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Audit: Frostburg State lost $680,000 on financial aid system it abandoned

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Audit: Frostburg State lost $680,000 on financial aid system it abandoned

Sep 16, 2024 | 7:35 pm ET
By William J. Ford
Audit: Frostburg State lost $680,000 on financial aid system it abandoned
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The Frostburg State University bobcat. Photo by Josh Kurtz.

Frostburg State University officials did not comply with procurement policies and procedures when they acquired a new financial aid system, then walked away from the system resulting in a net loss of $680,00, according to a state audit released Monday.

The audit by the Maryland Department of Legislative Services’ Office of Legislative Audits, for the period from Aug. 26, 2019, to July 15, 2023, also found that the university extended a sole-source contract for student mental health services without support, and failed to do the “adequate due diligence” that includes documenting its work.

The audit said the university procured a new financial aid system in October 2021 for $269,000 through a sole source procurement, then spent $701,000 with another vendor to implement the system, under a Maryland Education Enterprise Consortium contract.

The audit notes the university could have sought proposals from 16 other vendors that were available under the MEEC contract.

“Although not a requirement when using a MEEC contract, taking steps to solicit proposals from multiple vendors when available is a common best practice,” according to the audit.

After implementing the new system in the fall of 2022, the university reverted to it old system in summer 2024 because of “unremedied issues with the new system and because the new system did not meet its needs.” As of July 2023, the university had spent $680,000, or 70% of the expected cost to implement the system, the audit said.

“The lack of due diligence in the selection of the software and related vendors is significant because FSU discontinued using the system,” wrote Legislative Auditor Brian S. Tanen.

University officials disagreed with the cost of the replacement system, noting that much of the money that was spent with a current contractor would have been spent anyway.

“The difference in costs between the original Financial Aid System and the new System for the three-year period is $103,000,” said Ellen Herbst, University System of Maryland senior vice chancellor for administration and finance, in the system’s response for the university.

While it acknowledged the lack of documentation, the university also pushed back on the suggestion that it did not perform its due diligence, saying “each decision was given full consideration as being in the best interest of FSU and the goal of ensuring students were awarded financial aid in a timely manner.”

The system’s response also notes “key leadership” that recommended going with new technology left the university within a year of making that recommendation. Due to the turnover of financial aid staff, new personnel and leadership were more knowledgeable with the previous financial aid software.

“These factors along with an analysis of ongoing costs led FSU to make the decision in the best interest of the University and the students, to return to the original financial aid system,” according to the univeristy.

But the auditor’s office wrote that without documentation, there is not a way to verify the information provided. The university didn’t dispute the amount when audit field work was done “and only raised the concern in its response to the report.”

“In addition, FSU’s explanation of the circumstances leading up to the decision to discontinue the system has changed multiple times,” the auditors said. “Given these conflicting explanations, lack of support for the decisions made on this contract, and its calculation of the amount lost, we stand by the facts presented in this report.”

The audit also criticized Frostburg State for failing to competitively bid a contract for student health services in October 2019, and then continuing to extend the more than $1 million contract for “multiple years using questionable sole source justifications.”

The university system, in its response, said Frostburg State is in the process of putting out request for proposals for those services and will ensure “required justifications are completed in a timely manner.”

The audit also noted how Frostburg State did not verify students’ residency status on some financial aid, which led to $64,000 being incorrectly awarded. According to the audit’s analysis, for example, one student received $9,000 less than due for being classified as in-state, but was actually a regional student at the time of the award.

“FSU was not aware of these errors until we brought them to its attention,” according to the audit.

A response from USM agrees with the audit and wrote Frostburg State is in the process of reviewing the awards and “make appropriate corrections on a case-by-case basis as determined by the review.” In addition, implement procedures to identify students who change residency after they have been awarded financial aid.