WARNER UNIVERSITY, INC.
INDEPENDENT AUDITOR'S REPORT,
FINANCIAL STATEMENTS, AND
SUPPLEMENTAL INFORMATION
YEARS ENDED JUNE 30, 2017 AND 2016 WARNER UNIVERSITY, INC.
FINANCIAL STATEMENTS AND SUPPLEMENTAL INFORMATION
YEARS ENDED JUNE 30, 2017 AND 2016
TABLE OF CONTENTS
Page
Independent Auditor's Report 1-2
Financial Statements:
Statements of Financial Position 3
Statements of Activities 4
Statements of Cash Flows 5-6
Notes to Financial Statements 7-20
Supplemental Information:
Independent Auditor's Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 21-22
Independent Auditor's Report on Compliance for Each Major Program and on Internal Control Over Compliance Required by the Uniform Guidance and Chapter 10.650 Rules of the Auditor General 23-25
Schedule of Expenditures of Federal Awards and Florida Financial Assistance Programs 26
Notes to Schedule of Expenditures of Federal Awards and Florida Financial Assistance Programs 27-29
Schedule of Findings and Questioned Costs 30-43
Summary of Population, Items Tested, and Findings for Florida Financial Assistance Programs 44
Schedule of Prior Audit Findings and Questioned Costs: Federal Awards Programs 45 Florida Financial Assistance Programs 46
Institution's Corrective Action Plan 47-53 Bunting, Tripp & Ingley, LLP ROGER A. lNGLEY' CPA CERTIFIED PUBLIC ACCOUNT ANTS 230 EAST TILLMAN AVENUE DWI(iHT L. REEVES, CPA A Tradition of Excellence Since 1926 P. 0. Box 990 MICHELLE G. HURST, CPA LAKE WALES, FLORIDA 33859- 0990 DAVID w. ALLEN, CPA WILLIAM M. )ACOBS, CPA 863/676-7981 SUZANNE B. FLETCHER, CPA FAX 863/ 676- 8899 e-mail: [email protected] www. bticpa. com L.A. WHEELER, III, CPA p AUL T. SWYGERT' CPA SALVATORE D. TROPEA, CPA Independent Auditor's Report SARAH E. CLEMONS, CPA ALSO WITH OFFICES IN LAURA s. SALZLEIN' CPA TAMPA, FLORIDA
To the Board of Trustees Warner University, Inc. Lake Wales, Florida
Report on the Financial Statements
We have audited the accompanying financial statements of Warner University, Inc. (a nonprofit organization), which comprise the statements of financial position as of June 30, 2017 and 2016, and the related statements of activities and cash flows for the years then ended, and the related notes to the financial statements.
Manai:ement's Responsibility for the Financial Statements
The University's management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
1 MEMBERS AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS • FLORIDA INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Warner University, Inc. as of June 30, 2017 and 2016, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.
Other Matters
As described in Note N to the financial statements, the 2017 financial statements have been restated to correct the effects of an error in the accounting treatment for a severance agreement with its former president. Accordingly, amounts reported for accrued expenses and institutional support have been restated in the 201 7 financial statements now presented, and an adjustment has been made to umestricted net assets as of June 30, 2017, to correct the error. Our opinion is not modified with respect to this matter.
As described in Note Oto the financial statements, the 2017 financial statements have been restated to adjust the classification of net assets. Accordingly, amounts reported for beginning umestricted and permanently restricted net assets at July 1, 2016 have been restated as well as umestricted and permanently restricted contributions, to reflect the reclassifiction. Our opinion is not modified with respect to this matter.
Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying Supplemental Schedules of Change in Net Assets and the Schedule of Expenditures of Federal Awards and Florida Financial Assistance Programs, as required by Title 2 U.S, Code ofFederal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, and Chapter 10.650, Rules ofthe Auditor General, is presented for purposes of additional analysis and are not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the financial statements as a whole.
Other Reportine Required by Government Auditine Standards
In accordance with Government Auditing Standards, we have also issued our report dated March 26, 2018, on our consideration of Warner University Inc.' s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of the report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit preformed in accordance with Government Auditing Standards in considering Warner University, Inc.'s internal control over financial reporting and compliance. ~.1- Lake Wales, Florida March 26, 2018
2 WARNER UNIVERSITY, INC.
STATEMENTS OF FINANCIAL POSITION
JUNE 30, 2017 AND 2016
2016 2017 Restated
ASSETS
Cash and equivalents $ 1,002,963 $ 820,900 Accounts receivable from students, net 2,649,488 2,784,305 Contributions receivable, net 1,255,469 692,278 Investments 2,590,649 2,374,527 Inventory 261,539 243,725 Prepaids and other 111,132 168,763 Loans receivable from students, Perkins 321,937 324,552 Property and equipment, net 25,684,267 25,969,687
Total assets $ 33,877,444 $ 33,378,737
LIABILITIES AND NET ASSETS
Liabilities Accounts payable $ 267,916 $ 149,501 Accrued expenses 862,119 849,023 Deferred revenue 584,503 582,557 Student deposits 892,324 785,535 Annuities payable 114,295 126,245 Refundable Federal funds - student loans 296,016 312,230 Lines of credit 3,125,000 1,425,000 Long term debt 11,490,902 11,949,857
Total liabilities 17,633,075 16,179,948
Net Assets Unrestricted 6,498,815 7,806,518 Temporarily restricted 3,679,921 3,417,638 Permanently restricted 6,065,633 5,974,633
Total net assets 16,244,369 17,198,789
Total liabilities and net assets $ 33,877,444 $ 33,378,737
See accompanying Notes to Financial Statements.
3 WARNER UNIVERSITY, INC.
STATEMENTS OF ACTIVITIES
YEARS ENDED JUNE 30, 2017 AND 2016
Temporarily Unrestricted Restricted Revenues, Gains (Losses), and Other Support Tuition and fees $ 17,015,004 $ - Institutional scholarships (5,693,846) - Net tuition and fees 11,321,158 - Auxiliary enterprises 2,776,642 - Contributions received 1,476,735 788,590 Other support 12,736 - Investment income 200,239 - Net realized and unrealized gains (losses) on investments 50,301 28,990 Net assets released from restriction for capital improvements 348,062 (348,062) Net assets released from restriction for scholarships 216,292 (216,292) Total revenues, gains, (losses), and other support 16,402,165 253,226
Expenses Student services 5,446,631 - Institutional support 3,898,495 - Instruction 3,585,135 - Auxiliary enterprises 1,784,344 - Academic support 1,174,902 - Operation and maintenance 838,184 - Total expenses 16,727,691 -
Change in net assets before other activities (325,526) 253,226
Other Activities Investment income in excess of amounts used for operations 28,629 9,057 Depreciation expense (1,010,806) -
Change in net assets from other activities (982,177) 9,057
Change in net assets (1,307,703) 262,283
Net assets, beginning of year, as previously reported 7,806,518 3,417,638
2016, as restated (Note N) - -
Net assets, beginning of year, as restated 7,806,518 3,417,638
Net assets, end of year $ 6,498,815 $ 3,679,921
See accompanying Notes to Financial Statements. 2017 2016 Restated Permanently Temporarily Permanently Restricted Total Unrestricted Restricted Restricted Total
$ - $ 17,015,004 $ 17,445,938 $ - $ - $ 17,445,938 - (5,693,846) (5,898,131) - - (5,898,131) - 11,321,158 11,547,807 - - 11,547,807 - 2,776,642 3,352,807 - - 3,352,807 91,000 2,356,325 484,813 1,494,953 567,984 2,547,750 - 12,736 176,736 - - 176,736 - 200,239 199,385 - - 199,385 - 79,291 (74,553) 4,029 - (70,524) - - 491,174 (491,174) - - - - 233,247 (233,247) - - 91,000 16,746,391 16,411,416 774,561 567,984 17,753,961
- 5,446,631 5,198,519 - - 5,198,519 - 3,898,495 4,103,749 - - 4,103,749 - 3,585,135 3,722,881 - - 3,722,881 - 1,784,344 2,019,335 - - 2,019,335 - 1,174,902 1,246,964 - - 1,246,964 - 838,184 869,632 - - 869,632 - 16,727,691 17,161,080 - - 17,161,080
91,000 18,700 (749,664) 774,561 567,984 592,881
- 37,686 11,045 8,328 - 19,373 - (1,010,806) (1,027,417) - - (1,027,417)
- (973,120) (1,016,372) 8,328 - (1,008,044)
91,000 (954,420) (1,766,036) 782,889 567,984 (415,163)
5,974,633 17,198,789 14,651,658 2,634,749 327,545 17,613,952
- - (5,079,104) - 5,079,104 -
5,974,633 17,198,789 9,572,554 2,634,749 5,406,649 17,613,952
$ 6,065,633 $ 16,244,369 $ 7,806,518 $ 3,417,638 $ 5,974,633 $ 17,198,789
4 WARNER UNIVERSITY, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 2017 AND 2016
2016 2017 Restated
Operating Activities Change in net assets $ (954,420) $ (415,163)
Adjustments to reconcile change in net assets to net cash (used) provided by operating activities: Net realized and unrealized (gain) loss on investments (62,335) 70,524 Depreciation 1,010,806 1,027,417 Noncash contribution of property (63,000) - Forgiveness of notes payable - (450,000) Bad debt provision 300,000 275,000 (Increase) decrease in: Accounts receivable from students (162,568) (46,644) Contributions receivable (563,191) (522,861) Inventory (17,814) 33,031 Prepaids and other 57,631 (83,874) Increase (decrease) in: Accounts payable and accrued expenses 131,511 330,385 Deferred revenue and annuities payable (10,004) (22,246) Deposits and other current liabilities 90,575 164,687
Net cash (used) provided by operating activities (242,809) 360,256
Investing Activities Purchases of property and equipment (682,341) (813,721) Proceeds from sales of securities 27,913 296,336 Purchases of investments (127,059) (295,870) Reinvested investment income (37,686) (19,373) Proceeds from sales of property and equipment 3,000 461,073
Net cash used by investing activities (816,173) (371,555)
5 WARNER UNIVERSITY, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 2017 AND 2016
2016 2017 Restated
Financing Activities Payments on long term debt $ (583,560) $ (3,899,632) Net (payments) proceeds - line of credit 1,700,000 (1,486,600) Proceeds from long term debt 124,605 6,102,219
Net cash provided by financing activities 1,241,045 715,987
Net increase in cash and cash equivalents 182,063 704,688
Cash and cash equivalents, beginning of year 820,900 116,212
Cash and cash equivalents, end of year $ 1,002,963 $ 820,900
Supplemental Disclosure of Cash Flow Information Interest paid during the year $ 827,100 $ 814,585
Noncash Investing and Financing Activities Contribution of notes payable upon death of lender $ - $ 450,000
See accompanying Notes to Financial Statements.
6 WARNER UNIVERSITY, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2017 AND 2016
Nature of Activities
Warner University, Inc. (the University) is a Christian coeducational liberal arts university, founded in 1968, and located in Lake Wales, Florida. It is affiliated with the General Assembly of the Church of God based in Anderson, Indiana and offers two and four year degrees in a variety of fields and four masters degree programs in business administration, management, education, and ministry. Its total enrollment is 1,128 students, of which 368 are residential students and approximately 483 are enrolled in online programs.
Note A - Summary of Significant Accounting Policies
Basis of Presentation
The accompanying financial statements are prepared on the accrual basis of accounting. Net assets, revenues, gains, and losses are classified based on the absence or existence and nature of donor-imposed restrictions as follows:
Unrestricted Net Assets - Net assets that are not subject to donor-imposed restrictions.
Temporarily Restricted Net Assets - Net assets subject to donor-imposed restrictions that will be met either by actions of the University or the passage of time.
Permanently Restricted Net Assets - Net assets subject to donor-imposed restrictions that they be maintained permanently by the University. Generally, the donors of such assets permit the University to use all or part of the income earned on these assets with no donor-imposed restrictions.
Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could differ from those estimates.
Accounts Receivable from Students
Accounts receivable from students represent amounts due for tuition, fees, room, and board from currently enrolled and former students. The University extends credit to students and parents of dependent students in connection with their enrollment. Accounts receivable are stated at their estimated net realizable value. Management provides an allowance for doubtful accounts, equal to the estimated uncollectible amount, based on historical collection experience and a review of the current status of individual accounts. At June 30, 2017 and 2016, the allowance for doubtful accounts is approximately $1,100,000 and $800,000, respectively. The University assesses interest on unpaid amounts at 1% per month when an unpaid account reaches 90 days past due. Balances outstanding after the University has used reasonable collection efforts are written off through a charge to the valuation allowance. It is reasonably possible that the estimate of the allowance for doubtful accounts will change.
7 WARNER UNIVERSITY, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED JUNE 30, 2017 AND 2016
Note A - Summary of Significant Accounting Policies - Continued
Contributions Receivable
Unconditional promises to give are recorded at estimated net realizable value. Contributions to be received after one year are discounted to the present value of estimated future cash flows.
Cash and Cash Equivalents
Management considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.
Investments
Investments are stated at estimated fair value. See Note I for fair value measurements.
Remainder Interest in Charitable Trusts
Remainder interest in charitable trusts represents assets held in trust by others for which the University is irrevocably designated as remainder. These investments are valued at market, discounted at 5%. Management believes the net amount approximates the present value of estimated future cash flows.
Inventory
Inventory consists of bookstore merchandise held for sale and consumable printing supplies. Inventories are stated at the lower of cost or market, with cost determined on a first-in, first-out basis.
Loans Receivable from Students
Loans receivable from students represents amounts owed on student loans made under the Federal Perkins Loan Program.
Property and Equipment
Property and equipment are recorded at cost if purchased, or estimated fair value at the date of donation. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets. Management estimates that the useful lives generally range from five to ten years for equipment, ten to twenty years for property improvements, and forty to sixty years for buildings.
Expenditures for repairs necessary to maintain property and equipment in efficient operating condition are charged to operations. Expenditures which increase the useful lives of assets are capitalized.
8 WARNER UNIVERSITY, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED JUNE 30, 2017 AND 2016
Note A - Summary of Significant Accounting Policies - Continued
Impairment of Long-Lived Assets and Property Held for Sale
Long-lived assets and property held for sale are reviewed for impairment whenever events or changes in circumstances indicate that the amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amounts of an asset to future net cash flows expected to be generated by the asset. If an asset is considered impaired, the impairment loss to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value.
Revenue Recognition
Tuition, room, board, and participation fees are recognized over the term of the respective semester. Amounts collected in advance of the respective semester are recorded as deferred revenues. Other fee and auxiliary enterprise revenues are recognized as products are sold or services are provided.
Contributions, including unconditional promises to give, are recognized as revenues in the period received. Donated marketable securities and other noncash donations are recorded as contributions at their fair value at the date of the donation. The University reports contributions of cash and other assets as restricted support if the donor stipulates a limited use of the donated assets. When a donor restriction expires, that is, when a stipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the Statements of Activities as Net Assets Released from Restriction. Conditional promises to give are recognized only when the conditions on which they depend are substantially met and the promises become unconditional.
The University reports contributions of land, buildings, and equipment as unrestricted support unless explicit donor restrictions specify how donated assets must be used. Contributions of long-lived assets with explicit restrictions that specify how the assets are to be used and contributions of cash or other assets that must be used to acquire long-lived assets are reported as restricted support. Absent explicit donor restrictions about how long these long-lived assets must be maintained, the University reports expirations of donor restrictions when the donated or acquired long-lived assets are placed in service as instructed by the donor. The University reclassifies temporarily restricted net assets to unrestricted net assets at that time.
Functional Allocation of Expenses
The costs of providing the University's various programs and activities have been summarized on a functional basis in the Statements of Activities. Accordingly, certain costs have been allocated among the programs and supporting services benefited.
9 WARNER UNIVERSITY, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED JUNE 30, 2017 AND 2016
Note A - Summary of Significant Accounting Policies - Continued
Tax Status and Positions
The University is a tax-exempt organization under Section 501(c)(3) of the Internal Revenue Code and is not subject to federal and state income taxes on exempt income. In addition, the University qualifies for the charitable contribution deduction under Section 170(b)(1)(A) and has been classified as an organization that is not a private foundation under Section 509(a)(2).
Although organizations exempt under Section 501(c)(3) pay no tax on their exempt function income, they can be liable for business tax on income they earn from activities not related to their exempt purpose. For the years ended June 30, 2017 and 2016, management believes the University engaged in no activities that are not related to its exempt purpose.
In accordance with Accounting Standards Codification (ASC) 740-10, any interest and penalties recognized associated with a tax position are classified as current in the University's financial statements.
Management has evaluated its tax positions taken for all open years. Currently, the 2013 - 2016 tax years are open and subject to examination by the Internal Revenue Service. The University is not currently under audit, nor has it been contacted by the Internal Revenue Service. Based on the evaluation of the University's tax positions, management believes all positions taken would be upheld under an examination.
Reclassifications
Certain amounts in the 2016 financial statements have been reclassified to conform to the 2017 presentation. No change in net assets as previously reported for 2016 results from these reclassifications.
Date of Management Review
Subsequent events were evaluated through March 26, 2018, which is the date the financial statements were available to be issued.
10 WARNER UNIVERSITY, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED JUNE 30, 2017 AND 2016
Note B - Contributions Receivable
Contributions receivable at June 30, 2017 and 2016, consist of the following unconditional promises to give to the University:
2017 2016 Within one year $ 681,135 $ 156,659 One to five years 668,841 568,274 Six to ten years 23,482 28,312 Total 1,373,458 753,245 Less: present value discount at 4% (97,989) (40,967) Less: allowance for uncollectible pledges (20,000) (20,000)
Contributions receivable, net $ 1,255,469 $ 692,278
The allowance for uncollectible contributions is based on management's judgment and analysis of contributions receivable, past collection experience, and other relevant factors that bear on the ultimate collectibility of outstanding amounts.
Note C - Student Receivables
The University makes uncollaterlized loans to students based on financial need. Student loans are funded through Federal government loan programs or institutional resources. At June 30, 2017 and 2016, student loans represented 8.8% and 9.3% of total assets, respectively.
At June 30, student loans consisted of the following:
2017 2016 Federal government programs (Perkins) $ 321,937 $ 324,552 Institutional programs 3,748,429 3,586,529
4,070,366 3,911,081
Less allowance for doubtful accounts:
Beginning of year (802,224) (1,602,546) Increases (300,000) (275,000) Write-offs 3,283 1,075,322
End of year (1,098,941) (802,224)
Student loans receivable, net $ 2,971,425 $ 3,108,857
11 WARNER UNIVERSITY, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED JUNE 30, 2017 AND 2016
Note C - Student Receivables - Continued
The student loans receivable are presented in the accompanying statement of financial position as follows:
2017 2016 Accounts receivable from students, net $ 2,649,488 $ 2,784,305 Loans receivable from students, Perkins 321,937 324,552
Total student loans receivable $ 2,971,425 $ 3,108,857
At June 30, 2017 and 2016, the following amounts were past due under student loan programs:
1-60 Days 60-90 Days 90+ Days Total June 30, Past Due Past Due Past Due Past Due 2017 $ 311,592 $ - $ 3,436,836 $ 3,748,428 2016 $ 269,087 $ 2,483 $ 3,257,248 $ 3,528,818
Allowances for doubtful accounts are established based on prior collection experience and current economic factors which, in management's judgment, could influence the ability of loan recipients to repay the amounts per the loans terms. Institutional loan balances are written off only when they are deemed to be permanently uncollectible. During 2017, one hundred seventy three accounts totaling $633,310 were turned over to collection agencies for resolution. Amounts due under the Perkins loan program are guaranteed by the government and, therefore, no loss reserves are placed on any past due balances under the program.
The University participates in the Perkins Federal revolving loan program. The availability of funds for loans under the program is dependent on reimbursements to the pool from repayments on outstanding loans. Funds advanced by the Federal government of $296,016 and $312,230 at June 30, 2017 and 2016, respectively, are ultimately refundable to the government and are classified as liabilities in the Statements of Financial Position. Outstanding loans canceled under the program result in reduction of the funds available for loan and a decrease in the liability to the government.
Note D - Investments
At June 30, 2017 and 2016, investments consist of:
2017 2016 Corporate stock $ 59,752 $ 54,800 Corporate bonds and notes 941,709 878,240 Mutual funds 832,570 690,594 Remainder interest in charitable trusts 756,618 750,893
Total investments $ 2,590,649 $ 2,374,527 12 WARNER UNIVERSITY, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED JUNE 30, 2017 AND 2016
Note D - Investments - Continued
Investment activity during the years ended June 30, 2017 and 2016, is as follows:
2017 2016 Investments, beginning of year $ 2,374,527 $ 2,312,217 Investments donated and purchased 127,059 295,870 Withdrawal by University: Scholarships (22,000) (21,644) Working capital - (154,755) Investment returns/gains: Reinvested dividends and interest 37,686 19,373 Net realized and unrealized gain (loss) 79,290 (70,524) Investment expenses (5,913) (6,010)
Investments, end of year $ 2,590,649 $ 2,374,527
Note E - Property and Equipment, Net
Property and equipment at June 30, 2017 and 2016, consists of the following:
2017 2016 Buildings $ 27,656,319 $ 27,438,862 Land and improvements 3,161,126 3,050,045 Equipment, furniture, and vehicles 2,664,556 2,485,131 Books and collections 800,355 787,326 Property held for investment 922,341 883,961 Construction in progress 503,904 352,396 Total 35,708,601 34,997,721 Less: accumulated depreciation 10,024,334 9,028,034
Property and equipment, net $ 25,684,267 $ 25,969,687
13 WARNER UNIVERSITY, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED JUNE 30, 2017 AND 2016
Note E - Property and Equipment, Net - Continued
At June 30, 2017, construction in progress consists of the following:
2017 Estimated Balance Total Cost Agriculture building $ 416,004 $ 2,625,000 Marine Mechanics Program Site 50,700 250,000 Athletic facilities 37,200 2,500,000
Total construction in progress $ 503,904 $ 5,375,000
Depreciation expense for June 30, 2017 and 2016, was $1,010,806 and $1,027,417, respectively.
Note F - Annuities Payable
At June 30, 2017 and 2016, the University has annuity agreements with six individuals. Pursuant to terms of agreements with these donors, the University pays a fixed amount to them over their remaining lives. At June 30, 2017 and 2016, a liability of $114,295 and $126,245 is recorded based on their life expectancies using an average discount rate of 4%.
Note G - Line of Credit
At June 30, 2017, the University has a $1,800,000 line of credit agreement with Citizens Bank & Trust of Polk County to provide working capital. Interest on borrowings is payable monthly at a variable rate (4.25% at June 30, 2017). The agreement continues in full force and effect until such time as all of the University's loans in favor of the lender have been paid in full, unless demand is made earlier. At June 30, 2017, outstanding borrowings total $1,625,000. The line of credit is collateralized by an investment account held at the bank.
At June 30, 2017, the University has a $1,500,000 line of credit agreement with CenterState Bank to be used for short-term cash flow needs. Interest on borrowings is payable monthly at a variable rate (4.00% at June 30, 2017). The agreement is dated May 9, 2017, with a 120 day term. At June 30, 2017, outstanding borrowings total $1,500,000. The line of credit is collateralized by a first lien on all accounts receivable and an "agreement not to encumber" certain real estate owned by the University. The balance on the line of credit was paid in full on September 8, 2017.
14 WARNER UNIVERSITY, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED JUNE 30, 2017 AND 2016
Note H - Long Term Debt
As of June 30, 2017 and 2016, long term debt consists of:
2017 2016 Note payable to an estate; proceeds used for capital purchases. Interest payable monthly at 4.50% with principal and remaining interest due July 16, 2018. One note payable totaling $450,000 was forgiven during 2016 as part of estate distributions. $ 250,000 $ 250,000
Notes payable to churches and related entities, unsecured, with interest rates ranging from 4.25% to 4.50%. Notes are due on demand. 363,000 363,000
Note payable to Citizens Bank & Trust of Polk County, collateralized by a mortgage on the improved portion of the west campus. Monthly payments of $34,623 include principal and interest at 5.50%. Balloon payment of $4,465,372 due February 7, 2018. 4,542,705 4,712,950
Note payable to Citizens Bank & Trust of Polk County, collateralized by a mortgage on the improved portion of the west campus. Monthly payments of $37,153 include principal and interest at 3.99%. Balloon payment of $5,005,795 due June 1, 2021. 5,882,518 6,102,219
Two capital lease obligations for equipment. Net book value of leased assets included in property and equipment of $554,797 and $751,959, respectively. Amortization of assets held under capital leases is included with depreciation expense. 393,871 521,688
Two notes payable to Citizens Bank & Trust of Polk County, collateralized by two vehicles. Combined monthly payments of $1,172 include principal and interest at 3.99% through through January 4, 2022. 58,808 -
Total long term debt $ 11,490,902 $ 11,949,857 15 WARNER UNIVERSITY, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED JUNE 30, 2017 AND 2016
Note H - Long Term Debt - Continued
Maturities of notes payable and future minimum capital lease payments are as follows. Amounts due on demand are classified as payable during the year ending June 30, 2018.
Amount Due Year Ending June 30, or Callable 2018 $ 5,467,691 2019 516,957 2020 257,107 2021 5,238,063 2021 11,084
Total $ 11,490,902
In connection with the restatement of net assets discussed in Note O, it is the intent of the Board of Trustees to sign a promissory note in the amount of $5,644,561 to repay endowment funds that were previously used for operations and property and equipment purchases. These amounts will be repaid over time to restore endowment funds.
Note I - Fair Value Measurements
The University's financial assets and liabilities are stated at fair value based on the following hierarchy of fair value measurement inputs:
Financial assets and liabilities whose values are based on unadjusted quoted prices for Level 1 identical assets or liabilities in an active market.
Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value Level 3 measurement. These inputs reflect management's own assumptions about the assumptions a market participant would use in pricing the asset or liability.
16 WARNER UNIVERSITY, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED JUNE 30, 2017 AND 2016
Note I - Fair Value Measurements - Continued
At June 30, 2017, the University's financial assets and liabilities are categorized as follows:
Fair Value Level 1 Level 3 Assets Corporate stock $ 59,752 $ 59,752 $ - Corporate bonds and notes 941,709 941,709 - Mutual funds 832,570 832,570 - Remainder interest in charitable trusts 756,618 - 756,618
Total $ 2,590,649 $ 1,834,031 $ 756,618
Liabilities Annuities payable $ 114,295 $ - $ 114,295 Long term debt 11,490,902 - 11,490,902
Total $ 11,605,197 $ - $ 11,605,197
At June 30, 2016, the University's financial assets and liabilities are categorized as follows:
Fair Value Level 1 Level 3 Assets Corporate stock $ 54,800 $ 54,800 $ - Corporate bonds and notes 878,240 878,240 - Mutual funds 690,594 690,594 - Remainder interest in charitable trusts 750,893 - 750,893
Total $ 2,374,527 $ 1,623,634 $ 750,893
Liabilities Annuities payable $ 126,245 $ - $ 126,245 Long term debt 11,949,857 - 11,949,857
Total $ 12,076,102 $ - $ 12,076,102
17 WARNER UNIVERSITY, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED JUNE 30, 2017 AND 2016
Note I - Fair Value Measurements - Continued
Financial assets and liabilities valued using Level 3 inputs had the following activity:
2017 2016 Remainder interest in charitable trusts, beginning of year $ 750,893 $ 727,306 Unrealized gain in fair value 5,725 23,587
Remainder interest in charitable trusts, end of year $ 756,618 $ 750,893
Annuities payable, beginning of year $ 126,245 $ 148,170 Annuity payments (22,950) (23,813) Unrealized gain in fair value 11,000 1,888
Annuities payable, end of year $ 114,295 $ 126,245
Long term debt, beginning of year $ 11,949,857 $ 10,197,270 Loans originated 63,851 6,102,219 Principal repaid (522,806) (3,899,632) Principal forgiven - (450,000) Unrealized gain in fair value - -
Notes payable, end of year $ 11,490,902 $ 11,949,857
Note J - Restricted Net Assets
Temporarily restricted net assets at June 30, 2017 and 2016, are available for the following purposes:
2017 2016 Scholarships $ 101,072 $ 90,750 Agriculture program 2,654,037 2,575,995 Facility development 168,194 - Unrestricted (time restriction) 756,618 750,893
Total temporarily restricted net assets $ 3,679,921 $ 3,417,638
Permanently restricted net assets are invested in perpetuity, the income from which is restricted for providing scholarships to qualified students. At June 30, 2017 and 2016, the University's permanently restricted net assets are $6,065,633 and $5,974,633, respectively.
18 WARNER UNIVERSITY, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED JUNE 30, 2017 AND 2016
Note K - Significant Concentrations of Credit Risk
Financial instruments that potentially subject the University to concentrations of credit risk consist principally of temporary cash investments and student receivables. The University maintains its cash in bank deposit accounts that, at times, may exceed federally insured limits. At June 30, 2017 and 2016, all cash balances are fully insured. Concentrations of credit risk with respect to student receivables are limited due to the large number of students and their dispersion across different geographic areas.
Note L - Employee Benefit Plans
Full-time faculty and staff members who have completed one year of service are eligible to participate in one of two retirement plans. A University sponsored 403(b) plan with TIAA-CREF or the Servant Solutions 403(b) plan associated with the Church of God. Under each plan, participants may contribute up to 15% of their salary through salary reductions. The University contributes 5% to 7% of each eligible employee's salary, based on years of service. The University contributed $271,579 and $251,235 to the University sponsored TIAA-CREF plan for the years ended June 30, 2017 and 2016, respectively and contributed $27,868 and $33,304 to the Servant Solutions plan for the years ended June 30, 2017 and 2016, respectively.
Note M - Ground Lease
In January 2016, the University entered into a seventy-five year ground lease agreement with a private enterprise. Under the terms of the agreement, the enterprise constructed a 100-bed student housing facility on University property. The private enterprise operates the facility and the University is responsible for providing a resident director and resident assistants. The University requires all residents of the facility to purchase a University meal plan. At the end of the lease term, the private enterprise or its assigns shall cooperate with the University in transferring the facility to the University.
Note N - Restatement - Severance Agreement
The accompanying financial statements for 2016 have been restated to correct the accounting treatment for a severance agreement with its former President. In accordance with accounting principles generally accepted in the United States of America, the University's liability of $300,000 for the severance agreement with its former President should have been recorded and included in the University's Statement of Financial Position as of June 30, 2016. To record this obligation, accrued expenses were increased by $300,000 and institutional support was increased by $300,000 on the Statements of Activities for the year ended June 30, 2016.
19 WARNER UNIVERSITY, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED JUNE 30, 2017 AND 2016
Note O - Restatement - Reclassification of Net Assets
The accompanying financial statements for 2016 have been restated to adjust the classification of net assets. During the current year, the University conducted a thorough analysis of what it has previously considered to be its endowment funds. This analysis involved a review of prior contributions, aligning donor intent from known records with information from other various sources to establish a revised permanently restricted net asset balance. As a result of this process, the accompanying financial statements for 2016 have been restated. The result of the restatement increased permanently restricted net assets at July 1, 2015, and decreased beginning unrestricted net assets by $5,079,104. In addition, permanently restricted contributions received in the year ended June 30, 2016, were increased and unrestricted contributions received were decreased by $567,984.
20 SUPPLEMENTAL INFORMATION Bunting, Tripp .& Ingley, LLP ROGER A INGLEY' CPA CERTIFIED PUBLIC ACCOUNTANTS 230 EAST TILLMAN AVENUE DWIGHT L. REEVES' CPA A Tradition of Excellence Since 1926 P. 0. Box 990 MICHELLE G. HURST' CPA LAKE WALES, FLORIDA 33859- 0990 DAVID w. ALLEN, CPA WILLIAM M. JACOBS, CPA 863/ 676- 7981 SUZANNE B. FLETCHER, CPA FAX 863/ 676- 8899 e-mail: [email protected] www.bticpa.com L. A WHEELER, III, CPA PAUL T. SWYGERT, CPA SALVATORE D. TROPEA, CPA SARAH E. CLEMONS, CPA ALSO WITH OFFICES IN TAMPA, FLORIDA LAURA S. SALZLEIN, CPA Independent Auditor's Report on Internal Control Over Financial Reportin1: and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditine Standards
The Board of Trustees Warner University, Inc. Lake Wales, Florida
We have audited, in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of Warner University, Inc. (a nonprofit organization), which comprise the statement of financial position as of June 30, 2017, and the related statements of activities, and cash flows for the year then ended, and the related notes to the financial statements, and have issued our report thereon dated March 26, 2018.
Internal Control Over Financial Reportin1:
In planning and performing our audit of the financial statements, we considered Warner University, Inc.'s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the University's internal control. Accordingly, we do not express an opinion on the effectiveness of the University's internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.
21 MEMBERS AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS • FLORIDA INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS Compliance and Other Matters
As part of obtaining reasonable assurance about whether Warner University, Inc. 's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed instances of noncompliance or other matters that are required to be reported under Government Auditing Standards and which are described in the accompanying Schedule of Findings and Questioned Costs as items 2017-01 through 2017-11.
Warner University, Inc.'s Response to Findin~s
Warner University, Inc.'s response to the findings identified in our audit is described in the accompanying Schedule of Findings and Questioned Costs. Warner University, Inc.'s response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the University's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the University's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. 4,.-t- 1~ -~J~ Lake Wales, Florida March 26, 2018
22 Bunting, Tripp & Ingley, LLP Rourn A. lNGLEY, CPA CERTIFIED PUBLIC ACCOUNTANTS 230 EAST TILLMAN AVENUE DWIGHT L. REEVES, CPA A Tradition of Excellence Since 1926 P. 0. Box 990 MICHELLE G. HURST, CPA LAKE WALES, FLORIDA 33859- 0990 DAVID w. ALLEN, CPA WILLIAM M. JACOBS, CPA 863/ 676- 7981 SUZANNE B. FLETCHER, CPA FAX 863/ 676- 8899 e-mail: [email protected] www.bticpa.com L.A. WHEELER, III, CPA PAUL T. SWYGERT, CPA SALVATORE D. TROPEA, CPA SARAH E. CLEMONS, CPA ALSO WITH OFFICES IN LAURA s. SALZLEIN, CPA TAMPA, FLORIDA
Independent Auditor's Report on Compliance for Each Major Program and State Project on Internal Control Over Compliance Required by Uniform Guidance and Chapter 10.650 Rules of the Auditor General
The Board of Trustees Warner University, Inc. Lake Wales, Florida
Report on Compliance for Each Major Federal and State Program
We have audited Warner University, Inc. 's compliance with the types of compliance requirements described in the 0MB Compliance Supplement and Chapter 10.650, Rules ofthe Auditor General that could have a direct and material effect on each of the University's major Federal programs and State financial assistance programs for the year ended June 30, 2017. The University's major Federal and State programs are identified in the Summary ofAuditor's Results section of the accompanying Schedule of Findings and Questioned Costs.
Management's Responsibility
Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to each of its major Federal programs and State financial assistance programs.
Auditor's Responsibility
Our responsibility is to express an opinion on compliance for each of the University's major Federal and State programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; the audit Requirements of Title 2 U.S. Code ofFederal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance); and Chapter 10.650, Rules ofthe Auditor General. Those standards, Uniform Guidance, and Chapter 10.650, Rules of the Auditor General require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have .a direct and material effect on a major Federal or State program occurred. An audit includes examining, on a test basis, evidence about the University's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion on compliance for each major Federal program and State financial assistance program. However, our audit does not provide a legal determination of the University's compliance. 23 MEMBERS AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS • FLORIDA INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS Opinion on Each Major Federal and State Pro2ram
In our opinion, the University complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major Federal programs and State financial assistance programs for the year ended June 30, 2017.
Other Matters
The results of our auditing procedures disclosed instances of noncompliance, which are required to be reported in accordance with the Uniform Guidance and which are described in the accompanying Part B - Audit Findings of the Schedule of Findings and Questioned Costs for Federal Awards as items 2017-01 through 2017- 11. Our opinion on each major federal program is not modified with respect to these matters.
Warner University, Inc.'s response to the noncompliance findings identified in our audit is described in the accompanying Schedule of Findings and Questioned Costs. Warner University, Inc.'s response was not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response.
Report on Internal Control over Compliance
Management of the University is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the University's internal control over compliance with the types of requirements that could have a direct and material effect on each major Federal and State program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major Federal and State program and to test and report on internal control over compliance in accordance with Uniform Guidance and Chapter 10.650, Rules ofthe Auditor General, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the University's internal control over compliance.
A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a Federal or State program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a Federal or State program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a Federal or State program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.
Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that not been identified.
This purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of Uniform Guidance and Chapter 10.650, Rules ofthe Auditor General. Accordingly, this report is not suitable for any other purpose. 24 Report on Schedule of Expenditures of Federal Awards Required by the Uniform Guidance
We have audited the financial statements of the University as of and for the year ended June 30, 2017, and have issued our report thereon dated March 26, 2018, which contained an unmodified opinion on those financial statements. Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by the Uniform Guidance and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedule of expenditure of federal awards is fairly stated in all material respects in relation to the financial statements as a whole.
6~ /1~ i i/24;' L, t,p Lake Wales, Florida March 26, 2018
25 WARNER UNIVERSITY, INC.
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS AND FLORIDA FINANCIAL ASSISTANCE PROGRAMS
YEAR ENDED JUNE 30, 2017
Federal Federal CFDA No. Expenditures Federal Grantor - U. S. Department of Education: Student Financial Aid Cluster: Federal Supplemental Educational Opportunity Grants 84.007 $ 64,371 Federal Work-Study Program 84.033 58,034 Federal Perkins Loan Program (Note B) 84.038 3,480 Federal Pell Grant Program 84.063 2,928,404 Federal Direct Student Loan Program 84.268 9,673,419 Teacher Education Assistance for College and Higher Education Grants 84.379 37,268
Total expenditures of Federal awards $ 12,764,976
Florida Florida CSFA No. Expenditures Florida Grantor - Florida Department of Education: Florida Minority Teacher Education Scholarship Program 48.049 $ 16,000 Florida Work Experience Program 48.053 118,124 Florida Student Assistance Grant Program 48.054 356,121 Scholarships for Children and Spouses of Deceased or Disabled Veterans and Service Members 48.055 9,872 Florida Bright Futures Scholarship Program 48.059 60,018 Florida Resident Access Grant Program 48.064 2,034,000 Florida Honorably Discharged Graduate Assistance Program 48.118 6,500
Subtotal 2,600,635
Florida Grantor - Florida Department of Highway Safety and Motor Vehicles: Warner Southern College License Plate Project 76.062 2,614
Total expenditures of Florida financial assistance programs $ 2,603,249
See accompanying notes to schedule of expenditures of Federal awards and Florida financial assistance programs.
26 WARNER UNIVERSITY, INC.
NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS AND FLORIDA FINANCIAL ASSISTANCE PROGRAMS
YEAR ENDED JUNE 30, 2017
Note A - Basis Of Presentation
The accompanying Schedule of Expenditures of Federal Awards and Florida Financial Assistance Programs includes the Federal and Florida grant activity of Warner University, Inc. The schedule is prepared on the cash basis of accounting. Expenditures are recognized when paid. The amounts presented include required matching amounts, where applicable. The information in this schedule is presented in accordance with the requirements of Title 2 U. S. Code of Federal Regulations Part 200, Uniform Adminstrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) and the Florida Single Audit Act. Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the basic financial statements.
Because the schedule presents only a selected portion of the activities of the University, it is not intended to and does not present the financial position, changes in net assets, or cash flows of the University in accordance with accounting principles generally accepted in the United States of America.
Note B - Loans Outstanding
At June 30, 2017, Warner University, Inc., had loans outstanding under the Federal Perkins Loan Program (CFDA No. 84.038) of $324,552. Loans made during the year are included in the Federal expenditures presented in the schedule.
Note C - Florida Student Financial Assistance Programs
The administration of each State program is the responsibility of the Florida Department of Education's Office of Student Financial Assistance and management of Warner University, Inc. The following is a brief description of each Florida student financial assistance program administered by the Student Financial Aid Office of Warner University, Inc.:
1. Florida Work Experience Program
The Florida Work Experience Program (FWEP) is a need-based program providing eligible Florida students work experiences to complement and reinforce their educational and career goals. FWEP is a decentralized program, which means each participating institution determines application procedures, deadlines, student eligibility, and award amounts.
27 WARNER UNIVERSITY, INC.
NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS AND FLORIDA FINANCIAL ASSISTANCE PROGRAMS - CONTINUED
YEAR ENDED JUNE 30, 2017
Note C - Florida Student Financial Assistance Programs - Continued
2. Florida Student Assistance Grant Program
The Florida Student Assistance Grant (FSAG) Program is a need-based program consisting of four separately substantial financial need and are enrolled in participating postsecondary institutions. FSAG is a decentralized program, as defined above.
● The Florida Public Student Assistance Grant is available to students who attend state universities and public community colleges. ● The Florida Private Student Assistance Grant is available to students who attend eligible private, non-profit, four-year colleges and universities. ● The Florida Postsecondary Student Assistance Grant is available to students who attend eligible degree-granting private colleges and universities not eligible under the Florida Private Student Assistance Grant. ● The Florida Public Postsecondary Career Education Student Assistance Grant is available to students who attend participating public community colleges or career centers operated by district school boards.
3. Scholarships for Children and Spouses of Deceased or Disabled Veterans and Service Members
The Scholarships for Children and Spouses of Deceased or Disabled Veterans and Service Members (CSDDV) provides scholarships for dependent children or unremarried spouses of Florida veterans or active duty or who have been verified by the Florida Department of Veterans' Affairs as having service-connected 100% permanent and total disabilities. CSDDV also provides funds for dependent children whose parent is classified as a prisoner of war or missing in action by the Armed Forces of the United States or as civilian personnel captured while serving with the consent or authorization of the United States government during wartime service. CSDDV provides funding for tuition and registration fees at an eligible public postsecondary institution or the equivalent at an eligible private postsecondary institution in Florida.
28 WARNER UNIVERSITY, INC.
NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS AND FLORIDA FINANCIAL ASSISTANCE PROGRAMS - CONTINUED
YEAR ENDED JUNE 30, 2017
Note C - Florida Student Financial Assistance Programs - Continued
4. Florida Bright Futures Scholarship Program
The Florida Bright Futures Scholarship Program provides scholarships to Florida high school graduates with high academic achievement. These scholarships are lottery-funded. The program provides qualified, first-time-in-college, full-time, undergraduate students with assistance in paying for costs of education. Scholarships are available only to Florida residents attending eligible colleges and universities located in the state of Florida. The Florida Bright Futures Scholarship Program is comprised of the following awards:
● Florida Academic Scholars Award (FAS) ● Florida Medallion Scholars Award (FMS)
5. Florida Resident Access Grant Program
The William L. Boyd, IV, Florida Resident Access Grant (FRAG) Program provides tuition assistance to Florida undergraduate students attending an eligible private, non-profit Florida college or university.
6. Minority Teacher Education Scholarship Florida Fund for Minority Teachers, Inc.
The minority Teacher Education Scholarship (MTES) program is a collaborative performance based scholarship program for eligible minority Florida students administered by the Florida Fund for Minority Teachers, Inc. (FFMT). The participating institutions include Florida College System institutions and public and private post-secondary institutions that have teacher education programs.
7. Honorably Discharged Graduate Assistance Program
The Honorably Discharged Graduate Assistance Program (HDGAP) provides need-based educational benefits to Florida veterans in the form of supplemental living expenses during holiday and semester breaks. HDGAP funds are allocated to eligible Florida institutions pro-rated basis based on the number of eligible students.
Note D - Other Florida Financial Assistance Programs
The Warner University License Plate Project is a state program that issues specialty license plates that depict the University's logo. The funds that the University receives are based solely on license plate sales.
29 WARNER UNIVERSITY, INC.
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2017
Section I - Summary of Auditor's Results
Financial Statements
Type of auditor's report issued: Unqualified opinion
Internal control over financial reporting: ● Material weakness identified? Yes X No ● Significant deficiency identified? Yes X No
Noncompliance material to financial statements noted? Yes X No
Federal and Florida Awards
Internal control over major programs: ● Material weakness identified? Yes X No ● Significant deficiency identified? Yes X None reported
Type of auditor's report issued on compliance for major programs: Unqualified opinion
Any audit findings disclosed that are required to be reported in accordance with Section 2 CFR 200.516 (a)? X Yes No
Identification of major programs:
The Federal programs listed below are part of a cluster; therefore, they are treated and tested as a major program.
Student Financial Aid Cluster:
Federal Supplemental Educational Opportunity Grants CFDA No. 84.007 Federal Work-Study Program CFDA No. 84.033 Federal Perkins Loan Program CFDA No. 84.038 Federal Pell Grant Program CFDA No. 84.063 Federal Direct Student Loan Program CFDA No. 84.268 Teacher Education Assistance for College and Higher Education Grants CFDA No. 84.379
30
WARNER UNIVERSITY, INC.
SCHEDULE OF FINDINGS AND QUESTIONED COSTS - CONTINUED
YEAR ENDED JUNE 30, 2017
Section I - Summary of Auditor's Results - Continued
Identification of major programs - continued:
The Florida Student Financial Assistance Programs are also treated as a cluster and are tested as a major program:
Florida Minority Teacher Education or Disabled Veterans and Service Members CSFA No. 48.049 Florida Work Experience Program CSFA No. 48.053 Florida Student Assistance Grant Program CSFA No. 48.054 Scholarships for Children and Spouses of Deceased or Disabled Veterans and Service Members CSFA No. 48.055 Florida Bright Futures Scholarship Program CSFA No. 48.059 Florida Resident Access Grant Program CSFA No. 48.064 Florida Honorably Discharged Graduate Assistance Program CSFA No. 48.118
Dollar threshold used to distinguish between Type A and Type B programs: $300,000
Warner University, Inc., qualified as low-risk auditee? X Yes No
"Schedule of Prior Audit Findings and Questioned Costs - Federal Awards Program" attached? X Yes No
"Schedule of Prior Audit Findings and Questioned Costs - Florida Financial Assistance Program" attached? X Yes No
"Corrective Action Plan" attached? X Yes No (No findings required to be reported under the Federal or Florida Single Audit Acts.)
31
WARNER UNIVERSITY, INC.
SCHEDULE OF FINDINGS AND QUESTIONED COSTS - CONTINUED PART A - INFORMATION ABOUT UNIVERSE AND AUDIT SAMPLE
YEAR ENDED JUNE 30, 2017
Total Population: 1,063
Pell FDL FSEOG FWS FPL TEACH Total Universe Dollars: $2,928,404 $9,673,419 $64,371 $58,034 $3,480 $37,268 $12,764,976 Students: 711 964 53 45 2 10 1,063
Enrolled, graduated or students on an approved LOA: 962
Pell FDL FSEOG FWS FPL TEACH Total Universe Dollars: $2,741,673 $9,215,129 $57,027 $57,279 $3,480 $37,268 $12,111,856 Students: 631 884 43 43 2 10 962 Sample Dollars: $193,123 $347,865 $10,000 $5,788 $3,480 $37,268 $597,524 Students: 43 43 8 8 2 10 60
Enrolled, graduated or students on an approved LOA files tested: 60
Withdrawn, dropped or terminated students: 101
Pell FDL FSEOG FWS FPL TEACH Total Universe Dollars: $6,066 $8,274 $0 $0 $0 $0 $14,340 Refunded: Students: 80 80 10 2 0 0 101 Sample Dollars: $1,374 $4,452 $0 $0 $0 $0 $5,826 Refunded: Students: 24 20 6 2 0 0 26
Withdrawn, dropped or terminated students files tested: 26
IPA Definition of Materiality: Aggregate errors equal to or greater than ten percent of the Institution’s total program funds of the audit sample And equal to or greater than ten percent rate of occurrence of the audit sample would be considered material. Any findings concerning Administrative Requirements, G5 and Cash Management, or Institutional Eligibility and Participation could be considered material.
32
WARNER UNIVERSITY, INC.
SCHEDULE OF FINDINGS AND QUESTIONED COSTS - CONTINUED PART B - AUDIT FINDINGS
YEAR ENDED JUNE 30, 2017
Finding 2017-001: - GENERAL PROVISIONS - CASH MANAGEMENT Type - Compliance
Description - Institution did not disburse Title IV funds to student ledger accounts in the timeframe required by U.S. Department of Education federal regulations.
Condition - The institution had a total of one thousand sixty-three (1,063) students during the audit period. We tested eighty-six (86) files of those students. We found that disbursements involving twenty-one (21) students were not disbursed to student ledger accounts within the three (3) day timeframe required by the U.S. Department of Education.
Criteria - 34 CFR 668.162(b)(3)
Effect - No effect was noted; all of the funds that were requested were disbursed to students.
Auditor’s Threshold of
Error Material Non-
Universe Sample Occurrence Compliance No. of Students: 1,063 86 22 > 8, and
TIV Funds Disbursed: $ 12,764,976 $ 791,363 $74,115.41 > $79,136.30
Cause - No cause could be determined.
Recommendations 2017-001-a. - The Institution should update the dates of disbursements on all student ledger accounts covering the audit period to the present to match the dates of disbursements in COD.
2017-001-b. - The Institution should always consider the federal regulations regarding timely disbursement of Title IV funds when drawing down and disbursing those funds.
Views of Responsible Officials - We agree with the finding and recommendations. We have begun the process of amending the dates on all student ledger accounts to match the dates of disbursements in COD. Going forward, we will draw down Title IV funds in the correct timeframe and will add the procedure of checking the appropriate COD reports before disbursing Title IV funds to our students.
33
WARNER UNIVERSITY, INC.
SCHEDULE OF FINDINGS AND QUESTIONED COSTS - CONTINUED PART B - AUDIT FINDINGS - CONTINUED
YEAR ENDED JUNE 30, 2017
Finding 2017-002: - GENERAL PROVISIONS - NSLDS REPORTING Type - Compliance
Description - The Institution was not in compliance with NSLDS Enrollment Timeline reporting requirements for graduated and withdrawn students during the audit period.
Condition - The Institution had a total of three hundred thirty-four (334) graduated students and one hundred one (101) dropped students that received Title IV funds during the audit period. We tested the files of eleven (11) graduates and twenty-six (26) drops. We found discrepancies between the dates reported for those students on the NSLDS enrollment timeline reports and the dates in Institutional records for one (1) graduated student and two (2) dropped students.
Criteria - 34 CFR 668.16 and the NSLDS Enrollment Reporting Guide
Effect - Incorrect reporting may result in repayment status issues for student borrowers, does not support the timeliest processing of information and could subject the Department of Education to unnecessary interest and special allowance.
Auditor’s
Threshold of
Grad/WD Grad/WD Error Material Non-
Universe Sample Occurrence Compliance No. of Students: 435 37 3 > 3
Cause - No cause could be determined.
Recommendations 2017-002-a. - The Institution should correct the enrollment dates in NSLDS for the affected grad and drops in the audit sample and double check and correct as necessary the dates of all grad and drop enrollment reporting up to the present.
2017-002-b. - The Institution should upgrade its NSLDS enrollment reporting procedures as necessary to insure accurate reporting of incoming students and changes in students' enrollment statuses.
Views of Responsible Officials - We agree with the finding and recommendations. In comparing the NSLDS Reports with our records, we agree there were variations with the reported dates attended for the students in questions. We have begun the process of amending the reports for the affected students and all our graduates and drops as necessary up to the present time. Going forward, we will perform timely checks of our reporting system to insure accurate and timely entering of dates for all newly enrolled students, graduates, and drops. 34
WARNER UNIVERSITY, INC.
SCHEDULE OF FINDINGS AND QUESTIONED COSTS - CONTINUED PART B - AUDIT FINDINGS - CONTINUED
YEAR ENDED JUNE 30, 2017
Finding 2017-003: - FOL PROGRAM - EXIT INTERVIEWS Type - Compliance
Description - No evidence of exit interview attempt in students' files.
Condition - Our review of the student files revealed that the Institution did not complete the exit interview process for two (2) withdrawn student borrowers. Subsequent to the audit, the exit interviews were mailed to the students.
Criteria - 34 CFR 685.304(b)
Effect - Not completing exit interviews increases the likelihood of default.
Auditor’s
Threshold of
Grad/WD Grad/WD Error Material Non- Universe Sample Occurrence Compliance
No. of Students: 435 37 3 > 3
Cause - It appears that Institutional personnel overlooked these students after they withdrew from their courses of study.
Recommendations 2017-003-a. - The Institution mailed the exit interviews and the appropriate website links to the students, so that recommendation is not necessary.
2017-003-b. - The Institution should establish a procedure to identify and automatically send out the necessary materials/ links to all withdrawn and graduated borrowers that do not complete the exit process.
Views of Responsible Officials - We agree with the finding and recommendations. In order to insure against future incidents, we are updating our software to better track students that do not complete the exit interview process to facilitate timely contact with those students.
35
WARNER UNIVERSITY, INC.
SCHEDULE OF FINDINGS AND QUESTIONED COSTS - CONTINUED PART B - AUDIT FINDINGS - CONTINUED
YEAR ENDED JUNE 30, 2017
Finding 2017-004: - GENERAL PROVISIONS - RETURN OF TITLE lV FUNDS Type - Compliance
Description - Upon withdrawal, two (2) student's Return of Title IV calculations were calculated incorrectly.
Condition - The Institution had a total of one hundred one (101) students who withdrew during the audit period. We tested the twenty-six (26) files of those students. It was determined that the Institution miscalculated the R2T4 for two (2) students, over refunding the 16/17 Pell by $688.98 for the first student and under refunding $12.96 to the second student's Federal Direct unsub loan. Additionally, the refund for the second student was not made within the time frame required by ED regulations.
Criteria - 34 CFR 668.22
Effect - No effect was noted; the refunded amount was correct and timely.
Auditor’s Threshold of
WD/Refund WD/Refund Error Material Non-
Universe Sample Occurrence Compliance No. of Students: 101 26 2 > 2, and
Pell: $ 6,065.59 $ 1,374.19 $ 688.98 > $ 582.62 FDLP: $ 8,273.63 $ 4,452 $ 12.96
Cause - No cause could be determined.
Recommendations 2017-004-a. - The Institution should include an oversight process for all R2T4 calculations for accuracy prior to completing die withdrawal process.
Views of Responsible Officials - We agree with the finding and recommendation. The amounts used in the first student's R2T4 calculation did not include loan funds that could have been disbursed, causing the over refunding of the Pell funds. Per the second student, we used the wrong number of days in the term in our calculation and did not catch the mistake. To insure against any reoccurrence, we instituted mandatory training of FA personnel and included a mandatory double check of all funds and dates used in the calculation as the last step in our R2T4 process.
36
WARNER UNIVERSITY, INC.
SCHEDULE OF FINDINGS AND QUESTIONED COSTS - CONTINUED PART B - AUDIT FINDINGS - CONTINUED
YEAR ENDED JUNE 30, 2017
Finding 2017-005: - FOL PROGRAM-DELAYED DISBURSEMENT Type - Compliance
Description - The Institution was not in compliance with Federal Direct Loan delayed disbursement requirement for initial student borrowers during the audit period.
Condition - Our review of the student files disclosed two (2) instances in which the Institution failed to comply with the requirement that they delay disbursing Federal Direct Loan proceeds for at least thirty (30) days for all first-time, first- year borrowers.
Criteria - 34 CFR 685.303(4)
Effect - No effect was noted as both students were enrolled for more than thirty (30) days and became eligible for the funds.
Auditor’s Threshold of FDLP FDLP Error Material Non- Universe Sample Occurrence Compliance No. of Students: 964 63 2 > 6, and FDLP: $ 9,673,419 $ 472,774 $ 9,400 > $ 47,277.40
Cause - No cause could be determined.
Recommendations 2017-005-a. - The Institution should review and update its procedures to ensure that all first-time, first-year borrowers are enrolled at the Institution for at least thirty (30) days before Federal Direct Loan proceeds are disbursed.
Views of Responsible Officials - We agree with the finding and recommendation. These incidents were contrary to established policies and procedures. To insure against future occurrences. mandatory training has been given to all FA personnel and updated software procedures have been put in place to identify first-time borrowers to delay initial disbursement of loans for them.
37
WARNER UNIVERSITY, INC.
SCHEDULE OF FINDINGS AND QUESTIONED COSTS - CONTINUED PART B - AUDIT FINDINGS - CONTINUED
YEAR ENDED JUNE 30, 2017
Finding 2017-006: - GENERAL PROVISIONS - RETURN OF TITLE IV FUNDS Type - Compliance
Description - Upon withdrawal, one (1) student was not notified of the cancellation of Direct Loan funds refunded to the lender (U.S. Department of Education).
Condition - The Institution had a total of one hundred one (101) students who withdrew during the audit period. We tested the twenty-six (26) files of those students. It was determined that one (l) student was not notified by the Institution of the cancellation of Direct Loan funds to the U.S. Department of Education.
Criteria - 34 CFR 668.22
Effect - No effect was noted; the student finished the term
Auditor’s Threshold of FDLP/WD FDLP/WD Error Material Non- Universe Sample Occurrence Compliance No. of Students: 80 20 1 > 1, and FDLP: $ 458,290 $ 124,909 $ 4,700.00 > $ 12,490.90
Cause - No cause could be determined for this isolated incident.
Recommendations 2017-006-a. - The Institution should update its R2T4 procedures to ensure proper notification of all loan cancellations made on behalf of withdrawn student borrowers.
Views of Responsible Officials - We agree with the finding and recommendation. As noted by the auditor, this was an isolated incident and contrary to established policies and procedures. Before dropping, the student fell below half-time status and following our policy we refunded the initial disbursement of loans in full. When the student dropped, since the loan was cancelled, no exit interview was required. We simply overlooked notification to the student of the loan cancellation. To insure against any reoccurrence, we have included checking for all proper documentation as the last step in our R2T4 process.
38
WARNER UNIVERSITY, INC.
SCHEDULE OF FINDINGS AND QUESTIONED COSTS - CONTINUED PART B - AUDIT FINDINGS - CONTINUED
YEAR ENDED JUNE 30, 2017
Finding 2017-007: - GENERAL PROVISIONS - PELL OVER AWARD Type - Compliance
Description - Our review of the student files revealed that one (1) student was over awarded Federal Pell Grant funds.
Condition - The Institution had a total of seven hundred eleven (711) students who received Federal Pell Grant funds during the audit period. We tested sixty-seven (67) files of those students. It was determined that one (1) student was over awarded $9.08 in 16/17 Pell.
Criteria - 34 CFR 690.80(b)
Effect - The student was paid Federal Pell Grant funds in excess of what she was eligible to receive. Auditor’s Threshold of Pell Pell Error Material Non- Universe Sample Occurrence Compliance No. of Students: 711 67 1 > 6, and Pell: $ 2,928,404 $ 257,430 $ 9.08 > $ 25,743
Cause - No cause could be determined for this isolated incident.
Recommendations 2017-007-a. - The Institution should have an oversight procedure in place to double check its post- withdraw disbursement calculations before completing the process.
Views of Responsible Officials - We agree with the finding and recommendation. As noted by the auditor, this was an isolated incident and contrary to established policies and procedures. We have refunded the appropriate funds to the Federal Pell Grant program on behalf of the student in question. Upon the student's withdraw, we took a post- withdraw disbursement. Unfortunately, we took $9.08 more than we were eligible to take. To insure against any reoccurrence, we have included an additional check as the last step in our R2T4/ post-withdraw disbursement process.
39
WARNER UNIVERSITY, INC.
SCHEDULE OF FINDINGS AND QUESTIONED COSTS - CONTINUED PART B - AUDIT FINDINGS - CONTINUED
YEAR ENDED JUNE 30, 2017
Finding 2017-008: - GENERAL PROVISIONS - PELL UNDER AWARD Type - Compliance
Description - Our review of the student files revealed that one (1) student was under awarded Federal Pell Grant funds.
Condition - The Institution had a total of seven hundred eleven (711) students who received Federal Pell Grant funds during the audit period. We tested sixty-seven (67) files of those students. It was determined that one (1) student was under awarded $207.97 in 16/17 Pell.
Criteria - 34 CFR 690.80(b)
Effect - Additional Pell funds would have lowered the student's balance with the Institution.
Auditor’s Threshold of Pell Pell Error Material Non- Universe Sample Occurrence Compliance No. of Students: 711 67 1 > 6, and Pell: $ 2,928,404 $ 257,430 $ 207.97 > $ 25,743
Cause - No cause could be determined for this isolated incident.
Recommendations 2017-008-a. - The Institution should have an oversight procedure in place to double check its post- withdraw disbursement calculations before completing the process.
Views of Responsible Officials - We agree with the finding and recommendation. As noted by the auditor, this was an isolated incident and contrary to established policies and procedures. Upon the student's withdraw, we took a post-withdraw disbursement of Pell funds. Unfortunately, we took $207.97 less than we were eligible to take. We have credited the appropriate amount of funds to the student's account. To insure against any reoccurrence, we have included an additional check as the last step in our R2T4/post- withdraw disbursement process.
40
WARNER UNIVERSITY, INC.
SCHEDULE OF FINDINGS AND QUESTIONED COSTS - CONTINUED PART B - AUDIT FINDINGS - CONTINUED
YEAR ENDED JUNE 30, 2017
Finding 2017-009: - GENERAL PROVISIONS - GS AND CASH MANAGEMENT Type - Compliance
Description - The Institution did not comply with the federal account regulations during the audit period.
Condition - During the audit period the Institution has not maintained a subsidiary ledger account to hold Title IV credit balance funds as required by U.S. Department of Education regulations.
Criteria - 34 CFR 668.163
Effect - No effect was noted as all student credit balances tested were properly and timely disbursed to applicable students.
Cause - It appears the Institution was not aware of the regulation.
Recommendations 2017-009-a. - The Institution should review the regulations and set up and maintain the necessary account.
Views of Responsible Officials - We agree with the finding and recommendation. We generally issue credit balance checks to our students immediately for living expenses and very few students authorize us to hold funds. When students request their balances, we always issue checks to them in timely fashion, per regulation. However, we are in the process of opening an additional account to satisfy this regulation.
41
WARNER UNIVERSITY, INC.
SCHEDULE OF FINDINGS AND QUESTIONED COSTS - CONTINUED PART B - AUDIT FINDINGS - CONTINUED
YEAR ENDED JUNE 30, 2017
Finding 2017-010: - GENERAL PROVISIONS-TRANSFER STUDENTS Type - Compliance
Description - The Institution did not complete ED requirements for transfer students during the audit period.
Condition - During the audit period the Institution did not adequately utilize the transfer monitoring list before disbursing Title IV funds to transfer students.
Criteria - 34 CFR 668.19, 34 CFR 668.24, and 34 CFR 668.65
Effect - No effect was noted as the transfer students tested were disbursed Title IV funds correctly.
Cause - It appears the Institution was not aware of significance of the regulation.
Recommendations 2017-010-a. - The Institution should review the NSLDS transfer monitoring processes in order to insure correct awarding of Title IV funds, in particular Pell Grant eligibility for students and SULA eligibility for student borrowers.
Views of Responsible Officials - We agree with the finding and recommendation. Our procedure for accepting and awarding transfer student bas always been to check NSLDS loan and Pell history reports prior to disbursing funds to those students, to insure correct awarding and allocating of funds. We have begun placing transfer students on the list, and are training FA personnel as to how to best utilize the list before awarding Title IV funds to those students.
42
WARNER UNIVERSITY, INC.
SCHEDULE OF FINDINGS AND QUESTIONED COSTS - CONTINUED PART B - AUDIT FINDINGS - CONTINUED
YEAR ENDED JUNE 30, 2017
Finding 2017-011: - GENERAL PROVISIONS -REPEAT FINDING Type - Compliance
Description - The Institution's corrective action plan failed to remedy noncompliance during the audit period.
Condition - Last year's audit contained one (1) instance of a Pell under award, one (1) instance of a Pell over award, two (2) instances of initial disbursements of Direct Loan funds not delayed for thirty (30) days for first-time borrowers, and (1) instance of an exit interview attempt not completed for a withdrawn student borrower. The current audit contains repeats of those four findings (see Findings 2017-003, 2017-005, 2017-007, and 2017-008).
Criteria - 34 CFR 668.16 and 668.174(a)
Effect - Federal funds that would have been available for others were not available. Further, the Department of Education may have been subject to unnecessary interest and special allowance. Not completing the exit interview process increases the likelihood of default.
Cause - Inadequate application of corrective actions.
Recommendations 2017-011-a. - The Institution needs to ensure that it implements all aspects of its current corrective action plan and demonstrates diligence in adherence to compliance with the Federal Title IV requirements.
Views of Responsible Officials - We agree with the finding and recommendation. Pursuant to the audit, our Financial Aid department has made specific administrative moves to affect positive targeted changes. Our Financial Aid Director has hired new FA staff members with experience in differing aspects of student financial aid to target specific areas and enhance overall performance of the department. FA has coordinated with the business office to establish new oversight procedures. And we are looking at the FA Assessments and Tools For Schools through the Department's website to implement and utilize new reports, procedures, and training as necessary to improve the performance of our FA department.
43
WARNER UNIVERSITY, INC.
SUMMARY OF POPULATION, ITEMS TESTED, AND FINDINGS FOR FLORIDA FINANCIAL ASSISTANCE PROGRAMS
YEAR ENDED JUNE 30, 2017
Description Number Percent Amount Percent of of of of of Category Students Population Awards Population
FWEP: Population 67 100% $ 118,124 100% Tested 23 34.33% $ 39,852 33.74% Findings 0 0% $ 0 0%
FSAG: Population 214 100% $ 356,121 100% Tested 75 35.05% $ 123,797 34.76% Findings 0 0% $ 0 0%
CDDV: Population 2 100% $ 9,872 100% Tested 2 100% $ 9,872 100% Findings 0 0% $ 0 0%
BFFAS: Population 6 100% $ 18,746 100% Tested 6 100% $ 18,746 100% Findings 0 0% $ 0 0%
BFFMS: Population 23 100% $ 41,272 100% Tested 23 100% $ 41,272 100% Findings 0 0% $ 0 0%
MTES: Population 7 100% $ 6,500 100% Tested 7 100% $ 6,500 100% Findings 0 0% $ 0 0%
FRAG: Population 782 100% $ 2,034,000 100% Tested 129 16.5% $ 334,500 16.45% Findings 0 0% $ 0 0%
HDGAP: Population 7 100% $ 6,500 100% Tested 7 100% $ 6,500 100% Findings 0 0% $ 0 0%
44 WARNER UNIVERSITY, INC.
SCHEDULE OF PRIOR AUDIT FINDINGS AND QUESTIONED COSTS - FEDERAL AWARDS PROGRAMS
YEAR ENDED JUNE 30, 2017
No matters were reported.
45 WARNER UNIVERSITY, INC.
SCHEDULE OF PRIOR AUDIT FINDINGS AND QUESTIONED COSTS - FLORIDA FINANCIAL ASSISTANCE PROGRAMS
YEAR ENDED JUNE 30, 2017
No matters were reported.
46 ,I,:, .,Ed WARNER UNIVERSITY CORRECTIVE ACTION PLAN
Audit Firm: Bunting, Tripp & Jngley, LLP, Certified Public Accountants Audit Period: Jnly l, 2016 to June 30, 2017
February 28, 2018
U.S. Department of Education
To Whom It May Concern:
Warner University respectfully submits the following corrective action plan for the year ended June30,2017:
ITEM 2017-001 - GENERAL PROVISIONS - CASH MANAGEMENT
Comments on Findings and Recommendations:
We agree with the finding and recommendations.
Actions Taken or Planned:
We have begun the process of amending the dates on all student ledger accounts to match the dates of disoursement in COD. Going forward, we will draw down Title IV funds in the correct timeframe and will add the procedure of checking the appropriate COD reports before disbursing Title IV funds to our students.
ITEM 2017-002 - GENERAL PROVISIONS - NSLDS REPORTING
Comments on Findings and Recommendations:
We agree with the finding a11d recommendations.
Actions Taken or Planned:
In comparing the NSLDS reports with our records, we agree there were variations with the reported dates attended for the students in question. We have begun the process of amending the reports for the affected students and all our graduates and drops as necessary up to the present time. Going fonvard, we will perfonn timely checks of our reporting system to insure accurate and timely entering of dates for aU newly enrolled students, graduates, and drops.
wdrner.edu
47 CORIOXTIVE ACTION PLAN (Pagel)
Audit Firm: U1mting, Tripp & Ingfov, LLP. Certified Public Accountants Audit 1~eriod; Jucy 1~ 2016 to June 30, 2017
ll'EM 2017-003 - FDL PROGRAM - E..Xrr lNTERVlEWS
Comments on Findings and Recommendations:
We agree with the :finding and recommendations.
Actions Taken or Planned:
In. order to insure against future incidenl'l, we are updating our software to better track students that do not complete the exit interview process to facilitate timely contact with those students.
ITEM 2017-004 - GENERAL .PROVISIONS -- RETURN OF 1TfLE IV lWNDS
Comments on Findings and n.ecommendatious:
We agree with the finding and recommendation.
Actions Taken or Planned:
The amounts used in the first &'tudent's R2T4 calculation did not include loan funds that could have been disbursed, causing the over refunding of the l'ell funds. Per the second student, we' used the wrong number of days in the term in our calculation and did not catch the mistake. To insure against any reoccurrence, we instituted mandatory training of FA :personnel and included a mandatory double check of all ftmds and daks used in the calculation as the last step in our R2T4 process.
48 CORRECTl\lE ACTION .PLAN (Page 3)
Audit ]:\'frm~ Bunting, Tripp & Ingle:£, LLP, Certifietl Public Acconntants Audit Period; July J, 2016 to June 30, 2017
ITEM 2017~005 - F'DL PROGRAM - DELAYEl) DISBURSEMENT
Comments on J?indings and Recommendations:
We agree with the finding and recommendation.
Actions Taken or Plnnncd:
These incidents were contrary to established policies and procedures. To insure against future occurrences, mandatory training has been given to all FA personnel and updated software procedures have been put in place to identify first-time borrowers to delay initial disbursement of loans for them.
ITEM 2017-006 - GENERAL PUOVJSIONS - RETURN OF TITLE IV FUNDS
Comments on Findings and Rcconunendations:
We agree with the finding and recommendation.
Actions 1'aken 01· Planned:
As noted by tl1e auditor, this was an :isolated hlcident a11d contrary to established policies and prooedu:res. Before dropping, the student fell below half~time status and following our policy we refunded tl1e initial disbursement of loans in full. When the student dropped, since the loan was cancelled, no exit interview was required, We simply overlooked notification to the student of the loan cancellation. To insure against any reoccurrcmce, we have included checking for all proper documentation as the last step in our R2T4 process.
49 CORRECTlVF.; ACTION PLAN (Page 4)
Audit Firm! }!unting. Tripp & lnglt'!v, LLP, Certified Public Accountants Audit Period: Julv t. 2016 to ,June 30, :2017
ITF.J\f 2017-007 - GENERAL PROVISIONS - PELL 0Vl<3R AWARD
Comments on :Findings and Recommendations:
We agree with the finding and nXiommendation.
Actions Taken Ol' Planned:
As noted by the auditor, this was an isolated incident and contrary to established policies and procedures. We have refunded the appropriate funds to the Federal Pell Grant program on behalf of the student in question. Upon the student's withdraw, we took a post-withdraw disbursement. Unfortunately, we took $9.08 more than we were eligible to take. To insure against any reoccurrence, we have included an additional check as the last step in our R2T4/ post-withdraw disbursement process.
lT}:M 2017-008 · GENERAL PROVISIONS - PELL UNDER AWARD
Comn1ent(i. on Findings and Recommendations:
We agree wi1h the finding and recommendation.
Actions Tilken or Planned:
As noted by the auditor, this was an isolated incident and contrary to established policies and procedures. Upon the student;s withdtaw, we took a post-withdraw disbursement of Pell funds. Unfortunately, we took $207.97 less than we were eligible to take. We have credited the appropriate amount of funds to the student's account To insure against any reoccurrence, we have included an additional check as the last step in our R2T4/post-withdraw disbursement process.
50 COIU~ECTJVE ACTION PLAN (Page 5}
Audit Firm: Bunting, Tripp & lngJcy.LLP, Certified Public Accountants Audit Pedod: July :I. 2016 to.Jn:ne 30, 2017
ITEM 2017-009 - GENERAL PROVISIONS - G5 AND CASH. MANAGEMENT
Comments ou Findings and Recommendations:
We agree with the finding and recommendation.
Actions 'l'aken or Planned:
We generally issue credit balance checks to ou.r students immediately for living expenses and very few students authorize us to hold ftmds, When students request their balances, we always issue checks to them in timely fashion, per regulation. However, we are in the process of opening an additional account to satisfy this regulation.
ITEM 2017-010 · Gl~NERAL PROVISIONS -TRANSF'ER STUDENTS
Comments on Findings and Recommendations:
We agree with the :finding and recommendation.
Actions Taken or Planned:
Our procedure for accepting and awarding transfer student has always been to check NSLDS loan and Pell history reports prior to disbursing funds to those students, to insure correct awarding and allocating of funds. We have begun placing transfer students 011 the list, and are train.ing PA personnel as to how to best utilize the list before awarding Tide IV fonds to those students.
51 cmm.ECTIVU: ACTION .PLAN (Page 6)
Audit l~bm: Buntfog, TriP,P ,$<. Inglev, LLP~ Certified Public Accountants Audit Period: July l, 2016 to June 30, 2017
ITEM 2017-011 - GENERALPROVISIONS-REPEATFINDING
Cgmmentson I~indings and Recommendations:
We agree with the finding and recommendation.
Actions Taken or Planned:
Pursuant to the audit, our Financial Aid department has made specific a If you have any questions or concerns regardil1g this plan, please do not hesitate to contact me at (863) 638-7203. Sincerely, Lorrie Steedley Telephone: (863) 638-7203 Director of Financial Aid Fax Number: (863) 638-7290 December 26, 2017 E-inail Address: [email protected] 52 WARNER UNIVERSITY RE.YONO BELIEF CORRECTIVE ACTION PLAN Audit Firm: Bunting, Tripp & Ingley, LLP, Certified Public Accountants Audit Period: July 11 2016 to June 30, 2017 February 28, 2018 Florida Department of Education, Office of Student Financial Assistance To Whom It May Concern: Warner University respectfully submits the following corrective action plan for the year ended June 30, 2017: Comments on Findings and Recommendations: There are no findings in the current audit. Actions Taken or Planned: No actions are planned as there are no findings the current audit. ...J in u. Status of Corrective Actions on Prior Findings: Not applicable as there were no fmdings in the previous audit. If you have any questions or concerns regarding this plan, please do not hesitate to contact me at (863) 638-7203. Sincerely, Lorrie Steedley Director of Financial Aid warner.edu 53