Finding Text
Criteria: Institutions are required to report all Direct Loan (DL) disbursements and submit required records to the Department of Education?s Common Origination and Disbursement (COD) which is a web-based system for processing, storing, and reconciling DL financial aid data. Each month, the COD provides institutions with a School Account Statement (SAS) data file which consists of a Cash Summary, Cash Detail, and (optional at the request of the school) Loan Detail records. The school is required to reconcile these files to the Institution?s financial records (?DL Reconciliations?). The University completed a reconciliation at the student level for FY20 and FY21 as part of the audit process and noted $708,695 and $561,172 of direct loan funds that had been posted to student accounts but, did not appear on the student?s COD indicating that a total of $1,269,867 had not been properly processed by the University through the Department of Education and as such, the University had not received these funds to apply to the amounts awarded to student accounts (reimburse the University). To the extent that these issues were corrected, they were reported in the current year SEFA. However, significant issues were still encountered during the FY22 financial statement audit with reconciling direct student loans that resulted in audit adjustments and a passed / unrecorded audit adjustment for the amount that remained unreconciled at the end of FY22 and its financial statement audit completion. Condition: We tested the University?s monthly DL Reconciliation workpaper and noted that the design of the reconciliation process was not sufficient to determine reconciling items at a student level. Cause: The design of the University?s DL Reconciliations appeared to not include determining reconciling items at the student level. Effect: Due to the insufficient DL Reconciliation process, it is likely that the Institution could potentially miss detecting and correcting certain issues or instances of noncompliance in a timely manner. Questioned costs: $-0- Perspective information: The Department of Education requires institutions to reconcile the Direct Loan Program monthly. Identification of repeat findings: Yes, see FA-2021-001. Recommendation: We recommend that the DL Reconciliation process include cooperation between the business and financial aid offices given the financial aid office is the source of information reported to and from COD, and the business office is responsible for the drawdown of funds from the Department of Education?s G5 website as well as for disbursing DL funds to student accounts. At a minimum, the frequency of the DL Reconciliation must be monthly to meet compliance requirements. The financial aid and business offices should first perform an internal reconciliation of their records, identifying any reconciling items at a detailed (student) level. Once this internal reconciliation is complete, the University should perform the external reconciliation to COD?s records via the SAS data file, identifying any reconciling items at a detailed level. Reconciling items from both the internal and external reconciliations should be evaluated for items that require corrective action(s). Corrective actions should be taken timely to correct any issues identified by this process. Finally, cumulative data in G5, such as net drawdowns and net accepted and posted disbursements, should be incorporated into the reconciliation to ensure the University is in compliance with Department of Education?s Cash Management requirements. Further, as a result of the University performing a complete reconciliation for FY20 and FY21, the University should request that the Department of Education provide access to these years that are currently closed so that they can make the corrections required to complete the processing of the student awards not previously properly processed. Views of responsible officials: The University should retain these reconciliations, including all supporting documentation, for purposes of internal and/or external examination. See Client?s Corrective Action Plan.