Finding 1731 (2023-001)

Finding 2023‐001 – Special Tests and Provisions – Disbursements Information on the federal program: Federal awarding agency: United States Department of Education (ED) Federal Program: Student Financial Assistance Cluster: Federal Direct Student Loans, Assistance Listing No. 84.268 Award years: 2022‐2023 Criteria or specific requirement (including statutory, regulatory or other citation): 2 CFR 200.303 requires that a non-federal entity must (a) establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States and the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The institution must notify the student, or parent, in writing of (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 loan proceeds returned to the holder of that loan or the TEACH Grant payments returned to ED; 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, TEACH Grant, or TEACH Grant disbursement. The notification requirement for loan funds applies only if the funds are disbursed by EFT payment or master check (34 CFR 668.165). Institutions that implement an affirmative confirmation process (as described in 34 CFR 668.165 (a)(6)(i)) must make this notification to the student or parent no earlier than 30 days before, and no later than 30 days after, crediting the student’s account at the institution with Direct Loan or TEACH Grants. Institutions that do not implement an affirmative confirmation process must notify a student no earlier than 30 days before, but no later than seven days after, crediting the student’s account and must give the student 30 days (instead of 14) to cancel all or part of the loan. Condition: St. Mary’s University’s (the University) relies on a tool to automatically send out notifications to students receiving Federal Direct Student Loans (direct loans). The code within the tool did not have appropriate parameters to initiate a notification for all date ranges of disbursements during the fiscal year. Questioned costs: $0 Context: EY randomly selected and tested 40 students receiving direct loans totaling $686,677 during 2022-2023 from a population of 1,878 students receiving direct loans totaling $38,371,477. EY noted one of the 40 students did not receive a loan notification from the University. During our testing of disbursements, specifically loan notifications, we noted that the tool used to send notifications after a direct loan was generated was not coded properly. EY noted that the student who did not receive a loan notification received a direct loan disbursement in August 2022 for the 2021-2022 aid year. The University indicated that the loan notification was not sent by the tool due to the direct loan disbursement occurring in late Summer 2022 and the tool’s code not being designed to identify the late Summer 2022 loans that originated during the aid year 2021-2022 since the new aid year of 2022-2023 had begun. Effect: If the tool’s programming for direct loan notifications to students is not coded properly, loan notifications may not be sent to students, as required. Cause: The University’s tool used to automate the direct loan notification process was coded inappropriately. Identification as a repeat finding, if applicable: N/A Recommendation: The University should periodically review the code within the tool to ensure it is accurate and will appropriately generate loan notifications to all students receiving direct loans, as required by federal regulations. Views of responsible officials and planned corrective actions: Management agrees with the finding and has developed a plan to correct the finding.