A Federal Compliance Audit
A Report on State of Texas Compliance with Federal Requirements for the Student Financial Assistance Cluster for the Fiscal Year Ended August 31, 2016
Feburary 2017
Summary Analysis
The State of Texas complied in all material respects with the federal requirements for the Student Financial Assistance Cluster in fiscal year 2016.
As a condition of receiving federal funding, Title 2, Code of Federal Regulations, Section 200, requires non-federal entities that expend $750,000 or more in federal awards in a fiscal year to obtain annual Single Audits. Those audits test compliance with federal requirements in up to 12 areas that may have a material effect on a federal program at those non-federal entities.
From September 1, 2015, through August 31, 2016, the State of Texas expended $54 billion in federal funds. The State Auditor’s Office audited compliance with requirements for the Student Financial Assistance Cluster at 17 higher education institutions. Those 17 higher education institutions spent $3 billion in federal Student Financial Assistance Cluster funds during fiscal year 2016.
Auditors identified 55 findings for the Student Financial Assistance Cluster, including: Eight findings classified as material weaknesses and non-compliance, forty-six findings classified as significant deficiencies and non-compliance, and one finding classified as a significant deficiency.
Fifteen higher education institutions audited did not always report changes in students’ enrollment status to the National Student Loan Data System in an accurate or timely manner.
Eleven of the higher education institutions audited (1) awarded Student Financial Assistance Cluster funds to students who were not eligible to receive that assistance or (2) awarded incorrect amounts of Student Financial Assistance funds based on students’ eligibility.
Eight of the higher education institutions audited inconsistently or incorrectly calculated the students’ cost to attend those higher education institutions.
Seven of the higher education institutions audited (1) did not consistently follow their processes to determine students’ academic progress or (2) did not have adequate processes to determine whether students made satisfactory academic progress to be eligible for financial assistance.
Seven higher education institutions audited did not always accurately calculate the amount of Student Financial Assistance Cluster funds to be returned to the federal government and/or did not always return funds within the required time frames.
Five higher education institutions audited did not accurately verify all required information on students’ financial assistance applications and/or did not always correct Institutional Student Information Records when required.
Five higher education institutions audited did not always minimize the time between their drawdowns of federal funds and their disbursement of those funds, draw down funds from the correct federal award, and/or did not have sufficient internal controls over cash management.
Five higher education institutions audited did not perform monthly reconciliations in accordance with requirements and/or did not always report accurate loan disbursement dates to the Direct Loan Servicing System.
Auditors identified inappropriate access to information technology systems, insufficient segregation of duties, or insufficient controls over change management at seven higher education institutions.
Higher education institutions fully implemented corrective action plans for 21 (42 percent) of those 50 findings and partially implemented corrective action plans for 29 (58 percent) of those 50 findings.
We have audited the State of Texas’s (State) compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on the Student Financial Assistance Cluster for the year ended August 31, 2016.
In planning and performing our audit of compliance, we considered the State’s internal control over compliance with the types of requirements that could have a direct and material effect on the Student Financial Assistance Cluster to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for the Student Financial Assistance Cluster and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance.
This section identifies significant deficiencies, material weaknesses, and instances of noncompliance, including questioned costs, as required to be reported by Title 2, Code of Federal Regulations, Section 200.516(a).