Finding 1123698 (2024-005)

Significant Deficiency
Requirement
N
Questioned Costs
-
Year
2024
Accepted
2025-03-31
Audit: 351580
Organization: Johnson C. Smith University (NC)
Auditor: Bdo USA PC

AI Summary

  • Core Issue: The University failed to make required disclosures for Tier One arrangements regarding FSA credit balances on its website.
  • Impacted Requirements: Non-compliance with 34 CFR 668.164 regulations for disclosing contract details and updates within specified timeframes.
  • Recommended Follow-Up: Enhance internal controls and establish clear policies to ensure all disclosures are compliant and accessible, with interdepartmental training planned by August 2025.

Finding Text

Federal Program Information: Federal Supplemental Educational Opportunity Grants (ALN: 84.007), Federal Work-Study Program (ALN: 84.033), Federal Pell Grant Program (ALN: 84.063), and Federal Direct Student Loans (ALN: 84.268) Criteria or Specific Requirement (Including Statutory, Regulatory or Other Citation): N. Special Tests and Provisions – Using a Servicer or Financial Institution to Deliver Title IV Credit Balances to a Card or Other Access Device - An institution may enter into an arrangement with a servicer or a financial institution to make a direct payment of FSA credit balances to students through electronic funds transfer to a bank account designated by a student or parent, to issue a check payment to the student or to use an access device such as a debit, demand, or smart card provided by the servicer or its financial partner. Regulations at 34 CFR 668.164(e) and (f) establish two different types of arrangements between schools and financial account providers: Tier One arrangements and Tier Two arrangements. The type of arrangement determines the provisions that are applicable to the school. A school must disclose conspicuously on its Web site the contract(s) establishing the Tier One or Tier Two arrangement, except for any portions that, if disclosed, would compromise personal privacy, proprietary information technology, or the security of information technology or of physical facilities (34 CFR 668.164(e)(2)(vi) and 668.164(f)(4)(iii)). Schools with Tier One arrangements or Tier Two arrangements above the credit balance threshold must also disclose on their Web site: (a) the total consideration for the year, monetary and non-monetary, paid or received by the parties under the terms of the contract; (b) for any year in which the school's enrolled students open 30 or more financial accounts under the arrangement, (i) the number of students who had financial accounts under the contract at any time during the most recently completed award year, and (ii) the mean and median of the actual costs incurred by those account holders. This disclosure must be updated within 60 days after the end of each award year. A school must also provide to ED an up-to-date URL for the contract for publication in a centralized database accessible to the public. Unless the school has a Tier Two arrangement under the credit balance threshold, the URL must also include the contract data described in the paragraph above (34 CFR 668.164(e)(2)(viii); 668.164(f)(4)(iii)(B); 668.164(f)(4)(v)). Condition: Certain required disclosures were not appropriately made by the University for existing Tier One arrangements. Cause: Insufficient administrative oversight and internal controls with respect to disclosure requirements for Tier One arrangements with servicers that make direct payments of FSA credit balances to students. Effect or Potential Effect: The University was not in compliance with the disclosure requirements for Tier One arrangements with servicers that make direct payments of FSA credit balances to students. Questioned Costs: None. Context: The University did not disclose in a conspicuous location on its Web site the contract establishing the Tier One arrangement. Additionally, certain required disclosures regarding activity under the contract for the award year were not made or updated within 60 days after the end of the award year. Finally, the University did not provide an updated URL for its Tier One contract to the ED as required. Identification as a Repeat Finding: No similar findings noted in the prior year. Recommendation: We recommend that the University enhance its internal controls and implement formal policies and procedures over the applicable compliance requirements to ensure that all Tier One or Tier Two arrangements entered into are properly disclosed as required. Views of Responsible Officials: The University acknowledges shortcomings in our institutional processes for managing and communicating the details of Tier One and Tier Two financial arrangements. This has been due to a combination of factors, including outdated website management practices, a lack of clear guidelines on compliance responsibilities for web content, and insufficient inter-departmental communication regarding changes in federal regulations and their implications for our disclosure practices. The University is establishing a continuous feedback loop between Financial Aid, the Business Office, and University Communications and Marketing departments to ensure that our contractual disclosures are not only compliant but also clear and accessible to our stakeholders. Enhanced communication and collaboration across these departments are pivotal for maintaining ongoing compliance and ensuring that all disclosures are managed efficiently and transparently. This proactive approach is aimed at fostering a culture of compliance and transparency throughout the University. The University will improve the accessibility and visibility of contractual disclosures on its website to ensure compliance with federal requirements. The updated URLs will be provided to the Department of Education for publication of the contract in a centralized, accessible database. In addition, in partnership with Financial Aid Services (FAS), the University will conduct comprehensive interdepartmental training sessions by August 2025 for all relevant staff, emphasizing the critical nature of compliance with federal disclosure requirements.

Categories

Student Financial Aid Internal Control / Segregation of Duties Special Tests & Provisions Matching / Level of Effort / Earmarking HUD Housing Programs

Other Findings in this Audit

  • 547245 2024-001
    Significant Deficiency
  • 547246 2024-001
    Significant Deficiency
  • 547247 2024-001
    Significant Deficiency
  • 547248 2024-002
    Significant Deficiency
  • 547249 2024-002
    Significant Deficiency
  • 547250 2024-003
    Significant Deficiency
  • 547251 2024-003
    Significant Deficiency
  • 547252 2024-003
    Significant Deficiency
  • 547253 2024-003
    Significant Deficiency
  • 547254 2024-004
    Significant Deficiency
  • 547255 2024-005
    Significant Deficiency
  • 547256 2024-005
    Significant Deficiency
  • 547257 2024-005
    Significant Deficiency
  • 547258 2024-005
    Significant Deficiency
  • 547259 2024-006
    Significant Deficiency
  • 547260 2024-006
    Significant Deficiency
  • 547261 2024-007
    Significant Deficiency
  • 547262 2024-007
    Significant Deficiency
  • 547263 2024-007
    Significant Deficiency
  • 547264 2024-008
    Material Weakness Repeat
  • 547265 2024-008
    Material Weakness Repeat
  • 547266 2024-008
    Material Weakness Repeat
  • 547267 2024-008
    Material Weakness Repeat
  • 547268 2024-008
    Material Weakness Repeat
  • 547269 2024-008
    Material Weakness Repeat
  • 547270 2024-009
    Significant Deficiency Repeat
  • 547271 2024-009
    Significant Deficiency Repeat
  • 547272 2024-010
    Significant Deficiency Repeat
  • 547273 2024-010
    Significant Deficiency Repeat
  • 547274 2024-010
    Significant Deficiency Repeat
  • 547275 2024-011
    Material Weakness Repeat
  • 547276 2024-011
    Material Weakness Repeat
  • 547277 2024-012
    Significant Deficiency Repeat
  • 547278 2024-012
    Significant Deficiency Repeat
  • 1123687 2024-001
    Significant Deficiency
  • 1123688 2024-001
    Significant Deficiency
  • 1123689 2024-001
    Significant Deficiency
  • 1123690 2024-002
    Significant Deficiency
  • 1123691 2024-002
    Significant Deficiency
  • 1123692 2024-003
    Significant Deficiency
  • 1123693 2024-003
    Significant Deficiency
  • 1123694 2024-003
    Significant Deficiency
  • 1123695 2024-003
    Significant Deficiency
  • 1123696 2024-004
    Significant Deficiency
  • 1123697 2024-005
    Significant Deficiency
  • 1123699 2024-005
    Significant Deficiency
  • 1123700 2024-005
    Significant Deficiency
  • 1123701 2024-006
    Significant Deficiency
  • 1123702 2024-006
    Significant Deficiency
  • 1123703 2024-007
    Significant Deficiency
  • 1123704 2024-007
    Significant Deficiency
  • 1123705 2024-007
    Significant Deficiency
  • 1123706 2024-008
    Material Weakness Repeat
  • 1123707 2024-008
    Material Weakness Repeat
  • 1123708 2024-008
    Material Weakness Repeat
  • 1123709 2024-008
    Material Weakness Repeat
  • 1123710 2024-008
    Material Weakness Repeat
  • 1123711 2024-008
    Material Weakness Repeat
  • 1123712 2024-009
    Significant Deficiency Repeat
  • 1123713 2024-009
    Significant Deficiency Repeat
  • 1123714 2024-010
    Significant Deficiency Repeat
  • 1123715 2024-010
    Significant Deficiency Repeat
  • 1123716 2024-010
    Significant Deficiency Repeat
  • 1123717 2024-011
    Material Weakness Repeat
  • 1123718 2024-011
    Material Weakness Repeat
  • 1123719 2024-012
    Significant Deficiency Repeat
  • 1123720 2024-012
    Significant Deficiency Repeat

Programs in Audit

ALN Program Name Expenditures
84.268 Federal Direct Student Loans $10.89M
84.063 Federal Pell Grant Program $4.74M
11.028 Connecting Minority Communities Pilot Program $2.35M
84.031 Higher Education Institutional Aid $555,668
84.007 Federal Supplemental Educational Opportunity Grants $480,658
93.243 Substance Abuse and Mental Health Services Projects of Regional and National Significance $446,604
84.042 Trio Student Support Services $441,950
84.120 Minority Science and Engineering Improvement $427,368
84.033 Federal Work-Study Program $390,521
93.317 Emerging Infections Programs $363,742
84.217 Trio McNair Post-Baccalaureate Achievement $322,726
84.047 Trio Upward Bound $256,358
47.076 Stem Education (formerly Education and Human Resources) $137,979
15.932 Preservation of Historic Structures on the Campuses of Historically Black Colleges and Universities (hbcus). $63,530
93.391 Activities to Support State, Tribal, Local and Territorial (stlt) Health Department Response to Public Health Or Healthcare Crises $51,145
93.310 Trans-Nih Research Support $48,409
45.313 Laura Bush 21st Century Librarian Program $40,928
12.598 Centers for Academic Excellence $32,974
97.062 Scientific Leadership Awards $27,918
84.335 Child Care Access Means Parents in School $23,238
17.268 H-1b Job Training Grants $20,962
97.061 Centers for Homeland Security $17,900
11.417 Sea Grant Support $14,474
54.001 Intelligence Community Centers for Academic Excellence $11,094
89.003 National Historical Publications and Records Grants $6,956
84.425 Education Stabilization Fund $4,647
93.859 Biomedical Research and Research Training $1,550