LAGUNA COLLEGE OF ART & DESIGNNon-Profit

FINDING NO. 2021-001: CARES Act ? Significant Deficiency in Internal Control and Instance of Non-Compliance Federal Program: Higher Education Emergency Relief Fund (HEERF) Grant Program Federal Agency: U. S. Department of Education Award Year: 2020-21 Statement of Condition The Institution did not submit one quarterly report in a timely manner. Criteria The CARES Act requires that institutions submit all quarterly reports, student and institutional, within 10 days from the end of each calendar quarter. Q1 covers January-March and is due April 10, Q2 covers April-June and is due July 10, Q3 covers July-September and is due October 10, and Q4 covers October-December and is due January 10 (CARES Act Section 18004(a)(1)). Effect Of the 4 quarterly reports covering the audit period, the Institution did not report Q1 in a timely manner. The Institution submitted Q1, due April 10, 2021, on September 20, 2021. Cause The Institution failed to timely submit one of the four quarterly reports due during the year ended June 30, 2021. Recommendation The Institution should adhere to its procedures and seek guidance if necessary to fully understand regulatory requirements with respect to the federal programs. Institution Comments The Institution believes this was an isolated instance where there was a misunderstanding in the requirements to post quarterly reports. For the quarter in question, quarter one of 2021, the Institution only spent its institutional funds on additional student grants. The amount was listed on the Institution?s website and therefore the Institution thought that they were not required to do the quarterly reporting, as the information had been reported elsewhere. Once the oversight was identified, the Institution rectified the situation and submitted the missing report. The Controller, Bursar and Financial Aid offices will work closer together as well as avail themselves to all offered trainings to ensure that these misunderstandings and oversights do not happen again.

FINDING NO. 2020-001: Federal Pell Grant Underpayment ? Significant Deficiency in Internal Control and Instance of Non-Compliance Federal Program: Student Financial Assistance Cluster Federal Agency: U. S. Department of Education Award Year: 2019-20 Statement of Condition One student was underawarded in Federal Pell Grant funds. Criteria An institution is required to pro-rate Federal Pell award amounts, perform need analysis calculations, and review prior aid history to ensure that students are appropriately awarded (34 CFR 690.79.). Effect In 1 of 19 Federal Pell Grant files tested, the student was underawarded in 2019-20 Federal Pell Grant funds in the amount of $692. The student was underpaid due to a change in enrollment status. The Institution?s internal control over the related compliance requirement did not function as designed and was not effective in detecting this instance of non-compliance. Therefore, this finding represents a significant deficiency in internal control. Cause The related internal control did not function as designed and the Institution did not follow its procedures with respect to the awarding of Title IV funds. Recommendation The Institution should follow its procedures to ensure that students are appropriately awarded. Additional Information Upon learning of this finding, the Institution credited $692 to the student?s tuition account with 2019-20 Federal Pell Grant funds. We reviewed the documentation and found it to be accurate. Institution Comments The Institution agrees with this finding. Furthermore while we believe this to be an isolated incident where a change, in this case an increase (the student added a class during the add/drop period) in enrollment, we are committed to taking steps to ensure that this does not happen again. In the future we will have a second employee verify the enrollment status and aid awarded/disbursed, when reconciliation at our census date is performed. Additionally, the Institution has just created another position in the Financial Aid Office to ensure we have proper staffing in the future.

FINDING NO. 2020-002: Untimely Exit Counseling ? Significant Deficiency in Internal Control and Instance of Non-Compliance Federal Program: Student Financial Assistance Cluster Federal Agency: U. S. Department of Education Award Year: 2019-20 Statement of Condition Federal Direct Loan Program (FDLP) exit counseling was not performed in a timely manner for one student. Criteria All institutions must conduct exit counseling to inform each FDLP borrower of their rights and obligations as a borrower within 30 days of the official withdrawal or graduation date determined by the institution. Documentation of the exit counseling must be maintained in each borrower?s file (34 C.F.R. 685.304(b)). Effect In 1 of 24 FDLP files tested, the documentation indicated that exit counseling was not performed in a timely manner. The Institution?s internal control over the related compliance requirement did not function as designed and was not effective in detecting this instance of non-compliance. Therefore, this finding represents a significant deficiency in internal control. Cause The related internal control did not function as designed and the Institution's procedures for counseling FDLP borrowers in a timely manner were not applied. Recommendation The Institution should adhere to its procedures with respect to providing borrowers with FDLP exit counseling in a timely manner and maintaining documentation in the student files. Institution Comments The Institution agrees with this finding. Furthermore while we believe this to be an isolated incident, we are committed to taking steps to ensure that this does not happen again. Our Registrar?s Office regularly provides the Financial Aid Office with updated enrollment reports, including those who have withdrawn or taken a Leave of Absence. We will add an additional step such that the Financial Aid Office will be immediately copied/notified when a student completes a formal withdrawal or Leave of Absence form thus ensuring that the proper Financial Aid Exit notification can be immediately sent to the student. Additionally, the Institution has just created another position in the Financial Aid Office to ensure we have proper staffing in the future.

FINDING NO. 2020-003: Incomplete Verification ? Significant Deficiency in Internal Control and Instance of Non-Compliance Federal Program: Student Financial Assistance Cluster Federal Agency: U. S. Department of Education Award Year: 2019-20 Statement of Condition Verification was not completed prior to disbursement of funds in one student?s file. Criteria Federal regulations require that institutions verify certain need analysis data for students selected for verification by the U.S. Department of Education and for any student whose file contains conflicting data. Under certain conditions for the Federal Pell Grant and campus-based programs, the institution may make initial payment to the student for the first payment period while verification is being completed. If the student graduates or withdraws prior to completing verification, the institution is liable for the amount(s) disbursed (34 CFR 668.57). Effect Of 25 files tested, the file of 1 student selected for verification contained conflicting information with respect to the number in college. The Institution?s internal control over the related compliance requirement did not function as designed and was not effective in detecting this instance of non-compliance. The student received a Federal Pell Grant in the amount of $1,983. Therefore, this finding represents a significant deficiency in internal control. Cause The Institution?s internal control did not function as designed and therefore, the Institution did not apply its procedures for obtaining and reviewing complete documentation with respect to verification. Recommendation The Institution should follow its procedures for determining a student's aid eligibility and resolving conflicting information prior to disbursement. Additional Information Upon learning of this finding, the Institution recalculated the need analysis for the student using the accurate data. We reviewed the documentation and the student remained eligible for the Title IV funds disbursed. There are no remaining questioned costs associated with this finding. Institution Comments The Institution agrees with this finding. Furthermore while we believe this to be an isolated incident, we are committed to taking steps to ensure that this does not happen again. In this instance the Institution did have the correct and necessary verification documents and had even made the corrections in our system. Unfortunately, what was discovered in the audit was that the correction was not sent to ED-CPS for processing. The Financial Aid department have all met to discuss the seriousness of this finding and the importance of our completing the verification process accurately, including especially sending, submitting and receiving any ISIR corrections. Additionally, the Institution has just created another position in the Financial Aid Office to ensure we have proper staffing in the future.

FINDING NO. 2019-001: Untimely Enrollment Status and Status Effective Date Reported to NSLDS ? Significant Deficiency in Internal Control and Instance of Non-Compliance Federal Program: Student Financial Assistance Cluster Federal Agency: U. S. Department of Education Award Year: 2018-19 Statement of Condition The Institution did not always update the enrollment status effective date to the National Student Loan Data System (NSLDS) for certain students in a timely manner. Criteria Institutions are required to accurately report a student?s changes in enrollment status and notify NSLDS within 60 days of a student?s change in enrollment status. The Institution may utilize a Roster file (formerly called the Student Status Confirmation Report) for notification if the report will be submitted within 60 days of the status change. Accurate and timely reporting of student status changes is essential because the last day of attendance on at least a half-time basis triggers the beginning of the borrower?s grace period. Incorrect reporting of student status changes may result in federal interest subsidies being paid toward loans that should be in repayment and are no longer eligible for the subsidies (34 CFR 685.309(b)). Effect In 2 of 77 FDLP files tested, NSLDS was not notified of the students? enrollment status effective dates in a timely manner. The Institution?s internal control over the related compliance requirement did not function as designed and was not effective in detecting this instance of non-compliance. Therefore, this finding represents a significant deficiency in internal control. Cause In these instances of non-compliance, the Institution?s procedures with respect to timely reporting to NSLDS of borrowers? enrollment status changes were not always closely followed. Recommendation The Institution needs to follow its procedures to ensure that student enrollment status changes are reported timely to NSLDS. Institution Comments Laguna College of Art + Design (LCAD) acknowledges this audit finding. LCAD has reviewed its internal policies, procedures and controls with regard to reporting enrollment status updates to NSLDS. We believe these to be isolated cases of human error however are dedicated to increasing and improving our efforts to ensure this does not happen again. Our Registrar?s Office already reports updates monthly, not every 60 days, but will more closely monitor/compare these updates to Transfer Monitor reports and double check each manual entry before submission.

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