Finding Text
Finding 2025-007 - U.S. Department of Education (ED), Student Financial Assistance Cluster - Missing Documentation of Required Entrance and Exit Counseling (significant deficiency): Information on the Federal Program: Federal Pell Grant Program, FAL No. 84. 063, June 30, 2025; Federal Supplemental Educational Opportunity Grant (FSEOG), FAL No. 84.007, June 30, 2025; Federal Work-Study Program (FWS), FAL No. 84.033, June 30, 2025; Federal Direct Student Loans, FAL No. 84.268, June 30, 2025. Criteria – Per 34 CFR § 685.304(a), An institution must ensure that a first-time Direct Loan borrower must complete entrance counseling prior to loan disbursement. Per 34 CFR § 685.304(b), An institution must ensure that a Direct Loan borrower completes exit counseling when they cease to be enrolled at least half time or graduate. Per 34 CFR § 668.24(a), institutions must maintain documentation demonstrating compliance. Condition – During testing of student loan files, we identified that two (2) of 23 students did not have documentation demonstrating completion of required entrance or exit counseling after loan disbursement. Despite the missing of documentation, these students received Direct Loan funds without evidence that federally required counseling was completed. Cause – The exception appears to have resulted from lack of a formal tracking process to verify completion of entrance and exit counseling, failure to reconcile COD counseling completion reports with student files, and insufficient internal controls to prevent loan disbursement or student separation processing without required counseling documentation. Effect – The institution disbursed Direct Loan funds without verifying required counseling. Students may not have received critical information about loan terms, repayment obligations, and borrower rights and responsibilities. The weakness increases risk of improper loan administration and may impact the institution’s administrative capability under 34 CFR § 668.16. Questioned Costs – $0 Perspective – Entrance and exit counseling are fundamental borrower protection require-ments under the Direct Loan Program. Missing documentation in 9% of files (two (2) out of 23) indicates a systemic oversight issue, not an isolated occurrence. The Department of Education expects institutions to actively verify and retain evidence that counseling has been completed before disbursement and at separation. Repeat Finding – No Auditor’s Recommendation – The College should establish and implement comprehensive policies and procedures governing entrance and exit counseling for all borrowers by implementing counseling verification controls, perform regular counseling report reconciliation and retain documentation in student files. View of Responsible Officials – The institution is aware of this finding and has implemented a more stringent process to prevent this from recurring.