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This list of common review issues also includes recommendations for fixing them. There’s good advice here for higher education institutions; take it!


Use DOE’s Top 10 Findings to Prepare Your School for the Next Audit

  • 5/16/2016

The Department of Education (DOE) conducts thousands of audits and onsite reviews of student financial aid programs every year. Helpfully, it also issues an annual list of the 10 most common findings from these reviews and supplies recommendations for avoiding them. 

Your higher education institution can use this list to gauge possible deficiencies and follow the tips for fixing them so that when audit time rolls around again, or an onsite program review is scheduled, you’re better prepared. There’s some good advice here; take it! 

The DOE’s current slate of top 10 findings was presented at the 2015 National Association of Student Financial Aid Administrators’ conference

1. Repeat finding: failure to take corrective action 

The most commonly reported finding was failure to implement an effective corrective action plan (CAP). Institutions must ensure that the CAP is designed and implemented properly in order to remedy noncompliance. To resolve this issue, DOE officials recommended that aid offices: 

Develop a CAP implementation schedule. 

  • Ensure all staff are properly trained and understand the regulations and their role in ensuring the CAP is followed. 
  • Perform quality assurance checks to monitor effectiveness of new controls and procedures. 
  • Review the CAP results to determine if it is working or if further changes are needed. 
  • Assign staff to monitor the CAP audit findings. 

2. NSLDS roster reporting: inaccurate/untimely reporting 

The DOE found several issues that lead to inaccurate or untimely reporting of student enrollment status, including: 

  • Roster file (formerly the student status confirmation report [SSCR]) not submitted on time to NSLDS 
  • Notification of last date of attendance or changes in student enrollment status not submitted or submitted incorrectly 
  • Failure to report accurate enrollment types and effective dates 

To address these issues, the DOE recommends that institutions: 

  • Develop policies and procedures for processing and submitting the roster file. 
  • Train staff on reporting requirements and procedures. 
  • Maintain accurate enrollment records. 
  • Automate enrollment reporting using National Student Clearinghouse (NSC) uploads and NSLDS batch/online, and update them frequently. 
  • Designate responsibility for monitoring the SSCR reporting deadlines. 

Many institutions rely on a third party servicer, such as the NSC, to assist in reporting to NSLDS. In a “Dear Colleague” letter, published in January 2015, the DOE clarified institutions’ responsibilities and third party servicers related to student financial assistance. 

3. Return of Title IV (R2T4) calculation errors 

The DOE found several issues related to errors in R2T4 calculations, including: 

  • Incorrect number of days in term or payment period 
  • Actual clock hours used instead of scheduled hours 
  • Incorrect aid used as "could have been disbursed" 
  • Incorrect withdrawal date 
  • Mathematical and/or rounding errors 

To minimize these errors, the DOE recommends that aid offices: 

  • Establish policies and procedures to ensure accurate disbursement information is used in calculations. 
  • Provide R2T4 training for staff and attend conferences to keep informed on new regulations and requirements. 
  • Perform a self-assessment by reviewing a sample of student files and recalculating and testing calculation inputs. 
  • Use R2T4 templates, available online on the FAA and IFAP websites. 

4. Return of Title IV (R2T4) made late  

The DOE found issues with institutions not returning funds to the DOE within the allowable 45-day timeframe. Common reasons for late refunds include: 

  • School's policy and procedures not followed  
  • Inadequate system in place to identify/track official and unofficial withdrawals  
  • No system in place to track number of days remaining to return funds  

To remedy these issues, the DOE recommends that you: 

  • Establish or revise policies and procedures related to R2T4 calculations, return of funds to ensure timely notification of withdrawal, and return of funds as necessary.  
  • Develop an R2T4 monitoring system.  
  • Provide R2T4 training for staff.  
  • Ensure funds were properly returned to the DOE within the 45-day required timeframe, in accordance with the self-assessment performed on R2T4 calculations.  

5. Verification violations

The DOE found the following issues related to verification documentation and compliance: 

  • Verification worksheet missing/incomplete  
  • Income tax transcripts missing  
  • Untaxed income not verified  
  • Interim disbursement rules not followed  
  • Conflicting data not resolved  

The DOE recommends that institutions: 

  • Revise verification procedures to ensure all required documents are submitted and meet the acceptable documentation requirements.  
  • Create a verification checklist.  
  • Resolve conflicting information.  
  • Monitor verification process.  
  • Perform internal quality control file review.  

6. Pell Grant overpayment or underpayment

The following are common issues that cause overpayment or underpayment: 

  • Incorrect Pell Grant formula  
  • Inaccurate calculations related to proration, EFC, and number of weeks/hours  
  • Change in enrollment status  

To address these issues, the DOE recommends that schools: 

  • Establish internal controls and procedures to verify enrollment status before disbursing aid, and adjust aid accordingly for any changes in a student’s enrollment, budget, etc.  
  • Develop procedures for resolving overpayments and underpayments.  
  • Conduct random file reviews.  
  • Prorate when needed.  
  • Use the correct enrollment status.  
  • Use the correct Pell Grant formula and schedule.  
  • Assign responsibility for monitoring to ensure Pell Grant disbursements are accurate and timely.  

7. Student credit balance deficiencies

The DOE found these common issues when performing reviews and audits: 

  • Title IV credit balance not released to students within 14 days  
  • No process in place to determine when a Title IV credit balance has been created  
  • Non-compliant authorization to hold Title IV credit balances  
  • Credit balances not released by end of loan period or award year  

The DOE encourages institutions to: 

  • Develop and implement procedures and controls to identify and release Title IV credit balances on-time.  
  • Provide training for staff.  
  • Increase internal controls associated with Title IV credit balances.  
  • Conduct a self-audit of Title IV credit balance disbursements.  
  • Ensure credit balance authorization is compliant with Title IV requirements.  

8. Entrance and exit counseling deficiencies

The DOE often found the following issues: 

  • Entrance counseling not conducted or documented for first-time borrowers  
  • Exit counseling not conducted or documented for withdrawn students or graduates  
  • Exit counseling materials not mailed to students who failed to complete counseling  
  • Exit counseling completed late  

The DOE recommends that schools: 

  • Develop and implement procedures to ensure entrance and exit counseling is completed.  
  • Automate tracking and monitoring of entrance and exit counseling.  
  • Post links to entrance and exit counseling on their websites.  
  • Assign responsibility for monitoring the entrance and exit interview processes.  
  • Develop procedures for ensuring communication between registrar, business, and financial aid offices.  
  • Provide staff training.  

9. Qualified auditor’s opinion cited in audit

The DOE routinely found the following issues: 

  • Serious deficiencies or areas of concern in compliance audit and financial statements related to R2T4 violations  
  • Inadequate accounting systems and/or procedures  
  • Lack of internal controls  

The DOE recommends the following compliance solutions: 

  • Assess entire internal control, financial reporting, and student financial assistance processes to determine the depth of deficiencies.  
  • Design an institution-wide plan of action.  
  • Implement appropriate internal controls.  
  • Implement an appropriate CAP that is timely and effective.  
  • Develop and provide staff training.  

10. G5 expenditures untimely or incorrectly reported

The DOE often found the following issues: 

  • Discrepancies between disbursement and drawdown dates  
  • Inaccurate roster files  

The DOE recommends the following compliance solutions: 

  • Develop and implement procedures and controls related to G5 drawdown requests and reconciliation to student accounts.  
  • Provide training for staff.  
  • Increase internal controls associated with drawdown of funds.  
  • Conduct a self-audit of drawdown procedures, and reconcile between student accounts and G5.  

A review of this list and an honest check of your own processes can help you better prepare for an audit and help your school be an even better steward of student aid funds. Spend some time evaluating how your organization compares and what you can do to enhance controls and safeguards that keep you compliant and efficient. 

How we can help 

CLA’s higher education professionals can help your institution design and execute a CAP, review controls and procedures, ensure staff are properly trained and understand regulations, and implement changes necessary to monitor future compliance.