Finding 947629 (2023-001)

Finding 2023-001: Eligibility – Determining Federal Direct Student Loan Awards Federal Agency: U.S. Department of Education Program Name: Student Financial Assistance Cluster, Federal Direct Student Loans Assistance Listing Number: 84.268 Award Year: June 1, 2022 – May 31, 2023 Program Expenditures: $5,056,223 Questioned Costs: $271,146 Criteria: Per 34 CFR 685.203(b)(iii), in the case of a graduate or professional student for a period of enrollment beginning on or after July 1, 2012, the total amount the student may borrow for any academic year of study under the Unsubsidized Loan program may not exceed $8,500. Per 34 CFR 685.203(c)(2)(v), the additional amount that a student described in paragraph (c)(1)(i) of this section may borrow under the Direct Unsubsidized Loan Program for any academic year of student may not exceed the following: in the case of a graduate or professional student, $12,000. Per the 2022-2023 Federal Student Aid Handbook, Volume 3, Chapter 5, students in Health Professions Programs, including the Doctor of Osteopathic Medicine, an additional $26,667 in Unsubsidized Loans for an Academic Year Covering 12 months can be provided to students. For programs with an academic year covering 10 or 11 months, the annual additional unsubsidized loan limit must be prorated. KHSC's program is a 10 month program and the additional limit is $22,222 for a total maximum award of $42,722. Condition: During testing of eligibility, 7 out 7 students selected for testing were overawarded Unsubsidized Federal Direct Loans. We determined that KHSC improperly awarded 61 out of 61 students Unsubsidized Federal Direct Loans in excess of the maximum amount for one academic year. KHSC overawarded each student $4,445, which accumulated to $271,146 in total loan funds overawarded. Cause: The students were overawarded as a result of the students being awarded on a 12-month program and were not properly pro-rated for the 10-month program length. Effect: KHSC is required to return overawarded funds to the Department of Education in accordance with Department guidelines. Noncompliance with federal guidelines could impact future funding. Questioned Costs: $271,146 Context: 7 out 7 students subject to eligibility testing were overawarded Unsubsidized Federal Direct Loans in excess of the maximum allowed amount of $42,722 for a 10-month program. 61 out of a total student population of 61 students were overawarded Unsubsidized Federal Direct Student Loans in excess of maximum allowed amount of $42,722. Management detected the overaward subsequent to year-end, but prior to the start of the audit and informed RSM of the error. Repeat Finding: No Recommendation: We recommend KHSC strengthen internal controls around the establishing of financial aid award limits. Views of Responsible Officials: Management agrees with the finding. Please see corrective action plan attached.