Finding Text
Finding No. 2024-004 Delay in Direct Loan Adjustment After Enrollment Cancellation
Federal Program
ALN 84.268 Federal Direct Student Loans Program
Name of Federal Agency
U.S. Department of Education
Category
Other matters – N. Special test Return of Title IV Funds
Significant deficiency of internal controls over compliance
Criteria
Per federal regulations (34 CFR § 685.303(b)), when a student’s enrollment status changes, such as through
withdrawal or cancellation, any disbursed Title IV aid, including Pell Grants and Direct Loans, must be adjusted
and returned to the Department of Education (DE) in a timely manner. Institutions are required to follow Return
to Title IV (R2T4) procedures to ensure that funds are correctly adjusted based on the student's enrollment
status.
Condition found
During our eligibility test, we identified a situation in which a student's enrollment was canceled after Pell and
Direct Loan funds had already been credited to the student's account. Even though the Pell Grant adjustment
and return to common origination disbursement (COD) were completed promptly, the adjustment for the Direct
Loan was made after the audit tests disclosed that the loan had not been properly adjusted and returned to the
Department of Education, as follows:
Finding
Number
Related Audit
Compliance
Requirement
Student
Identifier OPEID
Pell
Disbursed
($)
Pell
Underpayment
($)
Pell Overpayment
($)
Direct Loan
Disbursed
($)
Direct Loan
Underpayment
($)
Direct Loan
Overpayment
($)
2024-004 Eligibility Tests Student 1 1072400 $ - $ - $ - $ 5,010 $ - $ 5,010
Cause
The Pell Grant program’s financial aid officer properly reported the adjustment to the fund on a timely basis.
However, the SSFA officer responsible for the adjustment did not execute the corresponding Direct Loan
adjustment.
Effect
The failure to promptly adjust and return Direct Loan funds may result in non-compliance with Title IV
regulations. This could lead to potential penalties, the loss of institutional eligibility to participate in Title IV
programs, and incorrect reporting to the Department of Education.
Questioned cost
None. The funds were returned.
Context
One (1) out of the sixty (60) student ledgers reviewed in the eligibility test indicated that the Direct Loan enrollment cancellation adjustment was not performed in a timely manner.
Identification of a repeat finding
This is not a repeat finding from the immediate previous audit.
Recommendation
We recommend that the institution strengthen its internal controls and communication between departments responsible for managing Title IV funds to ensure timely adjustment and return of all federal funds upon changes in student enrollment status. Implementing a formal review process and automating alerts within the financial aid system can help prevent delays in future adjustments and ensure compliance with federal regulations.
Views of responsible officials and planned corrective actions
The University’s management agrees with this finding. Please refer to the corrective action plan on pages 60-63.