Finding Text
Criteria or specific requirement: Code of Federal Regulations 2 CFR 200.303 Title 34, Subtitle B, Chapter VI, Part 674.19 requires that in administering its Federal Perkins Loan program, an institution shall establish and maintain an internal control system of checks and balances that ensures that no office can both authorize payments and disburse funds to students. When an institution uses a third-party servicer for its Perkins Loan program, the institution must perform due diligence to ensure that the third-party service is in compliance with the requirements for the functions the third-party servicer is performing for the institution. Such due diligence could include obtaining and reviewing the third-party servicer’s most recent Title IV compliance audit.
Condition: The College utilizes a third-party service provider for Perkins Loan servicing. Federal regulations require the institution to perform due diligence on the third-party servicer to ensure they are following federal regulations. The College did not perform their due diligence for fiscal year 2023.
Context: The due diligence typically performed by the College is the review of the third-party servicer’s compliance report. However, the third-party servicer was delated in having this report issued. The College did not have an alternate plan for performing due diligence over the third-party servicer.
Questioned costs: None.
Cause: The third-party servicer did not have their Title IV compliance audit report completed for the year ending June 30, 2023, so that the College could perform their required due diligence on the third-party servicer and the College did not have an alternate plan established.
Effect: The College did not perform due diligence to ensure that the third-party service is in compliance with the requirements for the functions the third-party servicer is performing for the institution.
Repeat Finding: No
Recommendation: We recommend the College implement a procedure with the third-party servicer to ensure that their Title IV compliance report is completed timely or develop other due diligence procedures to meet the federal regulations.
Views of responsible officials and management’s response: There is no disagreement with the audit finding.