Finding 400119 (2023-003)

Reference Number: 2023-003 Compliance Requirement: Activities Allowed or Unallowed Type of Finding: Internal Control and Compliance Internal Control Impact: Significant Deficiency Compliance Impact: Nonmaterial Noncompliance ALN Number and Title: Student Financial Assistance Cluster 84.007 – Federal Supplemental Educational Opportunity Grants 84.033 – Federal Work-Study Program 84.063 – Federal Pell Grants 84.268 – Federal Direct Student Loans 93.925 – Scholarships for Health Professions Students from Disadvantaged Backgrounds Federal Awarding Agency: U.S. Department of Education Federal Award Numbers: P007A220046 P033A220406 P063P221041 P268K231041 5 T08HP39331-03-00 Pass-through Entity: None Pass-through Award Number: None Questioned Costs: None The University failed to reconcile the amounts recorded for Federal Pell Grants on the Department of Education systems with amounts recorded for Federal Pell Grants in the University’s general ledger. Finding Title 34 of the Code of Federal Regulations (CFR) 668 Subpart L – Financial Responsibility and the Federal Student Aid (FSA) Handbook discuss an institution’s financial responsibility and the required reconciliation process. 34 CFR 668.171(a) states, “To begin and continue to participate in any title IV, HEA program, an institution must demonstrate to the Secretary that it is financially responsible…”. The FSA Handbook states, “The cash management regulations establish rules and procedures that a school must follow in requesting, managing, and returning FSA program funds. Under the cash management regulations, a school has a fiduciary responsibility to have a system in place to: safeguard FSA funds; ensure FSA funds are used only for the purposes intended; act on the student’s behalf to repay a student’s FSA education loan debt when the school is unable to pay a credit balance directly to the student; and return to the Department any FSA funds that cannot be used as intended.” A key component of the system described is a reconciliation. The U.S. Department of Education has three systems that are involved in the reconciliation process. The Common Origination and Disbursement System (COD) is the system used for processing, storing, and reconciling certain FSA programs. The G5 System is a grants management system. Among other things, the system is used for awards and payments. Finally, the National Student Loan Data System (NSLDS) is the Department’s central database for student aid. NSLDS receives data from schools, guaranty agencies, the Direct Loan program, and other Department of Education programs. The FSA Handbook states, “Title IV reconciliation is the process by which a school reviews and compares Title IV aid (grants, loans, and Campus-Based aid) recorded on the Department’s systems (COD, G5, NSLDS) with the information in the school’s internal records. Through reconciliation, disbursement and cash discrepancies are identified and resolved in a timely manner to ensure the school meets all regulatory requirements. Schools must document their reconciliation process and retain any reconciliation documentation for audit and review purposes.” Audit tests revealed the University failed to adequately document any required reconciliations for the Federal Pell Grant Program. Due to this, we could not verify that the University performed required Pell Grant reconciliations. Recommendation The University should design and implement internal controls to ensure that the amounts recorded for student Title IV aid on the Department of Education systems (COD, G5, NSDLS) are reconciled with amounts recorded for student Title IV aid in the University's general ledger. Views of Responsible Officials of the Auditee Management agrees with this finding and will take corrective actions.