Audit 294564

Finding 2023-001 – Student Financial Assistance Return of Title IV Funds Cluster: Student Financial Assistance Federal Agency: Department of Education Assistance Listing Program Title and Number: William D. Ford Federal Direct Loan Program – 84.268 Award Name: Federal Direct Loan Program Award Identifying Number: Not Applicable Award Year: Academic Year 2022-2023 Criteria: The University is subject to compliance requirements pertaining to the timely return of Title IV funds under Federal Student Aid (“FSA”) programs within the Student Financial Assistance cluster. Under 34 CFR 688.21 (a), if a student does not begin attendance in a payment period or period of enrollment, the institution must return the amount of payments made directly by or on behalf of the student to the institution for that payment period or period of enrollment, up to the total amount of the loan funds disbursed. Per 34 CFR 688.21 (b), the institution must return those funds as soon as possible, but no later than 30 days after the date the institution becomes aware the student will not begin attendance. The University’s policies and procedures over Title IV returns must include all relevant information on paying the returns of these funds within required due dates. Condition: Through our testing of a sample of 25 students at UM- Dearborn, we noted that for one of the five selected students who did not begin attendance, direct subsidized loan funds were not returned for 300 days. Additionally, we noted that management at UM-Dearborn did not have a control in place to ensure the timely remittance of Title IV refunds during the period from July 2022 through January 2023. Questioned Costs: None Cause: UM-Dearborn experienced significant turnover in its Office of Financial Aid and Scholarships (“OFAS”) in early fiscal 2023. During this time, there was no control in place to ensure timely submission of Title IV refunds and there was a lack of training/knowledge of staff around the Title IV refund requirements. Effect: Not having complete and accurate policies and procedures related to the return of Title IV funds and training staff on those policies and procedures, could result in late returns of federal student financial aid funds to the Department of Education. Recommendation: Management identified and remediated the policy deficiency in February 2023, as well as having fully staffed the OFAS and implemented a control to ensure timely remittance of Title IV refunds. However, the University should continually assess the operation of the updated policies and procedures in place as it relates to Title IV funds and assess the training needs of staff. This assessment should include an evaluation of not only the notification procedures, but also the process and controls around returning federal funds in line with the required due date. View of Responsible Officials: Refer to Management’s Views and Corrective Action Plan for the finding described above.

Finding 2023-002 – Student Financial Assistance Disbursements Cluster: Student Financial Assistance Federal Agency: Department of Education Assistance Listing Program Title and Number: Federal Pell Grant Program – 84.063, William D. Ford Federal Direct Loan Program – 84.268 Award Identifying Number: Not Applicable Award Year: Academic Year 2022-2023 Criteria: The University is subject to compliance requirements pertaining to the disbursement of funds to students under FSA programs within the Student Financial Assistance cluster. For any students participating in electronic transactions, schools must obtain their voluntary consent to participate. Under 34 CFR 668.165 and The Electronic Signatures in Global and National Commerce Act (or the E-Sign Act), voluntary consent is required for all financial information provided or made available to student loan borrowers and for all notices and authorization requirements. In addition, for all students receiving Title IV program funds and parent Direct PLUS borrowers, a general notification must be provided, whether in writing or electronically, prior to the disbursement of funds. In accordance with 34 CFR 668.165 and 668.165(b), this notice must include the amount of funds the student can expect to receive from each FSA program, and how and when these funds will be disbursed. Additionally, the notification must be sent before any disbursements are made. If these disbursements include a Direct Loan, the notice must include which funds are subsidized loans, unsubsidized loans, and/or PLUS loans. Condition: While reviewing the underlying support for a sample of 25 students at UM-Dearborn, we noted that voluntary consent for electronic disbursement participation was not obtained for any of the students. Additionally, if these 25 students, seven did not receive an award letter notifying them of the disbursement of their funds, and an additional six students received this notification subsequent to the disbursement itself. Of the 25 students, 15 also received direct loans, and 6 of these 15 did not receive letters specifying whether the loans were subsidized, unsubsidized, and/or PLUS loan funds. Questioned Costs: None Cause: UM-Dearborn experienced significant turnover in the OFAS in early 2023. In addition, there is neither a stated policy nor operating procedure that obtains voluntary consent for electronic disbursement transactions. Furthermore, for these disbursements, there is not a reliable control in place to ensure that students are notified of their awards prior to disbursements. Management was unaware of the voluntary consent requirement as noted in the E-Sign Act and thus omitted the process where the student would voluntarily consent to participate in electronic transactions from the list of terms and conditions each student is required to accept. Additionally, UM-Dearborn packaged students based on enrollment deposits, where a paid or waived deposit would proceed through to packaging and the subsequent sending of an aid offer notification. For students whose enrollment deposits were waived or delayed, UM-Dearborn’s system flagged them as unpaid, so they did not progress through to packaging and notification. Enrollment status had no bearing on funding disbursement, so disbursements were made to these students and subsequent notification was either delayed or not performed. Management did not identify this system issue until investigating the reason behind our exceptions. Effect: A lack of student consent to participate in electronic transactions may result in the transactions being denied legal effect, validity, or enforceability solely because it is in electronic form or because an electronic signature or electronic record was used in its formation. In addition, students at UMDearborn were disbursed Title IV and Direct loan funds without appropriate notification of the award, and as such, may not have had an opportunity to reject an award if they had chosen to. Recommendation: We recommend the University update its policies and procedures to ensure that it obtains student voluntary consent to participate in electronic transactions and revisit existing internal controls to ensure award notifications (including explicit description of loans, if necessary) are sent prior to the disbursement of any award funds in compliance with Federal disbursement requirements. View of Responsible Officials: Refer to Management’s Views and Corrective Action Plan for the finding described above.

Finding 2023-002 – Student Financial Assistance Disbursements Cluster: Student Financial Assistance Federal Agency: Department of Education Assistance Listing Program Title and Number: Federal Pell Grant Program – 84.063, William D. Ford Federal Direct Loan Program – 84.268 Award Identifying Number: Not Applicable Award Year: Academic Year 2022-2023 Criteria: The University is subject to compliance requirements pertaining to the disbursement of funds to students under FSA programs within the Student Financial Assistance cluster. For any students participating in electronic transactions, schools must obtain their voluntary consent to participate. Under 34 CFR 668.165 and The Electronic Signatures in Global and National Commerce Act (or the E-Sign Act), voluntary consent is required for all financial information provided or made available to student loan borrowers and for all notices and authorization requirements. In addition, for all students receiving Title IV program funds and parent Direct PLUS borrowers, a general notification must be provided, whether in writing or electronically, prior to the disbursement of funds. In accordance with 34 CFR 668.165 and 668.165(b), this notice must include the amount of funds the student can expect to receive from each FSA program, and how and when these funds will be disbursed. Additionally, the notification must be sent before any disbursements are made. If these disbursements include a Direct Loan, the notice must include which funds are subsidized loans, unsubsidized loans, and/or PLUS loans. Condition: While reviewing the underlying support for a sample of 25 students at UM-Dearborn, we noted that voluntary consent for electronic disbursement participation was not obtained for any of the students. Additionally, if these 25 students, seven did not receive an award letter notifying them of the disbursement of their funds, and an additional six students received this notification subsequent to the disbursement itself. Of the 25 students, 15 also received direct loans, and 6 of these 15 did not receive letters specifying whether the loans were subsidized, unsubsidized, and/or PLUS loan funds. Questioned Costs: None Cause: UM-Dearborn experienced significant turnover in the OFAS in early 2023. In addition, there is neither a stated policy nor operating procedure that obtains voluntary consent for electronic disbursement transactions. Furthermore, for these disbursements, there is not a reliable control in place to ensure that students are notified of their awards prior to disbursements. Management was unaware of the voluntary consent requirement as noted in the E-Sign Act and thus omitted the process where the student would voluntarily consent to participate in electronic transactions from the list of terms and conditions each student is required to accept. Additionally, UM-Dearborn packaged students based on enrollment deposits, where a paid or waived deposit would proceed through to packaging and the subsequent sending of an aid offer notification. For students whose enrollment deposits were waived or delayed, UM-Dearborn’s system flagged them as unpaid, so they did not progress through to packaging and notification. Enrollment status had no bearing on funding disbursement, so disbursements were made to these students and subsequent notification was either delayed or not performed. Management did not identify this system issue until investigating the reason behind our exceptions. Effect: A lack of student consent to participate in electronic transactions may result in the transactions being denied legal effect, validity, or enforceability solely because it is in electronic form or because an electronic signature or electronic record was used in its formation. In addition, students at UMDearborn were disbursed Title IV and Direct loan funds without appropriate notification of the award, and as such, may not have had an opportunity to reject an award if they had chosen to. Recommendation: We recommend the University update its policies and procedures to ensure that it obtains student voluntary consent to participate in electronic transactions and revisit existing internal controls to ensure award notifications (including explicit description of loans, if necessary) are sent prior to the disbursement of any award funds in compliance with Federal disbursement requirements. View of Responsible Officials: Refer to Management’s Views and Corrective Action Plan for the finding described above.

Finding 2023-001 – Student Financial Assistance Return of Title IV Funds Cluster: Student Financial Assistance Federal Agency: Department of Education Assistance Listing Program Title and Number: William D. Ford Federal Direct Loan Program – 84.268 Award Name: Federal Direct Loan Program Award Identifying Number: Not Applicable Award Year: Academic Year 2022-2023 Criteria: The University is subject to compliance requirements pertaining to the timely return of Title IV funds under Federal Student Aid (“FSA”) programs within the Student Financial Assistance cluster. Under 34 CFR 688.21 (a), if a student does not begin attendance in a payment period or period of enrollment, the institution must return the amount of payments made directly by or on behalf of the student to the institution for that payment period or period of enrollment, up to the total amount of the loan funds disbursed. Per 34 CFR 688.21 (b), the institution must return those funds as soon as possible, but no later than 30 days after the date the institution becomes aware the student will not begin attendance. The University’s policies and procedures over Title IV returns must include all relevant information on paying the returns of these funds within required due dates. Condition: Through our testing of a sample of 25 students at UM- Dearborn, we noted that for one of the five selected students who did not begin attendance, direct subsidized loan funds were not returned for 300 days. Additionally, we noted that management at UM-Dearborn did not have a control in place to ensure the timely remittance of Title IV refunds during the period from July 2022 through January 2023. Questioned Costs: None Cause: UM-Dearborn experienced significant turnover in its Office of Financial Aid and Scholarships (“OFAS”) in early fiscal 2023. During this time, there was no control in place to ensure timely submission of Title IV refunds and there was a lack of training/knowledge of staff around the Title IV refund requirements. Effect: Not having complete and accurate policies and procedures related to the return of Title IV funds and training staff on those policies and procedures, could result in late returns of federal student financial aid funds to the Department of Education. Recommendation: Management identified and remediated the policy deficiency in February 2023, as well as having fully staffed the OFAS and implemented a control to ensure timely remittance of Title IV refunds. However, the University should continually assess the operation of the updated policies and procedures in place as it relates to Title IV funds and assess the training needs of staff. This assessment should include an evaluation of not only the notification procedures, but also the process and controls around returning federal funds in line with the required due date. View of Responsible Officials: Refer to Management’s Views and Corrective Action Plan for the finding described above.

Finding 2023-002 – Student Financial Assistance Disbursements Cluster: Student Financial Assistance Federal Agency: Department of Education Assistance Listing Program Title and Number: Federal Pell Grant Program – 84.063, William D. Ford Federal Direct Loan Program – 84.268 Award Identifying Number: Not Applicable Award Year: Academic Year 2022-2023 Criteria: The University is subject to compliance requirements pertaining to the disbursement of funds to students under FSA programs within the Student Financial Assistance cluster. For any students participating in electronic transactions, schools must obtain their voluntary consent to participate. Under 34 CFR 668.165 and The Electronic Signatures in Global and National Commerce Act (or the E-Sign Act), voluntary consent is required for all financial information provided or made available to student loan borrowers and for all notices and authorization requirements. In addition, for all students receiving Title IV program funds and parent Direct PLUS borrowers, a general notification must be provided, whether in writing or electronically, prior to the disbursement of funds. In accordance with 34 CFR 668.165 and 668.165(b), this notice must include the amount of funds the student can expect to receive from each FSA program, and how and when these funds will be disbursed. Additionally, the notification must be sent before any disbursements are made. If these disbursements include a Direct Loan, the notice must include which funds are subsidized loans, unsubsidized loans, and/or PLUS loans. Condition: While reviewing the underlying support for a sample of 25 students at UM-Dearborn, we noted that voluntary consent for electronic disbursement participation was not obtained for any of the students. Additionally, if these 25 students, seven did not receive an award letter notifying them of the disbursement of their funds, and an additional six students received this notification subsequent to the disbursement itself. Of the 25 students, 15 also received direct loans, and 6 of these 15 did not receive letters specifying whether the loans were subsidized, unsubsidized, and/or PLUS loan funds. Questioned Costs: None Cause: UM-Dearborn experienced significant turnover in the OFAS in early 2023. In addition, there is neither a stated policy nor operating procedure that obtains voluntary consent for electronic disbursement transactions. Furthermore, for these disbursements, there is not a reliable control in place to ensure that students are notified of their awards prior to disbursements. Management was unaware of the voluntary consent requirement as noted in the E-Sign Act and thus omitted the process where the student would voluntarily consent to participate in electronic transactions from the list of terms and conditions each student is required to accept. Additionally, UM-Dearborn packaged students based on enrollment deposits, where a paid or waived deposit would proceed through to packaging and the subsequent sending of an aid offer notification. For students whose enrollment deposits were waived or delayed, UM-Dearborn’s system flagged them as unpaid, so they did not progress through to packaging and notification. Enrollment status had no bearing on funding disbursement, so disbursements were made to these students and subsequent notification was either delayed or not performed. Management did not identify this system issue until investigating the reason behind our exceptions. Effect: A lack of student consent to participate in electronic transactions may result in the transactions being denied legal effect, validity, or enforceability solely because it is in electronic form or because an electronic signature or electronic record was used in its formation. In addition, students at UMDearborn were disbursed Title IV and Direct loan funds without appropriate notification of the award, and as such, may not have had an opportunity to reject an award if they had chosen to. Recommendation: We recommend the University update its policies and procedures to ensure that it obtains student voluntary consent to participate in electronic transactions and revisit existing internal controls to ensure award notifications (including explicit description of loans, if necessary) are sent prior to the disbursement of any award funds in compliance with Federal disbursement requirements. View of Responsible Officials: Refer to Management’s Views and Corrective Action Plan for the finding described above.

Finding 2023-002 – Student Financial Assistance Disbursements Cluster: Student Financial Assistance Federal Agency: Department of Education Assistance Listing Program Title and Number: Federal Pell Grant Program – 84.063, William D. Ford Federal Direct Loan Program – 84.268 Award Identifying Number: Not Applicable Award Year: Academic Year 2022-2023 Criteria: The University is subject to compliance requirements pertaining to the disbursement of funds to students under FSA programs within the Student Financial Assistance cluster. For any students participating in electronic transactions, schools must obtain their voluntary consent to participate. Under 34 CFR 668.165 and The Electronic Signatures in Global and National Commerce Act (or the E-Sign Act), voluntary consent is required for all financial information provided or made available to student loan borrowers and for all notices and authorization requirements. In addition, for all students receiving Title IV program funds and parent Direct PLUS borrowers, a general notification must be provided, whether in writing or electronically, prior to the disbursement of funds. In accordance with 34 CFR 668.165 and 668.165(b), this notice must include the amount of funds the student can expect to receive from each FSA program, and how and when these funds will be disbursed. Additionally, the notification must be sent before any disbursements are made. If these disbursements include a Direct Loan, the notice must include which funds are subsidized loans, unsubsidized loans, and/or PLUS loans. Condition: While reviewing the underlying support for a sample of 25 students at UM-Dearborn, we noted that voluntary consent for electronic disbursement participation was not obtained for any of the students. Additionally, if these 25 students, seven did not receive an award letter notifying them of the disbursement of their funds, and an additional six students received this notification subsequent to the disbursement itself. Of the 25 students, 15 also received direct loans, and 6 of these 15 did not receive letters specifying whether the loans were subsidized, unsubsidized, and/or PLUS loan funds. Questioned Costs: None Cause: UM-Dearborn experienced significant turnover in the OFAS in early 2023. In addition, there is neither a stated policy nor operating procedure that obtains voluntary consent for electronic disbursement transactions. Furthermore, for these disbursements, there is not a reliable control in place to ensure that students are notified of their awards prior to disbursements. Management was unaware of the voluntary consent requirement as noted in the E-Sign Act and thus omitted the process where the student would voluntarily consent to participate in electronic transactions from the list of terms and conditions each student is required to accept. Additionally, UM-Dearborn packaged students based on enrollment deposits, where a paid or waived deposit would proceed through to packaging and the subsequent sending of an aid offer notification. For students whose enrollment deposits were waived or delayed, UM-Dearborn’s system flagged them as unpaid, so they did not progress through to packaging and notification. Enrollment status had no bearing on funding disbursement, so disbursements were made to these students and subsequent notification was either delayed or not performed. Management did not identify this system issue until investigating the reason behind our exceptions. Effect: A lack of student consent to participate in electronic transactions may result in the transactions being denied legal effect, validity, or enforceability solely because it is in electronic form or because an electronic signature or electronic record was used in its formation. In addition, students at UMDearborn were disbursed Title IV and Direct loan funds without appropriate notification of the award, and as such, may not have had an opportunity to reject an award if they had chosen to. Recommendation: We recommend the University update its policies and procedures to ensure that it obtains student voluntary consent to participate in electronic transactions and revisit existing internal controls to ensure award notifications (including explicit description of loans, if necessary) are sent prior to the disbursement of any award funds in compliance with Federal disbursement requirements. View of Responsible Officials: Refer to Management’s Views and Corrective Action Plan for the finding described above.