	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. For fiscal years 2000-2004, Congress appropriated $17 million annually for  the DCTAG program and appropriated $25.6 million for fiscal year 2005. 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. Invoices are then processed for  payment by the District’s Office of Finance and Resource Management  (OFRM) and 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. 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. 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. 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. 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, the District does not track the full amount of  administrative expenses incurred for the program. 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. 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. 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. However, we found that the reconciliations had not been performed prior  to our review. The CFO added that when GAO made the request, the  District’s general fund had not been fully reimbursed for all DCTAG  expenditures. 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 reconciled the bank statements to reports from  SOAR, the District’s financial management system.
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 (OFRM) 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.