Audit 379835

Special Tests and Provisions - Return of Title IV Funds Federal Program Federal Pell Grant Program (PELL), ALN. 84.063 Name of Federal Agency U.S. Department of Education Pass-through Entity N/A Category Significant Deficiency Compliance / Internal control Compliance Requirement Special test and provisions – Return of Title VI Funds Criteria 1. 34 CFR Section 668.173 (b) states that an institution returns unearned Title IV, HEA program funds timely if; (1) the institution deposits or transfers the funds into the bank account it maintains under §668.163 no later than forty-five (45) days after the date it determines that the student withdrew; (2) the institution initiates an electronic fund transfer (EFT) no later than forty-five (45) days after the date it determines that the student withdrew; (3) the institution initiates an electronic transaction, no later than forty five (45) days after the date it determines that the student withdrew, that informs a FFEL lender to adjust the borrower's loan account for the amount returned; or (4) the institution issues a check no later than forty-five (45) days after the date it determines that the student withdrew. 2. DCL GEN-04-03 Revised, November 2004, indicates “Treatment of a student who fails to receive a passing grade in any class”. a. An institution must have a procedure for determining whether a Title IV aid recipient who began attendance during a period completed the period or should be treated as a withdrawal. We do not require an institution to use a specific procedure for making this determination. i. If a student earns a passing grade in at least one course offered over an entire period, the institution may make the presumption that the student completed the course and, thus, completed the period. ii. No passing grades: If a student who began attendance and has not officially withdrawn fails to earn a passing grade in at least one course offered over an entire period, the institution must assume, for Title IV purposes, that the student has unofficially withdrawn, unless the institution can document that the student completed the period. iii. In this circumstance, if the institution determines that the student does have aid that could have been disbursed for the period and the student does not have any passing or “earned F” grades, the institution must perform the R2T4 calculation using the student’s documented withdrawal date and make any applicable PWDs. Finally, if the school does not have any completion percentage requirements for an incomplete grade, (or allows an incomplete grade to be assigned to a student without ensuring that the student completed at least 60% of the period), then the school must perform an R2T4 calculation. Condition Found 1. In testing compliance with the return of Title IV funds requirement, we selected a sample of ten (10) students’ withdrawal. During our examination, we noted one (1) instance, which based on the regulation previously indicated, the return of Title IV funds as calculated by the Institution was performed after the required 45 days. 2. In testing compliance with the Return of Title IV Funds (R2T4) requirements, we selected a sample of ten (10) students who received all failing and/or incomplete grades to determine whether each student completed the period. During our evaluation, we noted the following exceptions: a. We found two (2) instances in where the student began attendance but has not officially withdrawn and failed to earn a passing grade in one course taken during the payment period. Upon reviewing the academic records, we found no evidence of academic activity to indicate that the student completed the period. b. Although the institution subsequently performed an R2T4 calculation, the Title IV funds were returned late. Cause 1. The delay was due to deficiencies in internal control and follow-up procedures to the disbursement of credit balance to students. In the observed cases, the administrative office did not maintain sufficient evidence demonstrating timely monitoring of the process nor the existence of a formal record of disbursement dates. 2. The Assessment Office of the institution requested professors for a report entitled "Low academic achievement", where every quarter the professor had to document why the student obtains D or F in his course. The institution acknowledges that there are no detailed reports and that it indicates the time during which the student has been participating in their class. Unfortunately, in the reports submitted by the faculty, the data of some students were not found. As usual at the institution, the faculty is not asked to deliver a copy of their grade records. Effect As a result of this condition, the USDE may issue warnings and/or impose penalties to the University or issue warning as to incur in a probation status. It also could deprive other needy students of federal fund’s needs. Context 1. Of the sixty-eight (68) cases of withdrawal, we examined ten (10) and determined that one (1) case that the Return of Title IV was returned late. 2. Of a population of 103 participants of the Student Financial Aid Program with no passing grades, we examined ten (10) participants of PELL and in two (2) cases return of refund procedure were performed late. Identification of a Repeat Finding 1. Condition one is not a repeat finding from the immediate previous audit. 2. Condition two is a repeat finding from the immediate previous audit. Questioned Costs None Recommendation 1. In cases where students have a credit balance in their account and payment is made by check, it is recommended that the institution notify the student via email, so that they are aware that they will receive a surplus of financial aid to cover their study needs. Likewise, it is recommended that the institution review and strengthen its administrative, reconciliation, and disbursement procedures in order to ensure that surpluses are returned within the regulatory period of fourteen (14) calendar days, as established. 2. We recommend Atlantic University to enforce the procedures for students failing grades and to ascertain that the return of Title IV funds procedures is properly followed and ascertain compliance. Views of Responsible Officials of the Auditee and Planned Corrective Actions Management of the University agrees with this finding. Please refer to the corrective action plan on page 41.