Finding Text
FINDING 2022-001 Subject: Student Financial Assistance Cluster - Special Tests and Provisions - Return of Title IV Funds Federal Agency: Department of Education Federal Programs: Federal Supplemental Educational Opportunity Grants, Federal Pell Grant, Federal Direct Student Loans Assistance Listings Numbers: 84.007, 84.063, 84.268 Federal Award Number and Year (or Other Identifying Number): FY 2022 Compliance Requirement: Special Tests and Provisions - Return of Title IV Funds Audit Findings: Material Weakness, Other Matters Condition and Context The College had not designed, nor implemented an effective internal control system to ensure compliance with requirements related to the Special Tests and Provisions - Return of Title IV Funds compliance requirement. For 2 of 25 (8 percent) return of Title IV funds tested, the amount returned to the Department of Education was incorrect. The College completed an initial return of Title IV funds and properly posted the full amount of aid to be returned to the students' accounts. During an internal review, the College discovered an error in the initial calculation and therefore calculated a new return of Title IV funds. When the subsequent calculation was performed, the College once again posted the total amount of aid to be returned to each student's account. As a result, the College incorrectly returned too much in Title IV funds to the Department of Education in the amounts of $113 and $546 for the first and second errors, respectively. In addition, this caused both students' accounts to reflect a balance due to the College that should not have been owed. The lack of internal controls and noncompliance were systemic issues throughout the audit period; however, these were isolated to students for which a corrective calculation for return of Title IV funds was performed. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 34 CFR 668.22(g) states in part: "Return of unearned aid, responsibility of the institution. (1) The institution must return, in the order specified in paragraph (i) of this section, the lesser of ? (i) (ii) Cause The total amount of unearned title IV assistance to be returned as calculated under paragraph (e)(4) of this section; or An amount equal to the total institutional charges incurred by the student for the payment period or period of enrollment multiplied by the percentage of title IV grant or loan assistance that has not been earned by the student, as described in paragraph (e)(3) of this section. . . ." Management had not developed a system of internal control that would have ensured procedures were in place in order to comply with the provisions of federal statutes, regulations, and the terms and conditions of the federal award in relation to the Special Tests and Provisions - Return of Title IV Funds compliance requirement. The College should have considered the original amount of aid to be returned that had already been posted to each student's account. The College should have posted the additional amount of aid to be returned to the students' accounts based upon the net difference between the original calculation and the corrective calculation performed for each student. Effect The failure to design and implement an effective internal control system enabled material noncompliance to remain undetected. As a result, the College returned too much in Title IV funds to the Department of Education as outlined in the Condition and Context. Questioned Costs There were no questioned costs identified. Recommendation We recommended the College's management design and implement a system of internal control related to procedures for calculating the return of Title IV funds to ensure appropriate amounts are returned to the Department of Education and are posted to students' accounts. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report. Auditor's Response It is the College's responsibility to administer its student financial assistance programs in a manner that both complies with applicable federal regulations and guidelines as well as ensures that, when necessary, the appropriate amount of unearned financial assistance is returned to the Title IV programs. 34 CFR 668.22(g) states in part: "Return of unearned aid, responsibility of the institution. (1) The institution must return, in the order specified in paragraph (i) of this section, the lesser of ? (i) (ii) Cause The total amount of unearned title IV assistance to be returned as calculated under paragraph (e)(4) of this section; or An amount equal to the total institutional charges incurred by the student for the payment period or period of enrollment multiplied by the percentage of title IV grant or loan assistance that has not been earned by the student, as described in paragraph (e)(3) of this section. . . ." Management had not developed a system of internal control that would have ensured procedures were in place in order to comply with the provisions of federal statutes, regulations, and the terms and conditions of the federal award in relation to the Special Tests and Provisions - Return of Title IV Funds compliance requirement. The College should have considered the original amount of aid to be returned that had already been posted to each student's account. The College should have posted the additional amount of aid to be returned to the students' accounts based upon the net difference between the original calculation and the corrective calculation performed for each student. Effect The failure to design and implement an effective internal control system enabled material noncompliance to remain undetected. As a result, the College returned too much in Title IV funds to the Department of Education as outlined in the Condition and Context. Questioned Costs There were no questioned costs identified. Recommendation We recommended the College's management design and implement a system of internal control related to procedures for calculating the return of Title IV funds to ensure appropriate amounts are returned to the Department of Education and are posted to students' accounts. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report. Auditor's Response It is the College's responsibility to administer its student financial assistance programs in a manner that both complies with applicable federal regulations and guidelines as well as ensures that, when necessary, the appropriate amount of unearned financial assistance is returned to the Title IV programs.