Atlantic University, Inc.

Special Tests and Provisions - Return of Title IV Funds Federal Program Federal Pell Grant Program (PELL), ALN. 84.063 Name of Federal Agency U.S. Department of Education Pass-through Entity N/A Category Significant Deficiency Compliance / Internal control Compliance Requirement Special test and provisions – Return of Title VI Funds Criteria 1. 34 CFR Section 668.173 (b) states that an institution returns unearned Title IV, HEA program funds timely if; (1) the institution deposits or transfers the funds into the bank account it maintains under §668.163 no later than forty-five (45) days after the date it determines that the student withdrew; (2) the institution initiates an electronic fund transfer (EFT) no later than forty-five (45) days after the date it determines that the student withdrew; (3) the institution initiates an electronic transaction, no later than forty five (45) days after the date it determines that the student withdrew, that informs a FFEL lender to adjust the borrower's loan account for the amount returned; or (4) the institution issues a check no later than forty-five (45) days after the date it determines that the student withdrew. 2. DCL GEN-04-03 Revised, November 2004, indicates “Treatment of a student who fails to receive a passing grade in any class”. a. An institution must have a procedure for determining whether a Title IV aid recipient who began attendance during a period completed the period or should be treated as a withdrawal. We do not require an institution to use a specific procedure for making this determination. i. If a student earns a passing grade in at least one course offered over an entire period, the institution may make the presumption that the student completed the course and, thus, completed the period. ii. No passing grades: If a student who began attendance and has not officially withdrawn fails to earn a passing grade in at least one course offered over an entire period, the institution must assume, for Title IV purposes, that the student has unofficially withdrawn, unless the institution can document that the student completed the period. iii. In this circumstance, if the institution determines that the student does have aid that could have been disbursed for the period and the student does not have any passing or “earned F” grades, the institution must perform the R2T4 calculation using the student’s documented withdrawal date and make any applicable PWDs. Finally, if the school does not have any completion percentage requirements for an incomplete grade, (or allows an incomplete grade to be assigned to a student without ensuring that the student completed at least 60% of the period), then the school must perform an R2T4 calculation. Condition Found 1. In testing compliance with the return of Title IV funds requirement, we selected a sample of ten (10) students’ withdrawal. During our examination, we noted one (1) instance, which based on the regulation previously indicated, the return of Title IV funds as calculated by the Institution was performed after the required 45 days. 2. In testing compliance with the Return of Title IV Funds (R2T4) requirements, we selected a sample of ten (10) students who received all failing and/or incomplete grades to determine whether each student completed the period. During our evaluation, we noted the following exceptions: a. We found two (2) instances in where the student began attendance but has not officially withdrawn and failed to earn a passing grade in one course taken during the payment period. Upon reviewing the academic records, we found no evidence of academic activity to indicate that the student completed the period. b. Although the institution subsequently performed an R2T4 calculation, the Title IV funds were returned late. Cause 1. The delay was due to deficiencies in internal control and follow-up procedures to the disbursement of credit balance to students. In the observed cases, the administrative office did not maintain sufficient evidence demonstrating timely monitoring of the process nor the existence of a formal record of disbursement dates. 2. The Assessment Office of the institution requested professors for a report entitled "Low academic achievement", where every quarter the professor had to document why the student obtains D or F in his course. The institution acknowledges that there are no detailed reports and that it indicates the time during which the student has been participating in their class. Unfortunately, in the reports submitted by the faculty, the data of some students were not found. As usual at the institution, the faculty is not asked to deliver a copy of their grade records. Effect As a result of this condition, the USDE may issue warnings and/or impose penalties to the University or issue warning as to incur in a probation status. It also could deprive other needy students of federal fund’s needs. Context 1. Of the sixty-eight (68) cases of withdrawal, we examined ten (10) and determined that one (1) case that the Return of Title IV was returned late. 2. Of a population of 103 participants of the Student Financial Aid Program with no passing grades, we examined ten (10) participants of PELL and in two (2) cases return of refund procedure were performed late. Identification of a Repeat Finding 1. Condition one is not a repeat finding from the immediate previous audit. 2. Condition two is a repeat finding from the immediate previous audit. Questioned Costs None Recommendation 1. In cases where students have a credit balance in their account and payment is made by check, it is recommended that the institution notify the student via email, so that they are aware that they will receive a surplus of financial aid to cover their study needs. Likewise, it is recommended that the institution review and strengthen its administrative, reconciliation, and disbursement procedures in order to ensure that surpluses are returned within the regulatory period of fourteen (14) calendar days, as established. 2. We recommend Atlantic University to enforce the procedures for students failing grades and to ascertain that the return of Title IV funds procedures is properly followed and ascertain compliance. Views of Responsible Officials of the Auditee and Planned Corrective Actions Management of the University agrees with this finding. Please refer to the corrective action plan on page 41.

Finding No. 2024-01 Special Tests and Provisions - Return of Title IV Funds Federal Program Federal Pell Grant Program (PELL), ALN. 84.063 Name of Federal Agency U.S. Department of Education Pass-through Entity N/A Category Significant Deficiency Compliance / Internal control Compliance Requirement Special test and provisions – Return of Title VI Funds Criteria 1. DCL GEN-04-03 Revised, November 2004, indicates “Treatment of a student who fails to receive a passing grade in any class”. a. An institution must have a procedure for determining whether a Title IV aid recipient who began attendance during a period completed the period or should be treated as a withdrawal. We do not require an institution to use a specific procedure for making this determination. i. If a student earns a passing grade in at least one course offered over an entire period, the institution may make the presumption that the student completed the course and, thus, completed the period. ii. No passing grades: If a student who began attendance and has not officially withdrawn fails to earn a passing grade in at least one course offered over an entire period, the institution must assume, for Title IV purposes, that the student has unofficially withdrawn, unless the institution can document that the student completed the period. iii. In this circumstance, if the institution determines that the student does have aid that could have been disbursed for the period and the student does not have any passing or “earned F” grades, the institution must perform the R2T4 calculation using the student’s documented withdrawal date and make any applicable PWDs. Finally, if the school does not have any completion percentage requirements for an incomplete grade, (or allows an incomplete grade to be assigned to a student without ensuring that the student completed at least 60% of the period), then the school must perform an R2T4 calculation. 34 CFR Section 668.173 (b) states that: an institution returns unearned title IV, HEA program funds timely if; (1) the institution deposits or transfers the funds into the bank account it maintains under §668.163 no later than 45 days after the date it determines that the student withdrew; (2) the institution initiates an electronic funds transfer (EFT) no later than 45 days after the date it determines that the student withdrew; (3) the institution initiates an electronic transaction, no later than 45 days after the date it determines that the student withdrew, that informs a FFEL lender to adjust the borrower's loan account for the amount returned; or (4) the institution issues a check no later than 45 days after the date it determines that the student withdrew Condition Found In testing compliance with the Return of Title IV Funds (R2T4) requirements, we selected a sample of six (6) students who received all failing and/or incomplete grades to determine whether each student completed the period. During our evaluation, we noted the following exceptions: 1. We identified one (1) instance in which a student began attendance but did not officially withdraw and failed to earn a passing grade in the only course taken during the entire payment period. Upon reviewing the academic records, we found no evidence of academic activity to indicate that the student completed the period. 2. Although the institution subsequently performed an R2T4 calculation, the Title IV funds were returned late. Cause The Institution’s Assessment Office requires faculty to submit a quarterly report titled “Low Academic Achievement,” in which professors must document the reasons why students received a grade of D or F in their course. While the institution acknowledges that these reports are not detailed and only indicate the timeframe during which the student participated in class, we noted that some student data was missing from the reports submitted by faculty. Additionally, as is customary at the institution, faculty members are not required to submit copies of their grade records. Effect As a result of these conditions, the Department of Education may impose penalties and deprive other needy students of federal funds. Context Of the sixty-three (63) participants of the Student Financial Aid Program with no passing grades, we examined six (6) participants of PELL and in one (1) case return of refund procedure were performed late. Identification of a Repeat Finding This is not a repeat finding from the immediate previous audit. Questioned Costs None Recommendation We recommend that the Institution strengthen and enforce its procedures for documenting and monitoring students who receive failing grades. Additionally, the Institution should ensure that the Return of Title IV Funds (R2T4) process is properly followed in accordance with federal regulations, and that compliance is consistently maintained. Views of Responsible Officials of the Auditee and Planned Corrective Actions Management of the University agrees with this finding. Please refer to the corrective action plan on pages 42.

Name of Federal Agency US Department of Housing and Urban Development (HUD) Pass-through the Puerto Rico Housing Department Federal Program 14.288 Community Development Block Grant - Disaster Recovery Category Compliance / Internal control Compliance Requirements Reporting Criteria Uniform Guidance, Part 200.329 (c)(i) established that the non-Federal entity must submit performance reports at the interval required by the Federal awarding agency or pass-through entity to best inform improvements in program outcomes and productivity. Intervals must be no less frequent than annually nor more frequent than quarterly except in unusual circumstances, for example where more frequent reporting is necessary for the effective monitoring of the Federal award or could significantly affect program outcomes. Reports submitted annually by the non-Federal entity and/or pass-through entity must be due no later than 90 calendar days after the reporting period. Reports submitted quarterly or semiannually must be due no later than 30 calendar days after the reporting period. Alternatively, the Federal awarding agency or pass-through entity may require annual reports before the anniversary dates of multiple year Federal awards. As per agreement with the Authority clause II (b) established that the Authority shall submit regular monthly progress reports to the Puerto Rico Department of Housing (PRDOH), on the form and with the content to be specified and required by the PRDOH. The PRDOH will later notify the Authority in writing the guidelines and requirements applicable to the submittal of the monthly progress reports, and such notification shall be deemed incorporated by reference to this Agreement. This clause is in accordance with the guidance of the Subrecipient Guide. Condition During our procedures performed to determine compliance with reporting requirements, we noted that the Progress Report was not submitted on time to Puerto Rico Department of Housing (PRDOH). Cause and Potential Effect Noncompliance with the reporting requirements could lead to significant administrative actions by the grantor, including a reduction in the amounts to be awarded. In addition, it prevents the grantor from monitoring the performance of the program and could be interpreted as a failure to achieve program objectives.Questioned Costs None Recommendation The Authority shall ensure effective supervision over its reporting processes to guarantee the timely preparation and submission of progress reports. It is advised that the Authority prioritize providing comprehensive training to personnel responsible for preparing, reviewing, and approving performance reports. This training should focus on equipping them with the necessary skills and knowledge to include all relevant data elements and adhere to deadlines consistently. Views of responsible officials: Pursuant to the Subrecipient Agreement, on July 2, 2020, the Authority became the administrator of the Program. However, it wasn’t until June 1, 2021, when the Authority formed the Division, which consists of a team of employees designated to administer and implement the Program, and its priorities include ensuring that all Program requirements are being met. This includes submitting the Progress Reports that were past due before the Division’s formation and making sure that all future reports are submitted on time. Since then, the Division has been submitting the Progress Reports on time and is currently up to date. Moreover, the following measures have been taken to ensure compliance with this requirement: 1. On October of 2021, the Progress Reports began to be submitted electronically through the Grant Compliance Portal (GCP), making this process more efficient and faster. 2. The staff members responsible for submitting the Progress Reports are given frequent training on the report’s requirements and the GCP usage. 3. The Division continues to recruit additional personnel as needed. Therefore, the Program is currently in compliance with the Progress Reports submittal and the issues that might have caused any delays in submitting such reports before the Division’s formation were addressed. Responsible Person: Mrs. Janet Perez Cotto

Name of Federal Agency U.S. Department of Housing and Urban Development U.S. Department of Treasury Federal Program Various Assistance Listing Number Various Category Compliance/Internal Control Compliance Requirements Reporting Criteria Uniform Guidance, Part 200.512 (a) established that the audit must be completed, and the data collection form and reporting package must be submitted within the earlier of 30 days after receipt of the auditor's reports, or nine months after the end of the audit period, unless a longer period is agreed to in advance by the cognizant or oversight agency for audit. Unless restricted by law or regulation the auditee shall make copies available for public inspection. Condition The Data Collection Form and Single Audit reporting package were not submitted within nine months after the end of the audit period. Also did not submit six (6) months beyond the normal due date nor on extension date. Cause and Effect Information to complete the financial statements audit procedures was not available within the required period. Data collection form and single audit report were not submitted in a timely manner as required by the Uniform Guidance. A similar audit finding was reported during the prior audit (2022-002), (2021-002), (2020-002); (2019-002) and (2018-002).96 Questioned Cost None Recommendation Data collection from and single audit package shall be submitted within the required due dates. Views of Responsible Officials The delay in submitting the data collection form was an exceptional occurrence caused by a delay in obtaining upper management approval of the Single Audit Report. We anticipate submitting the data collection form to the Department of Housing and Urban Development on the same day following the completion of the Audited Financial Statements. Responsible Person: Hector L. Orsini Vélez / Amanda Oyola