Finding Text
Audit Finding Reference Number Questioned Costs 2024 – 013 – Annual Loan Limit / PLUS Denial $10,400 Federal Program and Specific Federal Award Identification ALN Title and Number 84.268 Federal Direct Student Loans (Direct) Federal Award Year June 30, 2024 Federal Agencies U. S. Department of Education Pass-Through Entity Not applicable Criteria OMB 2 CFR Part 200, Subpart F, Compliance Supplement, Part 5 – Student Financial Assistance Programs, Eligibility, requires institutions to determine student eligibility for Title IV assistance and ensure awards are made in accordance with applicable federal requirements. Title IV regulations, 34 CFR §685.203(c), provide that dependent undergraduate students may receive additional Federal Direct Unsubsidized Loan funds only if the student's parent is unable to obtain a Direct PLUS Loan or another applicable exception applies. Institutions must maintain documentation supporting the student's eligibility for the additional unsubsidized loan amount and ensure annual loan limits are not exceeded. Students whose parents are likely to be precluded by exceptional circumstances from receiving a PLUS loan may be eligible for an unsubsidized loan beyond the base amount of $2,000. Condition and Context During my audit, I noted that four (4) of fifty (50) dependent students tested received Federal Direct Unsubsidized Loans in excess of the $2,000 additional unsubsidized loan amounts permitted under federal regulations without documentation of a parental PLUS denial. Cause ABC did not establish, implement and monitor adequate internal controls to ensure Federal Direct Loan awards complied with annual loan limits and eligibility requirements. Specifically, management did not verify that dependent students receiving additional unsubsidized loan funds had a documented Direct PLUS Loan denial or other qualifying documentation prior to awarding and disbursing the loans. Questioned Costs For purposes of this condition, I have questioned costs totaling $10,400 related to the Direct loans. Effect As a result of these deficiencies, ABC awarded Federal Direct Unsubsidized Loan funds in excess of the amounts permitted by federal regulations without maintaining documentation supporting the students' eligibility for the additional loan amounts. Consequently, the institution did not demonstrate compliance with Title IV eligibility requirements, increasing the risk that Federal Direct Loan funds were over awarded to ineligible students. This exception resulted in questioned costs of $10,400. Repeat Finding No. Recommendation I recommend that ABC strengthen its internal controls over the Federal Direct Loan awarding process by implementing procedures to ensure dependent students are awarded additional Federal Direct Unsubsidized Loan funds only when they meet the eligibility requirements prescribed by federal regulations. Management should utilize Jenzabar to identify students receiving additional unsubsidized loan funds, verify and retain documentation of Direct PLUS Loan denials or other qualifying exceptions before disbursement, establish system edits or manual review procedures to prevent awards from exceeding applicable annual loan limits, and require supervisory review of all additional unsubsidized loan awards prior to disbursement. Management’s Response The Institution concurs with this finding. Under new leadership, Arkansas Baptist College accepts the recommendation to strengthen its internal controls over the Federal Direct Loan awarding process by implementing procedures to ensure dependent students are awarded additional Federal Direct Unsubsidized Loan funds only when they meet the eligibility requirements prescribed by federal regulations. Leadership will continue to utilize Jenzabar to identify students receiving additional unsubsidized loan funds, verify and retain documentation of Direct PLUS Loan denials or other qualifying exceptions before disbursement, establish system edits or manual review procedures to prevent awards from exceeding applicable annual loan limits, and require supervisory review of all additional unsubsidized loan awards prior to disbursement.