MARSHALL B. KETCHUM UNIVERSITYHigher Education

FINDING 2024-001 – Special Tests and Provisions-Return of Title IV Funds – Significant Deficiency In Internal Controls Over Compliance. Criteria: When a recipient of Title IV loan assistance withdraws from the University during a payment period or period of enrollment in which the recipient began attendance, the University must determine the amount of Title IV aid earned by the student as of the student’s withdrawal date. The regulations (34 CFR 668.22(f)(2)) provide that the total number of calendar days in a payment period or period of enrollment include all days within the period that the student was scheduled to complete and the number of calendar days completed in the period, except that scheduled breaks of at least five consecutive days and days on which the student was on an approved leave of absence are excluded from the total number of calendar days in a payment period or period of enrollment. The regulations (34 CFR 668.22(e)(4)) provide the total amount of unearned Title IV grant or loan assistance that has not been earned by the student and therefore is calculated by determining the complement of the percentage of Title IV grant or loan assistance earned by the student as described in 34 CFR 668.22(e)(2). The regulations do not prohibit a school from developing its own refund policy however, the school must comply with refund policies required by the noted regulations. Although the refund policy of the school will determine the charges a student will owe after withdrawing, those policies will not affect the amount of Title IV aid the student has earned under the R2T4 calculation. Condition/context: We selected a sample of five students out of a population of 21 that were identified by the University as having received some federal assistance and withdrew from the University during the year under audit. We believe this to be a representative sample of the population and a statistical sample. We found two calculations of the return of Title IV funds contained errors related to the total number of days in the term because consideration for the exclusion of certain days from the winter scheduled break were not properly implemented. This calculation error caused two of the five samples to have the wrong total of aid earned because those two students had withdrawn before the 60% completion threshold. In this same sample universe, two students had incorrect calculations of values to be returned because the institutional charges were not included in the R2T4 calculation. In both cases, the students began a term while the school evaluated their academic performance from the previous term. The students were dismissed from their respective programs based on academic performance, but the school refunded full tuition and fees as the students were not given adequate opportunity to attend the terms for which they withdrew. As such, the school had considered the full tuition refund as a $0 institutional charge on the R2T4 calculation which caused calculation errors for what was earned in the term. These two errors caused an understatement of $24,127 unsubsidized loan that would be required to be returned by the school. Questioned costs: No questioned costs were identified as part of this finding. Cause: In discussing these conditions with the University’s management, the department had input the start dates of the scheduled winter break as the first Monday after scheduled instruction, rather than the day after the final day of scheduled instruction time, which erroneously removed weekend days from the calculation. Effect: The overstated total days in term caused the calculation of aid earned to be understated and therefore more federal funding was returned than a proper calculation would have concluded. Repeat finding: This is not a repeat finding. Recommendation: We recommend the University update their policies and procedures to calculate the return of Title IV funding accordingly to ensure accurate calculations are performed. Views of responsible officials: Management agrees with the finding. A corrective action plan has been created by management and is included in the following section.

Finding 2020-001: Eligibility ? Significant Deficiency in Internal Control over Compliance (See Schedule of Findings and Questioned Costs - Section II - Federal Award Findings for table) Criteria ? SEC. 472 of the Higher Education Act (?HEA?) [20 U.S.C. 1087lI] requires institutions of higher education to establish a cost of attendance that is then matched up against each student?s estimated family contribution to calculate the student?s financial need of assistance. HEA defines cost of attendance as: ?(1) tuition and fees normally assessed a student carrying the same academic workload as determined by the institution and including costs for rental or purchase of any equipment, materials, or supplies required of all students in the same course of study.? The U.S. Department of Education?s office of Federal Student Aid has published various guidance regarding ?professional judgment? which allows institutions to increase the cost of attendance to account for extraordinary expenses a student might incur while attending the University, thus resulting in additional assistance. The HEA requires each basis of professional judgment be supported by adequate documentation that supports how the institution satisfied itself that an adjustment needed to be made. Condition/context ? We selected 44 of the 611 students awarded and disbursed federal student aid during the fiscal year ended June 30, 2020. We obtained each students? cost of attendance calculations and compared them to the University?s established cost of attendance policy, published tuition rates, and other supporting documents. Of those students selected, 19 had a calculated cost of attendance that did not include the University?s established budget for institutional fees. In addition, two students out of the 44 selected, were awarded an increase in their cost of attendance. The increase was determined by the University through professional judgement around the situations of the individual students, however, adequate evidence documenting justification for the increase was not retained. Effect ?If the cost of attendance is incorrect or not supported by documentation, the student?s financial need may not be correctly calculated and the student may not be awarded or disbursed the correct financial assistance. Cause ? The University has published budgets for each program?s cost of attendance; however, some additional costs of attendance were uniformly applied in the cost of attendance calculation for certain programs. This occurred because published budgets were not reconciled to the cost of attendance information included in the University?s financial aid packaging software. Additionally, for the two instances requiring professional judgement, documentation was not retained because the University does not have a formal policy for the extent of documentation required to be obtained from the student or retained in University files. Repeat finding ? This is not a repeat finding. Questioned costs ? Known questioned costs were $21,905. Recommendation ? We recommend that the University institute a process and control to ensure that student cost of attendance budgets are reviewed by the appropriate person(s) in a timely manner and that review is documented. In situations where professional judgment is utilized for specific students, a supervisory review should be performed over the documentation and reasoning should be retained. Management response ? Ahead of awarding and packaging students each year, the Financial Aid Office is responsible for coordinating with all academic programs to collect information on approved tuition, fees, and other expenses common to each student group. Using this finalized information, the Director of Financial Aid is responsible for preparing a cost of attendance budget for each academic program and class cohort that reflects these tuition and fees, along with the appropriate allowances for living expenses and an allowance for expected loan origination fees. The current Director of Financial Aid, hired in March 2020, agrees with the Moss Adams finding that there was a lack of consistency between the University?s published cost of attendance and the cost of attendance figures input into the Financial Aid information system (PowerFAIDS) for the 2019-2020 aid year.

Finding 2020-002: Special Tests: Enrollment Reporting ? Significant Deficiency in Internal Control over Compliance (See Schedule of Findings and Questioned Costs - Section II Federal Award Findings - Finding 2020-002 for table) Criteria ? 34 CFR 685.309 - Enrollment reporting process. (1) Upon receipt of an enrollment report from the Secretary [of the U.S. Department of Education], a school must update all information included in the report and return the report to the Secretary? (i) In the manner and format prescribed by the Secretary; and (ii) Within the timeframe prescribed by the Secretary. (2) Unless it expects to submit its next updated enrollment report to the Secretary within the next 60 days, a school must notify the Secretary within 30 days after the date the school discovers that? (i) A loan under title IV of the Act was made to or on behalf of a student who was enrolled or accepted for enrollment at the school, 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; or (ii) A student who is enrolled at the school and who received a loan under title IV of the Act has changed his or her permanent address. Condition/context ? We randomly selected 40 of the 377 withdrawals, graduations, leaves of absence, and address changes of students awarded and disbursed Pell grants and Direct Loans. We obtained the date the status change was reported per the National Student Loan Data System (NSLDS) Enrollment Detail and compared it to the date of the change per the University?s records. Of those student status changes selected, six change in permanent addresses were reported to NSLDS beyond the established deadline. Effect ? The students? permanent address change was not reported timely to the NSLDS. Cause ? The University?s controls were not operating as designed during the first 3 months of the fall 2019 semester. Specifically, procedures implemented did not capture first year student status changes until October 2019 at which point the errors were identified and corrected. The student status changes were then reported in October 2019. Repeat finding ? This is not a repeat finding. Questioned costs ? None Recommendation ? We recommend that the University institute a process and control to ensure that student status changes are reported timely to NSLDS on a more frequent basis. It is our understanding the University has already initiated a process to add an additional layer of review of system data to ensure reported status changes are complete. Management response ? The University agrees with the response and will modify its internal review and control process for NSLDS reporting, to ensure that it is in compliance with timely reporting requirements on a consistent basis.

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