Finding Text
Finding 2024-001: Excess Cash – Student Financial Aid
Federal Agency: U.S. Department of Education
Program Name: Student Financial Assistance Cluster, Federal Direct Student Loans
Assistance Listing Number: 84.268
Award Year: June 1, 2023 – May 31, 2024
Program Expenditures: $22,734,225
Questioned Costs: None
Criteria: Uniform Guidance for the Department of Education (34 CFR 668.166) states the Secretary considers excess cash to be any amount of title IV, HEA program funds, other than Federal Perkins Loan program funds, that an institution does not disburse to students by the end of the third business day following the date the institution: (1) received those funds from the Secretary; or (2) deposited or transferred to its depository account previously disbursed title IV, HEA program funds, such as those resulting from awards adjustments, recoveries, or cancellations. An institution may maintain for up to seven days an amount of excess cash that does not exceed one percent of the total amount of funds the institution drew down in the prior award year. The institution must return immediately to the Secretary any amount of excess cash over the one-percent tolerance and any amount of excess cash remaining in its account after the seven-day tolerance period.
Uniform Guidance (2 CFR 200.303) requires nonfederal entities receiving Federal awards establish and maintain internal controls designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure excess cash is properly handled.
Condition: Pacific Oaks Education Corporation (the College) had one instance of excess cash for the Federal Direct Student Loan program. During our cash management testing, we identified the College had excess cash for the Direct Loan program ranging from $1,335,590 to $4,774,182 for the period from September 6, 2023 to September 13, 2023. For that period, the excess cash exceeded one percent of total prior year drawdowns and amounts were not returned within the three business-day period.
Cause: College officials explained that the excess cash resulted from the College’s practice of drawing funds early to ensure timely disbursement of stipends to students. The drawdown occurred prior to completing the reconciliation of the award amounts. As a result, while the funds were drawn, they were not posted to the students' ledgers within the required three-day period, leading to the excess cash being held for a longer duration than allowed.
Effect: Excess cash is noncompliance with Federal regulations and could result in heightened monitoring by the U.S. Department of Education.
Questioned Costs: None
Context: For the period of September 6, 2023 to September 13, 2023, the College had excess cash in the amount ranging from $1,335,590 to $4,774,182. The College held excess cash for a period of 5 business days.
Repeat Finding: No.
Recommendation: We recommend the College strengthen internal controls around cash management to prevent or timely correct excess cash instances.
Views of Responsible Officials: Management agrees with the finding. Please see corrective action plan attached.