Federal Student Aid's Award and Administration of the Title IV Additional Servicers Contracts

Our audit to determine whether FSA selected Title IV Additional Servicers servicing prices that were most efficient and cost-effective found that it did so; however, we could not determine whether it did the same for changes made to those contracts. We also found that FSA did not adequately monitor Title IV Additional Servicers’ compliance with contract requirements. We were unable to determine whether FSA selected the most efficient and cost-effective prices for the contract changes because a contract modification to include a requirement for cohort default rate challenges resulted in a separate cost of more than $600,800, which was possibly more costly than it would have been if that requirement was included initially. In addition, FSA did not properly document decisions for 18 of 21 contract changes that totaled more than $1.2 million. We also found that contracting officer representatives did not sufficiently validate Title IV Additional Servicers’ invoices and confirm the timeliness and adequacy of deliverables, and FSA used inadequate criteria in its contract monitoring. We made 10 recommendations to address the weaknesses identified, including that FSA develop and implement guidance and procedures on how to adequately validate borrower volumes and related costs in invoices, and apply those steps to the invoices from our audit period to ensure accurate billing and payment occurred.