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entitled 'District of Columbia: Financial and Program Management 
Improvements Needed for Tuition Assistance Grant Program' which was 
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Report to Congressional Committees: 

October 2005: 

District of Columbia: 

Financial and Program Management Improvements Needed for Tuition 
Assistance Grant Program: 

GAO-06-14: 

GAO Highlights: 

Highlights of GAO-06-14, a report to congressional committees: 

Why GAO Did This Study: 

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 Found: 

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. 

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. 

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. 

[End of section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

Controls over Determining Institution Eligibility Were Generally 
Operating Effectively, but Controls over Student Eligibility Need 
Improvement: 

DCTAG Funds Are Being Accounted for Separately, but Routine Bank 
Reconciliations Are Needed: 

The SEO's Forecasting Method to Project Future Funding Needs Has Not 
Been Reviewed for Methodological Soundness: 

Total Amount of the Administrative Expenses for the DCTAG Program 
Unknown: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendixes: 

Appendix I: Scope and Methodology: 

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

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

Appendix IV: GAO Contact and Staff Acknowledgments: 

Table: 

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

Figures: 

Figure 1: Number and Percentage of DCTAG Students by Ward for Academic 
Year 2004-2005: 

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

Letter October 28, 2005: 

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),[Footnote 1] established a program to provide 
eligible college-bound 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).[Footnote 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 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.[Footnote 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 in- 
state 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.[Footnote 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,[Footnote 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;[Footnote 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 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.[Footnote 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).[Footnote 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. 

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.[Footnote 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.[Footnote 10] SEO also did not have an 
established procedure for determining and documenting the eligibility 
of applicants with special circumstances--those who were unable to 
submit the required documents with their application.[Footnote 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 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,[Footnote 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. 

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.[Footnote 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)[Footnote 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. 

Figure 1: Number and Percentage of DCTAG Students by Ward for Academic 
Year 2004-2005: 

[See PDF for image] 

[End of figure] 

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

[See PDF for image] 

[End of figure] 

D.C. students attending a participating public college or 
university[Footnote 15] 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 nationwide[Footnote 16] 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. 

For fiscal years 2000-2004, Congress appropriated $17 million annually 
for the DCTAG program and appropriated $25.6 million for fiscal year 
2005.[Footnote 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): 

Funds available: 

Federal appropriation amount; 
Fiscal year: 2000: $17.0; 
Fiscal year: 2001: $17.0; 
Fiscal year: 2002: $17.0; 
Fiscal year: 2003: $17.0; 
Fiscal year: 2004: $17.0; 
Fiscal year: 2005[A]: $25.6. 

Less rescission amount; 
Fiscal year: 2000: -0.1; 
Fiscal year: 2001: 0.0; 
Fiscal year: 2002: 0.0; 
Fiscal year: 2003: -0.1; 
Fiscal year: 2004: -0.1; 
Fiscal year: 2005[A]: -0.2. 

Carryover from prior year; 
Fiscal year: 2000: 0.0; 
Fiscal year: 2001: 16.3; 
Fiscal year: 2002: 22.7; 
Fiscal year: 2003: 23.2; 
Fiscal year: 2004: 17.0; 
Fiscal year: 2005[A]: 5.5. 

Cumulative interest earned[B]; 
Fiscal year: 2000: -; 
Fiscal year: 2001: -; 
Fiscal year: 2002: -; 
Fiscal year: 2003: -; 
Fiscal year: 2004: -; 
Fiscal year: 2005[A]: 2.7. 

Total funds available; 
Fiscal year: 2000: $16.9; 
Fiscal year: 2001: $33.3; 
Fiscal year: 2002: $39.7; 
Fiscal year: 2003: $40.1; 
Fiscal year: 2004: $33.9; 
Fiscal year: 2005[A]: $33.6. 

Funds expended: 

Grant disbursements; 
Fiscal year: 2000: 0.0; 
Fiscal year: 2001: 9.1; 
Fiscal year: 2002: 15.4; 
Fiscal year: 2003: 22.0; 
Fiscal year: 2004: 27.5; 
Fiscal year: 2005[A]: 23.0. 

Administrative expenses; 
Fiscal year: 2000: 0.6; 
Fiscal year: 2001: 1.5; 
Fiscal year: 2002: 1.1; 
Fiscal year: 2003: 1.1; 
Fiscal year: 2004: 0.9; 
Fiscal year: 2005[A]: 0.6. 

Total funds expended; 
Fiscal year: 2000: $0.6; 
Fiscal year: 2001: $10.6; 
Fiscal year: 2002: $16.5; 
Fiscal year: 2003: $23.1; 
Fiscal year: 2004: $28.4; 
Fiscal year: 2005[A]: $23.6. 

Funds remaining at year-end; 
Fiscal year: 2000: $16.3; 
Fiscal year: 2001: $22.7; 
Fiscal year: 2002: $23.2; 
Fiscal year: 2003: $17.0; 
Fiscal year: 2004: $5.5; 
Fiscal year: 2005[A]: $10.0. 

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. 

[End of table] 

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, 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.[Footnote 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.[Footnote 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 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.[Footnote 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 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 amount[Footnote 21] deposited back to the 
District's general fund and recorded in SOAR by OFRM.[Footnote 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.[Footnote 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 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.[Footnote 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.[Footnote 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. 

Lack of Social Security Number Verification: 

The required photocopy of the Social Security card is intended to 
establish the applicant's identity and citizenship.[Footnote 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.[Footnote 
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 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.[Footnote 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.[Footnote 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.[Footnote 30] The DCTAG program regulations define domicile 
as the current fixed place of residence to which the applicant returns 
following temporary absences and where the applicant intends to reside 
indefinitely.[Footnote 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,[Footnote 32] the DCTAG application (first-time D.C. private-
school graduates and renewals) must include a copy of the 
certified[Footnote 33] 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 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. 

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.[Footnote 34] 
According to the Standards for Internal Control in the Federal 
Government,[Footnote 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 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.[Footnote 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.[Footnote 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,[Footnote 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 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 DCTAG-dedicated 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 
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 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,[Footnote 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.[Footnote 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 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: 

* 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 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 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 year-end. 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 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. 

Signed by: 

Jeanette M. Franzel: 
Director: 
Financial Management and Assurance: 

[End of section] 

Appendixes: 

Appendix I: Scope and Methodology: 

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 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 amount[Footnote 41] deposited for that transaction. 

To test controls over institutional payment transactions, we selected a 
dollar unit sample[Footnote 42] of 58 tuition assistance payments made 
to institutions during fiscal year 2004,[Footnote 43] totaling about 
$11.3 million from payments totaling about $27.7 million.[Footnote 44] 
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. 

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 dollar-unit sample discussed above.[Footnote 45] 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 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. 

[End of section] 

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

Anthony A. Williams: 
Mayor: 

October 14, 2005: 

Ms. Jeanette Franzel: 
Director, Financial Management Assurance: 
Government Accountability Office: 
441 G Street, N.W.: 
WASHINGTON, D.C., 20548: 

Dear Ms. Franzel: 

I have reviewed your office's October, 2005 Draft DISTRICT OF COLUMBIA: 
Financial and Program Management Improvements Needed for Tuition 
Assistance Grant Program (GAO-06-14). We found your report to be very 
useful and it was a pleasure working with the General Accounting Office 
(GAO) during its development. 

As you know, the District of Columbia Tuition Assistance Grant (DCTAG) 
program has been a tremendous success since its inception in school 
year 2000/2001. For the most recent school year, 2004-2005, 4,767 
students received funding from the TAG program, an increase of 9.4% 
from the previous school year. 

In your report, you raise several administrative issues that we have 
prepared responses to. In several cases, we will illustrate, based upon 
the findings in the report, that these issues occurred during the 
earliest development stages of the DCTAG program and have been 
eliminated for several years. We maintain in each instance, that 
appropriate internal controls are currently in place to ensure that 
errors of the past are not replicated. This is supported by the fact 
that the draft report did not include any errors occurring in the 2004- 
2005 school year. The administrative issues as raised are addressed as 
followed: 

I. GAO Concern: 

The SEO Did Not Have Sufficient Documentation to Show Whether Internal 
Controls over Student Eligibility Are Operating Effectively (page 12 of 
the report): 

SEO Response: 

The majority of errors documented in the report, 9 out of 14 or 64%, 
occurred during the start-up period of the program in SY 2000-2001. In 
addition, two of the additional errors occurred during SY 2002-2003, 
indicating that 78% of the errors found occurred before the 2003-2004 
school year. The years for the remaining three errors are not 
documented in the report. The GAO did not find an occurrence of a first 
time applicant in SY 2004-2005, which was the base year of the audit, 
for which proper documentation had not been submitted. Based upon these 
findings, the SEO is confident that our strengthening of the program in 
the past year and our current internal controls are sufficient to 
provide appropriate documentation of student eligibility. We will 
continue to carefully analyze and document student eligibility. 

II. GAO Concern: 

Lack of Social Security Number Verification (page 13 of the report): 

SEO Response: 

* The majority of the errors found, 3 out of 5 or 60%, occurred during 
the start-up period of the program in SY 2000-2001 and the additional 
two errors occurred during SY 2002-2003. The GAO did not find an 
occurrence of a first time applicant in SY 2004-2005, which was the 
base year of the audit, for which proper documentation had not been 
submitted. Based upon these findings, the SEO is confident that it 
currently has in place proper internal controls for sufficient 
documentation. The SEO verifies applicant social security numbers by 
matching the numbers supplied on the social security card against 
information provided on certified District of Columbia tax documents. 

III. GAO Concern: 

Required Documents Proving District Domicile Were Not Available for 
Many DCTAG Participants (page 15 of the report): 

SEO Response: 

* The report is vague as to when the errors occurred, stating that ".. 
instances we identified were exceptions relating to academic years 
after 2000-2001." The current process the SEO uses to verify domicile 
include applicant submission of District of Columbia Tax information as 
certified by the Office of Tax Revenue as well as copies of two recent 
(within 45 days) utility bills. In addition, all applications and 
supporting documents are scanned and filed electronically, further 
assuring that relevant information is maintained. Based upon these 
findings, the SEO is confident that it has in place the proper internal 
controls for domicile verification. 

IV. GAO Concern: 

How the SEO Determined Eligibility Was Unclear for Applicants with 
Unusual Circumstances (page 16 of the report): 

SEO Response: 

* The report indicated "..several cases where applicants were not able 
to provide the prescribed documents due to unusual or special 
circumstances." Since the report was vague as to when the errors 
actually occurred, we will not be able to respond accordingly. However, 
currently these applicants are processed on case-by-case basis. SEO 
staff make determinations of eligibility using "professional judgment" 
(as covered in Section 479(a) of the Higher Education Act of 1965, as 
amended) and the Director of the Higher Education Financial Services 
department makes final decisions. Once the final decision has been 
rendered by the Director, a "letter to the file" is prepared for each 
applicant in question. 

V. GAO Concern: 

The SEO's Forecasting Method to Project Future Needs has not been 
Reviewed for Methodological Soundness (seepage 20 of the report): 

SEO Response: 

The forecasting method provided by the SEO to the GAO for review 
included actual student enrollment, expenditures and revenues for the 
DCTAG program from SY 1999-2000 through SY 2003-2004. Future cost 
projections were based upon growth trends in enrollment and average 
cost per student. The SEO is in the process of developing comprehensive 
District of Columbia high school graduation data as well as college 
retention data to further improve its ability to forecast costs. 

Recommendations: 

The SEO agrees with and will respond accordingly or has already 
implemented the six recommendations as put forth by the GAO. More 
specifically: 

I. GAO Recommendation: 

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: 

SEO Response: 

* SEO will modify our OneApp and will add the Student Aid Report, as 
criteria for eligibility, for the SY 2006-2007 application. 

II. GAO Recommendation: 

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: 

SEO Response: 

* We agree that it is critical that domicile verification information 
is maintained. Currently, domicile is verified primarily through the 
submission of certified District of Columbia tax returns and recent 
(within 45 days) utility bills for the address used in the application. 
The SEO is confident that its current approach is satisfactory to 
demonstrate applicant domicile. Therefore we submit that this 
recommendation includes proposed procedures that are currently in 
place. 

III. GAO Recommendation: 

Develop and retain documentation that clearly shows how eligibility 
decisions are reached when it reviews applications submitted by 
students with unusual circumstances: 

SEO Response: 

Currently these applicants are processed on a case-by-case basis. SEO 
staff make determinations of eligibility using "professional judgment" 
(as covered in Section 479(a) of the Higher Education Act of 1965, as 
amended) and the Director of the Higher Education Financial Services 
department makes final decisions. Once the final decision has been 
rendered by the Director, a "letter to the file' is prepared for each 
applicant in question. Therefore we submit that this recommendation 
includes proposed procedures that are currently in place. 

IV. GAO Recommendation: 

Develop a sound methodology for forecasting (1) numbers of students in 
the program and (2) funds needed for future fiscal years: 

SEO Response: 

* The SEO's current methodology is based on trend analyses using actual 
applicant data as well as up-to-date tuition costs. The 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. 

V. GAO Recommendation: 

Coordinate with OFRM and the Office of Budget and Planning to ensure 
that interest earned on the DCTAG dedicated bank accounts is made 
available to be expended for the DCTAG program. 

SEO Response: 

* SEO, OFRM and OBP have coordinated and interest earned has been 
budgeted in FY 2006. 

VI. GAO Recommendation: 

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: 

SEO Response: 

* SEO and OFRM have coordinated to improve the actual recording of 
administrative costs. We believe this will be valuable information for 
our agency, however, it is important to emphasize that the State 
Education Office has ensured that the program costs are not exceeding 
the legislatively allowed amount and that the legislation does not 
prohibit in any way other administrative support from the agency. 

Please do not hesitate to contact us if you need to discuss this 
response. Please call, Deborah Gist, State Education Officer at (202) 
727-3471, or John Parham, Director of Higher Education Financial 
Services if you should have any further concerns. He can be reached at 
(202) 727-3474. 

Sincerely, 

Signed by: 

Anthony A. Williams: 

[End of section] 

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

Government of the District of Columbia: 
Office of the Chief Financial Officer: 

Natwar M. Gandhi: 
Chief Financial Office: 

October 13, 2005: 

Ms. Jeanette Franzel: 
Director: 
Financial Management and Assurance: 
United States Government Accountability Office: 
441 G Street, N.W. 
Washington, DC 20548: 

Dear Ms. Franzel: 

Thank you for the opportunity to respond to the draft report, District 
of Columbia: Financial and Program Management Improvements Needed for 
Tuition Assistance Grant Program (GAO-06-014). We appreciate your 
assessment and recommendations for this vital program. 

While the report addressed both programmatic and financial issues, we 
are offering comments on your financial findings and recommendations. 
We understand that the State Education Office will provide separate 
written comments on programmatic issues. 

We would like to comment on the following three financial issues: 

1. Reconciliation of the Tuition Assistance Grant (TAG) dedicated bank 
accounts and the District's financial management system. 

The report states that reconciliations between the balances in the 
dedicated TAG bank accounts and the District's financial system could 
be improved. It should be noted that each quarter and at year-end the 
District is required to reconcile all bank accounts to verify that the 
balances in the District's financial system (System of Accounting and 
Reporting) correspond with balances in our bank accounts, and these 
reconciliations were performed timely. 

It is true that when GAO made the request for this reconciliation, the 
District's general fund had not been fully reimbursed for all TAG 
expenditures. We want to make clear that this did not harm the TAG 
program. Our procedure is to use the District's own funds to pay up- 
front for TAG-related expenditures, including tuition payments, and 
then be reimbursed with federal funds from the TAG bank accounts. We 
are taking action to ensure that this kind of reconciliation occurs on 
a more frequent basis and that our general fund is promptly reimbursed. 

Going forward, we will reimburse the general fund for all TAG 
expenditures on a monthly basis and reconcile quarterly. 

2. Earned interest in the TAG dedicated accounts. 

The report states that earned interest was not recorded as being 
"available." Earned interest has been consistently recorded in the 
dedicated TAG bank accounts and documented in the District's financial 
system. It is considered to be available to be budgeted and an integral 
part of the long-term planning for the program. However, the interest 
has not been included as budget authority, and perhaps in this sense 
was viewed in the report as not being "available." The interest has not 
been budgeted because in the early years of the program total 
expenditures could be met with the yearly appropriation from Congress. 
There was a carryover of funds from one year to the next, making it 
unnecessary to include the earned interest as budget authority. This 
was reflected in our annual budget submissions to Congress. 

Due to the successful outreach of the program, we have reached the 
point where we are now spending more than the yearly appropriation, and 
the carryover of funds is nearly exhausted. As your report points out, 
our analysis this year of cost drivers that affect the program -- 
numbers of students, schools attended, tuition costs, etc. --leads us 
to the conclusion that it would be prudent to budget the earned 
interest during FY 2006. This will provide an important resource to 
draw upon should these cost drivers change, even slightly, resulting in 
the requested $33.2 million not being sufficient to meet the needs of 
the program. The earned interest will help to minimize the negative 
impact of changes that may be required in the program should costs 
increase more than expected. 

3. Administrative expenses. 

Administrative expenses charged against federal funds are carefully 
tracked and, as the report states, are well within the seven percent 
limit of the total amount of federal funds appropriated to the TAG 
program. As the report points out, only $900,000, or 5.3 percent, of 
the federal appropriation was used for administrative purposes in FY 
2004. This minimum use of federal funds for administrative purposes is 
in line with our objective to maximize the use of federal funds to make 
tuition payments on behalf of District students. In so doing, the 
District is absorbing some indirect costs associated with the program, 
including most fixed costs and the costs of central administrative 
personnel in the State Education Office, which administers the TAG 
program. In short, we use federal funds to pay for direct program 
costs, including tuition payments and the cost of personnel dedicated 
to the program. We have been using our Local funds to pay for most of 
the indirect costs that might otherwise be charged to the program. We 
agree with your point that it is important to assess the total 
administrative cost of the program, and going forward we will develop a 
methodology to document this information. 

Thank you for this opportunity to provide comments on your report. Last 
year alone, the TAG program successfully assisted almost 5,000 District 
students to attend college or university. We look forward to working 
closely with you and your colleagues at the General Accountability 
Office and with the members of Congress and their staff to ensure the 
continued success of this vital program. 

If you have any questions or concerns, please contact Barbara Jumper, 
Associate Chief Financial Officer, Government Operations Cluster or 
Robert Jose, Agency Fiscal Officer, Office of Financial and Resource 
Management, at 202-727-0333. 

Sincerely, 

Signed by: 

Natwar M. Gandhi: 
Chief Financial Officer: 

cc: The Honorable Anthony A. Williams, Mayor of the District of 
Columbia; 
Lucille Dickinson, Chief of Staff, Office of the Chief Financial 
Officer; 
Barbara D. Jumper, Associate Chief Financial Officer, Office of the 
Chief Financial Officer; 
Deborah Gist, Director, State Education Office; 
Sebastian Lorigo, Executive Director, Office of Integrity and 
Oversight. 

[End of section] 

Appendix IV: GAO Contact and Staff Acknowledgments: 

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): 

FOOTNOTES 

[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. 

[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). 

[7] See appendix I for statistical sampling details. 

[8] See appendix I for details on data reliability procedures. 

[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. 

[10] D.C. Code §38-2702 (c) (2) (C) (2001 Ed., 2005 Pocket Part). 

[11] D.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. 

[12] The 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). 

[13] There are annual and lifetime caps on grant funds available to 
D.C. residents, depending on whether they attend public or private 
universities and colleges. 

[14] The 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. 

[15] An 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. 

[16] The 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). 

[17] Before rescission. 

[18] See appendix I for statistical sampling details. 

[19] For 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. 

[20] On 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. 

[21] In reviewing the refund paperwork, we found that several 
institutions had issued refunds covering multiple students. 

[22] Refunds 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. 

[23] 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. 

[24] See appendix I for statistical sampling details. 

[25] 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. See appendix I for statistical sampling 
details. 

[26] The 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. 

[27] GAO, Standards for Internal Control in the Federal Government, 
GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999). 

[28] To 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. 

[29] The 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. 

[30] D.C. Mun. Regs tit. 29, §7003.2. 

[31] D.C. Mun. Regs tit. 29, §7001.1. 

[32] The 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. 

[33] A 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. 

[34] Office 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). 

[35] GAO/AIMD-00-21.3.1. 

[36] This second account was established to earn a higher rate of 
return on deposited funds by investing in securities with longer 
maturities. 

[37] D.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). 

[38] GAO/AIMD-00-21.3.1. 

[39] Consolidated 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. 

[40] We 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). 

[41] In reviewing the refund paperwork, we found that refunds for 
several students from multiple institutions were grouped together to 
comprise one refund transaction. 

[42] The sample was selected based on a dollar-unit sampling 
methodology which by its nature will tend to select large dollar unit 
items. 

[43] The sample was selected from the fiscal year 2004 population of 
1,580 tuition grant disbursement transactions. 

[44] We are 95 percent confident that the net upper error limit of 
ineligible institutions receiving DCTAG payments is no more than $1.382 
million. 

[45] 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. 

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