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story.lead_photo.caption FILE — Henderson State University is shown in this 2019 file photo. ( Emily Walkenhorst)

Henderson State University's financial-aid office is nearly adequately trained and equipped to properly manage student financial aid and more quickly process verifications, Arkansas lawmakers were told Thursday.

Arkansas Legislative Audit issued 15 findings of apparent regulatory violations at the university's financial-aid office in a report presented to the Legislative Joint Auditing-Educational Institutions subcommittee. After a small amount of discussion about the progress the university had made, the subcommittee approved filing the audit Thursday.

Auditors found the university failed to, among other things, reconcile accounts and often improperly awarded or used federal financial aid.

Those findings pertain to two fiscal years, from July 1, 2017, through June 30, 2019. During that same time, delays in financial-aid verification had frustrated students, parents, educators and community members who had urged students to attend the university.

In August 2019, just weeks before the start of fall term, more than 1,000 Henderson State students -- out of just fewer than 4,000 students total -- were awaiting financial-aid verification, Arkansas State University System President Chuck Welch told lawmakers. The system hopes to merge Henderson State into it by Jan. 1, pending approval of the institutions' shared accrediting agency, the Higher Learning Commission.

There were only 14 pending verifications at that same time at Arkansas State University, which had more than 13,000 students last year.

"Most of those issues were poor staff training, people not qualified quite frankly to be doing the job," Welch said.

Software presented challenges to the financial-aid office, too, Welch said, but problems were mostly from "incompetence, if we want to be very frank about it."

He and Henderson State's interim president, Jim Borsig, were relieved to find that the audit contained no findings of fraud.

"We really didn't know," Welch said.

Since the audit period, only one employee in the financial-aid office remains with the office, Welch said. That employee, Welch said, had worked in the office for only about two months before and others began an overhaul of the office.

Within a couple of days of partnering with Henderson State in July 2019, the ASU System recommended moving the financial-aid office from the purview of the finance and administration department to student affairs, which is a more typical university setup, Welch said.

During the years of the audit, Brett Powell was in charge of the finance and administration department for all but the final month and a half. Powell, also a former Arkansas Division of Higher Education director, resigned in May 2019 to take a job in Baylor University's finance department after some tension between Powell and then-university President Glen Jones Jr.

The university is still making plans to train financial-aid staff and is preparing to transition to a different software program, Banner, to manage financial aid.

Auditors examined 50 student financial-aid recipients, 25 for each year, and 10 calculations of money to be returned to the federal government.

The resulting audit found that the university lacked several required written policies for financial-aid processing and failed to reconcile accounts, including discrepancies between funds received and actual cash disbursed for the Pell Grant Program and the Direct Loan Program.

Auditors noted numerous improper calculations that resulted in excess aid or less money returned to the federal government than should have been. Other improper calculations undercut the amount of Pell Grant money for which some students were actually eligible.

Additionally, the university used financial-aid money improperly by using excess loan funds to pay students' debts from prior semesters. Financial aid can only be used for the academic term it is awarded.

In its final finding, under the "other" umbrella of the audit, auditors wrote that staff had told them of loans, grants, scholarships and refunds that were processed late or not at all. Employees even had scholarship checks stowed away in their desks.

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