Finding Text
Finding 2025-02 - U.S. Department of Education (ED), Title IV Student Financial Aid Programs - ISIR Comment Code Not Resolved Prior to Disbursement (significant deficiency): Information on the federal program: Federal Direct Student Loans, FAL No. 84.268, June 30, 2025; Federal Pell Grant Program, FAL No. 84. 063, June 30, 2025; Federal Supplemental Educational Opportunity Grant, FAL No. 84.007, June 30, 2025; Federal Work-Study Program, FAL No. 84.033, June 30, 2025. Criteria – The Higher Education Act (HEA) § 480(d)(8) states that a student may be considered independent if the student is determined to be an unaccompanied homeless youth or at risk of homelessness. Institutions must collect and retain documentation supporting the determination. 34 CFR § 668.2 – Defines an unaccompanied homeless youth and establishes eligibility criteria for independent student status under Title IV. 34 CFR § 668.16(f) – Institutions must demonstrate the administrative capability to properly administer Title IV programs, including ensuring that all eligibility and dependency determinations are resolved and documented prior to disbursing Title IV funds. 34 CFR § 668.54(a)(3) and § 668.55(a) – Institutions must obtain and review documentation necessary to resolve information identified by the Secretary, including ISIR comment codes and rejects, before awarding or disbursing Title IV aid. Federal Student Aid Handbook – For ISIRs with Comment Code 325 (Reject 01), the Financial Aid Administrator (FAA) must collect documentation from an authorized entity or make a documented FAA determination of the student’s unaccompanied homeless youth status before Title IV funds may be disbursed. Condition – Based on documentation provided for the 2024–2025 award year, the College disbursed Title IV funds to a student whose ISIR contained Comment Code 325, indicating that the student’s unaccompanied homeless youth status required resolution prior to awarding and disbursing aid. The College did not provide documentation from an authorized entity, nor evidence of a documented Financial Aid Administrator case-by-case determination, to support the student’s independent status. As a result, the student’s dependency status remained unresolved at the time Title IV funds were disbursed. Cause – The condition appears to have resulted from failure to identify ISIR Comment Code 325 as a reject code requiring resolution prior to disbursement and insufficient internal controls to prevent disbursement of Title IV funds when dependency status determinations remain unresolved. Effect – Title IV funds were disbursed without confirmation of student eligibility, resulting in $19,895 in questioned costs. Disbursing aid prior to resolving a required homeless youth determination places the College out of compliance with federal eligibility, verification, and administrative capability requirements. The College may be required to return improperly disbursed funds to the Department of Education. Questioned Costs - $19,895 PELL SUBSIDIZED UNSUBSIDIZED $7,395 $5,500 $7,000 Perspective – ISIR Comment Code 325 represents a mandatory eligibility determination related to a student’s dependency status. Because dependency status directly affects Title IV eligibility and award calculations, failure to resolve this comment code prior to disbursement constitutes a significant compliance deficiency. In this instance, one (1) out of sixty (60) students tested (1.7%) was awarded and disbursed Title IV funds without resolution of ISIR Comment Code 325, which required documentation of unaccompanied homeless youth status or a documented Financial Aid Administrator determination prior to disbursement. Repeat Finding – No Auditor’s Recommendation – We recommend that the College strengthen its procedures for identifying and resolving ISIR Comment Codes related to unaccompanied homeless youth determinations. Specifically, the College should: a. Establish written procedures for homeless youth determinations. b. Require documentation prior to disbursement. c. Implement a secondary review process. d. Enhance system controls and monitoring. Management’s Response – Although a recommendation was noted, the Financial Aid Management System (FAMS) was not programmed as expected for the 2024–2025 FAFSA application year. The issue was anticipated to be addressed by the third-party vendor through system updates; however, because of the programming oversight, no system flag was generated to request self-supporting documentation or validation of a student’s homelessness or risk of homelessness. In addition, the Department of Education’s FAFSA application did not generate a comment code requiring further action on the student’s record. The Institution has since worked with its third-party vendor to correct the programming oversight to ensure that required documentation is requested for students who indicate homelessness or risk of homelessness. Additionally, at the direction of the FAMS vendor, the Financial Aid Office implemented an internal edit to ensure a system flag alerts staff when documentation is required to resolve such cases. With these corrections, the conditions that caused the error have been addressed. Responsible Officials - The Financial Aid Office under the direction of the Vice President of Student Affairs plans to have the finding resolved by its next fiscal year end audit (between July – October 2026). To ensure ongoing compliance, the Financial Aid Office will monitor student records for appropriate flags and required documentation. The College is aware of the need to review and mitigate compliance risks in this area and will use the described corrective action plan to reduce those risks and eliminate the potential for future audit findings. View of Responsible Officials – The College agrees with the finding.