Finding Text
Finding 2022-002 Federal program: Student Financial Assistance Cluster AL #: 84.038 Award Year: 2021/2022 Type of finding: Deficiency and Noncompliance Compliance requirement: Special Tests - Perkins Loan Recordkeeping and Record Retention Criteria: Under 34 CFR 674.19.(e), institutions must retain original or true and exact copies of promissory and master promissory notes (MPN), repayment records, and cancellation and deferment requests for each Perkins loan (including Defense, NDSL) made. Additionally, an institution shall retain repayment records, including cancellation and deferment requests for at least three years from the date on which a loan is assigned to the secretary, canceled, or repaid. An institution shall retain disbursement and electronic authentication and signature records for each loan made using an MPN for at least three years from the date the loan is canceled, repaid, or otherwise satisfied. Condition: The original MPN was not retained for one of the 16 judgmentally selected loans that were assigned in the previous three fiscal years and current fiscal year. The University had already identified nine missing MPNs in their loan assignment process, an additional eight to our one finding. We then expanded our sample, excluding these eight known missing MPNs, and tested an additional eight selections, noting no additional errors. Questioned costs: None Context: The University failed to maintain true and exact copies of MPNs. Cause: The University did not have a policy in place prior to 2005 when they began using a third-party servicer to ensure MPNs were retained for students. Effect: Not maintaining the original MPN for a student could cause problems with verifying the existence of the associated loan and any legally required repayment. This could also cause the University to purchase the loan. Repeat finding: No. Recommendations: We recommend that the University have controls in place to ensure that all required documentation is retained in compliance with Perkins Loan requirements. Views of responsible officials: The current policy requires a master promissory note (MPN) to be stored in a locked, fireproof safe. The University acknowledges there may have been gaps in internal controls during the 1970s and 1980s resulting in the missing MPN. Since 2005, MPNs are electronically signed and maintained by ECSI, the third-party servicer. During 2022, Trinity submitted 154 loans to the Department of Education (DOE) for assignment. While the University did not have an MPN for nine of these loans, the DOE accepted all but one loan based on additional documentation provided in lieu of an MPN. To determine potential future exposure, the University reviewed paper files for the 25 borrowers with loans disbursed prior to 2005 and found only three additional borrowers with a missing MPN. If the University were required to purchase these loans from the DOE, the estimated purchase amount would be less than $30,000.