EIN NUMBER: XX-XXX5244 OPE ID NUMBER: 03076300 DUNS NUMBER: 072470958 ECCLESIA, INC. D/B/A ECCLESIA COLLEGE AUDITED FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION FOR THE YEARS ENDED MAY 31, 2017 AND 2016 R. Michael LaBounty & Associates, P.C. Certified Public Accountants 2750 Buford Highway, Suite 247 Atlanta, Georgia 30324
TABLE OF CONTENTS INDEPENDENT AUDITORS REPORT...1 STATEMENTS OF FINANCIAL POSITION...3 STATEMENTS OF ACTIVITIES AND CHANGES IN NET ASSETS...5 STATEMENTS OF CASH FLOWS...6 NOTES TO THE FINANCIAL STATEMENTS...7 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS...12 INDEPENDENT AUDITORS' 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...13 INDEPENDENT AUDITORS' REPORT ON COMPLIANCE WITH SPECIFIED REQUIREMENTS APPLICABLE TO THE FEDERAL STUDENT FINANCIAL ASSISTANCE PROGRAMS AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE...15 SCHEDULE OF FINDINGS AND QUESTIONED COSTS...18 AUDITORS COMMENTS ON RESOLUTION OF MATTERS RELATING TO THE FEDERAL STUDENT FINANCIAL ASSISTANCE PROGRAMS... 20 CORRECTIVE ACTION PLAN Page
INDEPENDENT AUDITORS REPORT To the Board of Trustees Ecclesia Inc. d/b/a Ecclesia College 9653 Nations Drive Springdale, AR 72762 Report on the Financial Statements We have audited the accompanying financial statements of Ecclesia College (a nonprofit organization), which comprise the statement of financial position as of May 31, 2017 and 2016, and the related statements of activities and changes in net assets and cash flows for the year then ended, and the related notes to the financial statements. Management s Responsibility for the Financial Statements 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 presentation 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 audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit 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-
To the Board of Trustees d/b/a Ecclesia College Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Ecclesia College as of May 31, 2017 and 2016, and the changes in its net assets and its cash flows for the year ended in accordance with accounting principles generally accepted in the United States of America. Other Matters 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, as required by Title 2 U. S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, is presented for purposes of additional analysis and are not a required part of the financial statements. The accompanying Footnote B on related party transactions and Footnote D on the calculation of the composite score are required by the U.S. Department of Education and are presented for purposes of additional analysis, but 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 Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report on our consideration of Ecclesia College s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements and other matters. The purpose of that 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 the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Ecclesia College s internal control over financial reporting and compliance. Atlanta, Georgia November 2, 2017-2-
ECCLESIA, INC. D/B/A ECCLESIA COLLEGE STATEMENTS OF FINANCIAL POSITION AS OF MAY 31, 2017 AND 2016 ASSETS 2017 2016 CURRENT ASSETS: Cash $ 334,906 $ 600,518 Student receivables (net of allowance for uncollectable accounts of $27,000 & $76,038, respectively) 159,772 141,339 Accounts receivable from U.S. Department of Education 749,300 358,920 Other receivable 21,345 - Total current assets 1,265,323 1,100,777 PROPERTY & EQUIPMENT: Land 1,415,474 1,418,425 Buildings & improvements 5,001,519 5,000,419 Furniture, equipment & fixtures 356,532 344,379 Vehicles 61,490 55,473 Total property & equipment 6,835,015 6,818,696 Accumulated depreciation (1,684,740) (1,579,204) Total property & equipment - net 5,150,275 5,239,492 Total assets $ 6,415,598 $ 6,340,269 SEE INDEPENDENT AUDITORS REPORT AND ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS -3-
ECCLESIA, INC. D/B/A ECCLESIA COLLEGE STATEMENTS OF FINANCIAL POSITION (CONTINUED) AS OF MAY 31, 2017 AND 2016 LIABILITIES AND NET ASSETS 2017 2016 CURRENT LIABILITIES: Accounts payable $ 19,538 $ 22,772 Accrued expenses 119,017 53,441 Line of credit 1,000,000 1,000,000 Unearned tuition 21,514 25,153 Notes payable - current 100,632 100,632 Total current liabilities 1,260,701 1,201,998 LONG-TERM LIABILITIES: Notes payable 1,066,723 1,111,155 Total liabilities 2,327,424 2,313,153 NET ASSETS: Unrestricted 4,033,492 3,984,563 Temporarily restricted 54,682 42,553 Total net assets 4,088,174 4,027,116 Total liabilities and net assets $ 6,415,598 $ 6,340,269 SEE INDEPENDENT AUDITORS REPORT AND ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS -4-
ECCLESIA, INC. D/B/A ECCLESIA COLLEGE STATEMENTS OF ACTIVITIES AND CHANGES IN NET ASSETS FOR THE YEARS ENDED M AY 31, 2017 AND 2016 2017 2016 CHANGES IN UNRESTRICTED NET ASSETS: REVENUES: Tuition & fees $ 4,095,850 $ 2,606,992 Contributions 168,009 178,984 Other income 104,381 92,917 Interest income 355 99 Gain on sale of assets 91,099 - In-kind donations 20,895 - Released restrictions 9,802 10,800 Total revenue and support 4,490,391 2,889,792 PROGRAM EXPENSES: Academic instruction & support 2,435,050 1,107,467 Operations & maintenance 641,733 630,693 Student services 441,075 271,456 Room & board 193,400 187,309 Christian services 59,894 53,702 Total program expenses 3,771,152 2,250,627 FUNDRAISING EXPENSES: Contract services 87,204 99,651 Personnel 47,418 39,463 Office expenses 10,047 9,949 Total fundraising expenses 144,669 149,063 GENERAL AND ADMINISTRATIVE EXPENSES: Management and general 295,772 256,580 Depreciation 108,686 104,523 Bad debts 27,563 - Interest 93,298 67,077 Total general and administrative expenses 525,319 428,180 Total expenses 4,441,139 2,827,870 INCREASE IN UNRESTRICTED NET ASSETS 49,252 61,922 CHANGES IN TEMPORARILY RESTRICTED NET ASSETS: Contributions for specific purposes 21,608 4,096 Release of restrictions (9,802) (10,800) INCREASE (DECREASE) IN TEMPORARILY RESTRICTED NET ASSETS 11,806 (6,704) INCREASE IN NET ASSETS 61,058 55,218 NET ASSETS AT BEGINNING OF YEAR 4,027,116 3,971,898 NET ASSETS AT END OF YEAR $ 4,088,174 $ 4,027,116 SEE INDEPENDENT AUDITORS REPORT AND ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS -5-
ECCLESIA, INC. D/B/A ECCLESIA COLLEGE STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED MAY 31, 2017 AND 2016 2017 2016 CASH FLOWS (USED BY) OPERATING ACTIVITIES: Increase in net assets $ 61,058 $ 55,218 Adjustments to reconcile increase in net assets to net cash (used by) operating activities: Depreciation & amortization 108,686 104,523 Bad debts 27,563 - Donations in kind (20,895) - Gain on sale of assets (91,099) - (Increase) in student receivables (18,433) (105,544) (Increase) in U.S. DOE receivable (390,380) (358,920) (Increase) Decrease in other assets (21,345) 342 (Decrease) Increase in accounts payable (3,234) 1,048 (Decrease) in unearned tuition (3,639) - Increase in accrued expenses 65,576 11,561 Net cash (used by) operating activities (286,142) (291,772) CASH FLOWS PROVIDED BY (USED BY) INVESTING ACTIVITIES: Sale of land and building improvements 94,050 925,000 Purchase of vehicle, equipment, & furniture (29,088) (43,480) Net cash provided by (used by) investing activities 64,962 (43,480) CASH FLOWS PROVIDED BY (USED BY) FINANCING ACTIVITIES: Proceeds from line of credit- net - 925,000 Repayment installment debt (44,432) (42,235) Net cash (used by) provided by financing activities (44,432) 882,765 NET (DECREASE) INCREASE IN CASH (265,612) 547,513 CASH, BEGINNING OF YEAR 600,518 53,006 CASH, END OF YEAR $ 334,906 $ 600,518 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the year for: Interest $ 93,298 $ 67,077 Income taxes $ - $ - SEE INDEPENDENT AUDITORS REPORT AND ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS -6-
ECCLESIA, INC. D/B/A ECCLESIA COLLEGE NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED MAY 31, 2017 AND 2016 Ecclesia, Inc. d/b/a Ecclesia College (the Institution) is a four year Christian work college formed in 1975 in Springdale, Arkansas. It is accredited through the Association for Biblical Higher Education and currently offers 7 bachelor degree programs and 2 associate degree programs. Ecclesia, Inc. receives its revenue from tuition, fees, and contributions. Note A - Summary of Significant Accounting Policies The Institution s Summary of Significant Accounting Policies is presented to assist in understanding its financial statements. These accounting policies conform to accounting principles generally accepted in the United States of America, and have been consistently applied in the statements preparation. The financial statements and notes are representations of the Institution s management, who are responsible for their integrity and objectivity. Basis of Accounting and Presentation - The Institution uses the accrual basis of accounting for its revenues and expenses. The financial statements are prepared in accordance with generally accepted accounting principles. The classification of the Institution s net assets, revenues, expenses and gains or losses are based upon the existence or absence of donor-imposed restrictions. Revenues are reported as increases in unrestricted net assets, unless use of the related assets is limited by donor restrictions. Expenses are reported as decreases in unrestricted net assets. Expirations of temporarily restricted assets (i.e. by fulfillment of the donor-stipulated purpose and/or the stipulated time period has elapsed) are reported as reclassification between the applicable classes of net assets. There were no permanently restricted net assets as of May 31, 2017 and 2016. Cash and Cash Equivalents - Cash and cash equivalents include all highly liquid investments purchased with an original maturity of three months or less. Accounts Receivable and Revenue Recognition The Institution records in accounts receivable the total charges for tuition and other fees at the time of a student s enrollment. Tuition revenue is then recognized on a straight-line basis over the enrollment period. The primary payment sources for these receivables are student financial assistance programs through the U.S. Department of Education (DOE). Tuition and other fees received in advance of course commencement and amounts received by the DOE to be passed through to students are recorded as unearned tuition received. The DOE funds usually do not cover the entire charges for tuition and other fees; therefore, the Institution has a payment plan whereby students can make periodic payments on any balances due. The Institution does not require collateral from its students to secure their receivables, but does perform ongoing student credit evaluations. The Institution has recorded $27,000 and $76,038, respectively as allowance for doubtful accounts as of May 31, 2017 and 2016, based upon an evaluation of its historical experience, industry averages and current credit conditions. Accounts are written off against the allowance when collection efforts have proven unsuccessful. Property and Equipment Property and equipment are recorded at cost when purchased and at fair market value when contributed. Expenditures of $5,000 or more which prolong an asset s useful life beyond 2 years are capitalized. The cost of assets retired or sold and their associated accumulated depreciation are removed from the accounts upon disposition, with any related gain or loss included in income. Depreciation and amortization is computed under the straight line method over each asset s estimated useful life. Depreciation and amortization expense for the years ended May 31, 2017 and 2016 was $108,686 and $104,523, respectively. -7-
ECCLESIA, INC. D/B/A ECCLESIA COLLEGE NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEARS ENDED MAY 31, 2017 AND 2016 Note A - Summary of Significant Accounting Policies (Continued) Donated Assets Donated marketable securities and other non-cash donations are recorded as contributions at their estimated fair values at the date of donation. Donated assets for the years ended May 30, 2017 and 2016 was $20,895 and $0, respectively. Donated Services Donated services are recognized as contributions, if the services (a) create or enhance nonfinancial assets or (b) require specialized skills, are performed by people with those skills, and would otherwise be purchased by the Institution. Volunteers also provided various services throughout the year that are not recognized as contributions in the financial statements since the recognition criteria were not met. There were no donated services recognized during the years ended May 31, 2017 and 2016. Advertising Expense Advertising expense, except for costs associated with direct-response advertising, is charged to operations when incurred. Advertising expense for the years ended May 31, 2017 and 2016 was $12,067 and $6,910, respectively. The costs of direct-response advertising are capitalized and amortized over the period during which future benefits are expected to be received. For both years ended May 30, 2017 and 2016, the Institution had no capitalized direct-response advertising costs. Functional Allocation of Expenses The costs of providing the various programs and other activities are summarized on a functional basis in the statements of activities. Accordingly, certain costs have been allocated among the various programs and supporting services benefited. Tax Exempt Status The Institution is exempt from federal income tax under provisions of Section 501(c)(3) of the Internal Revenue Service Code, and classified by the Internal Revenue Service as an organization other than a private foundation. In the opinion of management, the Institution continues to operate as a tax-exempt organization and, accordingly, no provisions for federal and state income taxes have been recorded in the financial statements. Furthermore, management believes the Institution is in fact and form essentially a Church and as such is not required to and does not file a 990 tax return. Fair Value of Financial Instruments - The Institution s financial instruments include cash, accounts receivable, accounts payable, accrued liabilities and long-term debt. The carrying value of these instruments, except longterm debt, approximates fair value due to their relatively short-term nature. The long-term debt also approximates current markets as a result of its varying interest rate based on an index to reflect market conditions, as described in Note F. Use of 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 affecting the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting year. Actual results could differ from those estimates. Note B Related Party Transactions The Institution participates in Student Financial Aid (SFA) programs under the Title IV programs administered by the U.S. Department of Education pursuant to the Higher Education Act (HEA) of 1965, as amended. The Institution must comply with regulations promulgated under the HEA which require that all related party transactions be disclosed regardless of their materiality to the financial statements. There were no related party transactions for the years ended May 31, 2017 and 2016. -8-
ECCLESIA, INC. D/B/A ECCLESIA COLLEGE NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEARS ENDED MAY 31, 2017 AND 2016 Note C Temporarily Restricted Net Assets As described within Note A, temporarily restricted net assets are comprised of contributions received subject to donor-imposed restrictions. For the years ended May 31, 2017 and 2016, restricted net assets are comprised of the following: -9-2017 2016 Campus Master Plan $ 21,000 $ 21,000 Bibles for Nations - (800) Children s Ministry 1,445 1,168 Scholarship Fund 11,886 11,886 China Genesis 12,301 - Other 8,050 9,299 Total $ 54,682 $ 42,553 Net assets totaling $9,802 and $10,800 were released from donor restrictions during the years ended May 31, 2017 and 2016, respectively. Note D - Regulatory Matters The Institution is subject to extensive and complex regulations related to all government grant and loan programs. As such, the Institution undergoes periodic audits addressing operational, licensing, financial aid and other matters for compliance with certain regulations. Any regulatory violation could be the basis for the initiation of a suspension, limitation or termination proceeding against the Institution. In addition, the Institution could be required to reimburse any funds received while a campus was not in compliance with such regulations. Such actions could have an adverse effect on the Institution s financial position and results of operations. U.S. Department of Education (DOE) regulations require an institution participating in certain federally-supported student financial assistance programs to meet certain standards of financial responsibility. As of May 31, 2017 and 2016, management believes the Institution was in compliance with these standards. One standard for non profit institutions is the composite score standard, which measures an institution s overall financial health. The Institution has calculated its composite score to be 1.6 and 1.7 for the years ended May 31, 2017 and 2016, respectively. Note E Concentrations of Credit Risk The Institution maintains cash balances at several financial institutions insured by the Federal Deposit Insurance Corporation (FDIC). The FDIC-insured limit is $250,000 per depositor per financial institution. The Institution s account balances did and did not exceed this insured limit for the years ended May 31, 2017 and 2016, respectively. In addition, the Institution derives a significant portion of its cash receipts, primarily tuition, from Student Financial Aid (SFA) received by its students under the Title IV programs administered by the U.S. Department of Education pursuant to the Higher Education Act (HEA) of 1965, as amended. To continue participating in the SFA programs, the Institution must comply with regulations promulgated under the HEA. Note F Line of Credit The Institution has a revolving line of credit with a commercial bank, allowing it to borrow up to $1,000,000 at an interest rate of 4.65%. The loan is collateralized by the Institution s land, buildings and personal property. For the years ended May 31, 2017 and 2016, the outstanding balances for both years were $1,000,000.
Note G Long-Term Debt ECCLESIA, INC. D/B/A ECCLESIA COLLEGE NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEARS ENDED MAY 31, 2017 AND 2016 The Institution has an interest-indexed loan from a national financial institution, payable in monthly installments of $8,386 over a 5-year period with a balloon payment of $1,010,523 in March 2019. The loan is collateralized by the Institution s land, buildings and personal property. The loan s interest rate is 4.65%. Interest expense was $93,298 and $67,077 for the years ended May 31, 2017 and 2016, respectively. Current maturities for the next five years and in the aggregate are as follows: Year ended May 31, Note H Other Legal and Regulatory Matters 2018 $ 100,632 2019 1,010,523 $ 1,111,155 The Institution s President has been indicted by the U.S. Attorney related to alleged illegal political activity. The Institution and its President maintain that these allegations are false and are without merit. Legal counsel has been retained to represent both the Institution and its President in this matter. As a result, the US Department of Education (DOE) has placed the Institution on the HCM2 Reimbursement Method (HCM2) for receiving Title IV funds beginning in September 2016. This is a highly restrictive method of receiving Title IV funds. Before funds can be received, the Institution is required to submit extensive eligibility documentation for each student for review and approval by DOE. This process can lengthen the time for the disbursement of Title IV funds from several weeks to many months. The Institution received its first disbursement of Title IV funds since being placed on HCM2 in January 2017. As a result of a program review in the Spring of 2017, the U.S. Department of Education assessed the Institution approximately $86,000 in Title IV liabilities. The Institution has not recorded the liability as it is in the process of appealing this assessment. Management believes they will prevail in the appeals process. Note J Subsequent Events Management has evaluated events and transactions which occurred through November 02, 2017, which was the date the financial statements were available to be issued. As a result of this evaluation, management has determined that no events or transactions are required to be disclosed. -10-
SUPPLEMENTAL INFORMATION -11-
ECCLESIA, INC. D/B/A ECCLESIA COLLEGE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED MAY 31, 2017 CFDA FEDERAL GRANTOR/PASS-THROUGH GRANTOR OR CLUSTER TITLE NUMBER EXPENDITURES UNITED STATES DEPARTMENT OF EDUCATION Federal Supplemental Education Opportunity Grant Program 84.007 $ 13,171 Federal Work Study Program 84.033 127,769 Federal Pell Grant Program 84.063 614,650 Federal Direct Loan Program 84.268 783,022 Total expenditures of federal awards $ 1,538,612 Note A Significant Accounting Policies This Schedule of Expenditures of Federal Awards includes the federal grant activity of Ecclesia College and is presented on the cash basis of accounting. The information in this schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the presentation of the financial statements. Note B Loan Balances The Institution does not have any outstanding loans with any federal government agency. Note C Indirect Cost Rate The Institution does not have an indirect cost rate and has elected not to use the 10 percent de minimis rate allowed under Uniform Guidance. -12- The Accompanying Notes to the Schedule of Expenditures of Federal Awards are an Integral part of this Schedule
INDEPENDENT AUDITORS 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 To the Board of Trustees Ecclesia Inc. d/b/a Ecclesia College 9653 Nations Drive Springdale, AR 72762 We have audited the financial statements of Ecclesia College (the Institution) as of and for the year ended May 31, 2017 and have issued our report thereon dated November 2, 2017. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control over Financial Reporting In planning and performing our audit, we considered Ecclesia College s internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Ecclesia College s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of Ecclesia College s internal control over financial reporting. 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 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 over financial reporting that might be significant deficiencies or material weaknesses and therefore, material weaknesses or significant deficiencies may exist that were not identified. Given these limitations, during our audit, we did not identify any deficiencies in -13-
To the Board of Trustees d/b/a Ecclesia College internal control over financial reporting that we consider to be material weaknesses. weaknesses may exist that have not be identified. However, material Compliance and Other Matters As part of obtaining reasonable assurance about whether Ecclesia College s financial statements are free of 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 no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. 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 entity 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 entity s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Atlanta, Georgia November 02, 2017-14-
INDEPENDENT AUDITORS REPORT ON COMPLIANCE WITH SPECIFIED REQUIREMENTS APPLICABLE TO THE FEDERAL STUDENT FINANCIAL ASSISTANCE PROGRAMS AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE To the Board of Trustees Ecclesia Inc. d/b/a Ecclesia College 9653 Nations Drive Springdale, AR 72762 Report on Compliance for Each Major Federal Program We have audited Ecclesia College s (the Institution s) compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of the Institution s Federal Student Financial Assistance Programs for the year ended May 31, 2017. The Institution s Federal Student Financial Assistance Programs are identified in the summary of auditor s Population Summary section of the accompanying schedule of findings and questioned costs. Management s Responsibility Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs. Auditor s Responsibility Our responsibility is to express an opinion on Ecclesia College s compliance with Federal Student Financial Assistance 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; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance 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 Federal Student Financial Assistance Programs occurred. An audit includes examining, on a test basis, evidence about Ecclesia College s compliance with those requirements such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on Ecclesia College s compliance with Federal Student Financial Assistance Programs. However, our audit does not provide a legal determination of Ecclesia College s compliance. -15-
To the Board of Trustees d/b/a Ecclesia College Opinion on Federal Student Financial Assistance Programs In our opinion, Ecclesia College complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on its Federal Student Financial Assistance Programs for the year ended May 31, 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 schedule of findings and questioned costs as items 2017-001 and 2017-002. Our opinion on the Federal Student Financial Assistance Program is not modified with respect to these matters. Ecclesia College s response to the noncompliance findings identified in our audit is described in the accompanying schedule of findings and questioned costs. Ecclesia College 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 Ecclesia College 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 Ecclesia College s internal control over compliance with the types of requirements that could have a direct and material effect on Federal Student Financial Assistance Programs to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance with Federal Student Financial Assistance Programs and to test and report on internal control over compliance in accordance with the Uniform Guidance, 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 Ecclesia College 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 the Federal Student Financial Assistance Programs 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 the Federal Student Financial Assistance Programs 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 Federal Student Financial Assistance Programs 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 and therefore, material weaknesses or significant deficiencies may exist that were not identified. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. We identified deficiencies in internal control over compliance, as described in the accompanying schedule of findings and questioned costs as items 2017-001 and 2017-002 that we consider to be significant deficiencies. However, material weaknesses and significant deficiencies may exist that have not been identified. -16-
To the Board of Trustees d/b/a Ecclesia College Ecclesia College s responses to the internal control over compliance findings identified in our audit are described in the accompanying schedule of findings and questioned costs and corrective action plan for federal audit findings. Ecclesia College s responses were not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the responses. The 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 the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. Atlanta, Georgia November 02, 2017-17-
ECCLESIA, INC. D/B/A ECCLESIA COLLEGE SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED MAY 31, 2017 SECTION 1 - SUMMARY OF THE INDEPENDENT AUDITORS RESULTS: Financial Statements 1. Type of report the auditor issued on whether the financial statements audited were prepared in accordance with GAAP: 2. Internal control over financial reporting: a. Material weaknesses identified? b. Significant deficiencies identified? 3. Noncompliance material to the financial statements noted? Unmodified No No No Federal Awards 1. Internal control over major programs: a. Material weaknesses identified? b. Significant deficiencies identified? 2. Type of auditor s report issued on compliance for major programs: 3. Any audit findings disclosed that are required to be reported in accordance with 2 CFR 200.516(a)? 4. Identification of major programs: CFDA Number Cluster Program* 5. Dollar threshold used to distinguish between Type A and Type B programs: 6. Auditee qualified as a low-risk auditee? No Yes Unmodified Yes Name of Federal Program or Cluster Student Financial Assistance Cluster $750,000 No * See Schedule of Expenditures of Federal Awards for a complete listing of the student financial assistance cluster programs and their related CFDA numbers. -18-
ECCLESSIA, INC. D/B/A ECCLESIA COLLEGE SCHEDULE OF FINDINGS AND QUESTIONED COSTS (CONTINUED) FOR THE YEAR ENDED MAY 31, 2017 SECTION II FINDINGS RELATED TO THE FINANCIAL STATEMENTS: NONE SECTION III FINDINGS AND QUESTIONED COSTS FOR FEDERAL AWARDS: FINDING 2017-001 Incomplete or Incorrect Verification (Repeat Finding) CONDITION: The verification procedures were not properly performed or not completed. CRITERIA: 34 CFR 668.57 CONTEXT: Out of thirteen (13) student files tested that were selected for verification, verification procedures for two (2) students were not properly performed. This is an error rate of 16%. CAUSE: The new Financial Aid Director was not familiar with Department of Education rules and regulations related to verification. EFFECT: The errors could result in a change to the student s EFC and the amount of Title IV that should be disbursed. The Institution was not in compliance with the requirement of performing accurate verifications. RECOMMENDATION: Consider implementing a more rigorous and structured internal audit function for the review of activity and documentation in the student files. In addition, the Financial Aid Director should attend training courses to better understand DOE rules and regulations. VIEW OF RESPONSIBLE OFFICIALS: The Institution agrees with the auditors finding and will implement their recommendation. The Financial Aid Director has enrolled in a Regional DOE workshop scheduled for the Fall of 2017. FINDING 2017-002 Untimely and Inaccurate Enrollment Reporting to NSLDS CONDITION: The institution did not timely and/or accurately report the enrollment status to NSLDS for four (4) students selected for testing. CRITERIA: 34 CFR 685.309(b) CONTEXT: Out of forty (40) student files tested, four (4) students had untimely or inaccurate enrollment status reported to NSLDS. This is a 10% error rate. CAUSE: Due to high turnover of personnel in the financial aid office enrollment reporting was not routinely performed. After the new financial aid director was hired procedures were put in place in the fourth quarter of the fiscal year 2017 to insure that student status information is reported timely and accurately to NSLDS. EFFECT: Inaccurate and untimely student enrollment status reporting negatively affects the Department of Education s ability to properly manage its student loan portfolio and may increase its cost. RECOMMENDATION: The institution has already implemented new procedures to correct this problem. The institution should also consider implementing a vigorous internal audit function focused on Title IV compliance issues. VIEW OF RESPONSIBLE OFFICIALS: The Institution agrees with the auditors finding and plan on implementing a vigorous internal auditing function. -19-
ECCLESIA, INC. D/B/A ECCLESIA COLLEGE AUDITORS COMMENTS ON RESOLUTION OF MATTERS RELATING TO THE FEDERAL STUDENT FINANCIAL ASSISTANCE PROGRAMS FOR THE YEAR ENDED MAY 31, 2017 STATUS OF PRIOR YEAR S FINDINGS: FINDING 2016-001 Lack of Financial Expertise CONDITION: The accounting records required substantial adjustments in order to properly prepare accrualbased financial statements. CRITERIA: 34 CFR 668.16 CONTEXT: The Business Office Manager, hired in the Spring of 2015, lacked the skills necessary to properly perform her job. Upon resigning in the Spring of 2016, the Institution engaged a local CPA firm to perform the functions of the Business Office Manager. It has taken several months to reorganize the Business Office so that it is now functioning properly. CAUSE: Lack of rigorous oversight by management and an ineffective internal audit function. EFFECT: The Institution was not in compliance with DOE rules and regulations, with various accounting functions not being performed in a timely and accurate manner. RECOMMENDATION: Improve communications and expand the role of the local CPA to provide the expertise required to maintain the Institution s accounting records on the accrual basis and in compliance with DOE rules and regulations. STATUS: This finding was not repeated in the current year s compliance audit. The expanded role of the local CPA appears to be working. FINDING 2016-002 Late Returns of Over Award of Title IV Funds CONDITION: The return of Title IV funds, as a result of over awarding of title IV funds, was not made within the required 45 days. CRITERIA: 34 CFR 668.22 CONTEXT: Out of fifty-two (52) student files tested, two (2) students had late refunds posted to the ledger. CAUSE: The Institution s staff did not follow the Institutional policies and procedures. EFFECT: The Institution had access to $14,017 of Title IV funds to which it was not entitled. RECOMMENDATION: The Institution has since returned $4,726 of the Pell funds, the remaining $2,859 of Pell and $6,432 of loans have been returned as part of the HCM2 reimbursement process. Consider implementing a more rigorous and structured internal audit function for the review of activity and documentation in the student files. STATUS: This finding was not repeated in the current year s compliance audit. The revised policies and procedures implemented by the Institution appear to be working. -20-
ECCLESIA, INC. D/B/A ECCLESIA COLLEGE AUDITORS COMMENTS ON RESOLUTION OF MATTERS RELATING TO THE FEDERAL STUDENT FINANCIAL ASSISTANCE PROGRAMS (CONTINUED) FOR THE YEAR ENDED MAY 31, 2017 STATUS OF PRIOR YEAR S FINDINGS (CONTINUED): FINDING 2016-004 Failure to Notify Students of Loan Disbursements CONDITION: Students were not notified each time direct loans were disbursed. CRITERIA: 34 CFR 668.165 CONTEXT: The Institution did not obtain a signed notification from students acknowledging and accepting loan disbursements. CAUSE: The new Financial Aid Director was not familiar with Department of Education rules and regulations related to disbursement notifications. EFFECT: The students may not be aware of their rights and responsibilities. RECOMMENDATION: Consider implementing a more rigorous and structured internal audit function for the review of activity and documentation in the student files. In addition, the Financial Aid Director should attend training courses to better understand DOE rules and regulations STATUS: This finding was not repeated in the current year s compliance audit. The revised policies and procedures implemented by the Institution appear to be working. FINDING 2016-005 Lack of Documentation of Ability-to-Benefit CONDITION: Eligibility documentation was not obtained. CRITERIA: 34 CFR 668.32 CONTEXT: Out of fifty-two (52) student files tested, for one (1) student, the Institution did not obtain either a high school diploma or a GED certificate. CAUSE: Staff of the Institution did not follow the policies and procedures. EFFECT: The Institution may have admitted students who did not have the ability-to-benefit. RECOMMENDATION: Consider implementing a more rigorous and structured internal audit function for the review of activity and documentation in the student files. STATUS: This finding was not repeated in the current year s compliance audit. The revised policies and procedures implemented by the Institution appear to be working. -21-