Audit 379949

Criteria: Institutions placed under the Heightened Cash Monitoring 1 (HCMl) payment method are required to first disburse funds to students or apply them to student accounts using institutional funds before requesting reimbursement from the U.S. Department of Education. The Federal Student Aid (FSA) Handbook, Volume 4, Chapter 2, outlines that schools under HCMl may not draw funds in advance of disbursing Title IV aid to students. Condition: During testing of the Pell Grant Program, RBG noted that the Organization drew down Pell funds using the Advance Payment method rather than the HCMl reimbursement method required by the U.S. Department of Education. Specifically, the Organization initiated drawdowns of Pell funds prior to disbursing those funds to students. Effect: By not following the prescribed HCMl reimbursement process, the Organization was not in compliance with the Cash Management requirements of the Uniform Guidance and the FSA Handbook. This deficiency represents a significant deficiency in internal control over compliance and an instance of noncompliance with program requirements. Cause: Organization staff misunderstood the payment method requirements applicable under the Heightened Cash Monitoring 1 designation. Management believed the procedures under the Advance Payment method continued to apply. Questioned costs: None noted Context: Of 20 student disbursements tested, 19 were not compliant with HCMl requirements. For all 19 instances, the GS drawdown occurred prior to the disbursement of funds to students, while the Organization was under the HCMl payment restriction. The one compliant instance occurred after June 30, 2025, when the HCMl restriction was lifted by the U.S. Department of Education. Repeat Finding: No