Assistance listing program: Education Stabilization Fund - Higher Education Emergency Relief Fund (HEERF) Assistance Listing Number: 84.425E / 84.425F Award identification number: P425F204999 / P425E205418 Award period: September 29, 2020 to June 30, 2023 and July 23, 2020 to May 23, 2022 Federal agency: U.S. Department of Education Pass-through entity: N/A Category: Internal Control / Compliance Finding Type: Material Weakness Compliance requirement: Reporting Condition and context For testing internal controls and compliance with reporting requirements applicable to the HEERF programs, we inquired the Institution about the internal controls and procedures for determining the criteria and methodology used in compiling and reporting the data to be included in the annual and quarterly special reports. We requested a copy of the annual report for the calendar year 2021 and the quarterly reports for the quarter ended on December 31, 2021 related to the institutional aid portion and the student aid portion. As part of our procedures, we tested the method of distribution of grants to ascertain consistency with the method that was actually employed by the Institution to distribute emergency financial aid grants to students. After our examination and tests performed, we noted the following: a) The methodology used to compile the information in the annual report was based on the funds drawdowns which were based on disbursements rather than the actual program expenditures for the Institutional aid funds in accordance with GAAP. b) After examination of the institutional aid portion expenditures amounts reported in the annual special report for the calendar year ended December 31, 2021 to the support provided by the Institution, we noted that the total of institutional annual expenditures was understated by $7,160. c) From the sample of enrollment statistical data selected for verification to the source documents and/or information we noted several differences and were unable to identify some of the information in the source documents in nineteen (19) out of a sample of thirty (30) statistical data lines examined in the annual special report. The exceptions were as follows: d) After examination of the quarterly special report of the student aid portion for the quarter ended December 31, 2021, we noted a difference in the Item #5: ?The total number of students who have received an Emergency Financial Aid Grant to students under the CARES (a)(1) subprogram and the CRRSAA and ARP (a)(1) subprograms?. The total of students that received assistance aid reported was 443; however, the number per the student aid payroll reports examined was 460. Additionally, no support was available to determine if the Institution was timely and accurate in publicly posting the quarterly Student Aid Portion Report selected for testing. e) In one out of a sample of forty (40) disbursements of financial aid to students (2.5%) we noted that the payment made did not agree with the Institution's fund distribution plan to prioritize students with financial need. The aid in excess disbursed to that student was $200. Criteria 2 CFR 200.302 (a) establishes that each state must expend and account for the Federal award in accordance with state laws, and procedures for expending and accounting for the state's own funds. In addition, the state's and the other non-Federal entity's financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. 2 CFR 200.302 (b) (2) to (4) establish that accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in ?? 200.328 and 200.329. If a Federal awarding agency requires reporting on an accrual basis from a recipient that maintains its records on other than an accrual basis, the recipient must not be required to establish an accrual accounting system. This recipient may develop accrual data for its reports on the basis of an analysis of the documentation on hand. Records that identify adequately the source and application of funds for federally-funded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income, and interest and be supported by source documentation. Effective control over, and accountability for, all funds, property, and other assets. 2 CFR 200.303 (a) to (d) establish that the non-Federal entity must: (a) Establish and maintain effective internal control over the Federal awards that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal awards. These internal controls should be in compliance with guidance in ?Standards for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the ?Internal Control Integrated Framework,? issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). (b) Comply with the U.S. Constitution, Federal statutes, regulations, and the terms and conditions of the Federal awards. (c) Evaluate and monitor the non-Federal entity's compliance with statutes, regulations and the terms and conditions of Federal awards. (d) Take prompt action when instances of noncompliance are identified including noncompliance identified in audit findings. 2 CFR 200.334 establishes that financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. Cause The cause of the deficiencies noted were due to the following situations: a) The source of information provided by the Institution related to the financial information was the G5 report. Such information is on a cash basis; therefore, financial information was not reported on an accrual basis of accounting which is the basis of accounting followed by the Institution. Additionally, the Institution did not appropriately design and maintained documentation and/or analysis performed to prepare and complete the financial information required to be reported in the quarterly and annual reports. b) Lack of recordkeeping controls and procedures to document and maintain the source of information used for the financial and statistical data required in the annual and quarterly special reports. c) The Institution used the student EFC per the ISIR/SAR available at the time of the distribution, even though, an ISIR with a valid EFC was not available since the student FAFSA application was selected for verification by USDE. After the Institution completed the verification the student EFC increased from 0 to 3676. Effect Noncompliance with the reporting requirements could lead to significant administrative actions by the grantor, including a reduction in the amounts to be awarded. It could also be interpreted as a failure to achieve the programs objectives. Questioned costs Likely questioned costs are less than $25,000. Identification as a Repeat Finding No repeated finding. Recommendation We recommend the Institution to establish adequate procedures and controls to ensure that financial and statistical data information is properly supported and detailed to allow adequate audit trail of the information. Establish adequate supervisory procedures to identify, in a reasonable period of time, deficiencies or possible deficiencies in the procedures or guidance established by management to ascertain that the Institution reports the information as required by grantors, and that accurate and adequate support is properly maintained. Views of Responsible Officials Refer to the Institutional comments included in the Corrective Action Plan.