Quality in Student Financial Aid Programs A New Approach (1993) / Chapter Skim
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4 Current Quality Control Procedures
4 Current Quality Control Procedures
Pages 49-82
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From page 49... ...
Its pervasiveness, however, makes an understanding of payment error a prerequisite to an understanding of quality control, as practiced by the Department of Education. In principle, there are two kinds of payment errors in student financial aid programs, or in fact in any program designed to dispense resources to those in need of them: (1)
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From page 50... ...
Substantive errors are directly associated with the provision of information that determines eligibility for student financial aid and the calculation based on that information. Technical errors occur when a legally necessary document has not been submitted or has been submitted but is missing from a student's file.
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From page 51... ...
Recently, the Department of Education has made an effort to inspect the cases of unsuccessful applicants as well. Eligible individuals who do not apply are also a source of underpayment not addressed by current quality control activities.
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From page 52... ...
The Department of Education's regional and central office staff conduct program reviews to determine compliance with federal rules and regulations governing the student aid programs. The reviews are conducted at educational and lending institutions and guaranty agencies.
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From page 53... ...
PROCESSING ACTIVITIES Data Entry Data entry is done under contract. A central processor handles the federal application form, and several data entry contractors (called multiple data entry contractors, or MDEs)
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From page 54... ...
Additionally, units specifically assigned to address quality issues collect and maintain detailed statistics on data entry quality and conduct ongoing review and evaluation of processing functions and requested changes. The panel did not attempt to verify the contractors' strict adherence to, or the success of, the defined quality control activities.
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From page 55... ...
. After the data pass data entry quality control inspections, the processor transmits the data file to the central processor for more extensive computer editing.
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From page 56... ...
The central processor performs a second edit function flagging applications for institutional verification. Verification activities are discussed next.
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From page 57... ...
Data on the Stafford loan must then be revised by the school, the lender, and the guaranty agency. There is little year-to-year comparison of an applicant's information in the student financial aid system unless instituted by the school, in which case it also becomes liable for errors in reconciliation when using the prior data.
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From page 58... ...
Reauthorization, however, allows the Secretary of Education to mandate verification of all applications.) · Institutions report data changed in the verification process to the central processor for recalculation of the award formula and for creation of the analytic data sets used in the Management Information System.
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From page 59... ...
Selection Methodology CURRENT QUALITY CONTROL PROCEDURES The panel was interested in the statistical underpinnings of the verification selection strategy and observed the following. The analysis that leads to the criteria for selecting applications and the creation of computer programs that select the applicants are carried out under contract.
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From page 60... ...
Using the "not to be verified" group, an estimate is made of the self-corrections during SAR transactions by computing the difference in the award formula using original data and the final SAR transaction data. A differencing between the estimates of the two control groups for each criterion removes the effect of self-correction by the applicant in SAR processing, which provides a measure of verification-induced corrections.2 2Note that this is not an exact measure of error removed because verification data are subject to measurement error, but it is a reasonable proxy.
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From page 61... ...
The system developers are to be commended for their creativity in setting up the control group of applicants held immune from selection for verification, thus allowing measures of applicant self-correction (returned SARs'. Still, logistic regression might provide an efficient and more straightforward methodology if some items that are often corrected in the SAR process were excluded from the analysis (e.g., income items reported before the tax form is filed)
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From page 62... ...
The additional error removed was, on average, only about 70 points (roughly dollars) in the computation of the award index across all records studied during those years.
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From page 63... ...
, the Department of Education's verification selection methods rely on the internal consistency of the applicant's reported data. With fewer data items being collected, the criteria development procedures will most likely be less effective in finding error in the remaining data items.
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From page 64... ...
The Title IV student financial assistance audit and program review processes are designed to determine the accuracy of the administration of student financial aid programs by an institution. Specifically, the Title IV audit objectives are to measure the reliability of an institution's financial data, the adequacy of internal control systems, and compliance with program regulations.
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From page 65... ...
The auditor discusses the report with school officials, and the report is then sent to the Department of Education. 3Authority for audit of the Title IV student financial assistance programs is contained in Section 487(c)
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From page 66... ...
Material findings or nonsubmission of the audit may result in further inspection activities, such as a program review by the Department of Education student financial aid staff or an audit by the Department of Education's Office of the Inspector General, and punitive actions, such as limitations on, suspension of, or elimination from participation. According to the Department of Education, in recent years slightly over 3,000 institutional audits have been completed each year.
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From page 67... ...
(Departmental staff indicated that they often request that the documentation be verified in the "prior audit" section of the next required nonfederal audit.) · Error rates and amounts found in the audit sample should have been expanded to obtain an estimate of error in all cases, using the appropriate sampling fraction.
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From page 68... ...
Further, rewards might be considered for those institutions exhibiting exceptionally low error rates. The panel has similar concerns with program reviews (discussed later in this chapter)
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From page 69... ...
One of the frequent and very troubling problems encountered with the independent audit of student financial aid programs has been that independent auditors do not understand program compliance requirements or financial aid operations. Requiring more specific accreditation of the auditor improves the quality of the auditing process.
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From page 70... ...
Program Reviews The Department of Education describes the role of program reviews as identifying and addressing, through assessed liabilities, regulatory violations. Authority for the program review function of the Title IV student financial assistance programs is contained in the Higher Education Act.
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From page 71... ...
SOURCE: U.S. Department of Education, Office of Student Financial Assistance rations and its capability to perform financial and administrative processes and (2)
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From page 72... ...
. high default rates, high student withdrawal rates, and no program review in the past four years.
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From page 73... ...
As with audits, the program review outcomes can include corrective actions, liabilities, and administrative penalties, such as fines and limitation, suspension, or termination of Title IV programs. The core of the program review is derived from observations based on a sample of student financial aid files selected by the reviewer.
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From page 74... ...
The program review is closed when all assessed liabilities have been paid and the institution has sufficiently responded to required findings. Table 4-5 identifies the most frequent findings based on recent program reviews.
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From page 75... ...
Department of Education, Office of Student Financial Assistance. is maintained, but it does not serve the purpose of a management tool consistent with comments in Chapter 2.
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From page 76... ...
Terminations, which are effective for up to 18 months, are sought for serious program violations, failure to pay a fine, noncompliance with a limitation agreement, or failure to solve a program review or audit finding. See Table 4-6 for a summary of ~ .
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From page 77... ...
This has guided policy and management practices to an important extent. The panel believes that what is needed is a welldefined and well-maintained data base system that incorporates the results of program reviews in a form that management can use to guide policymaking.
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From page 78... ...
OIG Activities In addition to the audits and program reviews just described, the OIG conducts and supervises audits, investigations, inspections, and other reviews of the department's programs and operations. The OIG's role is to provide leadership, coordination, and policy recommendations to promote economy, efficiency, and effectiveness; prevent fraud and abuse in the department's operations and programs; and review proposed and existing legislation and regulations governing the department's programs.
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From page 79... ...
They are designed to assess absolute performance with respect to the accurate administration of student financial assistance programs, to impose sanctions based on error, and to count the occurrences of error. Audit and review activities are necessary if the Department of Education is to fulfill its responsibility to ensure that program participation is limited to those institutions that are willing and able to operate in accordance with program goals and expectations.
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From page 80... ...
For example, are the relative frequencies of findings comparable between audits and reviews? While the audit function can provide timely information, program reviews are the only system of institutional quality checks that is entirely in the control of the Department of Education.
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From page 81... ...
· Reviewers should be experienced enough to look beyond prescribed review instructions to report unsound practices that undermine the intent of student financial aid programs even if they do not violate regulations or prescribed procedures. · Better information on the cost of the audit and review functions and the liabilities actually collected should be maintained so resources can be allocated effectively.
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From page 82... ...
Recommendation 4-3: The Department of Education should redesign the current system of program reviews and independent audits. Program reviews should focus on compliance as part of an overall quality improvement program.
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