Michigan Office of the
Auditor General
Thomas H. McTavish, C.P.A.
Auditor General
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EXECUTIVE DIGEST #4329294

Tuition Incentive Program

INTRODUCTION This report contains the results of our performance and financial related audit of the Tuition Incentive Program (TIP), Department of Social Services, for the period October 1, 1988 through March 31, 1995, and our financial related audit for the period October 1, 1992 through September 30, 1994.
AUDIT PURPOSE This performance and financial related audit was conducted as part of the constitutional responsibility of the Office of the Auditor General. This audit was required by Act 312, P.A. 1994, the annual appropriations act for State institutions of higher education and certain State purposes related to education.
BACKGROUND The Legislature created and funded TIP in a fiscal year 1986-87 appropriations act (Act 124, P.A. 1987) and has renewed and funded TIP's existence each fiscal year thereafter in various appropriations acts. Appropriations for TIP are made through the Department of Education. However, TIP is administered by the TIP Section, Office of Financial Assistance Programs, Department of Social Services (DSS). TIP's mission is to reduce the State's high school student drop-out rate, especially among low-income youth, by offering to pay college tuition, with limitations, as an incentive for graduation from high school. To achieve its mission, TIP has two goals: (1) to reduce the high student drop-out rate in State high schools and (2) to reduce the need for long-term public assistance by educating the State's young people.

TIP's appropriations acts for fiscal years 1987-88 and 1988-89 provided tuition assistance, for fall term 1988, to students who graduated from high school in May or June 1988. Except for fiscal year 1994-95, TIP's appropriations acts did not specifically restrict TIP from enrolling high school graduates. A majority of TIP recipients (62%) were enrolled as high school seniors or after graduation from high school. TIP started to enroll applicants in fiscal year 1987-88. In fiscal year 1988-89, TIP expended $807,290 to pay for the college tuition of 895 TIP recipients. The amount of expenditures and number of TIP recipients has increased each year since fiscal year 1988-89 (see Exhibit 1). In fiscal year 1993-94, TIP expended $7,208,512 to pay for the college tuition of 5,923 TIP recipients. The average cost per participant was $1,217.

On October 25, 1994, there were 17,821 TIP participants potentially eligible for TIP funding. On March 17, 1995, there were an additional 101,328 DSS recipients who were eligible to apply to participate in TIP. If these additional DSS recipients participated at the current level of funding, the TIP Section would be unable to administer the program or meet funding demands. As of March 31, 1995, the TIP Section had four employees. Administrative costs for fiscal year 1993-94 were $266,277.
AUDIT OBJECTIVES AND CONCLUSIONS Audit Objective: To evaluate the effectiveness and efficiency of TIP by determining:

  1. If high school graduation rates had increased for TIP participants relative to the average high school graduation rates of the participants' school districts.


  2. If TIP recipients had graduated from two-year institutions, and determining the number of recipients who had continued in a four-year program and graduated.


  3. If TIP recipients subsequently received public assistance.


  4. If student financial records were accurate and complete.


  5. If TIP was effectively promoted.
Conclusion: The TIP Section was generally efficient in its administration and operation of TIP; however, based on our survey, we concluded that TIP did not achieve its mission to reduce the State's high school student drop-out rate among low-income youth. Also, our comparison of TIP recipients with public assistance records disclosed that former TIP recipients often received public assistance. Our assessment disclosed five material conditions:

  • The TIP Section did not design its promotion process to target students who were most at risk of becoming high school dropouts and did not establish goals and objectives to measure the effectiveness of its promotion efforts (Finding 1). As a result, the composite graduation rate for TIP students in the largest school district in our survey was not any better than the school district's 1993-1994 composite graduation rate. A significant reason for the failure to improve the graduation rate was that a majority of TIP participants (62%) were enrolled in their senior year of high school or after graduation. TIP's efforts to enroll high school seniors and graduates did not comply with its mission of reducing the State's high school drop-out rate as high school seniors and graduates are not at high risk of dropping out of school.


  • The TIP Section did not establish measurable goals for TIP and obtain the outcome data necessary to provide the program the opportunity to achieve its mission (Finding 2). For instance, we noted that:


    1. TIP recipients did not have a high rate of graduation from associate degree or certificate programs. Also, although TIP recipients had a high rate of graduation from colleges offering four-year degrees, only a small portion of all TIP recipients (7%) attended a four-year college.


    2. Overall, as of January 14, 1995, 3,269 (38%) of the 8,664 former TIP recipients received public assistance from DSS.


  • The State's annual appropriation process did not provide an adequate long-range funding mechanism for the TIP Section to operate effectively (Finding 3).


  • The State had not enacted ongoing enabling legislation for TIP, and the TIP Section had not promulgated administrative rules that reflect its current administrative practices (Finding 4).


  • The TIP Section's internal control structure was not adequate to safeguard its participant data base (Finding 5).
DSS agreed with the recommendations corresponding to Findings 1, 2, 3, and 5 and agreed with 1 of the 2 recommendations corresponding to Finding 4. However, DSS often disagreed with our conclusions and/or presentation related to these findings. Therefore, DSS's complete preliminary response and our corresponding epilogues are presented in the Appendix.

Audit Objective: To evaluate TIP's financial internal control structure to ensure that transactions were documented, recorded, and properly authorized in accordance with management's direction and State statutes, policies, and procedures.

Conclusion: The TIP Section's financial internal control structure was generally effective in documenting, recording, and authorizing TIP transactions in accordance with management's direction and State statutes, policies, and procedures. However, our review disclosed reportable conditions related to legislative approval for expenditures in excess of appropriations (Finding 6) and internal control procedures over timekeeping (Finding 7).
AUDIT SCOPE AND METHODOLOGY Our audit scope was to examine the program and other records of the Tuition Incentive Program for the period October 1, 1988 through March 31, 1995 and to examine the financial records for the period October 1, 1992 through September 30, 1994. Our audit was conducted in accordance with Government Auditing Standards issued by the Comptroller General of the United States and, accordingly, included such tests of the records and such other auditing procedures as we considered necessary in the circumstances.

To accomplish our objectives, we performed a preliminary survey of TIP's operations, governing statutes, rules, policies, and procedures. We determined that TIP had not established outcome measures to evaluate program effectiveness. As a result, in consultation with DSS staff, we designed a survey of TIP participants and recipients to determine the effectiveness of TIP in achieving its stated mission and objectives. However, because of the characteristics of TIP participants and recipients, it was determined that a control group was not available to which we could compare our TIP survey results. Therefore, we compared the high school graduation rate from our survey, for students from the State's largest school district, to the district's high school graduation rate as reported to the Department of Education. Students from this district comprise approximately 54% of TIP participants.

In addition, we selected a sample of financial transactions to review to determine if the transactions were documented, recorded, and properly authorized in accordance with management direction, and State statutes, policies, and procedures. To accomplish one of our audit objectives, we relied on an audit of TIP financial transactions performed by the DSS Office of Internal Audit to determine that student financial records were accurate and complete.
AGENCY RESPONSES Our report contains 7 findings and 10 corresponding recommendations. The agency's preliminary response indicates that it agrees with 9 of the recommendations and disagrees with 1. However, the agency disagrees with our corresponding conclusions and/or presentation for 6 of the recommendations with which it agreed (see Appendix).

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