Corrective Action Plan For the Year Ended June 30, 2022 Findings for the Year Ended June 30, 2022 2022 ? 001 Financial Responsibility Ratio (Student Financial Aid Cluster ? All programs) Criteria According to 34 CFR 668. 171(b)(1), an institution is considered to be financially responsible if the institution?s Equity, Primary Reserve, and Net Income ratios yield a composite score of at least 1.5. Condition The University?s composite score as of June 30, 2022 was below 1.5. Cause Noncompliance was caused by the University?s financial condition. Effect The University is not considered to be financially responsible. Questioned Cost There is no questioned cost related to this finding. Context During review of the University?s financial responsibility ratio calculation, we noted that its composite score as of June 30, 2022 was below 1.5. Recommendation We recommend the University take appropriate steps to improve its financial condition to be compliant. Corrective Action Planned In September 2019, the University secured long-term bond financing. The long-term financing allowed the implementation of the 5-Year Strategic Business Plan, repayment of the Presidio Bank operating line of credit, new program investments of $9.65 million, and provided additional operating cash needed during the strategic plan implementation. The goals of the 5-Year Strategic Business Plan are to develop new academic programs, increase enrollment, expand our advancement team and major donor programs, all of which will improve the financial position of the University. In addition, for the 2022-2023, the University reduced its budget by over $3.5 million. The Board of Trustees announced in December 2022, plans to cease academic operations and degree granting in May 2023 after the completion of the spring semester. In spring 2022, Holy Names University was seeking a partner institution to keep the university functioning and continue the mission of our founders, SNJM. While the University had interest in long-term collaboration from potential partners, the University was not able to reach closure in a way that would allow it to continue offering programs and services. The ongoing impact of COVID-19 enrollment declines were especially significant, particularly for fall term 2022. In addition, the University experienced rising operational costs and student retention issues. In January 2023, the University declared financial exigency, which gave the University greater flexibility to allocate its remaining resources to deliver spring term academic and athletic programs and support the transition of continuing students to other institutions. The University initiated layoffs beginning February 3, 2023 and continues to reduce expenses, funding only the most critical instructional and health and safety expenses. In February 2023, The University bondholder filed a notice of default based on noncompliance with the prior period operating ratio covenant. In March 2023 the University began marketing efforts to support the sale of the 60-acre campus. In April 2023 the University sold the residence, formerly occupied the University's President, for $3 million. The net proceeds to the University were $1.2 million after expenses and after a repayment of a $1.6 million loan on the property drawn in 2023. The net book value of the property at June 30, 2022 was $1.2 million. Responsible Personnel Jeanine Hawk, EdD, MBA Vice-President, Finance and Administration Mobile: 408-590-5834 hawk@ndnu.edu