Finding 23152 (2022-007)

Material Weakness
Requirement
BG
Questioned Costs
$1
Year
2022
Accepted
2023-05-04
Audit: 23264
Organization: Cleary University (MI)

AI Summary

  • Core Issue: The University misused Higher Education Emergency Relief Funds (HEERF III) by applying excess funds to student balances instead of providing emergency financial aid grants.
  • Impacted Requirements: The University failed to meet the requirement of using at least 50% of HEERF funds for direct student aid, resulting in $88,958 in questioned costs.
  • Recommended Follow-Up: Management and accounting staff should undergo grant-specific training and implement detailed recordkeeping to ensure compliance with federal funding requirements.

Finding Text

2022-007 ? Higher Education Emergency Relief Funds Earmarking Requirements Finding Type. Material Noncompliance/Material Weakness in Internal Control over Compliance (Earmarking/Allowable Costs/Cost Principles). Program. COVID-19 - Higher Education Emergency Relief Fund; Assistance Listing Numbers 84.425E, 84.425F. Criteria. The University is required to use Higher Education Emergency Relief Funds (HEERF) in accordance with the applicable law under which the funds were appropriated. At least 50% of HEERF I funds, appropriated under the Coronavirus Aid, Relief, and Economic Security Act (CARES), must be reserved to provide students with emergency financial aid grants. Under HEERF II, appropriated under the Coronavirus Response and Relief Supplemental Appropriations Act (CRRSAA), the University must provide at least the same amount of funding in financial aid grants to students as was required under its student aid portion of HEERF I. HEERF III, appropriated under the American Rescue Plan, requires a portion of funds must be used to implement evidence-based practices to monitor and suppress coronavirus in accordance with public health guidelines and conduct direct outreach to financial aid applicants about the opportunity to receive a financial aid adjustment due to the recent unemployment of a family member or independent student. The student portion of HEERF awards must be used to provide students with emergency financial aid grants. Condition. The University had excess funds after disbursing to students from the student portion of HEERF III emergency financial aid grants. Management discharged outstanding student balances using the excess student portion of HEERF III. Management advised students the funds could be applied to outstanding balances; however, students were not given the option to receive a cash payment in lieu of being applied to outstanding balances. Management also did not maintain detail records tracking how HEERF funds were spent across HEERF I, HEERF II, and HEERF III. Cause. This condition appears to have been caused by management lacking the appropriate knowledge and understanding of the grant requirements. Additionally, there was not appropriate oversight of accounting personnel involved in the grant management to ensure the appropriate level of detailed recordkeeping was being performed. Effect. As a result of this condition, the student portion of HEERF III was used for a purpose other than to provide emergency financial aid grants to students. The University partially discharged the existing student balance of 31 students amounting to $88,958. The University did not spend the required cumulative minimum of the student portion on allowable costs. Questioned Costs. $88,958 in questioned costs have been identified. Recommendation. We recommend management and accounting personnel with involvement in federal funding attend grant specific trainings and that the University maintain detailed records to allow the proper tracking of federal expenditures on a grant level basis. View of Responsible Officials. Management agrees with the finding. See corrective action plan.

Corrective Action Plan

2022-007 ? Higher Education Emergency Relief Funds Earmarking Requirements Auditor Description of Condition and Effect. The University had excess funds after disbursing to students from the student portion of HEERF III emergency financial aid grants. Management discharged outstanding student balances using the excess student portion of HEERF III. Management advised students the funds could be applied to outstanding balances; however, students were not given the option to receive a cash payment in lieu of being applied to outstanding balances. Management also did not maintain detail records tracking how HEERF funds were spent across HEERF I, HEERF II, and HEERF III. As a result of this condition, the student portion of HEERF III was used for a purpose other than to provide emergency financial aid grants to students. The University partially discharged the existing student balance of 31 students amounting to $88,958. The University did not spend the required cumulative minimum of the student portion on allowable costs. Auditor Recommendation. We recommend management and accounting personnel with involvement in federal funding attend grant specific trainings and that the University maintain detailed records to allow the proper tracking of federal expenditures on a grant level basis. "Corrective Action: The University better understands the tracking requirements and the University will ensure any future funds are tracked appropriately based on the grant guidelines. Specifically with respect to HEERF III disbursements, Cleary agrees with the finding. After disbursing HEERF III funds to each student, some students had remaining outstanding balances. Management was concerned for a subset of 31 students who still had large remaining balances and were in danger of having that balance sent to a collection agency. So the remaining funds available were applied to the balances of those students. In other communications to students, the University had in the past offered students the option of applying the funds to their accounts or taking the amount in cash. Due to an oversight, the University did not offer that option to students in this circumstance. The University should have presented students with the option of receiving the HEERF funds in cash rather than having it applied to their student account. The University is in the process of drafting a communication to each of the 31 individual students affected, making them aware that Cleary applied HEERF funds to their outstanding student balances but should have offered a cash payment option. The letter will state that Cleary can issue cash disbursements if the student contacts the Student Accounts office. The communication also makes it clear to students that this will create a balance due on their current student account that must be satisfied before they can re-register for classes. In addition, Business Office and Financial Aid staff involved in federal funding will attend grant-specific training on an annual basis." Responsible Person. Alan Drimmer Anticipated Completion Date: 4/20/2023

Categories

Questioned Costs Allowable Costs / Cost Principles Matching / Level of Effort / Earmarking Internal Control / Segregation of Duties Material Weakness

Other Findings in this Audit

  • 23136 2022-003
    Significant Deficiency
  • 23137 2022-004
    Significant Deficiency
  • 23138 2022-005
    Significant Deficiency
  • 23139 2022-006
    Significant Deficiency
  • 23140 2022-003
    Significant Deficiency
  • 23141 2022-004
    Significant Deficiency
  • 23142 2022-005
    Significant Deficiency
  • 23143 2022-006
    Significant Deficiency
  • 23144 2022-003
    Significant Deficiency
  • 23145 2022-004
    Significant Deficiency
  • 23146 2022-005
    Significant Deficiency
  • 23147 2022-006
    Significant Deficiency
  • 23148 2022-003
    Significant Deficiency
  • 23149 2022-004
    Significant Deficiency
  • 23150 2022-005
    Significant Deficiency
  • 23151 2022-006
    Significant Deficiency
  • 23153 2022-008
    Significant Deficiency
  • 23154 2022-009
    Significant Deficiency
  • 23155 2022-010
    Significant Deficiency
  • 23156 2022-011
    Significant Deficiency
  • 23157 2022-007
    Material Weakness
  • 23158 2022-008
    Significant Deficiency
  • 23159 2022-009
    Significant Deficiency
  • 23160 2022-010
    Significant Deficiency
  • 23161 2022-011
    Significant Deficiency
  • 599578 2022-003
    Significant Deficiency
  • 599579 2022-004
    Significant Deficiency
  • 599580 2022-005
    Significant Deficiency
  • 599581 2022-006
    Significant Deficiency
  • 599582 2022-003
    Significant Deficiency
  • 599583 2022-004
    Significant Deficiency
  • 599584 2022-005
    Significant Deficiency
  • 599585 2022-006
    Significant Deficiency
  • 599586 2022-003
    Significant Deficiency
  • 599587 2022-004
    Significant Deficiency
  • 599588 2022-005
    Significant Deficiency
  • 599589 2022-006
    Significant Deficiency
  • 599590 2022-003
    Significant Deficiency
  • 599591 2022-004
    Significant Deficiency
  • 599592 2022-005
    Significant Deficiency
  • 599593 2022-006
    Significant Deficiency
  • 599594 2022-007
    Material Weakness
  • 599595 2022-008
    Significant Deficiency
  • 599596 2022-009
    Significant Deficiency
  • 599597 2022-010
    Significant Deficiency
  • 599598 2022-011
    Significant Deficiency
  • 599599 2022-007
    Material Weakness
  • 599600 2022-008
    Significant Deficiency
  • 599601 2022-009
    Significant Deficiency
  • 599602 2022-010
    Significant Deficiency
  • 599603 2022-011
    Significant Deficiency

Programs in Audit

ALN Program Name Expenditures
84.268 Federal Direct Student Loans $4.12M
84.063 Federal Pell Grant Program $877,633
84.425 Education Stabilization Fund $127,202
84.033 Federal Work-Study Program $48,017
84.007 Federal Supplemental Educational Opportunity Grants $41,048