Finding Text
2022-001 Noncompliance: Special Tests and Provisions ? Disbursements to or on Behalf of Students Federal Program: Student Financial Assistance Cluster: Federal Direct Loan Program (ALN 84.268) Federal Agency: U.S. Department of Education Federal Award Year: July 1, 2021 to June 30, 2022 Statistically Valid Sample: No, and it was not intended to be Criteria: 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 and Context: We tested a sample of 40 disbursements to students who received funds from the Federal Direct Loan Program in fiscal year 2022. For three samples selected, the University did not notify the student or parent as required by 34 CFR 668.165. The notifications for these three samples were sent within 11-18 days after the required 30-day timeframe. Cause and Effect/Potential Effect The notification in accordance with 34 CFR 668.165 provided the borrower with the date and amount of the disbursement, the borrower?s right to cancel the loan, and date by which the borrower must notify the University if they want to cancel the loan. As a result of competing priorities during the Fall 2021 semester, the established process of internal controls was not followed, resulting in the delayed notice to students. The University became aware of the issue during December 2021 and corrected the matter before the Spring 2022 semester. Questioned Costs There are no known questioned costs related to this finding. Repeat Finding No. Recommendation We recommend that management review its current policies and procedures to notify students and parents regarding loan disbursement to ensure timely notification of disbursements in accordance with the compliance requirement. Views of Responsible Officials The Financial Aid directors have been on a path to automate a number of processes, including the Notification of Federal Loan Disbursement. To assist in streamlining our processes and improving the overall student experience, the University has engaged the services of an outside consultant, CampusWorks, on a two-year contract, which commenced on October 18, 2022, to work with relevant Pace personnel on Enterprise Systems modernization. Although this delay in notification is for an isolated time period, the Notification of Disbursement process has been automated as of February 23, 2023, and notifications will be released systematically on a regular schedule, in line with federal guidelines.