Finding Text
2023-002: Reporting the Common Origination and Disbursement (COD) System
Cluster: Student Financial Assistance
Sponsoring Agency: Department of Education
Award Names: Federal Pell Grant Program and Federal Direct Student Loans
Award Numbers: Not applicable
Assistance Listing Titles: Federal Pell Grant Program and Federal Direct Student Loans
Assistance Listing Numbers: 84.063 and 84.268
Award Year: 2022-2023
Pass-through entity: Not applicable
Criteria
Institutions submit Direct Loan, Pell Grant, TEACH grant, and IASB origination records and disbursement records to the COD system. Origination records can be sent well in advance of any disbursements, as early as the institution chooses to submit them for any student the institution reasonably believes will be eligible for a payment. The disbursement record reports the actual disbursement date and the amount of the disbursement. Institutions must report student disbursement data within 15 calendar days after the institution makes a disbursement or becomes aware of the need to make an adjustment to previously reported student disbursement data or expected student disbursement data.
A school that participates in the Direct Loan Program is required to reconcile cash with disbursements (actual disbursement records) it submitted to the Common Origination and Disbursement (COD) system monthly.
34 CFR 668.165 notes that before an institution disburses title IV, HEA program funds for any award year, the institution must notify a student of the amount of funds that the student or his or her parent can expect to receive under each title IV, HEA program, and how and when those funds will be disbursed. If those funds include Direct Loan program funds, the notice must indicate which funds are from subsidized loans, which are from unsubsidized loans, and which are from PLUS loans.
Condition
During the testing, we noted 3 exceptions related to COD reporting and disbursements, which are as follows:
Through our testing of 25 selections, we noted that the date of disbursement per the COD did not match the date per the student account detail for 13 out of 25 selections. Additionally, 8 of the 25 selections were not reported to the COD within 15 calendar days of the disbursement to the student. On average, the 8 disbursements were reported 77 calendar days late.
Through our testing of 25 samples, it was noted that one student who was awarded and disbursed an unsubsidized loan was not reported to the COD. Since this student was not properly reported, they were never sent a direct loan disbursement notification as required to notify the student of the date and amount of disbursement, the right to cancel, and procedures to cancel. This notification is to be sent within 30 days as required by 34 CFR 668.165(a)(3).
Through our testing of disbursements, we noted that reconciliations between the disbursements and COD were not prepared. These reconciliations are required to be performed monthly.
Cause
Through discussions with management, they noted that the disbursement date requirement was not met as most of this process is handled by one individual and that individual was not keeping appropriate and clear supporting documentation of this disbursement process, which led to late reporting. Similarly, this lack of a formalized and clear process around disbursements and reporting led to a student not receiving a direct loan disbursement notification as they were not properly reported. Lastly, the monthly reconciliation between disbursements and COD system requirement was not met as the process owner was not aware of the monthly requirement and was not performing a timely reconciliation.
Effect
Inaccurate or lack of timely information within the COD system could lead to inaccurate information in reports utilized by the Department of Education.
Questioned Costs
None noted.
Recommendation
We recommend the School utilize additional team members to assist on the Financial Aid team specific to the monthly disbursement reconciliations and reporting to the COD as currently the majority of the work is being performed by one individual. Additionally, we recommend the School provide recurring training on COD reporting requirements, including on the disbursement dates that should be reported and the timeline for reporting and that additional reviews be considered to identify potential errors prior to submission into the COD. Lastly, we recommend that the School formalizes the processes that are in place with specific controls that address the reporting to the COD, the reconciliation of disbursements to the COD and the general disbursements process.
Management’s Views and Corrective Action Plan
Management’s response is included in “Management’s Views and Corrective Action Plan” included at
the end of this report after the summary schedule of status of prior audit findings.