NAVARRO COLLEGE DISTRICT

III - Federal Award Findings and Questioned Costs #2025-001 Federal Program: Student Financial Aid Cluster Assistance Listing Numbers: 84.007, 84.033, 84.063, and 84.268 Compliance Requirement: N. Special Tests and Provisions – 3. Disbursements to or on Behalf of Students Type of Finding: Significant Deficiency and Compliance Criteria: When Direct Loans are being credited to a student’s account, the institution must notify the student, or parent, in writing of (1) the date and amount of the disbursement; (2) the student’s right, or parent’s right, to cancel all or a portion of that loan or loan disbursement and have the loan proceeds returned to the holder of that loan; and (3) the procedure and time by which the student or parent must notify the District that he or she wishes to cancel the loan (a minimum of 14 or 30 days depending on confirmation process). The notification requirement for loan funds applies only if the funds are disbursed by EFT payment or master check (34 CFR 668.165). Institutions that implement an affirmative confirmation process (as described in 34 CFR 668.165 (a)(6)(i)) must make this notification to the student or parent no earlier than 30 days before, and no later than 30 days after, crediting the student’s account at the institution with Direct Loans. Institutions that do not implement an affirmative confirmation process must notify a student no earlier than 30 days before, but no later than seven days after, crediting the student’s account and must give the student 30 days (instead of 14) to cancel all or part of the loan. Condition: In our test of Disbursements to or on Behalf of Students, 24 of 40 students in our sample received Direct Loans. Of these 24 students who received Direct Loans, 10 students were not notified within 30 days, in writing of (1) the date and amount of the disbursement; (2) the student’s right, or parent’s right, to cancel all or a portion of that loan or loan disbursement and have the loan proceeds returned to the holder of that loan; and (3) the procedure and time by which the student or parent must notify the District that he or she wishes to cancel the loan. Cause: The notifications were not sent to students due to an oversight by a former employee. Effect: The notification requirement is designed to protect borrowers by ensuring transparency and choice. Without this notification, students may be unaware of their right to cancel loans, leading to increased loan balances and repayment obligations. Questioned Costs: None reported Repeat Finding: No Recommendation: Implement internal controls and compliance reviews to ensure timely notifications to students. Conduct mandatory training for financial aid staff on updated procedures and system functionality. Implement periodic internal audits to verify that notifications are sent timely and documentation is retained in student files. Views of Responsible Official: Refer to corrective action plan.