Lincoln College of Technology's Use of Higher Education Emergency Relief Fund Student Aid and Institutional Grants (ED-OIG/A20CA0016)
Summary
A final audit report of the U.S. Department of Education Office of Inspector General, ED-OIG/A20CA0016, dated September 24, 2021, on Lincoln College of Technology's use of Higher Education Emergency Relief Fund Student Aid and Institutional Grants. The report states that the Lincoln Educational Services Corporation (LESC) generally used the Student Aid portion for allowable and intended purposes but did not always do so for the Institutional portion. It states that LESC improperly applied $700,155 of Institutional grant funds to credit 461 students' accounts for rent and improperly used $9,838 for software subscriptions beyond the grant performance period. OIG recommends that the Assistant Secretary for the Office of Postsecondary Education require policy updates and review the reallocated expenditures. The report summarizes LESC's comments and OIG's response.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
- Issuer
- U.S. Department of Education, Office of Inspector General
- Document type
- Report
- Date
- 2021-09-24
Cite this document
“Lincoln College of Technology's Use of Higher Education Emergency Relief Fund Student Aid and Institutional Grants (ED-OIG/A20CA0016).”
U.S. Department of Education, Office of Inspector General, dated 2021-09-24. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/lincoln-college-technology-heerf/
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U.S. Department of Education
Office of Inspector General
Lincoln College of Technology’s
Use of Higher Education
Emergency Relief Fund Student
Aid and Institutional Grants
September 24, 2021
ED-OIG/A20CA0016
ED OIG Oversight of Coronavirus Response Funds
NOTICE
Statements that managerial practices need improvements, as well as other conclusions
and recommendations in this report, represent the opinions of the Office of Inspector
General. The appropriate Department of Education officials will determine what
corrective actions should be taken.
In accordance with Freedom of Information Act (Title 5, United States Code,
Section 552), reports that the Office of Inspector General issues are available to
members of the press and general public to the extent information they contain is not
subject to exemptions in the Act.
UNITED STATES DEPARTMENT OF EDUCATION
OFFICE OF INSPECTOR GENERAL
Audit Services
September 24, 2021
Scott Shaw, CEO/President
Lincoln Educational Services Corporation
d/b/a Lincoln College of Technology
14 Sylvan Way, Suite A
Parsippany, NJ 07054
Dear President Shaw:
Enclosed is our final audit report, “Lincoln College of Technology’s Use of Higher Education Emergency
Relief Fund Student Aid and Institutional Grants,“ Control Number ED-OIG/A20CA0016. This report
incorporates the comments you provided in response to the draft report. If you have any additional
comments or information that you believe may have a bearing on the resolution of this audit, you
should send them directly to the following Department of Education official, who will consider them
before taking final Departmental action on this audit:
Dr. Michelle Asha Cooper
Acting Assistant Secretary
Office of Postsecondary Education
400 Maryland Avenue, S.W.
Washington, DC 20202
The U.S. Department of Education’s policy is to expedite audit resolution by timely acting on findings
and recommendations. Therefore, if you have additional comments, we would appreciate receiving
them within 30 days.
Sincerely,
/s/
Daniel P. Schultz
Director of Pandemic Relief Audits
Enclosure
400 MARYLAND AVENUE, S.W., WASHINGTON, DC 20202-1510
Promoting the efficiency, effectiveness, and integrity of the Department’s programs and operations.
Table of Contents
Results in Brief .................................................................................................................... 1
Introduction ........................................................................................................................ 5
Finding 1. LESC Generally Used Student Aid Grant Funds for Allowable and Intended
Purposes ............................................................................................................................. 9
Finding 2. LESC Did Not Always Use Institutional Grant Funds for Allowable and Intended
Purposes ........................................................................................................................... 14
Finding 3. LESC Did Not Follow Federal Cash Management Requirements ..................... 22
Other Matter. Student Aid and Institutional Reporting ................................................... 29
Other Matter. Incorrect Data Universal Number System Number................................... 31
Appendix A. Scope and Methodology............................................................................... 33
Appendix B. LESC Corporate Structure, Schools, and Campuses...................................... 41
Appendix C. Acronyms and Abbreviations........................................................................ 42
LESC Comments ................................................................................................................ 43
Results in Brief
What We Did
The objective of our audit was to determine whether Lincoln College of Technology
(Lincoln) used the Student Aid (Assistance Listing Number (ALN) 84.425E) and
Institutional (ALN 84.425F) portions of its Higher Education Emergency Relief Fund
(HEERF) funds for allowable and intended purposes. We also reviewed Lincoln’s cash
management practices and the timeliness and quality of the data Lincoln reported on its
use of HEERF funds. 1 Our audit covered Lincoln’s HEERF expenditures, cash flows, and
reporting from the grant award date 2 through December 31, 2020.
To achieve our audit objective, we interviewed Lincoln Educational Services Corporation
(LESC) 3 officials who were responsible for drawing down, managing, awarding, spending,
and reporting on Lincoln’s HEERF grant funds. We also reviewed LESC’s policies and
procedures and other supporting documentation (for example, bank records, invoices,
student records) for managing, authorizing, and accounting for HEERF-related
transactions and expenditures. Additionally, we reviewed a sample of Student Aid grant
distributions and Institutional grant expenditures to determine whether LESC used the
Student Aid and Institutional portions of Lincoln’s HEERF funds for allowable and
intended purposes. We also compared the timing and amounts of drawdowns of HEERF
funds with LESC’s accounting records (expenditure information) to determine whether
LESC minimized the time between draw down and disbursement of the funds. Lastly, we
reviewed HEERF reports that LESC posted on its website covering expenditures from the
grant date through December 31, 2020, and the school’s accounting records to
determine whether the school reported timely and quality information.
What We Found
LESC generally used the Student Aid portion of Lincoln’s HEERF funds for allowable and
intended purposes but did not always use the Institutional portion of its funds in
1
In this document, “HEERF” generally refers to both the Student Aid and Institutional grant funds. We
use “Student Aid” and “Institutional” when the information is specific to the respective grant.
2
The award date for Lincoln’s Student Aid grant was April 28, 2020, and the award date for its
Institutional grant was May 14, 2020.
3
At the time of our audit, LESC owned four schools that received HEERF grants, as shown in Appendix B.
LESC centrally administered all four schools’ HEERF grants. Our audit covered only one of LESC’s
schools—Lincoln.
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accordance with Federal requirements. We found that LESC did not adequately
document eligibility determinations for a small number of students who received
emergency financial aid grants, improperly applied Institutional grant funds to credit
student accounts, improperly charged expenditures that extended beyond the grant
performance period, and did not follow cash management requirements. Specifically,
LESC
• did not have policies and procedures with sufficient detail regarding students
who did not have an Institutional Student Information Record on file, to ensure
that (1) all the steps necessary to verify student eligibility were completed, and
(2) eligibility determinations were adequately supported for 202 students who
received an emergency financial aid grant, contrary to Federal regulations;
• improperly applied $700,155 of Institutional grant funds to credit 461 students’
accounts for rent the students paid to third-party landlords for the months the
school was closed due to coronavirus, contrary to U.S. Department of Education
(Department) guidance;
• improperly used $9,838 of Institutional grant funds to purchase software
subscriptions that extended beyond Lincoln’s 1-year grant performance period,
contrary to Federal regulations; and
• did not minimize the time between drawing down and disbursing HEERF funds
nor deposit excess HEERF funds in an interest-bearing account, contrary to
Federal regulations.
We also determined that the information in Lincoln’s required HEERF reports posted on
LESC’s website was generally accurate, complete, and timely. Following the presentation
of our findings to LESC, LESC officials reallocated the amounts we questioned to other
expenditures they believed were eligible to be charged to Lincoln’s Institutional grant. If
these other expenditures are allowable, this would be an acceptable remedy to our
finding, but we did not review these expenditures.
What We Recommend
We recommend that the Assistant Secretary for the Office of Postsecondary
Education—
• Require LESC to update its policies and procedures to contain sufficient detail
to ensure that (1) all the steps necessary to verify student eligibility and
distribute emergency financial aid grants to students are completed, and
(2) funding determinations are adequately documented and supported.
• Review the allowability of the reallocated Institutional expenditures, and if not
allowable, require LESC to return to the Department the $700,155 of
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Institutional grant funds improperly applied to credit 461 students’ accounts for
rent students paid to third-party landlords and the $9,838 improperly spent for
subscriptions that extended beyond the grant performance period.
• Require LESC to incorporate Federal cash management requirements in its
policies and procedures and determine whether LESC accurately calculated
interest and properly remitted the interest.
LESC Comments
We provided a draft of this report to LESC for comment.
LESC agreed with Finding 1 but disagreed with the recommendation, stating its belief
that such actions are not necessary. LESC stated that when Lincoln is prepared to
distribute Coronavirus Response and Relief Supplemental Appropriations Act (CRRSAA)
and American Rescue Plan (ARP) funds, it will prioritize students with exceptional need
based on the student’s Expected Family Contribution or, for an anticipated small
number of students, a survey instrument designed to identify students with exceptional
need.
LESC disagreed with Finding 2 and did not state whether it agreed or disagreed with the
recommendations. LESC stated that Lincoln nevertheless repurposed the funds in
question for purposes it believes are allowable. LESC disagreed with the sub-finding
regarding credits to student accounts for rent that students paid to third-party
landlords, stating its belief that the Office of Inspector General (OIG) interpreted the
Department’s guidance too narrowly when reporting that the account credit is not
equivalent to a cash payment. LESC further stated that Lincoln agreed with the sub-
finding regarding subscriptions that extended beyond the grant performance period.
LESC agreed that Lincoln purchased four annual software subscriptions, a portion of
which extended beyond the end of the grant performance period. LESC stated that even
though it contends that using Institutional grant funds to reimburse itself for the
student account credits was permissible, Lincoln reallocated the costs we questioned to
write off student account balances, which it believes is permissible in accordance with
the Department’s guidance on lost revenue. LESC also stated that, in addition to
Lincoln’s action, its other schools have completed a similar reallocation of Institutional
grant funds.
LESC agreed with Finding 3 and did not explicitly state whether it agreed or disagreed
with the recommendations. LESC stated that Lincoln did not have prior experience with
Federal cash management requirements and did not initially establish all the
appropriate procedures. LESC said that, after the Department highlighted the cash
management requirements in guidance published in October 2020, Lincoln deposited its
HEERF funds in an interest-bearing account, returned the HEERF funds not needed
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immediately to its account in the Department’s G5 system, and calculated and remitted
interest to the Department. In response to the recommendations, LESC stated that
Lincoln has revised its cash management policy in accordance with Federal cash
management regulations and believes its interest calculation was consistent with
prevailing interest rates during the April through December 2020 timeframe.
OIG Response
Regarding Finding 1, we disagree with LESC’s statement that the corrective action
outlined in Recommendation 1.1 is unnecessary and note that LESC did not state why it
believes that the recommendation to update its written policies is unnecessary. LESC
described how Lincoln intends to prioritize students with exceptional need when
distributing CRRSAA and ARP funds. However, LESC did not address incorporating the
steps necessary to accomplish this and document funding determinations in written
policies and procedures.
Regarding Finding 2, we disagree with LESC’s statement that Lincoln’s use of
Institutional grant funds to reimburse itself for crediting student accounts for rent
students paid to third-party landlords was consistent with the Department’s guidance.
As noted in our finding, crediting student accounts reduced student debt without
students’ permission. Moreover, the rent credits were not the equivalent of a cash
payment because students could not readily convert the credits to cash and did not
have discretion to use the funds for other eligible expenses. The finding acknowledges
that LESC reallocated the amounts we questioned to other expenditures it believed
were eligible to be charged to the grant.
Regarding Finding 3, we acknowledge the corrective actions that LESC took after the
Department published guidance highlighting the cash management requirements in
October 2020. LESC’s actions to incorporate the cash management requirements in its
policies and procedures were responsive to Recommendation 3.1.
We did not make any changes to the findings or recommendations based on LESC’s
comments, except for the addition of Expected Family Contribution in the definition of
an Institutional Student Information Record in Finding 1. We summarize LESC’s
comments at the end of each finding and provide the full text of the comments, except
the attachments, at the end of the report. (see LESC Comments) The attachments
provided with the written comments could be made available upon request unless
subject to withholding under a Freedom of Information Act exemption.
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Introduction
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act), enacted March 27,
2020, authorized more than $2 trillion to battle the coronavirus pandemic and its
economic effects. The CARES Act provided $31 billion for an Education Stabilization
Fund to prevent, prepare for, and respond to the coronavirus, domestically or
internationally, including $17 billion for State and local agencies and $14 billion for the
Higher Education Emergency Relief Fund (HEERF).
CARES Act Higher Education Emergency Relief Fund
In Section 18004 of the CARES Act, Congress set aside $14 billion in HEERF funds to
mitigate the impact of the coronavirus on students and institutions of higher education.
Section 18004(a)(1) provided about $12.6 billion (90 percent) for direct grants to schools
to prevent, prepare for, and respond to the coronavirus. Of the remaining HEERF funds,
7.5 percent ($1 billion) was for formula grants to schools to address needs directly
related to coronavirus and another 2.5 percent ($349 million) was for schools that the
U.S. Department of Education (Department) determined had the greatest unmet needs
related to the coronavirus.
For direct grants, the Act required schools to distribute at least 50 percent of their
HEERF funds to students as emergency financial aid grants to help cover expenses
related to the disruption of campus operations due to the coronavirus. Schools could
use the remaining funds for additional emergency financial aid grants, or to cover any
costs associated with significant changes to the delivery of instruction due to the
coronavirus. The Department’s Office of Postsecondary Education (OPE) is responsible
for administering and overseeing these grants, which were awarded to more than
4,500 schools.
In April 2020, the Department allocated the $12.6 billion to schools as two separate
grants—50 percent of each school’s total authorization for emergency financial aid
grants to students under Assistance Listing Number (ALN) 84.425E (Student Aid portion),
and 50 percent for institutional costs under ALN 84.425F (Institutional portion). 4 In
addition to submitting an application, the Department required schools to sign separate
Certification and Agreement forms in order to access their Student Aid and Institutional
grant funds. Schools had 1 calendar year from the award date of each HEERF grant
(Student Aid and Institutional) to spend the funds unless the school received a no-cost
extension. The Department also required schools to report publicly on their use of
4
Schools had to use the Student Aid portion only for emergency financial aid to students and could also
use some or all of the Institutional portion for emergency financial aid to students.
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HEERF funds by posting the required information on the school’s primary website on a
quarterly basis. The Student Aid and Institutional portions of HEERF funds are subject to
Uniform Administrative Requirements, Cost Principles, and Audit Requirements for
Federal Awards (Uniform Guidance) in 2 Code of Federal Regulations (C.F.R.) part 200.
The Uniform Guidance also addresses cash management requirements.
Additional Coronavirus Relief Legislation
After the CARES Act, Congress passed two additional coronavirus relief laws that
provided additional HEERF funding. The Coronavirus Response and Relief Supplemental
Appropriations Act (CRRSAA) was signed into law on December 27, 2020, authorizing an
additional $22.7 billion for schools under the HEERF programs. CRRSAA provided
additional flexibilities in how HEERF funds could be used, including for lost revenue,
reimbursement for expenses already incurred, technology costs associated with a
transition to distance education, faculty and staff trainings, and payroll. Additionally,
section 314(d)(2) of the CRRSAA extended the allowable use provisions listed above to a
school’s unspent CARES Act funds.
On March 11, 2021, the American Rescue Plan (ARP) was signed into law, adding
$39.6 billion in additional HEERF funding. ARP and subsequent Department regulations
changed the eligibility criteria to allow institutions to provide emergency aid to any
individual who is enrolled at an eligible institution on or after March 13, 2020, the date
of the national emergency.
Lincoln College of Technology
The Department had allocated Lincoln College of Technology (Lincoln) a total of
$24.9 million in coronavirus relief funds by the conclusion of our fieldwork in May 2021.
In April and May of 2020, the Department awarded Lincoln $13.3 million in CARES Act
HEERF funds—almost $6.7 million (50 percent) for the Student Aid portion
(ALN 84.425E) and almost $6.7 million (50 percent) for the Institutional portion
(ALN 84.425F). The Department awarded Lincoln $7.3 million in student aid grant funds
(ALN 84.425Q) under CRRSAA in March 2021, and $4.3 million in supplemental grant
funds (ALN 84.425Q) under ARP in August 2021. 5
Lincoln is a for-profit school that offers training in the areas of automotive technology
and skilled trades, such as welding, electrical technology, and heating, ventilation, and
5
CRRSAA and ARP authorized new HEERF funding for proprietary schools to be used only for emergency
financial aid grants to students. The Department allocated these funds under its Proprietary Institutions
Grant Funds for Students program (ALN 84.425Q). Our audit covered only the CARES Act HEERF funds.
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air conditioning (HVAC). These diploma and certificate programs typically take between
19 to 136 weeks to complete. Each month, new students enroll in and existing students
graduate from these programs.
The school consists of eight campuses located in six States, including its main campus in
Indianapolis, Indiana. According to Lincoln Educational Services Corporation (LESC)
officials, most students are working adults (25–26 years old), about 20 percent of the
students are recent high school graduates, and almost 70 percent of students are
eligible to participate in Title IV of the Higher Education Act of 1965 (Title IV) Federal
student aid programs. All of the campuses are nationally or regionally accredited. Only
the Nashville campus has a dormitory to house students.
In April 2020, LESC owned and operated a total of 4 schools with 22 campuses located in
14 States (including Lincoln, the subject of this audit). The Department awarded HEERF
grants (Student Aid and Institutional portions) to each school. LESC centrally
administered the HEERF grants for all of its schools. In Appendix B, we depict the
organizational structure of LESC’s schools and campus locations, and each school’s
CARES Act HEERF grants.
Impact of Coronavirus
Prior to March 13, 2020, the date of the national emergency, Lincoln’s campuses
generally provided only in-person instruction except for a few blended programs (both
in-person and remote instruction). In March 2020, Lincoln closed all its campuses
(including the Nashville dormitory) and transitioned classes from in-person, hands-on
instruction to 100-percent online, remote instruction. According to LESC officials, the
school was able to quickly pivot to distance learning because many students already had
computers provided as part of their educational program. LESC acquired computers for
some instructors and for students enrolled in some welding and HVAC programs which
previously did not require computers. LESC also obtained e-books for students and
purchased software to enhance its online learning platform.
Depending on their location, school campuses began to reopen between May and July
2020 for in-person instruction. As of August 2020, all campuses had reopened with
social distancing protocols in place, including limiting the number of students on campus
at one time and continuing to use some distance learning (blended instruction). Instead
of hiring additional staff, Lincoln incurred significant amounts of overtime for existing
employees and instructors to accommodate social distancing measures such as smaller
class sizes and extended instruction and business office hours. To adhere to social
distancing protocols when Lincoln’s Nashville campus and dormitory reopened, LESC
contracted with several hotels to house some students who would normally reside in
the dormitory.
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The number of students either enrolled or on leave of absence also illustrates the
impact of the coronavirus, as shown in Figure 1. Lincoln’s enrollment before the national
emergency averaged 5,100 students. Enrollment declined to about 4,900 students after
the national emergency was declared in March 2020, then trended upward to an
average of about 5,500 students from March 2020 to January 2021. During that same
period, an average of 15 students were on leave of absence before the national
emergency. That number increased to a high of about 300 students on leave of absence
in June 2020 and decreased to zero students in January 2021. LESC officials stated that
they kept their schools operating by providing students remote access to online classes,
financial aid, and other services, and by putting resources in place to help students
continue their education and to learn new skills during the coronavirus pandemic. They
attributed Lincoln’s enrollment increase to these measures.
Figure 1. Lincoln College of Technology Student Enrollment and Leave of Absence,
January 2019 through January 2021
7,000 National Emergency Declared, 350
March 13, 2020
6,000 300
5,000 250
Leave of Absence
Enrollment
4,000 200
3,000 150
2,000 100
1,000 50
0 0
Number of Students Enrolled Number of Students on Leave of Absence
SOURCE: Office of Inspector General (OIG) Analysis of Lincoln’s Enrollment and Leave of Absence
Data
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Finding 1. LESC Generally Used Student Aid
Grant Funds for Allowable and Intended
Purposes
LESC generally used Lincoln’s Student Aid grant funds to award emergency financial aid
grants to students in accordance with applicable Federal requirements. As of
December 31, 2020, LESC had awarded emergency financial aid grants to 8,435 students
totaling $6.3 million of the $6.7 million in Student Aid grant funds awarded to Lincoln
under the CARES Act. However, as discussed later in this finding, we found that LESC did
not adequately document eligibility determinations for a small number of students,
contrary to Federal regulations. In addition, as discussed in Finding 3, LESC did not
manage Lincoln’s Student Aid grant funds in accordance with Federal cash management
requirements.
How LESC Awarded and Distributed Student Aid Grant Funds
Congress intended for Student Aid grant funds to provide students emergency financial
relief for expenses related to the disruption of campus operations, including students’
cost of attendance, such as food, housing, course materials, technology, health care,
and childcare. The Department directed schools to award emergency financial aid grants
only to students who were or could be eligible to participate in Title IV programs
(Title IV-eligible). 6 Schools had discretion in determining the amount of individual
emergency financial aid grants and how to distribute the funds to students.
LESC’s policy was to distribute emergency financial aid grants before May 1, 2020, to
existing students who were or could be Title IV-eligible, and to consider students’
financial needs when determining the amount individual students would receive. The
Institutional Student Information Record (ISIR) contains information the student
reported on the Free Application for Federal Student Aid (FAFSA) form, which includes
information for determining a student’s Title IV eligibility and Expected Family
Contribution (EFC). For students who did not have an ISIR on file, LESC had a policy to
determine if they could be Title IV-eligible, which we address later in this finding. For
students who had an ISIR on file, LESC’s policy was to determine the amount a student
would receive based on factors that included the student’s EFC; whether the student
resided in a school dormitory or third-party housing; and whether the student had
graduated between March 13 and April 30, 2020. For students who were active as of
May 1, 2020, and had an ISIR on file, the amount of emergency financial aid grants these
6
As described later in this finding, Department regulations published in May 2021 changed the eligibility
criteria so that students no longer had to be Title IV-eligible to receive an emergency financial aid grant.
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students received ranged from $500 to $1,500, and was $500 for all other students. For
new students who began school after May 1, 2020, with an ISIR, LESC’s policy was to
award emergency financial aid grants in the amount of $500.
To distribute emergency financial aid grant funds as quickly as possible, LESC contracted
with a third-party servicer to mail students their funds via a debit card and a check.
Using the debit card would automatically cancel the check and depositing or cashing the
check would reduce the value on the debit card to zero. Students could use the debit
card at more than 70,000 in-network locations without incurring a surcharge. LESC
officials stated that they monitored whether students had activated the debit card or
cashed the check, attempted to contact students who had not, and deactivated debit
cards that were not activated within 90 days. They also said that funds from the
deactivated cards were reissued as emergency financial aid grants to other eligible
students.
LESC did not require students to complete an application. Instead, LESC compiled data
from its student management system to determine student eligibility and grant award
amounts. LESC informed students by email and letter that they had been awarded an
emergency financial aid grant, provided instructions on how to access their grant funds,
and provided a list of frequently asked questions (FAQ) to help answer questions
students might have about the grant. LESC’s FAQs explained that emergency financial
aid grants under the CARES Act were for expenses related to the disruption of campus
operations due to coronavirus (such as food, housing, course materials, technology,
health care, and childcare); and included a hyperlink to the Department’s website for
additional information about the Act. According to LESC officials, students also received
a survey on their actual and planned uses of grant funds, and based on “hundreds” of
survey responses, students predominately used the funds for housing, food, childcare,
and transportation.
LESC Did Not Adequately Document Eligibility Determinations
for a Small Number of Students
Of the 8,435 students who received an emergency financial aid grant, LESC did not have
documentation to support its eligibility determinations for 202 students. The
202 students did not have an ISIR (non-ISIR students) on file in May 2020 and LESC’s
policy was to determine if the students could be Title IV-eligible and thus eligible to
receive emergency financial aid grants. However, we found that LESC’s written policies
and procedures did not provide sufficient detail to ensure that (1) all the steps
necessary to verify student eligibility were completed, and (2) eligibility determinations
were adequately supported. When we asked for clarification during our testing, LESC
decided to re-evaluate the 202 students because supporting documentation was not
available.
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To help ensure the Department’s grant funds are used for intended purposes and
intended program goals are achieved, Federal regulations require recipients to maintain
adequate records of source documentation of all amounts charged to Federal awards.
Financial management systems for non-Federal entities, such as Lincoln, must include
documentation of compliance with Federal statutes and regulations, must be sufficient
to satisfy reporting requirements, and must be able to show that funds were used
according to terms and conditions of the award (2 C.F.R. § 200.302(a)). Records must
also adequately identify the source of funds for federally funded activities and contain
source documents supporting the usage of the award (2 C.F.R. § 200.302(b)(3)).
For the 202 non-ISIR students, LESC officials could not determine how student eligibility
was reviewed because the student management system did not contain all of the data
needed to support that the students could be Title IV-eligible. They also could not
provide documentation of the review. They said that the senior executive, who oversaw
the review of these students’ eligibility, passed away in July 2020. Thus, LESC’s lack of
documentation supporting its eligibility determinations for these 202 students did not
comply with Federal requirements.
When LESC officials re-evaluated the non-ISIR students, they found that 24 of the
202 students were not Title IV-eligible. 7 The officials were not able to clearly describe
the cause for their error in initially determining the 24 students to be Title IV-eligible.
They explained that communication issues among LESC officials and staff, coupled with
the focus on quickly providing grants to students, were factors for the error.
Nevertheless, the reason for the error might have been more evident or detected earlier
had LESC maintained documentation of its eligibility determinations.
After LESC distributed emergency financial aid grants to the 202 students in May 2020,
the Department issued additional guidance addressing student eligibility. In June 2020,
the Department published an Interim Final Rule (IFR) 8 clarifying that students had to be
Title IV-eligible to receive an emergency financial aid grant under the CARES Act. In its
October 2020 FAQ Rollup Document, the Department further clarified that the IFR was
not intended to have a retroactive effect and that the Department would “not initiate
any enforcement action based solely upon its early guidance as to student eligibility for
7
We sampled 9 of the 202 students who received an emergency financial aid grant and did not have an
ISIR on file, as shown in Table 7 (Group 2) in Appendix A. We also confirmed that 2 of the 9 students
were among the 24 students who LESC subsequently determined were not Title IV-eligible.
8
Eligibility of Students at Institutions of Higher Education for Funds Under the Coronavirus Aid, Relief,
and Economic Security (CARES) Act, IFR (85 FR 36494), June 17, 2020.
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HEERF emergency student financial aid grants that were disbursed to students prior to
the effective date of the IFR (June 17, 2020).” On May 14, 2021 (after our audit period),
the Secretary of Education amended Department regulations to allow institutions of
higher education to award emergency financial aid grants to students who were
currently or previously enrolled at an eligible institution as of March 13, 2020, the date
the national emergency was declared, regardless of whether they are Title IV-eligible. 9
Despite the subsequent clarifications in Department guidance and regulations, we
concluded that LESC did not maintain adequate documentation to support emergency
financial aid grants awarded to non-ISIR students and charged to Lincoln’s Student Aid
grant.
With the additional funding provided by the Department’s Proprietary Institutions Grant
Funds for Students program (ALN 84.425Q) under CRRSAA and ARP, it is important that
LESC have a sufficiently detailed plan for distributing the funds to students and
maintains documentation to support all student grant awards. The CRRSAA and ARP
directed schools to prioritize grants to students with exceptional need when distributing
emergency financial aid grants. Furthermore, the Department’s ARP guidance states
that institutions “should carefully document how they prioritize students with
exceptional need in distributing emergency financial aid grants to students, as the
Department is exploring reporting requirements regarding the distribution of
emergency financial aid grants to students (see 2 C.F.R. § 200.334).” 10
Recommendation
We recommend that the Assistant Secretary for the Office of Postsecondary Education
require LESC to—
1.1 Update its written policies and procedures to contain sufficient detail to ensure
that (1) all the steps necessary to verify student eligibility and distribute funds to
students under the CARES Act and subsequent coronavirus legislations are
addressed and completed, (2) funding determinations are adequately documented
and supported in accordance with 2 C.F.R. § 200.302, and (3) students with
exceptional need are prioritized in accordance with CRRSAA and ARP.
9
The May 2021 regulation applies to emergency financial aid grants to students under the HEERF
programs as originally enacted under the CARES Act and continued through the CRRSAA and ARP.
10
Higher Education Emergency Relief Fund III Frequently Asked Questions, American Rescue Plan Act of
2021, published May 11, 2021 (Questions 7 and 11 updated May 24, 2021). Question 11 addressed the
requirements for making emergency financial aid grants to students.
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LESC Comments
LESC agreed with the finding but disagreed with the recommendation, stating its belief
that the actions contained in the recommendation are not necessary. LESC stated that
when Lincoln is prepared to distribute CRRSAA and ARP funds, it will prioritize students
with exceptional need by distributing larger emergency student financial aid grants to
students with relatively lower amounts of EFC. For the relatively small number of
students who Lincoln anticipates will not have EFC information, it will use a survey
instrument designed to identify students with exceptional need.
OIG Response
We disagree with LESC’s statement that the corrective action outlined in the
recommendation is unnecessary and note that LESC did not state why it believes that
the recommendation to update its written policies is unnecessary. As noted in the
finding, Federal regulations require recipients, such as Lincoln, to maintain adequate
supporting documentation to ensure grant funds are used in accordance with the terms
and conditions of the award. LESC described how Lincoln intends to prioritize students
with exceptional need when distributing CRRSAA and ARP funds. However, its
comments do not address incorporating in written policies and procedures the steps
necessary to prioritize students with exceptional need and ensure funding
determinations for each student are adequately documented and supported, as
required by 2 C.F.R. § 200.302.
We did not make any changes to the finding and recommendation based on LESC’s
comments, except to add EFC in the description of the ISIR.
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Finding 2. LESC Did Not Always Use Institutional
Grant Funds for Allowable and Intended
Purposes
As of December 31, 2020, LESC had spent $3.4 million (51 percent) of the $6.7 million in
Institutional grant funds awarded to Lincoln. We determined that LESC spent
$2.7 million (79 percent) for allowable purposes but spent about $710,000 (21 percent)
of the $3.4 million for unallowable purposes. Specifically, as discussed later in this
finding, LESC applied $700,155 to credit student accounts for the amount of rent
students paid to third-party landlords and used $9,838 for subscriptions that extended
beyond the grant performance period. In addition, as discussed in Finding 3, LESC did
not manage Lincoln’s Institutional grant funds in accordance with Federal cash
management requirements.
After we concluded our audit fieldwork, LESC officials informed us that they decided to
reallocate the amounts we questioned to what they believe were other eligible
expenditures, as described near the end of this finding.
How LESC Used Institutional Grant Funds
Under the CARES Act, Congress intended for schools to use Institutional grant funds to
cover any costs associated with significant changes to the delivery of instruction due to
coronavirus. In deciding how to use Lincoln’s Institutional grant funds, LESC officials
stated that they reviewed expenditures incurred to date (or expected to be incurred
within the grant period) to keep the school operating when campuses closed for 2 to
3 months due to coronavirus and then re-opened. To help in their decision-making on
what costs might be allowable for reimbursement under the grant, they consulted with
LESC’s Title IV compliance auditor and submitted questions to the Department.
Of the $3.4 million spent as of December 31, 2020, LESC reported using 74 percent for
expenditures related to student housing and 26 percent for expenditures related to
technology and campus safety, as shown in Table 1 on the following page. According to
LESC officials, the housing-related expenditures were for (1) hotel lodging for students
who were displaced from their dormitory housing to allow for social distancing when
the Nashville campus re-opened; (2) refunds of housing or meal fees in the form of a
credit to student accounts for about 470 students who had to leave their dormitory
housing when the Nashville campus and cafeteria closed; and (3) as discussed later in
this finding, reimbursement in the form of a credit to student accounts for rents that
461 students paid for third-party housing. The remaining expenditures included
purchases of computers to enable remote instruction for students enrolled in programs
that did not previously require computers; software subscriptions for distance learning,
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as discussed later in this finding; and campus safety supplies such as personal protection
equipment.
Table 1. Lincoln’s Institutional Expenditures through December 31, 2020
Percent of
Category of Expenditure Amount
Total
Housing: Hotel Lodging for Social
$973,567 28%
Distancing (Nashville)
Housing: Dormitory Housing and
858,016 25%
Meal Fees (Nashville)
Housing: Third-Party Housing 700,155 21%
Technology (Hardware and
889,078 26%
Software) and Campus Safety
Total $3,420,816 100%
SOURCE: OIG analysis of Lincoln’s quarterly Institutional expenditure reports posted on
LESC’s website for the periods ending September 30 and December 31, 2020
LESC Improperly Applied Institutional Grant Funds to Credit
Student Accounts for Rent Students Paid to Third-Party
Landlords
In December 2020, LESC improperly applied $700,155 of Lincoln’s Institutional grant
funds to credit student accounts to reduce student debt owed to LESC or the
Department for rent (“rent credits”) that 461 students paid to third-party landlords for
the 2 to 3 months that school campuses were closed due to coronavirus. Pre-dating the
CARES Act, LESC had contracts with third parties that offered housing services and
referred students to these third-party entities as the preferred, first-choice housing
provider (third-party landlord). 11 A student in need of housing could choose to rent from
this third-party landlord or any other landlord and was legally obligated to the landlord
for rent payments. A student could also choose to authorize the school to pay the
11
LESC had contracts with third-party entities that offered housing services at four of Lincoln’s
campuses. In addition to the distinction of being the “preferred housing provider,” the service providers
assisted students in finding roommates, housing, and other related services. The contract specified that
the legal obligation for students’ rent remained with the student regardless of the source of payment.
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student’s rent from either available funds in the student’s account or financing provided
by LESC. 12
Because the 461 students paid rent directly to a third-party landlord, Department
guidance specified that LESC should have made direct cash payments or equivalent to
reimburse the students for their rent payments. LESC officials stated that their decision
to issue “rent credits” in December 2020 was based on the Department’s guidance,
which was in response to a question LESC had submitted. Question 34 in the
Department’s FAQ Rollup Document (October 2020) states:
Question: My institution has students that paid housing fees for April
and May 2020 for collegiate housing, but who were not there physically
due to [the coronavirus pandemic]. Can our institution provide our
students an account credit for the rent amount paid and be reimbursed
through the HEERF?
Answer: If an institution chooses to reimburse students for rent
payments they made, in addition to campus housing fees, during a time
when the student could not remain in campus housing “due to
significant changes to the delivery of instruction due to the
coronavirus,” then that is a permissible use of funds from the
Institutional Portion of its allocation under section 18004(a)(1) of the
CARES Act to reimburse itself for this cost. However, in such a case, if
the student paid rent directly to an entity other than the institution,
then the institution would need to issue the rent credit to the student in
the form of a cash payment, or equivalent. However, if the rent
payments were made to the institution, then the institution can
reimburse the student for those payments by issuing an account credit
for the rent amount paid.
LESC did not provide student housing facilities nor charge rent to students who resided
in properties owned by third-party landlords. Students’ rental agreements were
12
At the time of enrollment, students could enter into an agreement with LESC to finance any unpaid
amounts on student accounts via an institutional loan covering unpaid educational services, including
tuition, fees, books, supplies, and related services. Other unpaid amounts could result if the student
chose to authorize LESC to facilitate making the student’s rent payments to third-party landlords. The
institutional loan was a retail installment contract that typically had a 7-year repayment period, an
interest rate of 9 percent, and provided the students with an option to defer loan repayment while
enrolled in school.
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between the student and the landlord, and not the school. Under the financing
arrangement between LESC and the student, LESC issued the student a monthly “rent
stipend” housing check payable to the student or third-party landlord. This transaction
either reduced the amount of available funds (including from Federal student aid
sources) 13 in the student’s account or increased the amount of funds the student
borrowed from the school by the amount of the payment to the third-party landlord. In
either case, students were using their own or borrowed funds to pay their rent to third-
party landlords and did not make rent payments to the school.
The Department’s guidance addresses the form in which a school would issue a “rent
credit” depending on whether the student paid rent directly to a third-party entity or to
the school. Issuing an account credit to reimburse students for rent would be
permissible if students made rent payments to the school, which was not the case for
LESC. Instead, students paid rent to a third-party entity, in which case the guidance
states that the school would need to issue the rent credits to the students in the form of
cash payments or equivalent. Contrary to this guidance, LESC issued account credits and
not direct payments to the students. By issuing the credits, LESC used Institutional grant
funds to pay down the students’ debt owed on Title IV loans or to the school without
students’ permission. 14
LESC officials claimed they followed the Department’s guidance. However, we
determined that they incorrectly concluded that posting the rent credit to the student
accounts was equivalent to a form of cash payment. The rent credit was not the
equivalent of a cash payment because students could not readily convert the credits to
cash. By issuing an account credit instead of cash or an equivalent, students did not
have discretion to use the funds for other eligible expenses that might have provided
more timely and effective relief for their own circumstances related to the disruption of
campus operations due to coronavirus.
Of the $700,155 in Institutional grant funds that we questioned, we were not able to
determine the amount that LESC returned to the Department to pay down students’
Title IV loans and the amount that LESC used to pay down students’ institutional debt.
Additionally, LESC officials could not readily provide this information.
13
Federal student aid programs under Title IV of the Higher Education Act could include Pell grants and
Direct Loans.
14
In February 2021, LESC told students that the credit would offset the rent the students paid to their
third-party landlords and could result in a reduction of their institutional loan or Federal student loan
balance.
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As we reviewed documentation related to Lincoln, we noted that LESC also applied
“rent credits” to student accounts for students enrolled in at least one of its other
schools. We recommend that the Assistant Secretary for the Office of Postsecondary
Education determine if the “rent credit” issue occurred at LESC’s other schools and take
corrective action as appropriate.
LESC Improperly Used Institutional Grant Funds for
Subscriptions that Extended beyond the Grant Performance
Period
LESC improperly used $9,838 of its Institutional grant funds to purchase software
subscriptions that extended beyond Lincoln’s 1-year grant performance period. The
performance period for Lincoln’s Institutional grant was from May 14, 2020, through
May 13, 2021. According to cost principles specified in Uniform Guidance at 2 C.F.R.
§ 200.309, “a non-Federal entity may charge to the Federal award only allowable costs
incurred during the period of performance ….” Thus, LESC should not have charged costs
incurred after May 13, 2021, to Lincoln’s Institutional grant.
During the grant period, LESC purchased annual subscriptions from four vendors for
various online learning systems, including collaboration and communication software,
online study tools and testing services, and learning management platform. However, a
portion ($9,838) of the $43,117 in subscription costs extended beyond the 1-year grant
period, as shown in Table 2.
Table 2. Subscriptions Extending beyond Lincoln’s Institutional Grant Performance
Period, May 14, 2020, through May 13, 2021
Total Amount
Vendor Subscription Subscription Period Subscription Extending beyond
Amount May 13, 2021
Online testing Aug. 2020 through
Vendor 1 $9,069 $1,968
environment tools July 2021
Online access security June 2020 through
Vendor 2 7,338 363
services May 2021
Online teaching Oct. 2020 through
Vendor 3 18,491 7,101
software Sept. 2021
Workforce mobile June 2020 through
Vendor 4 8,219 406
application May 2021
Total - - $43,117 $9,838
SOURCE: OIG analysis of LESC’s Expenditure Data
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Recognizing their limited experience administering Federal grants, LESC officials stated
that they decided to charge the total amount for the annual subscriptions to the grant
after consulting with their external Title IV compliance auditor. We noted that this
consultation did not address the cost principles applicable to Federal grants. By charging
to the grant the cost of subscriptions that extended beyond the grant performance
period, LESC officials did not apply nor appear to understand the applicable cost
principles contained in Uniform Guidance.
While the dollar amount of costs we questioned was small, it is critical that grantees not
prepay costs that extend beyond the grant performance period. Properly allocating
costs to the grant performance period helps to protect taxpayer dollars; minimize the
risk of fraud, waste, and abuse; and ensure Federal funds are used for allowable and
intended purposes.
As we reviewed documentation related to Lincoln, we noted that LESC also purchased
subscriptions for its other schools; thus, we believe the issue of using Institutional grant
funds to purchase subscriptions extending beyond the grant performance period might
have also occurred at these schools. We recommend that the Assistant Secretary for the
Office of Postsecondary Education determine if this issue occurred at LESC’s other
schools and take corrective action as appropriate.
LESC Reallocated Questioned Costs
After we discussed our audit results at the Exit Conference, 15 LESC officials informed us
that they reallocated the amounts we questioned in this finding to other expenditures
they believed were eligible to be charged to the grant. The officials stated that they
reallocated Lincoln’s Institutional grant funds to write off $710,274 in unpaid accounts
receivable for 148 students who withdrew from the school due to coronavirus. They also
provided an electronic spreadsheet detailing the write-off amounts for each student.
LESC officials said that their rationale for reallocating the funds was based on the
Department’s March 19, 2021, FAQ question 3. 16 Additionally, they stated that they
15
We held an exit conference with LESC officials on May 25, 2021.
16
The Department published guidance titled, Higher Education Emergency Relief Fund (HEERF I, II, and
III) Lost Revenue Frequently Asked Questions, March 19, 2021. HEERF I refers to grant funds awarded
under the CARES Act, HEERF II refers to the CRRSSA, and HEERF III refers to the ARP. Question 3 in this
FAQ addresses the potential sources of lost revenue that may be reimbursable under the HEERF grant
programs, including unpaid student accounts receivable.
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planned to revise Lincoln’s HEERF Institutional expenditure report on its website for the
applicable quarter to reflect this change.
Because we had concluded our audit fieldwork, we did not review the additional
documentation LESC provided in relation to this reallocation. We recommend that the
Assistant Secretary for the Office of Postsecondary Education review the reallocated
funds for allowability during the audit resolution process. We will provide the
spreadsheet, which contains student information, to OPE under separate cover.
Recommendations
Regarding LESC’s decision to reallocate the amounts we questioned in this finding, we
recommend that the Assistant Secretary for the Office of Postsecondary Education—
2.1 Review the reallocated funds and determine whether LESC’s use of $710,274 of
Lincoln’s Institutional grant funds to write off unpaid accounts receivable for
students, who withdrew from the school due to coronavirus, was allowable
and for the intended purposes of applicable coronavirus relief legislation.
If LESC’s reallocation of Lincoln’s Institutional grant funds is deemed unallowable, we
recommend that the Assistant Secretary for the Office of Postsecondary require LESC
to—
2.2 Return to the Department the $700,155 of Lincoln’s Institutional grant funds
that LESC improperly applied to credit student accounts for rent students paid
to third-party landlords and the $9,838 that LESC improperly spent for
subscriptions extending beyond the grant performance period and determine if
these issues occurred at LESC’s other schools and take corrective action as
appropriate.
LESC Comments
While LESC disagreed with the finding, LESC stated that Lincoln nevertheless repurposed
the funds in question for uses it believes are allowable. LESC did not state whether it
agreed or disagreed with the recommendations.
LESC disagreed with the sub-finding, Crediting Student Accounts for Rent Students Paid
to Third-Party Landlords, stating its belief that the OIG interpreted the Department’s
guidance language too narrowly when reporting that the account credit is not
equivalent to a cash payment to a student. LESC said that Lincoln routinely and
repeatedly sought and received direct guidance from the Department, as it did on this
topic, regarding the proper use of HEERF funds. LESC also stated its belief, contrary to
the sub-finding, that issuing account credits was consistent with the Department’s
guidance.
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LESC agreed with the sub-finding, Subscriptions that Extended beyond the Grant
Performance Period. LESC agreed that Lincoln purchased four annual software
subscriptions, a portion of which continued beyond the end of the grant performance
period on May 13, 2021.
LESC stated that Lincoln reallocated the costs we questioned regarding the rent credits
and subscriptions for other uses even though it contends that using Institutional grant
funds to reimburse itself for the student account credits was permissible. Specifically,
LESC said that Lincoln used $710,274 (slightly more than the total amounts questioned
in this finding) to write off student account balances, which it believes is a permissible
use in accordance with the Department’s guidance on lost revenue. LESC also stated
that, in addition to Lincoln’s action, its other schools have completed a similar
reallocation of Institutional grant funds.
OIG Response
We disagree with LESC’s statement that Lincoln’s use of Institutional grant funds to
reimburse itself for crediting student accounts for rent students paid to third-party
landlords was consistent with the Department’s guidance. As noted in our finding,
crediting student accounts reduced student debt without students’ permission.
Moreover, the rent credits were not the equivalent of a cash payment because students
could not readily convert the credits to cash and did not have discretion to use the funds
for other eligible expenses.
We did not make any changes to the finding and recommendations based on LESC’s
comments. The finding acknowledges that LESC reallocated the amounts we questioned
to other expenditures it believed were eligible to be charged to the grant and
recommends that the Assistant Secretary for the Office of Postsecondary Education
review the reallocated funds for allowability.
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Finding 3. LESC Did Not Follow Federal Cash
Management Requirements
LESC did not minimize the time between drawing down and disbursing Lincoln’s Student
Aid and Institutional grant funds nor deposit its excess HEERF funds in an interest-
bearing account, as required by Federal cash management requirements. LESC officials
did not demonstrate an understanding of, and lacked policies and procedures to ensure
compliance with, the requirements.
Federal regulations at 2 C.F.R. § 200.305(b) state that non-Federal entities, such as
Lincoln, “must minimize the time elapsing between the transfer of funds from [the
Department] and the disbursement by the non-Federal entity ….” The regulations
further address the timing of Federal payments, the need for an interest-bearing
account, and remitting interest earnings to the Federal government:
(1) Advance payments to a non-Federal entity must be limited to the
minimum amounts needed and be timed to be in accordance with the
actual immediate cash requirements of the non-federal entity in
carrying out the purpose of the approved program or project. The
timing and amount of advance payments must be as close as is
administratively feasible to the actual disbursements by the non-Federal
entity …
(8) The non-Federal entity must maintain advance payments of Federal
awards in interest-bearing accounts …
(9) Interest earned amounts up to $500 per year may be retained by the
non-Federal entity for administrative expense. Any additional interest
earned on Federal advance payments deposited in interest-bearing
accounts must be remitted annually to the Department of Health and
Human Services Payment Management System …
LESC did not follow Federal cash management requirements set forth in 2 C.F.R.
§ 200.305(b) because senior executives stated that they were not aware of the
requirements until the Department issued guidance in October 2020. 17 However, when
signing the respective Recipient’s Funding Certification and Agreement in April 2020 to
access Lincoln’s Student Aid and Institutional grant funds, LESC certified that it would
comply with 2 C.F.R. part 200. Further, Enclosure 4 of the Grant Award Notification for
17
FAQ Rollup Document, October 14, 2020. Question 9 addressed the cash management requirements
set forth in 2 C.F.R. § 200.305(b).
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the Student Aid and Institutional grants, respectively dated in April and May 2020, also
reminded grantees of existing cash management requirements in 2 C.F.R. part 200 and
described the requirements in detail. Additionally, Lincoln has been a long-time
participant in Title IV Federal student aid programs, which are subject to similar cash
management requirements. Even though LESC officials had limited experience
administering Federal grants, they were made aware of, agreed to comply with, and
should have ensured compliance with Federal cash management requirements.
Nevertheless, LESC’s cash management policies and procedures did not incorporate
Federal cash management requirements related to minimizing the time between
drawing down and disbursing Federal grant funds, maintaining the funds in an interest-
bearing account, or remitting interest earned in excess of $500 to the Federal
government. Recognizing its noncompliance with cash management requirements, LESC
subsequently deposited Lincoln’s HEERF funds in interest-bearing accounts, returned
unspent funds to the Department, and calculated and remitted interest to the
Department.
As we reviewed LESC’s documentation related to Lincoln and school information in the
Department’s G5 system, we noted that the cash management issues we identified at
Lincoln were also applicable at LESC’s other three schools. LESC returned unspent funds
and remitted interest to the Department for Lincoln and its other schools at the same
time.
LESC Did Not Minimize the Time Between Drawing Down and
Disbursing Institutional and Student Aid Grant Funds
LESC drew down all of Lincoln’s HEERF grant funds in advance of immediate cash needs
and, thus, did not minimize the time between drawing down and disbursing the funds.
The Department authorized $6,670,527 in Student Aid grant funds for Lincoln on
April 28, 2020, and LESC drew down all the funds on May 1, 2020. Further, the
Department authorized $6,670,527 in Institutional grant funds for Lincoln on May 14,
2020, and LESC drew down all those funds on June 29, 2020. Lincoln did not have an
immediate cash need for all the drawn funds, as discussed below; thus, LESC did not
comply with 2 C.F.R. § 200.305(b)(1).
As shown in Table 3 on the following page, LESC did not begin to disburse Lincoln’s
Institutional grant funds until 2 months (67 days) after drawing down the funds. By
September 30, 2020, LESC had disbursed only 33 percent of Lincoln’s Institutional grant
funds and made no further disbursements the rest of the year. LESC returned
$3,528,466 (53 percent) to the Department 176 days after drawing down the funds.
LESC did not return the remaining $963,243 because senior executives planned to and
did disburse the funds in early January 2021, more than 185 days after the funds were
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drawn. LESC officials attributed delays in spending Institutional grant funds to delays in
receiving guidance from outside sources, such as external auditors and the Department,
about whether anticipated disbursements were allowable under the CARES Act and
HEERF. However, as noted above, LESC officials were made aware of, and agreed to
comply with, Federal cash management requirements and should not have drawn down
the funds until they were prepared to spend them.
Table 3. Draw Down and Disbursement Activity for Lincoln’s Institutional Grant Funds,
June 29 through December 31, 2020
Percent of Number of
Draw Down and Remaining
Drawn Funds Days Elapsed
Date (Disbursement) Institutional Grant
Disbursed from June 29,
Amount Funds
(Cumulative) 2020
June 29, 2020 $6,670,527 $6,670,527 0% 0
Sept. 4, 2020 (538,209) 6,132,318 8% 67
Sept. 30, 2020 (1,640,609) 4,491,709 33% 93
Dec. 22, 2020 a (3,528,466) 963,243 86% 176
Dec. 31, 2020 0 963,243 - 185
SOURCE: OIG Analysis of LESC’s Bank Activity for CARES Act Account
a
LESC returned $3,528,466 to the Department on December 22, 2020.
As shown in Table 4 on the following page, LESC began disbursing Lincoln’s Student Aid
grant funds within 15 days of drawing down the funds. However, LESC inappropriately
held onto the remaining funds as it continued to disburse grant funds on generally a
monthly basis through November 2020. By the time LESC returned the remaining
$325,027 (5 percent) to the Department, 235 days had elapsed since drawing down the
funds.
It is important that schools not draw Federal funds before they have immediate needs
for the funds. The U.S. Treasury incurs additional borrowing costs when a school draws
Federal funds in advance of its immediate cash needs because the U.S. Treasury often
borrows the cash needed to fund Federal programs and, as a result, incurs interest
costs.
LESC returned a total of $3,853,493 of Lincoln’s unspent funds to the Department on
December 22, 2020, during our audit. LESC stated they expected to spend all the funds
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by the end of each grant’s 1-year performance period—April 27, 2021, for the Student
Aid grant, and May 13, 2021, for the Institutional grant. 18
Table 4. Draw Down and Disbursement Activity for Lincoln’s Student Aid Grant Funds,
May 1 through December 31, 2020
Percent of Number of
Draw Down and Remaining
Drawn Funds Days Elapsed
Date (Disbursement) Student Aid Grant
Disbursed from May 1,
Amount Funds
(Cumulative) 2020
May 1, 2020 $6,670,527 $6,670,527 0% 0
May 13, 2020 (4,955,000) 1,715,527 74% 12
May 28, 2020 (61,250) 1,654,277 75% 27
June 15, 2020 (5,250) 1,649,027 75% 45
July 6, 2020 (98,000) 1,551,027 77% 66
July 27, 2020 (7,250) 1,543,777 77% 87
Aug. 19, 2020 (553,000) 990,777 85% 110
Sept. 10, 2020 (160,500) 830,277 88% 132
Oct. 13, 2020 (1,500) 828,777 88% 165
Nov. 20, 2020 (503,750) 325,027 95% 203
Dec. 22, 2020a (325,027) 0 - 235
Dec. 31, 2020 0 0 - -
SOURCE: OIG Analysis of LESC’s Bank Activity for CARES Act Account
a
LESC returned $325,027 to the Department on December 22, 2020.
18
According to the CARES Act HEERF reports that were posted on LESC’s website, it appears Lincoln
spent all of its $6.7 million in Student Aid grant funds as of the quarter ending March 31, 2021, and
spent almost all (99 percent) of its $6.7 million in Institutional grant funds as of the quarter ending
June 30, 2021.
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LESC Did Not Maintain Institutional and Student Aid Grant
Funds in Interest-Bearing Accounts at First
Upon drawing down Lincoln’s Student Aid and Institutional grant funds from the
Department, LESC maintained the funds in a noninterest-bearing bank account. LESC
converted the account to an interest-bearing account in early November 2020, shortly
after the Department issued the guidance addressing cash management requirements
in 2 C.F.R. § 200.305(b).
LESC Calculated and Remitted Interest
In January 2021, LESC calculated the amount of interest Lincoln’s Student Aid and
Institutional grant funds might have earned had the funds been deposited in an interest-
bearing account from the start. LESC applied an interest rate of 0.3 percent to the
remaining balance of unspent Student Aid and Institutional grant funds, respectively,
from the date of the initial draw to December 22, 2020, when nearly all of Lincoln’s
remaining funds were remitted to the Department. Based on Lincoln’s Student Aid and
Institutional remaining grant funds (as shown in Table 3 and Table 4 above), LESC
calculated a total of $10,826 in interest and remitted this amount to the Department on
January 29, 2021.
We did not assess the reasonableness of LESC’s method for calculating interest.
However, we noted that its method did not consider imputed interest for the period
when the HEERF funds were maintained in noninterest-bearing accounts (from grant
draw down dates through October 2020) nor the actual interest earned (in November
and December 2020). Instead LESC used an interest rate of 0.3 percent, which was the
rate on its December 2020 bank statement, for the entire period.
We also noted that LESC similarly calculated and remitted interest for its other three
schools in the same manner. For the three schools and Lincoln combined, LESC
calculated a total of $23,400 in interest as shown in Table 5 on the following page,
which was sent to the Department on January 29, 2021.
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Table 5. LESC Summary of Calculated Interest by School and HEERF Grant through
December 22, 2020
OPEID a Student Aid Institutional
School Total Interest
Number (84.425E) (84.425F)
Lincoln 00793800 $2,707.03 $8,119.28 $10,826.31
Iselin, NJ 01246100 536.45 5,207.97 5,744.42
New Britain, CT 00730300 708.40 5,379.57 6,087.97
Columbia, MD 00793600 99.11 642.37 741.48
Total Interest - $4,050.99 $19,349.19 $23,400.18
SOURCE: LESC
a
The Department uses the OPE Identification (OPEID) number to identify a school for student
financial aid eligibility purposes.
Recommendations
We recommend that the Assistant Secretary for the Office of Postsecondary
Education—
3.1 Require LESC to incorporate in its policies and procedures the cash
management requirements for minimizing the time between drawing down
and disbursing Federal grant funds, including HEERF funds, maintaining the
funds in an interest-bearing account, and remitting interest earned more than
$500 in accordance with 2 C.F.R. § 200.305(b).
3.2 Determine whether LESC accurately calculated interest and properly remitted
the interest returned in January 2021, in accordance with 2 C.F.R.
§ 200.305(b)(9).
LESC Comments
LESC agreed with the finding. LESC stated that Lincoln did not have prior experience
with the cash management requirements of 2 C.F.R. part 200 and did not initially
establish all the appropriate procedures. LESC said that, after the Department
highlighted the cash management requirements in guidance published in October 2020,
Lincoln deposited its HEERF funds in an interest-bearing account, returned the HEERF
funds not needed immediately to its account in the Department’s G5 system, and
calculated and remitted interest to the Department.
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LESC did not explicitly state whether it agreed or disagreed with the recommendations,
but did state that it took corrective action in response to the recommendation to
incorporate the cash management requirements in its policies and procedures
(Recommendation 3.1). Specifically, LESC stated that Lincoln has revised its cash
management policy in accordance with 2 C.F.R. § 200.305(b). LESC provided
documentation of this corrective action. Additionally, LESC stated Lincoln’s belief that its
interest calculation was consistent with prevailing interest rates during the April through
December 2020 timeframe.
OIG Response
We acknowledge the corrective actions LESC stated that it took to deposit HEERF funds
in an interest-bearing account, return unspent funds, and calculate and remit interest
after the Department published guidance highlighting the cash management
requirements in October 2020. We reviewed the documentation LESC provided and
found that the corrective action was responsive to Recommendation 3.1.
We did not change the recommendation for the Department to determine whether
LESC calculated interest accurately and remitted the interest properly. As noted in the
finding, LESC’s method for calculating interest did not consider imputed interest nor the
actual interest earned. Additionally, LESC returned the interest to the Department
instead of to the Department of Health and Human Services in accordance with 2 C.F.R.
§ 200.305(b)(9).
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ED-OIG/A20CA0016 28
Other Matter. Student Aid and Institutional
Reporting
Schools must report publicly on their use of HEERF funds by posting the required
information on the school’s primary website on a quarterly basis. The Department
prescribed the contents and due dates for schools’ quarterly Student Aid and
Institutional reports. We determined that the information in Lincoln’s initial and 45-day
Student Aid reports, and Student Aid and Institutional reports for the periods ending
September 30 and December 31, 2020, was generally accurate, complete, and timely. 19
However, after posting updated reports LESC did not keep previous Student Aid reports
posted on its website, contrary to Department guidance.
In October 2020, the Department offered a webinar on the quarterly reporting
requirements for HEERF grantees. Following the webinar, the Department issued
guidance about maintaining all the quarterly reports on the school’s public website.
Technical FAQ Question 2 in the guidance states: “We ask that institutions separately
maintain each quarterly report on their website, which adds transparency and
accountability as to when and how institutions expended funds.” 20
Because schools were not required to submit the quarterly reports to the Department,
the reports appearing on school websites provided an important means to ensure
transparency and accountability. In April 2021, we noted that LESC did not keep the
previous Student Aid reports posted on its website for any of its schools. When we
brought this matter to their attention, LESC officials stated that it was an oversight and
promptly uploaded the missing reports to their website.
We suggest that the Assistant Secretary for the Office for Postsecondary Education take
steps to ensure and confirm LESC maintains previous Student Aid reports for all of its
schools on its public website, as required.
LESC Comments
LESC did not state whether it agreed or disagreed with this matter or suggestion.
However, LESC stated that Lincoln immediately restored the earlier reports to its
website when the OIG brought this matter to its attention. LESC said that a section of
19
We did not determine the impact of our findings on the quality of the data in Lincoln’s quarterly
Student Aid and Institutional reports.
20
In a letter to HEERF project directors dated October 19, 2020, the Department provided a summary of
the webinar, resources, and Technical FAQs on the quarterly public reporting requirements.
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Lincoln’s public website for information regarding COVID-19 and the CARES Act will also
include the required quarterly reports for both the Student Aid and Institutional HEERF
funds received under the CRRSAA and ARP. LESC also stated that all of these reports will
be maintained for a minimum of 3 years after the submission of the final report in
accordance with 2 C.F.R. § 200.333 (record retention).
OIG Response
We appreciate LESC taking prompt corrective action when we brought the matter to its
attention in April 2021. LESC’s proposed action, if implemented as described for all its
schools, is responsive to our suggestion.
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Other Matter. Incorrect Data Universal Number
System Number
During our audit we noted that the Department awarded Lincoln’s Institutional grant
under the Data Universal Number System (DUNS) number 21 assigned to LESC’s
Columbia, Maryland school (Columbia), as shown in Table 6. As a result, LESC had to
draw down Lincoln’s Institutional grant funds ($6,670,527) under Columbia’s DUNS
number. We noted that Lincoln’s application for Federal Assistance (SF-424) for the
Institutional grant funds reflected the incorrect DUNS. It was not clear what review
processes were in place at the school or at the Department that would allow this error
to go unnoticed. We determined that LESC appropriately treated Lincoln’s Institutional
grant funds as being awarded to Lincoln and spent the funds only for the benefit of
Lincoln’s eight campuses.
Table 6. Lincoln and Columbia HEERF Grant Awards by DUNS Number
Student Aid Institutional
School DUNS Number
(84.425E) (84.425F)
Lincoln 150600344 $6,670,527 -
$6,670,527
Columbia 064857808 574,773 + 574,773
$7,425,300
SOURCE: Department’s G5 grants management system
LESC officials said that they had to submit the annual report 22 for Lincoln’s Institutional
grant funds under Columbia’s DUNS number. LESC advised the Department of the
incorrect DUNS number for Lincoln’s Institutional grant funds and was informed the
error could not be corrected. Thus, LESC had to combine Lincoln’s and Columbia’s
Institutional grant funds ($7,425,300) in the Columbia annual report. We are making the
Department aware of this matter because it affects the quality of the Institutional data
in the annual reports for Lincoln and Columbia. In its review of grant applications, we
suggest that the Department ensure that the DUNS number is accurately reflected in
both the grant application and award documents.
21
The Department uses the DUNS number to allocate and track grant awards.
22
Schools’ first annual report on HEERF funds was due to the Department on February 8, 2021. We did
not assess the timeliness or quality of the annual report during our audit.
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LESC Comments
LESC did not state whether it agreed or disagreed with this matter or suggestion.
However, LESC stated that the incorrect DUNS number appeared to result from an error
on Lincoln’s application that inadvertently listed Columbia’s DUNS number instead of
Lincoln’s number. LESC also said that it contacted the Department when Lincoln
received the Institutional grant funds in the incorrect account in the Department’s G5
system. LESC stated that the Department and Lincoln determined that a solution was
not readily available. LESC also stated that the DUNS number error has not recurred,
and each of its schools has received their CRRSAA and ARP funds in the correct account
and will be able to prepare quarterly reports on the use of these funds accurately.
OIG Response
LESC’s statement that the DUNS number error has not recurred, if accurate, is
responsive to this matter. We note, however, that our suggestion for the Department to
ensure the accuracy of DUNS numbers during its review of grant applications relates to
LESC’s schools in addition to all other recipients of HEERF funds.
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Appendix A. Scope and Methodology
We initially planned for our audit to cover Lincoln College of Technology’s use of HEERF
funds from the grant award date through September 30, 2020. The award date for
Lincoln’s Student Aid grant was April 28, 2020, and the award date for its Institutional
grant was May 14, 2020. Because LESC drew down but did not expend all of Lincoln’s
Student Aid and Institutional grant funds by September 30, 2020, we expanded our
audit period to December 31, 2020. Our audit also covered LESC’s cash management
practices and reporting of HEERF expenditures.
To achieve our audit objective, we gained an understanding of the following laws,
regulations, Department guidance, and grant documents relevant to HEERF:
• Section 18004 of the CARES Act, Higher Education Emergency Relief Fund;
• Section 314 of CRRSAA, Higher Education Emergency Relief Fund;
• Section 2003 of ARP, Higher Education Emergency Relief Fund;
• 2 C.F.R. part 200 (Uniform Guidance, January 1, 2020, volume), including
§ 200.305(b) (cash management for non-Federal entities), § 200.309 (period of
performance), and § 200.318-.320 (general procurement standards,
competition, and methods of procurement);
• Department’s Interim Final Rule (June 17, 2020) and Final Regulation (May 14,
2021) regarding student eligibility; Secretary of Education letters (April 9 and
April 21, 2020) addressing school access to HEERF grants; and five HEERF
Frequently Asked Questions documents issued from April through October
2020, including Student Portion FAQs (April 9, 2020) and FAQ Rollup Document
(October 14, 2020); and
• Lincoln’s Student Aid and Institutional grant documents, including its signed
Certification and Agreement and the Grant Award Notification documents.
We also reviewed the following prior OIG and Government Accountability Office (GAO)
reports to gain an understanding of common risks associated with managing emergency
financial relief grants, such as HEERF:
• OIG Reports—Challenges for Consideration in Implementing and Overseeing the
CARES Act, ED-OIG/X20DC0003 (September 2020); and Lessons from
Implementing the American Recovery and Reinvestment Act of 2009,
ED-OIG/X09M0002, September 2014; and
• GAO Report—COVID-19: Opportunities to Improve Federal Response Efforts,
GAO-20-625, June 2020.
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Through interviews, we gained an understanding of LESC’s processes for drawing down
and managing Lincoln’s HEERF grant funds, awarding and distributing emergency
financial aid grants to students, spending Institutional grant funds, and preparing
required HEERF expenditure reports. We interviewed senior officials from LESC’s
Executive, Finance/Accounting, Compliance/Regulatory, and Information Technology
departments who had a significant role in administering Lincoln’s HEERF grants. To
assess the reliability of the testimonial evidence, we compared and corroborated
information obtained through corporate-level interviews by reviewing LESC documents
and records and interviewing school officials from the Student Administration
department at Lincoln’s Nashville and Grand Prairie campuses. We concluded that the
testimonial evidence we obtained was sufficiently reliable within the context of our
audit objective.
We reviewed LESC’s written policies and procedures for managing, authorizing, and
accounting for HEERF-related transactions and expenditures. We also reviewed LESC’s
written policies and procedures for HEERF-related cash management and reviewed
Lincoln’s drawdown and refund information from the Department’s G5 system. We also
reviewed relevant information from LESC’s bank statements; accounting and student
management systems; and electronic spreadsheets documenting HEERF distribution and
expenditure data. We describe how we used this information to review Lincoln’s (1) use
of Student Aid and Institutional grant funds in the Sample Methodology section on the
next page and (2) cash management practices and HEERF reports below.
Cash Management. We compared the dates and amounts of Lincoln’s drawdowns of
Student Aid and Institutional grant funds (obtained from the Department’s G5 system)
to its expenditure records to determine whether LESC minimized the time between
drawdown and disbursement of those funds. We also traced drawdown information
from the Department’s G5 system to LESC’s bank statements and accounting records to
verify that the information reconciled. Lastly, we reviewed the type of accounts that
LESC used to deposit Lincoln’s HEERF funds to determine whether the accounts earned
interest.
Reporting. We reviewed the following Student Aid and Institutional reports to
determine whether (1) the information included in those reports was complete and
accurate and (2) LESC posted Lincoln’s HEERF reports on time:
• Student Aid reports dated June 1 (initial report) and July 15, 2020 (45-day
report); and
• Student Aid and Institutional reports for the periods ending September 30 and
December 31, 2020.
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To determine whether the reports included complete and accurate information, we
compared the information in each report to the Department’s reporting requirements
and to the applicable underlying source data (for example, school accounting records
and bank statements). To determine whether the reports were submitted on time, we
compared each report's posting date to the reporting due date established by the
Department.
Sampling Methodology
We tested a sample of Student Aid distributions and Institutional expenditures to
determine whether LESC used the Student Aid and Institutional portions of Lincoln’s
HEERF funds for allowable and intended purposes.
Student Aid Expenditure Selection and Testing
During our audit period, LESC used Lincoln’s Student Aid grant funds to award
emergency financial aid grants to 8,435 students. We used stratified, random sampling
to select 30 students for review. We developed seven strata and used a risk-based
approach to randomly select students from each stratum. To develop the strata, we
conducted the following steps:
• We analyzed the data that LESC provided identifying the universe of students
who were awarded a grant.
• From this data, we created three unique groups based on LESC’s process for
awarding the emergency financial aid grants—(1) students who had an ISIR on
file and received an additional $500 in their grant because they lived in the
school dormitory (Nashville) or third-party housing; (2) students who did not
have an ISIR on file; and (3) students who had an ISIR on file and did not receive
the additional $500 in their grant.
• Within each group, we determined whether the students had a FAFSA in the
Department’s Central Processing System, received Title IV financial aid funds in
the Department’s National Student Loan Data System, or did not have a record
in either system.
• Based on the information from the Department systems, we created a stratum
for each unique situation that applied.
Once we defined the seven strata, we used a risk-based approach to determine the
number of students to select in each stratum, as summarized in Table 7 on the following
page. We selected a disproportionately greater number of students who did not have an
ISIR on file because we considered them to be of higher risk for determining whether
they could be Title IV-eligible. Because there is no assurance that the students tested
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were representative of the universe of students who received emergency financial aid
grants, the results could not be projected to the untested students.
Table 7. Universe and Sample of Student Aid Grant Expenditures through
December 31, 2020
Sample Coverage
Universe Student Sample Student Student Count and
Group- Description Count and Dollar Count and
Stratum Dollar Amount
Amount Dollar Amount (Percent by Stratum)
Student had an ISIR and received
an additional $500 in their grant; 22 students 1 student 4.5% students
1–1
student had a FAFSA and did not $26,000 $1,000 3.9%
receive Title IV funds
Student had an ISIR and received
an additional $500 in their grant; 796 students 5 students 0.6% students
1–2
student had a FAFSA and $1,150,250 $7,500 0.7%
received Title IV funds
Student did not have an ISIR; 56 students 1 student 1.8% students
2–3 student had a FAFSA and did not
receive Title IV funds $ 28,000 $500 1.8%
Student did not have an ISIR; 12 students 1 student 8.3% students
2–4 student had a FAFSA and
received Title IV funds $6,000 $500 8.3%
Student did not have an ISIR; 134 students 7 students 5.2% students
2–5 student did not have a FAFSA and
did not receive Title IV funds $67,000 $3,500 5.2%
Student had an ISIR; student had 778 students 5 students 0.6% students
3–6 a FAFSA and did not receive
Title IV funds $464,500 $2,750 0.6%
Student had an ISIR; student had 6,637 students 10 students 0.2% students
3–7 a FAFSA and received
Title IV funds $4,603,750 $7,250 0.2%
8,435 students 30 students 0.4% students
Totals -
$6,347,500 $23,000 0.4%
For the 30 emergency financial aid grants tested, we reviewed relevant information
from LESC’s student management system to confirm the students met eligibility
requirements. We confirmed the students were actively enrolled at the school, enrolled
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in an eligible program, and met other Title IV eligibility requirements. We limited our
review to student eligibility. We did not perform work to determine how students spent
their grant funds or whether the students used the funds for intended purposes.
We also reviewed student information in the third-party servicer’s (debit card
contractor) data system to determine if the grant funds had been distributed to the
student and activated. We followed up on three debit cards that were not activated and
received confirmation from LESC officials that the cards had been deactivated.
Institutional Expenditure Selection and Testing
During our audit period, LESC used Lincoln’s Institutional grant funds to make
1,732 purchase transactions totaling $3.4 million. We used a combination of stratified
random and judgmental sampling to select 30 Institutional expenditures to review. To
define the strata, we analyzed the universe of expenditures from Lincoln’s quarterly
Institutional expenditure reports and the supporting expenditure data and created a
stratum for each major expenditure category. This resulted in a total of seven strata
from which we randomly selected 3 transactions and judgmentally selected
27 transactions, as summarized in Table 8 on the following page. Because there is no
assurance that the transactions tested were representative of the universe of
transactions, the results could not be projected to the untested transactions.
For the 30 transactions tested, we reviewed supporting documentation such as invoices,
authorizations, and justifications to determine whether the expenditures were
allowable and used for purposes intended under the CARES Act. Specifically, we
reviewed each expenditure to determine whether it was valid, authorized, allowable,
allocable, and reasonable under the CARES Act and in accordance with Uniform
Guidance at 2 C.F.R. part 200 and applicable Department guidance (HEERF FAQs).
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Table 8. Universe and Sample of Institutional Expenditures as of December 31, 2020
Universe Sample Sample Coverage
Transaction Transaction Transaction Count Selection Method
Stratum Description
Count and Dollar Count and Dollar and Dollar Amount
Amount Amount (Percent by Stratum)
Stratified by
Hotel vendor to
Lodging for 120 transactions 3 transactions 3% transactions randomly select
1 Social 2 transactions for
Distancing $973,567 $35,865 4% one vendora and
(Nashville) 1 transaction for
the other vendor
Selected 8
students in
Dormitory
different programs
Housing 472 students 8 students 2% students and with varying
2 and Meal
$858,015 $15,998 2% student account
Fees
balances (debit,
(Nashville)
credit, or zero
balance)
Selected 7
students from
461 students 7 students 2% students different campuses
Third-Party
3 with varying
Housing $700,155 $8,415 1% account balances
(debit, credit, or
zero balance)
Selected the 3
highest
transactions, 1
highest employee
539 transactions 5 transactions 1% transactions reimbursement
Campus
4 transaction, and
Safety $427,726 $81,208 19% 1 highest
transaction with a
vendor whose
total purchases
exceeded $10,000
33 transactions 4 transactions 12% transactions Selected the 4
5 Computers highest
$350,717 $149,753 43% transactions
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Universe Sample Sample Coverage
Transaction Transaction Transaction Count Selection Method
Stratum Description
Count and Dollar Count and Dollar and Dollar Amount
Amount Amount (Percent by Stratum)
Distance
48 transactions 2 transactions 4% transactions Selected the 2
Learning
6 highest
Subscrip- $85,629 $34,422 40% transactions
tions
Equipment 59 transactions 1 transaction 2% transactions Selected the 1
7 and
$25,000 $3,029 12% highest transaction
Supplies
1,732
30 transactions 2% transactions
- Total transactions -
$328,690 10%
$3,420,809c
a
This vendor accounted for 87 percent of the hotel lodging expenditures.
b
The total dollar amount is slightly different ($7) from the total expenditures reported by LESC in
Table 1 (Finding 2) due to rounding.
Use of Computer-Processed Data
We relied, in part, on computer-processed data from LESC’s student management and
accounting systems. We used information in its student management system on
enrollment, attendance, ledger activity (account balances), and other data necessary to
confirm a student’s eligibility to receive an emergency financial aid grant. To assess the
reliability of Title IV information, we compared student data to information contained in
the Department’s National Student Loan Data System and Central Processing System. To
assess the reliability of the data in the accounting system, we compared HEERF fund
deposit and disbursement information recorded in the accounting system to the
Department’s G5 system, Lincoln’s monthly bank statements, and vendor invoices. We
did not identify any issues and concluded that the data in LESC’s student management
and accounting systems were sufficiently reliable for the purposes of our audit.
Additionally, we relied on computer-processed data from LESC’s electronic spreadsheets
documenting Lincoln’s use of HEERF funds. We used the data to select a sample of
students who were awarded emergency financial aid grants and a sample of
Institutional expenditures for testing. We used data on the number of students receiving
emergency financial aid grants and the total dollar amounts of those grants and
Institutional expenditures to determine whether LESC included complete and accurate
information in Lincoln’s Student Aid and Institutional reports. We also used data on cash
receipts and disbursements to determine whether LESC minimized the time between
drawing down and disbursing HEERF funds. To assess the reliability of the data, we
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compared student, expenditure, and cash flow data to information in LESC’s student
management and accounting systems, vendor invoices, monthly bank statements, and
Student Aid and Institutional reports. The information reconciled and we concluded that
the data in LESC’s electronic spreadsheets were sufficiently reliable for purposes of our
audit.
We also relied on computer-processed data contained in LESC’s third-party servicer’s
(debit card contractor) information system. We used debit card data to determine
whether LESC distributed Student Aid grant funds to students and whether students had
activated their debit cards. To assess the reliability of the data, we verified that students
who were awarded emergency financial aid grants were included in the contractor’s
system. We concluded that the data in the contractor’s information system were
sufficiently reliable for purposes of our audit.
Internal Controls
We considered only limited aspects of internal controls over compliance with the
applicable Federal requirements to be significant within the context of the audit
objective. Therefore, our assessment of the design of internal controls was limited to
gaining an understanding of LESC’s processes (controls) within the context of the
individual transactions selected for testing and determining the underlying cause for
identified findings and other matters.
Compliance with Standards
We conducted this performance audit in accordance with generally accepted
government auditing standards. Those standards require that we plan and perform the
audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objective. We believe that the evidence
obtained provides a reasonable basis for our findings and conclusions based on our
audit objective.
We performed our audit work remotely from December 2020 through May 2021. We
held an exit conference with LESC officials on May 25, 2021, to discuss the results of our
audit.
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Appendix B. LESC Corporate Structure, Schools,
and Campuses
In April 2020, LESC owned and operated a total of 4 schools with 22 campuses located in
14 States, as shown in Table 9. LESC centrally administered the HEERF grants for each
school. Our audit covered the CARES Act HEERF grants awarded to one of its schools—
Lincoln (OPEID ED007893800).
Table 9. LESC Schools and Campus Locations and CARES Act HEERF Grants, April 2020
OPEID ED00793800 ED00730300 ED1246100 ED00793600
Indianapolis, IN New Britain, CT Columbia, MD a
Main Campus Iselin, NJ
(Lincoln) (New Britain) (Columbia)
Additional Mahwah, NJ Shelton, CT Paramus, NJ
Campuses Union, NJ East Windsor, Moorestown, NJ
Whitestone, NY CT Lincoln, RI
South Allentown, PA Somerville, MA
Plainfield, NJ Philadelphia, PA Las Vegas, NV -
Denver, CO Melrose Park, IL Marietta, GA
Grand Prairie,
TX
Nashville, TN
Student Aid Grant
$6,670,527 $3,247,523 $3,226,412 $574,774
Institutional Grant
6,670,527 b 3,247,522 3,226,411 574,773
Total HEERF Grants
$13,341,054 $6,495,045 $6,452,823 $1,149,547
SOURCE: LESC OPEID Structure; U.S. Department of Education Student Aid and Institutional Grant
Allocation Data
a
The Columbia school became one of New Britain’s campus locations on September 10, 2020.
LESC officials said that they continued to administer Columbia’s HEERF grants separate from the
other New Britain campuses.
b
As we noted in “Other Matter. Incorrect Data Universal Number System Number,” Lincoln’s
Institutional grant was erroneously awarded to the Columbia school.
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Appendix C. Acronyms and Abbreviations
ALN Assistance Listing Number
ARP American Rescue Plan
CARES Act Coronavirus Aid, Relief, and Economic Security Act
C.F.R. Code of Federal Regulations
Columbia Lincoln Educational Services Corporation’s Columbia, Maryland
school
CRRSAA Coronavirus Response and Relief Supplemental Appropriations Act
Department U.S. Department of Education
DUNS Data Universal Number System
EFC Expected Family Contribution
FAFSA Free Application for Federal Student Aid
FAQ frequently asked question
GAO Government Accountability Office
HEERF Higher Education Emergency Relief Funds
HVAC heating, ventilation, and air conditioning
IFR Interim Final Rule
ISIR Institutional Student Information Record
LESC Lincoln Educational Services Corporation
Lincoln Lincoln College of Technology
OIG Office of Inspector General
OPE Office of Postsecondary Education
OPEID Office of Postsecondary Education Identification
Title IV Title IV of the Higher Education Act of 1965
Uniform Uniform Administrative Requirements, Cost Principles, and Audit
Guidance Requirements for Federal Awards
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LESC Comments
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- db72a05c49afc031ec79d542302f91db8698070efdd4969976a5e80945e1b900
- Original
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