University of San DiegoHigher Education

FINDING 2025-001 – Special Tests and Provisions – Return of Title IV: Significant Deficiency in Internal Control Over Compliance (SEE SCHEDULE OF FINDINGS AND QUESTIONED COSTS - SECTION III - FINDING 2025-001 FOR INCLUDED TABLE) Criteria – 34 CFR section 668.22(j): Timeframe for the return of Title IV funds. (1) An institution must return the amount of Title IV funds for which it is responsible under paragraph (g) of this section as soon as possible but no later than 45 days after the date of the institution’s determination that the student withdrew as defined in paragraph (l)(3) of this section. Condition/Context – A sample of 22 students who were recipients of Title IV funding and had withdrawn or earned no credits during the year were selected and the student records were compared to the calculation of the return of Title IV funds, if any, and the federal government’s Common Origination and Disbursement system. The sample was not statistically valid. Of the 22 students selected, funds were not returned within the required 45 days following the University’s date of determination for 1 student, 2 students were not identified as withdrawn within the required 30 days following the end of the term, and returned funds for 2 students were incorrectly calculated. Effect – If controls are not in place and operating correctly, the University of San Diego may not accurately or timely return the required Title IV funds to the federal government. Cause – For the exceptions identified, the Title IV funds were not returned within the required time frame due to gaps in the lines of communication between departments in certain situations where there was a change in status. Incorrect calculations of funds to be returned were a result of an incorrectly calculated number of days in the Spring term. Repeat Finding – Yes, see 2024-001. Recommendation – We recommend the University of San Diego revise its process to ensure all changes in status are communicated to the office of financial aid to be processed for return of Title IV, if applicable. We also recommend a policy be established requiring someone other than the calculation’s preparer review the calculated number of days in the term used in the return calculations. Views of Responsible Officials– Management concurs with this finding and has established new reporting mechanism within its weekly processes to monitor student withdrawals.

FINDING 2025-002 –Eligibility: Material Weakness in Internal Control Over Compliance (SEE SCHEDULE OF FINDINGS AND QUESTIONED COSTS - SECTION III - FINDING 2025-002 FOR INCLUDED TABLE) Criteria – 34 CFR section 668.32(d): A student is eligible to receive Title IV, HEA program assistance if the student either meets all of the requirements in paragraphs (a) through (m) of this section or meets the requirement in paragraph (n) of this section as follows: (d) Satisfies the citizenship and residency requirements contained in § 668.33 and subpart I of this part. 34 CFR section 668.33: Except as provided in paragraph (b) of this section, to be eligible to receive title IV, HEA program assistance, a student must—(1) Be a citizen or national of the United States; or (2) Provide evidence from the U.S. Immigration and Naturalization Service that he or she— (i) Is a permanent resident of the United States; or (ii) Is in the United States for other than a temporary purpose with the intention of becoming a citizen or permanent resident. Condition/Context – A sample of 70 students who were recipients of Title IV funding during the year were selected and the student records were compared student eligibility supporting documentation, disbursement documentation and FAFSA records. One student was identified during our testing whom was ineligible to receive Title IV funding as a result of their citizenship status. Upon further investigation by management, it was determined a total of 7 students had been awarded and disbursed Title IV funds during the year which were ineligible due to citizenship status. The total disbursed was determined to be $297,078 which was subsequently returned to the federal government. Effect – Students were disbursed funds when they were ineligible to receive such funds. Cause – The C-flag notifications within the student financial aid system for the law school was not properly set up at the start of the year and accordingly, certain C-flags, namely those related to citizenship were not relayed to the student aid processors within the law school. Repeat Finding – No Recommendation – We recommend the University of San Diego implement a process to monitor the system setup and evaluate it for proper functionality prior to when students are processed. Views of Responsible Officials– Management concurs with this finding and has established a new process by which there will be secondary verification of the student system setup completed annually.

FINDING 2025-003 – Equipment Management: Significant Deficiency in Internal Control Over Compliance (SEE SCHEDULE OF FINDINGS AND QUESTIONED COSTS - SECTION III - FINDING 2025-003 FOR INCLUDED TABLE) Criteria – 2 CFR section 200.313(d)2: A physical inventory of the property must be conducted, and the results must be reconciled with the property records at least once every two years. Condition/Context – During our audit we requested the results of the most recent physical inventory of federally purchases equipment. The most recent physical inventory had been completed during the fiscal year ending June 30, 2020. Effect – Management may not have full knowledge of the current location, existence and condition of federally purchased equipment. Cause – University of San Diego does not currently have a protocol in place to initiate the physical inventory on the required basis. Repeat Finding – No. Recommendation – We recommend the University of San Diego implement a process to trigger the process of a physical inventory of equipment every other year. Views of Responsible Officials– Management concurs with this finding and has established new responsibilities at individual employee levels to allow for additional oversight over the process. The process of completing the inventory has also been added to the annual fiscal close process documentation.

FINDING 2024-001 – Special Tests and Provisions – Return of Title IV: Significant Deficiency in Internal Control Over Compliance (See table in Schedule of Findings and Questioned Costs). Criteria – 34 CFR section 668.22(j): Timeframe for the return of Title IV funds. (1) An institution must return the amount of Title IV funds for which it is responsible under paragraph (g) of this section as soon as possible but no later than 45 days after the date of the institution’s determination that the student withdrew as defined in paragraph (l)(3) of this section. Condition/Context – A sample of 16 students who were recipients of Title IV funding and had withdrawn during the year were selected and the student records were compared to the calculation of the return of Title IV funds, if any, and the federal government’s Common Origination and Disbursement system. The sample was not statistically valid. The University of San Diego identified 1 of the sampled students as a withdrawal; however, the University of San Diego did not return the funds within the required 45 days following the date of the University of San Diego’s determination of withdrawal. Effect – If controls are not in place and operating correctly, the University of San Diego may not accurately or timely return the required Title IV funds to the federal government. Cause – For the exception identified, the Title IV funds were not returned within the required time frame due to gaps in the lines of communication between one department in certain situations where there was a change in status. Repeat Finding – This is not a repeat finding. Recommendation – We recommend the University of San Diego revise its process to ensure all changes in status are communicated to the office of financial aid to be processed for return of Title IV, if applicable. Views of Responsible Officials and Planned Corrective Actions – Management concurs with this finding. This exception was due to Professional and Continuing Education (PCE) not being part of the withdrawal information workflow. PCE has created an e-form which will be completed by them and submitted to the Office of Financial Aid anytime a student withdrawals or takes a leave of absence. Management believes these enhancements will be sufficient to prevent future errors.

FINDING 2023-001 – Special Tests and Provisions – Borrower Data Transmission and Reconciliation: Significant Deficiency in Internal Control Over Compliance (See Finding 2023-001 for included table): Criteria – 34 CFR 685.300(b)(5) – On a monthly basis, the school must reconcile institutional records with Direct Loan funds received from the Secretary and Direct Loan disbursement records submitted to and accepted by the Secretary. Condition / Context – The University of San Diego operates a law school and an undergraduate and graduate school. A sample of 6 direct loan reconciliations were selected from the population of all reconciliations performed by the University, under both schools during the year ended June 30, 2023. We obtained the supporting schedules used to reconcile the disbursed direct loan funds to the federal government’s records. The University did not complete reconciliations of its direct loan program disbursements for the law school between December 2022 and June 2023. Cause –There was turnover in the position responsible for reconciling this data, and the responsibility did not transfer to another individual, and as a result, the reconciliations were not completed. Effect – There is a chance that the University of San Diego’s records may not match the federal government’s records of direct loan disbursement. Repeat finding – This is a repeat finding, see 2022-002. Recommendation – We recommend the University revise its existing policies and procedures to ensure when a change in personnel occurs, responsibilities appropriately transfer to a new individual. View of responsible officials – Management concurs with this finding. This exception was due to the monthly reconciliation not being part of the established policies and procedures for the Law School Financial Aid Office. As a result, during staff turnover the interim staff were unaware of the responsibilities and requirements for the monthly reconciliation. Management updated the direct lending servicing system reconciliation procedures for the Law School to clearly delineate the responsible parties. Management believes these enhancements will be sufficient to prevent future errors.

FINDING 2022-001 ? Special Tests and Provisions ? Enrollment Reporting: Significant Deficiency in Internal Control Over Compliance "SEE SCHEDULE OF FINDINGS AND QUESTION COSTS FOR CHART/TABLE" Criteria ? Direct Loan, 34 CFR section 685.309(b)(2)(i): An institution is required to notify the Department of Education within 30 to 60 days (depending on the method of communication) if it discovers that a Direct Subsidized, Direct Unsubsidized, or Direct PLUS Loan has been made to or on behalf of a student who enrolled at that school but has ceased to be enrolled on at least a half-time basis. Condition/Context ? A sample of 34 federal aid recipient students were selected from system generated reports of students who graduated, reported a physical address change, withdrew, or dropped during the 2021-2022 academic year. The enrollment information and withdrawal, address change, or graduation date per the University?s records was compared to the information reported to the National Student Loan Data System (NSLDS) in order to determine if status changes were reported within the required timeframes. An exception was noted whereby the permanent physical address change for 1 student was not reported within the required timeframe to the NSLDS. Effect ? The NSLDS database did not include accurate information until the point at which it was corrected. This information is utilized by Department of Education, the Direct Loan program, lenders, and other institutions to determine in-school status, deferment, and grace periods of student loans. Incorrect information could result in incorrect deferment, grace periods, Billing, and repayment of student loans. Cause ? The University of San Diego contracts with a third-party intermediary to transmit enrollment information to NSLDS. Ultimately, the University of San Diego is responsible for the accuracy and timeliness of its reporting, regardless of whether it uses a third party. For the exceptions noted above, the student status change was not reported within the required time frame or not correctly reported due to the University of San Diego not having effective internal controls established to prevent or detect and correct the non-compliance in a timely manner. Repeat Finding ? This is a repeat finding. See 2021-001. Recommendation ? We recommend the University of San Diego revise its policies to establish a requirement that the list of graduates submitted to NSLDS be reviewed prior to and after being submitted to the NSLDS. We also recommend the University of San Diego establish an internal control to identify and report status changes prior to the established deadline. Views of Responsible Officials and Planned Corrective Actions ? Management concurs with this finding. This student had a permanent physical address change before we implemented the change in the process described in finding 2021-001. During the 2021 audit, we identified that the exception to the timeframe for reporting a permanent physical address update was due to an incorrect parameter in the report used to provide the data as a result of employee turnover in the Registrar's Office. Management amended the report parameters to correctly report students who make permanent physical address changes and believes these enhancements will be sufficient to prevent future errors.

FINDING 2022-002 - Special Tests and Provisions - Borrower Data Transmission and Reconciliation: Significant Deficiency in Internal Control Over Compliance: See Schedule of Findings and Questioned Costs for Chart/Table. Criteria - 34 CFR 685.300(b)(5) - On a monthly basis, the school must reconcile institutional records with Direct Loan funds received from the Secretary and Direct Loan disbursement records submitted to and accepted by the Secretary. Condition / Context - The University of San Diego operates a law school and an undergraduate and graduate school. A sample of 6 direct loan reconciliations were selected from the population of all reconciliations performed by the University, under both schools during the year ended June 30, 2022. We obtained the supporting schedules used to reconcile the disbursed direct loan funds to the federal government?s records. The University did not complete reconciliations of its direct loan program disbursements for the undergraduate and graduate school. Cause - The process for reconciling this data was revised during the year ended June 30, 2022, and the change was not reflected in the University of San Diego?s policies and procedures. There was turnover in the position responsible for reconciling this data, and the responsibility did not transfer to another individual, and as a result, the reconciliations were not completed. Effect - There is a chance that the University of San Diego?s records may not match the federal government?s records of direct loan disbursement. Repeat finding - This is not a repeat finding. Recommendation - We recommend the University revise its existing policies and procedures to accommodate the change. View of responsible officials - Management concurs with this finding. This exception was due to a change in the undergraduate and graduate school monthly reconciliation process that was not subsequently communicated during employee turnover in the Controller?s Office. Management updated the direct lending servicing system reconciliation procedures to accommodate the change in process. Management believes these enhancements will be sufficient to prevent future errors.

FINDING 2021-001 ? Special Tests and Provisions ? Enrollment Reporting: Significant Deficiency in Internal Control Over Compliance Criteria ? Direct Loan, 34 CFR section 685.309(b)(2)(i): An institution is required to notify the Department of Education within 30 to 60 days (depending on the method of communication) if it discovers that a Direct Subsidized, Direct Unsubsidized, or Direct PLUS Loan has been made to or on behalf of a student who enrolled at that school but has ceased to be enrolled on at least a half-time basis. Condition/Context ? A sample of 65 federal aid recipient students were selected from system generated reports of students who graduated, reported a physical address change, withdrew, or dropped during the 2020-2021 academic year. The enrollment information and withdrawal, address change, or graduation date per the University?s records was compared to the information reported to the National Student Loan Data System (NSLDS) in order to determine if status changes were reported within the required timeframes. An exception was noted whereby the status change of 2 withdrawn students selected for testing were accurately reported to the NSLDS, but not within the required timeframe. An exception was noted with 9 students that were selected for testing in which the students graduated from the University of San Diego and the date of graduation was incorrectly reported to the NSLDS. An exception was noted whereby the permanent physical address change for 1 student was not reported within the required timeframe to the NSLDS. Effect ? The NSLDS database did not include accurate information until the point at which it was corrected. This information is utilized by Department of Education, the Direct Loan program, lenders, and other institutions to determine in-school status, deferment, and grace periods of student loans. Incorrect information could result in incorrect deferment, grace periods, billing, and repayment of student loans. Cause ? The University of San Diego contracts with a third-party intermediary to transmit enrollment information to NSLDS. Ultimately, the University of San Diego is responsible for the accuracy and timeliness of its reporting, regardless of whether it uses a third party. For the exceptions noted above, the student status change was not reported within the required time frame or not correctly reported due to the University of San Diego not having effective internal controls established to prevent or detect and correct the non-compliance in a timely manner. Repeat Finding ? This is not a repeat finding. Recommendation ? We recommend the University of San Diego revise its policies to establish a requirement that the list of graduates submitted to NSLDS be reviewed prior to and after being submitted to the NSLDS. We also recommend the University of San Diego establish an internal control to identify and report status changes prior to the established deadline. Views of Responsible Officials and Planned Corrective Actions ? Management concurs with this finding and has implemented and/or revised existing processes, as described below. Management believes these enhancements will be sufficient to prevent future errors. For one student identified as an exception to the timeframe for reporting a status change, this student had a change of status before the start of classes, causing them to be excluded from the first enrollment transmission. Management has amended enrollment reporting periods and will send the first enrollment report prior to the start of classes to capture students with a status change before the start of the semester. A second student identified as an exception to the timeframe for reporting a status change resulted from the student withdrawing from all courses except for a zero credit orientation course. For NSLDS reporting, this student continued to be reported as enrolled. Management has amended the report parameters to correctly report students who are enrolled in zero units as withdrawn. For the nine students identified with an incorrect graduation date, these students? graduation dates were run with an incorrect parameter in the report used to provide the data as a result of employee turnover in the Registrar's Office. Management has updated the documented process to clearly identify the required parameters for generating the report. Lastly, the one student identified as an exception to the timeframe for reporting a permanent physical address update was due to an incorrect parameter in the report used to provide the data as a result of employee turnover in the Registrar's Office. Management has amended the report parameters to correctly report students who make permanent physical address changes.

FINDING 2021-002 ? Special Tests and Provisions ? Return of Title IV: Significant Deficiency in Internal Control Over Compliance Criteria ? 34 CFR section 668.22(j): Timeframe for the return of Title IV funds. (1) An institution must return the amount of Title IV funds for which it is responsible under paragraph (g) of this section as soon as possible but no later than 45 days after the date of the institution?s determination that the student withdrew as defined in paragraph (l)(3) of this section. 34 CFR section 668.22 (2)(i): Withdrawal from a program offered in modules. A student is considered to have withdrawn from a payment period or period of enrollment if: (C) For a student in a non-term or nonstandard-term program, the student is not scheduled to begin another course within a payment period or period of enrollment for more than 45 calendar days after the end of the module the student ceased attending, unless the student is on an approved leave of absence. (1) A student is not considered to have withdrawn if the institution obtains written confirmation from the student at the time that would have been a withdrawal of the date that he or she will attend a module that begins later in the same payment period or period of enrollment; and (2) For non-term and nonstandard-term programs, that module begins no later than 45 calendar days after the end of the module the student ceased attending. Condition/Context ? A sample of 20 students who were recipients of Title IV funding and had withdrawn during the year were selected and the student records were compared to the calculation of the return of Title IV funds, if any, and the federal government?s Common Origination and Disbursement system. The University of San Diego identified 1 of the sampled students as a withdrawal and calculated the amount to be returned. Funds required to be returned were calculated correctly. However, the University of San Diego did not return the funds within the required 45 days following the date of the University of San Diego?s determination of withdrawal. Effect ? If controls are not in place and operating correctly, the University of San Diego may not accurately or timely return the required Title IV funds to the federal government. Cause ? For the exception identified, the Title IV funds were not returned within the required time frame due to the University of san Diego not having effective internal controls established to prevent or detect and correct the non-compliance in a timely manner. Repeat Finding ? This is not a repeat finding. Recommendation ? We recommend the University of San Diego implement a process in which there is a final review of the Title IV return after the fact to ensure all aspects are correct and timely. Views of Responsible Officials and Planned Corrective Actions ? Management concurs with this finding. Financial Aid was aware of a software issue impacting uploading the required R2T4 refund information to federal government?s Common Origination and Disbursement (COD) system and actively monitored the progress with an external vendor to resolve that issue. The process for managing software issues has been amended to ensure that any pending software issues include a review and signoff of compliance timeframes; in the event a manual adjustment is needed, the process reflects that action will be completed. Management believes these enhancements will be sufficient to prevent future errors.

FINDING 2019-001 ? Special Tests and Provisions ? Disbursements: Significant Deficiency in Internal Control Over Compliance See Schedule of Findings and Questioned Costs for chart/table Criteria ? 34 CFR 668.164(h) Title IV, HEA credit balances. (1) A title IV, HEA credit balance occurs whenever the amount of title IV, HEA program funds credited to a student?s ledger account for a payment period exceeds the amount assessed the student for allowable charges associated with that payment period as provided under paragraph (c) of this section. (2) A title IV, HEA credit balance must be paid directly to the student or parent as soon as possible, but no later than ? (i) Fourteen (14) days after the balance occurred if the credit balance occurred after the first day of class. (ii) Fourteen (14) days after the first day of class of a payment period if the credit balance occurred on or before the first day of class of that payment period. Condition/context ? A statistically valid sample of 25 out of 500 students of the law school were selected from system generated reports of students who were awarded and received federal student aid in the 2018-2019 academic year. The student?s financial activity report was analyzed for potential credit balances, and if credit balances occurred, that they were either returned to the student timely, or the student authorized the credit balance remain to offset future charges. An exception was noted with one of the 25 students that were selected for testing. The student?s account contained a credit balance that was not returned until 26 days after the credit balance occurred, and the student had not authorized the school to retain the credit balance to offset future charges. Effect ? The University is not in compliance with the credit balance requirement set forth in the above criteria for this student. The student did not receive the funds awarded to them in excess of their charges in a timely manner. Cause ? In 2013, the University implemented an automated process to return credit balances within the 14-day timeline for standard tuition and fees charges that were incurred on a student account. Beginning in the fall of 2014, all full-time students were required to carry health insurance, a miscellaneous charge billed to student accounts that, by regulation, may only be paid with Title IV funds with the student?s authorization.In an effort to inform students who were assessed a miscellaneous charge and did not already have a Title IV authorization, the University established a process to notify the student prior to issuing a refund that would generate an outstanding balance due for the miscellaneous charge(s). The notification process was automated, however, the review process capturing the response from students was manual, leading to a delay in the refunding of a credit balance due to students with miscellaneous charges. Repeat finding ? This is not a repeat finding. Recommendation ? We recommend the University enhance the existing automated processes for miscellaneous charges unless adequate manual controls can be put in place to prevent instances of non compliance with the existing process. Views of responsible officials and planned corrective actions ? Management concurs with this recommendation and has immediately taken steps to enhance our existing automated process to include miscellaneous charges. The enhancement will specifically identify students with a unique refund hold that will be programmatically set to expire in 7 days. This refund hold will be picked up in the automated, standard refund process and, once the hold-to date expires, credits will be automatically selected for review and refunded within the required timeframes. Management believes this enhancement will be sufficient in preventing future errors.

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