The Episcopal Theological Seminary of the Southwest

Program: Federal Direct Loan Program ALN 84.268 Criteria: Eligibility: A Direct PLUS loan may not exceed the student’s cost of attendance minus other financial aid awarded during the period of enrollment for that student. Special Tests–Disbursements to or on Behalf of Students: An institution is required to confirm at the time of disbursement that the student is eligible for the type and amount of title IV funds identified by that disbursement. Condition: A Direct PLUS loan of $9,528 was disbursed to a student who had total other financial aid that exceeded the cost of attendance for the student. Internal controls in place did not detect the student was ineligible for receiving a Direct PLUS loan or prevent the ineligible disbursement. Questioned costs: Known questioned costs: $9,528 Projected questioned costs: $44,658 Projected questioned costs are calculated by multiplying the total population of Direct PLUS loans ($136,683) by the known questioned costs ($9,528) divided by the total sampled ($29,162). Cause: Personnel involved in awarding financial aid used professional judgment to award a Direct PLUS loan to the student. Support for calculating the cost of attendance used to determine the amount of Direct PLUS loans the student was eligible for was not retained. Internal controls were not in place to detect and prevent students from receiving Direct PLUS loans if they do not meet all eligibility requirements for the type of loan being awarded, including exceeding the loan limit threshold. Effect or potential effect: Direct PLUS loans could be disbursed to students who are not eligible. Perspective information: The Seminary disbursed Direct PLUS loans to 6 students for a total of $136,683. 33% (2) students were tested for compliance with the eligibility and special tests–disbursements to and on behalf of students as a part of the audit. Recommendations: Personnel involved in awarding and disbursing student financial assistance funds should be adequately trained on the compliance requirements and eligibility criteria required by the program. Internal controls should be in place to detect and prevent ineligible students from receiving Direct PLUS loans. Adequate documentation should be retained whenever professional judgment is used to calculate the cost of attendance when determining the amount of Direct PLUS loans students are eligible for. Views of responsible officials: Responsible official: Frederick Clement, Executive Vice President Management agrees with the finding and will take action to correct the conditions that resulted in the finding. First, the institution entered into a professional services agreement with Higher Education Assistance Group to provide a comprehensive business process review of its financial aid operations. The objective of this review is to improve upon the functionality of processes, internal controls, and systems to ensure regulatory compliance and the effectiveness of service deliverables to students receiving financial aid. This review will include updates to policies, procedures, and internal controls for the import and export of electronic records, document tracking and file review, packaging and awarding, satisfactory academic progress, disbursement and reconciliation, withdrawal and Return to Title IV. Workflow and gap analysis will be performed to ensure intraoffice Title IV program compliance and best practices. Second, the institution has entered into a professional services agreement with Higher Education Assistance Group to provide interim staffing and third-party federal student aid processing including, but not limited to, counseling students and families on financial aid options, assisting with the management of Federal Direct Loan and Federal Graduate PLUS Loan programs to include student eligibility, file review, awarding, and origination and disbursement authorization using Populi, COD and other Department of Education software. In addition, Higher Education Assistance Group will provide additional Title IV training for personnel involved in federal student aid processing. With more than 35 years of experience, Higher Education Assistance Group and its team of seasoned consultants, all of whom have worked in federal student aid administration, whether in public/private colleges and universities or for the Department of Education itself, specializes in the compliant administration of Title IV student financial aid programs. The institution will adopt a supplemental internal control to cross-check student eligibility for Direct PLUS loans to ensure that an over-award is not originated and disbursed.

See Schedule of Findings and Questions Costs for chart/table in place of the chart or table within the text.