Finding 2025-001
significant deficiencyother matters
- Program
- STUDENT FINANCIAL ASSISTANCE (84.007, 84.033, 84.038 and 3 more)
- Compliance requirement
- Special tests and provisions
- FAC record
- FY2025 audit on fac.gov
Finding text from the filing
Criteria: Regulations at 34 CFR 668.164 establish two types of arrangements between schools and financial institutions: Tier One arrangements (T1) and Tier Two arrangements (T2). A T1 arrangement the servicer performs one or more of the functions associated with processing direct payments of Title IV funds on behalf of the school, and the third-party servicer makes payments to one or more financial accounts that are offered to students under the contract. The regulations and Dear Colleague Letter GEN-22-14 include various disclosure and reporting requirements including that a school must disclose conspicuously on its Website the contract(s) establishing the T1or T2 arrangement. Also, no later than 60 days following the most recently completed award year, disclose conspicuously on its Website and in a format established by the Secretary (a) the total consideration for the most recently completed award year, monetary and non-monetary, paid or received by the parties under the terms of the contract, and (b) for any year in which the institution's enrolled students open 30 or more financial accounts under the T1 arrangement, the number of students who had financial accounts under the contract at any time during the most recently completed award year, and the mean and median of the actual costs incurred by those account holders. A school must also provide to the U.S. Department of Education (ED) an up-to-date URL for the contract for publication in a centralized database accessible to the public. The institution is also required to document that it conducts reasonable due diligence reviews at least every two years to ascertain whether the fees imposed under the T1 arrangement are, considered as a whole, consistent with or below prevailing market rates.
Condition: The University did not have the Tier One contract or the additional financial disclosures posted conspicuously on its website. The University had not provided ED the URL for the contract and financial disclosures for publication in the cash management contracts centralized database and therefore was not listed in the database. The University had performed a due diligence review however it did not specifically review to ensure the fees imposed under the agreement were consistent with or below the prevailing market rates.
Subsequent to the auditor identifying these issues, the University posted the contract and financial disclosures on its website and provided the required URL to ED and the auditor viewed the University’s website and screen print of the submission to ED. Additionally, the University updated its due diligence review to include the fees and the auditor viewed the update document noting it covered the fees imposed under the agreement.
Cause: The University was not aware of all the requirements related to using a servicer to provide Title IV credit balance refunds to students.
Effect: The University was not in compliance with some of the applicable requirements.
Questioned costs: Not applicable
Context: Not applicable.
Recommendation: The University should review the cash management regulations and ensure its website disclosures and due diligence are updated as required.
Management's Response: The University agrees with the finding and has updated all items as noted above.