of the 

total amount of federal funds appropriated for the DCTAG program since enactment of the 

1999 Act for administrative expenses. D.C. Code, §§ 38-2705 (b) (1) (2001 Ed., 2005 Pocket 

Part). 
Page 7 GAO-06-14 District of Columbia

Background The 1999 Act, as amended, establishes a program to provide college-bound 

students domiciled in the District of Columbia with greater choices among 

institutions of higher education by affording them the benefits of in-state 

tuition at state colleges and universities outside the District of Columbia. 

The District is authorized to use the federal payment for residential tuition 

support to pay institutions the difference between in-state and out-of-state 

tuition on behalf of eligible students, within certain capped amounts.13 The 

District also provides grants for eligible students to attend private HBCUs 

nationwide as well as private institutions in the District of Columbia 

metropolitan area. The University of the District of Columbia (UDC)14 is 

not eligible to participate in the DCTAG program because in-state tuition 

rates are already available for D.C. residents attending that institution. For 

academic year 2004-2005, 4,731 students participated in the DCTAG 

program, attending about 650 different public or private colleges and 

universities. Figure 1 shows the distribution of DCTAG-approved 

applicants for the academic year 2004-2005 by ward in the District of 

Columbia. The District disbursed about $28.6 million in DCTAG funds for 

academic year 2004-2005 to public and private colleges and universities. 

Figure 2 shows the distribution of DCTAG program payments for the 2004-

2005 academic year by type of institution. 

13There are annual and lifetime caps on grant funds available to D.C. residents, depending on 

whether they attend public or private universities and colleges. 

14The District of Columbia has only one postsecondary institution, the University of the 

District of Columbia (UDC), which was created in 1977 when the D.C. Teacher’s College, the 

Federal City College, and the Washington Technical Institute were combined into a single 

institution. UDC currently offers certificates, 2-year, 4-year, and graduate degree programs.
Page 8 GAO-06-14 District of Columbia

Figure 1: Number and Percentage of DCTAG Students by Ward for Academic Year 

2004-2005

Ward 3

10%

(495 students)

Ward 4

25%

(1161 students)

Ward 1

7%

(345 students)

Ward 5

17%

(798 students)

Ward 7

16%

(738 students)

Ward 8

12%

(577 students)

Ward 6

8%

(387 students)

Ward 2

4%

(189 students)

Source: GAO based on data from the District of Columbia State Education Office.
Page 9 GAO-06-14 District of Columbia

Figure 2: DCTAG Payments Made during Academic Year 2004-2005 by Type of 

Institution 

D.C. students attending a participating public college or university15 can 

receive tuition assistance of up to $10,000 per year (calculated as the 

difference between in-state and out-of-state tuition rates), with a total cap 

of $50,000 per student. D.C. residents attending private institutions in the 

District of Columbia metropolitan area and private HBCUs nationwide16

may receive an annual grant award of up to $2,500 per year, with a total cap 

of $12,500 per student. DCTAG program funds can be applied only to a 

student’s tuition and fee costs and must not supplant other grant funding 

that otherwise would be provided to eligible students. As a result, DCTAG 

program funds are considered as the final or “last dollar” that is added to a 

student’s financial aid package. Because this assistance can be applied 

only to tuition and fees, other costs associated with college attendance, 

such as room and board fees, books, and transportation costs, must be paid 

by other means.

15An eligible institution may participate in the grant program only if the institution has 

formally signed a Program Participation Agreement (PPA), which is also signed by the 

Mayor of the District of Columbia. 

16The 2002 Amendment expanded the range of private HBCUs that District of Columbia 

residents could attend from those located in Maryland and Virginia to nationwide. DC Code 

§ 38-2704 (c) (1) (B) (2001 Ed., 2005 Pocket Part).

$1.1 million (3.8%) - Private, non-profit

$1.3 million (4.5%) - Private, non-profit HBCU

$11.2 million (39.2%) - Public, HBCU

$15.0 million (52.5%) - Public

Source: GAO, based on data provided by the District of Columbia State Education Office.
Page 10 GAO-06-14 District of Columbia

For fiscal years 2000-2004, Congress appropriated $17 million annually for 

the DCTAG program and appropriated $25.6 million for fiscal year 2005.17 

This funding remains available until expended. Table 1 shows the amount 

of funds available and the use of those funds for grants and administrative 

expenses. 

Table 1: DCTAG Funds Available and Expended by Fiscal Year (Dollars in millions)

Source: GAO based on data from the District of Columbia Office of Finance and Resource Management.

a

2005 figures are as of June 30, 2005.

b

The District did not recognize interest earned as funds available for the program until 2005.

Controls over 

Determining Institution 

Eligibility Were 

Generally Operating 

Effectively, but 

Controls over Student 

Eligibility Need 

Improvement

On the basis of our detailed reviews of processes and supporting 

documentation, we concluded that SEO’s controls over determining 

institution eligibility were generally operating effectively. Institutions that 

we tested that had received DCTAG program funds met eligibility 

requirements and had signed PPAs. In addition, these institutions were 

providing the required information to SEO along with their invoices. We 

also found that SEO reviewed the accompanying student information prior 

to approving the invoices for payment. However, we found that SEO’s 

controls over determining student eligibility were less effective because 

some of the documents required to determine if applicants were eligible 

were not in the files. Missing paperwork included required documents, 

17Before rescission.

Fiscal year 2000 2001 2002 2003 2004 2005a

Funds available

Federal appropriation amount $17.0 $17.0 $17.0 $17.0 $17.0 $25.6

Less rescission amount -0.1 0.0 0.0 -0.1 -0.1 -0.2

Carryover from prior year 0.0 16.3 22.7 23.2 17.0 5.5

Cumulative interest earnedb - - - - - 2.7

Total funds available $16.9 $33.3 $39.7 $40.1 $33.9 $33.6

Funds expended

Grant disbursements 0.0 9.1 15.4 22.0 27.5 23.0

Administrative expenses 0.6 1.5 1.1 1.1 0.9 0.6

Total funds expended $0.6 $10.6 $16.5 $23.1 $28.4 $23.6

Funds remaining at year-end $16.3 $22.7 $23.2 $17.0 $5.5 $10.0
Page 11 GAO-06-14 District of Columbia

such as photocopies of Social Security cards and documents proving 

domicile in the District of Columbia. Moreover, even when photocopies of 

Social Security cards were provided, we found that SEO officials were not 

taking steps to ensure the validity of applicants’ Social Security numbers. 

Furthermore, we found that SEO had no process in place to document how 

eligibility determinations were made for those applicants with unusual or 

extraordinary circumstances that precluded them from providing the 

required documents. We also found that the high management turnover 

that occurred at the SEO since the DCTAG program’s inception affected the 

organization’s control environment and program operations.

Controls over Institution 

Eligibility and Payments Are 

Generally Effective

On the basis of our detailed review of processes and supporting 

documentation of college and university invoices paid by the District with 

DCTAG program funds, we concluded that (1) the billing institutions were 

eligible to participate in the DCTAG program and (2) the required 

information was provided with the invoices. To test specific controls at 

SEO and OFRM, we selected a statistical sample of payment transactions 

made during fiscal year 2004 totaling about $11 million from DCTAG 

disbursement transactions of approximately $28 million.18 

As mentioned, institutions eligible to participate in the DCTAG program 

include public colleges and universities as well as public and private 

HBCUs nationwide, and private colleges and universities in the District of 

Columbia metropolitan area. An eligible institution must have signed a 

PPA, which is also signed by the Mayor of the District of Columbia, to 

participate in the DCTAG program.19 The PPA states that the institution 

must follow the DCTAG program regulations and all provisions of the 

legislation that established the program. Once the SEO has a signed PPA 

on file, the District makes grant payments directly to that institution for the 

approved applicants in the DCTAG program attending that institution. 

Payments for each academic period are based on invoices submitted by the 

institutions to the SEO. Each payment period, institutions must submit a 

roster of eligible students for payment containing (1) the institution’s Tax 

Information number and Dun and Bradstreet number; (2) the student’s 

18See appendix I for statistical sampling details.

19For students interested in attending an eligible institution that has not yet signed a 

Program Participation Agreement (PPA), SEO officials will contact the school and request a 

signed PPA. 
Page 12 GAO-06-14 District of Columbia

name, Social Security number, permanent address, enrollment status, 

amount of financial aid received, amount of tuition and fees charged for the 

payment period, the amount that would be charged to an in-state student 

for the payment period, and the award amount that should be paid to the 

institution for the payment period for each student on the roster. When the 

SEO receives an invoice, it verifies that both the institution submitting the 

invoice and all students listed on the roster are eligible for the DCTAG 

program funds, before payment of the invoice. In addition, the SEO 

determines the maximum payment allowed to each student considering 

program annual and lifetime limits. Invoices are then processed for 

payment by the District’s Office of Finance and Resource Management 

(OFRM) and recorded in SOAR. 

We reviewed the supporting documentation to assess whether (1) the 

institution met the criteria for an eligible institution as defined in the law 

and regulations, (2) the SEO had a signed and dated PPA on file for that 

institution at the time of the payment, (3) the information on the invoice 

submitted by the institution agreed with the information on the approved 

invoice sent to OFRM for payment, (4) payment of the invoice was 

authorized and dated by an appropriate individual in OFRM, and (5) all 

information shown on the paid invoice agreed with the transaction amount 

and information recorded in SOAR. We did not note any exceptions or 

discrepancies for these tests, and as a result, concluded that the SEO has 

effective controls for determining institution eligibility and processing 

payments to those institutions for the DCTAG program.20 

Controls over Refund 

Processing Are Generally 

Effective

Occasionally, the SEO receives refunds of DCTAG grant funds from 

institutions due to student withdrawals from college or other factors, such 

as a reduction in a student’s course load below half-time. When refunding 

all or part of a tuition grant, institutions are required to submit certain 

information with the refund check, including the students’ names, Social 

Security numbers, brief explanations for the refunds, and the academic 

periods to which the refunds relate. We examined the documentation 

relating to 16 refunds, which represented the entire population of refunds, 

received by the District during fiscal year 2004. In reviewing this 

documentation, we verified that (1) all of the required information was 

20On the basis of the results of our tests, we are 95 percent confident that the net upper error 

limit overstatement of improper/incorrect disbursements approved for payment is not more 

than $1.38 million. See appendix I for statistical sampling details.
Page 13 GAO-06-14 District of Columbia

submitted with the refund check and the paperwork was signed and dated, 

(2) the receipt of the refund was posted to the student’s account in SEO’s 

Automated Information System (AIS) so that the student’s annual and 

lifetime totals were correct, and (3) the refund amounts shown on the 

paperwork from the institutions agreed with the total refund amount21

deposited back to the District’s general fund and recorded in SOAR by 

OFRM.22 For these 16 transactions, we found that all the required 

information was submitted and the refunds were properly recorded in 

SOAR. We also found that students’ accounts were correctly adjusted for 

the refunded amounts. We did not audit to determine whether all refunds 

due the District were paid. Refunds are initiated solely by the participating 

institutions unless the SEO receives information indicating that a program 

participant was not entitled to some or all of the tuition assistance 

received.

The SEO Did Not Have 

Sufficient Documentation to 

Show Whether Internal 

Controls over Student 

Eligibility Are Operating 

Effectively 

The SEO did not have sufficient documentation in the applicants’ files we 

reviewed to demonstrate that applicants approved for DCTAG funds met 

the criteria in the DCTAG legislation and program regulations. On the basis 

of the results of our work, we estimated that documentation for 35.6 

percent of the 3,094 students receiving DCTAG funds was inadequate to 

demonstrate their eligibility to participate in the DCTAG program.23 For 

example, we noted that some first-time applicants did not include a 

photocopy of their Social Security card with their application as required 

by DCTAG program regulations. We also found that the SEO was not 

verifying the Social Security numbers of DCTAG applicants which is used 

to establish citizenship, as required by the 2002 Amendment. In addition, 

we found that some applicants’ files did not contain records sufficient to 

establish that the applicant was domiciled in the District of Columbia. 

Without adequate documentation in the applicants’ files, we could not 

21In reviewing the refund paperwork, we found that several institutions had issued refunds 

covering multiple students. 

22Refunds are recorded as credits against DCTAG program expenditures. When the 

District’s general fund is reimbursed for payments made for the DCTAG program, the 

refunded amounts are netted against the program expenditures for that period. 

23On the basis of the results of our work, we estimate at the 95 percent confidence level that 

the documentation for 35.6 percent of the 3,094 students receiving DCTAG payments was 

inadequate to demonstrate eligibility to participate in the program, with the range of 

estimates of student files lacking such documentation falling between 21.8 percent and 51.3 

percent. 
Page 14 GAO-06-14 District of Columbia

determine whether some students were eligible to receive DCTAG tuition 

grants. 

We selected a random sample of students who received DCTAG funds 

during fiscal year 2004 from the population of students that were included 

in the grant payment transactions that we tested.24 For each of the 

students, we reviewed the application submitted for the academic year, 

which was indicated on the institutional invoice for that student. If that 

application was a renewal application, we also reviewed that applicant’s 

initial application for DCTAG funds as well because the initial application 

would have been required to include key documents as evidence of the 

applicant’s identity and domicile in the District. Using the relevant 

application for each year, we tested whether the (1) applications were 

completed properly, (2) applications were signed and dated, and 

(3) required documents were in the file with the application. From the 

student files we reviewed, we noted 16 exceptions.25 More specifically, we 

determined that 14 of the 45 sample files were missing required 

documentation—such as photocopies of Social Security cards and utility 

bills demonstrating domicile in the District of Columbia. We also found 1 

of the 45 sample files where a student’s application for academic year 2002-

2003 was missing and another file where a student had not signed the 

affirmation statement on the renewal application for academic year 2003-

2004 as required. In addition, we found that SEO officials did not have 

procedures to verify Social Security numbers—which provide a key 

verification for eligibility to receive federal funds for education. We could 

not determine whether the applicants had not provided all the requisite 

documentation or whether they had done so and SEO had not retained it in 

the relevant files.

24See appendix I for statistical sampling details.

25On the basis of the results of our work, we estimate at the 95 percent confidence level that 

the documentation for 35.6 percent of the 3,094 students receiving DCTAG payments was 

inadequate to demonstrate eligibility to participate in the program, with the range of 

estimates of student files lacking such documentation falling between 21.8 percent and 51.3 

percent. See appendix I for statistical sampling details.
Page 15 GAO-06-14 District of Columbia

Lack of Social Security 

Number Verification

The required photocopy of the Social Security card is intended to establish 

the applicant’s identity and citizenship.26 While several applicants can have 

the exact same name, the Social Security number is a unique identifier that 

does not change. We also found that for those applicants that submitted a 

photocopy of their Social Security card, the SEO did not verify the validity 

of the Social Security number. 

DCTAG program regulations require applicants to provide a copy of their 

signed Social Security card for identification purposes with their initial 

application for DCTAG funds. Furthermore, GAO’s Standards for Internal 

Control in the Federal Government require that all transactions and other 

significant events be clearly documented, and that the documentation be 

readily available for examination.27 During our testing of student eligibility 

for DCTAG funds, we checked students’ applications to determine if the 

initial application submitted was accompanied by a signed copy of the 

applicant’s Social Security card. We found that for 5 of the 45 student files 

we reviewed, there was no record of receipt of a photocopy of the 

applicants’ Social Security card. According to SEO officials, either the 

photocopy of the Social Security card was not received from these 

applicants or the SEO did not retain the copy received. SEO officials stated 

that during the 9-month period after the DCTAG program was started, they 

focused more on creating awareness of the program than adhering to 

established policies and procedures. However, we did find that two of the 

five student files missing Social Security card documentation occurred in 

the 2002-2003 academic year, after the initial start-up year of the DCTAG 

program had passed. SEO officials informed us that while they have 

resolved this internal control issue by having the staff verify the applicants’ 

Social Security numbers against those recorded on the District of Columbia 

Individual Income Tax return, Form D-40, or the public income source 

documents required for domicile verification, they recognize that the 

program remains vulnerable. The SEO’s failure to collect or maintain 

proper documentation of applicants’ Social Security cards prior to the 

disbursement of funds is a violation of its own procedures. Moreover, the 

26The 2002 Amendment provided that DCTAG applicants must meet the same citizenship 

and immigration status requirements as are needed to receive federal student assistance as 

described in section 484(a)(5) of the Higher Education Act of 1965 (20 U.S.C. 1091 (a) (5)). 

Thus, applicants must be a U.S. citizen or eligible noncitizen to qualify for the DCTAG 

program. 

27GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1 

(Washington, D.C.: November 1999).
Page 16 GAO-06-14 District of Columbia

District is at increased risk that individuals not meeting DCTAG program 

requirements, including citizenship, are receiving DCTAG funds, or 

individuals are receiving DCTAG funds through the use of fraudulent Social 

Security numbers and may not be eligible for these funds.

For the 40 applications that did have documentation of the applicants’ 

Social Security card, we found that the SEO did not take steps to ensure the 

validity of the student’s Social Security number. According to SEO 

officials, they have not implemented a policy calling for verification of 

applicants’ citizenship. For other federal financial aid, applicants are 

required to file a Free Application for Federal Student Aid (FAFSA) form.28 

We were told that some applicants and their families do not see the need to 

complete or submit this form to apply for DCTAG funds because the 

DCTAG program is not need or merit based. However, if the SEO required 

all DCTAG program applicants to submit the FAFSA form through the U.S. 

Department of Education, applicant citizenship and identity would then be 

verified through the normal process for providing federal student 

assistance.29 The Social Security Administration (SSA) matches 

information provided on FAFSA forms with information on file to verify 

name, date of birth, U.S. citizenship status, Social Security number, and 

possible date of death. After these matches are completed, applicants 

receive Student Aid Reports (SAR). Without procedures to verify identity 

and citizenship, and by not requiring applicants to submit SARs, the SEO is 

at risk of disbursing DCTAG funds to ineligible individuals.

Required Documents 

Proving District Domicile 

Were Not Available for Many 

DCTAG Participants

DCTAG program regulations require applicants to submit sufficient 

documents demonstrating domicile in the District of Columbia for at least 

12 consecutive months prior to the start of their freshman year in college.30 

The DCTAG program regulations define domicile as the current fixed place 

of residence to which the applicant returns following temporary absences

28To apply for Title IV federal student aid programs, students submit a Free Application for 

Federal Student Aid on which they report their own and/or their families’ income, assets, 

and federal income tax expenses. 

29The U.S. Department of Education reviews the Free Application for Federal Student Aid 

forms submitted by students and issues Student Aid Reports that notify students of their 

eligibility to receive federal student aid for postsecondary education.

30D.C. Mun. Regs tit. 29, §7003.2.
Page 17 GAO-06-14 District of Columbia

and where the applicant intends to reside indefinitely.31 Applicants are to 

submit such documentation with their initial application, and must include 

sufficient evidence of continued domicile in the District of Columbia with 

each renewal application. SEO accepts copies of domicile documentation 

and does not authenticate the validity of documents provided. If the 

student is a dependent,32 the DCTAG application (first-time D.C. privateschool graduates and renewals) must include a copy of the certified33 Form 

D-40, filed by the applicant’s parent(s), guardian, or spouse from the most 

recent tax year. The certified copy of the tax return must include Schedule 

S of the Form D-40, showing the applicant as a dependent. Independent 

applicants are required to provide a certified copy of their own tax return 

for the most recent tax year with their applications. In cases where District 

taxes are not required to be filed (for example, receipt of public assistance, 

unemployment, retirement, or disability payments), copies of official 

agency letters showing receipt of these types of income may be filed with 

the DCTAG application in lieu of tax returns.

In addition, applicants are to submit copies of two current utility bills or 

copies of two earnings and leave statements (pay stubs). Copies of utility 

bills submitted must not be older than 45 days from the date of the 

application and should have the name and address of the parent(s), 

guardian, or spouse for dependent students. For independent applicants, 

the name and address of the student must be on the utility bill. Utilities 

that meet the criteria are those for residential service only and available 

from gas, electric, water, telephone, or cable providers. For situations in 

which utility costs are included in monthly rent payments, the SEO will 

accept a notarized letter from the rental/leasing agency verifying this 

arrangement. Alternatively, applicants may submit two pay stubs that must 

be for different pay periods. For applicants who are dependents, the copies 

of the pay stubs must have the name and address of a parent, guardian, or 

31D.C. Mun. Regs tit. 29, §7001.1.

32The domicile of a dependent applicant is the domicile of the minor’s parents or legal 

guardian. For purposes of the DCTAG program, an applicant is a dependent student if his or 

her parent or guardian has not surrendered the right to the applicant’s care, custody, and 

earnings. Dependent applicants are also those who receive over 50 percent of annual 

financial support from a parent, guardian, spouse, or other person. 

33A certified copy of a D-40 tax return bears the stamp and staff signature of the District of 

Columbia’s Office of Tax and Revenue (OTR). A D-40 tax return that is stamped and signed 

indicates that OTR has completed the review and processing of the tax return.
Page 18 GAO-06-14 District of Columbia

spouse. Pay stubs submitted for an independent applicant must have the 

applicant’s name and address. 

In testing to determine if students were eligible for DCTAG program funds, 

we found 9 of the 45 student files we reviewed lacked sufficient proof of 

domicile in the District of Columbia. For these 9 students, we found that 

either applicants did not provide the required documents or the documents 

filed did not provide sufficient evidence of domicile in the District of 

Columbia. According to SEO officials, this lack of sufficient 

documentation was caused by the creation of a new program and the time 

needed to firmly establish procedures for reviewing applications. These 

officials explained that most of the weaknesses in documentation occurred 

during the DCTAG program’s first year in operation. However, 6 of the 9 

instances we identified were exceptions relating to academic years after 

2000-2001, which was the first year of operation for the program. Without 

the required proof of domicile documentation, the District is at increased 

risk that individuals who are not domiciled in the District of Columbia are 

receiving DCTAG program funds.

How the SEO Determined 

Eligibility Was Unclear for 

Applicants with Unusual 

Circumstances

While reviewing student applications for eligibility, we encountered several 

cases where applicants were not able to provide the prescribed documents 

due to unusual or special circumstances. For example, a D.C. resident who 

is a ward of the court may not have all of the documents required to 

demonstrate domicile in the District of Columbia. A ward of the court is a 

person 21 years of age or younger who is in the custodial care of the 

District’s foster care system due to the absence of parents or a legal 

guardian. Once a ward of the court turns the age of 22, they are technically 

no longer in the District’s foster care system. Therefore, these applicants 

may not be able to produce the typical documents to demonstrate domicile 

in the District of Columbia, such as certified D-40 tax returns and recent 

utility bills with a District of Columbia address. In these extraordinary 

situations, DCTAG program regulations allow the SEO to determine on a 

case-by-case basis the domicile of applicants based on the particular facts 

and circumstances. In our review, we could not tell how SEO officials 

made these case-by-case determinations for those applicants with unusual 

circumstance because the SEO had no process in place to document how 

eligibility determinations are to be made for those applicants. Without a 

uniform procedure to document the facts and circumstances for each 

applicant, there is no way to tell how SEO officials satisfied themselves 

that the students were eligible for DCTAG funds.
Page 19 GAO-06-14 District of Columbia

High Management Turnover 

at SEO Affected the Control 

Environment and Program 

Operations

The DCTAG program has experienced significant management turnover 

since its beginning in 2000. Four individuals have held the position of 

DCTAG director. In addition, there have been changes in management 

positions providing oversight for the DCTAG program—two individuals 

have held the position of director of the SEO and there have also been 

changes in the position of director of higher education financial services at 

the SEO. The director of higher education financial services oversees the 

DCTAG program as well as other college assistance programs within the 

SEO. The effect of increased turnover of personnel and the lack of 

consistent leadership within the SEO was also identified by the District of 

Columbia Auditor in a report about the performance of the District’s 

special nutrition and commodities distribution program, for which the SEO 

also has responsibility for administering.34 According to the Standards for 

Internal Control in the Federal Government,

35 a positive control 

environment is the foundation for all of the other internal control 

standards, providing discipline and structure as well as the climate that 

influences the quality of internal control. The management of an 

organization has a tremendous influence over an entity’s control 

environment. For example, management influences the control 

environment by (1) setting and maintaining an organization’s ethical tone, 

(2) ensuring employees have the proper knowledge and training, and 

(3) creating the philosophy and operating style of the organization. 

Without consistent leadership, the control environment of DCTAG was 

unstable, changing with each shift in management. This inconsistency 

created a challenge for the program when attempting to develop an 

effective and efficient control environment.

DCTAG Funds Are 

Being Accounted for 

Separately, but Routine 

Bank Reconciliations 

Are Needed

While the District had established dedicated bank accounts for the DCTAG 

program as required by law, reconciliations were not being done between 

these bank accounts and the account balances for the DCTAG program in 

SOAR. When District officials performed a reconciliation in May 2005 at 

our request, they discovered a difference of approximately $11 million that 

had not been reconciled—$8.3 million of which should have been 

transferred from the DCTAG-dedicated bank accounts to the District’s 

34Office of the District of Columbia Auditor, Effectiveness of the Special Nutrition and 

Commodities Distribution Program Was Hindered by Lax Management and Inadequate 

Oversight by Other Agencies (Washington, D.C.: Sept. 22, 2004). 

35GAO/AIMD-00-21.3.1. 
Page 20 GAO-06-14 District of Columbia

general fund and $2.7 million of which was interest that had been earned in 

the dedicated bank accounts since these accounts were established. 

DCTAG Funds Accounted 

for in Dedicated Accounts

The District has established two dedicated accounts for the DCTAG 

program—one for funds to be expended in the short term (within the next 

90 days) and the other for longer-term needs.36 The 2002 Amendment 

requires that the District government establish a dedicated account that is 

available solely for the DCTAG program and consists of the following 

amounts: (1) federal funds appropriated to carry out the program, 

(2) District-appropriated funds for the program, (3) any unobligated 

balances from amounts made available to the DCTAG program from 

previous fiscal years, and (4) interest earned on the balances in the 

dedicated or separate accounts.37 When the District receives the annual 

federal payment amount from the federal government for the DCTAG 

program, the funds are deposited directly in the short- and longer-term 

dedicated accounts. Payments made from DCTAG program funds to 

institutions for tuition grants and to vendors for administrative expenses 

are recorded in SOAR and paid with funds from the District’s general fund. 

On the basis of the pattern of grant payments, OFRM regularly initiates 

transactions to transfer funds from the DCTAG-dedicated accounts to 

reimburse the District’s general fund for disbursements made on behalf of 

the program based on transactions recorded in SOAR. 

Reconciliations Not 

Performed

According to our Standards for Internal Control in the Federal 

Government,

38 internal control should generally be designed to ensure that 

ongoing monitoring occurs in the course of normal operations. Ongoing 

monitoring includes reconciliations of cash balances against the amounts 

recorded in the financial management system. A reconciliation process is a 

36This second account was established to earn a higher rate of return on deposited funds by 

investing in securities with longer maturities. 

37D.C. Code, § 38-2705 (h) (2001 Ed., 2005 Pocket Part). This provision of the law stemmed 

from a report issued by the Department of Education, Office of the Inspector General, which 

reported that because DCTAG federal funds were being maintained in the District’s general 

fund, the District was retaining the interest earned on those funds and using the interest for 

unrelated purposes. U.S. Department of Education, Office of Inspector General, Audit of 

the Implementation of the District of Columbia College Access Act of 1999, ED-OIG/A03-

B0003 (Philadelphia, Pa.: August 2001).

38GAO/AIMD-00-21.3.1. 
Page 21 GAO-06-14 District of Columbia

necessary and valuable part of a sound system of financial management 

controls. The District has a process in place for disbursement of DCTAG 

funds structured so that actual disbursements of tuition grants and 

program administrative expenses are paid out of the District’s general fund 

and then funds are transferred from the DCTAG-dedicated bank accounts 

to reimburse the general fund. Periodically, OFRM calculates the amount 

of expenditures that have been paid out of the general fund and transfers 

funds from the dedicated bank accounts to the general fund via wire 

transfer. However, these calculations are not based on a reconciliation of 

DCTAG fund activity. As a result of the reconciliation performed by OFRM, 

we also found that a significant amount of expenditures, $8.3 million, had 

not been captured in OFRM’s calculations of the amount to be reimbursed 

to the District’s general fund, and had not been transferred from the 

DCTAG-dedicated bank accounts to the District’s general fund. According 

to District officials, the transactions were year-end accruals that 

subsequently became expenditures in succeeding fiscal years and were 

paid from the District’s general fund on behalf of the DCTAG program, and 

it was an oversight by OFRM to not have included them in its calculations 

of the amount of funds to be transferred from the DCTAG-dedicated 

accounts to the general fund. In July 2005, District officials told us that 

they had electronically transferred the $8.3 million from the DCTAGdedicated accounts to the general fund to reimburse the general fund for 

these expenditures. 

The other part of the unreconciled difference of $11 million discussed 

above, $2.7 million, was identified by District officials as interest earned on 

funds from the time the dedicated bank accounts were established in 2001 

through June 30, 2005. Although these interest earnings appeared on the 

bank statements, District officials informed us that the $2.7 million had not 

been recorded as available funds for expenditure for the DCTAG program. 

District officials told us that the interest earned is considered to be an 

integral part of the long-term planning and available budget for the DCTAG 

program; however, budget authority for the interest earned on DCTAG 

program funds had not been requested. The interest earned was not 

included as funds available for the DCTAG program in quarterly reports 

provided to congressional staff. They explained that up until 2005, there 

had been a carryover of funds from one year to the next for the DCTAG 

program. Due to the successful outreach of the program, District officials 

stated that they have reached the point where the carryover has been 

nearly exhausted. District officials also stated that based on their analysis 

of cost drivers that affect the program, such as the number of students and 
Page 22 GAO-06-14 District of Columbia

cost of tuition, it would be prudent for the District to budget the earned 

interest during fiscal year 2006. 

Without routine reconciliations between DCTAG-dedicated bank accounts 

and SOAR, errors that occur can go undetected. Errors that result in the 

failure to reimburse the District general fund for DCTAG program 

disbursements paid can affect the District’s cash flow and could potentially 

contribute to the need for the District to borrow to cover short-term needs. 

Moreover, these errors could result in the understatement or overstatement 

of DCTAG program expenditures as well as the amount of funds available 

to be expended. Reconciliations are most effective when they are done 

soon after the close of the month when differences can still be researched 

easily.

The SEO’s Forecasting 

Method to Project 

Future Funding Needs 

Has Not Been 

Reviewed for 

Methodological 

Soundness

The District’s forecasting method to estimate the number of students and 

the average cost per student for those participating in the DCTAG program 

each year for future years is based on assumptions that have not been 

reviewed against historical experience or developed using other available 

information. The SEO’s projections for fiscal years 2007 through 2010 are 

based on a flat 6 percent increase in the number of students in the program 

each year and an annual increase of 10 percent in the average cost per 

student to attend college. SEO officials do not have documentation or 

analysis supporting the appropriateness of these percentages for 

estimation purposes. According to SEO officials, the DCTAG program is 

unique because no other city in the United States has this type of program 

and, therefore, information already available on the numbers of high school 

graduates continuing on to college in other states or jurisdictions is not 

applicable. SEO officials stated that they recognize the need to develop a 

sound methodology for making these projections, but the focus has been 

on recruitment of students and colleges and universities to participate in 

the program. The officials explained that they have not yet had an 

opportunity to develop such a methodology or obtain the historical data 

needed to project current and future needs based on District information. 

This would require capturing, among other information, tuition rates at 

DCTAG participating institutions as well as historical graduation data from 

the District’s public schools, 54 charter schools, and D.C.’s private high 

schools, and keeping statistics on the number of high school graduates that 

continue on to college and remain in college in subsequent years. With the 

development of a sound methodology for projecting the numbers of eligible 

applicants applying for DCTAG program funds, both Congress and the 
Page 23 GAO-06-14 District of Columbia

District will be able to make more informed funding and budgeting 

decisions necessary to sustain the program.

Total Amount of the 

Administrative 

Expenses for the 

DCTAG Program 

Unknown

While the District reported that it used 5.3 percent ($0.9 million) of the 

$17 million of federal funds appropriated in fiscal year 2004 appropriated 

funds, less the rescission,39 the District does not track the full amount of 

administrative expenses incurred for the program. The SEO does not 

allocate indirect costs by program, thereby likely undercharging the 

DCTAG program for administrative expenses incurred. District officials 

acknowledged that they did not know how much the total administrative 

costs were, but estimated that operating the DCTAG program costs more 

than the 7 percent legislatively set limit for federal funding. They explained 

that these additional costs are absorbed using District funds. According to 

SEO officials, they are working on a cost allocation process so that they 

can more fully track administrative expenses.

The 2002 Amendment provides that the DCTAG program may not use more 

than 7 percent of the total amount appropriated for the program since 

November 12, 1999, for administrative expenses.40 Administrative 

expenses are defined as any program costs other than tuition grants, and 

generally include such things as payroll, supplies, materials, and utilities as 

well as SEO overhead costs. As noted, the District used 5.3 percent of the 

DCTAG federal payment for administrative expenses for fiscal year 2004. 

For fiscal year 2004 we reviewed, but did not audit, the administrative 

expense information included in the quarterly expenditure reports 

submitted to the Senate and House appropriations committees. The 

amount of DCTAG administrative expenses reported for fiscal year 2004 

may not be the full amount of those expenses. District officials told us that 

they estimate the cost of administrative expenses for the DCTAG program 

based on the established limit of 7 percent, and explained that they do not 

have a process where they can accumulate and assign administrative costs 

to the SEO’s various programs, including DCTAG. Also, during our review 

39Consolidated Appropriations Act, 2004, Pub. L. No. 108-199, Div. H, § 168, 118 Stat. 457 

(January 23, 2004), included a provision for an across-the-board 0.59 percent rescission to 

be deducted from the budget authority provided for any discretionary accounting in the act. 

40We note that the federal payment for fiscal year 2005 provides that not more than 

$1.2 million of the total amount appropriated for this program may be used for 

administrative expenses. The law applies to the period subsequent to the period we 

reviewed. Pub. L. No. 108-335, 118 Stat. 1322 (Oct. 18, 2004).
Page 24 GAO-06-14 District of Columbia

of fiscal year 2004 expenditures, we identified nine transactions amounting 

to $34,510 of non-DCTAG expenditures for fiscal year 2004 that had been 

charged to the program in error. These expenditures were for 

administrative expenses incurred by the District’s Tuition Assistance 

Program Initiative for Temporary Assistance for Needy Families. Once we 

notified the District of these improperly recorded transactions, District 

officials made the correcting entries in SOAR. District officials informed us 

that steps would be taken to implement routine reviews of expense 

allocations to ensure the accuracy of each transaction, including the 

assignment of expense to the appropriate SEO program.

Conclusions The SEO has taken actions to put program and financial management 

procedures in place, but DCTAG is at risk in the areas of student eligibility 

and program budgeting. Internal controls for determining whether 

applicants are eligible for program funds are not adequately designed and 

are not operating as prescribed in the DCTAG legislation and regulations. 

The District needs well-designed and executed internal controls to provide 

reasonable assurance that DCTAG program objectives will be met and that 

only District residents meeting the eligibility criteria are awarded these 

tuition grants. These controls are crucial for the credibility of the program 

and the appropriate use of federal funding. To address the challenges of a 

growing program, the SEO will need continuity of leadership going forward 

to plan, direct, and control operations to effectively and strategically 

achieve the goals of the DCTAG program. Moreover, SEO and OFRM 

officials must closely monitor DCTAG program funds to ensure that 

accurate records are maintained, account reconciliations are performed 

and documented, and that sufficient funds are available to meet current 

and future financial needs. To ensure that the District has the resources to 

meet the demand for DCTAG tuition grants, the District needs projections 

of both the short-term and long-term financial needs of the program based 

on a sound analytical methodology. It is also important for the District to 

be able to accurately measure the administrative costs of the DCTAG 

program so that total operational costs can be determined. As the program 

continues to grow, monitoring of DCTAG program funds will become more 

crucial. 

Recommendations for 

Executive Action

We recommend that the Mayor of the District of Columbia direct the head 

of the State Education Office to
Page 25 GAO-06-14 District of Columbia

• require applicants for DCTAG program funds to provide a valid Student 

Aid Report or other document with similar information with their 

applications so that applicants’ identities and citizenship will have been 

verified by the federal government before the District receives the 

information,

• establish and implement procedures to ensure that sufficient evidence is 

obtained and maintained to demonstrate that applicants are actually 

domiciled in the District prior to providing participants with DCTAG 

funding,

• develop and retain documentation that clearly shows how eligibility 

decisions are reached when it reviews applications submitted by 

students with unusual circumstances,

• develop a sound methodology for forecasting (1) numbers of students 

in the program and (2) funds needed for future fiscal years,

• coordinate with OFRM and the Office of Budget and Planning to ensure 

that interest earned on DCTAG-dedicated bank accounts is made 

available to be expended for the DCTAG program, and

• refine the current mechanisms for identifying and recording the actual 

costs of administering the DCTAG program, in coordination with the 

Office of the Chief Financial Officer and OFRM.

We recommend that the Chief Financial Officer of the District of Columbia 

direct the Office of Finance and Resource Management to 

• routinely conduct reconciliations and document the reconciliations 

performed between the DCTAG bank accounts and financial data in 

SOAR and 

• establish and implement procedures to ensure that reimbursements that 

are due the District’s general fund for all expenditures made on behalf of 

the DCTAG program are executed timely for the correct amounts.

Agency Comments and 

Our Evaluation

We received written comments on a draft of this report from the Mayor of 

the District of Columbia and the District’s Chief Financial Officer. The 

Mayor and Chief Financial Officer generally agreed with our findings and 

recommendations and provided additional discussion about the issues 
Page 26 GAO-06-14 District of Columbia

raised in the report. Their written comments are reprinted in appendixes II 

and III, respectively. 

In his October 14, 2005, letter (see app. II), the Mayor generally agreed with 

our findings and recommendations, stating that the SEO will or has already 

implemented the six recommendations. In his comments, the Mayor 

characterized the findings in the draft report as stemming from weaknesses 

existing in the program’s start-up years versus more currently. However, as 

described in our scope and methodology (see app. I), our testing was based 

on a sample of payments from all fiscal year 2004 expenditure transactions 

for the DCTAG program. These expenditure transactions for fiscal year 

2004 included payment transactions for students receiving grants for both 

the 2003-2004 and 2004-2005 school years. Students receiving payments 

during that time period may have submitted their original applications 

during previous years depending on the year in which they entered the 

program. In order to test the sufficiency of documentation to obtain 

assurances on student eligibility, we reviewed the initial application 

submitted by each student, as well as the application submitted for fiscal 

year 2004. Our report identified a total of 16 exceptions that occurred as 

follows: 6 in the initial year of the program (2000-2001); 1 during academic 

year 2001-2002; 4 for academic year 2002-2003; and 5 during academic year 

2003-2004. Thus, weaknesses in assessing eligibility in the early years can 

impact the use of DCTAG program payments in subsequent years.

The Mayor stated that appropriate internal controls are currently in place 

to ensure that the errors of the past are not replicated. The Mayor also 

stated that SEO agrees with or has already implemented the 

recommendations made by GAO. The Mayor also had the following 

specific responses to our recommendations:

The Mayor stated that the SEO will modify its OneApp (application for 

financial assistance) and will add the Student Aid Report, as criteria for 

eligibility for the 2006-2007 school year application, to address our 

recommendation that students’ Social Security numbers be verified.

• The Mayor agreed that it is critical that domicile information be verified 

and maintained, and stated that the SEO is confident that its current 

approach satisfies our recommendation to establish and implement 

procedures to verify that applicants are domiciled in the District.

• The Mayor stated that a “letter to the file” is prepared for each applicant 

with unusual or special circumstances. However, at the time of our 
Page 27 GAO-06-14 District of Columbia

review, none of the applicant files where special case-by-case 

determinations were made contained a letter to the file or any other 

written evidence documenting how eligibility decisions were made for 

applicants with unusual or special circumstances. 

• The Mayor also stated that SEO is in the process of developing 

comprehensive District of Columbia high school graduation and college 

retention data to further improve its ability to forecast student 

participation in the DCTAG program and related costs. In responding to 

the related recommendation, the Mayor noted that SEO will improve 

upon its current forecasting methodology through additional analysis of 

District of Columbia high school graduation data as well as college 

retention data.

• The Mayor noted that SEO, OFRM, and the Office of Budget and 

Planning have coordinated as we recommended in the draft report and 

the interest earned on the funds in the dedicated accounts has been 

budgeted for fiscal year 2006. According to the Mayor, SEO and OFRM 

have also worked together to improve the recording of actual 

administrative costs incurred in operating the DCTAG program.

In commenting on a draft of this report, the CFO expressed his 

appreciation for our assessment and recommendations for the DCTAG 

program. According to the CFO, the District is required to reconcile all 

bank accounts to verify that the balances in the District’s financial system 

(SOAR) correspond with bank account balances each quarter and at yearend. The CFO added that these reconciliations were performed timely. 

However, we found that the reconciliations had not been performed prior 

to our review. The CFO explained that the District’s procedure is to use its 

own funds to pay DCTAG expenditures, including tuition payments, and 

then be reimbursed with federal funds maintained in the DCTAG-dedicated 

bank accounts. The CFO added that when GAO made the request, the 

District’s general fund had not been fully reimbursed for all DCTAG 

expenditures. The CFO also noted that going forward the District will 

reimburse the general fund for all DCTAG expenditures on a monthly basis 

and reconcile quarterly.

The CFO agreed that the earned interest in the dedicated bank accounts 

had not been included in budget authority. While the CFO stated that the 

earned interest was reflected in the annual budget submissions to 

Congress, our review of information provided by the Office of Budget and 

Planning shows that the earned interest was not included in the budget 
Page 28 GAO-06-14 District of Columbia

request submissions. According to the CFO, the interest had not been 

budgeted because in the early years of the DCTAG program, the yearly 

congressional appropriation was more than sufficient to meet total 

expenditures. However, the CFO has concluded that budgeting the earned 

interest during fiscal year 2006 would be prudent, as the program growth 

has resulted in nearly exhausting the carry-forward of funds from previous 

years. 

In his comments, the CFO stated that the District is absorbing some of the 

indirect costs that might otherwise be charged to the DCTAG program, 

while using federal funds to pay direct costs to the program. However, the 

CFO agreed that it is important to assess the total administrative cost of the 

DCTAG program. The CFO added that a methodology will be developed to 

document this information.

We will send copies of this report to the Mayor of the District of Columbia, 

the Chief Financial Officer of the District of Columbia, and the Director of 

the SEO. We are also sending copies of this report to the Chairman and 

Ranking Minority Members of the Subcommittee on Oversight of 

Government Management, the Federal Workforce, and the District of 

Columbia, Senate Committee on Homeland Security and Governmental 

Affairs; the House Committee on Government Reform; appropriate 

congressional committees; and other interested parties. We will also make 

copies of this report available to others on request. In addition, the report 

will be available at no charge on GAO’s Web site at http://www.gao.gov.

If you or your staff have any questions about this report, please contact 

Jeanette M. Franzel, Director, Financial Management and Assurance, at 

(202) 512-9471 or FranzelJ@gao.gov. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page 

of this report. GAO staff that made major contributions to this report are 

listed in appendix IV.

Jeanette M. Franzel

Director 

Financial Management and Assurance 
Page 29 GAO-06-14 District of Columbia

Appendix I

Scope and Methodology AAppenednxidexiIs

To understand the processing of the District’s Tuition Assistance Grant 

(DCTAG) program transactions, we reviewed reports issued by the Office 

of the Inspector General, U.S. Department of Education, and the Office of 

the District of Columbia Auditor. We interviewed District officials within 

the Office of the Chief Financial Officer (OCFO), the Office of Finance and 

Resource Management (OFRM), and the State Education Office (SEO) and 

reviewed documents to understand how DCTAG appropriated funds are 

recorded, monitored, and expended. We received an overview of the 

processing of DCTAG transactions and conducted walk-throughs of all 

processes at the SEO and OFRM to identify the internal controls built into 

these processes. We interviewed SEO officials to obtain an understanding 

of how institution and student eligibility for participation in the DCTAG 

program is determined and conducted walk-throughs of the steps taken to 

reach eligibility decisions.

We assessed the reliability of the District’s DCTAG financial data by 

(1) reviewing existing documentation related to data sources, (2) analyzing 

the data to identify obvious problems with completeness or accuracy, 

(3) interviewing knowledgeable agency officials about the data, and

(4) reviewing reports to identify known data reliability issues affecting the 

District financial management system, System of Accounting and 

Reporting (SOAR). We determined that the data were sufficiently reliable 

for purposes of this report.

In addition, we reviewed supporting documentation and reconciled the 

totals of disbursement transactions as recorded in SOAR with similar 

information provided in the quarterly reports that the District submitted to 

the Senate and House appropriations committees for fiscal year 2004. We 

also reviewed the disbursement transactions to identify any duplicate or 

missing amounts. Overall, we found the disbursement transaction data to 

be sufficiently complete and reliable for the purpose of testing the controls 

over determining institution and student eligibility and for documenting the 

total DCTAG program administrative expenses paid through SOAR for 

fiscal year 2004.

To test whether the data used to test student and institution eligibility were 

complete and accurate, we obtained a database of all fiscal year 2004 

expenditure transactions from SOAR, and sorted the expenditures by 

object class. Each object class total was compared to the quarterly 

expenditure report compiled by OFRM in order to verify the completeness 

and accuracy of the population against actual expenditures. We analyzed 

the data to identify any duplicate or improperly classified transactions. We 
Appendix I

Scope and Methodology

Page 30 GAO-06-14 District of Columbia

identified all refund transactions in the database provided to us and found 

that 16 refunds were posted during fiscal year 2004. We tested 100 percent 

of the refund transactions and verified that (1) all of the required 

information was submitted with the refund check and the paperwork was 

signed and dated, (2) the receipt of the refund was posted to the student’s 

account in the SEO’s Automated Information System (AIS) so that the 

student’s annual and lifetime totals were correct, and (3) the refund 

amounts shown on the paperwork from the institutions agreed with the 

total refund amount1

 deposited for that transaction.

To test controls over institutional payment transactions, we selected a 

dollar unit sample2

 of 58 tuition assistance payments made to institutions 

during fiscal year 2004,3

 totaling about $11.3 million from payments totaling 

about $27.7 million.4

 We tested the tuition grant payments made to 

institutions to determine whether the institutions were eligible to receive 

DCTAG payments. Eligible institutions in this context were those 

institutions that met the criteria specified in the DCTAG legislation and 

executed signed Program Participation Agreements, which had also been 

signed by the Mayor of the District of Columbia.

In testing the selected payments to institutions, we verified that the billing 

institutions were eligible to participate in the DCTAG program and that the 

required information was provided with the invoices. Specifically, we 

determined whether (1) the institution met the criteria for an eligible 

institution as defined in the law and regulations, (2) the SEO had a signed 

and dated PPA on file for that institution, (3) the information on the invoice 

submitted by the institution agreed with the documentation that was 

forwarded to OFRM for payment processing, (4) payment of the invoice 

was authorized and dated by an appropriate individual in OFRM, and (5) all 

information shown on the paid invoice agreed with the transaction as 

recorded in SOAR.

1

In reviewing the refund paperwork, we found that refunds for several students from 

multiple institutions were grouped together to comprise one refund transaction. 

2

The sample was selected based on a dollar-unit sampling methodology which by its nature 

will tend to select large dollar unit items.

3

The sample was selected from the fiscal year 2004 population of 1,580 tuition grant 

disbursement transactions.

4

We are 95 percent confident that the net upper error limit of ineligible institutions receiving 

DCTAG payments is no more than $1.382 million. 
Appendix I

Scope and Methodology

Page 31 GAO-06-14 District of Columbia

To test controls over the SEO’s processes to determine student eligibility 

for DCTAG program funds, we selected a random sample of 45 transactions 

from 3,094 individual payments made on behalf of students that were 

identified on the invoices from institutions that were selected in the dollarunit sample discussed above.5

 For each student selected, we reviewed the 

initial application submitted by that student as well as the application 

submitted for fiscal year 2004. We also reviewed applicant files to ensure 

that (1) all of the documents required to be submitted with the application 

were present, (2) the required documents provided were reviewed by the 

SEO, and (3) on the basis of that information, whether the students were 

eligible to receive DCTAG funds.

To assess whether funds for the DCTAG program were being accounted for 

separately in dedicated accounts, we reviewed District procedures for 

maintaining the dedicated accounts for the DCTAG program and for 

reimbursing the District’s general fund for disbursements made on behalf 

of the program. We requested and reviewed (1) bank statements from the 

two dedicated bank accounts for fiscal year 2004 and June 2005 and

(2) documentation showing the calculation of reimbursements to the 

District’s general fund. We reconciled the bank statements to reports from 

SOAR, the District’s financial management system. We also inquired about 

the frequency of reconciliations performed between the DCTAG bank 

accounts and the account balances in SOAR, and reviewed the results of 

two reconciliations performed by OFRM staff between the dedicated bank 

account balances and the balances recorded in SOAR. 

To determine whether administrative expenses charged against federal 

funds are within the 7 percent limit of the total amount of federal funds 

appropriated for the DCTAG program, we obtained and reviewed 

information on the types and amounts of administrative expenses incurred 

to operate the DCTAG program. We reviewed the policies and procedures 

followed by the District intended to provide safeguards that the 7 percent 

limit on these expenses is not exceeded. To ensure that the administrative 

expense data we reviewed were complete and accurate, we obtained a 

database of all fiscal year 2004 expenditure transactions from SOAR, and 

sorted the expenditures by object class. We compared each object class 

5

On the basis of the results of our work, we estimate at the 95 percent confidence level that 

the documentation for 35.6 percent of the 3,094 students receiving DCTAG payments was 

inadequate to demonstrate eligibility to participate in the program, with the range of 

estimates of student files lacking such documentation falling between 21.8 percent and 51.3 

percent. 
Appendix I

Scope and Methodology

Page 32 GAO-06-14 District of Columbia

total to the quarterly expenditure report compiled by OFRM in order to 

verify the completeness and accuracy of the population. We analyzed the 

data to identify any duplicate or improperly classified transactions that 

existed. We requested a breakdown of administrative expenses incurred 

during fiscal year 2004 by each program under the SEO’s responsibility, 

however, the SEO was unable to provide us this information.

We conducted our work from March 2004 through June 2004 and from 

February 2005 through July 2005 in accordance with U.S. generally 

accepted government auditing standards.
Page 33 GAO-06-14 District of Columbia

Appendix II

Comments from the Mayor of the District of 

Columbia ApendxiI
Appendix II

Comments from the Mayor of the District of 

Columbia

Page 34 GAO-06-14 District of Columbia
Appendix II

Comments from the Mayor of the District of 

Columbia

Page 35 GAO-06-14 District of Columbia
Appendix II

Comments from the Mayor of the District of 

Columbia

Page 36 GAO-06-14 District of Columbia
Appendix II

Comments from the Mayor of the District of 

Columbia

Page 37 GAO-06-14 District of Columbia
Page 38 GAO-06-14 District of Columbia

Appendix III

Comments from the Chief Financial Officer of 

the District of Columbia ApendxiI
Appendix III

Comments from the Chief Financial Officer of 

the District of Columbia

Page 39 GAO-06-14 District of Columbia
Appendix III

Comments from the Chief Financial Officer of 

the District of Columbia

Page 40 GAO-06-14 District of Columbia
Page 41 GAO-06-14 District of Columbia

Appendix IV

GAO Contact and Staff Acknowledgments ApendxiIV

GAO Contact Jeanette M. Franzel at (202) 512-9471 or FranzelJ@gao.gov

Acknowledgments The following individuals also made important contributions to this report: 

Norma Samuel, Sharon Byrd; Richard Cambosos; Lisa Crye; Katelin 

Carnahan; James Maziasz; Philip Reiff; John Saylor; Sandra Silzer; 

Christopher Spain; and Sabrina Springfield. 

(194389)
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