GOVERNOR STATE UNIVERSITY

2025-001. FINDING (Enrollment Reporting) Federal Department: U.S. Department of Education Assistance Listing Number: 84.268 Cluster Name: Student Financial Assistance Cluster Program Name: Federal Direct Student Loans Award Numbers: P268K250567 (2025), P268K240567 (2024) Questioned Cost: None Governors State University (University) did not timely and accurately report student enrollment information to the U.S. Department of Education’s National Student Loan Data System (NSLDS). CONDITION During testing of 40 enrollment status changes, we noted the following: • One of 40 (3%) enrollment status changes was not accurately or timely reported to the NSLDS Program-Level Record. The enrollment status change was incorrectly reported as withdrawn instead of graduated, and the update was reported 113 days after the date of occurrence. • Thirteen of 40 (33%) enrollment status changes data contained inaccurate Program Begin Dates, with discrepancies ranging from 1 to 45 days later than the official program start dates. The sample was not intended to be, and was not, a statistically valid sample. CRITERIA The Code of Federal Regulations (34 CFR 685.309) requires the University, upon the receipt of an enrollment report from the Secretary of the Department of Education (ED), to update all information included in the report and return the report to the ED within the timeframe prescribed by the ED. It further requires the University to report enrollment changes within 30 days unless a roster file is expected within 60 days, in which case the enrollment data may be updated on that roster file changes. The NSLDS Enrollment Reporting Guide states the University is responsible for accurately reporting all Program-Level Record and Campus-Level Record data elements. The Program Begin Date is the date the student first began attending the program being reported. Typically, this would be the first day of the term in which the student began enrollment in the program, unless the student enrolled in the program on an earlier date. The Uniform Guidance (2 CFR 200.303) requires nonfederal entities receiving federal awards to establish and maintain internal controls designed to reasonably ensure compliance with federal statutes, regulations, and terms and conditions of the federal award. Effective internal controls should include procedures to ensure accurate and timely student enrollment status reports are submitted to NSLDS. CAUSE University officials stated that the University reports enrollment status changes to the NSLDS through the National Student Clearinghouse (NSC), a third-party servicer. The incorrect reporting for the one student noted occurred because the student was enrolled under a doctoral program while taking courses applicable to a master’s program. The student met the requirements for the master’s degree, and the University awarded the degree and reported the student as graduated to the NSC. However, when the NSC transmitted the information to the NSLDS, the NSLDS assigned a withdrawn status because no enrollment record existed for the master’s program. With regard to the discrepancies noted in Program Begin Dates, system‑generated files are uploaded to the NSC, which then provides the data to the NSLDS in accordance with the University’s enrollment reporting process. Upon review of the system-generated files, there are various dates contained within the files, which may have caused inaccurate Program Begin Dates reflected in the NSLDS’ Program-Level Record. The University is aware of these discrepancies through the error reports it receives from the NSC when uploading the files and has been correcting the differences. However, the corrected information is not being reflected in the NSLDS when the NSC transmits the files. EFFECT Accurate, timely, and complete enrollment reporting is essential for the proper administration of federal student aid programs. Failure to comply with federal enrollment reporting requirements may expose the University to loss of future federal funding. (Finding Code No. 2025-001, 2024-002, 2023-002, 2022-002, 2021-003) RECOMMENDATION We recommend the University strengthen internal controls and improve its reporting procedures to ensure timely and accurate reporting of student enrollment status to the NSLDS. UNIVERSITY RESPONSE The University agrees with this finding and accepts the recommendation. The University has manually corrected the incorrect status for the one student noted, and the student is now properly reflected as graduated in the NSLDS. The University will further review this matter internally and will consult with both the NSC and the NSLDS to identify a viable solution to prevent similar issues from recurring. The discrepancies in Program Begin Dates are a known issue related to the NSC reporting. The University has already notified the NSC of this matter and is awaiting guidance on how to correct the Program Begin Date discrepancies so that the information will properly flow through to the NSLDS. The University will implement any necessary procedural changes once feedback is received from the NSC.

2025-002. FINDING (Noncompliance with Notification Requirements on Direct PLUS Loans Disbursements) Federal Department: U.S. Department of Education Assistance Listing Number: 84.268 Cluster Name: Student Financial Assistance Cluster Program Name: Federal Direct Student Loans Award Numbers: P268K250567 (2025), P268K240567 (2024) Questioned Cost: None Governors State University (University) did not comply with the notification requirements on Direct PLUS Loans disbursements. CONDITION During testing of 25 Direct Loans disbursements, we noted four (16%) students with Direct PLUS loans, where the parents were not properly notified. Notifications were made only to students. CRITERIA The Code of Federal Regulations (34 CFR 668.165) requires the University when Direct Loans are being credited to a student’s account to notify the student, or parent, in writing of (1) the date and amount of the disbursement; (2) the student’s right, or parent’s right, to cancel all or a portion of that loan or loan disbursement and have the loan proceeds returned to Department of Education; and (3) the procedure and time by which the student or parent must notify the institution that he or she wishes to cancel the loan (a minimum of 14 or 30 days depending on confirmation process). Further, the Federal Student Aid (FSA) handbook clarified that general notification must be provided to the parent Direct PLUS borrower and all students receiving FSA funds. CAUSE University officials stated the University revised its Direct PLUS borrower notification procedures upon identifying the issue; however, a significant number of Fall 2024 PLUS loans had already been processed under the prior procedure, resulting in the noted noncompliance.   EFFECT Proper notifications protect the borrower’s rights and give the parent borrower a chance to reconsider the loan, adjust disbursements or cancel within the specified timeframe. (Finding Code No. 2025-002, 2024-004) RECOMMENDATION We recommend the University continue full implementation of its updated procedures to ensure proper notification is made to the parent Direct PLUS borrowers. UNIVERSITY RESPONSE The University agrees with this finding and accepts the recommendation. However, we would like to clarify that we were not made aware of this issue until the end of the Fall 2024 semester. By that time, more than half of the PLUS loans for the year had already been processed. Although the University implemented the corrective action plan immediately upon being notified, the majority of the academic year’s PLUS loans had already been completed. As part of the corrective action, the University now provides direct notification to the parent at the time PLUS loans are processed.

2025-003. FINDING (Noncompliance with Activities Allowed or Unallowed and Allowable Costs and Cost Principles Requirements) Federal Department: U.S. Department of Education Assistance Listing Number: 84.425D Program Name: Elementary and Secondary School Emergency Relief Fund Award Number: S425D210041 (2022) Questioned Cost: $2,614 Governors State University (University) did not comply with activities allowed or unallowed and allowable costs and cost principles requirements. CONDITION During our review of the Illinois Tutoring Initiative program under the Elementary and Secondary School Emergency Relief Fund, which incurred total expenditures of $113,816, we identified three of 10 (30%) expenditures that were inappropriately charged to the grant. The University charged $2,614 in Central Management Services (CMS) insurance costs for an employee who did not perform any work related to the program. The sample was not intended to be, and was not, a statistically valid sample. CRITERIA The Code of Federal Regulations (2 CFR 200.431(c)) requires the University to allocate fringe benefits to federal awards and all other activities in a manner consistent with the pattern of benefits attributable to the individuals or group(s) of employees whose salaries and wages are chargeable to such federal awards and other activities, and charged as direct or indirect costs following the University's accounting practices. Additionally, the Uniform Guidance (2 CFR 200.303(a)) requires nonfederal entities receiving federal awards to establish and maintain effective internal controls designed to reasonably ensure compliance with federal laws, statutes, regulations, and the terms and conditions of the federal award. CAUSE University officials stated the payroll change for the one employee noted was inadvertently not reflected in the calculation for the corresponding CMS insurance charges. While review and approval procedures for payroll changes are already in place, they were not consistently followed during the period in question due to staffing constraints. EFFECT Failure to accurately charge the correct grant may result in disallowance of federal expenditures and questioned costs, and could jeopardize future federal funding. (Finding Code No. 2025-003, 2024-007) RECOMMENDATION We recommend the University improve its procedures to ensure fringe benefits allocated to the grant align consistently with the salaries and wages charged to the grant. UNIVERSITY RESPONSE The University agrees with this finding and accepts the recommendation. Effective immediately, a second level of approval will be required for all payroll adjustments to ensure that any changes are accurately reflected in the calculation of the related CMS insurance charges.

2025-004 FINDING (Noncompliance with Reporting Requirements for Teacher Education Assistance for College and Higher Education Grants (TEACH Grants)) Federal Department: U.S. Department of Education Assistance Listing Number: 84.379 Cluster Name: Student Financial Assistance Cluster Program Name: Teacher Education Assistance for College and Higher Education Grants (TEACH Grants) Award Number: P379T250567 (2025), P379T250567 (2024) Questioned Cost: None Governors State University (University) did not timely submit TEACH Grants disbursement records to the U.S. Department of Education’s (ED) Common Origination and Disbursement (COD) System. CONDITION During testing of three TEACH Grants disbursements, we noted one (33%) student whose Fall and Spring term disbursements were reported to the ED's COD System 227 days and 143 days late, respectively. The sample was not intended to be, and was not, a statistically valid sample. CRITERIA The Code of Federal Regulations (Code) (34 CFR 690.83(b)(2)) requires the University to submit, in accordance with deadline dates established by the Secretary of the ED, through publication in the Federal Register, other reports and information the ED requires and to comply with the procedures the ED finds necessary to ensure the reports are correct. The Federal Register (Volume 90, No. 179 published on September 30, 2025) requires institutions to submit TEACH Grants disbursement records to the COD System no later than November 30, 2024 or 15 days after making the disbursement or becoming aware of the need to adjust a previously reported disbursement, whichever is later. Further, transmissions must be completed and accepted before the designated processing time on the deadline submission date. If transmissions are started at the designated time, but are not completed until after the designated time, those transmissions will not meet the deadline. In addition, any transmission submitted on or just prior to the deadline date that is rejected may not be reprocessed because the deadline will have passed by the time the user gets the information notifying him or her of the rejection.   Additionally, the Uniform Guidance (2 CFR 200.303(a)) requires nonfederal entities receiving federal awards to establish and maintain effective internal controls designed to reasonably ensure compliance with federal laws, statutes, regulations, and the terms and conditions of the federal award. CAUSE University officials stated the disbursements were initially reported to the COD System within the required timeframe but were rejected. The University corrected the errors during its reconciliation process; however, the reconciliation was completed after the required reporting deadline to the COD System. EFFECT Failure to submit disbursement records within the required timeframe may affect the accuracy and integrity of federal grant reporting, and represents noncompliance with federal regulations. (Finding Code No. 2025-004) RECOMMENDATION We recommend the University strengthen internal controls over its COD System reporting process to ensure TEACH Grants disbursement records are transmitted timely, accurate, and accepted by ED prior to the required deadlines. Controls should include timely monitoring of rejected records and prompt resolution of errors. UNIVERSITY RESPONSE The University agrees with this finding and accepts the recommendation. Procedures were promptly updated to ensure that any TEACH Grants discrepancies are reconciled on a monthly basis, consistent with the reconciliation process used for the Federal Pell Grant and Direct Loan programs.

2024-002. FINDING (Enrollment Reporting) Federal Department: U.S. Department of Education Assistance Listing Number: 84.268 Cluster Name: Student Financial Assistance Cluster Program Name: Federal Direct Student Loans Award Numbers: P268K240567, P268K230567 Questioned Cost: None Program Expenditures: $21,113,430 Cluster Expenditures: $32,781,904 Governors State University (University) did not timely and accurately report student enrollment information to the U.S. Department of Education’s National Student Loan Data System (NSLDS). CONDITION During testing of 40 enrollment status changes, we noted the following: • Seven of 40 (18%) enrollment status changes were not reported timely to the NSLDS. These enrollment status changes were reported 1 to 228 days late after the date of occurrence. In addition, 2 of the 7 enrollment status changes pertain to students with direct loans who ceased to be enrolled on at least a half-time basis for the period for which the loan was intended. • Ten of 40 (25%) enrollment status changes data had discrepancies in Program Begin Date ranging from 1,254 days early to 2 days late when compared to their official program start dates. The sample was not intended to be, and was not, a statistically valid sample. CRITERIA The Code of Federal Regulations (34 CFR 685.309) requires the University, upon the receipt of an enrollment report from the Secretary of the Department of Education (ED), to update all information included in the report and return the report to the ED within the timeframe prescribed by the ED. It further requires the University to report enrollment changes within 30 days unless a roster file is expected within 60 days, in which case the enrollment data may be updated on that roster file changes. This report should include changes such as when a Direct Loan was made to or on behalf of a student who was enrolled or accepted for enrollment at the University, and the student has ceased to be enrolled on at least a half-time basis or failed to enroll on at least a half-time basis for the period for which the loan was intended. The NSLDS Enrollment Reporting Guide states the University is responsible for accurately reporting all Program-Level Record and Campus-Level Record data elements. The Program Begin Date is the date the student first began attending the program being reported. Typically, this would be the first day of the term in which the student began enrollment in the program, unless the student enrolled in the program on an earlier date. The Uniform Guidance (2 CFR 200.303) requires nonfederal entities receiving federal awards to establish and maintain internal controls designed to reasonably ensure compliance with federal statutes, regulations, and terms and conditions of the federal award. Effective internal controls should include procedures to ensure accurate and timely student enrollment status reports are submitted to NSLDS. CAUSE University officials stated the delay in reporting status changes was attributable to challenges within the reporting protocols to the NSLDS for various status change scenarios occurring after the term end date and delays in the internal reporting process. The University reports enrollment status changes to NSLDS through the National Student Clearinghouse (NSC), a third-party servicer. As part of the enrollment reporting process, system-generated files are uploaded to the NSC, which then provides the data to NSLDS. Upon review of the system-generated files, there are various dates contained within the files, which may have caused inaccurate Program Begin Dates reflected in the NSLDS’ Program-Level Record. EFFECT Accurate, timely, and complete enrollment information is critical for effective and proper administration of the student financial aid programs. Noncompliance with enrollment reporting regulations may result in a loss of future federal funding. (Finding Code No. 2024-002, 2023-002, 2022-002, 2021-003) RECOMMENDATION We recommend the University improve its procedures to ensure timely and accurate reporting of student enrollment status to the NSLDS both in Program-Level Record and Campus-Level Record. UNIVERSITY RESPONSE The University agrees with this finding and accepts the recommendation. Following consultation with the NSC, guidelines were provided for handling various status change scenarios. These guidelines will enhance the accuracy of enrollment status change reporting, particularly for students with changes occurring before or after the subsequent enrollment file submission. Status changes are now being reported to the NSLDS in a timely and accurate manner, in accordance with the NSC guidelines. The University has also implemented a reporting timeline and review protocols to ensure status changes are reported to the NSLDS in a timely manner. Additionally, the University will collaborate with its Information Technology Services and representatives from the NSC and NSLDS to verify the accuracy of the file layouts and the data flow of the information provided.

2024-003. FINDING (Noncompliance with Gramm-Leach-Bliley Act) Federal Department: U.S. Department of Education, U.S. Department of Health and Human Services Assistance Listing Number: 84.268, 84.063, 84.038, 84.033, 84.007, 84.379, 93.925, 93.264 Cluster Name: Student Financial Assistance Cluster Program Name: Federal Direct Student Loans, Federal Pell Grant Program, Federal Perkins Loan Program, Federal Work-Study Program, Federal Supplemental Educational Opportunity Grants, Teacher Education Assistance for College and Higher Education Grants, Scholarships for Health Professions Students from Disadvantaged Backgrounds, and Nurse Faculty Loan Program Award Numbers: P268K240567, P268K230567, P063P230567, P063P220567, P033A231156, P033A221156, P007A231156, P007A221156, P379T240567, 5 T08HP39308‐04‐00, and E01HP27019 Questioned Cost: None Program Expenditures: $21,113,430; $7,760,752; $1,938,618; $512,881; $227,850; $31,236; $576,000; $621,137 Cluster Expenditures: $32,781,904 Governors State University (University) did not establish a written incident response plan designed to promptly respond to, and recover from, any security event materially affecting the confidentiality, integrity, or availability of customer information in their control. CONDITION During our audit, we noted the University was unable to complete the development of the written incident response plan as of the end of the audit period. CRITERIA On December 9, 2021, the Federal Trade Commission issued final regulations to amend the Standards for Safeguarding Customer Information (Safeguards Rule), an important component of the Gramm-Leach-Bliley Act’s (GLBA) requirements for protecting the privacy and personal information of consumers. The Code of Federal Regulations (16 CFR 314.4(h)) requires the University to develop, implement and maintain an information security program which includes establishing a written incident response plan designed to promptly respond to, and recover from, any security event materially affecting the confidentiality, integrity, or availability of customer information in its control. At a minimum, such incident response plan shall address the following areas: • the goals of the incident response plan; • the internal processes for responding to a security event; • the definition of clear roles, responsibilities, and levels of decision-making authority; • external and internal communications and information sharing; • identification of requirements for the remediation of any identified weaknesses in information systems and associated controls; • documentation and reporting regarding security events and related incident response activities; and • the evaluation and revision as necessary of the incident response plan following a security event. Additionally, the Uniform Guidance (2 CFR 200.303(a)) requires nonfederal entities receiving federal awards to establish and maintain effective internal control designed to reasonably ensure compliance with federal laws, statutes, regulations, and the terms and conditions of the federal award. CAUSE University officials stated the University has been actively engaged in the development of a written incident response plan; however, the plan was not completed by the end of Fiscal Year 2024 due to the extensive range of tasks required for its completion. EFFECT The intent of the GLBA Safeguards Rule is to enhance security over confidential information. Without a documented response to all applicable requirements, the University is more susceptible to vulnerabilities as it relates to protecting the privacy and personal information of students than it will be following full implementation. (Finding Code No. 2024-003, 2023-003) RECOMMENDATION We recommend the University continue towards completion and full implementation of the written incident response plan. UNIVERSITY RESPONSE The University agrees with this finding and accepts the recommendation. The University has recently completed the development of the written incident response plan during Fiscal Year 2025.

2024-004. FINDING (Noncompliance with Notification Requirements on Direct PLUS Loans Disbursements) Federal Department: U.S. Department of Education Assistance Listing Number: 84.268 Cluster Name: Student Financial Assistance Cluster Program Name: Federal Direct Student Loans Award Numbers: P268K240567, P268K230567 Questioned Cost: None Program Expenditures: $21,113,430 Cluster Expenditures: $32,781,904 Governors State University (University) did not comply with the notification requirements on Direct PLUS Loans disbursements. CONDITION During testing of 25 Direct Loans disbursements, we noted 2 (8%) students with Direct PLUS loans, where the parents were not properly notified. Notifications were made only to students. CRITERIA The Code of Federal Regulations (34 CFR 668.165) requires the University when Direct Loans are being credited to a student’s account to notify the student, or parent, in writing of (1) the date and amount of the disbursement; (2) the student’s right, or parent’s right, to cancel all or a portion of that loan or loan disbursement and have the loan proceeds returned to Department of Education; and (3) the procedure and time by which the student or parent must notify the institution that he or she wishes to cancel the loan (a minimum of 14 or 30 days depending on confirmation process). Further, the Federal Student Aid (FSA) handbook clarified that general notification must be provided to the parent Direct PLUS borrower and all students receiving FSA funds. CAUSE University officials stated they were aware of the notification requirements and believed the existing process was compliant with the requirements. EFFECT Proper notifications protect the borrower’s rights and give the parent borrower a chance to reconsider the loan, adjust disbursements or cancel within the specified timeframe. In addition, failure to implement notification requirements represents noncompliance with federal regulations. (Finding Code No. 2024-004) RECOMMENDATION We recommend the University improve its procedures to ensure proper notification is made to the parent Direct PLUS borrowers. UNIVERSITY RESPONSE The University agrees with this finding and accepts the recommendation. The University has implemented changes to procedures to send proper notification to the parent Direct PLUS borrowers.

2024-005. FINDING (Failure to Retain Adequate Documentation of Internal Direct Loans Reconciliation) Federal Department: U.S. Department of Education Assistance Listing Number: 84.268 Cluster Name: Student Financial Assistance Cluster Program Name: Federal Direct Student Loans Award Numbers: P268K240567, P268K230567 Questioned Cost: None Program Expenditures: $21,113,430 Cluster Expenditures: $32,781,904 Governors State University (University) did not retain documentation of its internal monthly Direct Loans reconciliation to demonstrate timely completion. CONDITION During testing of Direct Loans, we were unable to verify whether the University completed the monthly internal reconciliation in a timely manner due to the absence of supporting documentation. CRITERIA The Federal Student Aid (FSA) issued Electronic Announcement General-22-86 covering reconciliation requirements for all Title IV programs between Department of Education’s G5 system records and the University’s internal records. It further requires the University to reconcile internally, disbursement data between Financial Services and Comptroller Office and Financial Aid Office. Additionally, the Uniform Guidance (2 CFR 200.303(a)) requires nonfederal entities receiving federal awards to establish and maintain effective internal control designed to reasonably ensure compliance with federal laws, statutes, regulations, and the terms and conditions of the federal award. CAUSE University officials stated the University performs the monthly internal reconciliation process. However, the monthly internal reconciliation spreadsheet is updated each month without retaining the prior versions. EFFECT Failure to properly document internal monthly reconciliations between the Financial Services and Comptroller Office and Financial Aid Office may result in inaccurate and incomplete financial information. (Finding Code No. 2024-005) RECOMMENDATION We recommend the University improve its procedures to ensure documentation is retained to demonstrate timely completion of reconciliations. UNIVERSITY RESPONSE The University agrees with this finding and accepts the recommendation. Existing procedures have been revised to require the retention of internal reconciliation records on a monthly basis.

2024-006. FINDING (Noncompliance with Perkins Loans’ Retention of Records Requirements) Federal Department: U.S. Department of Education Assistance Listing Number: 84.038 Cluster Name: Student Financial Assistance Cluster Program Name: Federal Perkins Loan Program Award Number: None Questioned Cost: None Program Expenditures: $1,938,618 Cluster Expenditures: $32,781,904 Governors State University (University) did not maintain a copy of the master promissory note (MPN) for a Perkins Loan program loan. CONDITION During testing of Perkins Loan receivables, we identified 1 of 12 (8%) students with a missing MPN. CRITERIA The Code of Federal Regulations (34 CFR 674.19(e)) requires the University to retain a record of disbursements for each loan made to a borrower on a promissory note. In addition, the University is required to keep the original MPN until the loans are satisfied. If required to release original documents in order to enforce the loan, the University must retain certified true copies of those documents. CAUSE University officials stated the University maintains copies of the MPNs; however, the one MPN pertained to a Perkins Loan disbursed over 18 years ago. Consequently, it may have been misplaced due to staffing changes over the years. EFFECT Failure to properly maintain loan documentation may result in inaccurate loan balances, potential disputes with borrowers, and noncompliance with federal regulations. (Finding Code No. 2024-006) RECOMMENDATION We recommend the University improve its procedures to ensure compliance with records retention requirements. UNIVERSITY RESPONSE The University agrees with this finding and accepts the recommendation. Existing University procedures ensure MPNs and other Perkins-related documentation requirements are properly maintained. The University will continue its ongoing process of reviewing Perkins documentation to comply with the requirements.

2024-007. FINDING (Noncompliance with Activities Allowed or Unallowed and Allowable Costs and Cost Principles Requirements) Federal Department: U.S. Department of Education Assistance Listing Number: 84.425D Cluster Name: Education Stabilization Fund Program Name: Elementary and Secondary School Emergency Relief Fund Award Number: S425D210041 Questioned Cost: None Program Expenditures: $1,222,010 Cluster Expenditures: $1,466,030 Governors State University (University) did not comply with activities allowed or unallowed and allowable costs and cost principles requirements. CONDITION During our review of the Illinois Tutoring Initiative program under the Elementary and Secondary School Emergency Relief (ESSER) Fund which had total expenditures of $1,222,010, we identified 1 of 25 (4%) expenditures was inappropriately charged to the grant. The University inadvertently charged Central Management Services (CMS) insurance of $414 for an employee who did not work on the program. The sample was not intended to be, and was not, a statistically valid sample. CRITERIA The Code of Federal Regulations (2 CFR 200.431(c)) requires the University to allocate fringe benefits to federal awards and all other activities in a manner consistent with the pattern of benefits attributable to the individuals or group(s) of employees whose salaries and wages are chargeable to such federal awards and other activities, and charged as direct or indirect costs following the University's accounting practices. Additionally, the Uniform Guidance (2 CFR 200.303(a)) requires nonfederal entities receiving federal awards to establish and maintain effective internal control designed to reasonably ensure compliance with federal laws, statutes, regulations, and the terms and conditions of the federal award. CAUSE University officials stated the charge was meant for a different federal grant, but was inadvertently assigned to the ESSER grant due to a formula error in the supporting spreadsheet. EFFECT Failure to accurately charge the correct grant may result in disallowance of federal expenditures and questioned costs, and could jeopardize future federal funding. (Finding Code No. 2024-007) RECOMMENDATION We recommend the University improve its procedures to ensure fringe benefits allocated to the grant align consistently with the salaries and wages charged to the grant. UNIVERSITY RESPONSE The University agrees with this finding and accepts the recommendation. More stringent review procedures have been implemented to prevent the recurrence of this issue.

2023-002. FINDING (Enrollment Reporting) Federal Department: U.S. Department of Education Assistance Listing Number: 84.268 Cluster Name: Student Financial Assistance Cluster Program Name: Federal Direct Student Loans Award Numbers: P268K230567, P268K220567 Questioned Cost: None Program Expenditures: $21,864,079 Cluster Expenditures: $33,549,307 Governors State University (University) did not timely report student enrollment information to the U.S. Department of Education’s National Student Loan Data System (NSLDS). During our audit, we tested 33 students who experienced a change in enrollment status during the fiscal year. Our testing identified two students (6%) whose enrollment status change was not reported timely to the NSLDS. The student enrollment status changes were reported 236 and 353 days late after the date of occurrence. The sample was not intended to be, and was not, a statistically valid sample. The Code of Federal Regulations (34 CFR 685.309) requires the University, upon the receipt of an enrollment report from the Secretary, to update all information included in the report and return the report to the Secretary within the timeframe prescribed by the Secretary. It further requires the University to report enrollment changes within 30 days unless a roster file is expected within 60 days, in which case the enrollment data may be updated on that roster file. The Uniform Guidance (2 CFR 200.303) requires nonfederal entities receiving federal awards establish and maintain internal controls designed to reasonably ensure compliance with federal statutes, regulations, and terms and conditions of the federal award. Effective internal controls should include procedures to ensure timely student enrollment status reports are submitted to NSLDS. University officials stated the students noted were granted administrative withdrawal for a single course after the semester (the students registered for) ended, which resulted in a change of enrollment from Full-time to Three-Quarters of a Time. The University reports enrollment status changes to NSLDS through the National Student Clearinghouse (NSC), a third-party servicer. Changes to enrollment that occur after the term has been reported will not be updated in NSLDS by changes made by the University in NSC. Those enrollment changes need to be updated directly in the NSLDS enrollment history update function. Enrollment reporting in a timely manner is critical for effective management of the student financial aid programs. Noncompliance with enrollment reporting regulations may result in a loss of future federal funding. (Finding Code No. 2023-002, 2022-002, 2021-003) RECOMMENDATION We recommend the University improve its procedures to ensure timely reporting of student enrollment status to the NSLDS. UNIVERSITY RESPONSE The University agrees with this finding and accepts the recommendation. The University has already identified a method to report directly to NSLDS all enrollment changes occurring after the end of the term. The University will continue to update timely the NSLDS enrollment history as needed when the situation of late withdrawals occurs beyond the reporting dates.

2023-003. FINDING (Noncompliance with Gramm-Leach-Bliley Act) Federal Department: U.S. Department of Education, U.S. Department of Health and Human Services Assistance Listing Number: 84.038, 84.033, 84.007, 84.063, 84.268, 84.379, 93.925,93.264 Cluster Name: Student Financial Assistance Cluster Program Name: Federal Perkins Loan Program, Federal Work-Study Program, Federal Supplemental Educational Opportunity Grants, Federal Pell Grant Program, Federal Direct Student Loans, Teacher Education Assistance for College and Higher Education Grants, Scholarships for Health Professions Students from Disadvantaged Backgrounds, and Nurse Faculty Loan Program Award Numbers: P033A221156, P033A211156, P033A171156, P007A221156, P007A211156, P063P220567, P063P210567, P268K230567, P268K220567, P379T230567, P379T220567, 5T08HP39308‐03‐00, and E01HP27019 Questioned Cost: None Program Expenditures: $2,474,974; $503,715; $265,650; 7,216,654, $21,864,079; $25,930; $576,000; $622,305 Cluster Expenditures: $33,549,307 Governors State University (University) did not establish a written incident response plan designed to promptly respond to, and recover from, any security event materially affecting the confidentiality, integrity, or availability of customer information in their control. During our audit, we noted the University was unable to complete the development of the written incident response plan as of the end of the audit period. On December 9, 2021, the Federal Trade Commission issued final regulations to amend the Standards for Safeguarding Customer Information (Safeguards Rule), an important component of the Gramm-Leach-Bliley Act’s (GLBA) requirements for protecting the privacy and personal information of consumers. The Code of Federal Regulations (16 CFR 314.4 (h)) requires the University to develop, implement and maintain an information security program which includes establishing a written incident response plan designed to promptly respond to, and recover from, any security event materially affecting the confidentiality, integrity, or availability of customer information in its control. At a minimum, such incident response plan shall address the following areas: • the goals of the incident response plan; • the internal processes for responding to a security event; • the definition of clear roles, responsibilities, and levels of decision-making authority; • external and internal communications and information sharing; • identification of requirements for the remediation of any identified weaknesses in information systems and associated controls; • documentation and reporting regarding security events and related incident response activities; and • the evaluation and revision as necessary of the incident response plan following a security event. Additionally, the Uniform Guidance (2 CFR 200.303(a)) requires nonfederal entities receiving federal awards establish and maintain effective internal control designed to reasonably ensure compliance with federal laws, statutes, regulations, and the terms and conditions of the federal award. University officials stated the University has started the process of developing the written incident response plan but has not been completed to date due to resource constraints and competing priorities. The intent of the GLBA Safeguards Rule is to enhance security over confidential information. Without a documented response to all applicable requirements, the University is more susceptible to vulnerabilities as it relates to protecting the privacy and personal information of students than it will be following full implementation. (Finding Code No. 2023-003) RECOMMENDATION We recommend the University continue towards completion and full implementation of the written incident response plan. UNIVERSITY RESPONSE The University agrees with this finding and accepts the recommendation. The University is currently drafting the incident response plan and is working to secure a contract with an incident response firm. Additionally, the University recently hired an Information Security Analyst, a newly created position designed to address smaller-scale alerts and incidents.

2023-004. FINDING (Inadequate Controls over Payroll Expenditures and Noncompliance with Allowable Cost & Cost Principles Requirements Applicable to the Head Start Cluster) Federal Department: U.S. Department of Health and Human Services Assistance Listing Number: 93.600 Cluster Name: Head Start Cluster Program Name: Early Head Start Award Numbers: 05CH011351-03-02, 05CH011351-04-03 Questioned Cost: Known ($37,377) Program Expenditures: $985,732 Cluster Expenditures: $1,026,985 The Governors State University (University) did not have adequate controls over payroll expenditures and did not comply with the allowable cost and cost principles requirements applicable to the Head Start Cluster. During our testing of Head Start Cluster payroll expenditures amounting to $555,569, we noted the following: • There was no periodic reconciliation performed between the amount actually worked on the grant (i.e. certified time and effort reports) against payroll expenditures to ensure the amount charged to the grant was accurate. Payroll expenditures for five (5) of twelve (12) employees tested were charged to the Early Head Start program using incorrect time and effort rates. The actual amounts charged to the grant were less than computed payroll expenditures using the certified time and effort rates. These differences were not adjusted at year-end to ensure the accuracy of the accounting records and schedule of expenditures of federal awards. The questioned costs were ($37,377). The sample was not intended to be, and was not, a statistically valid sample. • Our testing of payroll expenditures identified 12 instances out of 12 employees tested who worked on multiple federal awards and/or nonfederal awards lacked appropriate supporting documentation to account for 100% actual time and effort certification of the employees for each reporting period to provide a basis to reconcile with payroll distribution used in charging these awards. The University’s time and effort certification shows only the percentage of effort for each employee on a specific grant. As a result, we were unable to ascertain the accuracy of the payroll expenditure charged as a whole. The sample was not intended to be, and was not, a statistically valid sample. The Code of Federal Regulations (Code) (2 CFR 200.303) requires the University establish and maintain effective internal control over the federal award that provides reasonable assurance the University is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Effective internal controls should include procedures to ensure that there is reconciliation between the compensation for personal services charged to the agreement and the amount actually worked on the agreement. The Code (2 CFR 200.430) states charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed and must support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one federal award; a federal award and nonfederal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. These records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated. The University’s effort reporting guidelines requires the University to have a periodic review of the salary distribution system to confirm the reasonableness of the charges to the federal projects. In addition, the University is required to review, update, and prepare salary reallocations, and if necessary, make appropriate changes to the effort reports and certify reports on a quarterly basis to ensure that the salaries charged to federally sponsored projects are reasonable and consistent with the portion of activity committed to projects. The effort report must represent, in percentages totaling 100%, a reasonable estimate of an employee’s University compensated effort for the period. University officials stated the reconciliation process for time and effort reports is in place; however, staffing constraints resulted in some delays in the reconciliation process. The Early Head Start program is a calendar year grant that runs from January through December. The necessary adjustments to correct the differences noted for 2023 were made by the University after fiscal year end, but within the grant’s budget period. University officials stated 100% of work is captured on Human Resource and workflow records but not on the certification forms. Failure to accurately charge sponsored agreements for the equitable distribution of employee compensation may result in federal expenditures being disallowed and could jeopardize future federal funding. (Finding Code No. 2023-004) RECOMMENDATION We recommend the University timely reconcile payroll and ensure employees certify 100% of time worked to allow for adequate application of allowable cost and cost principles requirements for the Head Start Cluster. UNIVERSITY RESPONSE The University agrees with this finding and accepts the recommendation. The University has updated its process to collect time and effort information on a semi-annual basis rather than quarterly, which relieves some burden from staff, but still complies with federal regulations. By collecting time and effort information on a semi-annual basis, staff will have more time to reconcile time and effort against actual payroll expenditures. The University has also redesigned the time and effort collection form to show the 100% distribution of work. Further, the University now has a full-time financial research administrator who will help ensure that payroll- related adjustments are done timely. The financial research administrator will work with the Early Head Start program management to ensure that the related payroll reports are reviewed and reconciled timely, in accordance with existing University procedures.

2023-005. FINDING (Failure to File Real Property Status Report) Federal Department: U.S. Department of Health and Human Services Assistance Listing Number: 93.600 Cluster Name: Head Start Cluster Program Name: Early Head Start Award Numbers: 05CH011351-03-02, 05CH011351-04-03 Questioned Cost: None Program Expenditures: $985,732 Cluster Expenditures: $1,026,985 Governors State University (University) failed to submit the required annual real property status report (SF-429). During our audit, we identified the University did not submit the calendar year 2022 SF-429 report. The SF-429 report must be submitted by all grantees on the same date the grantee’s SF- 425 Final Federal Financial Report for the budget period is due. Grantees must act in compliance with the requirements of this grant and applicable federal statutes, regulations, and policies as included in the Compendium of Program Instructions and Information Memoranda. The Office of Head Start has issued Program Instruction Log Number ACF-PI-HS-17-03 which requires all grantees, including those with no covered real property, to prepare and submit SF-429 with Attachment A on an annual basis at the same time as their annual SF-425 Federal Financial Report. The Program Instruction Log Number ACF-PI-HS-17- 03 is required in accordance with the Code of Federal Regulations (Code) (45 CFR 75.343). The Code (45 CFR 75.343) requires nonfederal entities to submit reports periodically dependent on time frame on the status of real property in which the federal government retains an interest. Additionally, the Code (2 CFR 200.303) requires nonfederal entities receiving federal awards to establish and maintain internal controls designed to reasonably ensure compliance with federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure reports are submitted timely. University officials stated the SF-429 report was inadvertently not submitted as there was no real property acquired from the grant funds. Failure to meet grant reporting requirements is a noncompliance with the related grant request for proposal and application agreement and could result in loss of grant funding in future years. (Finding Code No. 2023-005) RECOMMENDATION We recommend the University improve its procedures to ensure timely submission of required reports. UNIVERSITY RESPONSE The University agrees with this finding and accepts the recommendation. Existing procedures are already in place to ensure that required reports are submitted. As indicated in the finding above, this was just a misunderstanding on the part of the employee submitting the report as there was no real property acquired from the Early Head Start grant funds. The University believes that this matter did not have a direct and material effect on the University’s compliance with federal requirements.

2022-002. FINDING: Enrollment Reporting Federal Department: U.S. Department of Education Assistance Listing Number: 84.268 Cluster Name: Student Financial Assistance Cluster Program Name: Federal Direct Student Loans Award Numbers: P268K200567, P268K210567 Questioned Cost: None Program Expenditures: $22,967,948 Cluster Expenditures: $34,781,190 Governors State University (University) did not timely report student enrollment information to the U.S. Department of Education?s National Student Loan Data System (NSLDS). During our audit, we tested 40 students who experienced a change in enrollment status during the fiscal year. Our testing identified five students (13%) whose enrollment status change was not reported timely to the NSLDS. The student enrollment status changes were reported between 11 to 180 days late after the date of occurrence. The sample was not intended to be, and was not, a statistically valid sample. The Code of Federal Regulations (34 CFR 685.309) requires the University, upon the receipt of an enrollment report from the Secretary, to update all information included in the report and return the report to the Secretary within the timeframe prescribed by the Secretary. It further requires the University to report enrollment changes within 30 days unless a roster file is expected within 60 days, in which case the enrollment data may be updated on that roster file. The Uniform Guidance (2 CFR 200.303) requires nonfederal entities receiving Federal awards establish and maintain internal controls designed to reasonably ensure compliance with Federal statutes, regulations, and terms and conditions of the Federal award. Effective internal controls should include procedures to ensure timely student enrollment status reports are submitted to NSLDS. University officials stated the students noted were granted administrative withdrawal after the semester (the students registered for) ended, which resulted in these students not being reported as withdrawn during the semester they registered for. The students ?withdrawn? status was captured and reported to NSLDS in the subsequent reporting cycle, which was during the semester following the semester the students registered for. Enrollment reporting in a timely manner is critical for effective management of the student financial aid programs. Noncompliance with enrollment reporting regulations may result in a loss of future Federal funding. (Finding Code No. 2022-002, 2021-003).

2022-003. FINDING: Federal Perkins Loan Cohort Default Rate Too High Federal Department: U.S. Department of Education Assistance Listing Number: 84.038, 84.033, 84.007, 84.063, 84.268, 84.379 Cluster Name: Student Financial Assistance Cluster Program Name: Federal Perkins Loan Program ? Federal Capital Contributions, Federal Work-Study Program, Federal Supplemental Educational Opportunity Grants, Federal Pell Grant Program, Federal Direct Student Loans, Teacher Education Assistance for College, and Higher Education Grants Award Numbers: P033A201156, P033A191156, P007A151156, P007A191156, P007A201156, P063P190567, P063P200567, P268K210567, P268K200567, P379T200567, and P379T210567 Questioned Cost: None Program Expenditures: $2,837,726; $467,499; $287,775; $6,964,315; $22,967,948; $14,145 Cluster Expenditures: $34,781,190 Governors State University?s (University) Federal Perkins loan cohort default rate is in excess of the threshold for administrative capability stipulated by the U.S. Department of Education. The Federal Perkins Loan Cohort Default Rate for the past three years (Fiscal Years 2020, 2021, and 2022, for borrowers who entered repayment during Fiscal Years 2019, 2020, and 2021, respectively) is 19.38% which exceeded the 15% threshold. The University chose to continue servicing their Perkins Loan portfolio after Federal Perkins Loan Program loan originations were discontinued in Fiscal Year 2018. The Code of Federal Regulations (Code) (34 CFR 668.16) states ?to begin and to continue to participate in any Title IV, HEA program, an institution shall demonstrate to the Secretary that the institution is capable of adequately administering that program under each of the standards established in this section. The Secretary considers an institution to have that administrative capability if the institution ? ... (m)(1) Has a cohort default rate - (iii) as defined in 34 CFR 674.5, on loans made under the Federal Perkins Loan Program to students for attendance at the institution that does not exceed 15 percent.? For institutions with less than 30 borrowers in the cohort for a fiscal year, cohort default rate is computed as the percentage of the total number of borrowers in that cohort and in the two most recent prior cohorts who are in default by the total number of borrowers in that cohort and the two most recent prior cohorts (34 CFR 668.202 (d)(2)(ii)). The U.S. Department of Education?s Dear Colleague Letter (DCL ID: GEN-17-10) states institutions that choose to continue to service their outstanding Perkins Loan portfolios must continue to service these loans in accordance with the Federal Perkins Loan Program regulations in 34 CFR 674. The Uniform Guidance (2 CFR 200.303) requires nonfederal entities receiving Federal awards establish and maintain internal controls designed to reasonably ensure compliance with Federal statutes, regulations, and terms and conditions of the Federal award. Effective internal controls should include procedures to ensure the University maintains a Federal Perkins Loan cohort default rate of less than 15%. University officials indicated they have met all due diligence requirements with regards to Perkins collections and have worked closely with the collection agency and with former students to facilitate loan consolidations, to reduce the cohort default rate. The University?s cohort default rate during the Fiscal Year 2022 (for borrowers who entered repayment during Fiscal Year 2021) was at 11.11%, meeting the 15% threshold. However, since the number of University borrowers who entered repayment during Fiscal Year 2021 were fewer than 30, the current cohort default rate calculation also included the University borrowers who entered into repayment and defaulted for the past three years, in accordance with federal regulations. Failure to maintain a Federal Perkins Loan cohort default rate below 15% resulted in noncompliance with the Code, the Uniform Guidance, and the U.S. Department of Education?s directive. (Finding Code No. 2022- 003, 2021-005, 2020-002, 2019-005, 2018-008, 2017-003, 2016-006)

2021-002 FINDING: EXIT COUNSELING Federal Department: U.S. Department of Education Assistance Listing Number: 84.268 Cluster Name: Student Financial Assistance Cluster Program: Federal Direct Student Loans Award Numbers: P268K200567, P268K210567 Questioned Cost: None Program Expenditures: $27,426,646 Cluster Expenditures: $40,197,084 Governors State University (University) did not timely provide exit counseling for Federal Direct Student Loan recipients who ceased half-time study at the University. We tested a sample of 60 students who received Federal student financial aid. Included in those 60 students were 14 Federal Direct Student Loan recipients who ceased half-time study at the University during Fiscal Year 2021. The University?s notification to the students of the need to complete exit counseling was provided 43 days late for 2 (14%) of the students and was never sent for 3 (21%) students. The sample was not intended to be, and was not, a statistically valid sample. The Code of Federal Regulations (34 CFR 685.304(b)) requires schools to ensure exit counseling is conducted with each Direct Subsidized Loan or Direct Unsubsidized Loan borrower and graduate or professional student Direct PLUS Loan borrower shortly before the student borrower ceases at least half-time study at the school. In addition, if a student borrower withdraws from school without the school?s prior knowledge or fails to complete the exit counseling as required, exit counseling must, within 30 days after the school learns that the student borrower has withdrawn from the school or failed to complete exit counseling as required, be provided either through interactive electronic means, by mailing written counseling materials to the student borrower at the student borrower?s last known address, or by sending written counseling materials to an email address provided by the student borrower that is not an email address associated with the school sending the counseling materials. The Uniform Guidance (2 CFR 200.303) requires nonfederal entities receiving Federal awards establish and maintain internal controls designed to reasonably ensure compliance with Federal statutes, regulations, and terms and conditions of the Federal award. Effective internal controls should include procedures to ensure the University conducts timely exit counseling for students that have received Federal Direct Student Loans and have ceased half-time study at the school. University officials indicated the Office of Financial Aid receives a report from the Office of the Registrar indicating which students have ceased half-time enrollment and due to issues with the timing of reports, some exit counseling notifications were sent out late. The notifications not sent at all were due to oversight. Failure to conduct timely exit counseling resulted in students not being notified of their rights and responsibilities, and could result in the loss of Federal funding. (Finding Code No. 2021-002) RECOMMENDATION We recommend the University conduct timely exit counseling in accordance with Federal regulations. UNIVERSITY RESPONSE The University agrees with this finding and accepts the recommendation and has updated its procedures to conduct timely exit counseling in accordance with Federal regulations.

2021-003 FINDING: ENROLLMENT REPORTING Federal Department: U.S. Department of Education Assistance Listing Number: 84.268 Cluster Name: Student Financial Assistance Cluster Program Name: Federal Direct Student Loans Award Numbers: P268K200567, P268K210567 Questioned Cost: None Program Expenditures: $27,426,646 Cluster Expenditures: $40,197,084 Governors State University (University) did not accurately and timely report student enrollment information to the U.S. Department of Education?s National Student Loan Data System (NSLDS). During our audit, we tested 25 students who experienced a change in enrollment status during the fiscal year. Our testing identified two students (8%) who had a change in enrollment status (graduated) which was not reported accurately to the NSLDS (student was erringly reported as withdrawn). These two students were reported to NSLDS 119 days (59 days late) after the status change. The sample was not intended to be, and was not, a statistically valid sample. The Code of Federal Regulations (34 CFR 685.309) requires the University, upon the receipt of an enrollment report from the Secretary, to update all information included in the report and return the report to the Secretary within the timeframe prescribed by the Secretary. It further requires the University to report enrollment changes within 30 days unless a roster file is expected within 60 days, in which case the enrollment data may be updated on that roster file. The Uniform Guidance (2 CFR 200.303) requires nonfederal entities receiving Federal awards establish and maintain internal controls designed to reasonably ensure compliance with Federal statutes, regulations, and terms and conditions of the Federal award. Effective internal controls should include procedures to ensure accurate and timely student enroll status reports are submitted to NSLDS. University officials stated the Registrar?s office did not timely and accurately update student enrollment with NSLDS due to delays in transitioning students to graduate status in the University?s system. Enrollment reporting in a timely and accurate manner is critical for effective management of the student financial aid programs. Noncompliance with enrollment reporting regulations may result in a loss of future Federal funding. (Finding Code No. 2021-003) RECOMMENDATION We recommend the University improve its procedures to ensure timely and accurate reporting of student enrollment status to the NSLDS. UNIVERSITY RESPONSE The University agrees with this finding and accepts the recommendation and has updated its procedures to ensure timely and accurate reporting of students to NSLDS.

2021-004 FINDING: FISCAL OPERATIONS REPORT Federal Department: U.S. Department of Education Assistance Listing Number: 84.038 Cluster Name: Student Financial Assistance Cluster Program Name: Federal Perkins Loan Program ? Federal Capital Contributions Questioned Cost: None Program Expenditures: $3,257,469 Cluster Expenditures: $40,197,084 Governors State University (University) did not have adequate procedures to ensure accurate information was reported and the final changes, corrections, and edits to the Fiscal Operations Report and Application to Participate (FISAP) were timely filed. During the audit, we noted the University did not report accurate information for the following fields related to the Federal Perkins Loan Program: As reported Correct amount Part III, Section A, Field 30.2 (Repayments of excess/liquidated fund capital to Institution) $77,118 $95,122 Part III, Section B, Field 13 (Amount of loan service cancellation) $ - $59,881 We also noted the second submission of the FISAP, which included final changes, corrections and edits, was not timely filed. The University submitted its final FISAP to the U.S. Department of Education on January 18, 2022 (34 days late). (The FISAP?s first submission was made timely by the University and there were only minor updates/changes on the final submission.) The Code of Federal Regulations (34 CFR 674.19 (d)(2)) requires the University to submit a Fiscal Operations Report plus other information required; the information must be accurate and shall be submitted on the form at the time specified. The Federal Register notice on January 26, 2021 (86 FR 7075) requires corrections to the FISAP be made by December 15, 2021. The Uniform Guidance (2 CFR 200.303) requires nonfederal entities receiving Federal awards establish and maintain internal controls designed to reasonably ensure compliance with Federal statutes, regulations, and terms and conditions of the Federal award. Effective internal controls should include procedures to ensure accurate information is reported on the FISAP on a timely basis. University officials stated the input error in FISAP was due to oversight on the part of the employee preparing the FISAP. The amounts were thought to be immaterial differences, and the correct amounts were properly reported and included on the totals column. The late filing of the second submission was due to additional changes that need to be made after the December 15, 2021 deadline. University officials stated changes made were extremely minor and did not affect total amounts of Perkins, FSEOG, or FWS. As allowed by Federal regulations, the University can request to change the information on FISAP even after the deadline, and the University has secured approval from the U.S. Department of Education to submit changes after the deadline. Failure to timely and accurately submit the University?s FISAP may jeopardize future federal funding. (Finding Code No. 2021-004) RECOMMENDATION We recommend the University improve procedures to ensure accurate and timely reporting. UNIVERSITY RESPONSE The University agrees with this finding and accepts the recommendation and has updated its procedures to ensure that reporting requirements and deadlines are met.

2021-005 FINDING: FEDERAL PERKINS LOAN COHORT DEFAULT RATE TOO HIGH Federal Department: U.S. Department of Education Assistance Listing Numbers: 84.038, 84.033, 84.007, 84.063, 84.268, 84.379 Cluster Name: Student Financial Assistance Cluster Programs: Federal Perkins Loan Program ? Federal Capital Contributions, Federal Work-Study Program, Federal Supplemental Educational Opportunity Grants, Federal Pell Grant Program, Federal Direct Student Loans, Teacher Education Assistance for College and Higher Education Grants Award Numbers: P033A201156, P033A191156, P007A151156, P007A191156, P007A201156, P063P190567, P063P200567, P268K210567, P268K200567, P379T200567, P379T210567 Questioned Cost: None Program Expenditures: $3,257,469; $437,855; $303,625; $7,662,088; $27,426,646; $12,244 Cluster Expenditures: $40,197,084 Governors State University?s (University) Federal Perkins loan cohort default rate is in excess of the threshold for administrative capability stipulated by the U.S. Department of Education. The Federal Perkins Loan cohort default rate as of June 30, 2021 (for borrowers who entered repayment during Fiscal Year 2020) was 16.67%, which exceeded the 15% threshold. The University chose to continue servicing their Perkins Loan portfolio after Federal Perkins Loan Program loan originations were discontinued in Fiscal Year 2018. The Code of Federal Regulations (Code) (34 CFR 668.16) states ?to begin and to continue to participate in any Title IV, HEA program, an institution shall demonstrate to the Secretary that the institution is capable of adequately administering that program under each of the standards established in this section. The Secretary considers an institution to have that administrative capability if the institution ? ... (m)(1) Has a cohort default rate - (iii) as defined in 34 CFR 674.5, on loans made under the Federal Perkins Loan Program to students for attendance at the institution that does not exceed 15 percent.? The U.S. Department of Education?s Dear Colleague Letter (DCL ID: GEN-17-10) states institutions that choose to continue to service their outstanding Perkins Loan portfolios must continue to service these loans in accordance with the Federal Perkins Loan Program regulations in 34 CFR 674. The Uniform Guidance (2 CFR 200.303) requires nonfederal entities receiving Federal awards establish and maintain internal controls designed to reasonably ensure compliance with Federal statutes, regulations, and terms and conditions of the Federal award. Effective internal controls should include procedures to ensure the University maintains a Federal Perkins Loan cohort default rate of less than 15%. University officials indicated they have met all due diligence requirements with regards to Perkins collections and have worked closely with the collection agency and with former students to facilitate loan consolidations, to reduce the cohort default rate; however economic conditions continue to present challenges for some former students. Failure to maintain a Federal Perkins Loan cohort default rate below 15% resulted in noncompliance with the Code, the Uniform Guidance, and the U.S. Department of Education?s directive. (Finding Code No. 2021-005, 2020-002, 2019-005, 2018-008, 2017-003, 2016-006) RECOMMENDATION We recommend the University improve its efforts and procedures to ensure its cohort default rate is not in excess of the threshold for administrative capabilities stipulated by the U.S. Department of Education. UNIVERSITY RESPONSE The University agrees with this finding and accepts the recommendation. The University will continue to closely monitor and communicate with students entering on default on a month-to-month basis, in addition to sending defaulted student loans to the Illinois State Comptroller?s Offset system.

2020-002 FINDING: FEDERAL PERKINS LOAN COHORT DEFAULT RATE TOO HIGH Federal Department: U.S. Department of Education CFDA Numbers: 84.038, 84.033, 84.007, 84.063, 84.268, 84.379 Cluster Name: Student Financial Assistance Cluster Programs: Federal Perkins Loan Program ? Federal Capital Contributions, Federal Work-Study Program, Federal Supplemental Educational Opportunity Grants, Federal Pell Grant Program, Federal Direct Student Loans, Teacher Education Assistance for College and Higher Education Grants Award Numbers: P033A181156, P033A191156, P007A171156, P007A181156, P007A191156, P063P180567, P063P190567, P063Q190567, P268K190567, P268K200567, P379T190567, P379T200567 Questioned Cost: None Program Expenditures: $44,779,885 Governors State University?s (University) Federal Perkins loan cohort default rate is in excess of the threshold for administrative capability stipulated by the U.S. Department of Education. The Federal Perkins Loan cohort default rate as of June 30, 2020 (for borrowers who entered repayment during Fiscal Year 2019) was 22.67%, which exceeded the 15% threshold. The University chose to continue servicing their Perkins Loan portfolio after Federal Perkins Loan Program loan originations were discontinued in Fiscal Year 2018. The Code of Federal Regulations (Code) (34 CFR 668.16) states ?to begin and to continue to participate in any Title IV, HEA program, an institution shall demonstrate to the Secretary that the institution is capable of adequately administering that program under each of the standards established in this section. The Secretary considers an institution to have that administrative capability if the institution ? ... (m)(1) Has a cohort default rate - (iii) as defined in 34 CFR 674.5, on loans made under the Federal Perkins Loan Program to students for attendance at the institution that does not exceed 15 percent.? The U.S. Department of Education?s Dear Colleague Letter (DCL ID: GEN-17-10) states institutions that choose to continue to service their outstanding Perkins Loan portfolios must continue to service these loans in accordance with the Federal Perkins Loan Program regulations in 34 CFR 674. The Uniform Guidance (2 CFR 200.303) requires nonfederal entities receiving Federal awards establish and maintain internal controls designed to reasonably ensure compliance with Federal statutes, regulations, and terms and conditions of the Federal award. Effective internal controls should include procedures to ensure the University maintains a Federal Perkins Loan cohort default rate of less than 15%. University officials indicated contracting with a new collection agency has helped to reduce the rate; however economic conditions resulting from the pandemic continue to present challenges for University students. Failure to maintain a Federal Perkins Loan cohort default rate below 15% resulted in noncompliance with the Code, the Uniform Guidance, and the U.S. Department of Education?s directive. (Finding Code No. 2020-002, 2019-005, 2018-008, 2017-003, 2016-006) RECOMMENDATION We recommend the University improve its efforts and procedures to ensure its cohort default rate is not in excess of the threshold for administrative capabilities stipulated by the U.S. Department of Education. UNIVERSITY RESPONSE The University agrees with this finding and accepts the recommendation. The University and its newly contracted collection agency have been closely monitoring and communicating with students entering on default on a month-to-month basis, in addition to sending defaulted student loans to the Illinois State Comptroller?s Offset system.

2020-003 FINDING: FAILURE TO MEET EARMARKING REQUIREMENTS FOR HEAD START PROGRAM Federal Department: U.S. Department of Health and Human Services CFDA Numbers: 93.600 Program Name: Head Start Award Numbers: 05CH8457-05 & 05CH011351-01 Questioned Cost: Undetermined Program Expenditures: $982,625 Governors State University (University) did not meet the funded enrollment requirement for its Head Start Program (Program). The University is a recipient of a grant from the Administration for Children and Families of the U.S. Department of Health and Human Services (DHHS). In accordance with the grant agreement with the DHHS, the University has a funded enrollment requirement of 72 individuals. In our testing of the monthly enrollment reports for Fiscal Year 2020, we noted the University did not meet the funded enrollment requirement for any of the 12 months (2 to 12 individuals under-enrolled). The Head Start Act (Act) (42 USC 9837(g)) requires each Head Start agency to enroll 100% of its funded enrollment and maintain an active waiting list at all times with ongoing outreach to the community and activities to identify underserved populations. The Act (42 USC 9836a(h)(2)(A)) further requires each entity carrying out a Head Start program to report on a monthly basis to the Secretary (DHHS) and the relevant Head Start agency the actual enrollment in such program. As defined by the Act (42 USC 9836a(h)(1)(A)), actual enrollment means, with respect to the program of a Head Start agency, the actual number of children enrolled in such program and reported by the agency in a given month. We noted the DHHS suspended the full enrollment determinations during the pandemic. The Uniform Guidance (2 CFR 200.303) requires nonfederal entities receiving Federal awards establish and maintain internal controls designed to reasonably ensure compliance with Federal statutes, regulations, and terms and conditions of the Federal award. Effective internal controls should include procedures to ensure earmarking requirements are met. University officials indicated failure to meet the enrollment requirement for the Program is due to difficulty in finding families who are interested in enrolling in the home based and pregnant women programs. Failure to meet the funded enrollment of its Program resulted in noncompliance with the Federal program earmarking requirement. Additionally, the awarding agency may recapture, withhold, or reduce the base grant for the program. (Finding Code No. 2020-003, 2019-001, 2018-010, 2017-004, 2016-007, 2015-002, 2014-003) RECOMMENDATION We recommend the University improve its recruitment procedures to ensure compliance with the funded enrollment of the Program. UNIVERSITY RESPONSE The University agrees with this finding and accepts the recommendation. The University?s Family Development Center has been employing several different methods to improve enrollment. During the COVID-19 lockdown period from March 16, 2020 to June 15, 2020, the University?s Family Development Center has: ? Provided remote services to children and families. ? Provided meals to children and families offering distance pick-up and delivery. ? Provided basic education materials to children and families to continue education at home. ? Created video lessons for parents and children. ? Provided parents information and support regarding housing, medical, food, mental health, and financial assistance. ? Updated its website to make it easier to navigate and more attractive to families. After reopening, the University?s Family Development Center has: ? Increased online recruitment on social medial and google to have a continuous daily online presence. ? Placed an advertisement in ?Family Time?, a local family oriented newspaper. ? Updated recruitment materials to include photos of teachers in masks. ? Sent out a mass mailer to about 5,000 families of children ages 0-3 who are income qualified. ? Added a QR code to our mailers to allow parents to easily access applications. ? Begun recruiting through ?refer a friend? program.

2019-001 FINDING: NONCOMPLIANCE WITH HEAD START PROGRAM REQUIREMENTS Federal Department: U.S. Department of Health and Human Services CFDA Numbers: 93.600 Program Name: Head Start Award Numbers: 05CH8457-04 & 05CH8457-05 Questioned Cost: See below Program Expenditures: $1,123,999 Governors State University (University) did not comply with various requirements for its Head Start Program. Our testing of the University?s Head Start Program identified the following noncompliance: 1. The University did not meet the funded enrollment requirement for its Head Start Program. The University is a recipient of a grant from the Administration for Children and Families of the U.S. Department of Health and Human Services (DHHS). In accordance with the grant agreement with the DHHS, the University has a funded enrollment requirement of 72 individuals. In our detailed testing of the monthly enrollment reports for Fiscal Year 2019, we noted the University did not meet the funded enrollment requirement for 11 months (3 to 12 individuals under-enrolled). The Head Start Act (Act) (42 USC 9837(g)) requires each Head Start agency to enroll 100% of its funded enrollment and maintain an active waiting list at all times with ongoing outreach to the community and activities to identify underserved populations. The Act (42 USC 9836a(h)(2)(A)) further requires each entity carrying out a Head Start program to report on a monthly basis to the Secretary (DHHS) and the relevant Head Start agency the actual enrollment in such program. As defined by the Act (42 USC 9836a(h)(1)(A)), actual enrollment means, with respect to the program of a Head Start agency, the actual number of children enrolled in such program and reported by the agency in a given month. The Uniform Guidance (2 CFR 200.303) requires nonfederal entities receiving Federal awards establish and maintain internal controls designed to reasonably ensure compliance with Federal statutes, regulations, and terms and conditions of the Federal award. Effective internal controls should include procedures to ensure earmarking requirements are met. University officials indicated failure to meet the enrollment requirement for the program is due to difficulty in finding families who are interested in enrolling in the home based and pregnant women programs. Questioned Cost: Undetermined 2. The University did not fully comply with the program governance special tests and provisions compliance requirements applicable to the University?s Head Start Program. We requested documentation to substantiate the Head Start Program?s Governing Board and Policy Council were provided with accurate and regular financial and other information. The University could not provide any documentation of the Policy Council being provided the financial audit for Fiscal Year 2017. As of the date of our testing (June 10, 2019), the Fiscal Year 2018 financial audit had not been provided to the Governing Board or Policy Council. The University did provide the Fiscal Year 2018 financial audit to the Policy Council subsequent to our inquiry. The Act (42 USC 9837(d)(2)) requires each Head Start agency to share accurate and regular information for use by the governing body and the policy council, about program planning policies, and the Head Start agency operations. The financial audit is one item specifically required to be provided to the governing body and the policy council. The Uniform Guidance (2 CFR 200.303) requires nonfederal entities receiving Federal awards establish and maintain internal controls designed to reasonably ensure compliance with Federal statutes, regulations, and terms and conditions of the Federal award. Effective internal controls should include procedures to ensure compliance with program governance requirements. University officials indicated the University?s Head Start personnel discusses the results of audits with the Governing Board and Policy Council, however, a copy of the actual financial audit report was not provided. Questioned Cost: Undetermined 3. The University?s internal controls over the compliance requirements of allowable costs/cost principles applicable to the Head Start Program were ineffective. We tested internal controls and compliance relative to 40 expenditures (including 8 journal entries) totaling $85,749 and noted the following: ? Two of the expenditures ($3,000) were journal entries which did not include evidence of review and approval by an appropriate supervisor of the calculation supporting the journal entry or the journal entry itself. ? One expenditure ($548) did not have the required source documentation attached to the expenditure package. ? One expenditure package ($67) (evidencing source documentation and approvals) could not be located by the University. The sample was not intended to be, and was not, a statistically valid sample. The Uniform Guidance states the following: ? (2 CFR 200.302(b)(3)) The nonfederal entity must have records that adequately identify the application of funds for federally-funded activities and the records must be supported by source documentation. ? (2 CFR 200.302(b)(4)) The nonfederal entity must provide a financial management system which provides for effective control over and accountability for all funds. The nonfederal entity must adequately safeguard all assets and assure that they are used solely for authorized purposes. ? (2 CFR 200.303) Nonfederal entities receiving Federal awards must establish and maintain internal controls designed to reasonably ensure compliance with Federal statutes, regulations, and terms and conditions of the Federal award. Effective internal controls should include maintaining source documentation of expenditures and as well as proper approval of expenditures and journal entries. University officials indicated conditions noted were due to voucher processing and review procedures not consistently being followed caused by staffing constraints. Questioned cost: Known $661 (including indirect costs of $46) (Projected $8,061 calculated as follows: $615 (error noted in sample) / $85,749 (sample size) X $1,123,999 (total program expenditures)) Failure to meet the funded enrollment of its Head Start program resulted in noncompliance with the Federal program earmarking requirement. Additionally, the awarding agency may recapture, withhold, or reduce the base grant for the program. Failure to provide accurate and regular information to the Governing Board and Policy Council limits their ability to make informed decisions. Failure to maintain supporting documentation of expenditures may result in program costs being disallowed and may jeopardize future funding. Failure to properly review and approve journal entries increases the risk of inaccurate charges to federal award programs. (Finding Code No. 2019-001, 2018-010, 2017-004, 2016-007, 2015-002, 2014-003) RECOMMENDATION We recommend the University: ? improve its recruitment procedures to ensure compliance with the funded enrollment of its Head Start program; ? provide all required information to its Head Start Governing Board and Policy Council as required by the Act; and ? improve its controls to ensure all program charges are appropriately reviewed and supporting documentation is retained to evidence expenditures. UNIVERSITY RESPONSE The University agrees with this finding and accepts the recommendation. On the issue of the University not meeting the funded enrollment requirement for its Head Start Program, the University?s Family Development Center has been employing several different methods to improve enrollment, as follows: ? Opening another Early Head Start classroom to take pressure off home-based and pregnant women programs, which have been historically harder to fill. ? Mailing out flyers to local families, local businesses and restaurants who historically employ at a minimum wage, faith-based communities, local food pantries, among others. ? Working with the University Park Mayor to create advertising on local radio and television stations. ? Brochures and flyers are going out to the various colleges within the University so faculty members can promote the programs to their students who do direct service work like social work with at risk families. ? Recruits at local facilities on a monthly basis. ? Recruits through ?refer a friend? program. Families who are currently enrolled in the program get an incentive for referring other families to enroll in the program. ? Participates in events as well as local festivals and high school resource fairs, providing handouts and recruitment materials to all local families. ? Participates in the Southland Human Leadership Council?s quarterly meetings. This Council is comprised of nonprofit organizations who could potentially provide services. The intent is to create additional partnerships with these organizations for referrals to the Family Development Center as well as providing referral services to the families. ? Created a Community Partnership Committee with local agencies. These agencies help with referrals for families who need additional resources. ? Placing online social media ads that highlight the benefits of our home-based and pregnant women programs. ? The University?s marketing department is in the process of publishing a story with Chicago newspapers about our Early Head Start home-based and pregnant women programs. On the issue of the University not providing a copy of the financial audit report to its Head Start Program Governing Board and Policy Council, the Family Development Center?s Executive Director has created governance procedures which include a calendar that provides an easy visual for the board meeting dates with all the items (including the financial audit report) that need to be approved. Said procedures also state that the required items will be listed in the agenda and covered in the minutes. On the issue of ineffective controls over Early Head Start expenditures, the University has recently filled the Grant Accountant vacancy. The Grant Accountant will strengthen existing procedures to ensure grant expenditure vouchers and journal entries are properly approved, documented, and supported.

2019-002 FINDING: INEFFECTIVE CONTROLS OVER MENTAL AND BEHAVIORAL HEALTH EDUCATION AND TRAINING GRANTS EXPENDITURES Federal Department: U.S. Department of Health and Human Services CFDA Numbers: 93.732 Program Name: Mental and Behavioral Health Education and Training Grants Award Numbers: M01HP31301-01-00 / M01HP31301-02-00 Questioned Cost: Known $1,649 (including indirect costs of $122) (Projected $14,252 calculated as follows: $1,527 (error in sample exclusive of indirect costs) / $61,353 (sample size) X $572,613 (total program expenditures)) Program Expenditures: $572,613 Governors State University?s (University) internal controls over the compliance requirements of allowable costs/cost principles applicable to its Mental and Behavioral Health Education and Training Grants (BHWET) were ineffective. We tested internal controls and compliance relative to 40 expenditures totaling $61,353 (which included 10 journal entries) and noted the following: ? One expenditure ($87) was improperly charged to the grant. The proper account number was written on the expenditure packet; however, was inadvertently posted to the incorrect general ledger account when it was input into the computer system. ? Nine of the expenditures ($6,029) were journal entries which did not include any documentation of the review and approval by an appropriate supervisor or of the supporting calculation of the journal entries. ? Two expenditures ($725) were not approved by the Principal Investigator or the Program Director. ? One payroll expenditure ($1,440) was for a stipend for an employee that worked for the School of Extended Learning and did training for the BHWET grant. The grant paid the School of Extended Learning as well as the employee for the same work performed. The sample was not intended to be, and was not, a statistically valid sample. The Uniform Guidance states the following: ? (2 CFR 200.302(b)) The nonfederal entity must provide a financial management system which provides for effective control over and accountability for all funds. The nonfederal entity must adequately safeguard all assets and assure that they are used solely for authorized purposes. ? (2 CFR 200.303) Nonfederal entities receiving Federal awards must establish and maintain internal controls designed to reasonably ensure compliance with Federal statutes, regulations, and terms and conditions of the Federal award. Effective internal controls should include documentation of approvals of journal entries and ensure charges for the same expenditure are paid only once. The University?s stated procedures for allowable costs/cost principles require all grant expenditures to be first approved by the Project Director or Principal Investigator as they have knowledge and expertise on which costs are allowable and which are not. In the prior and the current audit periods, University officials indicated the conditions noted were due to controls not being consistently followed because of staffing constraints. Failure to maintain effective internal controls over Federal compliance requirements results in disallowed program costs and may jeopardize future funding. Failure to have documents properly reviewed and approved may result in inaccurate charges to award programs. (Finding Code No. 2019-002, 2018-005) RECOMMENDATION We recommend the University improve its controls to ensure the University complies with the requirements of the Federally funded program and ensure all documentation is appropriately reviewed and approved prior to recording. UNIVERSITY RESPONSE The University agrees with this finding and accepts the recommendation. The University has recently filled the Grant Accountant vacancy. The Grant Accountant will strengthen existing procedures to ensure grant expenditure vouchers and journal entries are properly recorded, approved, documented, and supported. The $1,440 exception noted has been corrected by the University.

2019-003 FINDING: INACCURATE RETURN OF TITLE IV FUNDS CALCULATIONS Federal Department: U.S. Department of Education CFDA Numbers: 84.038, 84.033, 84.007, 84.063, 84.268, 84.379 Cluster Name: Student Financial Assistance Cluster Programs: Federal Perkins Loan Program ? Federal Capital Contributions, Federal Work-Study Program, Federal Supplemental Educational Opportunity Grants, Federal Pell Grant Program, Federal Direct Student Loans, Teacher Education Assistance for College and Higher Education Grants Award Numbers: P033A181156, P033A171156, P033A161156, P033A121156, P007A181156, P007A171156, P007A161156, P063P170567, P063P180567, P268K180567, P268K190567, P379T190567 Questioned Cost: Undetermined Program Expenditures: $47,534,539 Governors State University (University) incorrectly calculated the amount of Title IV Funds the University was required to return to the U.S. Department of Education (ED). Our testing of 25 students who withdrew from the University identified three students (12%) where the University determined the period of enrollment by the student incorrectly. The University failed to exclude the University?s Spring Break from the number of calendar days completed during the period for those students who withdrew during the Spring Break. As a result, the University did not initially return the correct amount of Title IV Funds (a total of $341 was not refunded). Once this information was brought to the attention of the University, the additional amount was refunded to the ED. The sample was not intended to be, and was not, a statistically valid sample. The Code of Federal Regulations states: ? (34 CFR 668.22 (f)(1)(i)) ? the percentage of the period of enrollment completed is calculated by dividing the total number of calendar days in the period of enrollment into the number of calendar days completed in the period. ? (34 CFR 668.22 (f)(2)(i)) - the total number of calendar days in the period of enrollment includes all days within the period that the student was scheduled to complete, except that scheduled breaks of at least five consecutive days are excluded from the total number of calendar days in a period of enrollment and the number of days completed. The Uniform Guidance (2 CFR 200.303) requires nonfederal entities receiving Federal awards establish and maintain internal controls designed to reasonably ensure compliance with Federal statutes, regulations, and terms and conditions of the Federal award. Effective internal controls should include procedures to ensure that proper calculations of the period of enrollment attended by students are used in preparation of Return of Title IV calculations. University officials indicated the return of Title IV Funds miscalculations were due to the improper setup of software parameters to address withdrawals during the University?s break in classes. Failure to complete accurate refund calculations may jeopardize future Federal funding. (Finding Code No. 2019-003) RECOMMENDATION We recommend the University improve its procedures to ensure all return of Title IV Funds calculations are prepared in accordance with ED?s regulations. UNIVERSITY RESPONSE The University agrees with this finding and accepts the recommendation. The Office of Financial Aid has reviewed its return of Title IV process and made changes accordingly to prevent this issue from reoccurring. This process change has already been implemented.

2019-004 FINDING: EXIT COUNSELING Federal Department: U.S. Department of Education CFDA Numbers: 84.268 Cluster Name: Student Financial Assistance Cluster Program: Federal Direct Student Loans Award Numbers: P268K180567, P268K190567 Questioned Cost: None Program Expenditures: $34,371,877 Governors State University (University) did not timely provide exit counseling for Federal Direct Student Loan recipients who ceased half-time study at the University. We tested a sample of 60 students who received Federal student financial aid. Included in those 60 students were 11 Federal Direct Student Loan recipients who ceased half-time study at the University during Fiscal Year 2019. The notification was provided 9 and 60 days late for 2 (18%) of the students and was never sent for 1 (9%) student. The sample was not intended to be, and was not, a statistically valid sample. The Code of Federal Regulations (34 CFR 685.304(b)) requires schools to ensure exit counseling is conducted with each Direct Subsidized Loan or Direct Unsubsidized Loan borrower and graduate or professional student Direct PLUS Loan borrower shortly before the student borrower ceases at least half-time study at the school. In addition, if a student borrower withdraws from school without the school?s prior knowledge or fails to complete the exit counseling as required, exit counseling must, within 30 days after the school learns that the student borrower has withdrawn from the school or failed to complete exit counseling as required, be provided either through interactive electronic means, by mailing written counseling materials to the student borrower at the student borrower?s last known address, or by sending written counseling materials to an email address provided by the student borrower that is not an email address associated with the school sending the counseling materials. The Uniform Guidance (2 CFR 200.303) requires nonfederal entities receiving Federal awards establish and maintain internal controls designed to reasonably ensure compliance with Federal statutes, regulations, and terms and conditions of the Federal award. Effective internal controls should include procedures to ensure the University conducts timely exit counseling for students that have received Federal Direct Student Loans and have ceased half-time study at the school. University officials indicated the Office of Financial Aid receives a report from the Office of Registration indicating which students have ceased half-time enrollment and due to issues with the timing of reports, exit counseling notifications were either sent out late or not sent at all. Failure to conduct timely exit counseling could result in the loss of Federal funding and fails to notify the student of their rights and responsibilities. (Finding Code No. 2019-004) RECOMMENDATION We recommend the University conduct timely exit counseling in accordance with Federal regulations. UNIVERSITY RESPONSE The University agrees with this finding and accepts the recommendation. In order to communicate to students the requirement of completing the exit counseling, the Office of Financial Aid relies on a report received from the Office of Registration. This report was missing some students who had reduced enrollment to less-than-half time. The Office of Financial Aid had discussed this issue with the new Registrar and the new Associate Registrar; both are aware of the importance and accuracy of this report. The Associate Registrar will run this report on a monthly basis and will send to the Office of Financial Aid to ensure communication of exit counseling to the correct students within the required timeframe. This process has already been implemented.

2019-005 FINDING: FEDERAL PERKINS LOAN COHORT DEFAULT RATE TOO HIGH Federal Department: U.S. Department of Education CFDA Numbers: 84.038, 84.033, 84.007, 84.063, 84.268, 84.379 Cluster Name: Student Financial Assistance Cluster Programs: Federal Perkins Loan Program ? Federal Capital Contributions, Federal Work-Study Program, Federal Supplemental Educational Opportunity Grants, Federal Pell Grant Program, Federal Direct Student Loans, Teacher Education Assistance for College and Higher Education Grants Award Numbers: P033A181156, P033A171156, P033A161156, P033A121156, P007A181156, P007A171156, P007A161156, P063P170567, P063P180567, P063Q160567, P063Q170567, P063Q180567, P268K180567, P268K190567, P379T190567 Questioned Cost: None Program Expenditures: $47,534,539 Governors State University?s (University) Federal Perkins loan cohort default rate is in excess of the threshold for administrative capability stipulated by the U.S. Department of Education. The Federal Perkins Loan cohort default rate as of June 30, 2019 (for borrowers who entered repayment during Fiscal Year 2018) was 38.96%, which exceeded the 15% threshold. The University chose to continue servicing their Perkins Loan portfolio after Federal Perkins Loan Program loan originations were discontinued in Fiscal Year 2018. The Code of Federal Regulations (Code) (34 CFR 668.16) states ?to begin and to continue to participate in any Title IV, HEA program, an institution shall demonstrate to the Secretary that the institution is capable of adequately administering that program under each of the standards established in this section. The Secretary considers an institution to have that administrative capability if the institution ? ... (m)(1) Has a cohort default rate - (iii) as defined in 34 CFR 674.5, on loans made under the Federal Perkins Loan Program to students for attendance at the institution that does not exceed 15 percent.? The U.S. Department of Education?s Dear Colleague Letter (DCL ID: GEN-17-10) states institutions that choose to continue to service their outstanding Perkins Loan portfolios must continue to service these loans in accordance with the Federal Perkins Loan Program regulations in 34 CFR 674. The Uniform Guidance (2 CFR 200.303) requires nonfederal entities receiving Federal awards establish and maintain internal controls designed to reasonably ensure compliance with Federal statutes, regulations, and terms and conditions of the Federal award. Effective internal controls should include procedures to ensure the University maintains a Federal Perkins Loan cohort default rate of less than 15%. In the prior and current audit periods, University officials indicated economic conditions continue to present challenges for University students in loan repayment status. University officials further indicated there are two important forces on the increase in default rates. First, the University added on-campus housing in Fall 2014 which adds to the potential for significant additional debt to accumulate in the short term. Second, despite the University having the lowest tuition and fees in the region, the gap for our most vulnerable students (of whom we educate a higher percentage than others in our area) between what is supported by the State and the cost of tuition has widened over time. University officials stated the University has kept tuition low throughout the State?s budget crisis, but at the same time the loss of services made the costs for students higher when daycare, social service, and elderly care were no longer available. In addition, University officials indicated, in the current year, a staffing vacancy on the student accounts area has made it more challenging for the University to address this issue. Failure to maintain a Federal Perkins Loan cohort default rate below 15% resulted in noncompliance with the Code, the Uniform Guidance, and the U.S. Department of Education?s directive. (Finding Code No. 2019-005, 2018-008, 2017-003, 2016-006) RECOMMENDATION We recommend the University improve its efforts and procedures to ensure its cohort default rate is not in excess of the threshold for administrative capabilities stipulated by the U.S. Department of Education. UNIVERSITY RESPONSE The University agrees with this finding and accepts the recommendation. As part of the University?s collection efforts, the University has contracted with a new collection agency through an Illinois Public Higher Education Consortium awarded firm. The University and the newly contracted collection agency have been closely monitoring and communicating with students entering on default on a month-to-month basis. In addition, the University started sending defaulted student loans to the Illinois State Comptroller?s Offset system in Fall of 2019.

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