It's now set in the Entra profile, and if you are using Exchange on-prem using ADsync it will attribute match to the AAD Department.

https://learn.microsoft.com/en-us/powershell/exchange/recipientfilter-properties?view=exchange-ps&preserve-view=true

Connect-AzAccount
Update-AzADUser -UserPrincipalName "[email protected]" -Department "Engineering"
Get-AzADUser -UserPrincipalName "[email protected]" | Select-Object DisplayName, Department

Connect-ExchangeOnline -UserPrincipalName [email protected]
Get-User -Filter "Department -eq 'Engineering'"