Finding Text
Finding 2025-001 – Direct Loan Disbursement Notifications Repeat Finding: No Federal Program Title – U.S. Department of Education Student Financial Assistance Cluster Federal Direct Student Loans: 84.268 Federal Award Year 2024-2025 Award Number: P268K Condition During our testing over direct loan disbursement notifications, we found that for twenty out of twenty students tested, City Colleges could not provide evidence that notifications were sent within the required timeframe informing the student, or parent, that a credit will be made to the student’s account for a direct loan disbursement. While City Colleges demonstrated that its system was configured to automatically send notification letters and confirmed that notifications were issued, City Colleges could not provide documentation showing the specific date each notification was sent in relation to the loan disbursement. Criteria 34 CFR 668.165 requires institutions who credit a student's account with a direct loan disbursement must notify the student, or parent, in writing of the (1) the date and amount of the disbursement; (2) the student's right, or parent's right, to cancel all or a portion of that loan or loan disbursement and have the proceeds returned..; and (3) the procedure and time by which the student or parent must notify the institution that he or she wishes to cancel the loan. 2 CFR Section 200.303 requires 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 in place to ensure there is a sufficient audit trail of direct loan disbursement notifications. Questioned Costs None. Cause City Colleges’ system is designed to record the date notifications are sent to students; however, it does not retain a copy of the actual notification content that was transmitted. Context Frequent. Twenty out of twenty students (100%) selected for testing. Effect Failure to maintain documentation of the notifications sent to students regarding their direct loan disbursements may prevent students from exercising their right to cancel awards within the allowable timeframe. This constitutes noncompliance with federal regulations and could jeopardize City Colleges’ eligibility for future funding. Recommendation We recommend City Colleges enhance its system to retain both the date of the notification and a copy of the actual notification sent to students. Views of responsible officials We agree with this finding. See corrective action plan.