Audit 324487

Finding No.: 2021-011 Federal Agency: U.S. Department of Education AL Program: 84.047A TRIO Upward Bound Federal Award No.: P047A171556-21 Area: Allowable Costs/Cost Principles Questioned Costs: $7,018 Criteria: Federal program expenditures should be necessary and reasonable for the performance of the Federal award in accordance with allowable costs/cost principles requirements and be adequately documented. Conditions: 1. For seventeen (or 71%) of twenty-four items, aggregating $17,796 of $185,064 in payroll total expenditures, deficiencies were noted, as follows: For item #s 1 through 8, employees were paid at a higher rate with no approved revised employee contract or pay increment memorandum on file to substantiate the higher rate paid to employees. For item #s 8 through 12, there were no approved timesheet on file to substantiate the actual number of hours worked. Further, for item # 12, there was no approved employment contract on file. For item #s 13 through 16, we noted discrepancy in the number of credits paid which is based on employment contract against the number of equivalent credits assigned to instructors per approved memorandum. Item # 17 pertains to salary advance for which there was inadequate documentation as to approval of advance made. 2. For one (or 6%) of sixteen items, aggregating $50,464 of $128,947 in total non-payroll expenditures, the item amounting to $2,185 (Check # 1033875) pertains to the purchase of office equipment for which no vendor invoice and receiving report was on file. Cause: The College lacks adequate internal controls over compliance with applicable federal regulations relating to allowable costs/cost principles, specifically, obtaining and retaining sufficient documentation to support all transactions. Effect: The College is in noncompliance with applicable allowable costs/cost principles requirements. Accordingly, questioned costs of $7,018 result because the projected questioned costs exceed the $25,000 threshold. For Condition # 1, item #s 1 through 7, only $403 is included in the total questioned costs, which relates to the difference between the unsupported higher rate paid and the approved rate. Further, for Condition # 1, item #s 13 through 16, only $1,641 is included in the total questioned costs, which relates to the dollar amount of difference in the number of credits paid between employment contract and approved memorandum. Recommendation: College management should improve internal control policies and strengthen controls requiring obtaining and retaining sufficient documentation to support all transactions. Views of Auditee and Corrective Action Plan: The College partially agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2021-012 Federal Agency: U.S. Department of Education AL Program: 84.047A TRIO Upward Bound Federal Award No.: P047A171556-21 Area: Eligibility Questioned Costs: $24,646 Criteria: Per OMB Compliance Supplement July 2021, an individual is eligible to participate in a Regular UB project if the individual meets all of the following requirements: (a) is a citizen, national, or permanent resident of the United States, or is in the United States for other than a temporary purpose; (b) is a potential first-generation college student, a low-income individual, or an individual who has a high risk for academic failure; (c) has a need for academic support in order to pursue successfully a program of education beyond high school; and (d) at the time of initial selection has completed the 8th grade but has not entered the 12th grade and is at least 13 years old but not older than 19. A veteran, regardless of age, who meets all other criteria is eligible to participate. A citizen, national, or permanent resident of the United States, includes a permanent resident of Guam, the Northern Mariana Islands, the Trust Territory of the Pacific Islands (Palau), or resident of one of the Freely Associated States - the Federated States of Micronesia or the Republic of the Marshall Islands. Moreover, 34 CFR Part 645.6(b) defines “Individual who has a high risk for academic failure” as an individual who: (a) Has not achieved at the proficient level on State assessments in reading or language arts; (b) Has not achieved at the proficient level on State assessments in math; (c) Has not successfully completed pre-algebra or algebra by the beginning of the tenth grade; or (d) Has a grade point average of 2.5 or less (on a 4.0 scale) for the most recent school year for which grade point averages are available. Furthermore, to be eligible for a stipend, participants must show evidence of satisfactory participation in project activities, including regular attendance and performance in accordance with the number of sessions in which a student participated. Stipends for regular projects may not exceed $40 per month from September to May of the academic year and $60 for each of the summer months (June, July, and August). Moreover, 34 CFR Part 645.43(c) states that for each participant, a grantee must maintain a record of the basis for the grantee’s determination that the participant is eligible to participate in the project and the basis for the grantee’s determination that the participant has a need for academic support in order to pursue successfully a program of education beyond secondary school. Condition: Of 9 students tested, aggregating $24,646 of $239,524 in total participant benefits, we noted noncompliance, as follows: 1. For 4 students listed below, no documentation was on file to support whether the individual is a citizen, national, or permanent resident of the United States (including a permanent resident of Guam, the Northern Mariana Islands, the Trust Territory of the Pacific Islands (Palau), or resident of one of the Freely Associated States - the Federated States of Micronesia or the Republic of the Marshall Islands), or is in the United States for other than a temporary purpose. 2. For 6 students listed below, it does not appear that the student has a need for academic support to successfully pursue a program of education beyond high school. Specifically, we noted that the student has either a) achieved at the proficient level on State assessments in reading or language arts; b) achieved at the proficient level on State assessments in math; c) successfully completed pre-algebra or algebra by the beginning of the tenth grade; or d) has a grade point average of higher than 2.5 (on a 4.0 scale) for the most recent school year. Further, we determined that the student does not have a high risk for academic failure, which is inconsistent with the College’s determined student eligibility status (“At high risk for academic failure”) reflected in the Annual Performance Report. 3. For 1 student (Student Case Number C000421734), it does not appear that the student has a need for academic support to successfully pursue a program of education beyond high school. Specifically, based on our examination of UB Program Recommendation Form accomplished by the student’s English and Math teachers, we noted that both teachers assigned the student a “B” grade (equivalent to 3.00 - 3.40 point in a 4.0 scale). Further, transcripts of records and/or State Assessments are not on file to support the College’s determined student eligibility status (“At high risk for academic failure”) reflected in the Annual Performance Report. 4. For 1 student (Student Case Number C000374322), no documentation was on file to support whether the individual has a need for academic support, to successfully pursue a program of education beyond high school. Further, transcripts of records and/or State Assessments are not on file to support the College’s determined student eligibility status (“At high risk for academic failure”) reflected in the Annual Performance Report. 5. For 3 students listed below, no documentation was on file to support whether the individual at the time of initial selection has completed the 8th grade but has not entered the 12th grade and is at least 13 years old but not older than 19. Cause: The College lacks adequate internal control policies and procedures over eligibility determinations, including obtaining required documentation and verification to support the College’s determination that the participant is eligible to participate in the project. Effect: The College is in noncompliance with applicable eligibility requirements. Accordingly, questioned costs of $24,646 result because the projected questioned costs exceed the $25,000 threshold. Recommendation: College management should improve internal control policies and strengthen controls so that eligibility determinations, including obtaining required documentation and verification, are performed in accordance with applicable eligibility requirements. Views of Auditee and Corrective Action Plan: The College agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2021-013 Federal Agency: U.S. Department of Education AL Program: 84.047A TRIO Upward Bound Federal Award No.: P047A171556-21 Area: Special Tests and Provisions - Minimizing Duplication of Services under the TS and UB Programs Questioned Costs: $ Undeterminable Criteria: Per OMB Compliance Supplement July 2021, to minimize the duplication of services and promote collaborations so that more students can be served, TS and UB projects are required to collaborate with other TRIO projects, Gaining Early Awareness and Readiness for Undergraduate programs (GEAR UP) projects (Assistance Listing 84.334), or projects from other programs serving similar populations that are serving the same target schools or target area (34 CFR sections 643.11(b) and 645.21(a)(4)). In addition, the recipients of TS and UB grants are required to keep records, to the extent practicable, of any services TS or UB participants receive during the project year from another TRIO program or another federally funded program that serves populations similar to those served under the TS and UB programs (34 CFR sections 643.32(c)(5) and 645.43(c)(5)). Condition: No supporting documentation (e.g., email correspondence, advertisements, etc.) was provided to demonstrate that specified plans in the UB Grant Application Form were implemented and/or other collaboration efforts were in place during FY2021. Cause: The College lacks adequate internal control policies and procedures over compliance with applicable special tests and provisions requirements for minimizing duplication of services under the TS and UB Programs. Effect: The College is in noncompliance with applicable special tests and provisions requirements for minimizing duplication of services under the TS and UB Programs requirements. No questioned cost is presented as we are unable to quantify the extent of noncompliance. Recommendation: College management should improve internal control policies and strengthen controls over compliance with applicable special tests and provisions requirements for minimizing duplication of services under the TS and UB Programs requirements. Views of Auditee and Corrective Action Plan: The College agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2021-014 Federal Agency: U.S. Department of Education AL Program: 84.425 Education Stabilization Fund AL Sub-Program: 84.425E Higher Education Emergency Relief Fund (HEERF) - Student Aid Portion Federal Award No.: COVID-19 P425E204126 AL Sub-Program: 84.425F HEERF - Institutional Portion Federal Award No.: COVID-19 P425F202732 AL Sub-Program: 84.425L HEERF - Minority Serving Institution Federal Award No.: COVID-19 P425L200219 Area: Activities Allowed or Unallowed Questioned Costs: $45,752 Criteria: In accordance with applicable activities allowed or unallowed requirements, institutions must demonstrate that costs incurred are allowable under the relevant statutory provisions and consistent with the purpose of the ESF “to prevent, prepare for, and respond to coronavirus”. Allowable expenditures incurred and liquidated prior to December 27, 2020 must have been “to cover any costs associated with significant changes to the delivery of instruction due to the coronavirus”. Further, beginning December 27, 2020, any unused HEERF I Institutional Portion funds, new HEERF II Institutional Portion funds and HEERF III Institutional Portion Funds, may be used to defray expenses associated with coronavirus (including lost revenue, reimbursement for expenses already incurred, technology costs associated with a transition to distance education, faculty and staff trainings, and payroll). Conditions: 1. For eleven (or 100%) of eleven items, aggregating $33,038 of $619,494 in total payroll expenditures, deficiencies were noted, as follows: The above salaries and wages were standard recurring costs and not an additional cost to the College. Specifically, for item #s 1 through 4, they are not directly associated with significant changes to the delivery of instructions due to the coronavirus (i.e. online teaching or expansion). Moreover, for item #s 5 through 11, they are not associated with coronavirus. Furthermore, there is no evidence of communication or consultation with the grantor agency that above expenditures are allowable. 2. For two (or 7%) of twenty-nine items, aggregating $1,716,073 of $2,490,000 in total non-payroll expenditures, deficiencies were noted, as follows: Item #s 12 and 13 are not associated with coronavirus. Specifically, expenditure relates to purchase of drone cameras and related accessories for the College’s graduation media operation. There is no evidence of communication or consultation with the grantor agency that above expenditures are allowable. Cause: The College lacks adequate internal controls over compliance with applicable activities allowed or unallowed requirements. Effect: The College is in noncompliance with applicable activities allowed or unallowed requirements. The total questioned cost is $45,752. Identified as a Repeat Finding: 2020-009 Recommendation: College management should improve internal control policies and strengthen controls and procedures over compliance with applicable federal regulations on activities allowed or unallowed. Views of Auditee and Corrective Action Plan: The College partially agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2012-015 Federal Agency: U.S. Department of Education AL Program: 84.425 Education Stabilization Fund AL Sub-Program: 84.425E Higher Education Emergency Relief Fund (HEERF) - Student Aid Portion Federal Award No.: COVID-19 P425E204126 AL Sub-Program: 84.425F HEERF - Institutional Portion Federal Award No.: COVID-19 P425F202732 AL Sub-Program: 84.425L HEERF - Minority Serving Institution Federal Award No.: COVID-19 P425L200219 Area: Allowable Costs/Cost Principles Questioned Costs: $109,757 Criteria: Federal program expenditures should be necessary and reasonable for the performance of the Federal award in accordance with allowable costs/cost principles requirements and be adequately documented. Conditions: 1. For nine (or 82%) of eleven items, aggregating $33,038 of $619,494 in total payroll expenditures, deficiencies were noted, as follows: For item #s 1 through 2, and item #s 4 through 9, we noted discrepancy in the number of credits paid which is based on employment contract against the number of equivalent credits assigned to instructors per Semester Section Offering or Instructor’s Schedule. Moreover, for item # 1, the employee was paid total amount of $2,275 that pertains to two separate contracts ($1,300 and $975), however, there was no approved additional contract or revision to the initial contract to substantiate the payment relating to $975. For item #s 3 and 7, there was no approved employment contract on file. No questioned costs are reported at this finding as questioned costs are reported at finding # 2021-014. 2. For two (or 7%) of twenty-nine items, aggregating $1,716,073 of $2,490,000 in total non-payroll expenditures, deficiencies were noted, as follows: Item #s 10 and 11 were not supported by adequate documentation (i.e. vendor invoices and receiving reports) to ascertain whether such expenditures were allowable costs of the underlying grants. Cause: The College lacks adequate internal controls over compliance with applicable federal regulations relating to allowable costs/cost principles, specifically, obtaining and retaining sufficient documentation to support all transactions. Effect: The College is in noncompliance with applicable allowable costs/cost principles requirements. The total questioned cost is $138,920, of which $29,163 is reported at finding # 2021-014. Recommendation: College management should improve internal control policies and strengthen controls requiring obtaining and retaining sufficient documentation to support all transactions. Views of Auditee and Corrective Action Plan: The College partially agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2021-017 Federal Agency: U.S. Department of Education AL Program: 84.425 Education Stabilization Fund AL Sub-Program: 84.425E Higher Education Emergency Relief Fund (HEERF) - Student Aid Portion Federal Award No.: COVID-19 P425E204126 AL Sub-Program: 84.425F HEERF - Institutional Portion Federal Award No.: COVID-19 P425F202732 AL Sub-Program: 84.425L HEERF - Minority Serving Institution Federal Award No.: COVID-19 P425L200219 Area: Reporting Questioned Costs: $0 Criteria: Annual Reporting - Per OMB Compliance Supplement Addendum July 2021, the HEERF Data Collection Form (OMB Control Number 1840-0850) must be submitted to ED via the Annual Report Data Collection System on February 8, 2021 (for reporting period from March 13, 2020 through December 31, 2020). Furthermore, amounts and data reported in the report should be accurate. Quarterly Public Reporting for (a)(1) Student Aid Portion - Per OMB Compliance Supplement Addendum July 2021, institutions that received a HEERF 18004(a)(1) Student Aid Portion award are required to publicly post certain information on their website no later than 30 days after award and update that information every 45 days thereafter. On August 31, 2020, the frequency of reporting after the initial 30-day period was decreased from every 45 days thereafter to every calendar quarter. On May 13, 2021, ED published an additional notice for student aid public reporting under CRRSAA and ARP, which requires that institution publicly post certain information on their website. Institutions must publicly post their report as soon as possible, but no later than 30 days after the publication of the notice or 30 days after the date ED first obligated funds under HEERF I, II, or III to the institution for Emergency Financial Aid Grants to Students, whichever comes later. The report must be updated no later than 10 days after the end of each calendar quarter. Quarterly Public Reporting for (a)(1) Institutional Portion and (a)(2), and (a)(3) funds - Per OMB Compliance Supplement Addendum July 2021, Quarterly Budget and Expenditure form must be conspicuously posted on the institution’s primary website on the same page the reports of the IHE’s activities as to the emergency financial aid grants to students (Student Aid Portion) are posted. The form must be posted covering each quarterly reporting period no later than 10 days after the end of each calendar quarter. Condition: 1. Total annual expenditures per the Annual Report Data Collection System differ from cumulative expenditures from the date of award through 12/31/20 per underlying accounting records, as follows: 2. ALN 84.425E COVID-19 HEERF-Student Aid Portion A. For both quarterly reports tested, the required quarterly updates were done on an annual basis. B. Total amount of Emergency Financial Aid Grants distributed to students for the year ended 12/31/2020 per the publicly posted Student Emergency Financial Aid Reporting differ from the annual student aid portion expenditures per underlying accounting records, as follows: C. Total amount of Emergency Financial Aid Grants distributed to students for the year ended 12/31/2021 per the publicly posted Student Emergency Financial Aid Reporting differ from the annual student aid portion expenditures per underlying accounting records, as follows: 3. 84.425F COVID-19 HEERF-Institutional Portion 84.425L COVID-19 HEERF-Minority Serving Institution A. Quarterly Budget and Expenditure reports were publicly posted beyond the 10-day posting requirement after the end of each calendar quarters as follow: B. Total quarterly expenditures for the quarter ended 06/30/2021 per the publicly posted Quarterly Budget and Expenditure Reporting differ from the quarterly expenditures per underlying accounting records, as follows: Cause: The College lacks adequate internal controls over the timely and accurate preparation and review of required reports as stipulated in the Compliance Supplement. Effect: The College is in noncompliance with applicable reporting requirements. No questioned costs are presented as the identified reporting differences do not represent overpayments, and we are unable to quantify the impact of late reporting on the program. Identified as a Repeat Finding: 2020-008 Recommendation: College management should strengthen controls so that required reports are timely and accurately prepared and reviewed and submitted within the specified timeframes to evidence compliance with applicable reporting requirements. Views of Auditee and Corrective Action Plan: The College agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2021-014 Federal Agency: U.S. Department of Education AL Program: 84.425 Education Stabilization Fund AL Sub-Program: 84.425E Higher Education Emergency Relief Fund (HEERF) - Student Aid Portion Federal Award No.: COVID-19 P425E204126 AL Sub-Program: 84.425F HEERF - Institutional Portion Federal Award No.: COVID-19 P425F202732 AL Sub-Program: 84.425L HEERF - Minority Serving Institution Federal Award No.: COVID-19 P425L200219 Area: Activities Allowed or Unallowed Questioned Costs: $45,752 Criteria: In accordance with applicable activities allowed or unallowed requirements, institutions must demonstrate that costs incurred are allowable under the relevant statutory provisions and consistent with the purpose of the ESF “to prevent, prepare for, and respond to coronavirus”. Allowable expenditures incurred and liquidated prior to December 27, 2020 must have been “to cover any costs associated with significant changes to the delivery of instruction due to the coronavirus”. Further, beginning December 27, 2020, any unused HEERF I Institutional Portion funds, new HEERF II Institutional Portion funds and HEERF III Institutional Portion Funds, may be used to defray expenses associated with coronavirus (including lost revenue, reimbursement for expenses already incurred, technology costs associated with a transition to distance education, faculty and staff trainings, and payroll). Conditions: 1. For eleven (or 100%) of eleven items, aggregating $33,038 of $619,494 in total payroll expenditures, deficiencies were noted, as follows: The above salaries and wages were standard recurring costs and not an additional cost to the College. Specifically, for item #s 1 through 4, they are not directly associated with significant changes to the delivery of instructions due to the coronavirus (i.e. online teaching or expansion). Moreover, for item #s 5 through 11, they are not associated with coronavirus. Furthermore, there is no evidence of communication or consultation with the grantor agency that above expenditures are allowable. 2. For two (or 7%) of twenty-nine items, aggregating $1,716,073 of $2,490,000 in total non-payroll expenditures, deficiencies were noted, as follows: Item #s 12 and 13 are not associated with coronavirus. Specifically, expenditure relates to purchase of drone cameras and related accessories for the College’s graduation media operation. There is no evidence of communication or consultation with the grantor agency that above expenditures are allowable. Cause: The College lacks adequate internal controls over compliance with applicable activities allowed or unallowed requirements. Effect: The College is in noncompliance with applicable activities allowed or unallowed requirements. The total questioned cost is $45,752. Identified as a Repeat Finding: 2020-009 Recommendation: College management should improve internal control policies and strengthen controls and procedures over compliance with applicable federal regulations on activities allowed or unallowed. Views of Auditee and Corrective Action Plan: The College partially agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2012-015 Federal Agency: U.S. Department of Education AL Program: 84.425 Education Stabilization Fund AL Sub-Program: 84.425E Higher Education Emergency Relief Fund (HEERF) - Student Aid Portion Federal Award No.: COVID-19 P425E204126 AL Sub-Program: 84.425F HEERF - Institutional Portion Federal Award No.: COVID-19 P425F202732 AL Sub-Program: 84.425L HEERF - Minority Serving Institution Federal Award No.: COVID-19 P425L200219 Area: Allowable Costs/Cost Principles Questioned Costs: $109,757 Criteria: Federal program expenditures should be necessary and reasonable for the performance of the Federal award in accordance with allowable costs/cost principles requirements and be adequately documented. Conditions: 1. For nine (or 82%) of eleven items, aggregating $33,038 of $619,494 in total payroll expenditures, deficiencies were noted, as follows: For item #s 1 through 2, and item #s 4 through 9, we noted discrepancy in the number of credits paid which is based on employment contract against the number of equivalent credits assigned to instructors per Semester Section Offering or Instructor’s Schedule. Moreover, for item # 1, the employee was paid total amount of $2,275 that pertains to two separate contracts ($1,300 and $975), however, there was no approved additional contract or revision to the initial contract to substantiate the payment relating to $975. For item #s 3 and 7, there was no approved employment contract on file. No questioned costs are reported at this finding as questioned costs are reported at finding # 2021-014. 2. For two (or 7%) of twenty-nine items, aggregating $1,716,073 of $2,490,000 in total non-payroll expenditures, deficiencies were noted, as follows: Item #s 10 and 11 were not supported by adequate documentation (i.e. vendor invoices and receiving reports) to ascertain whether such expenditures were allowable costs of the underlying grants. Cause: The College lacks adequate internal controls over compliance with applicable federal regulations relating to allowable costs/cost principles, specifically, obtaining and retaining sufficient documentation to support all transactions. Effect: The College is in noncompliance with applicable allowable costs/cost principles requirements. The total questioned cost is $138,920, of which $29,163 is reported at finding # 2021-014. Recommendation: College management should improve internal control policies and strengthen controls requiring obtaining and retaining sufficient documentation to support all transactions. Views of Auditee and Corrective Action Plan: The College partially agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2012-016 Federal Agency: U.S. Department of Education Federal Award No.: COVID-19 P425E204126 AL Sub-Program: 84.425F HEERF - Institutional Portion Federal Award No.: COVID-19 P425F202732 AL Sub-Program: 84.425L HEERF - Minority Serving Institution Federal Award No.: COVID-19 P425L200219 Area: Procurement and Suspension and Debarment Questioned Costs: $192,795 Criteria: Under the terms of the sub-awards administered by RepMar under the Compact of Free Association grant awards, RepMar authorizes the College to use its own procedures for procurement provided they meet the RepMar Procurement Code. RepMar’s Procurement Code states the following: (a) Section 126.7 - Award shall be made to the responsible offeror whose proposal is determined in writing to be the most advantageous to the Government taking into consideration price and the evaluation factors set forth in the Request for Proposals. No other factors or criteria shall be used in the evaluation. The contract file shall contain the basis on which the award is made. (b) Section 127 - Procurement of goods and services not exceeding $25,000 may be made in accordance with small purchase procedures promulgated by RepMar’s Policy Office. Small purchase procedures are those relatively simple and informal methods for securing services, supplies, or other property that do not cost more than $25,000. RepMar’s Ministry of Finance has previously declared that if small purchase procedures are used, price or rate quotations shall be obtained from an adequate number of qualified sources. (c) Section 128 - a contract may be awarded for supply, service, or construction item without competition when it is determined in writing that there is only one source for the required supply, service, or construction item. (d) Section 129 - Notwithstanding any other provision of this Chapter, the Chief Procurement Officer, the head of a Purchasing Agency, or a designee of either officer may make or authorize others to make emergency procurement when there exists a threat to public health, welfare, or safety under emergency conditions as defined in regulations promulgated by the Policy Office; provided, that such emergency procurement shall be made with such competition as is practicable under the circumstances. Condition: Of eight items, aggregating $268,560 of $700,377 in total non-payroll expenditures, deficiencies were noted, as follows: 1. For 4 items (or 50%), procurement was not supported by competitive sealed bid or another appropriate procurement methodology; thus, the following purchases either appear to have been sole sourced without written justification or sole sourced with written justification but does not appear to be justified: No questioned cost is reported at this finding for item # 4 as questioned cost is reported at finding # 2021-015. 2. For 3 items (or 38%), supporting procurement documentation was not sufficient to substantiate compliance with small purchase procedures: For item # 6, there were no vendor quotations on file. Moreover, for item #s 5 and 7, selected vendor is not the lowest bidder and no justification of vendor selection was on file. Cause: The College did not follow internal control policies and procedures over documentation of the procurement process to satisfy compliance with applicable procurement requirements. Effect: The College is in noncompliance with applicable procurement requirements. The total questioned cost is $251,250, of which $58,455 is reported at finding # 2021-015. Recommendation: Responsible personnel should ensure that documentation be adequate to comply with applicable procurement requirements. Specifically, documentation should indicate the history of procurement, including the solicitation process and rationale for contractors or vendor selection. Views of Auditee and Corrective Action Plan: The College partially agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2021-017 Federal Agency: U.S. Department of Education AL Program: 84.425 Education Stabilization Fund AL Sub-Program: 84.425E Higher Education Emergency Relief Fund (HEERF) - Student Aid Portion Federal Award No.: COVID-19 P425E204126 AL Sub-Program: 84.425F HEERF - Institutional Portion Federal Award No.: COVID-19 P425F202732 AL Sub-Program: 84.425L HEERF - Minority Serving Institution Federal Award No.: COVID-19 P425L200219 Area: Reporting Questioned Costs: $0 Criteria: Annual Reporting - Per OMB Compliance Supplement Addendum July 2021, the HEERF Data Collection Form (OMB Control Number 1840-0850) must be submitted to ED via the Annual Report Data Collection System on February 8, 2021 (for reporting period from March 13, 2020 through December 31, 2020). Furthermore, amounts and data reported in the report should be accurate. Quarterly Public Reporting for (a)(1) Student Aid Portion - Per OMB Compliance Supplement Addendum July 2021, institutions that received a HEERF 18004(a)(1) Student Aid Portion award are required to publicly post certain information on their website no later than 30 days after award and update that information every 45 days thereafter. On August 31, 2020, the frequency of reporting after the initial 30-day period was decreased from every 45 days thereafter to every calendar quarter. On May 13, 2021, ED published an additional notice for student aid public reporting under CRRSAA and ARP, which requires that institution publicly post certain information on their website. Institutions must publicly post their report as soon as possible, but no later than 30 days after the publication of the notice or 30 days after the date ED first obligated funds under HEERF I, II, or III to the institution for Emergency Financial Aid Grants to Students, whichever comes later. The report must be updated no later than 10 days after the end of each calendar quarter. Quarterly Public Reporting for (a)(1) Institutional Portion and (a)(2), and (a)(3) funds - Per OMB Compliance Supplement Addendum July 2021, Quarterly Budget and Expenditure form must be conspicuously posted on the institution’s primary website on the same page the reports of the IHE’s activities as to the emergency financial aid grants to students (Student Aid Portion) are posted. The form must be posted covering each quarterly reporting period no later than 10 days after the end of each calendar quarter. Condition: 1. Total annual expenditures per the Annual Report Data Collection System differ from cumulative expenditures from the date of award through 12/31/20 per underlying accounting records, as follows: 2. ALN 84.425E COVID-19 HEERF-Student Aid Portion A. For both quarterly reports tested, the required quarterly updates were done on an annual basis. B. Total amount of Emergency Financial Aid Grants distributed to students for the year ended 12/31/2020 per the publicly posted Student Emergency Financial Aid Reporting differ from the annual student aid portion expenditures per underlying accounting records, as follows: C. Total amount of Emergency Financial Aid Grants distributed to students for the year ended 12/31/2021 per the publicly posted Student Emergency Financial Aid Reporting differ from the annual student aid portion expenditures per underlying accounting records, as follows: 3. 84.425F COVID-19 HEERF-Institutional Portion 84.425L COVID-19 HEERF-Minority Serving Institution A. Quarterly Budget and Expenditure reports were publicly posted beyond the 10-day posting requirement after the end of each calendar quarters as follow: B. Total quarterly expenditures for the quarter ended 06/30/2021 per the publicly posted Quarterly Budget and Expenditure Reporting differ from the quarterly expenditures per underlying accounting records, as follows: Cause: The College lacks adequate internal controls over the timely and accurate preparation and review of required reports as stipulated in the Compliance Supplement. Effect: The College is in noncompliance with applicable reporting requirements. No questioned costs are presented as the identified reporting differences do not represent overpayments, and we are unable to quantify the impact of late reporting on the program. Identified as a Repeat Finding: 2020-008 Recommendation: College management should strengthen controls so that required reports are timely and accurately prepared and reviewed and submitted within the specified timeframes to evidence compliance with applicable reporting requirements. Views of Auditee and Corrective Action Plan: The College agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2021-014 Federal Agency: U.S. Department of Education AL Program: 84.425 Education Stabilization Fund AL Sub-Program: 84.425E Higher Education Emergency Relief Fund (HEERF) - Student Aid Portion Federal Award No.: COVID-19 P425E204126 AL Sub-Program: 84.425F HEERF - Institutional Portion Federal Award No.: COVID-19 P425F202732 AL Sub-Program: 84.425L HEERF - Minority Serving Institution Federal Award No.: COVID-19 P425L200219 Area: Activities Allowed or Unallowed Questioned Costs: $45,752 Criteria: In accordance with applicable activities allowed or unallowed requirements, institutions must demonstrate that costs incurred are allowable under the relevant statutory provisions and consistent with the purpose of the ESF “to prevent, prepare for, and respond to coronavirus”. Allowable expenditures incurred and liquidated prior to December 27, 2020 must have been “to cover any costs associated with significant changes to the delivery of instruction due to the coronavirus”. Further, beginning December 27, 2020, any unused HEERF I Institutional Portion funds, new HEERF II Institutional Portion funds and HEERF III Institutional Portion Funds, may be used to defray expenses associated with coronavirus (including lost revenue, reimbursement for expenses already incurred, technology costs associated with a transition to distance education, faculty and staff trainings, and payroll). Conditions: 1. For eleven (or 100%) of eleven items, aggregating $33,038 of $619,494 in total payroll expenditures, deficiencies were noted, as follows: The above salaries and wages were standard recurring costs and not an additional cost to the College. Specifically, for item #s 1 through 4, they are not directly associated with significant changes to the delivery of instructions due to the coronavirus (i.e. online teaching or expansion). Moreover, for item #s 5 through 11, they are not associated with coronavirus. Furthermore, there is no evidence of communication or consultation with the grantor agency that above expenditures are allowable. 2. For two (or 7%) of twenty-nine items, aggregating $1,716,073 of $2,490,000 in total non-payroll expenditures, deficiencies were noted, as follows: Item #s 12 and 13 are not associated with coronavirus. Specifically, expenditure relates to purchase of drone cameras and related accessories for the College’s graduation media operation. There is no evidence of communication or consultation with the grantor agency that above expenditures are allowable. Cause: The College lacks adequate internal controls over compliance with applicable activities allowed or unallowed requirements. Effect: The College is in noncompliance with applicable activities allowed or unallowed requirements. The total questioned cost is $45,752. Identified as a Repeat Finding: 2020-009 Recommendation: College management should improve internal control policies and strengthen controls and procedures over compliance with applicable federal regulations on activities allowed or unallowed. Views of Auditee and Corrective Action Plan: The College partially agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2012-015 Federal Agency: U.S. Department of Education AL Program: 84.425 Education Stabilization Fund AL Sub-Program: 84.425E Higher Education Emergency Relief Fund (HEERF) - Student Aid Portion Federal Award No.: COVID-19 P425E204126 AL Sub-Program: 84.425F HEERF - Institutional Portion Federal Award No.: COVID-19 P425F202732 AL Sub-Program: 84.425L HEERF - Minority Serving Institution Federal Award No.: COVID-19 P425L200219 Area: Allowable Costs/Cost Principles Questioned Costs: $109,757 Criteria: Federal program expenditures should be necessary and reasonable for the performance of the Federal award in accordance with allowable costs/cost principles requirements and be adequately documented. Conditions: 1. For nine (or 82%) of eleven items, aggregating $33,038 of $619,494 in total payroll expenditures, deficiencies were noted, as follows: For item #s 1 through 2, and item #s 4 through 9, we noted discrepancy in the number of credits paid which is based on employment contract against the number of equivalent credits assigned to instructors per Semester Section Offering or Instructor’s Schedule. Moreover, for item # 1, the employee was paid total amount of $2,275 that pertains to two separate contracts ($1,300 and $975), however, there was no approved additional contract or revision to the initial contract to substantiate the payment relating to $975. For item #s 3 and 7, there was no approved employment contract on file. No questioned costs are reported at this finding as questioned costs are reported at finding # 2021-014. 2. For two (or 7%) of twenty-nine items, aggregating $1,716,073 of $2,490,000 in total non-payroll expenditures, deficiencies were noted, as follows: Item #s 10 and 11 were not supported by adequate documentation (i.e. vendor invoices and receiving reports) to ascertain whether such expenditures were allowable costs of the underlying grants. Cause: The College lacks adequate internal controls over compliance with applicable federal regulations relating to allowable costs/cost principles, specifically, obtaining and retaining sufficient documentation to support all transactions. Effect: The College is in noncompliance with applicable allowable costs/cost principles requirements. The total questioned cost is $138,920, of which $29,163 is reported at finding # 2021-014. Recommendation: College management should improve internal control policies and strengthen controls requiring obtaining and retaining sufficient documentation to support all transactions. Views of Auditee and Corrective Action Plan: The College partially agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2012-016 Federal Agency: U.S. Department of Education Federal Award No.: COVID-19 P425E204126 AL Sub-Program: 84.425F HEERF - Institutional Portion Federal Award No.: COVID-19 P425F202732 AL Sub-Program: 84.425L HEERF - Minority Serving Institution Federal Award No.: COVID-19 P425L200219 Area: Procurement and Suspension and Debarment Questioned Costs: $192,795 Criteria: Under the terms of the sub-awards administered by RepMar under the Compact of Free Association grant awards, RepMar authorizes the College to use its own procedures for procurement provided they meet the RepMar Procurement Code. RepMar’s Procurement Code states the following: (a) Section 126.7 - Award shall be made to the responsible offeror whose proposal is determined in writing to be the most advantageous to the Government taking into consideration price and the evaluation factors set forth in the Request for Proposals. No other factors or criteria shall be used in the evaluation. The contract file shall contain the basis on which the award is made. (b) Section 127 - Procurement of goods and services not exceeding $25,000 may be made in accordance with small purchase procedures promulgated by RepMar’s Policy Office. Small purchase procedures are those relatively simple and informal methods for securing services, supplies, or other property that do not cost more than $25,000. RepMar’s Ministry of Finance has previously declared that if small purchase procedures are used, price or rate quotations shall be obtained from an adequate number of qualified sources. (c) Section 128 - a contract may be awarded for supply, service, or construction item without competition when it is determined in writing that there is only one source for the required supply, service, or construction item. (d) Section 129 - Notwithstanding any other provision of this Chapter, the Chief Procurement Officer, the head of a Purchasing Agency, or a designee of either officer may make or authorize others to make emergency procurement when there exists a threat to public health, welfare, or safety under emergency conditions as defined in regulations promulgated by the Policy Office; provided, that such emergency procurement shall be made with such competition as is practicable under the circumstances. Condition: Of eight items, aggregating $268,560 of $700,377 in total non-payroll expenditures, deficiencies were noted, as follows: 1. For 4 items (or 50%), procurement was not supported by competitive sealed bid or another appropriate procurement methodology; thus, the following purchases either appear to have been sole sourced without written justification or sole sourced with written justification but does not appear to be justified: No questioned cost is reported at this finding for item # 4 as questioned cost is reported at finding # 2021-015. 2. For 3 items (or 38%), supporting procurement documentation was not sufficient to substantiate compliance with small purchase procedures: For item # 6, there were no vendor quotations on file. Moreover, for item #s 5 and 7, selected vendor is not the lowest bidder and no justification of vendor selection was on file. Cause: The College did not follow internal control policies and procedures over documentation of the procurement process to satisfy compliance with applicable procurement requirements. Effect: The College is in noncompliance with applicable procurement requirements. The total questioned cost is $251,250, of which $58,455 is reported at finding # 2021-015. Recommendation: Responsible personnel should ensure that documentation be adequate to comply with applicable procurement requirements. Specifically, documentation should indicate the history of procurement, including the solicitation process and rationale for contractors or vendor selection. Views of Auditee and Corrective Action Plan: The College partially agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2021-017 Federal Agency: U.S. Department of Education AL Program: 84.425 Education Stabilization Fund AL Sub-Program: 84.425E Higher Education Emergency Relief Fund (HEERF) - Student Aid Portion Federal Award No.: COVID-19 P425E204126 AL Sub-Program: 84.425F HEERF - Institutional Portion Federal Award No.: COVID-19 P425F202732 AL Sub-Program: 84.425L HEERF - Minority Serving Institution Federal Award No.: COVID-19 P425L200219 Area: Reporting Questioned Costs: $0 Criteria: Annual Reporting - Per OMB Compliance Supplement Addendum July 2021, the HEERF Data Collection Form (OMB Control Number 1840-0850) must be submitted to ED via the Annual Report Data Collection System on February 8, 2021 (for reporting period from March 13, 2020 through December 31, 2020). Furthermore, amounts and data reported in the report should be accurate. Quarterly Public Reporting for (a)(1) Student Aid Portion - Per OMB Compliance Supplement Addendum July 2021, institutions that received a HEERF 18004(a)(1) Student Aid Portion award are required to publicly post certain information on their website no later than 30 days after award and update that information every 45 days thereafter. On August 31, 2020, the frequency of reporting after the initial 30-day period was decreased from every 45 days thereafter to every calendar quarter. On May 13, 2021, ED published an additional notice for student aid public reporting under CRRSAA and ARP, which requires that institution publicly post certain information on their website. Institutions must publicly post their report as soon as possible, but no later than 30 days after the publication of the notice or 30 days after the date ED first obligated funds under HEERF I, II, or III to the institution for Emergency Financial Aid Grants to Students, whichever comes later. The report must be updated no later than 10 days after the end of each calendar quarter. Quarterly Public Reporting for (a)(1) Institutional Portion and (a)(2), and (a)(3) funds - Per OMB Compliance Supplement Addendum July 2021, Quarterly Budget and Expenditure form must be conspicuously posted on the institution’s primary website on the same page the reports of the IHE’s activities as to the emergency financial aid grants to students (Student Aid Portion) are posted. The form must be posted covering each quarterly reporting period no later than 10 days after the end of each calendar quarter. Condition: 1. Total annual expenditures per the Annual Report Data Collection System differ from cumulative expenditures from the date of award through 12/31/20 per underlying accounting records, as follows: 2. ALN 84.425E COVID-19 HEERF-Student Aid Portion A. For both quarterly reports tested, the required quarterly updates were done on an annual basis. B. Total amount of Emergency Financial Aid Grants distributed to students for the year ended 12/31/2020 per the publicly posted Student Emergency Financial Aid Reporting differ from the annual student aid portion expenditures per underlying accounting records, as follows: C. Total amount of Emergency Financial Aid Grants distributed to students for the year ended 12/31/2021 per the publicly posted Student Emergency Financial Aid Reporting differ from the annual student aid portion expenditures per underlying accounting records, as follows: 3. 84.425F COVID-19 HEERF-Institutional Portion 84.425L COVID-19 HEERF-Minority Serving Institution A. Quarterly Budget and Expenditure reports were publicly posted beyond the 10-day posting requirement after the end of each calendar quarters as follow: B. Total quarterly expenditures for the quarter ended 06/30/2021 per the publicly posted Quarterly Budget and Expenditure Reporting differ from the quarterly expenditures per underlying accounting records, as follows: Cause: The College lacks adequate internal controls over the timely and accurate preparation and review of required reports as stipulated in the Compliance Supplement. Effect: The College is in noncompliance with applicable reporting requirements. No questioned costs are presented as the identified reporting differences do not represent overpayments, and we are unable to quantify the impact of late reporting on the program. Identified as a Repeat Finding: 2020-008 Recommendation: College management should strengthen controls so that required reports are timely and accurately prepared and reviewed and submitted within the specified timeframes to evidence compliance with applicable reporting requirements. Views of Auditee and Corrective Action Plan: The College agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2021-006 Pass-Through Entity: Republic of the Marshall Islands Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social and Political Development of the Territories Federal Award No.: Compact of Free Association Program, As Amended Area: Allowable Costs/Cost Principles Questioned Costs: $4,597 Criteria: Federal program expenditures should be necessary and reasonable for the performance of the Federal award in accordance with allowable costs/cost principles requirements and be adequately documented. Conditions: 1. For three (or 9%) of thirty-two items, aggregating $29,888 of $1,479,778 in total payroll expenditures, deficiencies were noted, as follows: For item #s 1 and 2, there were no approved timesheets on file to substantiate the actual number of hours worked. For item # 3, we noted discrepancy in the number of credits paid which is based on employment contract against the number of equivalent credits assigned to instructors per Semester Section Offering or Instructor's Schedule. 2. For one (or 13%) of eight items, aggregating $49,248 of $320,550 in non-payroll expenditures, the item amounting to $1,250 (21-PO-2096) pertains to a per diem payment that was not supported by adequate documentation to ascertain whether the travel transpired. 3. One duplicated expenditure amounting to $2,119 (21-PO-1098) was charged to the program. Cause: The College lacks adequate internal controls over compliance with applicable federal regulations relating to allowable costs/cost principles, specifically, obtaining and retaining sufficient documentation to support all transactions. Effect: The College is in noncompliance with applicable allowable costs/cost principles requirements. Accordingly, questioned costs of $4,597 result because the projected questioned costs exceed the $25,000 threshold. Recommendation: College management should improve internal control policies and strengthen controls requiring obtaining and retaining sufficient documentation to support all transactions. Views of Auditee and Corrective Action Plan: The College partially agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2021-007 Pass-Through Entity: Republic of the Marshall Islands Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social and Political Development of the Territories Federal Award No.: Compact of Free Association Program, As Amended Area: Equipment and Real Property Management Questioned Costs: $ Undeterminable Criteria: Non-federal entities other than states must follow Sections 200.313(c) through (e) of the Uniform Guidance. Section 200.313(d) states that procedures for managing equipment, whether acquired in whole or in part under a Federal award, until disposition takes place will, as a minimum, meet the following requirements: a. Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property; b. A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years; c. A control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of the property. Any loss, damage, or theft must be investigated; d. Adequate maintenance procedures must be developed to keep the property in good condition; and e. If the non-Federal entity is authorized or required to sell the property, proper sales procedures must be established to ensure the highest possible return. Condition: Capital assets records do not meet the criteria above and are not effectively maintained since updates to the records occur only once a year. Specifically, we noted the following deficiencies: 1. Certain information in the capital assets records are either incomplete or missing, such as the source of funding for the property (including the FAIN), who holds title, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property). 2. An inventory of capital assets has been performed on an annual basis, however, the result of the physical inventory was not completely reflected/ reconciled with the property records. 3. As capital assets records are not effectively maintained, it does not appear that the College has effectively developed means to adequately safeguard capital assets from loss, damage, or theft, or to reasonably investigate such occurrences. 4. Long-lived assets are not routinely evaluated for possible impairment. Cause: The College lacks adequate internal control policies and procedures over compliance with applicable federal property rules and regulations and lacks effective procedures governing property maintenance, as well as periodic assessment of asset impairment conditions. Moreover, internal control policies and procedures requiring periodic and timely performance and independent review of capital assets reconciliations and related general ledger accounts are not effectively implemented. Effect: The College is in noncompliance with applicable equipment and real property management requirements. Questioned costs, if any, that may result from inadequate property records, maintenance procedures, and the absence of timely reconciliations are not determinable. Capital outlays within the program for fiscal years are summarized as follows: Recommendation: College management should establish and strengthen internal control policies and procedures over compliance with applicable federal regulations on equipment and real property management. Views of Auditee and Corrective Action Plan: The College agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2021-008 Pass-Through Entity: Republic of the Marshall Islands Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social and Political Development of the Territories Federal Award No.: Compact of Free Association Program, As Amended Area: Period of Performance Questioned Costs: $2,107 Criteria: The terms of the sub-awards administered by RepMar under the Compact of Free Association grant awards stipulate the period of performance during which time only costs resulting from obligations of the funding period may be charged. Condition: For three (or 9%) of thirty-two items, aggregating $29,888 of $1,479,778 in total payroll expenditures, the following cost of salaries charged to the program were incurred prior to the funding period stipulated in the grant awards: Cause: The College lacks adequate internal controls over compliance with applicable federal regulations relating to period of performance. Effect: The College is in noncompliance with applicable period of performance requirements. Accordingly, questioned costs of $2,107 result because the projected questioned costs exceed the $25,000 threshold. For item # 1, only $307 is included in the total questioned costs, which relates to costs incurred prior to the funding period stipulated in the grant awards. Recommendation: College management should improve internal control policies and strengthen controls to comply with applicable period of performance requirements. Specifically, review should be made to ensure all costs charged to the program are within the funding period stipulated in the grant awards. Views of Auditee and Corrective Action Plan: The College partially agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2021-009 Pass-Through Entity: Republic of the Marshall Islands Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social and Political Development of the Territories Federal Award No.: Compact of Free Association Program, As Amended Area: Procurement and Suspension and Debarment Questioned Costs: $68,090 Criteria: Under the terms of the sub-awards administered by RepMar under the Compact of Free Association grant awards, RepMar authorizes the College to use its own procedures for procurement provided they meet the RepMar Procurement Code. RepMar’s Procurement Code states the following: (a) Section 126.7 - Award shall be made to the responsible offeror whose proposal is determined in writing to be the most advantageous to the Government taking into consideration price and the evaluation factors set forth in the Request for Proposals. No other factors or criteria shall be used in the evaluation. The contract file shall contain the basis on which the award is made. (b) Section 127 - Procurement of goods and services not exceeding $25,000 may be made in accordance with small purchase procedures promulgated by RepMar’s Policy Office. Small purchase procedures are those relatively simple and informal methods for securing services, supplies, or other property that do not cost more than $25,000. RepMar’s Ministry of Finance has previously declared that if small purchase procedures are used, price or rate quotations shall be obtained from an adequate number of qualified sources. (c) Section 128 - a contract may be awarded for supply, service, or construction item without competition when it is determined in writing that there is only one source for the required supply, service, or construction item. (d) Section 129 - Notwithstanding any other provision of this Chapter, the Chief Procurement Officer, the head of a Purchasing Agency, or a designee of either officer may make or authorize others to make emergency procurement when there exists a threat to public health, welfare, or safety under emergency conditions as defined in regulations promulgated by the Policy Office; provided, that such emergency procurement shall be made with such competition as is practicable under the circumstances. Conditions: Of twenty-one items, aggregating $104,429 of $277,718 in total non-payroll expenditures, deficiencies were noted, as follows: 1. For 2 items (or 10%), procurement was not supported by appropriate procurement methodology; thus, the following purchases appear to have been sole sourced without written justification: 2. For 10 items (or 48%), supporting procurement documentation was not sufficient to substantiate compliance with small purchase procedures. For item #s 1 through 7, there were no vendor quotations on file. Moreover, for item #s 8 through 10, selected vendor is not the lowest bidder and no justification of vendor selection was on file. Cause: The College did not follow internal control policies and procedures over documentation of the procurement process to satisfy compliance with applicable procurement requirements. Effect: The College is in noncompliance with applicable procurement requirements. Total questioned cost is $68,090. Recommendation: Responsible personnel should ensure that documentation be adequate to comply with applicable procurement requirements. Specifically, documentation should indicate the history of procurement, including the solicitation process and rationale for contractors or vendor selection. Views of Auditee and Corrective Action Plan: The College agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2021-010 Pass-Through Entity: Republic of the Marshall Islands Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social and Political Development of the Territories Federal Award No.: Compact of Free Association Program, As Amended Area: Reporting Questioned Costs: $0 Criteria: Under the terms of the sub-awards administered by RepMar under the Compact of Free Association grant awards, the College is required to submit: 1. As supporting report for the initial payment request, a duly accomplished standard Form SG1- Subgrant Objectives and Budget Proposal; 2. As supporting report for subsequent payment requests, a duly accomplished standard Form SG2- Performance and Financial Evaluation quarterly report; 3. Duly accomplished Form SG2-Performance and Financial Evaluation final report within 30 calendar days after the end of the MOA’s term. If the organization is receiving subsidy or subgrant in the new fiscal year or new funding period, the prior year’s or prior funding period’s SG2 final report is required to be submitted together with the SG1 report, before the initial payment can be released under the new subsidy or subgrant MOA. Further, the College shall maintain an acceptable financial management system during the term of the sub-award agreement including an accurate, current and complete disclosure of financial activity of Company funds and consistency with all financial administration, program monitoring, performance reporting and enforcement provisions of the Financial Management Act. Conditions: 1. The College did not prepare and submit the required Form SG1- Subgrant Objectives and Budget Proposal as supporting report for the initial payment for the U.S. Compact Funding subaward for the Education Sector, Ebeye Special Needs – Adult Education, Compact Capital Fund and Supplemental Education Grant. 2. The College did not provide the required Form SG2-Performance and Financial Evaluation final report and Form SG2- Performance and Financial Evaluation quarterly report for the quarter ended June 30, 2021 for the U.S. Compact Funding subaward for the Education Sector, Ebeye Special Needs – Adult Education, Compact Capital Fund and Supplemental Education Grant. 3. Expenditures reported per the Form SG2- Performance and Financial Evaluation quarterly report did not agree to the underlying quarterly expenditures report submitted to the Secretary of Finance as follows: a. 1st Quarter ended December 31, 2020 b. 2nd Quarter ended March 31, 2021 4. Expenditures reported per the Form SG2- Performance and Financial Evaluation quarterly report did not agree to the quarterly expenditures reported in SEFA as follows: a. 1st Quarter ended December 31, 2020 b. 2nd Quarter ended March 31, 2021 No reconciliation was provided to reconcile the quarterly expenditures reported in SEFA against the expenditures reported per the Form SG2- Performance and Financial Evaluation quarterly report. Cause: The College lacks adequate internal controls over the timely and accurate preparation and review of required reports as stipulated in the sub-award agreements. Effect: The College appears to be in noncompliance with applicable reporting requirements. No questioned costs are presented as the total expenditures per SEFA for the fiscal year were reconciled with the federal awards received from the RMI Government. Recommendation: College management should strengthen controls so that required reports are timely and accurately prepared and reviewed and submitted within the specified timeframes to evidence compliance with applicable reporting requirements. Views of Auditee and Corrective Action Plan: The College partially agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2021-011 Federal Agency: U.S. Department of Education AL Program: 84.047A TRIO Upward Bound Federal Award No.: P047A171556-21 Area: Allowable Costs/Cost Principles Questioned Costs: $7,018 Criteria: Federal program expenditures should be necessary and reasonable for the performance of the Federal award in accordance with allowable costs/cost principles requirements and be adequately documented. Conditions: 1. For seventeen (or 71%) of twenty-four items, aggregating $17,796 of $185,064 in payroll total expenditures, deficiencies were noted, as follows: For item #s 1 through 8, employees were paid at a higher rate with no approved revised employee contract or pay increment memorandum on file to substantiate the higher rate paid to employees. For item #s 8 through 12, there were no approved timesheet on file to substantiate the actual number of hours worked. Further, for item # 12, there was no approved employment contract on file. For item #s 13 through 16, we noted discrepancy in the number of credits paid which is based on employment contract against the number of equivalent credits assigned to instructors per approved memorandum. Item # 17 pertains to salary advance for which there was inadequate documentation as to approval of advance made. 2. For one (or 6%) of sixteen items, aggregating $50,464 of $128,947 in total non-payroll expenditures, the item amounting to $2,185 (Check # 1033875) pertains to the purchase of office equipment for which no vendor invoice and receiving report was on file. Cause: The College lacks adequate internal controls over compliance with applicable federal regulations relating to allowable costs/cost principles, specifically, obtaining and retaining sufficient documentation to support all transactions. Effect: The College is in noncompliance with applicable allowable costs/cost principles requirements. Accordingly, questioned costs of $7,018 result because the projected questioned costs exceed the $25,000 threshold. For Condition # 1, item #s 1 through 7, only $403 is included in the total questioned costs, which relates to the difference between the unsupported higher rate paid and the approved rate. Further, for Condition # 1, item #s 13 through 16, only $1,641 is included in the total questioned costs, which relates to the dollar amount of difference in the number of credits paid between employment contract and approved memorandum. Recommendation: College management should improve internal control policies and strengthen controls requiring obtaining and retaining sufficient documentation to support all transactions. Views of Auditee and Corrective Action Plan: The College partially agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2021-012 Federal Agency: U.S. Department of Education AL Program: 84.047A TRIO Upward Bound Federal Award No.: P047A171556-21 Area: Eligibility Questioned Costs: $24,646 Criteria: Per OMB Compliance Supplement July 2021, an individual is eligible to participate in a Regular UB project if the individual meets all of the following requirements: (a) is a citizen, national, or permanent resident of the United States, or is in the United States for other than a temporary purpose; (b) is a potential first-generation college student, a low-income individual, or an individual who has a high risk for academic failure; (c) has a need for academic support in order to pursue successfully a program of education beyond high school; and (d) at the time of initial selection has completed the 8th grade but has not entered the 12th grade and is at least 13 years old but not older than 19. A veteran, regardless of age, who meets all other criteria is eligible to participate. A citizen, national, or permanent resident of the United States, includes a permanent resident of Guam, the Northern Mariana Islands, the Trust Territory of the Pacific Islands (Palau), or resident of one of the Freely Associated States - the Federated States of Micronesia or the Republic of the Marshall Islands. Moreover, 34 CFR Part 645.6(b) defines “Individual who has a high risk for academic failure” as an individual who: (a) Has not achieved at the proficient level on State assessments in reading or language arts; (b) Has not achieved at the proficient level on State assessments in math; (c) Has not successfully completed pre-algebra or algebra by the beginning of the tenth grade; or (d) Has a grade point average of 2.5 or less (on a 4.0 scale) for the most recent school year for which grade point averages are available. Furthermore, to be eligible for a stipend, participants must show evidence of satisfactory participation in project activities, including regular attendance and performance in accordance with the number of sessions in which a student participated. Stipends for regular projects may not exceed $40 per month from September to May of the academic year and $60 for each of the summer months (June, July, and August). Moreover, 34 CFR Part 645.43(c) states that for each participant, a grantee must maintain a record of the basis for the grantee’s determination that the participant is eligible to participate in the project and the basis for the grantee’s determination that the participant has a need for academic support in order to pursue successfully a program of education beyond secondary school. Condition: Of 9 students tested, aggregating $24,646 of $239,524 in total participant benefits, we noted noncompliance, as follows: 1. For 4 students listed below, no documentation was on file to support whether the individual is a citizen, national, or permanent resident of the United States (including a permanent resident of Guam, the Northern Mariana Islands, the Trust Territory of the Pacific Islands (Palau), or resident of one of the Freely Associated States - the Federated States of Micronesia or the Republic of the Marshall Islands), or is in the United States for other than a temporary purpose. 2. For 6 students listed below, it does not appear that the student has a need for academic support to successfully pursue a program of education beyond high school. Specifically, we noted that the student has either a) achieved at the proficient level on State assessments in reading or language arts; b) achieved at the proficient level on State assessments in math; c) successfully completed pre-algebra or algebra by the beginning of the tenth grade; or d) has a grade point average of higher than 2.5 (on a 4.0 scale) for the most recent school year. Further, we determined that the student does not have a high risk for academic failure, which is inconsistent with the College’s determined student eligibility status (“At high risk for academic failure”) reflected in the Annual Performance Report. 3. For 1 student (Student Case Number C000421734), it does not appear that the student has a need for academic support to successfully pursue a program of education beyond high school. Specifically, based on our examination of UB Program Recommendation Form accomplished by the student’s English and Math teachers, we noted that both teachers assigned the student a “B” grade (equivalent to 3.00 - 3.40 point in a 4.0 scale). Further, transcripts of records and/or State Assessments are not on file to support the College’s determined student eligibility status (“At high risk for academic failure”) reflected in the Annual Performance Report. 4. For 1 student (Student Case Number C000374322), no documentation was on file to support whether the individual has a need for academic support, to successfully pursue a program of education beyond high school. Further, transcripts of records and/or State Assessments are not on file to support the College’s determined student eligibility status (“At high risk for academic failure”) reflected in the Annual Performance Report. 5. For 3 students listed below, no documentation was on file to support whether the individual at the time of initial selection has completed the 8th grade but has not entered the 12th grade and is at least 13 years old but not older than 19. Cause: The College lacks adequate internal control policies and procedures over eligibility determinations, including obtaining required documentation and verification to support the College’s determination that the participant is eligible to participate in the project. Effect: The College is in noncompliance with applicable eligibility requirements. Accordingly, questioned costs of $24,646 result because the projected questioned costs exceed the $25,000 threshold. Recommendation: College management should improve internal control policies and strengthen controls so that eligibility determinations, including obtaining required documentation and verification, are performed in accordance with applicable eligibility requirements. Views of Auditee and Corrective Action Plan: The College agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2021-013 Federal Agency: U.S. Department of Education AL Program: 84.047A TRIO Upward Bound Federal Award No.: P047A171556-21 Area: Special Tests and Provisions - Minimizing Duplication of Services under the TS and UB Programs Questioned Costs: $ Undeterminable Criteria: Per OMB Compliance Supplement July 2021, to minimize the duplication of services and promote collaborations so that more students can be served, TS and UB projects are required to collaborate with other TRIO projects, Gaining Early Awareness and Readiness for Undergraduate programs (GEAR UP) projects (Assistance Listing 84.334), or projects from other programs serving similar populations that are serving the same target schools or target area (34 CFR sections 643.11(b) and 645.21(a)(4)). In addition, the recipients of TS and UB grants are required to keep records, to the extent practicable, of any services TS or UB participants receive during the project year from another TRIO program or another federally funded program that serves populations similar to those served under the TS and UB programs (34 CFR sections 643.32(c)(5) and 645.43(c)(5)). Condition: No supporting documentation (e.g., email correspondence, advertisements, etc.) was provided to demonstrate that specified plans in the UB Grant Application Form were implemented and/or other collaboration efforts were in place during FY2021. Cause: The College lacks adequate internal control policies and procedures over compliance with applicable special tests and provisions requirements for minimizing duplication of services under the TS and UB Programs. Effect: The College is in noncompliance with applicable special tests and provisions requirements for minimizing duplication of services under the TS and UB Programs requirements. No questioned cost is presented as we are unable to quantify the extent of noncompliance. Recommendation: College management should improve internal control policies and strengthen controls over compliance with applicable special tests and provisions requirements for minimizing duplication of services under the TS and UB Programs requirements. Views of Auditee and Corrective Action Plan: The College agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2021-014 Federal Agency: U.S. Department of Education AL Program: 84.425 Education Stabilization Fund AL Sub-Program: 84.425E Higher Education Emergency Relief Fund (HEERF) - Student Aid Portion Federal Award No.: COVID-19 P425E204126 AL Sub-Program: 84.425F HEERF - Institutional Portion Federal Award No.: COVID-19 P425F202732 AL Sub-Program: 84.425L HEERF - Minority Serving Institution Federal Award No.: COVID-19 P425L200219 Area: Activities Allowed or Unallowed Questioned Costs: $45,752 Criteria: In accordance with applicable activities allowed or unallowed requirements, institutions must demonstrate that costs incurred are allowable under the relevant statutory provisions and consistent with the purpose of the ESF “to prevent, prepare for, and respond to coronavirus”. Allowable expenditures incurred and liquidated prior to December 27, 2020 must have been “to cover any costs associated with significant changes to the delivery of instruction due to the coronavirus”. Further, beginning December 27, 2020, any unused HEERF I Institutional Portion funds, new HEERF II Institutional Portion funds and HEERF III Institutional Portion Funds, may be used to defray expenses associated with coronavirus (including lost revenue, reimbursement for expenses already incurred, technology costs associated with a transition to distance education, faculty and staff trainings, and payroll). Conditions: 1. For eleven (or 100%) of eleven items, aggregating $33,038 of $619,494 in total payroll expenditures, deficiencies were noted, as follows: The above salaries and wages were standard recurring costs and not an additional cost to the College. Specifically, for item #s 1 through 4, they are not directly associated with significant changes to the delivery of instructions due to the coronavirus (i.e. online teaching or expansion). Moreover, for item #s 5 through 11, they are not associated with coronavirus. Furthermore, there is no evidence of communication or consultation with the grantor agency that above expenditures are allowable. 2. For two (or 7%) of twenty-nine items, aggregating $1,716,073 of $2,490,000 in total non-payroll expenditures, deficiencies were noted, as follows: Item #s 12 and 13 are not associated with coronavirus. Specifically, expenditure relates to purchase of drone cameras and related accessories for the College’s graduation media operation. There is no evidence of communication or consultation with the grantor agency that above expenditures are allowable. Cause: The College lacks adequate internal controls over compliance with applicable activities allowed or unallowed requirements. Effect: The College is in noncompliance with applicable activities allowed or unallowed requirements. The total questioned cost is $45,752. Identified as a Repeat Finding: 2020-009 Recommendation: College management should improve internal control policies and strengthen controls and procedures over compliance with applicable federal regulations on activities allowed or unallowed. Views of Auditee and Corrective Action Plan: The College partially agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2012-015 Federal Agency: U.S. Department of Education AL Program: 84.425 Education Stabilization Fund AL Sub-Program: 84.425E Higher Education Emergency Relief Fund (HEERF) - Student Aid Portion Federal Award No.: COVID-19 P425E204126 AL Sub-Program: 84.425F HEERF - Institutional Portion Federal Award No.: COVID-19 P425F202732 AL Sub-Program: 84.425L HEERF - Minority Serving Institution Federal Award No.: COVID-19 P425L200219 Area: Allowable Costs/Cost Principles Questioned Costs: $109,757 Criteria: Federal program expenditures should be necessary and reasonable for the performance of the Federal award in accordance with allowable costs/cost principles requirements and be adequately documented. Conditions: 1. For nine (or 82%) of eleven items, aggregating $33,038 of $619,494 in total payroll expenditures, deficiencies were noted, as follows: For item #s 1 through 2, and item #s 4 through 9, we noted discrepancy in the number of credits paid which is based on employment contract against the number of equivalent credits assigned to instructors per Semester Section Offering or Instructor’s Schedule. Moreover, for item # 1, the employee was paid total amount of $2,275 that pertains to two separate contracts ($1,300 and $975), however, there was no approved additional contract or revision to the initial contract to substantiate the payment relating to $975. For item #s 3 and 7, there was no approved employment contract on file. No questioned costs are reported at this finding as questioned costs are reported at finding # 2021-014. 2. For two (or 7%) of twenty-nine items, aggregating $1,716,073 of $2,490,000 in total non-payroll expenditures, deficiencies were noted, as follows: Item #s 10 and 11 were not supported by adequate documentation (i.e. vendor invoices and receiving reports) to ascertain whether such expenditures were allowable costs of the underlying grants. Cause: The College lacks adequate internal controls over compliance with applicable federal regulations relating to allowable costs/cost principles, specifically, obtaining and retaining sufficient documentation to support all transactions. Effect: The College is in noncompliance with applicable allowable costs/cost principles requirements. The total questioned cost is $138,920, of which $29,163 is reported at finding # 2021-014. Recommendation: College management should improve internal control policies and strengthen controls requiring obtaining and retaining sufficient documentation to support all transactions. Views of Auditee and Corrective Action Plan: The College partially agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2021-017 Federal Agency: U.S. Department of Education AL Program: 84.425 Education Stabilization Fund AL Sub-Program: 84.425E Higher Education Emergency Relief Fund (HEERF) - Student Aid Portion Federal Award No.: COVID-19 P425E204126 AL Sub-Program: 84.425F HEERF - Institutional Portion Federal Award No.: COVID-19 P425F202732 AL Sub-Program: 84.425L HEERF - Minority Serving Institution Federal Award No.: COVID-19 P425L200219 Area: Reporting Questioned Costs: $0 Criteria: Annual Reporting - Per OMB Compliance Supplement Addendum July 2021, the HEERF Data Collection Form (OMB Control Number 1840-0850) must be submitted to ED via the Annual Report Data Collection System on February 8, 2021 (for reporting period from March 13, 2020 through December 31, 2020). Furthermore, amounts and data reported in the report should be accurate. Quarterly Public Reporting for (a)(1) Student Aid Portion - Per OMB Compliance Supplement Addendum July 2021, institutions that received a HEERF 18004(a)(1) Student Aid Portion award are required to publicly post certain information on their website no later than 30 days after award and update that information every 45 days thereafter. On August 31, 2020, the frequency of reporting after the initial 30-day period was decreased from every 45 days thereafter to every calendar quarter. On May 13, 2021, ED published an additional notice for student aid public reporting under CRRSAA and ARP, which requires that institution publicly post certain information on their website. Institutions must publicly post their report as soon as possible, but no later than 30 days after the publication of the notice or 30 days after the date ED first obligated funds under HEERF I, II, or III to the institution for Emergency Financial Aid Grants to Students, whichever comes later. The report must be updated no later than 10 days after the end of each calendar quarter. Quarterly Public Reporting for (a)(1) Institutional Portion and (a)(2), and (a)(3) funds - Per OMB Compliance Supplement Addendum July 2021, Quarterly Budget and Expenditure form must be conspicuously posted on the institution’s primary website on the same page the reports of the IHE’s activities as to the emergency financial aid grants to students (Student Aid Portion) are posted. The form must be posted covering each quarterly reporting period no later than 10 days after the end of each calendar quarter. Condition: 1. Total annual expenditures per the Annual Report Data Collection System differ from cumulative expenditures from the date of award through 12/31/20 per underlying accounting records, as follows: 2. ALN 84.425E COVID-19 HEERF-Student Aid Portion A. For both quarterly reports tested, the required quarterly updates were done on an annual basis. B. Total amount of Emergency Financial Aid Grants distributed to students for the year ended 12/31/2020 per the publicly posted Student Emergency Financial Aid Reporting differ from the annual student aid portion expenditures per underlying accounting records, as follows: C. Total amount of Emergency Financial Aid Grants distributed to students for the year ended 12/31/2021 per the publicly posted Student Emergency Financial Aid Reporting differ from the annual student aid portion expenditures per underlying accounting records, as follows: 3. 84.425F COVID-19 HEERF-Institutional Portion 84.425L COVID-19 HEERF-Minority Serving Institution A. Quarterly Budget and Expenditure reports were publicly posted beyond the 10-day posting requirement after the end of each calendar quarters as follow: B. Total quarterly expenditures for the quarter ended 06/30/2021 per the publicly posted Quarterly Budget and Expenditure Reporting differ from the quarterly expenditures per underlying accounting records, as follows: Cause: The College lacks adequate internal controls over the timely and accurate preparation and review of required reports as stipulated in the Compliance Supplement. Effect: The College is in noncompliance with applicable reporting requirements. No questioned costs are presented as the identified reporting differences do not represent overpayments, and we are unable to quantify the impact of late reporting on the program. Identified as a Repeat Finding: 2020-008 Recommendation: College management should strengthen controls so that required reports are timely and accurately prepared and reviewed and submitted within the specified timeframes to evidence compliance with applicable reporting requirements. Views of Auditee and Corrective Action Plan: The College agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2021-014 Federal Agency: U.S. Department of Education AL Program: 84.425 Education Stabilization Fund AL Sub-Program: 84.425E Higher Education Emergency Relief Fund (HEERF) - Student Aid Portion Federal Award No.: COVID-19 P425E204126 AL Sub-Program: 84.425F HEERF - Institutional Portion Federal Award No.: COVID-19 P425F202732 AL Sub-Program: 84.425L HEERF - Minority Serving Institution Federal Award No.: COVID-19 P425L200219 Area: Activities Allowed or Unallowed Questioned Costs: $45,752 Criteria: In accordance with applicable activities allowed or unallowed requirements, institutions must demonstrate that costs incurred are allowable under the relevant statutory provisions and consistent with the purpose of the ESF “to prevent, prepare for, and respond to coronavirus”. Allowable expenditures incurred and liquidated prior to December 27, 2020 must have been “to cover any costs associated with significant changes to the delivery of instruction due to the coronavirus”. Further, beginning December 27, 2020, any unused HEERF I Institutional Portion funds, new HEERF II Institutional Portion funds and HEERF III Institutional Portion Funds, may be used to defray expenses associated with coronavirus (including lost revenue, reimbursement for expenses already incurred, technology costs associated with a transition to distance education, faculty and staff trainings, and payroll). Conditions: 1. For eleven (or 100%) of eleven items, aggregating $33,038 of $619,494 in total payroll expenditures, deficiencies were noted, as follows: The above salaries and wages were standard recurring costs and not an additional cost to the College. Specifically, for item #s 1 through 4, they are not directly associated with significant changes to the delivery of instructions due to the coronavirus (i.e. online teaching or expansion). Moreover, for item #s 5 through 11, they are not associated with coronavirus. Furthermore, there is no evidence of communication or consultation with the grantor agency that above expenditures are allowable. 2. For two (or 7%) of twenty-nine items, aggregating $1,716,073 of $2,490,000 in total non-payroll expenditures, deficiencies were noted, as follows: Item #s 12 and 13 are not associated with coronavirus. Specifically, expenditure relates to purchase of drone cameras and related accessories for the College’s graduation media operation. There is no evidence of communication or consultation with the grantor agency that above expenditures are allowable. Cause: The College lacks adequate internal controls over compliance with applicable activities allowed or unallowed requirements. Effect: The College is in noncompliance with applicable activities allowed or unallowed requirements. The total questioned cost is $45,752. Identified as a Repeat Finding: 2020-009 Recommendation: College management should improve internal control policies and strengthen controls and procedures over compliance with applicable federal regulations on activities allowed or unallowed. Views of Auditee and Corrective Action Plan: The College partially agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2012-015 Federal Agency: U.S. Department of Education AL Program: 84.425 Education Stabilization Fund AL Sub-Program: 84.425E Higher Education Emergency Relief Fund (HEERF) - Student Aid Portion Federal Award No.: COVID-19 P425E204126 AL Sub-Program: 84.425F HEERF - Institutional Portion Federal Award No.: COVID-19 P425F202732 AL Sub-Program: 84.425L HEERF - Minority Serving Institution Federal Award No.: COVID-19 P425L200219 Area: Allowable Costs/Cost Principles Questioned Costs: $109,757 Criteria: Federal program expenditures should be necessary and reasonable for the performance of the Federal award in accordance with allowable costs/cost principles requirements and be adequately documented. Conditions: 1. For nine (or 82%) of eleven items, aggregating $33,038 of $619,494 in total payroll expenditures, deficiencies were noted, as follows: For item #s 1 through 2, and item #s 4 through 9, we noted discrepancy in the number of credits paid which is based on employment contract against the number of equivalent credits assigned to instructors per Semester Section Offering or Instructor’s Schedule. Moreover, for item # 1, the employee was paid total amount of $2,275 that pertains to two separate contracts ($1,300 and $975), however, there was no approved additional contract or revision to the initial contract to substantiate the payment relating to $975. For item #s 3 and 7, there was no approved employment contract on file. No questioned costs are reported at this finding as questioned costs are reported at finding # 2021-014. 2. For two (or 7%) of twenty-nine items, aggregating $1,716,073 of $2,490,000 in total non-payroll expenditures, deficiencies were noted, as follows: Item #s 10 and 11 were not supported by adequate documentation (i.e. vendor invoices and receiving reports) to ascertain whether such expenditures were allowable costs of the underlying grants. Cause: The College lacks adequate internal controls over compliance with applicable federal regulations relating to allowable costs/cost principles, specifically, obtaining and retaining sufficient documentation to support all transactions. Effect: The College is in noncompliance with applicable allowable costs/cost principles requirements. The total questioned cost is $138,920, of which $29,163 is reported at finding # 2021-014. Recommendation: College management should improve internal control policies and strengthen controls requiring obtaining and retaining sufficient documentation to support all transactions. Views of Auditee and Corrective Action Plan: The College partially agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2012-016 Federal Agency: U.S. Department of Education Federal Award No.: COVID-19 P425E204126 AL Sub-Program: 84.425F HEERF - Institutional Portion Federal Award No.: COVID-19 P425F202732 AL Sub-Program: 84.425L HEERF - Minority Serving Institution Federal Award No.: COVID-19 P425L200219 Area: Procurement and Suspension and Debarment Questioned Costs: $192,795 Criteria: Under the terms of the sub-awards administered by RepMar under the Compact of Free Association grant awards, RepMar authorizes the College to use its own procedures for procurement provided they meet the RepMar Procurement Code. RepMar’s Procurement Code states the following: (a) Section 126.7 - Award shall be made to the responsible offeror whose proposal is determined in writing to be the most advantageous to the Government taking into consideration price and the evaluation factors set forth in the Request for Proposals. No other factors or criteria shall be used in the evaluation. The contract file shall contain the basis on which the award is made. (b) Section 127 - Procurement of goods and services not exceeding $25,000 may be made in accordance with small purchase procedures promulgated by RepMar’s Policy Office. Small purchase procedures are those relatively simple and informal methods for securing services, supplies, or other property that do not cost more than $25,000. RepMar’s Ministry of Finance has previously declared that if small purchase procedures are used, price or rate quotations shall be obtained from an adequate number of qualified sources. (c) Section 128 - a contract may be awarded for supply, service, or construction item without competition when it is determined in writing that there is only one source for the required supply, service, or construction item. (d) Section 129 - Notwithstanding any other provision of this Chapter, the Chief Procurement Officer, the head of a Purchasing Agency, or a designee of either officer may make or authorize others to make emergency procurement when there exists a threat to public health, welfare, or safety under emergency conditions as defined in regulations promulgated by the Policy Office; provided, that such emergency procurement shall be made with such competition as is practicable under the circumstances. Condition: Of eight items, aggregating $268,560 of $700,377 in total non-payroll expenditures, deficiencies were noted, as follows: 1. For 4 items (or 50%), procurement was not supported by competitive sealed bid or another appropriate procurement methodology; thus, the following purchases either appear to have been sole sourced without written justification or sole sourced with written justification but does not appear to be justified: No questioned cost is reported at this finding for item # 4 as questioned cost is reported at finding # 2021-015. 2. For 3 items (or 38%), supporting procurement documentation was not sufficient to substantiate compliance with small purchase procedures: For item # 6, there were no vendor quotations on file. Moreover, for item #s 5 and 7, selected vendor is not the lowest bidder and no justification of vendor selection was on file. Cause: The College did not follow internal control policies and procedures over documentation of the procurement process to satisfy compliance with applicable procurement requirements. Effect: The College is in noncompliance with applicable procurement requirements. The total questioned cost is $251,250, of which $58,455 is reported at finding # 2021-015. Recommendation: Responsible personnel should ensure that documentation be adequate to comply with applicable procurement requirements. Specifically, documentation should indicate the history of procurement, including the solicitation process and rationale for contractors or vendor selection. Views of Auditee and Corrective Action Plan: The College partially agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2021-017 Federal Agency: U.S. Department of Education AL Program: 84.425 Education Stabilization Fund AL Sub-Program: 84.425E Higher Education Emergency Relief Fund (HEERF) - Student Aid Portion Federal Award No.: COVID-19 P425E204126 AL Sub-Program: 84.425F HEERF - Institutional Portion Federal Award No.: COVID-19 P425F202732 AL Sub-Program: 84.425L HEERF - Minority Serving Institution Federal Award No.: COVID-19 P425L200219 Area: Reporting Questioned Costs: $0 Criteria: Annual Reporting - Per OMB Compliance Supplement Addendum July 2021, the HEERF Data Collection Form (OMB Control Number 1840-0850) must be submitted to ED via the Annual Report Data Collection System on February 8, 2021 (for reporting period from March 13, 2020 through December 31, 2020). Furthermore, amounts and data reported in the report should be accurate. Quarterly Public Reporting for (a)(1) Student Aid Portion - Per OMB Compliance Supplement Addendum July 2021, institutions that received a HEERF 18004(a)(1) Student Aid Portion award are required to publicly post certain information on their website no later than 30 days after award and update that information every 45 days thereafter. On August 31, 2020, the frequency of reporting after the initial 30-day period was decreased from every 45 days thereafter to every calendar quarter. On May 13, 2021, ED published an additional notice for student aid public reporting under CRRSAA and ARP, which requires that institution publicly post certain information on their website. Institutions must publicly post their report as soon as possible, but no later than 30 days after the publication of the notice or 30 days after the date ED first obligated funds under HEERF I, II, or III to the institution for Emergency Financial Aid Grants to Students, whichever comes later. The report must be updated no later than 10 days after the end of each calendar quarter. Quarterly Public Reporting for (a)(1) Institutional Portion and (a)(2), and (a)(3) funds - Per OMB Compliance Supplement Addendum July 2021, Quarterly Budget and Expenditure form must be conspicuously posted on the institution’s primary website on the same page the reports of the IHE’s activities as to the emergency financial aid grants to students (Student Aid Portion) are posted. The form must be posted covering each quarterly reporting period no later than 10 days after the end of each calendar quarter. Condition: 1. Total annual expenditures per the Annual Report Data Collection System differ from cumulative expenditures from the date of award through 12/31/20 per underlying accounting records, as follows: 2. ALN 84.425E COVID-19 HEERF-Student Aid Portion A. For both quarterly reports tested, the required quarterly updates were done on an annual basis. B. Total amount of Emergency Financial Aid Grants distributed to students for the year ended 12/31/2020 per the publicly posted Student Emergency Financial Aid Reporting differ from the annual student aid portion expenditures per underlying accounting records, as follows: C. Total amount of Emergency Financial Aid Grants distributed to students for the year ended 12/31/2021 per the publicly posted Student Emergency Financial Aid Reporting differ from the annual student aid portion expenditures per underlying accounting records, as follows: 3. 84.425F COVID-19 HEERF-Institutional Portion 84.425L COVID-19 HEERF-Minority Serving Institution A. Quarterly Budget and Expenditure reports were publicly posted beyond the 10-day posting requirement after the end of each calendar quarters as follow: B. Total quarterly expenditures for the quarter ended 06/30/2021 per the publicly posted Quarterly Budget and Expenditure Reporting differ from the quarterly expenditures per underlying accounting records, as follows: Cause: The College lacks adequate internal controls over the timely and accurate preparation and review of required reports as stipulated in the Compliance Supplement. Effect: The College is in noncompliance with applicable reporting requirements. No questioned costs are presented as the identified reporting differences do not represent overpayments, and we are unable to quantify the impact of late reporting on the program. Identified as a Repeat Finding: 2020-008 Recommendation: College management should strengthen controls so that required reports are timely and accurately prepared and reviewed and submitted within the specified timeframes to evidence compliance with applicable reporting requirements. Views of Auditee and Corrective Action Plan: The College agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2021-014 Federal Agency: U.S. Department of Education AL Program: 84.425 Education Stabilization Fund AL Sub-Program: 84.425E Higher Education Emergency Relief Fund (HEERF) - Student Aid Portion Federal Award No.: COVID-19 P425E204126 AL Sub-Program: 84.425F HEERF - Institutional Portion Federal Award No.: COVID-19 P425F202732 AL Sub-Program: 84.425L HEERF - Minority Serving Institution Federal Award No.: COVID-19 P425L200219 Area: Activities Allowed or Unallowed Questioned Costs: $45,752 Criteria: In accordance with applicable activities allowed or unallowed requirements, institutions must demonstrate that costs incurred are allowable under the relevant statutory provisions and consistent with the purpose of the ESF “to prevent, prepare for, and respond to coronavirus”. Allowable expenditures incurred and liquidated prior to December 27, 2020 must have been “to cover any costs associated with significant changes to the delivery of instruction due to the coronavirus”. Further, beginning December 27, 2020, any unused HEERF I Institutional Portion funds, new HEERF II Institutional Portion funds and HEERF III Institutional Portion Funds, may be used to defray expenses associated with coronavirus (including lost revenue, reimbursement for expenses already incurred, technology costs associated with a transition to distance education, faculty and staff trainings, and payroll). Conditions: 1. For eleven (or 100%) of eleven items, aggregating $33,038 of $619,494 in total payroll expenditures, deficiencies were noted, as follows: The above salaries and wages were standard recurring costs and not an additional cost to the College. Specifically, for item #s 1 through 4, they are not directly associated with significant changes to the delivery of instructions due to the coronavirus (i.e. online teaching or expansion). Moreover, for item #s 5 through 11, they are not associated with coronavirus. Furthermore, there is no evidence of communication or consultation with the grantor agency that above expenditures are allowable. 2. For two (or 7%) of twenty-nine items, aggregating $1,716,073 of $2,490,000 in total non-payroll expenditures, deficiencies were noted, as follows: Item #s 12 and 13 are not associated with coronavirus. Specifically, expenditure relates to purchase of drone cameras and related accessories for the College’s graduation media operation. There is no evidence of communication or consultation with the grantor agency that above expenditures are allowable. Cause: The College lacks adequate internal controls over compliance with applicable activities allowed or unallowed requirements. Effect: The College is in noncompliance with applicable activities allowed or unallowed requirements. The total questioned cost is $45,752. Identified as a Repeat Finding: 2020-009 Recommendation: College management should improve internal control policies and strengthen controls and procedures over compliance with applicable federal regulations on activities allowed or unallowed. Views of Auditee and Corrective Action Plan: The College partially agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2012-015 Federal Agency: U.S. Department of Education AL Program: 84.425 Education Stabilization Fund AL Sub-Program: 84.425E Higher Education Emergency Relief Fund (HEERF) - Student Aid Portion Federal Award No.: COVID-19 P425E204126 AL Sub-Program: 84.425F HEERF - Institutional Portion Federal Award No.: COVID-19 P425F202732 AL Sub-Program: 84.425L HEERF - Minority Serving Institution Federal Award No.: COVID-19 P425L200219 Area: Allowable Costs/Cost Principles Questioned Costs: $109,757 Criteria: Federal program expenditures should be necessary and reasonable for the performance of the Federal award in accordance with allowable costs/cost principles requirements and be adequately documented. Conditions: 1. For nine (or 82%) of eleven items, aggregating $33,038 of $619,494 in total payroll expenditures, deficiencies were noted, as follows: For item #s 1 through 2, and item #s 4 through 9, we noted discrepancy in the number of credits paid which is based on employment contract against the number of equivalent credits assigned to instructors per Semester Section Offering or Instructor’s Schedule. Moreover, for item # 1, the employee was paid total amount of $2,275 that pertains to two separate contracts ($1,300 and $975), however, there was no approved additional contract or revision to the initial contract to substantiate the payment relating to $975. For item #s 3 and 7, there was no approved employment contract on file. No questioned costs are reported at this finding as questioned costs are reported at finding # 2021-014. 2. For two (or 7%) of twenty-nine items, aggregating $1,716,073 of $2,490,000 in total non-payroll expenditures, deficiencies were noted, as follows: Item #s 10 and 11 were not supported by adequate documentation (i.e. vendor invoices and receiving reports) to ascertain whether such expenditures were allowable costs of the underlying grants. Cause: The College lacks adequate internal controls over compliance with applicable federal regulations relating to allowable costs/cost principles, specifically, obtaining and retaining sufficient documentation to support all transactions. Effect: The College is in noncompliance with applicable allowable costs/cost principles requirements. The total questioned cost is $138,920, of which $29,163 is reported at finding # 2021-014. Recommendation: College management should improve internal control policies and strengthen controls requiring obtaining and retaining sufficient documentation to support all transactions. Views of Auditee and Corrective Action Plan: The College partially agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2012-016 Federal Agency: U.S. Department of Education Federal Award No.: COVID-19 P425E204126 AL Sub-Program: 84.425F HEERF - Institutional Portion Federal Award No.: COVID-19 P425F202732 AL Sub-Program: 84.425L HEERF - Minority Serving Institution Federal Award No.: COVID-19 P425L200219 Area: Procurement and Suspension and Debarment Questioned Costs: $192,795 Criteria: Under the terms of the sub-awards administered by RepMar under the Compact of Free Association grant awards, RepMar authorizes the College to use its own procedures for procurement provided they meet the RepMar Procurement Code. RepMar’s Procurement Code states the following: (a) Section 126.7 - Award shall be made to the responsible offeror whose proposal is determined in writing to be the most advantageous to the Government taking into consideration price and the evaluation factors set forth in the Request for Proposals. No other factors or criteria shall be used in the evaluation. The contract file shall contain the basis on which the award is made. (b) Section 127 - Procurement of goods and services not exceeding $25,000 may be made in accordance with small purchase procedures promulgated by RepMar’s Policy Office. Small purchase procedures are those relatively simple and informal methods for securing services, supplies, or other property that do not cost more than $25,000. RepMar’s Ministry of Finance has previously declared that if small purchase procedures are used, price or rate quotations shall be obtained from an adequate number of qualified sources. (c) Section 128 - a contract may be awarded for supply, service, or construction item without competition when it is determined in writing that there is only one source for the required supply, service, or construction item. (d) Section 129 - Notwithstanding any other provision of this Chapter, the Chief Procurement Officer, the head of a Purchasing Agency, or a designee of either officer may make or authorize others to make emergency procurement when there exists a threat to public health, welfare, or safety under emergency conditions as defined in regulations promulgated by the Policy Office; provided, that such emergency procurement shall be made with such competition as is practicable under the circumstances. Condition: Of eight items, aggregating $268,560 of $700,377 in total non-payroll expenditures, deficiencies were noted, as follows: 1. For 4 items (or 50%), procurement was not supported by competitive sealed bid or another appropriate procurement methodology; thus, the following purchases either appear to have been sole sourced without written justification or sole sourced with written justification but does not appear to be justified: No questioned cost is reported at this finding for item # 4 as questioned cost is reported at finding # 2021-015. 2. For 3 items (or 38%), supporting procurement documentation was not sufficient to substantiate compliance with small purchase procedures: For item # 6, there were no vendor quotations on file. Moreover, for item #s 5 and 7, selected vendor is not the lowest bidder and no justification of vendor selection was on file. Cause: The College did not follow internal control policies and procedures over documentation of the procurement process to satisfy compliance with applicable procurement requirements. Effect: The College is in noncompliance with applicable procurement requirements. The total questioned cost is $251,250, of which $58,455 is reported at finding # 2021-015. Recommendation: Responsible personnel should ensure that documentation be adequate to comply with applicable procurement requirements. Specifically, documentation should indicate the history of procurement, including the solicitation process and rationale for contractors or vendor selection. Views of Auditee and Corrective Action Plan: The College partially agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2021-017 Federal Agency: U.S. Department of Education AL Program: 84.425 Education Stabilization Fund AL Sub-Program: 84.425E Higher Education Emergency Relief Fund (HEERF) - Student Aid Portion Federal Award No.: COVID-19 P425E204126 AL Sub-Program: 84.425F HEERF - Institutional Portion Federal Award No.: COVID-19 P425F202732 AL Sub-Program: 84.425L HEERF - Minority Serving Institution Federal Award No.: COVID-19 P425L200219 Area: Reporting Questioned Costs: $0 Criteria: Annual Reporting - Per OMB Compliance Supplement Addendum July 2021, the HEERF Data Collection Form (OMB Control Number 1840-0850) must be submitted to ED via the Annual Report Data Collection System on February 8, 2021 (for reporting period from March 13, 2020 through December 31, 2020). Furthermore, amounts and data reported in the report should be accurate. Quarterly Public Reporting for (a)(1) Student Aid Portion - Per OMB Compliance Supplement Addendum July 2021, institutions that received a HEERF 18004(a)(1) Student Aid Portion award are required to publicly post certain information on their website no later than 30 days after award and update that information every 45 days thereafter. On August 31, 2020, the frequency of reporting after the initial 30-day period was decreased from every 45 days thereafter to every calendar quarter. On May 13, 2021, ED published an additional notice for student aid public reporting under CRRSAA and ARP, which requires that institution publicly post certain information on their website. Institutions must publicly post their report as soon as possible, but no later than 30 days after the publication of the notice or 30 days after the date ED first obligated funds under HEERF I, II, or III to the institution for Emergency Financial Aid Grants to Students, whichever comes later. The report must be updated no later than 10 days after the end of each calendar quarter. Quarterly Public Reporting for (a)(1) Institutional Portion and (a)(2), and (a)(3) funds - Per OMB Compliance Supplement Addendum July 2021, Quarterly Budget and Expenditure form must be conspicuously posted on the institution’s primary website on the same page the reports of the IHE’s activities as to the emergency financial aid grants to students (Student Aid Portion) are posted. The form must be posted covering each quarterly reporting period no later than 10 days after the end of each calendar quarter. Condition: 1. Total annual expenditures per the Annual Report Data Collection System differ from cumulative expenditures from the date of award through 12/31/20 per underlying accounting records, as follows: 2. ALN 84.425E COVID-19 HEERF-Student Aid Portion A. For both quarterly reports tested, the required quarterly updates were done on an annual basis. B. Total amount of Emergency Financial Aid Grants distributed to students for the year ended 12/31/2020 per the publicly posted Student Emergency Financial Aid Reporting differ from the annual student aid portion expenditures per underlying accounting records, as follows: C. Total amount of Emergency Financial Aid Grants distributed to students for the year ended 12/31/2021 per the publicly posted Student Emergency Financial Aid Reporting differ from the annual student aid portion expenditures per underlying accounting records, as follows: 3. 84.425F COVID-19 HEERF-Institutional Portion 84.425L COVID-19 HEERF-Minority Serving Institution A. Quarterly Budget and Expenditure reports were publicly posted beyond the 10-day posting requirement after the end of each calendar quarters as follow: B. Total quarterly expenditures for the quarter ended 06/30/2021 per the publicly posted Quarterly Budget and Expenditure Reporting differ from the quarterly expenditures per underlying accounting records, as follows: Cause: The College lacks adequate internal controls over the timely and accurate preparation and review of required reports as stipulated in the Compliance Supplement. Effect: The College is in noncompliance with applicable reporting requirements. No questioned costs are presented as the identified reporting differences do not represent overpayments, and we are unable to quantify the impact of late reporting on the program. Identified as a Repeat Finding: 2020-008 Recommendation: College management should strengthen controls so that required reports are timely and accurately prepared and reviewed and submitted within the specified timeframes to evidence compliance with applicable reporting requirements. Views of Auditee and Corrective Action Plan: The College agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2021-006 Pass-Through Entity: Republic of the Marshall Islands Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social and Political Development of the Territories Federal Award No.: Compact of Free Association Program, As Amended Area: Allowable Costs/Cost Principles Questioned Costs: $4,597 Criteria: Federal program expenditures should be necessary and reasonable for the performance of the Federal award in accordance with allowable costs/cost principles requirements and be adequately documented. Conditions: 1. For three (or 9%) of thirty-two items, aggregating $29,888 of $1,479,778 in total payroll expenditures, deficiencies were noted, as follows: For item #s 1 and 2, there were no approved timesheets on file to substantiate the actual number of hours worked. For item # 3, we noted discrepancy in the number of credits paid which is based on employment contract against the number of equivalent credits assigned to instructors per Semester Section Offering or Instructor's Schedule. 2. For one (or 13%) of eight items, aggregating $49,248 of $320,550 in non-payroll expenditures, the item amounting to $1,250 (21-PO-2096) pertains to a per diem payment that was not supported by adequate documentation to ascertain whether the travel transpired. 3. One duplicated expenditure amounting to $2,119 (21-PO-1098) was charged to the program. Cause: The College lacks adequate internal controls over compliance with applicable federal regulations relating to allowable costs/cost principles, specifically, obtaining and retaining sufficient documentation to support all transactions. Effect: The College is in noncompliance with applicable allowable costs/cost principles requirements. Accordingly, questioned costs of $4,597 result because the projected questioned costs exceed the $25,000 threshold. Recommendation: College management should improve internal control policies and strengthen controls requiring obtaining and retaining sufficient documentation to support all transactions. Views of Auditee and Corrective Action Plan: The College partially agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2021-007 Pass-Through Entity: Republic of the Marshall Islands Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social and Political Development of the Territories Federal Award No.: Compact of Free Association Program, As Amended Area: Equipment and Real Property Management Questioned Costs: $ Undeterminable Criteria: Non-federal entities other than states must follow Sections 200.313(c) through (e) of the Uniform Guidance. Section 200.313(d) states that procedures for managing equipment, whether acquired in whole or in part under a Federal award, until disposition takes place will, as a minimum, meet the following requirements: a. Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property; b. A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years; c. A control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of the property. Any loss, damage, or theft must be investigated; d. Adequate maintenance procedures must be developed to keep the property in good condition; and e. If the non-Federal entity is authorized or required to sell the property, proper sales procedures must be established to ensure the highest possible return. Condition: Capital assets records do not meet the criteria above and are not effectively maintained since updates to the records occur only once a year. Specifically, we noted the following deficiencies: 1. Certain information in the capital assets records are either incomplete or missing, such as the source of funding for the property (including the FAIN), who holds title, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property). 2. An inventory of capital assets has been performed on an annual basis, however, the result of the physical inventory was not completely reflected/ reconciled with the property records. 3. As capital assets records are not effectively maintained, it does not appear that the College has effectively developed means to adequately safeguard capital assets from loss, damage, or theft, or to reasonably investigate such occurrences. 4. Long-lived assets are not routinely evaluated for possible impairment. Cause: The College lacks adequate internal control policies and procedures over compliance with applicable federal property rules and regulations and lacks effective procedures governing property maintenance, as well as periodic assessment of asset impairment conditions. Moreover, internal control policies and procedures requiring periodic and timely performance and independent review of capital assets reconciliations and related general ledger accounts are not effectively implemented. Effect: The College is in noncompliance with applicable equipment and real property management requirements. Questioned costs, if any, that may result from inadequate property records, maintenance procedures, and the absence of timely reconciliations are not determinable. Capital outlays within the program for fiscal years are summarized as follows: Recommendation: College management should establish and strengthen internal control policies and procedures over compliance with applicable federal regulations on equipment and real property management. Views of Auditee and Corrective Action Plan: The College agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2021-008 Pass-Through Entity: Republic of the Marshall Islands Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social and Political Development of the Territories Federal Award No.: Compact of Free Association Program, As Amended Area: Period of Performance Questioned Costs: $2,107 Criteria: The terms of the sub-awards administered by RepMar under the Compact of Free Association grant awards stipulate the period of performance during which time only costs resulting from obligations of the funding period may be charged. Condition: For three (or 9%) of thirty-two items, aggregating $29,888 of $1,479,778 in total payroll expenditures, the following cost of salaries charged to the program were incurred prior to the funding period stipulated in the grant awards: Cause: The College lacks adequate internal controls over compliance with applicable federal regulations relating to period of performance. Effect: The College is in noncompliance with applicable period of performance requirements. Accordingly, questioned costs of $2,107 result because the projected questioned costs exceed the $25,000 threshold. For item # 1, only $307 is included in the total questioned costs, which relates to costs incurred prior to the funding period stipulated in the grant awards. Recommendation: College management should improve internal control policies and strengthen controls to comply with applicable period of performance requirements. Specifically, review should be made to ensure all costs charged to the program are within the funding period stipulated in the grant awards. Views of Auditee and Corrective Action Plan: The College partially agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2021-009 Pass-Through Entity: Republic of the Marshall Islands Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social and Political Development of the Territories Federal Award No.: Compact of Free Association Program, As Amended Area: Procurement and Suspension and Debarment Questioned Costs: $68,090 Criteria: Under the terms of the sub-awards administered by RepMar under the Compact of Free Association grant awards, RepMar authorizes the College to use its own procedures for procurement provided they meet the RepMar Procurement Code. RepMar’s Procurement Code states the following: (a) Section 126.7 - Award shall be made to the responsible offeror whose proposal is determined in writing to be the most advantageous to the Government taking into consideration price and the evaluation factors set forth in the Request for Proposals. No other factors or criteria shall be used in the evaluation. The contract file shall contain the basis on which the award is made. (b) Section 127 - Procurement of goods and services not exceeding $25,000 may be made in accordance with small purchase procedures promulgated by RepMar’s Policy Office. Small purchase procedures are those relatively simple and informal methods for securing services, supplies, or other property that do not cost more than $25,000. RepMar’s Ministry of Finance has previously declared that if small purchase procedures are used, price or rate quotations shall be obtained from an adequate number of qualified sources. (c) Section 128 - a contract may be awarded for supply, service, or construction item without competition when it is determined in writing that there is only one source for the required supply, service, or construction item. (d) Section 129 - Notwithstanding any other provision of this Chapter, the Chief Procurement Officer, the head of a Purchasing Agency, or a designee of either officer may make or authorize others to make emergency procurement when there exists a threat to public health, welfare, or safety under emergency conditions as defined in regulations promulgated by the Policy Office; provided, that such emergency procurement shall be made with such competition as is practicable under the circumstances. Conditions: Of twenty-one items, aggregating $104,429 of $277,718 in total non-payroll expenditures, deficiencies were noted, as follows: 1. For 2 items (or 10%), procurement was not supported by appropriate procurement methodology; thus, the following purchases appear to have been sole sourced without written justification: 2. For 10 items (or 48%), supporting procurement documentation was not sufficient to substantiate compliance with small purchase procedures. For item #s 1 through 7, there were no vendor quotations on file. Moreover, for item #s 8 through 10, selected vendor is not the lowest bidder and no justification of vendor selection was on file. Cause: The College did not follow internal control policies and procedures over documentation of the procurement process to satisfy compliance with applicable procurement requirements. Effect: The College is in noncompliance with applicable procurement requirements. Total questioned cost is $68,090. Recommendation: Responsible personnel should ensure that documentation be adequate to comply with applicable procurement requirements. Specifically, documentation should indicate the history of procurement, including the solicitation process and rationale for contractors or vendor selection. Views of Auditee and Corrective Action Plan: The College agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2021-010 Pass-Through Entity: Republic of the Marshall Islands Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social and Political Development of the Territories Federal Award No.: Compact of Free Association Program, As Amended Area: Reporting Questioned Costs: $0 Criteria: Under the terms of the sub-awards administered by RepMar under the Compact of Free Association grant awards, the College is required to submit: 1. As supporting report for the initial payment request, a duly accomplished standard Form SG1- Subgrant Objectives and Budget Proposal; 2. As supporting report for subsequent payment requests, a duly accomplished standard Form SG2- Performance and Financial Evaluation quarterly report; 3. Duly accomplished Form SG2-Performance and Financial Evaluation final report within 30 calendar days after the end of the MOA’s term. If the organization is receiving subsidy or subgrant in the new fiscal year or new funding period, the prior year’s or prior funding period’s SG2 final report is required to be submitted together with the SG1 report, before the initial payment can be released under the new subsidy or subgrant MOA. Further, the College shall maintain an acceptable financial management system during the term of the sub-award agreement including an accurate, current and complete disclosure of financial activity of Company funds and consistency with all financial administration, program monitoring, performance reporting and enforcement provisions of the Financial Management Act. Conditions: 1. The College did not prepare and submit the required Form SG1- Subgrant Objectives and Budget Proposal as supporting report for the initial payment for the U.S. Compact Funding subaward for the Education Sector, Ebeye Special Needs – Adult Education, Compact Capital Fund and Supplemental Education Grant. 2. The College did not provide the required Form SG2-Performance and Financial Evaluation final report and Form SG2- Performance and Financial Evaluation quarterly report for the quarter ended June 30, 2021 for the U.S. Compact Funding subaward for the Education Sector, Ebeye Special Needs – Adult Education, Compact Capital Fund and Supplemental Education Grant. 3. Expenditures reported per the Form SG2- Performance and Financial Evaluation quarterly report did not agree to the underlying quarterly expenditures report submitted to the Secretary of Finance as follows: a. 1st Quarter ended December 31, 2020 b. 2nd Quarter ended March 31, 2021 4. Expenditures reported per the Form SG2- Performance and Financial Evaluation quarterly report did not agree to the quarterly expenditures reported in SEFA as follows: a. 1st Quarter ended December 31, 2020 b. 2nd Quarter ended March 31, 2021 No reconciliation was provided to reconcile the quarterly expenditures reported in SEFA against the expenditures reported per the Form SG2- Performance and Financial Evaluation quarterly report. Cause: The College lacks adequate internal controls over the timely and accurate preparation and review of required reports as stipulated in the sub-award agreements. Effect: The College appears to be in noncompliance with applicable reporting requirements. No questioned costs are presented as the total expenditures per SEFA for the fiscal year were reconciled with the federal awards received from the RMI Government. Recommendation: College management should strengthen controls so that required reports are timely and accurately prepared and reviewed and submitted within the specified timeframes to evidence compliance with applicable reporting requirements. Views of Auditee and Corrective Action Plan: The College partially agrees with the finding and provides details in its Corrective Action Plan.