Franklin University and Subsidiary

CFDA Number, Federal Agency, and Program Name CFDA Nos. 84.063 and 84.268, Department of Education, Federal Pell Grant Program, and Federal Direct Student Loans Federal Award Identification Number and Year N/A Pass through Entity None Finding Type Significant deficiency Repeat Finding Yes 2020 001 Criteria Federal Pell Grant Program: An institution shall submit, in accordance with deadline dates established by the secretary, through publication in the Federal Register, other reports and information the secretary requires and shall comply with the procedures the secretary finds necessary to ensure that the reports are correct (34 CFR Section 690.83(b)(2)). Federal Direct Student Loans: Changes in student status are required to be reported to the National Student Loan Data System (NSLDS) within 30 days of the change or included in a Student Status Confirmation Report (SSCR) sent to the NSLDS within 60 days of the status change (34 CFR Section 685.309(b)). Condition The University did not report student status changes for certain students within the required time frame. Questioned Costs None Identification of How Questioned Costs Were Computed N/A Context Of the 40 students tested for student status changes at the University, 3 students were not reported within the required time frame. Cause and Effect The University did not have a process in place to ensure that all files were submitted in the required time frame. Recommendation The University should implement controls and processes to ensure that all student status changes are reported to NSLDS in the required timeframe. Views of Responsible Officials and Corrective Action Plan - The Registrar will modify the cadence of its reporting to align with the transmission of data between the National Student Clearinghouse and National Student Loan Data System. The University expects this modification, combined with the adjustments made in the prior year, will ensure all student status changes are reporting within the required 60-day window.

Finding Number: 2021-001 Condition: The University did not report student status changes for certain students within the required time frame. Planned Corrective Action: The Registrar will modify the cadence of its reporting to align with the transmission of data between the National Student Clearinghouse and National Student Loan Data System. The University expects this modification, combined with the adjustments made in the prior year, will ensure all student status changes are reporting within the required 60-day window. Contact person responsible for corrective action: Frank Yanchak Anticipated Completion Date: 11/30/2021

2020-001

CFDA Number, Federal Agency, and Program Name - CFDA Nos. 84.063 and 84.268, Department of Education, Federal Pell Grant Program, and Federal Direct Student Loans Federal Award Identification Number and Year - N/A Pass through Entity - None Finding Type - Material weakness and material noncompliance with laws and regulations Repeat Finding - Yes 2019 001 Criteria - Federal Pell Grant Program: An institution shall submit, in accordance with deadline dates established by the secretary, through publication in the Federal Register, other reports and information the secretary requires and shall comply with the procedures the secretary finds necessary to ensure that the reports are correct (34 CFR Section 690.83(b)(2)). Federal Direct Student Loans: Changes in student status are required to be reported to the National Student Loan Data System (NSLDS) within 30 days of the change or included in a Student Status Confirmation Report (SSCR) sent to the NSLDS within 60 days of the status change (34 CFR Section 685.309(b)). Condition - The University did not report student status changes for certain students within the required time frame. Questioned Costs - None Identification of How Questioned Costs Were Computed - N/A Context - Of the 40 students tested for student status changes at the University, 2 students were not properly reported as withdrawals within the required time frame. In addition, although not a part of the 40 students tested, it was noted that certain graduates with an account hold at their graduation date were not reported as graduations within the required time frame. The total number of students with active account holds as of their graduation date was 39 out of a total of 884 graduations of students receiving direct loans. Cause and Effect - The University did not have a process in place to review submitted files for proper updating in NSLDS records and to ensure that all files were submitted in the required time frame. Additionally, the University had a policy to hold reporting of graduations until all account holds were released, which caused the respective student status changes to be reported outside of the required time frame. Recommendation - The University should implement controls and processes to ensure that all student status changes are properly reported to NSLDS in the required time frame. Views of Responsible Officials and Corrective Action Plan - The University modified its classification of students who earned sufficient credits to graduate but still have a balance with the University. Effective August 31, 2020, these students will be reported as graduated but maintain a hold on their account. Prior to August 31, 2020, these students would have been reported as withdrawn until the associated balance had been paid in full. At which time, the student status would have been reclassified as graduated. Additionally, the registrar modified its process to both allow time for the data validation and run the enrollment file creation process daily. Our expectation is this will eliminate any delayed enrollment changes and ensure all changes are reported within the required 60 day window.

Finding Number: 2020-001 Condition: The University did not report the student status changes for certain students within the required timeframe. Planned Corrective Action: The University modified its classification of students who earned sufficient credits to graduate but still have a balance with the University. Effective August 31, 2020, these students will be reported as graduated but maintain a hold on their account. Prior to August 31, 2020, these students would have been reported as withdrawn until the associated balance had been paid in full. At which time, the student status would have been reclassified as graduated. Additionally, the Registrar modified its process to both allow time for the data validation and run the enrollment file creation process daily. Our expectation is this will eliminate any delayed enrollment changes and ensure all changes are reported within the required 60-day window. Contact person responsible for corrective action: Frank Yanchak Anticipated Completion Date: 11/15/2020

2019-001

CFDA Number, Federal Agency, and Program Name - Franklin University: CFDA Nos. 84.063 and 84.268, Department of Education, Federal Pell Grant Program, and Federal Direct Student Loans Federal Award Identification Number and Year - N/A Pass through Entity - None Finding Type - Material weakness and material noncompliance with laws and regulations Repeat Finding - Yes, 2018-001 Criteria - Federal Pell Grant Program: An institution shall submit, in accordance with deadline dates established by the secretary, through publication in the Federal Register, other reports and information the secretary requires and shall comply with the procedures the secretary finds necessary to ensure that the reports are correct (34 CFR Section 690.83(b)(2)). Federal Direct Student Loans: Changes in student status are required to be reported to the National Student Loan Data System (NSLDS) within 30 days of the change or included in a Student Status Confirmation Report (SSCR) sent to the NSLDS within 60 days of the status change (34 CFR Section 685.309(b)) Condition - The University did not report the student status changes for certain students accurately or within the required time frame. Questioned Costs - None Identification of How Questioned Costs Were Computed - N/A Context - Of the 50 students tested for student status changes at the University, 10 students were not properly reported as graduated in the required timeframe, and 6 students were not properly reported as withdrawals in the required timeframe. Cause and Effect - The University did not have a process in place to review submitted files for proper updating in NSLDS records and to ensure the files were submitted in the required timeframe. Recommendation - The University should implement controls and processes to ensure that all student status changes are properly reported to NSLDS in the required timeframe. Views of Responsible Officials and Corrective Action Plan The University Office has worked with the National Student Clearinghouse on why these were not reported to the NSLDS. We were informed that another step needs to be taken to ensure that students are reported correctly. The Senior Registrar Specialist will manually update the information to the National Student Clearinghouse and the Degree Verify fields. Going forward, the University will require review and approval prior to the submission of graduation files to the National Student Clearinghouse.

Finding Number: 2019-001 Condition: The University did not report the student status changes for certain students accurately or within the required timeframe. Planned Corrective Action: The University Office has worked with the National Student Clearinghouse on why these were not reported to the NSLDS. We were informed that another step needs to be taken to ensure that students are reported correctly. The Senior Registrar Specialist will manually update the information to the National Student Clearinghouse and the Degree Verify fields. Going forward, the University will require review and approval prior to the submission of graduation files to the National Student Clearinghouse. Contact person responsible for corrective action: Frank Yanchak Anticipated Completion Date: October 15, 2019

2018-001

CFDA Number, Federal Agency, and Program Name - CFDA Nos. 84.007, 84.033, 84.038, 84.063, 84.268, and 84.379; Department of Education; Federal Supplemental Educational Opportunity Grants, Federal Work Study Program, Federal Perkins Loan Program, Federal Pell Grant Program, Federal Direct Student Loans, and TEACH Grant. Federal Award Identification Number and Year - N/A Pass through Entity None Finding Type - Material noncompliance with laws and regulations Repeat Finding - Yes, 2018 003 Criteria - Except as otherwise provided in this part, if an institution ceases to satisfy any of the requirements for eligibility under this part: It becomes ineligible to continue to participate in any HEA program as of the date it ceases to satisfy any of the requirements. (34 CFR 600.40(d)(2)) Condition - Urbana University became accredited as a branch campus of Franklin University as of July 1, 2017 and thus lost its eligibility to receive Title IV funds as a separate institution. Franklin University and Urbana University worked with the Department of Education to merge the institutions' OPE ID numbers immediately following the branch campus approval of July 1, 2017. Urbana University worked closely with the Department of Education, documented by several emails and communications, throughout the process to maintain eligibility for Urbana University, but there was a lack of clarity on timing on when to shift from Urbana University to Franklin University's OPE ID for issuing Title IV funds. Delays in completion and final approval of the merger application resulted in Urbana University being ineligible for all aid funded since July 1, 2017 under their OPE ID number. During the year ended July 31, 2019, $2,455,294 of Title IV funds was received through Urbana University's OPE ID number. Questioned Costs - None Identification of How Questioned Costs Were Computed - N/A Context - Urbana University received Title IV funds during the year when it was an ineligible institution. However, Plante & Moran, PLLC had direct communication with the Department of Education on January 10, 2019 with an Institutional Review Specialist who indicated the noncompliance of questioned costs, including $2,455,294 related to the year ended July 31, 2019 is considered waived as the Department of Education determined they would not require return of any funds disbursed under the expired OPE ID. To resolve the noncompliance, the Department of Education concluded to accept the institutional eligibility during the transition period, allowing the institution to issue student financial aid. Cause and Effect - Urbana University received Title IV funds during the year when it was considered a branch campus of Franklin University and no longer separately accredited. Urbana University as a separate institution was ineligible to receive Title IV funds. If the noncompliance had not been waived by the Department of Education as described above, the institution would not have been eligible to issue financial aid to the affected students. Recommendation - Urbana University, as a branch campus of Franklin University, should ensure that all Title IV aid is requested through Franklin University's program participant agreement with the Department of Education. Views of Responsible Officials and Planned Corrective Actions - The University submitted a merge application that was approved on March 4, 2019 by the Department of Education. At that time, the University's Urbana branch campus location student population regained access to Title IV financial aid. The action plan has been corrected as of March 4, 2019. Given the nature of this finding, process changes to detect, prevent, and correct this issue are not considered necessary. The University's existing controls are deemed sufficient to maintain compliance with applicable regulations.

Finding Number: 2019-002 Condition: Urbana University became accredited as a branch campus of Franklin University as of July 1, 2017 and thus lost its eligibility to receive Title IV funds as a separate institution. Franklin University and Urbana University worked with the Department of Education to merge the institutions' OPE ID numbers immediately following the branch campus approval of July 1, 2017. Urbana University worked closely with the Department of Education, documented by several emails and communications, throughout the process to maintain eligibility for Urbana University, but there was a lack of clarity on timing on when to shift from Urbana University to Franklin University's OPE ID for issuing Title IV funds. Delays in completion and final approval of the merger application resulted in Urbana University being ineligible for all aid funded for the years ended July 31, 2018 and 2019. To mitigate the impact of the noncompliance, the institution requested the Department of Education to waive the noncompliance requirement. Planned Corrective Action: The University submitted a merge application that was approved on March 4, 2019 by the Department of Education. At that time, the University's Urbana branch campus location student population regained access to Title IV financial aid. The action plan has been corrected as of March 4, 2019. Given the nature of this finding, process changes to detect, prevent, and correct this issue are not considered necessary. The University's existing controls are deemed sufficient to maintain compliance with applicable regulations. Contact person responsible for corrective action: Goldie Langley, former Director of Financial Aid Anticipated Completion Date: March 4, 2019

2018-003

CFDA Number, Federal Agency, and Program Name - CFDA No. 84.031; Department of Education; Higher Education Institutional Aid Federal Award Identification Number and Year - N/A Pass through Entity - N/A Finding Type - Material weakness and material noncompliance with laws and regulations Repeat Finding - No Criteria - Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated (2 CFR Section 200.430(i)(1)(i)). Condition - For salaries and wages charged to the grant for course development and certain salaried personnel, the University did not maintain adequate records to support actual time and effort incurred. For course development, as projects were completed, the University recorded expenditures to the grant based on the budgeted hours per course development project based upon the approved budget in the grant agreement. For salaried personnel allocating a portion of their time to the grant throughout the year, the University allocated salaries and benefits based on budgeted level of effort percentages per grant throughout the year. The University obtained annual certifications of the percentage of time spent, but did not maintain any other documentation. Questioned Costs - None Identification of How Questioned Costs Were Computed - N/A Context - $205,892 of the total federal expenditures for this grant of $770,609 were salaries and benefits related to course development. These expenditures were recorded based on budgeted hours per course development project rather than records supporting actual time and effort incurred. The University did have analysis to support that actual costs incurred per course were higher than the budgeted amounts recorded for federal expenditures, which caused there to be no questioned costs. Additionally, $62,631.71 of the total federal expenditures for this grant of $770,609 were salaries and benefits for salaried employees allocating a portion of their time to the grant for which adequate documentation was not maintained to support actual time and effort incurred. Cause and Effect - The University did not have a process in place to track actual time and effort incurred for course development projects and salaried personnel. As a result, the University recorded based on budget and did not maintain adequate support for actual time and effort incurred. Recommendation - The University should implement a process where salaried employees track their time and effort spent on the grant to support the allocation of salaries and benefits to the grant. Views of Responsible Officials and Planned Corrective Actions - Going forward, the Title III Project Coordinator will obtain more frequent certifications of time spent, correlating with the execution of draw requests such that draw requests will not be processed without the requisite certifications. Further, the Title III Project Coordinator will not submit draw requests without first obtaining detailed records of time spent on development, should those activities be included in the expenses sought for reimbursement. The combined effect of these activities will require that additional documentation associated with each draw of funds be obtained and maintained along with each draw.

Finding Number: 2019-003 Condition: For salaries and wages charged to the grant for course development and certain salaried personnel, the University did not maintain adequate records to support actual time and effort incurred. For course development, as projects were completed, the University recorded expenditures to the grant based on the budgeted hours per course development project based upon the approved budget in the grant agreement. For salaried personnel allocating a portion of their time to the grant throughout the year, the University allocated salaries and benefits based on budgeted level of effort percentages per grant throughout the year. The University obtained annual certifications of the percentage of time spent but did not maintain any other documentation. Planned Corrective Action: Going forward, the Title III Project Coordinator will obtain more frequent certifications of time spent, correlating with the execution of draw requests such that draw requests will not be processed without the requisite certifications. Further, the Title III Project Coordinator will not submit draw requests without first obtaining detailed records of time spent on development, should those activities be included in the expenses sought for reimbursement. The combined effect of these activities will require that additional documentation associated with each draw of funds be obtained and maintained along with each draw. Contact person responsible for corrective action: Constance Wanstreet, Title III Project Coordinator Anticipated Completion Date: November 30, 2019

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2017-001

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