Finding 2025-003 - U.S. Department of Education (ED), Title III Programs (material weakness) Information on the Federal Programs – Title III, FAL No. 84.031, June 30, 2025 Criteria – Federal regulations require recipients of federal awards to minimize the time elapsing between the transfer of funds from the U.S. Department of Education and the disbursement of those funds. Specifically, 2 CFR §200.305(b) requires non-federal entities to maintain effective cash management procedures to ensure that federal funds are drawn only to meet immediate cash needs for program expenditures. Condition – The institution maintained excess federal cash balances for Title III programs at year-end of $1,320,114. Federal funds were drawn down in advance of actual program expenditures and were not disbursed within a reasonable period, resulting in excess cash balances that exceeded immediate program needs. Cause – The excess cash balances resulted from inadequate cash management procedures, including: a) lack of timely reconciliation between federal drawdowns and actual expenditures; b) drawdown practices not aligned with immediate cash needs; c) insufficient monitoring and oversight of grant cash balances and d) failure to adjust drawdown amounts based on current spending patterns. Effect – As a result of these deficiencies: a) federal cash was not managed in accordance with 2 CFR §200.305; b) the College was exposed to potential disallowances and increased federal oversight; c) there is an increased risk of questioned costs and repayment of excess funds and d) continued noncompliance may jeopardize future federal funding. Auditor’s Perspective – From the auditor’s perspective, the magnitude of excess cash, particularly within the Title III program, combined with the repeat nature of the finding, indicates a material weakness in internal control over compliance. Effective cash management controls are fundamental to federal grant compliance, and failure to correct this issue increases the risk of misuse or mismanagement of federal funds. Questioned Costs – $1,320,114. However, the excess cash balances represent noncompliance with federal cash management requirements and may be subject to further review or repayment if not promptly resolved. Repeat Finding – Yes. This finding was reported in a prior audit and corrective actions were not sufficient to prevent recurrence. Auditor’s Recommendation – We recommend that management: a) Establish and implement formal cash management procedures to ensure federal funds are drawn only to meet immediate cash needs; b) perform regular and timely reconciliations between drawdowns and actual expenditures for each federal program; c) strengthen oversight and monitoring of grant cash balances at both the program and central finance levels; d) provide training to staff responsible for federal drawdowns on federal cash management requirements and e) periodically review spending trends and adjust drawdown practices accordingly. Management should also develop and implement a corrective action plan to address the repeat nature of this finding and ensure sustained compliance with federal regulations. View of Responsible Officials – The College is aware of the findings and has hired additional staff to ensure that past behavior changes through a better understanding of the process. In addition, the College will send additional individuals to Title III Training. The college will ensure that every expenditure has a clear audit trail and that reconciliation is performed monthly. Progress will be tracked on each activity.
Finding 2025-005 - U.S. Department of Education (ED), Student Financial Assistance Cluster - Untimely Return of Title IV Funds (R2T4) (significant deficiency): Information on the Federal Program: Federal Pell Grant Program, FAL No. 84. 063, June 30, 2025; Federal Supplemental Educational Opportunity Grant (FSEOG), FAL No. 84.007, June 30, 2025; Federal Work-Study Program (FWS), FAL No. 84.033, June 30, 2025; Federal Direct Student Loans, FAL No. 84.268, June 30, 2025. Criteria – Per 34 CFR § 668.22 (j), (1) institutions must return the amount of Title IV funds for which they are responsible as soon as possible, but no later than 45 days after the date the institution determines that a student has withdrawn. Condition – During our review of the Return of Title IV Funds (R2T4) calculations, we identified one (1) out of four (4) students for whom the institution did not return unearned Title IV funds within the 45-day requirement. Cause – The institution did not consistently apply the R2T4 requirements under 34 CFR §668.22 for all students who withdrew during the review period, resulting in funds not being returned timely. Effect – The institution was not in compliance with federal R2T4 return requirements. Untimely returns reflect weaknesses in internal controls over Title IV administration and may adversely affect administrative capability under 34 CFR § 668.16. Questioned Costs – $0 Perspective – Returning unearned Title IV funds within 45 days is a core compliance requirement. Institutions must demonstrate the ability to promptly identify withdrawals, accurately calculate R2T4 amounts, and process returns to maintain Title IV eligibility. Repeat Finding – No Auditor’s Recommendation – The institution should implement a formal R2T4 tracking and monitoring system, strengthen coordination between departments and perform periodic supervisory reviews of R2T4 calculations and returns. View of Responsible Officials – Do not concur. All returns to Title IV were processed within 45 days of receiving withdrawal notification from the Registrar’s Office.
Finding 2025-006 - U.S. Department of Education (ED), Student Financial Assistance Cluster - Untimely Release of Title IV Credit Balances (significant deficiency): Information on the Federal Program: Federal Pell Grant Program, FAL No. 84. 063, June 30, 2025; Federal Supplemental Educational Opportunity Grant (FSEOG), FAL No. 84.007, June 30, 2025; Federal Work-Study Program (FWS), FAL No. 84.033, June 30, 2025; Federal Direct Student Loans, FAL No. 84.268, June 30, 2025. Criteria – Per 34 CFR § 668.164 (h)(1)-(2), institutions must Pay a Title IV credit balance to the student (or parent, in the case of a PLUS Loan) no later than 14 calendar days after the balance occurs. Condition – During testing of student account activity, we identified that nine (9) out of 38 students had credit balances related to Title IV funds that remained on their accounts for more than 14 days without being released. Cause – The delays resulted from insufficient monitoring and follow-up of aged credit balances on student accounts. Effect – Holding Title IV funds beyond the allowable timeframe negatively impacts administrative capability under 34 CFR § 668.16 and exposes the College to regulatory findings and corrective action. Questioned Costs – $0 Perspective – Timely release of Title IV credit balances is one of the Department of Education’s most frequently tested compliance areas. A failure rate of 13.3% (8 out of 60 students) indicates a systemic internal control weakness rather than an isolated oversight error. Repeat Finding – Yes Auditor’s Recommendation – The institution should implement weekly monitoring of credit balances, enhance interdepartmental coordination, and establish automated alerts to ensure timely disbursements. View of Responsible Officials – The institution is aware of the late refunds and has implemented a process to prevent this from recurring.
Finding 2025-007 - U.S. Department of Education (ED), Student Financial Assistance Cluster - Missing Documentation of Required Entrance and Exit Counseling (significant deficiency): Information on the Federal Program: Federal Pell Grant Program, FAL No. 84. 063, June 30, 2025; Federal Supplemental Educational Opportunity Grant (FSEOG), FAL No. 84.007, June 30, 2025; Federal Work-Study Program (FWS), FAL No. 84.033, June 30, 2025; Federal Direct Student Loans, FAL No. 84.268, June 30, 2025. Criteria – Per 34 CFR § 685.304(a), An institution must ensure that a first-time Direct Loan borrower must complete entrance counseling prior to loan disbursement. Per 34 CFR § 685.304(b), An institution must ensure that a Direct Loan borrower completes exit counseling when they cease to be enrolled at least half time or graduate. Per 34 CFR § 668.24(a), institutions must maintain documentation demonstrating compliance. Condition – During testing of student loan files, we identified that two (2) of 23 students did not have documentation demonstrating completion of required entrance or exit counseling after loan disbursement. Despite the missing of documentation, these students received Direct Loan funds without evidence that federally required counseling was completed. Cause – The exception appears to have resulted from lack of a formal tracking process to verify completion of entrance and exit counseling, failure to reconcile COD counseling completion reports with student files, and insufficient internal controls to prevent loan disbursement or student separation processing without required counseling documentation. Effect – The institution disbursed Direct Loan funds without verifying required counseling. Students may not have received critical information about loan terms, repayment obligations, and borrower rights and responsibilities. The weakness increases risk of improper loan administration and may impact the institution’s administrative capability under 34 CFR § 668.16. Questioned Costs – $0 Perspective – Entrance and exit counseling are fundamental borrower protection require-ments under the Direct Loan Program. Missing documentation in 9% of files (two (2) out of 23) indicates a systemic oversight issue, not an isolated occurrence. The Department of Education expects institutions to actively verify and retain evidence that counseling has been completed before disbursement and at separation. Repeat Finding – No Auditor’s Recommendation – The College should establish and implement comprehensive policies and procedures governing entrance and exit counseling for all borrowers by implementing counseling verification controls, perform regular counseling report reconciliation and retain documentation in student files. View of Responsible Officials – The institution is aware of this finding and has implemented a more stringent process to prevent this from recurring.
Finding 2025-002 – U.S. Department of Education (ED), TRIO Programs (material weakness): Information on Federal Programs – TRIO Upward Bound Assistance Listing, FAL No. 84.047, June 30, 2025 Criteria – Federal regulations require that at least two-thirds (67%) of participants served by the TRIO Upward Bound Program be low-income and first-generation college students. 20 U.S.C. § 1070a-11 34 CFR § 645.3 (Definitions); 34 CFR § 645.11 (Participant eligibility and selection). In addition, recipients are required to maintain accurate eligibility documentation and report complete and reliable participant data in the annual performance report in accordance with 2 CFR § 200.303 and 2 CFR § 200.328. Condition – The TRIO Upward Bound Program did not meet the federally required two-thirds first-generation/low-income participant threshold. The annual performance report reflected that only 51% of participants were identified as first-generation and/or low-income. During testing of participant eligibility documentation, the participant roster reflected that only 58% of participants met the first-generation and/or low-income eligibility requirement. Cause – The condition appears to be the result of insufficient internal controls over participant eligibility determination and monitoring, including: a) inadequate review procedures to ensure eligibility requirements were met prior to participant enrollment; b) lack of ongoing monitoring to ensure continued compliance with the two-thirds eligibility requirement throughout the program year and c) insufficient reconciliation between eligibility documentation and performance reporting data. Effect – Failure to meet the statutory eligibility threshold places the program out of compliance with federal requirements and may result in: a) questioned eligibility of program participants, b) increased risk of enforcement actions, including corrective action plans or repayment of federal funds.; c) possible loss or reduction of future funding and d) risk of program eligibility. Repeat Finding – Yes. Although this is a repeat finding for Upward Bound, Student Support Services was resolved in the current year. Questioned Costs – Questioned costs could not be reasonably determined for this finding due to the inability to directly associate program expenditures with individual ineligible participants. Auditor’s Perspective – From the auditor’s perspective, this finding represents material noncompliance with federal eligibility and reporting requirements for the TRIO Upward Bound Program. Federal statutes and regulations require that at least two-thirds (67%) of program participants be low-income and first-generation college students. The program’s failure to meet this threshold both in reported data (51%) and in tested eligibility documentation (58%) demonstrates a systemic breakdown in compliance, rather than an isolated or clerical error. The discrepancy between eligibility documentation and the annual performance report further indicates weaknesses in internal controls over compliance, as required by 2 CFR § 200.303. Accurate eligibility determination is a core program requirement, directly tied to the program’s statutory purpose and funding authorization. Noncompliance with this requirement undermines assurance that federal funds were used to serve the intended population. Auditor’s Perspective – (continued) Because eligibility compliance affects the allowability of participant-related costs, the inability to demonstrate that the required proportion of participants met eligibility criteria creates an elevated risk of questioned or disallowed costs. While questioned costs could not be reasonably quantified, the scope and pervasiveness of the condition support classification of this finding as material. Absent corrective action, the program remains exposed to continued noncompliance, increased federal oversight, and potential enforcement actions by the U.S. Department of Education. Strengthening eligibility controls, monitoring, and reporting reconciliation is necessary to restore compliance and reduce future audit risk. Auditor’s Recommendation – We recommend that management: a) strengthen internal controls over participant eligibility determination, including documented review and approval procedures; b) implement periodic monitoring to ensure the two-thirds first-generation/low-income require-ment is met throughout the program year; c) Ensure accurate and consistent reporting between eligibility records and annual performance reports and d) provide staff training on federal eligibility requirements for the TRIO Upward Bound Program. View of Responsible Officials – The correct 2/3 requirement percentage from the 2024-2025 TRIO Upward Bound APR is 63%; the referenced 51% was from the 2023-2024 APR. The TRIO Upward Bound Program’s fiscal year for 2024-2025 was September 1, 2024, to August 31, 2025, which is different from the College’s fiscal year. A roster was requested and submitted reflecting TRIO Upward Bound participants during the College’s fiscal year, July 1, 2024 -June 30, 2025. The submitted roster did not reflect the participants for the Program’s 2024-2025 fiscal year. Failure to meet the 2/3 requirement stems from ongoing challenges in recruiting Program participants. Recruitment has been and continues to be a challenge for TRIO Programs nationwide since the pandemic. The TRIO Upward Bound Staff are very knowledgeable about Program eligibility and documentation requirements. A thorough review of eligibility is completed to ensure applicants meet at least one (and preferably both) eligibility criteria PRIOR TO acceptance. The TRIO Upward Bound Program received funding for FY2025 (September 1, 2025, - August 31, 2026) in the full amount of $550,864.00. The receipt of a Non-Competing Continuation (NCC) Grant Award Notice means the U.S. Department of Education is giving approval to allow the Paine College TRIO Upward Bound Program to continue serving students without any stipulations to the Program or College. The Program is operating under normal terms and conditions. Program Staff is working diligently to recruit more students to ensure compliance with the 2/3 eligibility requirement for the 2025-2026 program/fiscal year.
Finding 2025-004 - U.S. Department of Education (ED), TRIO Programs (material weakness) Information on the Federal Programs –TRIO Upward Bound, FAL No. 84.047A, June 30, 2025 and TRIO Student Support Services, FAL No. 84.042A, June 30, 2025 Criteria – Federal regulations require recipients of federal awards to minimize the time elapsing between the transfer of funds from the U.S. Department of Education and the disbursement of those funds. Specifically, 2 CFR §200.305(b) requires non-federal entities to maintain effective cash management procedures to ensure that federal funds are drawn only to meet immediate cash needs for program expenditures. Condition – The institution maintained excess federal cash balances for multiple federal programs at year-end, as follows: TRIO Upward Bound: $95,989 TRIO Student Support Services: $211,218 Federal funds were drawn down in advance of actual program expenditures and were not disbursed within a reasonable period, resulting in excess cash balances that exceeded immediate program needs. Cause – The excess cash balances resulted from inadequate cash management procedures, including: a) lack of timely reconciliation between federal drawdowns and actual expenditures; b) drawdown practices not aligned with immediate cash needs; c) insufficient monitoring and oversight of grant cash balances and d) failure to adjust drawdown amounts based on current spending patterns. Effect – As a result of these deficiencies: a) federal cash was not managed in accordance with 2 CFR §200.305; b) the College was exposed to potential disallowances and increased federal oversight; c) there is an increased risk of questioned costs and repayment of excess funds and d) continued noncompliance may jeopardize future federal funding. Auditor’s Perspective – From the auditor’s perspective, the magnitude of excess cash, particularly within the TRIO program, combined with the repeat nature of the finding, indicates a material weakness in internal control over compliance. Effective cash management controls are fundamental to federal grant compliance, and failure to correct this issue increases the risk of misuse or mismanagement of federal funds. Questioned Costs – $307,207. However, the excess cash balances represent noncompliance with federal cash management requirements and may be subject to further review or repayment if not promptly resolved. Repeat Finding – Yes. This finding was reported in a prior audit and corrective actions were not sufficient to prevent recurrence. Auditor’s Recommendation – We recommend that management: a) Establish and implement formal cash management procedures to ensure federal funds are drawn only to meet immediate cash needs; b) perform regular and timely reconciliations between drawdowns and actual expenditures for each federal program; c) strengthen oversight and monitoring of grant cash balances at both the program and central finance levels; d) provide training to staff responsible for federal drawdowns on federal cash management requirements and e) periodically review spending trends and adjust drawdown practices accordingly. Management should also develop and implement a corrective action plan to address the repeat nature of this finding and ensure sustained compliance with federal regulations. View of Responsible Officials – The College is aware of the past breakdown in Internal controls under the previous Administration and is working closely with the directors to ensure that we do not have any repeat findings in this area. The main tasks that are being performed are hiring of additional staff, constant communication, and timely reconciliation.