Finding Text
Compliance Area Special Tests and Provisions – Direct Loan Requirements Criteria or Requirement Pursuant to 34 CFR § 685.304(a) and the Federal Student Aid Handbook, Volume 8 (Direct Loans), Chapter 2, a borrower receiving a Direct Subsidized or Direct Unsubsidized Loan must complete entrance counseling prior to the first disbursement of the loan unless the borrower has previously completed entrance counseling for a prior loan period at the University. Condition Found, Including Perspective During our testing of 40 Direct Loan recipients, we noted that for one student selected for testing, the University did not maintain documentation evidencing that entrance counseling was completed prior to the first Direct Loan disbursement. No evidence of completion was observed within the student information system or the student's electronic file prior to the disbursement date. Possible Asserted Cause and Effect Based on discussions with management, the University makes entrance counseling available to students through the U.S. Department of Education's online platform; however, procedures were not in place to verify and document completion prior to the first disbursement of Direct Loan funds. As a result, Direct Loan funds were disbursed without documented evidence that the borrower satisfied entrance counseling requirements as required by federal regulations. Questioned Costs None. Statistical Validity Our sample of 40 students was selected using a nonstatistical sampling method. Therefore, results of our testing cannot be projected to the entire population. Identification of Whether the Audit Finding is a Repeat of a Finding in the Immediate Prior Audit Finding 2025-001 is not a repeat of a finding from the immediate prior audit. Recommendation We recommend the University implement procedures to verify and document completion of entrance counseling prior to the first Direct Loan disbursement. Controls should ensure that documentation of completion is retained in the student file or that system controls prevent disbursement until entrance counseling requirements are satisfied.