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The report accompanying these financial statements was issued by BDO USA, LLP, a Delaware limited liability partnership and the U.S. member of BDO International Limited, a UK company limited by guarantee. University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Management’s Discussion and Analysis, Financial Statements (with Independent Auditor’s Report Thereon), and Required Supplementary Information Year Ended September 30, 2020     University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Management’s Discussion and Analysis, Financial Statements (with Independent Auditor’s Report Thereon), and Required Supplementary Information Year Ended September 30, 2020 University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Contents   2 Independent Auditor’s Report 3-5 Management’s Discussion and Analysis 6-15 Financial Statements Statement of Net Position 16-17 Statement of Revenues, Expenses, and Changes in Net Position 18 Statement of Cash Flows 19-20 Notes to Financial Statements 21-51 Required Supplementary Information Schedule of the University’s Proportionate Share of the Other Postemployment Benefits (OPEB) Liability 52 Notes to Required Supplementary Information - OPEB 53 Schedule of the University’s Proportionate Share of the Net Pension Liability 54 Schedule of the University’s Pension Contributions 55   3 BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms. Tel: 301-354-2500 Fax: 301-354-2501 www.bdo.com 12505 Park Potomac Ave, Suite 700 Potomac, MD 20854 Independent Auditor’s Report To the Board of Trustees University of the Virgin Islands Report on the Financial Statements We have audited the accompanying financial statements of the business-type activities and the discretely presented component unit of the University of the Virgin Islands (the University), a component unit of the Government of the U.S. Virgin Islands (the Government), as of and for the year ended September 30, 2020, and the related notes to the financial statements, which collectively comprise the University’s basic financial statements, as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.     4 Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the business-type activities and the discretely presented component unit of the University as of September 30, 2020, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with the accounting principles generally accepted in the United States of America. Emphasis of Matters As discussed in Note 10 to the financial statements, the University is in default on a covenant pertaining to a general obligation note payable and the lender may demand repayment of this obligation. However, as of report date and as further discussed in Note 18, the University repaid the outstanding balance thereby, documenting the close of the general obligation note. Our opinion is not modified with respect to this matter. The accompanying financial statements have been prepared assuming the University will continue as a going concern. As discussed in Note 17 to the financial statements, the University is in an uncertain financial position and has reported a net deficit and has suffered losses from operations that raise substantial doubt about its ability to continue as a going concern. Management’s evaluation of the events and conditions and management’s plans regarding those matters are also described in Note 17. These financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to this matter. As further discussed in Note 17, the University is highly dependent on funding from the Government to repay obligations and fund its operations. The Government is in a significant net deficit position and currently faces significant fiscal, economic, and liquidity challenges. There can be no assurance that the Government’s actions will be sufficient to permit continued funding of the University such that its operations and activities will not be curtailed or ceased in the future. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that Management’s Discussion and Analysis on pages 6 through 15 and the Schedule of the University’s Proportionate Share of the Other Postemployment Benefits (OPEB) Liability, Notes to Required Supplementary Information – OPEB, Schedule of the University’s Proportionate Share of the Net Pension Liability, and Schedule of the University’s Pension Contributions on pages 52 through 55, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements.     5 We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we also have issued our report dated May 31, 2023, on our consideration of the University’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the University’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the University’s internal control over financial reporting and compliance. May 31, 2023     Management’s Discussion and Analysis   University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Management’s Discussion and Analysis   6 The following discussion presents an overview of the financial position and activities of the University of the Virgin Islands (the University) for the fiscal year ended September 30, 2020, with selected comparative information for the year ended September 30, 2019. This discussion also includes some of management’s insights and analysis of the University’s financial performance for the year. The discussion and analysis is designed to focus on current activities, resulting changes, and current known facts. The financial statements, notes to the financial statements, and this discussion are the responsibility of management. Reporting Entity The University is a component unit of the Government of the U.S. Virgin Islands (the Government). It was organized under Act 852 of March 16, 1962, in accordance with Section 16(a) of the revised Organic Act of the U.S. Virgin Islands of 1954, as amended. The University receives substantial financial and other support from the Government. In addition, the University is exempt from all taxes and special assessments of the U.S. Virgin Islands or any taxing authority or body thereof. The financial reporting entity consists of the University and its component units which are legally separate organizations for which the University is financially accountable. The primary government consists of the University, and one blended component unit. The definition of the reporting entity is based primarily on the notion of financial accountability. A primary government is financially accountable for the organizations that make up its legal entity. It is also financially accountable for legally separate organizations if its officials appoint a voting majority of an organization’s governing body, and it is either able to impose its will on that organization, or there is a potential for the organization to provide specific financial benefits to, or to impose specific financial burdens on the primary government. The primary government may also be financially accountable for organizations that are fiscally dependent on it if there is a potential for the organizations to provide specific financial benefits to the primary government or impose specific financial burdens on the primary government regardless of whether the organizations have separate elected governing boards, governing boards appointed by higher levels of government, or jointly appointed boards. The University is financially accountable for all of its component units. The financial operations and position of two institutional cooperative organizations: Foundation for the University of the Virgin Islands (the Foundation) and Foundation for the Reichhold Center for the Arts (Reichhold Foundation), are considered component units of the University and are included by blended and discrete presentation, respectively, in the University’s financial statements. Blended Component Unit: The Foundation, a blended component unit, although legally separate, is reported as if it was part of the primary government because it operates for the sole purpose of assisting and supporting the University in accomplishing its charitable and educational mission, engages collaboratively with the University in its fundraising efforts, and provides services entirely to the University. Complete financial statements of the Foundation can be obtained by contacting the University’s administrative offices. Discretely Presented Component Unit: The Reichhold Foundation is a not-for-profit corporation organized exclusively for charitable and educational purposes with its principal emphasis on the arts in the U.S. Virgin Islands. The resources (and income thereon), which the Reichhold Foundation holds and invests, are restricted to the activities of the University. University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Management’s Discussion and Analysis   7 Since the University does not appoint a voting majority of the Reichhold Foundation’s governing body nor is the Reichhold Foundation fiscally dependent on the University, the University is not considered to be financially accountable for the Reichhold Foundation. However, as the resources held by the Reichhold Foundation can only be used by, or for the benefit of the University, the Reichhold Foundation is considered a component unit of the University and is discretely presented in the University’s financial statements. The financial statements of the discretely presented component unit have a September 30 year-end, the same as the University’s financial statements year-end. Complete financial statements of the Reichhold Foundation can be obtained by contacting the Reichhold Foundation’s administrative offices. The financial statements encompass the University of the Virgin Islands and its component units; however, this Management’s Discussion and Analysis focuses only on the operations of the University, including the Foundation, which is treated as a blended component unit. It excludes its discretely presented component unit. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the basic financial statements of the University. The basic financial statements present information about the University as a primary government, which includes the University’s blended component unit. This information is presented separately from the University’s discretely presented component unit. The accounting and reporting policies of the University conform to accounting principles generally accepted in the United States of America, as applicable to governmental entities. The Governmental Accounting Standards Board (GASB) is the accepted standards setting body for establishing governmental accounting and financial reporting principles. The financial statement presentation required by GASB provides a comprehensive, entity-wide perspective of the University’s assets, deferred outflows of resources, liabilities, deferred inflows of resources, net position, revenues, expenses, changes in net position, and cash flows. For financial reporting purposes, the University is considered a special purpose governmental agency engaged only in business type activities, as defined by GASB Statement No. 35, Basic Financial Statements and Management’s Discussion and Analysis for Public Colleges and Universities. Accordingly, the University’s financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant transactions related to internal service activities such as publications and institutional computing, as well as, inter-fund receivable and payable balances and transactions, have been eliminated where appropriate. The basic financial statements of the University include the following: (1) Statement of Net Position, (2) Statement of Revenues, Expenses, and Changes in Net Position, (3) Statement of Cash Flows, and (4) Notes to the Financial Statements. The first two statements are further discussed in the next sections. The Statement of Cash Flows shows changes in cash and cash equivalents, resulting from operating, non–capital and capital financing, and investing activities, which include cash receipts and cash disbursements information, and the Notes to the Financial Statements provide additional information that is essential for a full understanding of the data provided in the basic financial statements.   University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Management’s Discussion and Analysis   8 Statement of Net Position The Statement of Net Position presents information on all the University’s assets, deferred outflows of resources, liabilities, deferred inflows of resources, and net position. Net position is the difference between: (a) assets and deferred outflows of resources, and (b) liabilities and deferred inflows of resources. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the University is improving or deteriorating. The net position is displayed in three parts: net investment in capital assets, restricted, and unrestricted. Restricted net position may either be expendable or non-expendable and are those assets that are restricted by law on third-party agreements or by an external donor. Unrestricted net position, while it is generally designated for specific purposes, is available for use by the University to meet current expenses for any purpose. The Statement of Net Position, along with all of the University’s basic financial statements, is prepared under the accrual basis of accounting, whereby revenues are recognized when the service is provided and expenses are recognized when others provide the service to the University, regardless of when cash is exchanged. Assets and liabilities included in the Statement of Net Position are classified as current or noncurrent.   University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Management’s Discussion and Analysis   9 The difference between total assets and deferred outflows of resources, and total liabilities and deferred inflows of resources, net position, is one indicator of the current financial condition of the University. Fiscal Year Fiscal Year 2020 2019 Change Assets: Current assets $ 27,136,444 $ 24,316,821 $ 2,819,623 Noncurrent assets: Capital assets, net 77,608,349 60,250,742 17,357,607 Other 73,988,551 75,878,051 (1,889,500) Total assets 178,733,344 160,445,614 18,287,730 Deferred outflows of resources: Deferred charge on debt refunding 7,334,303 4,312,234 3,022,069 Pension related outflows 22,089,954 12,484,384 9,605,570 OPEB related outflows 351,351 - 351,351 Total deferred outflows of resources 29,775,608 16,796,618 12,978,990 Total assets and deferred outflows of resources $ 208,508,952 $ 177,242,232 $ 31,266,720 Liabilities: Current liabilities $ 12,386,040 $ 9,869,542 $ 2,516,498 Noncurrent liabilities 198,835,942 170,021,137 28,814,805 Total liabilities 211,221,982 179,890,679 31,331,303 Deferred inflows of resources: Pension related inflows 19,300,101 17,622,637 1,677,464 OPEB related inflows 765,739 967,758 (202,019) Total deferred inflows of resources 20,065,840 18,590,395 1,475,445 Total liabilities and deferred inflows of resources 231,287,822 198,481,074 32,806,748 Total net (deficit) position (22,778,870) (21,238,842) (1,540,028) Total liabilities and net (deficit) position $ 208,508,952 $ 177,242,232 $ 31,266,720 Current Assets Current assets consist primarily of cash, cash equivalents, and receivables. The increase in current assets of $2.8 million is due to an inflow of cash for the 2020 Census project and an increase in funding from the “Coronavirus, Aid, Relief, and Economic Security (CARES)” Act to aid in the University’s defense against the global COVID-19 pandemic. The University’s current assets of $27.1 million cover the current liabilities of $12.4 million. The current ratio of 2.2 decreased when compared to fiscal year 2019, by 0.3. The change is due primarily to the increase in accounts payable.   University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Management’s Discussion and Analysis   10 Capital Assets One of the critical factors in continuing the quality of the University’s academic and research programs is the development and renewal of capital assets. The University continues to implement its long-range plan to modernize its complement of older buildings along with a balanced investment in new construction. During fiscal year 2020, the University had construction in progress of $23.7 million which is associated with the Medical School facilities and restoration of buildings impacted by the 2017 hurricanes. The University entered into a construction contract of approximately $19.0 million for the Medical School facilities. As of September 30, 2020, the debt associated with the construction of the Medical School has been refinanced, and all commitments have been incurred. During fiscal year 2020, the University also entered into a $15.0 million long-term debt agreement, for which the proceeds would be used for the construction of the Innovation Center. As of September 30, 2020, outstanding commitments of $4.5 million, have not yet been incurred. Capital asset additions primarily represent replacement and improvements to existing buildings, as well as significant investments in equipment. Depreciation expense was $2.4 million and $2.5 million for fiscal years 2020 and 2019, respectively. Other Noncurrent Assets Other noncurrent assets include restricted cash and cash equivalents, restricted deposits with trustee(s), students loan receivables, and endowment investments at fair value. The decrease in other noncurrent assets of $1.9 million is related primarily to a decline of $3.0 million in investments during the fiscal year. Current Liabilities Current liabilities consist primarily of accounts payable and accrued liabilities, unearned revenues, and the current portion of long-term liabilities. The increase of $2.5 million in current liabilities is due primarily to an increase in accounts payable and accrued liabilities of $3.6 million offset by decreases in unearned revenues of approximately $285,000 and the current portion of long-term liabilities of approximately $785,000. Noncurrent Liabilities Noncurrent liabilities consist of long-term debt and other obligations for which the principal is due more than one year from the Statement of Net Position date. Noncurrent liabilities amounted to $198.8 million and $170.0 million in fiscal years September 30, 2020 and 2019, respectively. The increase in noncurrent liabilities of $28.8 million is attributable to an increase surrounding the net pension liability of approximately $12.2 million, an increase surrounding the OPEB liability of approximately $1.2 million, and an increase in long-term debt of approximately $14.5 million.   University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Management’s Discussion and Analysis   11 The University has been participating in the U.S. Department of Education’s Historically Black College and University (HBCU) Capital Financing Program (Program) since 2009. The Program was established to provide federal assistance to facilitate low-cost capital basis for HBCUs, which enables them to continue and expand their educational mission and enhance their significant role in American higher education. The Program’s enabling legislation provides for a Designated Bonding Authority (DBA) to act as the Department’s agent. The DBA works with the HBCUs to determine, among other things, if the institution has the necessary credit standing to qualify for a loan. The Program does not require the institution to provide an investment grade or bond market credit rating. The University was vetted and deemed eligible for this Program and has executed several loan agreements since 2009. Under a loan agreement executed in February 2015, as part of the Program, the University was authorized to request advances up to $19.0 million under the Series A 2015-1 Bonds. This loan was refinanced during fiscal year 2020, to allow the University to take advantage of the current market interest rates. Net Position Net position represents the residual amount in the University’s assets and deferred outflows of resources after liabilities and deferred inflows of resources are deducted. Total net position summarized at September 30, 2020 and 2019, follows: Fiscal Year 2020 Fiscal Year 2019 Net position: Net investment in capital assets $ (10,993,010) $ (17,628,283) Restricted 30,928,498 40,931,559 Unrestricted deficit (42,714,358) (44,542,118) Total net (deficit) position $ (22,778,870) $ (21,238,842) Net investment in capital assets consists of the University’s capital assets, net of accumulated depreciation, reduced by outstanding debt obligations that are attributable to the acquisition, construction, or improvement of those assets. In addition the net investment in capital assets consists of deferred outflows of resources and deferred inflows of resources that are attributable to deferred losses from debt refinancing. Restricted, non-expendable net position consists of assets and deferred outflows of resources reduced by liabilities and deferred inflows of resources related to those assets. Restricted, non- expendable assets include endowment and similar type funds which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity and invested for the purpose of producing present and future income, which may either be expended or added to principal. Restricted, expendable net position consists of restricted, expendable assets and deferred outflows of resources reduced by liabilities and deferred inflows of resources related to those assets. Restricted, expendable assets include resources that the University is legally or contractually obligated to spend in accordance with restrictions imposed by external third parties. Restricted, non-expendable assets and expendable assets were $15.5 million and $15.4 million in 2020, respectively. University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Management’s Discussion and Analysis   12 Unrestricted net position is the net position amount of the assets, deferred outflows of resources, liabilities, and deferred inflows of resources that are not included in the determination of the net investment in capital assets or restricted components of net position. It represents resources derived from student tuition and fees, local government appropriations, sales and services of educational activities, and auxiliary enterprises. Auxiliary enterprises are substantially self- supporting activities that provide services for students, faculty, and staff. While unrestricted net position may be designated for specific purposes by action of management or the Board, they are available for use, at the discretion of the governing board, to meet current expenses for any purpose. For fiscal year 2020, the University shows a deficit of approximately $22.8 million due primarily to the cumulative effect of recognizing the net pension liability and OPEB liability. Statement of Revenues, Expenses, and Changes in Net Position The Statement of Revenues, Expenses, and Changes in Net Position presents information on how the University’s net position changed during the reporting periods. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. The purpose of this statement is to present the revenues earned, both operating and non-operating, and the expenses paid and accrued, and any other revenues, expenses, gains and losses earned or spent by the University during the reporting periods. Generally, operating revenues are used to provide goods and services to the various customers and constituencies of the University. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for operating revenues, and to carry out the mission of the University. Non-operating revenues are revenues received for which goods and services are not provided.   University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Management’s Discussion and Analysis   13 A summarized comparison of the University’s revenues, expenses, and changes in net position for the years ended September 30, 2020 and 2019, follows: Fiscal Year Fiscal Year 2020 2019 Change Operating revenues: Tuition and fees $ 12,521,349 $ 16,095,779 $ (3,574,430) Federal grants and contracts 35,461,176 25,414,971 10,046,205 State grants and contracts 4,058,355 3,150,548 907,807 Auxiliary enterprises 1,100,924 1,546,324 (445,400) Other operating revenues 3,570,732 370,632 3,200,100 Total operating revenues 56,712,536 46,578,254 10,134,282 Operating expenses 100,575,600 90,066,295 10,509,305 Operating loss (43,863,064) (43,488,041) (375,023) Non-operating revenues (expenses): Local government appropriations 28,222,854 33,666,462 (5,443,608) Federal Pell Grant program 4,083,204 4,419,640 (336,436) Interest expense (2,990,062) (2,857,419) (132,643) Other non-operating income 6,569,196 2,521,592 4,047,604 Total non-operating revenues, net 35,885,192 37,750,275 (1,865,083) Change in net position, before capital appropriations and special item (7,977,872) (5,737,766) (2,240,106) Local government capital appropriations 4,542,907 4,992,205 (449,298) Insurance recoveries on capital assets, net 1,894,937 11,779,746 (9,884,809) Change in net position (1,540,028) 11,034,185 (12,574,213) Net deficit, beginning of year (21,238,842) (32,273,027) 11,034,185 Net deficit, end of year $ (22,778,870) $ (21,238,842) $ (1,540,028) The University supplements the funds it receives from student tuition and fees, with local government appropriations, federal and local sponsored programs, private gifts and grants, and investment income. The University manages the financial resources from these efforts to fund its operating activities. Tuition and local government appropriations are the primary source of funding for the University’s academic programs. There is a direct relationship between the growth or reduction in local government support and the University’s ability to restrain tuition and fee increases. The University strives to provide students with access to a quality education at an affordable cost. The University continues to foster a strong relationship and partnership with the local government and recognizes the importance of its continued support. Auxiliary enterprises include the revenues derived from bookstore sales, residence halls and campus housing fees, Wellness Center membership fees, and ticket and concession stand sales. There was no significant change in this area.   University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Management’s Discussion and Analysis   14 Operating revenues increased by $10.1 million resulting from an increase in grants and contracts awarded to the University in fiscal year 2020. Other revenues consist of capital appropriations received from the Government to meet outstanding capital debt obligations. Other non-operating revenues consist of investment income, gifts, and insurance recoveries. In 2019, the University was awarded a contract of $15.5 million from the U.S. Department of Commerce to conduct the 2020 Census of the U.S. Virgin Islands. The University conducted this census throughout fiscal year 2020, resulting in an increase in revenues and associated expenses for this project. The University was also awarded funding under the CARES Act to provide emergency relief to students, as well as aid the University in protecting staff and students against COVID-19. For fiscal year 2020, operating expenses amounted to $100.5 million including compensation and benefits of $59.1 million, supplies and other expenditures of $24.2 million, depreciation expense of $2.4 million, scholarships of $11.0 million, and utilities of $3.8 million. A comparative summary of the University’s operating expenses by object categories for the years ended September 30, 2020 and 2019, follows: Fiscal Year 2020 Fiscal Year 2019 Salaries and benefits $ 59,103,177 $ 46,623,686 Supplies and other services 24,242,647 26,773,195 Depreciation 2,359,429 2,488,964 Scholarship 11,037,413 10,052,267 Utilities 3,832,934 4,128,183 Total $ 100,575,600 $ 90,066,295 Operating expenses increased by $10.5 million primarily due to increase in compensation and benefits of $12.5 million, offset by decreases of $2.8 million in utilities, supplies, and other expenses due to budgetary cuts in response to the COVID-19 pandemic. Scholarship expenses increased by $985,000 primarily because of an increase in student aid, including assistance under the CARES Act. A comparative summary of the University’s total operating expenses by functional classification for the years ended September 30, 2020 and 2019, follows: 2020 2019 Instruction $ 13,645,537 $ 15,652,007 Institutional support 16,889,104 17,627,231 Research 23,609,659 13,890,382 Operation/plant maintenance 12,493,643 10,438,540 Student aid 10,628,675 6,693,284 Public service 5,985,398 5,517,304 Academic support 6,078,961 6,570,962 Auxiliary 3,620,071 5,204,900 Student services 4,188,765 5,256,852 Depreciation 2,359,429 2,488,964 Other 1,076,358 725,869 Total expenses by function $ 100,575,600 $ 90,066,295   University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Management’s Discussion and Analysis   15 Expenditure programs with increases were research, operation and maintenance of plant, student aid and other. These increases were due primarily to the federal contract to perform the 2020 Census and increased student aid as a result of the COVID-19 pandemic. The decrease in remaining programs was primarily due to reductions in spending as a result of the COVID-19 pandemic. Factors Impacting Future Periods During fiscal year 2020, the University continued to feel the impact of economic contraction. The University’s President and the Board continue to explore new ways to address the reduction in revenues in the face of increasing expenditures. The University seeks to utilize online education as a method for better supporting students by providing additional options for studies. The offering of online degrees would necessitate offering a full complement to general education courses. The University is offering many general education courses online through additional faculty training or external partnerships. Further, in December 2019, a novel strain of coronavirus, known as COVID-19, was reported which quickly spread around the globe, including the United States and its Territories. In March 2020, the Governor of the U.S. Virgin Islands declared a state of emergency due to COVID-19. As various emergency measures are eased, management continues to actively monitor the evolving impact of the outbreak on the operational and financial performance of the University. The University is highly dependent on funding from the Government to repay and fund its obligations. Approximately 35.0% of the University’s total revenues are derived from government appropriations. The Government faces significant fiscal and economic challenges related to continuing structural deficits, high levels of debt, and unfunded pension obligations. The challenge of unfunded pension liabilities was addressed through increases in the contribution rates of the employers and members participating in the Government’s multiple employer cost-sharing pension plan. To date, revenues pledged for debt service have not been significantly impacted by the Government’s financial condition and it is unknown what impact, if any, the Government’s financial condition will have on the University. The University’s budget for fiscal year 2021 is not expected to change. There can be no assurance that the Government’s actions will be sufficient to permit continued funding of the University such that its operations and activities will not be curtailed or ceased in the future. Contacting the University’s Financial Management This financial report is designed to provide a general overview of the University’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Vice President for Administration and Finance. The executive offices of the University are located at #2 John Brewer’s Bay, St. Thomas, Virgin Islands 00802-9990.   Financial Statements University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Notes to Financial Statements   21 1. Reporting Entity The University of the Virgin Islands (the University) was organized under Act 852 of March 16, 1962, in accordance with Section 16(a) of the Revised Organic Act of the U.S. Virgin Islands of 1954, as amended. The University is a higher education institution that offers four-year liberal arts degree and master’s degree programs in teacher education, business and public administration, and associates degree in arts and occupational programs. The University operates through campuses on the islands of St. Thomas and St. Croix, and has a satellite office in St. Martin. The University is a component unit of the Government of U.S. Virgin Islands (the Government or GVI) and, therefore, the financial statements of the University are not intended to present fairly the financial position and results of operations of the Government. The University receives substantial financial and other support from the Government and is exempt from all taxes and special assessments of the U.S. Virgin Islands or any taxing authority or body thereof. The financial reporting entity consists of the University and its component units which are legally separate organizations for which the University is financially accountable. The primary government consists of the University and its blended component unit. The definition of the reporting entity is based primarily on the notion of financial accountability. A primary government is financially accountable for the organizations that make up its legal entity. It is also financially accountable for legally separate organizations if its officials appoint a voting majority of an organization’s governing body and either it is able to impose its will on that organization or there is a potential for the organization to provide specific financial benefits to, or to impose specific financial burdens on the primary government. The primary government may also be financially accountable for organizations that are fiscally dependent on it if there is a potential for the organizations to provide specific financial benefits to the primary government or impose specific financial burdens on the primary government regardless of whether the organizations have separate elected governing boards, governing boards appointed by higher levels of government, or jointly appointed boards. The University is financially accountable for all its component units. The financial statements encompass the University and its two component units, the Foundation for the University of the Virgin Islands (the Foundation) and the Foundation for the Reichhold Center for the Arts (Reichhold Foundation), included by blended and discrete presentation, respectively. Component Units A component unit is reported as blended when either (i) the component unit’s governing body is substantively the same as the University, and (a) there is a financial benefit or burden relationship between the University and the component unit, or (b) management of the University has operational responsibility for the component unit, or (ii) the component unit provides services entirely, or almost entirely, to the University or otherwise exclusively, or almost exclusively, benefits the University, or (iii) the component unit’s outstanding debt is expected to be repaid entirely or almost entirely with resources of the University. Blended component unit - The following component unit, although, legally separate, is reported as if it was part of the primary government because it operates for the sole purpose of assisting and supporting the University in accomplishing its mission:   University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Notes to Financial Statements   22 Foundation for the University of the Virgin Islands The Foundation is a legally separate entity from the University and is governed by a separate board. The Foundation is a not-for-profit corporation organized for the sole purpose of assisting and supporting the University in accomplishing its charitable and educational mission. Because the Foundation was established for the purpose of supporting the core mission and purposes of the University, engages collaboratively with the University in its fundraising efforts, and provides services entirely to the University, the Foundation has been determined to be a blended component unit. Complete financial statements of the Foundation can be obtained by contacting the University’s administrative offices. Discretely presented component unit - The following discretely presented component unit is legally separate from the University. This entity is reported as a discretely presented component unit because a financial benefit/burden situation exists. Foundation for the Reichhold Center for the Arts The Reichhold Foundation is a not-for-profit corporation organized exclusively for charitable and educational purposes with its principal emphasis on the arts in the U.S. Virgin Islands. The Reichhold Foundation provides financial assistance incidental to maintaining and operating the Reichhold Center for the Arts located on the St. Thomas campus. The resources and income thereon, which the Reichhold Foundation holds and invests, are restricted to the activities of the University. Since the University does not appoint a voting majority of the Reichhold Foundation’s governing body nor is the Reichhold Foundation fiscally dependent on the University, the University is not considered to be financially accountable for the Reichhold Foundation. However, as the resources held by the Reichhold Foundation can only be used by, or for the benefit of the University, the Reichhold Foundation is considered a component unit of the University and is discretely presented in the University’s financial statements. The financial statements of the discretely presented component unit have a September 30 year-end, same as the University’s financial statements year- end. The Reichhold Foundation conforms to the requirements of the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 958, Not-for-Profit Entities (ASC 958). ASC 958 establishes standards for external financial reporting by not-for-profit organizations and requires that resources be classified for accounting and reporting purposes into two net asset categories according to externally (donor) imposed restrictions: with donor restrictions and without donor restrictions. However, when the Reichhold Foundation is incorporated in the financial statements of the University, it conforms to the requirements of the Governmental Accounting Standards Board (GASB). Complete financial statements of the Reichhold Foundation can be obtained by contacting the Reichhold Foundation’s administrative offices at 2 John Brewers Bay, St. Thomas, VI 00802. 2. Summary of Significant Accounting Policies The financial statements of the University have been prepared in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP, as applied to governmental units. GASB is the accepted, standard-setting body for establishing governmental accounting and financial reporting standards.   University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Notes to Financial Statements   23 Measurement Focus and Basis of Accounting For financial reporting purposes, the University is considered a special purpose governmental agency engaged only in business type activities, as defined by GASB Statement No. 35, Basic Financial Statements and Management’s Discussion and Analysis for Public Colleges and Universities. Accordingly, the University’s financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant transactions related to internal service activities such as publications, telecommunications, and institutional computing have been eliminated where appropriate. Cash, Cash Equivalents, and Restricted Cash The University considers all cash held in banks and investments with a maturity of three months or less from the date of purchase as cash and cash equivalents for financial reporting purposes. Restricted cash is for maintaining liquidity for the specific purposes for which the funds were created, including supporting the release of funds to the University. Investments Investments in marketable securities are reported at fair value, which is based upon values provided by the University’s custodians or current market quotations. Investment income, including changes in fair value of investments, is recognized as gain (loss) in the accompanying statement of revenues, expenses, and changes in net position. Investments in alternative strategies are reported at fair value, as estimated by management in the absence of readily determinable fair values. The estimated fair value of alternative strategies is based on valuations provided by the external investment managers as of September 30. Because investments in alternative strategies are not readily marketable, their estimated value is subject to uncertainty and therefore, may differ from the value that would have been used had a ready market for such investments existed. Students and Other Receivables Students and other receivables are reported at the estimated net realizable amount. The allowance for doubtful accounts is an amount that management believes will be adequate to absorb possible losses on existing receivables that may become uncollectible based on evaluations of the collectability of the receivables and prior credit loss experience. Inventories Inventories are stated at the lower of cost (first-in, first-out method) or market, and consist primarily of textbooks available for sale to students. The University evaluates bookstore inventory on a quarterly basis to determine inventory movement on merchandise. The University determines and writes-off inventory damaged or obsoleted twice a year. Further, any textbooks which have remained unsold for four years are written-off.   University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Notes to Financial Statements   24 Prepaid Expenses and Other Current Assets Prepaid expenses and other assets consist primarily of amounts paid by the University for services not yet provided by vendors, which primarily relate to property and liability insurance. Capital Assets The University’s capital assets consist of land, buildings, infrastructure and improvements, furniture and equipment, library resources, and construction in progress. Capital assets are recorded at cost or, if donated, at fair value at the date of donation. It is the policy of the University to capitalize expenditures according to the Board approved thresholds by category and to remove from the accounts major items retired. Description Capitalization Threshold Land and land improvements $ 1 New buildings and library collection 1 Betterment and improvement of buildings 10,000 Infrastructure 10,000 Machinery and equipment 2,500 Computer software 50,000 Depreciation is recorded using the straight-line method over the estimated useful lives of the assets, generally 25 to 50 years for buildings and infrastructure, 5 to 20 years for equipment and library materials, including computer and computer software, and 7 to 30 years for land improvements. Renovations to buildings and other capital assets that significantly increase the value or extend the useful life of the asset are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense is incurred. A capital asset is considered impaired when its service utility has declined significantly and unexpectedly. The University evaluates prominent events or changes in circumstances affecting capital assets to determine whether impairment of a capital asset has occurred. Such events or changes in circumstances that may be indicative of impairment include evidence of physical damage, enactment or approval of laws or regulations or other changes in environmental factors, technological changes or evidence of obsolescence, changes in the manner or duration of use of a capital asset, and construction stoppage, amongst others. The University reviews the carrying value of its capital assets to determine if circumstances exist indicating impairment. If facts or circumstances support the possibility of impairment, an impairment is recognized in the year the impairment occurs. Impairment losses are reported in the statement of revenues, expenses, and changes in net position net of any realizable insurance recoveries. For impairment losses recoverable through disaster assistance programs sponsored by higher levels of government (such as the Federal Emergency Management Agency), the loss would be reported separately from the grant awarded for recovery purposes. University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Notes to Financial Statements   25 Any impairment adjustment to the carrying value of a capital asset would be treated as a proportionate reduction of both the reported value of the asset and its accumulated depreciation, based on the notion that the impairment represents the effective retirement of a portion of the asset. Deferred Outflows of Resources Deferred outflows of resources represent a consumption of net position that applies to a future period(s) and will not be recognized as an outflow of resources (expense) until that time. Deferred outflows of resources consist of (i) unrecognized items not yet charged to pension expense and contributions from the University after the measurement date but before the end of the University’s reporting period; (ii) other postemployment benefits net differences between expected and actual experience and changes in assumptions; and (iii) deferred charges on debt refunding. Unearned Revenues Unearned revenues consist primarily of cash received in advance of an event, such as student tuition and fees related to tuition for future fiscal years. On September 30, 2020, approximately $2.2 million of tuition and fees collected that relate to the remainder of the fall semester are deferred. In addition, the University collected $1.6 million in grant and contract advances. Accrued Vacation The University pays vacation time to all eligible employees. Unpaid vacation leave compensation, as well as the University’s share of related social security taxes, is accrued as benefits are earned by the employees if attributable to past services and if it is probable the University will compensate the employees for such benefits. Amounts accrued are measured using salary rates in effect at September 30. Vacation time is accrued based on years of service and as follows: Length of service Hours/week Rate of accrual Annual accrual 0-3 years 35 8.75 hours per month 15 days 3+ years 35 12.25 hours per month 21 days 0-3 years 40 10 hours per month 15 days 3+ years 40 14 hours per month 21 days Bond Issuance and Refunding   Bonds and notes premiums and discounts are deferred and amortized over the life of the debt using the effective interest method and are reported net of the applicable bond premium or discount. When issuing new debt for refunding purposes, the difference between the reacquisition price of the new debt and the net carrying amount of the refunded debt is recognized as either a deferred outflow of resources or deferred inflow or resources and amortized using the straight-line method as a component of interest expense over the remaining life of the old debt or the life of the new debt, whichever is shorter.   University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Notes to Financial Statements   26 Net Pension Liability For purposes of measuring the net pension liability, deferred outflows and inflows of resources related to pensions, pension expense, information about the fiduciary net position of the pension plans, as well as additions to and deductions from the pension plan fiduciary net position have been determined on the same basis as they are reported in the financial statements of the Government Employees’ Retirement System of the U.S. Virgin Islands (GERS). University contributions are recognized when due and the University has a legal requirement to provide the contributions. Also see Note 11. Net Other Postemployment Benefits (OPEB) Liability The University participates in the Government’s multiple employer OPEB plan. For purposes of measuring the net OPEB liability, deferred outflows and inflows of resources related to OPEB and OPEB expenses have been determined on the same basis as they are reported in the financial statements of the Government. Also see Note 12. Deferred Inflows of Resources Deferred inflows of resources represent an acquisition of net position that applies to a future period(s) and will not be recognized as an inflow of resources (revenue) until that time. Deferred inflows of resources consist of (i) unamortized portion of the net differences between projected and actual earnings on pension plan investments, changes in assumptions, change in proportionate share, and other differences between expected and actual experience; and (ii) unamortized portion of other postemployment benefits changes in assumptions or other inputs. Net Position The University’s net position is classified as follows: Net investment in capital assets: Capital assets, net of accumulated depreciation and outstanding principal balances of debt and accounts payable attributable to the acquisition, construction, or improvement of those assets. Deferred outflows of resources that are attributable to the acquisition, construction, or improvement of those assets or related debt are also included in this component of net position. The portion of debt attributed to the unspent debt proceeds or deferred inflows of resources is included in the same net position component as the unspent proceeds. Restricted, non-expendable: Restricted, non-expendable assets include endowment and similar type funds which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity and invested for the purpose of producing present and future income, which may either be expended or added to principal. Restricted, expendable: Restricted, expendable assets include resources that the University is legally or contractually obligated to spend in accordance with restrictions imposed by external third parties.   University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Notes to Financial Statements   27 Unrestricted: Net position amount of the assets, deferred outflows of resources, liabilities, and deferred inflows of resources that are not included in the determination of the net investment in capital assets or restricted components of net position. It represents resources derived from student tuition and fees, local government appropriations, sales and services of educational activities, and auxiliary enterprises. Auxiliary enterprises are self-supporting activities that provide services for students, faculty, and staff. While the unrestricted net position may be designated for specific purposes by actions of management or the governing board, they are available for use, at the discretion of the governing board, to meet current expenses for any purpose. When an expense is incurred that can be paid using either restricted or unrestricted resources, it is the University’s practice to use restricted resources first to the extent permissible, then unrestricted resources when they are needed. Classification of Revenues and Expenses The University has classified its revenues and expenses as either operating or non-operating. Operating revenues include activities that have the characteristics of exchange transactions such as student tuition and fees, net of scholarship discounts and allowances; sales and services of auxiliary enterprises; and some Federal, state, and local grants and contracts. Non-operating revenues include activities that have the characteristics of non-exchange transactions, and other revenue sources that are defined as non-operating, such as local government appropriations, Federal Pell grants, gifts, and investment income. Gifts to the endowment fund are classified as other non-operating revenues. The University classifies all expenses as operating, except for interest expense and losses on disposal of capital assets, if any, which are classified as non-operating. Gifts, Pledges, and Contributions Pledges of financial support from organizations and individuals representing an unconditional promise to give are recognized once all eligibility requirements, including time requirements, have been met. In the absence of such promise, revenue is recognized when the gift is received. Unconditional promises that are expected to be collected in future years are recorded at the present value of the estimated future cash flows. Endowments pledges generally do not meet eligibility requirements, as defined, and are not recorded as assets until the related gift has been received. Gift and contributions are recognized when received. Grants and Contracts The University has been awarded grants and contracts for which the funds have not been received or expenses made for the purpose specified in the award. These awards have not been reflected in the accompanying financial statements but represent commitments of sponsors to provide funds for specific research or training projects. For grants that have allowable cost provisions, the revenue will be recognized as the related expenditures are made. For grants with work completion requirements, the revenue is recognized as the work is completed, and for grants without either of the above requirements, the revenue is recognized as it is received.   University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Notes to Financial Statements   28 Tuition and Fees Student tuition and fee revenues are reported net of scholarship discounts and allowances in the accompanying statement of revenues, expenses, and changes in net position. Scholarship discounts and allowances are the differences between the stated charge for goods and services provided by the University, and the amount that is paid by students and third parties making payments on behalf of students. The scholarship discounts and allowance for the fiscal year ended September 30, 2020, amounted to $249,000. Use of Estimates in the Preparation of Financial Statements The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets, deferred outflows of resources, liabilities, and deferred inflows of resources and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Adoption of Accounting Pronouncements In November 2016, GASB issued Statement No. 83, Certain Asset Retirement Obligations. This Statement addresses accounting and financial reporting for certain asset retirement obligations (AROs). An ARO is a legally enforceable liability associated with the retirement of a tangible capital asset. The requirements of this Statement are effective for the University’s financial statements for the year ended September 30, 2020. The University has evaluated this Statement and has determined there is no impact on the financial statements, as it does not own any types of tangible capital assets which have a legal obligation to perform future asset retirement activities. In March 2018, GASB issued Statement No. 88, Certain Disclosures Related to Debt, including Direct Borrowings and Direct Placements. This Statement improves consistency in the information that is disclosed in notes to the financial statements related to debt, including direct borrowings and direct placements and it provides additional essential information about debt to the user of the financial statements. The requirements of this Statement are effective for the University’s financial statements for the year ended September 30, 2020. The University has evaluated this Statement and has included the required information in Note 10. Following are statements issued by GASB that are effective in future years. In light of the COVID-19 pandemic, on May 8, 2020, the GASB issued Statement No. 95, Postponement of the Effective Dates of Certain Authoritative Guidance, to provide relief to governments. This Statement, which was effective upon issuance, postpones the effective dates of certain provisions in these upcoming pronouncements for one year, except for GASB Statement No. 87 which is postponed for eighteen months. Certain provisions of GASB Statement No. 92 are excluded from GASB Statement No. 95. along with provisions in GASB Statement No. 93 related to lease modifications.   University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Notes to Financial Statements   29 GASB Statement No. Adoption Effective in Fiscal Year (as Revised) 84 Fiduciary Activities 2021 87 Leases 2022 89 Accounting for Interest Cost Incurred Before the End of a Construction Period 2022 90 Majority Equity Interests – An Amendment of GASB Statements No. 14 and No. 61 2021 91 Conduit Debt Obligations 2023 92 Omnibus 2020 2022 93 Replacement of Interbank Offered Rates 2022 96 Subscription–Based Information Technology Agreements 2023 97 Certain Component Unit Criteria, and Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans – an amendment of GASB Statements No. 14 and No. 84, and a supersession of GASB Statement No. 32 2022 Following are statements issued by GASB that are effective in the immediate future years as based on the original effective dates. GASB Statement No. Adoption Effective in Fiscal Year 94 Public-Private and Public-Public Partnerships and Availability Payment Arrangements 2023 98 The Annual Comprehensive Financial Report 2022 Earlier application of all standards is permitted to the extent specified in each pronouncement as originally issued. The University is currently evaluating the impact of these statements.   University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Notes to Financial Statements   30 3. Blended Component Unit Reporting Following is the Foundation’s condensed financial information as of and for the fiscal year ended September 30, 2020: Condensed Information from Statement of Net Position Current assets $ 220,956 Noncurrent assets, excluding capital assets 69,078,752 Capital assets, less accumulated depreciation 113,000 Total assets $ 69,412,708 Current liabilities $ 39,967,765 Net position: Restricted, non-expendable 15,531,020 Restricted, expendable 13,913,923 Total net position 29,444,943 Total liabilities and net position $ 69,412,708 Condensed Information from Statement of Revenues, Expenses, and Changes in Net Position Operating revenues $ 3,787,689 Operating expenses 3,511,839 Change in net position 275,850 Net position, beginning of year 29,169,093 Net position, end of year $ 29,444,943 Condensed Information from Statement of Cash Flows Net cash provided by (used in): Operating activities $ (1,927,530) Investing activities 2,895,099 Net change in cash and cash equivalents 967,569 Cash and cash equivalents, beginning of year 1,684,397 Cash and cash equivalents, end of year $ 2,651,966 4. Cash, Cash Equivalents, and Restricted Cash All operating cash of the University is pooled into one bank account. Cash balances by funds represent cash that is allocated to each fund of the University. By law, banks or trust companies designated as depositories of public funds of the Government and its various agencies, authorities, and instrumentalities, are to maintain corporate surety bonds or pledge collateral satisfactory to the Government’s Commissioner of Finance to secure all governmental funds deposited. At September 30, 2020, the University’s carrying amounts of cash and cash equivalents were covered by federal deposit insurance, corporate surety bonds, or by collateral held by the Government. University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Notes to Financial Statements   31 At September 30, 2020, cash and cash equivalents amounted to approximately $18.8 million and restricted cash and cash equivalents amounted to approximately $7.3 million. 5. Accounts Receivable The University’s accounts receivable at September 30, 2020, consist of the following: Students $ 6,075,251 U.S. Federal government 6,485,650 University of the Virgin Islands Research and Technology Park Corporation (RT Park) 366,921 Other 56,490 Gross accounts receivables 12,984,312 Less allowance for doubtful accounts (5,542,581) Total $ 7,441,731 6. Investments The Board of Trustees (the Board), as the governing Board, is responsible for the management of the University’s investments and establishes an investment policy, which is carried out by the Vice President for Administration and Finance. The University and the Reichhold Foundation have a formal investment policy approved by their corresponding Board of Trustees, which contains a requisite section on addressing risks. In fiscal year 2014, the Board passed a resolution to transfer all the University’s investments to the Foundation’s investment portfolio for management and investment purposes. Investments are recorded at fair value. Accordingly, the change in fair value of investments is recognized as an increase or decrease to investment assets and investment income. The University categorizes the fair market measurements of its investments within the fair value hierarchy established by generally accepted accounting principles. GASB Statement No. 72, Fair Value Measurement and Application, provides the framework for measuring fair value by establishing a three-level fair value hierarchy that describes inputs that are used to measure assets and liabilities as follows: Level 1: Inputs are quoted prices (unadjusted) for identical assets or liabilities in active markets that a government can access at the measurement date. Level 2: Inputs are other than quoted prices included within Level 1 that are observable for an asset or liability, that are either directly or indirectly observable. This includes quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, or inputs that are derived principally from or corroborated by observable market data. University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Notes to Financial Statements   32 Level 3: Inputs are significant unobservable inputs. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The fair value hierarchy gives the highest priority to Level 1 and the lowest priority to Level 3 inputs. If a price for an identical asset is not observable, a government may evaluate fair market value using another valuation technique that maximizes the use of relevant observable inputs and minimizes the use of unobservable inputs. If the fair value of an asset is measured using inputs from more than one level of the fair market value hierarchy, the measurement is based on the lowest level input that is significant to the entire measurement. The following section describes the valuation technique methodologies the University is using to measure assets at fair value:  Equity securities – Investments in equity securities are measured at fair value using quoted market prices. They are classified as Level 1 as they are traded in an active market for which closing stock prices are readily available.  Mutual funds – Investments in mutual funds are measured at fair value using quoted market prices. They are classified as Level 1 as they are traded in an active market for which market prices are readily available.  Fixed income securities – Investments in fixed income securities are classified as Level 2, since their pricing is based on multiple sources of information that include market data and/or quoted prices from either market that are not active or are for the identical or similar assets in an active market.  Alternative strategies – The Foundation invests in certain alternative strategies that are essentially funds of funds. The multi-strategy bond fund, multi-strategy equity fund, and the multi-strategy intermediate fund are classified as Level 3, since these contain underlying investments for which their pricing is based on multiple sources of information that include market data and/or quoted prices from either markets that are not active or are for the identical or similar assets in an active market, as well as underlying investments for which valuation is based on unobservable inputs. Common fund’s marketable funds pricing and valuation processes are built upon a base of independent third-party pricing for the majority of fund holdings. Independent third-party pricing sources are used to price all security positions for which a readily determinable market price is available. Securities for which third-party pricing sources are not available are priced on a “fair value” basis, subject to review and approval by the Fair Value Committee. The University values its private capital funds using the net asset value (NAV) provided by the private investment companies as a practical expedient. The University applies the practical expedient to its private capital funds on an investment-by-investment basis, and consistently with the University’s entire position in a particular investment, unless it is probable that the University will sell a portion of an investment at an amount different from the NAV of the investment. The Foundation can make redemptions from the multi-strategy funds on a monthly basis upon five business days’ notice. University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Notes to Financial Statements   33 At September 30, 2020, the University had the following recurring fair value measurements: Fair Value Measurement Level 1 Level 2 Level 3 Equity securities $ 4,901,241 $ 4,901,241 $ - $ - Fixed income securities 121,683 121,683 - - Commonfund: Multi-strategy bond fund 17,043,305 - - 17,043,305 Multi-strategy equity fund 33,325,685 - - 33,325,685 Multi-strategy intermediate fund 4,956,123 - - 4,956,123 Other mutual fund 1,588,750 1,588,750 - - Subtotal 61,936,787 6,611,674 - 55,325,113 Investments measured at net asset value (NAV): Private capital fund 4,343,971 - - - Total $ 66,280,758 $ - $ - $ - At September 30, 2020, the Reichhold Foundation had the following recurring fair value measurements: Fair Value Measurement Level 1 Level 2 Level 3 Corporate bonds and U.S. debt securities $ 124 $ - $ 124 $ - Mutual funds 572,717 572,717 - - Fixed income 4,009,434 4,009,434 - - Equity securities 7,788,096 7,788,096 - - Total $ 12,370,371 $ 12,370,247 $ 124 $ - There are many factors that can affect the value of investments. Some, such as custodial credit risk or concentration of credit risk, may affect both equity and fixed income securities. Equity securities respond to such factors as economic conditions, individual company earnings performance, and market liquidity, while fixed income securities are particularly sensitive to credit risk and changes in interest rates. Interest rate risk – Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. The University does have a formal investment policy that limits investment maturities as a means of managing its exposure to fair market value losses arising from increasing interest rates. Credit risk - Credit risk is the risk that the University and the Reichhold Foundation will not recover their investment due to the inability of the counterparty to fulfill its obligation. Investments issued or explicitly guaranteed by the U.S. Government are not considered to be exposed to credit risk.   University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Notes to Financial Statements   34 Following is a summary of the University and Reichhold Foundation’s credit quality distribution for securities, as of September 30, 2020: University Reichhold Credit Carrying Value Carrying Value Agency Rating Commonfund multi-strategy bond fund $ 17,043,305 $ - A+ (average rating) Commonfund multi-strategy intermediate term fund 4,956,123 - AA (average rating) Commonfund multi-strategy equity fund 33,325,685 - Not rated Non-marketable funds 4,465,654 - Not rated Marketable investments 6,489,991 12,370,371 Not rated $ 66,280,758 $ 12,370,371 Concentration of Credit Risk - The University places no limit on the amount that may be invested in one issuer. At September 30, 2020, more than 5.0% of the University’s investments were invested in: Commonfund multi-strategy bond fund (25.0%); Commonfund multi-strategy equity fund (49.0%); and Commonfund multi-strategy intermediate term fund (7.0%). At September 30, 2020, more than 5.0% of Reichhold’s investments were invested in: S&P 500 ETF Trust (37.0%); Blackrock Corealpha Bond Fund (20.0%); Vanguard FTSE Developed Markets ETF (9.0%); iShares Currency Hedged MSCI EAFE ETF (7.0%); and Goldman Sachs Tactical Tilt Overlay Fund Class P (5.0%). Custodial credit risk ‐ The custodial credit risk for investments is the risk that, in the event of the failure of a depository financial institution or other counterparty, the University and Reichhold Foundation will not be able to recover the value of an investment or collateral securities that are in the possession of an outside party. At September 30, 2020, custody of these investments is held by the trust department of a commercial bank in the name of the University and the Reichhold Foundation, and the portfolio is managed by a brokerage firm. 7. Donor-Restricted Endowments The University’s endowment, through the Foundation, consists of donations from individuals, private corporations, and the Federal government. The fund was established for a variety of purposes. The endowment includes both donor-restricted endowment funds and funds designated by the Board to function as endowments. Net position associated with endowment funds, including funds designated by the Board to function as endowments, are classified and reported based on the existence or absence of donor-imposed restrictions. The University classifies as restricted, non-expendable net position (i) the original value of gifts donated to the endowment; (ii) the original value of subsequent gifts to the endowment; and (iii) accumulations to the endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund. The remaining portion of the donor-restricted endowment fund that is not classified as restricted, non-expendable net position is classified as restricted, expendable net position.   University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Notes to Financial Statements   35 The University has a spending policy that establishes specific terms under which endowment funds can be spent. The Board must consider the use of funds for spending on a year-to-year basis. The policy spending rate per annum shall be not more than 5.0% on the entire value of the donor- restricted endowment fund, unless the donor stipulates otherwise. Restricted Investments Subject to the intent of a donor, as expressed in a gift instrument, the Foundation may appropriate for expenditures or accumulate so much of the investments as the Board determines to be prudent for the uses, benefits, purposes, and duration for which each of the separate endowments in the investments are established. In making a determination to appropriate or accumulate, the Foundation shall act in good faith, with the care of an ordinary prudent person, in a like position under similar circumstances and shall consider, if relevant, the following factors: • The duration and preservation of the investments • The purposes of the Foundation and the investments • General economic conditions • The possible effect of inflation or deflation • The expected total return from income and the appreciation of investments • Other resources of the Foundation • The Foundation’s investment policy The policy spending rate per annum for the investments shall be not more than 5.0%. The amount available for appropriation during each fiscal year shall be calculated by applying the policy spending rate to the average of the previous three fiscal years’ beginning period endowment values. Any special appropriation or decision not to spend the amount, indicated by the spending formula, must be approved in advance by the Board. 8. Student Loans Receivable Student loans receivable are generally repayable over a maximum period of 10 years and bear interest at varying rates, once the loan is classified to a repayment status. Student loans receivable are normally classified to a repayment status at the time a recipient no longer maintains student status at the University, but such classification may be further extended in certain cases. At September 30, 2020, student loans receivable amounted to $14,523. University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Notes to Financial Statements   36 9. Capital Assets Capital assets as of September 30, 2020, are comprised as follows: Beginning Balance Additions Disposals Transfers Ending Balance Capital assets not being depreciated: Land $ 7,485,112 $ - $ - $ - $ 7,485,112 Construction in progress 15,092,748 10,727,021 - (2,135,992) 23,683,777 Total capital assets not being depreciated 22,577,860 10,727,021 - (2,135,992) 31,168,889 Capital assets being depreciated: Land improvements 2,872,882 31,420 - - 2,904,302 Buildings, fixed equipment, improvements, and infrastructure 75,667,246 8,400,000 - 1,928,677 85,995,923 Equipment and library materials 13,999,566 595,726 (611,302) 207,315 14,191,305 Total capital assets being depreciated 92,539,694 9,027,146 (611,302) 2,135,992 103,091,530 Less accumulated depreciation for: Land improvements (2,246,923) (312,225) - - (2,559,148) Buildings, fixed equipment, improvements, and infrastructure (43,403,519) (1,300,417) - - (44,703,936) Equipment and library materials (9,216,370) (746,787) 574,171 - (9,388,986) Total accumulated depreciation (54,866,812) (2,359,429) 574,171 - (56,652,070) Total capital assets being depreciated, net 37,672,882 6,667,717 (37,131) 2,135,992 46,439,460 Total capital assets, net $ 60,250,742 $ 17,394,738 $ (37,131) $ - $ 77,608,349 On September 6 and 19, 2017, the U.S. Virgin Islands were struck by two Category 5 hurricanes. The extent and severity of the storms was unprecedented and resulted in catastrophic damage to the Territory. The University had purchased commercial insurance to cover its risk of loss from destruction of assets and realized insurance recoveries during the fiscal year ended September 30, 2020, of $1.9 million which is reported as a special item in the accompanying financial statements. The University evaluated its capital assets for impairment and no impairment was considered necessary for the year ended September 30, 2020. University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Notes to Financial Statements   37 10. Long-Term Liabilities Bonds Payable Bonds payable activity for the year ended September 30, 2020, follows: Beginning Balance Additions Reductions Ending Balance Due Within One Year Series A 2011-2 Bonds $ 31,989,435 $ - $ - $ 31,989,435 $ 1,720,591 Series A 2011-3 Bonds 12,641,921 326,552 (12,968,473) - - Series A 2015-1 Bonds 13,742,612 - (13,742,612) - - Series A 2019-7 Bonds - 30,134,428 - 30,134,428 - Series A 2019-8 Bonds - 10,114,078 - 10,114,079 - Total $ 58,373,968 $ 40,575,058 $ (26,711,085) $ 72,237,941 $ 1,720,591 In June 2011, the University entered into two capital project loan agreements under the U.S. Department of Education’s Historically Black College and University (HBCU) Capital Financing Program for various capital projects. Under these loan agreements, the University was authorized to drawdown advances up to $44.0 million under the Series A 2011-2 Bonds and up to $16.0 million under the Series A 2011-3 Bonds. The Series A 2011-2 Bonds have maturity dates through August 1, 2034, and the Series A 2011-3 Bonds have maturity dates through August 1, 2040. Interest payments are due in February and August. Interest on the Series A 2011-2 Bonds is calculated at 3.5% and interest on the Series A 2011-3 Bonds is variable and calculated from the date of each advance using the long-term U.S. Treasury Rate on that day. In February 2015, the University obtained an additional HBCU capital loan agreement, the Series A 2015-1 Bonds, for a maximum loan amount of $19.0 million to finance various capital projects, and stated to mature on February 1, 2045. In November 2019, the University entered into an additional HBCU capital loan agreement, the Series A 2019-7 Bonds, for a maximum loan amount of $32.0 million. The proceeds from the Series A 2019-7 Bonds were utilized to refund the outstanding Bond Series A 2011-3 and Series A 2015-1. As a result, the Series A 2011-3 and Series A 2015-1 Bonds were fully paid off and the University recognized a deferred charge on debt refunding amounting to $3.5 million. Also, in November 2019, the University entered into a second HBCU capital loan agreement, the Series A 2019-8 Bonds, for a maximum loan amount of $15.0 million on which the University drew down $10.1 million for capital projects. Interest on these 2019 Bonds is variable and calculated from the date of each advance at a variable, adjustable, or floating rate. The interest rate was 2.3% as of September 30, 2020 and is paid semi-annually. During August 2020, the University's Series A 2011-2 and Series A 2019-7 Bonds were modified under the “Coronavirus Aid, Relief, and Economic Security (CARES)” Act to defer principal and interest payments retroactively to October 1, 2019. During the deferment period, the University was not required to make periodic installments of both principal and interest as required. Additionally, because of this provision, approximately $3.0 million of principal and interest payments made during fiscal year 2020 were refunded to the University during fiscal year 2021. University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Notes to Financial Statements   38 The aggregate debt service requirements of bonds payable at September 30, 2020, are as follows: Year ending September 30, Principal Interest Total Maturity Year: 2021 $ 1,720,591 $ 1,884,824 $ 3,605,415 2022 1,780,760 1,824,655 3,605,415 2023 1,840,558 1,767,175 3,607,733 2024 1,902,940 1,707,110 3,610,050 2025 1,971,855 1,635,877 3,607,732 2026-2030 10,947,933 7,093,046 18,040,979 2031-2035 14,134,077 5,040,280 19,174,357 2036-2040 12,293,107 3,423,869 15,716,976 2041-2045 13,649,485 2,067,491 15,716,976 2046-2049 11,996,635 576,950 12,573,585 Total $ 72,237,941 $ 27,021,277 $ 99,259,218 The University has pledged revenues to the timely payment of principal and interest on the Series A 2011-2 Bonds, Series A 2019-7 Bonds, and Series A 2019-8 Bonds. The pledged revenues are defined as all receipts, revenues, income, rents, fees and charges, and any other money received by the University from any available source and all rights to receive the same (including, without limitation, tuition and fees; appropriations made by the Government including those appropriations allotted for the payment of debt service including with respect to the bonds, operating revenues, and non-operating revenues determined in accordance with generally accepted accounting principles), whether in the form of accounts receivable, contract rights, chattel paper, instruments and other rights, and the proceeds thereof, whether cash or non-cash, and any insurance thereon. The pledged revenues do not prevent the University from expending, depositing, or commingling the pledged revenues so long as all required bond payments are made. Notes Payable In 1994, the University was advanced a mortgage note payable by the U.S. Department of Education with a maximum principal of $2.2 million. The note is payable in semi-annual installments of $75,000, including interest, over a term of 30 years and bears interest at an annual rate of 5.5%. The note is secured by a general obligation of the Government of the U.S. Virgin Islands. In September 2018, the University extended its loan agreement with First Bank for $30.0 million to assist in establishing a School of Medicine. Initially, the loan was a non-revolving line of credit and converted into a general obligation note “Series 2018”. The note bears interest at the JP Morgan Chase Prime Rate plus 70 basis points, subject to a minimum interest rate of 3.95% each month thereafter until payment of the principal on or before September 2021. Also see Note 18. University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Notes to Financial Statements   39 Notes payable activity for the year ended September 30, 2020, follows: Beginning Balance Additions Reductions Ending Balance Due Within One Year Mortgage note $ 593,089 $ - $ (119,559) $ 473,530 $ 126,238 General obligation note 23,224,192 - - 23,224,192 - Total $ 23,817,281 $ - $ (119,559) $ 23,697,722 $ 126,238 The aggregate debt service requirements of notes payable at September 30, 2020, are as follows: Year ending September 30, Principal Interest Total Maturity Year: 2021 $ 126,238 $ 24,330 $ 150,568 2022 1,291,149 913,796 2,204,945 2023 1,345,153 859,792 2,204,945 2024 1,326,167 803,494 2,129,661 2025 1,303,287 751,090 2,054,377 2026-2030 7,346,234 2,925,651 10,271,885 2031-2035 8,947,404 1,324,481 10,271,885 2036-2040 2,012,090 43,288 2,055,378 Total $ 23,697,722 $ 7,645,922 $ 31,343,644 As security and collateral for the mortgage note payable to the U.S. Department of Education, the University has pledged the first priority mortgage secured by the loan. As security and collateral for the Series 2018 general obligation note, the University has pledged all assets of the existing endowment at the time of the loan and the medical school endowment created by the loan. The University has also pledged revenues and proceeds derived from a private gift to the timely payment of principal and interest. Covenants The University’s bonds contain a provision that in the event of default, the Secretary of Education may exercise its option to declare any funds which have been provided to the borrower, and interest accrued to the debt, be immediately payable in full. The bond agreements contain certain affirmative and negative covenants, of which the University, except as noted, was in compliance with at year-end. The agreements require the University to deliver audited financial statements within 180 days after the end of its fiscal year. As a result of the disruption to the University’s operations from Hurricanes Irma and Maria along with the impact of the COVID-19 global pandemic, the lender has granted the University a waiver from this requirement for the year ended September 30, 2020. The general obligation note payable with First Bank requires the University to deliver audited financial statements within 90 days after the end of its fiscal year and maintain a minimum Debt Service Coverage Ratio (DSCR) of 1.25. The lender has granted the University a waiver from the reporting requirement for the year ended September 30, 2020. The University was not in compliance with the DSCR as of September 30, 2020. The agreement considers any noncompliance of the covenants as default. However, as of report date and as further discussed in Note 18, the University repaid the outstanding balance thereby, documenting the close of the general obligation note.   University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Notes to Financial Statements   40 Changes in Other Long-Term Liabilities The following is a schedule of changes in other long-term liabilities for the year ended September 30, 2020: Beginning Balance Additions Reductions Ending Balance Due Within One Year Accrued vacation $ 4,359,922 $ 1,396,393 $ (209,780) $ 5,546,535 $ 297,099 Other liabilities 321,400 4,693 - 326,093 - Total $ 4,681,322 $ 1,401,086 $ (209,780)) $ 5,872,628 $ 297,099 For the year ended September 30, 2020, the University’s interest expense was $3.0 million. This amount is included in the accompanying statement of revenues, expenses, and changes in net position. 11. Retirement and Pension Plans Defined Contribution Plan Teachers Insurance and Annuity Association - College Retirement Equities Fund (TIAA-CREF) is a defined contribution pension plan covering participating, full-time faculty members and other exempt employees, under which the contributions, including employees’ contributions, are used to purchase annuities. There are no unfunded past service costs, and vested benefits are equal to the annuities purchased under TIAA-CREF. The University’s Board of Trustees administers, establishes, and amends benefit provisions of TIAA-CREF. The University is required to contribute 14.5% of the annual covered payroll. The University’s contributions to TIAA-CREF amounted to $3.0 million for the year ended September 30, 2020. Defined Benefit Plan Following is a description of the pension plan and accounting for pension expense, liabilities, and deferred outflows/inflows of resources. As required, the University follows the provisions of GASB Statement No. 68, Accounting and Financial Reporting for Pensions – an amendment of GASB Statement No. 27, as amended by GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date – an amendment of GASB Statement No. 68 and GASB Statement No. 82, Pension Issues – an amendment of GASB Statements No. 67, No. 68, and No. 73. (a) Plan Description and Benefits Full time employees of the University are members of the Government Employees’ Retirement System of the U.S. Virgin Islands (GERS), a cost sharing, multiple-employer, defined benefit pension plan (the plan) established as of October 1, 1959, Title 3, Chapter 27 of the V.I. Code to provide retirement, death, and disability benefits. Benefits may be extended to beneficiaries of plan members. University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Notes to Financial Statements   41 The plan covers all employees of the University, except employees compensated on a contract fee basis, casual, per diem or provisional, and part time employees who work less than twenty (20) hours per week. Persons over the age of fifty-five (55) may opt out of the plan by providing formal notification to the plan. Vesting of benefits occurs after ten (10) years of service. There are two tiers within the plan: Tier I: Employees hired prior to September 30, 2005 Tier II: Employees hired on or after October 1, 2005 Regular Tier I employees who have completed thirty (30) years of credited service or have attained age sixty (60) with at least ten (10) years of credited service are eligible for a full-service retirement annuity. Regular Tier II employees who have attained age sixty-five (65) with at least ten (10) years of service are eligible for a full-service retirement annuity. Members who are considered “safety employees” as defined in the Code are eligible for full-service retirement benefits under Tier I when they have earned at least twenty (20) years of government service or have reached the age of fifty- five (55) with at least ten (10) years of credited service. Under Tier II, safety employees are eligible for full retirement when they have earned at least twenty-five (25) years of government service and have reached age fifty-eight (58) or have reached age (60) with at least ten (10) years of service. The monthly annuity benefit payment is determined by applying a stipulated benefit ratio to the member’s average compensation. Average compensation for regular and safety Tier I members is determined by averaging the five highest years of credited service within the last ten years of service, subject to the maximum salary limitations in effect during such service. Average compensation for regular and safety Tier II members is based on career average salary, subject to the maximum salary limitations in effect during the service. The maximum annual salary that can be used in this computation for regular and safety employees is $65,000. In 1995, the Early Retirement Incentive Training and Promotion Act was amended by the Legislature of the Virgin Islands to allow a member with a combined aggregate number of years of service and age of at least seventy-five (75) years to retire without a reduction in their annuity. Early retirement benefits provided under the Act vary depending upon age of retirement, type of employment, and credited years of service. GERS is a separate and independent agency that is included for financial reporting purposes as a blended pension trust fund of the Government. GERS issues a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained by writing to the Government Employees’ Retirement System of the U.S. Virgin Islands, 3438 Kronprindsens Gade, St. Thomas, Virgin Islands 00802. (b) Funding and Contribution Policy Contributions to GERS are established by the Board of Trustees of GERS. The Government’s required employer contribution for Tier I and Tier II members effective January 1, 2015, was 20.5% of the member’s annual salary. On January 1, 2020, the employer contribution for Tier I and Tier II members was increased to 23.5%. University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Notes to Financial Statements   42 Employee contribution rates (as a percentage of payroll) for fiscal year 2020 were as follows: Tier I Tier II Regular Employees 11.0% 11.5% Public Safety Employees 13.0% 13.625% Prior to June 29, 2000, member contributions were refundable without interest upon withdrawal from employment before retirement. Effective July 1, 2009, GERS’ Board of Trustees approved an effective annual interest rate on refunded contributions of 2.0% per annum. Both the plan and the University have a September fiscal year end. GASB Statement No. 68 requires that the reported results must pertain to liability and asset information within certain defined time frames. For this report, the following time frames are used: Valuation Date: October 1, 2019 Measurement Date: September 30, 2019 Measurement Period: October 1, 2018 – September 30, 2019 The University is considered an employer of the plan with a proportionate share of 1.6400% as of the measurement date September 30, 2019, which was a decrease of 0.1555% from its proportionate share measured as of September 30, 2018. The University’s percentage was estimated by management based on the average of each employer’s contributions during the period October 1, 2014 through September 30, 2019. The University’s proportionate share of employer contributions recognized by GERS was $1.4 million for the plan’s fiscal year ended September 30, 2019. (c) Pension Liabilities, Expense, and Deferred Outflows/Inflows of Resources As of September 30, 2020, the actuarially calculated net pension liability for the University’s proportionate share was $87.1 million. The net pension liability is measured as of September 30, 2019, and the total pension liability is actuarially computed as of October 1, 2019. For the year ended September 30, 2020, the University recognized $4.3 million of pension expense, inclusive of amortization of deferred outflows and inflows of pension related items. Following is a schedule of deferred outflows of resources and deferred inflows of resources allocated to the University in the computation of net pension liability for the year ended September 30, 2020: Deferred Outflows of Resources Deferred Inflows of Resources Changes in assumptions $ 19,323,319 $ 6,960,678 Net difference between projected and actual earnings on pension plan investments 49,413 40,373 Difference between expected and actual experience 1,075,433 - Changes in proportionate share 226,643 12,299,050 Contributions made subsequent to measurement date 1,415,146 - $ 22,089,954 $ 19,300,101 The amount reported for contributions subsequent to the measurement date of $1.4 million will be recognized as a reduction of the net pension liability in the year ended September 30, 2021. University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Notes to Financial Statements   43 Other amounts reported as deferred outflows and inflows, exclusive of contributions made after the measurement date, will be recognized in pension expense as follows: Year ending September 30, 2021 $ (420,036) 2022 528,880 2023 534,370 2024 287,026 2025 444,467 $ 1,374,707 (d) Actuarial Assumptions A summary of the actuarial assumptions and methods used to calculate the total pension liability as of the measurement date on September 30, 2019, is provided below. Refer to the October 1, 2019, actuarial valuation report for a complete description of all other assumptions, which can be found on GERS’ website. Inflation rate 2.50% Salary increases 3.25% including inflation Actuarial cost method Entry age normal Expected rate of return 4.00% Municipal bond yield 2.66% Discount rate 2.67% Mortality table RP-2014 Blue Collar The demographic assumptions for the 2019 actuarial valuation are based on the results of an actuarial experience study for the period October 1, 2011 through September 30, 2015, with the net investment return assumption updated for the October 1, 2019 valuation. (e) Investment Rate of Return The long-term expected rate of return of 4.00% on pension plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense, and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Notes to Financial Statements   44 Best estimates of arithmetic real rates of return for each major asset class included in the pension plan’s target asset allocation, as of the measurement date of September 30, 2019, are summarized below: Asset Class Target Allocation Long-Term Expected Real Rate of Return Domestic equity 9% 6.23% Fixed income 60% 0.98% Real estate 10% 4.33% Cash 12% 0.48% Private equity (alternatives) 9% 10.23% 100% (f) Discount Rate The discount rate used to measure the total pension liability was 2.67% as of September 30, 2019, which was a decrease of 1.58% from the discount rate as of September 30, 2018. The projection of cash flows used to determine the discount rate assumed plan member contributions will be made at the current contribution rate, including the future increases in the employee contribution rates legislated. Based on those assumptions, the plan’s fiduciary net position was not projected to be available to make all projected future benefit payments of current plan members. Therefore, the plan’s long-term expected rate of return on plan investments of 4.00% was applied to all periods of projected benefit payments that are covered by projected assets. For periods where future benefit payments are not covered by projected assets, the yield on a twenty (20) year AA Municipal Bond Index was applied. As of September 30, 2019, that rate was 2.66%. (g) Sensitivity of Proportionate Share of the Net Pension Liability to Changes in the Discount Rate The following presents the University’s proportionate share of the net pension liability (NPL) for the plan, calculated using the discount rate, as well as what the University’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is one percentage point lower or one percentage point higher than the current rate for the year ended September 30, 2020: 1.00% Decrease - Share of NPL @ 1.67% Share of NPL @ 2.67% 1.00% Increase – Share of NPL @ 3.67% $ 101,128,148 $ 87,160,224 $ 75,711,830 Detailed information about the pension plan’s fiduciary net position is available in the separately issued GERS financial report. University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Notes to Financial Statements   45 12. Other Postemployment Benefits Plan Description and Benefits In addition to the pension benefits described above, the Government provides other postemployment benefits (OPEB) of healthcare, prescription, dental and life insurance coverage. These benefits are provided in accordance with Title 3, Chapter 25, Subchapter VIII of the V.I. Code as part of a multiple employer defined benefit OPEB plan, in which the University participates. All employees who retire from government service after attaining age fifty-five (55) with at least thirty (30) years of service, except for policemen and firemen who can retire with at least twenty (20) years of service, are eligible for these benefits. Healthcare, prescription, and dental insurance is provided through negotiated contracts with private insurance companies. Participants in the plan may elect coverage for their spouses and dependent children. Participants are required to contribute 35.0% of medical, prescription, and dental premiums. As required, the University follows the provisions of GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. This standard requires the reporting and disclosure of costs and liabilities associated with postemployment benefits provided to retirees. Employees Covered by the Plan As of the valuation date of October 1, 2019, the following University’s employees were covered by the benefit terms: Service and disability retirees 66 Active employees 427 Total 493 Contributions The contribution requirements of plan members and the Government are legislated within the V.I. Code, and may be amended, by the Legislature of the Virgin Islands. Payments made by the Government for the University do not qualify as a special funding situation. For the year ended September 30, 2020, the University recognized $250,120 of non-operating revenue related to the cost paid by the Government for the University’s retirees. The plan is a non-trusted pay-as-you-go plan, no assets have been accumulated in a trust that meets the criteria of GASB Statement No. 75, and expenses are paid as they become due. OPEB Liabilities, Expense, and Deferred Outflows/Inflows of Resources At September 30, 2020, the University reported a total OPEB liability for its proportionate share of 1.46%, as of the measurement date of October 1, 2019, which was an increase of 0.12% from its proportionate share from the prior year. University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Notes to Financial Statements   46 The proportionate share is determined based on the respective census data. The University’s proportionate share of the total OPEB liability as of September 30, 2020 amounted to $12.0 million. For the year ended September 30, 2020, the University recognized expense of $848,000, inclusive of amortization of deferred outflows and inflows of OPEB related items. Following is a schedule of deferred outflows and deferred inflows of resources in the computation of the total OPEB liability for the year ended September 30, 2020: Deferred Outflows of Resources Deferred Inflows of Resources Changes in actuarial assumptions or other inputs $ 164,947 $ 765,739 Difference between expected and actual experience 186,404 - Total $ 351,351 $ 765,739 Amounts reported as deferred outflows and inflows related to OPEB will be recognized in OPEB expense as follows: Year ending September 30, 2021 $ (135,095) 2022 (135,095) 2023 (135,095) 2024 (61,249) 2025 35,415 Thereafter 16,731 Total $ (414,388) Actuarial Assumptions The postemployment benefit plan is an unfunded plan. An actuarial valuation was conducted of the amount required to fund the plan, involving assumptions about the probability of the occurrence of events in the future. Actuarial assumptions used in the computation of the total OPEB liability were as follows: Valuation date: October 1, 2019 Measurement date: October 1, 2019 Report date: September 30, 2020 Actuarial cost method: Entry age normal cost method Amortization method: Recognition period of 6 years Salary increases: Payroll growth of 3.25% per year Discount rate: Beginning of year rate of 3.64% End of year rate of 3.58% S&P Municipal Bond 20-year high grade rate index as of September 30, 2019 University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Notes to Financial Statements   47 Healthcare cost trend rates: Pre-Medicare increases of 6.00% in 2020 to 4.50% in 2023 Medicare increases of 5.00% in 2020 to 4.50% in 2023 Dental increases of 5.00% in 2020 to 4.50% in 2023 Inflation: 2.25% Implicit Rate in Healthcare Trend Analysis Retirees share of costs: 35.0% of medical and dental premiums and noncontributory life insurance coverage. Retirees of the University’s defined contribution plan pay 100.0% of coverage Mortality: RP-2014 Blue Collar Mortality Generational Table Adjusted 110.0 % with Scale MP-2015 for Healthy Lives. For disability retirees, RP-2014 Disable Mortality Generational Table adjusted 125.0% with Scale MP-2015 Marital status: Assumed 50.0% of future male retirees and 25.0% of future female retirees cover spouses in retirement. Husbands assumed to be 3 years older than spouse. Subsidized coverage of spouses and dependents ceases upon death Actuarial experience study: The actuarial assumptions used in the October 1, 2019, valuation were based on the results of an actuarial experience study for the period October 1, 2011 - September 30, 2015 Change in Assumptions The discount rate changed from 3.64% in the prior valuation to 3.58% as of September 30, 2019. Sensitivity of OPEB Liability to Changes in the Discount Rate The following sensitivity analysis shows the impact of the total OPEB liability if the discount rate was one percentage point higher or one percentage point lower than the current discount rate: 1.00% Decrease - Discount Rate (2.58%) Current Discount Rate (3.58%) 1.00% Increase – Discount Rate (4.58%) $ 14,002,450 $ 12,011,355 $ 10,404,994 Sensitivity of OPEB Liability to Changes in the Healthcare Cost Trend Rates The following sensitivity analysis shows the impact of the total OPEB liability if the healthcare cost trend rates were one percentage point higher or one percentage point lower than the current healthcare cost trend rate: 1.00% Decrease - Healthcare Cost Trend Rate (5.00%) Current Healthcare Cost Trend Rate (6.00%) 1.00% Increase - Healthcare Cost Trend rate (7.00%) $ 10,216,537 $ 12,011,355 $ 14,308,961 University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Notes to Financial Statements   48 13. Functional Information As of September 30, 2020, the University’s operating expenses by functional classification are as follows: Salaries and Benefits Supplies and Other Services Scholarships Utilities Depreciation Other Expenses Total Instruction $ 12,432,855 $ 1,134,172 $ 49,491 $ 29,019 $ - $ - $ 13,645,537 Research 15,331,147 7,751,159 335,354 191,999 - - 23,609,659 Public service 3,994,397 1,930,336 6,430 54,235 - - 5,985,398 Academic support 4,651,644 1,198,770 225,252 3,295 - - 6,078,961 Student services 3,056,209 851,809 40,785 239,962 - - 4,188,765 Institutional support 13,273,796 2,886,071 723,560 5,677 - - 16,889,104 Operation/plant maintenance 4,550,710 4,866,655 - 3,076,278 - - 12,493,643 Student aid 235,678 732,421 9,656,541 4,035 - - 10,628,675 Auxiliary 1,576,741 1,814,896 - 228,434 - - 3,620,071 Depreciation - - - - 2,359,429 - 2,359,429 Other - - - - - 1,076,358 1,076,358 $ 59,103,177 $ 23,166,289 $ 11,037,413 $ 3,832,934 $ 2,359,429 $ 1,076,358 $ 100,575,600 14. Related Party Transactions As of September 30, 2020, the Foundation was owed $367,000 by the University of the Virgin Islands Research and Technology Park Corporation (RT Park) for payroll paid on its behalf. RT Park is a public corporation and a component unit of the Government. As of September 30, 2020, the University was owed $40.0 million from the Foundation for payments made on its behalf. This amount is considered as an inter-fund transaction and was eliminated from the Statement of Net Position for consolidation presentation purposes between the University and the Foundation. Appropriations received from the Government for the year ended September 30, 2020, amounted to $32.8 million. Also see Note 17. 15. Contingencies Litigation During the normal course of business, the University is a defendant in various lawsuits. In the opinion of management and legal counsel, the outcome of these cases and resulting liability, if any, is either adequately covered by insurance or should not materially affect the University’s financial position. University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Notes to Financial Statements   49 Grant Funds The University participates in various federally funded programs including those of the U.S. Department of Education and student financial assistance under Title IV of the Higher Education Act of 1965, as amended. These financial assistance programs are routinely subject to compliance audits by the grantor and/or federal agency. Such grantor and/or federal agencies have the authority to determine liabilities as well as to limit, suspend, or terminate financial assistance programs. Other federal programs are also subject to audits. Such audits could result in claims against the resources of the University. No provision has been made for any liabilities, which may arise from such audits since the amount, if any, cannot be determined at this date. Further, management believes these non-compliance instances, if any, should not materially affect the University’s financial position. Global Pandemic In March 2020, the Governor of the U.S. Virgin Islands declared a state of emergency due to the coronavirus pandemic known as COVID-19. The state of emergency was approved by the President of the United States under the provisions of the Stafford Act and the National Emergencies Act. A Federally approved state of emergency activates federal assistance to states in the form of financial, logistical, and technical assistance. The state of emergency also activates other emergency response protocols and systems to protect citizenry such as stay-at-home orders, travel restrictions, and social distancing requirements. As the emergency measures are eased, management continues to actively monitor the evolving impact of the COVID-19 outbreak on its financial condition, including the duration of the closings, speed of recovery, and impact on demand. Management further continues to identify and implement various additional mitigation efforts to minimize the impact on results of operations, financial position, and liquidity. Economic Relief Legislation In March 2020, the President of the United States signed into law the “Coronavirus Aid, Relief, and Economic Security (CARES) Act.” The CARES Act, among other things, appropriated funds for the Coronavirus Relief Fund to be used to make payments for specified uses to state, territorial, local, and tribal governments. Also see Note 18. 16. Risk Management The University is exposed to various risks of losses, including torts; thefts of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The University has commercial insurance to mitigate its exposure to certain losses involving real and personal property (including windstorm, flood, and earthquake damages) and comprehensive general and automobile claims. Each commercial insurance policy maintained by the University contains specific policy limits and deductibles. Claims expenses and liabilities are recorded when it is probable that a loss has occurred in excess of insured amounts and the amount of that loss can be reasonably estimated. Settled claims resulting from these risks have not exceeded commercial insurance coverage in any of the past three fiscal years. University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Notes to Financial Statements   50 17. Financial Condition The University has been financially challenged and its situation was exacerbated by a global occurrence. The management team is focused on its plan for the immediate future which includes exploration of alternative revenue sources, evaluation of tuition rates, reduction of operating expenses, and investment of federal funds. Also see Note 18. Further, the University not organized as a self-sustaining entity and is highly dependent on funding from the Government to repay and fund its obligations. The Government is in a significant net deficit position and currently faces significant fiscal, economic, and liquidity challenges. To date, local appropriations for funding the University’s programs have not been significantly impacted by the Government’s financial condition and it is unknown what impact, if any, the Government’s financial condition will have on the University. There can be no assurance that the Government’s actions will be sufficient to permit continued funding of the University such that its operations and activities will not be curtailed or ceased in the future. 18. Subsequent Events Hurricane Recovery The University has made significant progress towards restoring its facilities which were damaged by Hurricanes Irma and Maria in September 2017. Rebuilding the University’s facilities has taken precedence over other activities and the University continues to tabulate the associated costs and expenses with respect to remediation, mitigation, and the restoration of services. In 2021, the University received approximately $750,000 in connection with its insurance claims related to damages incurred. FEMA’s Public Assistance Grant Program (PA) provides federal support to include assistance for debris removal, life-saving emergency protective measures, and the repair, replacement, or restoration of disaster-damaged facilities. As of March 2023, the University has been approved for approximately $23.4 million in grant funding for emergency restoration work, and permanent and hazard mitigation projects. Economic Relief Legislation To address issues related to the continuance of the global coronavirus pandemic, in December 2020, “The Consolidated Appropriations (CA) Act” was passed. The CA Act among other things, provided for an extension of time to spend any CARES Act funds until December 31, 2021, and provided funding for education, healthcare, broadband, and transportation. Additionally, Section 706 of the CA Act directs the Secretary of Education to repay, for each institution of higher education that is a participant in the Historically Black College and University (HBCU) Capital Financing Program, the institution’s outstanding balance of principal, interest, and fees on the disbursed loan amounts on closed loan agreements as of December 27, 2020. This repayment by the Secretary of Education also applies to closed loan agreements related to deferments for public and private HBCUs under the CARES Act. In March 2021, approximately $62.0 million of the University’s debt was cancelled through the Capital Financing Program. University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Notes to Financial Statements   51 In March 2021, “The American Rescue Plan (ARP) Act of 2021” was signed into law. The ARP Act builds on previously enacted aid measures to aid states, counties, cities, and tribal governments to cover increased expenditures, replenish lost revenue, and mitigate economic harm from the COVID- 19 pandemic. However, there is no assurance that the University will be eligible for these funds or will be able to obtain them. However, the University continues to examine the impact that the ARP Act may have on its operations and to explore initiatives with the Governor and his Administration to derive benefit from the passage of the legislation. Other In November 2021, the University repaid in full its general obligation note with First Bank in the amount of $23.2 million. In March 2023, the University received an alert notification from the U.S. Department of Education for lack of submission of various annual reports which may result in, amongst other things, provisional certification and placement on a heightened cash monitoring payment method. The University continues to diligently monitor such requirements as it continues to recover from the disruption to its operations from Hurricanes Irma and Maria along with the impact of the COVID-19 global pandemic. In April 2023, the Legislature of the U.S. Virgin Islands approved the conveyance of a tract of land on St. Thomas to the University by the Virgin Islands Port Authority, in exchange for the University’s conveyance to the Virgin Islands Port Authority of a similar sized parcel of land, also on St. Thomas. The land swap is deemed more applicable to the intended use of the parcels by both entities. Management’s Evaluation Management has evaluated any events or transactions occurring after September 30, 2020, the statement of net position date, through May 31, 2023, the date the financial statements were available to be issued, and noted that there have been no additional events or transactions which would require adjustments to or disclosure in the University’s financial statements for the year ended September 30, 2020.     Required Supplementary Information University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Schedule of the University’s Proportionate Share of the OPEB Liability     52 September 30, 2020 2019 2018 University’s proportion of the OPEB liability 1.46% 1.34% 1.29% University’s proportionate share of the OPEB liability $ 12,011,355 $ 10,859,868 $ 10,589,360 University’s covered payroll $ 6,549,946 $ 7,911,010 $ 7,621,442 Total OPEB liability as a percentage of the University’s covered payroll 183.4% 137.3% 138.9% This schedule is intended to show a 10-year trend. Additional years will be reported as they become available. University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Notes to Required Supplementary Information - OPEB   53 1. Other Postemployment Benefits The Government does not have assets accumulated in a trust that meets the criteria of Paragraph 4 of GASB Statement No. 75 to pay related benefits. The discount rate changed from 3.64% for the opening balance as of September 30, 2019, to the discount rate of 3.58% for the ending balance as of September 30, 2020. This change resulted in an increase in total OPEB liability. The base mortality tables and mortality improvement sales were updated to RP-2014 Blue Collar Mortality table (110.0% adjustment) projected forward using the MP-2015 scale. Future participation in the retiree health plan is projected to be 85.0%. University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Schedule of the University’s Proportionate Share of the Net Pension Liability     54 September 30, 2020 2019 2018 2017 2016 2015 University’s proportion of the net pension liability 1.6400% 1.7954% 1.9355% 1.9869% 2.0943% 2.0471% University’s proportionate share of the net pension liability $ 87,160,224 $ 74,920,851 $ 84,782,113 $ 91,924,998 $ 85,271,734 $ 63,173,875 University’s covered payroll $ 7,911,010 $ 7,621,442 $ 7,427,200 $ 7,515,486 $ 7,230,037 $ 6,526,549 University’s proportionate share of the net pension liability as a percentage of its covered payroll 1102% 983% 1142% 1223% 1179% 968% Plan fiduciary net position as a percentage of the total pension liability 11% 16% 16% 17% 20% 27% This schedule is intended to show a 10-year trend. Additional years will be reported as they become available. The amounts presented for each fiscal year are as of the measurement date (September 30 of the previous year). University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Schedule of the University’s Pension Contributions     55 September 30, 2020 2019 2018 2017 2016 2015 Actuarially required contributions $ 6,015,349 $ 4,982,936 $ 5,182,168 $ 4,254,987 $ 4,384,689 $ 3,326,083 Contributions in relation to the actuarially required contributions 1,415,146 1,404,569 1,491,530 1,500,992 1,531,380 1,401,719 Contribution deficiency (excess) $ 4,600,203 $ 3,578,367 $ 3,690,638 $ 2,753,995 $ 2,853,309 $ 1,924,364 Covered payroll $ 6,549,946 $ 7,911,010 $ 7,621,442 $ 7,427,200 $ 7,515,486 $ 7,230,037 Contributions as a percentage of covered payroll 22% 18% 20% 20% 20% 19% This schedule is intended to show a 10-year trend. Additional years will be reported as they become available. The amounts presented for each fiscal year are as of the latest fiscal year.  The report accompanying these financial statements was issued by BDO USA, P.C., a Virginia professional service corporation, and the U.S. member of BDO International Limited, a UK company limited by guarantee. University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Schedule of Expenditures of Federal Award and Reports Required by Government Auditing Standards and the Uniform Guidance Year Ended September 30, 2020 University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Schedule of Expenditures of Federal Awards and Reports Required by Government Auditing Standards and the Uniform Guidance Year Ended September 30, 2020 University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Contents Independent Auditor’s Reports Independent Auditor’s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 3-4 Independent Auditor’s Report on Compliance for Each Major Federal Program, Report on Internal Control Over Compliance, and Report of Schedule of Expenditures of Federal Awards Required by the Uniform Guidance 5-10 Schedule of Expenditures of Federal Awards 11-15 Notes to Schedule of Expenditure of Federal Awards 16-18 Schedule of Findings and Questioned Costs 19-39 Management’s Appendices Appendix A: Status of Prior Audit Findings 40 Appendix B: Corrective Action Plan 41-47 BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms. 3 Tel: 301-354-2500 Fax: 301-354-2501 www.bdo.com 12505 Park Potomac Ave, Suite 700 Potomac, MD 20854 Independent Auditor’s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards To the Board of Trustees University of the Virgin Islands We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the University of the Virgin Islands (the University), a component unit of the Government of the U.S. Virgin Islands, which comprise the business type activities and the discretely presented component unit as of and for the year ended September 30, 2020, and the related notes to the financial statements, and have issued our report thereon dated May 31, 2023. Report on Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered the University’s internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the University’s internal control. Accordingly, we do not express an opinion on the effectiveness of the University’s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. We identified certain deficiencies in internal control, identified below and described in greater detail in the accompanying schedule of findings and questioned costs, that we consider to be material weaknesses. Finding # Nature of Finding 2020-001 Financial Position 2020-002 Year-End Close Process 2020-003 Capital Assets and Related Expenditures 2020-004 Grants Management 2020-005 Accuracy of Liabilities 2020-006 Net Position Restrictions and Designations 2020-007 Bank Accounts 4 Report on Compliance and Other Matters As part of obtaining reasonable assurance about whether the University’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the financial statements. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. The University’s Response to Findings Government Auditing Standards requires the auditor to perform limited procedures on the University’s response to the findings identified in our audit and described in Appendix B. The University’s response was not subjected to the other auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on the response. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the University’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the University’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. May 31, 2023 BDO USA, P.C., a Virginia professional service corporation, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms. 5 Tel: 301-354-2500 Fax: 301-354-2501 www.bdo.com 12505 Park Potomac Ave, Suite 700 Potomac, MD 20854 Independent Auditors’ Report On Compliance for Each Major Federal Program, Report on Internal Control Over Compliance, and Report on the Schedule of Expenditures of Federal Awards Required by the Uniform Guidance To the Board of Trustees University of the Virgin Islands Report on Compliance for Each Major Federal Program We have audited the University of the Virgin Islands’ (the University) compliance with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Compliance Supplement that could have a direct and material effect on each of the University’s major federal programs for the year ended September 30, 2020. The University’s major federal programs are identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs. The University is a component unit of the Government of the U.S. Virgin Islands. Management’s Responsibility Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs. Auditors’ Responsibility Our responsibility is to express an opinion on compliance for each of the University’s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the University’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our modified opinions on compliance for each major Federal program. However, our audit does not provide a legal determination of the University’s compliance. 6 Basis for Qualified Opinions on the Three Major Federal Programs Identified in Table I As described in the accompanying schedule of findings and questioned costs, the University did not comply with requirements regarding the following: Compliance with such requirements is necessary, in our opinion, for the University to comply with the requirements applicable to those programs. Qualified Opinions on the Three Major Federal Programs Identified in Table I In our opinion, except for the noncompliance described in the Basis for Qualified Opinion paragraph, the University complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on the major programs identified in Table II for the year ended September 30, 2020. Other Matters The results of our auditing procedures disclosed instances of noncompliance which are required to be reported in accordance with the Uniform Guidance and which are described in the accompanying schedule of findings and questioned costs, and as identified in Table II below. Our opinion on each major Federal program is not modified with respect to these matters. Table I – Material Noncompliance Resulting in Qualified Opinions Finding Number CFDA Number(s) Major Program Compliance Requirement 2020-010 59.037 Small Business Development Centers Procurement and Suspension and Debarment 2020-013 84.007 84.033 84.038 84.063 84.268 Student Financial Assistance Cluster Special Tests and Provisions - Disbursement to or on behalf of Students (Loan Disbursement Notification Testing) 2020-015 84.007 84.033 84.038 84.063 84.268 Student Financial Assistance Cluster Special Tests and Provisions – Enrollment Reporting 2020-016 84.425E 84.425F 84.425J Higher Education Emergency Relief Fund Procurement and Suspension and Debarment Table II – Other Instances of Noncompliance Noted in Programs with Qualified Opinions Finding Number CFDA Number(s) Major Program Compliance Requirement 2020-008 59.037 Small Business Development Centers Data Collection Form and Single Audit Reporting Package 2020-009 59.037 Small Business Development Centers Cash Management 7 The University’s response to the noncompliance findings identified in our audit is described in the accompanying schedule of findings and questioned costs and corrective action plan. The University’s response was not subjected to our auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response. The University is responsible for preparing a corrective action plan to address each audit finding included in our auditor’s report. The University’s corrective action plan was not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on it. Table II – Other Instances of Noncompliance Noted in Programs with Qualified Opinions Finding Number CFDA Number(s) Major Program Compliance Requirement 2020-008 84.007 84.033 84.038 84.063 84.268 Student Financial Assistance Cluster Data Collection Form and Single Audit Reporting Package 2020-011 84.007 84.033 84.038 84.063 84.268 Student Financial Assistance Cluster Special Tests and Provisions - Borrower Data and Reconciliation 2020-012 84.007 84.033 84.038 84.063 84.268 Student Financial Assistance Cluster Special Tests and Provisions - Federal Perkins Loan Liquidation 2020-014 84.007 84.033 84.038 84.063 84.268 Student Financial Assistance Cluster Special Tests and Provisions - Disbursement to or on behalf of Students (Federal Work Study Program) 2020-008 84.425E 84.425F 84.425J Higher Education Emergency Relief Fund Data Collection Form and Single Audit Reporting Package 2020-017 84.425E 84.425F 84.425J Higher Education Emergency Relief Fund Reporting 8 Report on Internal Control Over Compliance Management of the University is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the University’s internal control over compliance with the types of requirements that could have a direct and material effect on each major Federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major Federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the University’s internal control over compliance. Our consideration of internal control over compliance was for the limited purpose described in the preceding paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that have not been identified. However, as discussed below, we did identify certain deficiencies in internal control over compliance that we consider to be material weaknesses and significant deficiencies. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a Federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a Federal program will not be prevented, or detected and corrected, on a timely basis. We consider the deficiencies in internal control over compliance described in the accompanying schedule of findings and questioned costs, and as identified in Table III below, to be material weaknesses. Table III – Material Weaknesses in Internal Control over Compliance Finding Number CFDA Number(s) Major Program Compliance Requirement 2020-010 59.037 Small Business Development Centers Procurement and Suspension and Debarment 2020-013 84.007 84.033 84.038 84.063 84.268 Student Financial Assistance Cluster Special Tests and Provisions - Disbursement to or on behalf of Students (Loan Disbursement Notification Testing) 2020-015 84.007 84.033 84.038 84.063 84.268 Student Financial Assistance Cluster Special Tests and Provisions – Enrollment Reporting 9 A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance yet important enough to merit attention by those charged with governance. We consider the deficiencies in internal control over compliance described in the accompanying schedule of findings and questioned costs, and as identified in Table IV below, to be significant deficiencies. Table III – Material Weaknesses in Internal Control over Compliance Finding Number CFDA Number(s) Major Program Compliance Requirement 2020-016 84.425E 84.425F 84.425J Higher Education Emergency Relief Fund Procurement and Suspension and Debarment Table IV – Significant Deficiencies in Internal Control over Compliance Finding Number CFDA Number(s) Major Program Compliance Requirement 2020-008 59.037 Small Business Development Centers Data Collection Form and Single Audit Reporting Package 2020-009 59.037 Small Business Development Centers Cash Management 2020-008 84.007 84.033 84.038 84.063 84.268 Student Financial Assistance Cluster Data Collection Form and Single Audit Reporting Package 2020-011 84.007 84.033 84.038 84.063 84.268 Student Financial Assistance Cluster Special Tests and Provisions - Borrower Data and Reconciliation 2020-012 84.007 84.033 84.038 84.063 84.268 Student Financial Assistance Cluster Special Tests and Provisions - Federal Perkins Loan Liquidation 2020-014 84.007 84.033 84.038 84.063 84.268 Student Financial Assistance Cluster Special Tests and Provisions - Disbursement to or on behalf of Students (Federal Work Study Program) 2020-008 84.425E 84.425F 84.425J Higher Education Emergency Relief Fund Data Collection Form and Single Audit Reporting Package 2020-017 84.425E 84.425F 84.425J Higher Education Emergency Relief Fund Reporting 10 The University’s response to the internal control over compliance findings identified in our audit is described in the accompanying schedule of findings and questioned costs and corrective action plan. The University’s response was not subjected to our auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response. The University is responsible for preparing a corrective action plan to address each audit finding included in our auditor’s report. The University’s corrective action plan was not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on it. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. Report on Schedule of Expenditures of Federal Awards Required by the Uniform Guidance We have audited the financial statements of the University of the Virgin Islands, a component unit of the Government of the U.S. Virgin Islands, as of and for the year ended September 30, 2020, and have issued our reports thereon dated May 31, 2023, which contained an unmodified opinion on those financial statements. Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying Schedule of Expenditures of Federal Awards is presented for purposes of additional analysis as required by the Uniform Guidance and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Schedule of Expenditures of Federal Awards is fairly stated in all material respects in relation to the basic financial statements as a whole. (formerly known as BDO USA, LLP) September 8, 2023 Schedule of Expenditures of Federal Awards Year ended September 30, 2020 Pass-through Student Higher Federal Entity Financial Research & Education Small Award Total CFDA Identification Assistance Development Institutional CARES Business Other Provided to Federal Federal Grantor/Pass-Through Grantor/Program or Cluster Title Number Number Cluster Cluster Aid Act Development Programs Subrecipients Expenditures Research and Development Cluster U.S. Department of Agriculture Direct program: Plant and Animal Disease, Pest Control, and Animal Care 10.025 25,123 25,123 Cooperative Forestry Research 10.202 59,717 59,717 Payments to Agricultural Experiment Stations Under Hatch Act 10.203 1,238,367 1,238,367 Resident Instruction Grants for Insular Area Activities 10.308 25,887 25,887 Distance Education Grants for Institutions of Higher Education in Insular Areas 10.322 118,946 118,946 Rural Business Development Grant 10.351 50,000 50,000 Cooperative Extension Service 10.500 947,078 135,341 1,082,419 Plant Materials For Conservation 10.905 10,538 10,538 Agricultural Statistics Report 10.950 36,945 36,945 Total Direct Program - 2,462,601 - - - 185,341 - 2,647,942 Pass-through program: Pass-through from Government of the Virgin Islands: Specialty Crop Block Program: 10.170 Jicama Production and Market Potent 41,844 41,844 Propagating Guava Berry A High Value 34,329 34,329 Turmeric Product & Market Potential in the Virgin Islands 16SCBGPV10024 (5,593) (5,593) Tropical Winged Bean Project 26,348 26,348 Sweet Potato Weed Control (26,348) (26,348) Sustainable Agricultural Research & Education: 10.215 Pass-through from University of Georgia: Sustainable Agriculture Research and Education SUB0001838 39,264 39,264 Pass-through from University of Florida: Educational Material for Cover Crop UFDSP00012289 925 925 Pass-through from Kansas State University: Cooperative Extension Service: 10.500 4H Military Partnership Grant S19111 4,273 4,273 Total Pass-through Program - 110,769 - - - 4,273 - 115,042 TOTAL U.S. DEPARTMENT OF AGRICULTURE - 2,573,370 - - - 189,614 - 2,762,984 U.S. Department of Commerce Direct program: NOAA Mission-Related Education Awards 11.008 70,838 70,838 Economic Development Cluster Economic Adjustment Assistance 11.307 109,565 109,565 Fisheries Development and Utilization 11.427 (372) (372) Center for Sponsored Coastal Ocean Research Coastal Ocean Program 11.478 2,148 2,148 Coral Reef Conservation Program 11.482 81,664 81,664 Marine Debris Program 11.999 43,598 43,598 Total Direct Program - 307,441 - - - - - 307,441 University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Schedule of Expenditures of Federal Awards 11 Year ended September 30, 2020 Pass-through Student Higher Federal Entity Financial Research & Education Small Award Total CFDA Identification Assistance Development Institutional CARES Business Other Provided to Federal Federal Grantor/Pass-Through Grantor/Program or Cluster Title Number Number Cluster Cluster Aid Act Development Programs Subrecipients Expenditures University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Schedule of Expenditures of Federal Awards U.S. Department of Commerce (continued) Pass-through program: Pass-through from University of Puerto Rico: Integrated Ocean Observing System (IOOS): 11.012 CARICCOS-Enhancing Coastal Intelligence 2016-2017-007 39,938 39,938 Sea Grant Support: 11.417 NOAA - VI Marine Advisory Service A-151-2-14 UPR (24,157) (24,157) USVI Marine Advisory 2018-2019-004 78,386 78,386 Marine Protected Areas USVI 2018-2019-003 69,589 69,589 Early Life Hist Stages of Coral 2018-2019-014 44,878 5,726 50,604 Pass-through from University of South Carolina: Fisheries Development and Utilization Research and Development Grants and Cooperative Agreements Program 11.427 PSA 2/12/2018 (11,633) (11,633) Marine Fisheries Initiative 11.433 16-2997 (2,556) (2,556) Pass-through from University of Miami: National Oceanic and Atmospheric Administration (NOAA) Cooperative Institutes: 11.432 Coral Reef Monitoring Program S18-04 99,718 99,718 Coordination and Development of Research and Monitoring Activities in VI SPC00-1012 124,233 124,233 Maturity Reef Fishes USVI 719633-712683 24,540 24,540 USVI Deep Coral Reef Program SPC00-1250 128,267 128,267 Pass-through from Government of the Virgin Islands: Unallied Science Program: 11.472 Acropora Monitoring Program SA-CZMP20191010 85,756 85,756 Marine Debris Program: 11.999 Diving for Debris SA-CZMP20191012 2,244 2,244 Cleaning Our Coasts SA-CZMP20201002 21,336 21,336 Pass-through from Florida Gulf Coast University: Center for Sponsored Coastal Ocean Research Coastal Ocean Program: 11.478 ECOHAB: CIGUATOX 17024-UVI-001 37,903 37,903 Pass-through from William Marsh Rice University: Coral Reef Conservation Program: 11.482 Tracking and Mitigation the Impacts R1A-061 1,659 1,659 Total Pass-through Program - 720,101 - - - - 5,726 725,827 TOTAL U.S. DEPARTMENT OF COMMERCE - 1,027,542 - - - - 5,726 1,033,268 United States Geological Survey Direct Program: Assistance to State Water Resources Research Institutes 15.805 112,539 112,539 12 Year ended September 30, 2020 Pass-through Student Higher Federal Entity Financial Research & Education Small Award Total CFDA Identification Assistance Development Institutional CARES Business Other Provided to Federal Federal Grantor/Pass-Through Grantor/Program or Cluster Title Number Number Cluster Cluster Aid Act Development Programs Subrecipients Expenditures University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Schedule of Expenditures of Federal Awards U.S. Department of Interior Direct Program: Cooperative Research and Training Programs - Resources of the National Park System 15.945 7,140 7,140 Pass-through program: Pass-through from Government of the Virgin Islands: Economic, Social, and Political Development of the Territories: 15.875 Ocean Acidification Coral Reef Program USVI-CRI-5/D16AP00101 18,873 18,873 Emergence & Impacts Red Algae CRI-USVI-6/D17AP0070 9,285 9,285 Determining Nursery Grown Coral Outplant Success Between Genotypes SA-CZMP20191005 49,642 49,642 Total Pass-through Program - 77,800 - - - - - 77,800 TOTAL U.S. DEPARTMENT OF INTERIOR - 84,940 - - - - - 84,940 U.S. Department of Labor Direct Program: Consultation Agreements 17.504 259,199 259,199 U.S. National Aeronautics and Space Administration Direct Program: Education Program 43.008 721,613 721,613 Pass-through Program: Pass-through from University of South Florida: Science: 43.001 Basic Research Educational Outreach - Laying the Foundation of the MBON Network 80NSSC18K0318 8,331 8,331 Pass-through from College of Charleston: Education Program: 43.008 Effects of Watershed Development 521202-UVI 1,477 1,477 Pass-through from Space Telescope Science Institute: Space Technology: 43.012 3-D Magnetohydrodynamic Simulation HST-AR-15053-001-A 32,754 32,754 Total Pass-through Programs 42,562 - - - - - 42,562 TOTAL U.S. NATIONAL AERONAUTICS AND SPACE ADMINISTRATION 764,175 - - - - - 764,175 National Endowment for the Humanities Direct Program: Promotion of the Humanities Division of Preservation and Access 45.149 10,542 10,542 U.S. National Science Foundation Direct Program: Mathematical and Physical Sciences 47.049 154,006 154,006 Geosciences 47.050 30,527 30,527 Biological Sciences 47.074 9,847 9,847 STEM Education (formerly Education and Human Resources) 47.076 1,370,673 135,793 207,043 1,713,509 Office of International Science and Engineering 47.079 326,349 326,349 Integrative Activities 47.083 2,048,318 2,048,318 Total Direct Program - 3,939,720 - - - 135,793 207,043 4,282,556 13 Year ended September 30, 2020 Pass-through Student Higher Federal Entity Financial Research & Education Small Award Total CFDA Identification Assistance Development Institutional CARES Business Other Provided to Federal Federal Grantor/Pass-Through Grantor/Program or Cluster Title Number Number Cluster Cluster Aid Act Development Programs Subrecipients Expenditures University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Schedule of Expenditures of Federal Awards U.S. National Science Foundation (continued) Pass-through Program: Pass-through from South Carolina State University: Mathematical and Physical Sciences: Excellence in Research: an HBCU Partnership to leverage Resources 47.049 60,289 60,289 Geosciences: 47.050 Pass-through from Arizona State University: GOLD: Sparks for Change 17-075 16,285 16,285 Pass-through from Florida Gulf Coast University: Greater Caribbean Center 17056-NSF-UVI-01 83,882 83,882 Pass-through from University of Hartford: STEM Education (formerly Education and Human Resources): 47.076 Support & Sustain Scholarly Mathematics Teaching P-1383 11,368 11,368 Office of International Science and Engineering: 47.079 Pass-through from University of South Alabama: PIRE Advancing Global Strategies A17-0170-S0001 142,719 142,719 Pass-through from University of South Florida: PIRE Synergistic Water Energy System 2104-1185-00-A (1,918) (1,918) Total Pass-through Program - 312,625 - - - - - 312,625 TOTAL U.S. NATIONAL SCIENCE FOUNDATION - 4,252,345 - - - 135,793 207,043 4,595,181 Small Business Administration Direct Program: Small Business Development Center CARES Act 59.037 152,812 152,812 Small Business Development Center 59.037 593,568 593,568 TOTAL SMALL BUSINESS ADMINISTRATION - - - 152,812 593,568 - - 746,380 United States Environmental Protection Agency Direct Program: Solid Waste Management Assistance Grants 66.808 1,409 1,409 Environmental Education Grants 66.951 47,915 13,552 61,467 Total Direct Program - 49,324 - - - - 13,552 62,876 Pass-through Program: Pass-through from Extension Foundation: Research, Development, Monitoring, Public Education, Outreach, Training, Demonstrations, and Studies 66.716 Pesticide Safety Workshops SA-2019-2 8,595 8,595 Total Pass-through Program - 8,595 - - - - - 8,595 TOTAL UNITED STATES ENVIRONMENTAL PROTECTION AGENCY - 57,919 - - - - 13,552 71,471 U.S. Department of Energy Pass-through program: Pass-through from Norfolk State University: National Nuclear Security Administration (NNSA) Minority Serving Institutions (MSI) Program: 81.123 NNSA HBCU Program F10400061-14-11 73,978 73,978 TOTAL U.S. DEPARTMENT OF ENERGY - 73,978 - - - - - 73,978 14 Year ended September 30, 2020 Pass-through Student Higher Federal Entity Financial Research & Education Small Award Total CFDA Identification Assistance Development Institutional CARES Business Other Provided to Federal Federal Grantor/Pass-Through Grantor/Program or Cluster Title Number Number Cluster Cluster Aid Act Development Programs Subrecipients Expenditures University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Schedule of Expenditures of Federal Awards Student Financial Assistance Cluster U.S. Department of Education Direct program: Federal Supplemental Educational Opportunity Grants 84.007 111,369 $ 111,369 $ Federal Work-Study Program 84.033 53,865 53,865 Federal Pell Grant Program 84.063 4,083,204 4,083,204 Federal Direct Student Loan 84.268 3,234,152 3,234,152 Total Student Financial Assistance Cluster 7,482,590 - - - - - - 7,482,590 Higher Education Institution Aid 84.031B 2,600,173 2,600,173 Disaster Recovery Assistance for Education 84.938 1,459,751 1,459,751 Higher Education Emergency Relief Fund Student Aid Portion 84.425E 717,992 717,992 Higher Education Emergency Relief Fund Institutional Aid Portion 84.425F 563,563 563,563 Higher Education Emergency Relief Fund Historically Black Colleges and Universities 84.425J 1,875,124 1,875,124 Total Higher Education Emergency Relief Fund Program - - - 3,156,679 - - - 3,156,679 TOTAL U.S. DEPARTMENT OF EDUCATION 7,482,590 - 2,600,173 3,156,679 - 1,459,751 - 14,699,193 U.S. Department of Health and Human Services Direct Program: ACL Assistive Technology 93.464 100,834 100,834 University Centers for Excellence in Developmental Disabilities Education, Research, and Service 93.632 661,475 661,475 Biomedical Research and Research Training 93.859 459,714 459,714 Total Direct Program - 459,714 - - - 762,309 - 1,222,023 Pass-through Program: Pass-through from University of Miami: Maternal and Child Health Federal Consolidated Programs: 93.110 Child Development & Multi-Disciplinary Facility SPC-000504 5,751 5,751 Child Development & Multi-Disciplinary Facility SPC-001154 17,088 17,088 Pass-through from Government of the Virgin Islands: Every Student Succeeds Act/Preschool Development Grants 93.434 Road to Success Early Child Care 90TP002301 374,223 374,223 Pass-through from Yale University: Minority Health and Health Disparities Research: 93.307 YALETCC Health Disparities Res Year 3 M17A1264 (A10932) 72,955 72,955 ECHORN Year 6 M12A11250 (A08627) 11,010 11,010 Translation and Implementation Science Research for Heart, Lung, Blood Diseases, and Sleep Disorders: 93.840 Pediatric ECHORN Cohort Study GR105030 (CON-80001591) 75,051 75,051 Total Pass-through Program - 159,016 - - - 397,062 - 556,078 TOTAL U. S. DEPARTMENT OF HEALTH AND HUMAN SERVICES - 618,730 - - - 1,159,371 - 1,778,101 TOTAL EXPENDITURES OF FEDERAL AWARDS 7,482,590 $ 9,565,538 $ 2,600,173 $ 3,309,491 $ 593,568 $ 3,214,270 $ 226,321 $ 26,991,951 $ 15 University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Notes to Schedule of Expenditures of Federal Awards For the Year Ended September 30, 2020 16 1. Reporting Entity The Schedule of Expenditures of Federal Awards (the Schedule) includes the activity of all federal grant of the University of the Virgin Islands (the University) under the programs of the Federal government for the year ended September 30, 2020. The information in the schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Further, because the Schedule presents only a selected portion of the operations of the University, it is not intended to and does not present the financial position, changes in net position, or cash flows of the University. 2. Summary of Significant Accounting Policies Basis of Accounting The expenditures for each of the Federal award programs are presented in the Schedule on an accrual basis of accounting. Such expenditures are recognized following the cost principle contained in the Uniform Guidance. Negative amounts shown on the Schedule represent adjustments or credits made in the normal course of business to amounts reported as expenditures in prior years. The financial transactions are recorded by the University in accordance with the terms and conditions of the grants, which are consistent with accounting principles generally accepted in the United States of America. Matching Costs Matching costs, such as the non-federal share of certain program costs, are not included in the accompanying Schedule. Relationship to Federal Financial Reports The relationship and guidelines governing the preparation of Federal financial reports vary by Federal agency and among programs administered by the same agency. Accordingly, the amounts reported in in the Federal financial reports do not necessarily agree with the amounts reported in the accompanying Schedule, which is prepared on the basis described above. 3. Major Federal Programs Major programs are identified in the summary of auditors’ results section in the Schedule of Findings and Questioned Costs. Federal programs are presented by federal agency. 4. Federal Perkins Loan Program The Federal Perkins Loan Program is administered directly by the University and balances and transactions are included in the University's financial statements. The balance of loans outstanding under the Federal Perkins Loan Program was $70,764 as of September 30, 2020. University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Notes to Schedule of Expenditures of Federal Awards For the Year Ended September 30, 2020 17 The University disbursed $0 under the Federal Perkins Loan Program for the year ended September 30, 2020. 5. Federal Direct Student Loan Program During the fiscal year ended September 30, 2020, the University processed $3,234,152 of new loans under the Federal Direct Student Loans Program (CFDA No. 84.268). Only new loans made during the fiscal year ended September 30, 2020, relating to this program are reported as expended. The University is responsible only for the performance of certain administrative duties with respect to the Federal Direct Student Loan Program and, accordingly, these loans are not included on the University’s financial statements; furthermore, it is not practical to determine the balance of loans outstanding to students and former students of the University under these programs at September 30, 2020. 6. Indirect Cost Rate The University has a federally negotiated indirect cost agreement applicable to all programs, with an effective date of October 1, 2017 to September 30, 2027. The negotiated and approved rates are 68% on-campus and 37% off-campus. 7. Contingencies The University participates in various federally funded programs including the U.S. Department of Education, including programs of student financial assistance under Title IV of the Higher Education Act of 1965, as amended. These financial assistance programs are routinely subject to compliance audits by the grantor and/or federal agency. Such grantor and/or federal agencies have the authority to determine liabilities as well as to limit, suspend, or terminate federal student financial assistance programs. Other federal programs are also subject to audits. Such audits could result in claims against the resources of the University. No provision has been made for any liabilities, which may arise from such audits since the amount, if any, cannot be determined at this date. 8. Subsequent Events Hurricane Recovery The University has made significant progress towards restoring its facilities which were damaged by Hurricanes Irma and Maria in September 2017. Rebuilding the University’s facilities has taken precedence over other activities and the University continues to tabulate the associated costs and expenses with respect to remediation, mitigation, and the restoration of services. In 2021, the University received approximately $750,000 in connection with its insurance claims related to damages incurred. FEMA’s Public Assistance Grant Program (PA) provides federal support to include assistance for debris removal, life-saving emergency protective measures, and the repair, replacement, or restoration of disaster-damaged facilities. As of July 2023, the University has been approved for approximately $37.6 million in grant funding for emergency restoration work, and permanent and hazard mitigation projects. University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Notes to Schedule of Expenditures of Federal Awards For the Year Ended September 30, 2020 18 Economic Relief Legislation To address issues related to the continuance of the global coronavirus pandemic, in December 2020, “The Consolidated Appropriations (CA) Act” was passed. The CA Act among other things, provided for an extension of time to spend any CARES Act funds until December 31, 2021, and provided funding for education, healthcare, broadband, and transportation. Additionally, Section 706 of the CA Act directs the Secretary of Education to repay, for each institution of higher education that is a participant in the Historically Black College and University (HBCU) Capital Financing Program, the institution’s outstanding balance of principal, interest, and fees on the disbursed loan amounts on closed loan agreements as of December 27, 2020. This repayment by the Secretary of Education also applies to closed loan agreements related to deferments for public and private HBCUs under the CARES Act. In March 2021, approximately $62.0 million of the University’s debt was cancelled through the Capital Financing Program. In March 2021, “The American Rescue Plan (ARP) Act of 2021” was signed into law. The ARP Act builds on previously enacted aid measures to aid states, counties, cities, and tribal governments to cover increased expenditures, replenish lost revenue, and mitigate economic harm from the COVID-19 pandemic. However, there is no assurance that the University will be eligible for these funds or will be able to obtain them. However, the University continues to examine the impact that the ARP Act may have on its operations and to explore initiatives with the Governor and his Administration to derive benefit from the passage of the legislation. Other In March 2023, the University received an alert notification from the U.S. Department of Education for lack of submission of various annual reports which may result in, amongst other things, provisional certification and placement on a heightened cash monitoring payment method. The University continues to diligently monitor such requirements as it continues to recover from the disruption to its operations from Hurricanes Irma and Maria along with the impact of the COVID- 19 global pandemic. Schedule of Findings and Questioned Costs University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Schedule of Findings and Questioned Costs For the Year Ended September 30, 2020 19 Section I - Summary of Auditor’s Results Financial Statements Type of report the auditor issued on whether the financial statements audited were prepared in accordance with generally accepted accounting principles: Unmodified Internal control over financial reporting: • Material weakness(es) identified? X Yes No • Significant deficiency(ies) identified? Yes X None reported Noncompliance material to financial statements noted? Yes X No Federal Awards Internal control over major federal programs: • Material weakness(es) identified? X Yes No • Significant deficiency(ies) identified? X Yes None reported Type of auditor’s report issued on compliance for major federal programs: CFDA Number Name of Federal Program or Cluster Opinion 59.037 Small Business Development Center Qualified 84.007, 84.033, 84.038, 84.063, 84.268 Student Financial Assistance Cluster Qualified 84.425E, 84.425F, 84.425J Higher Education Emergency Relief Fund Qualified Any audit findings disclosed that are required to be reported in accordance with 2 CFR 200.516(a)? X Yes No University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Schedule of Findings and Questioned Costs For the Year Ended September 30, 2020 20 Identification of major federal programs: Dollar threshold used to distinguish between Type A and Type B programs: $ 809,758 Auditee qualified as low-risk auditee? Yes X No CFDA Number Name of Federal Program or Cluster 59.037 Small Business Development Center 84.007, 84.033, 84.038, 84.063, 84.268 Student Financial Assistance Cluster 84.425E, 84.425F, 84.425J Higher Education Emergency Relief Fund University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Schedule of Findings and Questioned Costs For the Year Ended September 30, 2020 21 Section II - Financial Statements Findings Finding 2020-001: Financial Position The University is in a difficult financial position based largely on operating losses, outstanding debt, pension obligation, and other postemployment obligation issues. In addition, the University’s operations were impacted by the global coronavirus pandemic. Management is working to stabilize the University’s financial position by implementing a new short- term cash management process and identifying opportunities to reduce operating costs. The University is also a recipient of significant federal assistance in connection with the global coronavirus pandemic. It is further noted that as of September 30, 2020, all payments on bonds and notes obligations have been remitted as required. Deficits in Unrestricted Net Position Finding and Recommendation: For the past few years, the University has incurred significant losses from operations, resulting in growing deficits of its unrestricted net position. This unfavorable financial position has caused the financial statements to include a disclosure in the audit opinion. This situation must improve if the University is to fund debt, pension, and other postemployment benefits obligations. Future plans and budgets should be developed to produce operating income, avoid continuing deficits, and begin to rebuild net position. Continuation of these negative financial results could have a significant impact on the financial position and cash flows of the University. Views of Responsible Officials: The University concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the University’s Corrective Action Plan which is attached as Appendix B to the Single Audit Report. University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Schedule of Findings and Questioned Costs For the Year Ended September 30, 2020 22 Finding 2020-002: Year-End Close Process Accounting tasks, such as periodic reconciliations, play a key role in proving the accuracy of accounting data and information included in various interim financial statements and/or reports. Timeliness and Methodology of Close Process Finding and Recommendation: • We noted a significant delay in the year-end closing process and preparation of year-end financial statements. We noted that in many cases, reconciliations were finalized during the audit process, which represents a substantial delay when compared to the University’s fiscal year-end. Capital assets, grants revenues and receivables, accruals and other liabilities, and net position schedules had not been reconciled on a periodic basis. Moreover, the sheer volume of manual journal vouchers and reversal entries being recorded results in further challenges and delays in the reconciliation process. • Detailed schedules supporting general ledger accounts did not always agree with the respective general ledger balances. There were a significant number of post-closing adjustments provided by the University during the audit process. Such a continuing and growing backlog of transactions and journal entries that are not posted into the accounting system on a timely basis, renders the accounting information virtually useless in making well informed business decisions on a timely basis. Additionally, there was no readily available evidence that various post-closing journal entries had been reviewed by a responsible official prior to posting in the general ledger. In order to prevent significant errors in the financial records and financial statements as well as prevent possible irregularities, including fraud, to exist and continue without notice, we recommend that all accounts, accruals, and reconciliations be performed and reviewed on a periodic basis. The composition of any unreconciled differences should be determined and followed up on, and any journal entries, deemed necessary as a result, should be recorded. Further, strict adherence to the year-end closing schedule will allow the University to comply with its financial and other reporting covenants, and for the year-end work and audit preparation to be a much less time-consuming and arduous process, without sacrificing the quality of the accounting records or minimizing existing internal controls. Views of Responsible Officials: The University concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the University’s Corrective Action Plan which is attached as Appendix B to the Single Audit Report. University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Schedule of Findings and Questioned Costs For the Year Ended September 30, 2020 23 Accuracy and Timing of Interim Financial Statements Finding and Recommendation: It appears from the large number of year-end adjustments, that the University’s monthly interim financial statements did not include all the necessary adjustments to prepare interim financial statements comparable to the audited financial statements. This could result in conflicting information for management, the governing board, and outside users. We recommend that the University review the content of the audit adjustments made to the year-end statements and incorporate them into the periodic closing process. Views of Responsible Officials: The University concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the University’s Corrective Action Plan which is attached as Appendix B to the Single Audit Report. Debt Covenants Finding and Recommendation: We noted that the University was not in compliance with certain financial and reporting covenants pertaining to its agreements. We recommend that management establish and implement a policy to periodically monitor and evaluate its covenants. If such a practice can be implemented, potential violations can be cured before the measurement date, thereby avoiding any violations that must be reported to the lenders and disclosed in the audited financial statements. Views of Responsible Officials: The University concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the University’s Corrective Action Plan which is attached as Appendix B to the Single Audit Report. University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Schedule of Findings and Questioned Costs For the Year Ended September 30, 2020 24 Finding 2020-003: Capital Assets and Related Expenditures Capital assets constitute an investment of substantial amounts, thereby, requiring an excellent system of controls for the maintenance and safeguarding of these assets. We recommend diligence with respect to the monitoring and review of capital assets and in ensuring the reconciliation of supporting registers to the primary register. Record Keeping Finding and Recommendation: The process of maintaining capital asset records (i.e. recording additions, disposals, and transfers) is conducted when performing the annual financial statement close resulting in significant adjusting entries. As such, supervisory review and other checks and balances may not be timely and/or effective in all instances. During our sampled procedures, we noted the following: • Approximately $8.4 million in capital asset additions had been erroneously expensed. • Completed construction in process (CIP) projects had not been transferred on a timely basis to the completed asset category and various erroneous accruals had been recorded resulting in several adjustments to the CIP balances. To prevent the need for major adjustments at the end of each year, we suggest that the general ledger accounts be reconciled to the detailed records on a quarterly basis. Movements in the rollforward schedules should be timely and adequately analyzed to minimize large variances at year-end. Views of Responsible Officials: The University concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the University’s Corrective Action Plan which is attached as Appendix B to the Single Audit Report. University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Schedule of Findings and Questioned Costs For the Year Ended September 30, 2020 25 Finding 2020-004: Grants Management The University receives grant and contract funds from various funding agencies. These situations necessitate a strong accounting system to record specific grant and contract activities. Consideration must also be given to compliance with laws and regulations that are a component of any grant or contract accepted. Control Systems Finding and Recommendation: Based on our review of the schedule of grants and contracts, we noted the University is not monitoring its outstanding receivables and deferred revenues on a periodic basis. While a grants and contracts rollforward schedule was prepared, various reconciling items had not been taken into account leading to additional time and effort during the audit process to reconcile and rectify the balances. Additionally, numerous adjustments were required to the Schedule of Expenditures of Federal Awards (SEFA). We suggest the University establish a system that is capable of properly accounting for such transactions, as well as maintaining more accurate and complete records for all grant revenues and expenses. The existing system in place makes it difficult to ascertain the funds received and expended for each individual grant, the receivable outstanding at the end of the year, and any deferred revenues. Management may consider maintaining detailed grants and contracts analyses that are monitored for subsequent collections. The analyses should also include the amount, term, dates of receipt, reporting requirements, any restrictions, and other pertinent information. A similar system of monitoring should be considered for undrawn invoices with special attention as to when these are eventually drawn down and received in order to prevent any duplication of accounts. Furthermore, a reconciliation between Accounting and Grants Management departmental records should be performed regularly to minimize the amount of effort required at year-end. Views of Responsible Officials: The University concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the University’s Corrective Action Plan which is attached as Appendix B to the Single Audit Report. University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Schedule of Findings and Questioned Costs For the Year Ended September 30, 2020 26 Finding 2020-005: Accuracy of Liabilities Strong and effective controls over liabilities can be extremely critical to the survival of a business. Moreover, given that debt servicing is a priority in the periodic disbursement requirements of the University, critical management of these payment priorities and practices is key in ensuring that operational needs are adequately addressed. Review and Reconciliation Finding and Recommendation: • We noted several accruals from prior years that had not been updated to properly reflect actual invoices recorded and payments made. • Principal and interest payments were not properly accounted for during the year resulting in incorrect journal entries posted to debt and accrued interest balances. • A debt refunding transaction in the amount of $3.3 million had not been accounted for accurately. • Certain deferment of principal and interest payments, as a result of the passage of the “Coronavirus Aid, Relief, and Economic Security (CARES) Act”, had not been accounted for accurately. While correcting entries were recommended and recorded during the audit process, we recommend a more thorough review of accruals and various debt transactions. For instance, accrual entries from the prior years should be regularly analyzed to ensure these are still valid to prevent duplication of recording when the actual invoices are received and/or paid. Views of Responsible Officials: The University concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the University’s Corrective Action Plan which is attached as Appendix B to the Single Audit Report. University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Schedule of Findings and Questioned Costs For the Year Ended September 30, 2020 27 Finding 2020-006: Net Position Restrictions and Designations Net (deficit) position is the difference between total assets plus deferred outflows of resources and total liabilities plus deferred inflows of resources. It discloses the amount that may or may not be available for future spending. Review and Reconciliation Finding and Recommendation: The University had not reconciled the general ledger accounts for net (deficit) position and a detailed net asset rollforward schedule was not available. Significant delays were encountered during the audit process while the University reconciled and adjusted the general ledger. We recommend the University prepare a net position/net asset roll forward analysis to include the opening balance for each restricted net position/net asset fund, revenue (additions), expenses (releases), and the ending balance. Revenue and expenses should be reconciled to the current year financial statements and beginning net asset balances should be reconciled to prior year financial statements. Views of Responsible Officials: The University concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the University’s Corrective Action Plan which is attached as Appendix B to the Single Audit Report. Restrictions and Designations Finding and Recommendation: Restricted net position represents limitations that have been placed on assets by creditors, grantors, contributors, laws, and regulations. The University and its Foundation have various restrictions imposed by laws and regulations as well as by external parties such as creditors and grantors. During our procedures, we noted the following: • The University, including its Foundation, does not have the requisite processes and procedures in place for reporting and documenting accurate restriction classifications. • Certain details of restricted assets showed negative scholarships and had not been reconciled on a regular basis. • The Foundation for the University of the Virgin Islands (FUVI) incorrectly recorded a release of donor restricted net assets for expenditures which had been incurred in a prior fiscal year. Net assets should be released from restriction in the year in which the related expenditure is incurred. • There was incomplete documentation relative to a transfer of funds during the year to FUVI’s quasi-endowment fund. Minutes of meetings of the Board of Trustees should be expanded to include pertinent details relative to financial matters, including designations of net assets. University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Schedule of Findings and Questioned Costs For the Year Ended September 30, 2020 28 • We noted instances in which certain donor agreement’s terms and conditions did not correlate with the University’s related net asset category classification. • The University and its Foundation do not have a formal endowment policy. We recommend that the University formalize its restricted net position/net asset policy, to include (i) a description of the various types of restricted net assets; (ii) who can approve the creation of internally restricted net assets; and (iii) who can approve appropriations to and from internally restricted net assets. Additionally, we recommend that the Foundation utilize a checklist to assist with management’s review of the agreement, consideration of barriers, rights of return and release, donor restrictions, and conclusion as to whether the contribution is conditional or unconditional and with or without donor restriction. We also recommend that the Foundation improve its recordkeeping system and maintain a file for each individual grant that includes the original donor agreement and any subsequent communication with the donor regarding restrictions. In addition, the Foundation should develop an endowment policy to clarify matters such as (i) the types of gifts that will be accepted for endowment contributions; (ii) the endowment spending policy; (iii) who can create and designate contributions to the Foundation’s quasi-endowments; and (iv) an underwater endowment policy (for when the fair market value of the endowment is less than the original gift amount). Views of Responsible Officials: The University concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the University’s Corrective Action Plan which is attached as Appendix B to the Single Audit Report. University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Schedule of Findings and Questioned Costs For the Year Ended September 30, 2020 29 Finding 2020-007: Bank Accounts Cash is the most liquid of assets and has the highest risk for theft, embezzlement, and misappropriation. Timely preparation of complete and accurate bank reconciliations is key to maintaining adequate control over both cash receipts and disbursements. Strengthen Controls Over Bank Reconciliations Finding and Recommendation: We noted instances where bank reconciliations included variances that had not been properly explained or investigated. Additionally, we observed the following: • We noted that certain bank reconciliation adjustments had not been properly accounted for in the records resulting in additional and further adjusting entries. In one instance, a reconciling difference had been incorrectly reflected in other expenses when it should have been recorded as an adjustment to the bank balance. • We noted bank receipts that had not been fully analyzed for proper accounting in the books and records. Unidentified receipts in the bank should be periodically analyzed to accurately reflect them as either collections of receivables or advance payments (liabilities). • The University has retained unclaimed checks dating from 1985 to 2008. Research should be done periodically to eliminate large numbers of old items being carried from month to month and from year to year. As an auxiliary step, consideration should also be given to the Territory’s unclaimed property laws. When bank reconciliations are not performed consistently and in a timely manner, there is an increased risk of unauthorized transactions or bank errors going undetected. We recommend that bank reconciliations be prepared and reviewed for accuracy and completeness on a timely basis. Ideally, these reconciliations and reviews should take place on a monthly basis. Views of Responsible Officials: The University concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the University’s Corrective Action Plan which is attached as Appendix B to the Single Audit Report. University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Schedule of Findings and Questioned Costs For the Year Ended September 30, 2020 30 Section III - Federal Award Findings and Questioned Costs Finding Number: 2020-008 Prior Year Finding Number: N/A Compliance Requirement: Data Collection Form and Single Audit Reporting Package Information on Federal Program(s) – Small Business Administration Direct Program: Small Business Development Centers CFDA Number: 59.037 U.S. Department of Education Direct Program: Student Financial Assistance Cluster CFDA Number: 84.007, 84.033, 84.038, 84.063, 84.268 U.S. Department of Education Direct Program: Higher Education Emergency Relief Fund CFDA Number: 84.425E, 84.425F, 84.425J Criteria or Specific Requirement – 2 CFR 200.512, Report Submission, establishes that the audit shall be completed and the data collection form and reporting package shall be submitted to the Federal Audit Clearinghouse (FAC) within the earlier of 30 days after receipt of the auditor’s report or nine (9) months after the end of the audit period, unless a longer period is agreed to in advance by the cognizant or oversight agency for audit. Condition – The University did not comply with the required submission date of the data collection form and reporting package to the FAC for the fiscal year ended September 30, 2020. Questioned Costs – Not applicable. Context –This is a condition identified per review of the University’s compliance with specified requirements for 1 of 1 annual reporting. Effect – The University was not in compliance with the reporting requirements and could be exposed to a reduction or elimination of funds by the federal awarding agencies. Cause – The University did not have administrative and internal control oversight in place to ensure that the reporting package was submitted to the FAC within the required timeframe. Recommendation – We recommend that the University enhance its procedures and internal controls to ensure the reporting package is submitted to the FAC annually within the required timeframe. Views of Responsible Officials – The University concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the University’s Corrective Action Plan which is attached as Appendix B to the Single Audit Report. University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Schedule of Findings and Questioned Costs For the Year Ended September 30, 2020 31 Finding Number: 2020-009 Prior Year Finding Number: N/A Compliance Requirement: Cash Management Information on Federal Program(s) - Small Business Administration Direct Program: Small Business Development Centers CFDA Number: 59.037 Criteria or Specific Requirement – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with federal statues, regulations, and the terms and conditions of the federal award. In addition, 2 CFR section 200.305(b) requires that non-federal entities must minimize the time elapsing between the transfer of funds from the U.S. Treasury or pass-through entity and disbursement by the non-Federal entity for direct program or project costs and the proportionate share of allowable indirect costs, whether the payment is made by electronic funds transfer, or issuance or redemption of checks, warrants, or payment by other means. Condition – The University did not minimize the time elapsing between the receipt of a $320,000 advance for COVID-19 related expenses and the disbursement of the funds to the various vendors. The advance was received on February 15, 2020, and had not been expended by September 30, 2020. Questioned Costs – Not determinable. Context – This is a condition identified per review of the University’s compliance with the specified requirements using a statistically valid sample for 1 of 3 selected cash drawsdown for cash management testing out of a population of 5. The sampled total was $517,547 out of a population total of $837,547. Effect – The University is not compliance with the stated provisions. Cause – It appears that administrative and internal control oversight were not functioning as intended. Recommendation – We recommend that the University comply with the specified requirements and enhance its procedures and internal controls to ensure that they minimize the time elapsing between the transfer of funds from the U.S. Treasury or pass-through entity and disbursement for program costs. Views of Responsible Officials – The University concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the University’s Corrective Action Plan which is attached as Appendix B to the Single Audit Report. University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Schedule of Findings and Questioned Costs For the Year Ended September 30, 2020 32 Finding Number: 2020-010 Prior Year Finding Number: N/A Compliance Requirement: Procurement and Suspension and Debarment Information on Federal Program(s) - Small Business Administration Direct Program: Small Business Development Centers CFDA Number: 59.037 Criteria or Specific Requirement – The Uniform Guidance in 2 CFR Section 200.318-326, General Procurement Standards, requires that recipients of Federal awards must have adequate policies and controls in place to ensure that the procedures are properly documented in the entity’s files, provide full and open competition supported by a cost or price analysis, provide a vendor debarment or suspension certification, provide for retention of files, and that supporting documentation corroborate compliance with these requirements. Condition – In our review of 8 out of 25 procurement transactions, we noted the following: • All of the 8 selected procurement transaction files did not contain sufficient supporting documents in order to verify the contractors’ exclusion from the Excluded Parties List System to validate the procurement decisions made. • There is no evidence of issuance of Request for Proposal for 2 out of 8 samples tested. • In 1 of 8 samples reviewed, there was no evidence of quotations that had been obtained, or sole source justification before a vendor was selected. Questioned Costs – Not determinable. Context – This is a condition identified per review of the University’s compliance with the specified requirements using a statistically valid sample for 8 of 8 selected procurements. We reviewed 8 procurement files with expenditures totaling $194,350 out of the population totaling $284,366 for fiscal year 2020. Effect – The University is not compliance with the stated provisions and could inadvertently contract with or make sub-awards to parties that are suspended or debarred from doing business with the Federal government. In addition, failure to perform procurement procedures in accordance with University’s documented policies and Procurement Procedures as outlined in the Uniform Administrative Requirements could result in the procurement being disallowed. Cause – It appears that administrative and internal control oversight were not functioning as intended. Recommendation – We recommend that the University enhance its procedures and internal controls to ensure adherence to Federal regulations relating to the procurement of goods and services and review current records retention policies. Views of Responsible Officials – The University concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the University’s Corrective Action Plan which is attached as Appendix B to the Single Audit Report. University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Schedule of Findings and Questioned Costs For the Year Ended September 30, 2020 33 Finding Number: 2020-011 Prior Year Finding Number: N/A Compliance Requirement: Special Tests and Provisions - Borrower Data and Reconciliation Information on Federal Program(s) - U.S. Department of Education Direct Program: Student Financial Assistance Cluster CFDA Number: 84.007, 84.033, 84.038, 84.063, 84.268 Criteria or Specific Requirement – Institutions must report all loan disbursements and submit required records to Common Origination and Disbursement (COD) within 15 days of disbursement (OMB No. 1845-0021). Each month, the COD provides institutions with a School Account Statement (SAS) data file which consists of a Cash Summary, Cash Detail, and (optional at the request of the institution) Loan Detail records. The institution is required to reconcile these files to the institution’s financial records. Condition – During our review, we noted the following: • We selected 25 samples for testing and noted that 1 sample had not been reported within the 15 days as per the COD reporting timeline. Questioned Costs – Not determinable. Context – This is a condition identified per review of the University’s compliance with the specified requirements using a statistically valid sample for 1 of 25 disbursements selected for testing. Total fiscal year 2020 loan disbursements were $3,234,152. Effect – The University is not compliance with the stated provisions and inaccurate information may have been reported to the Federal government. Cause – It appears that administrative and internal control oversight were not functioning as intended. Recommendation – The University should immediately undertake a process to review its procedures and internal controls to ensure that they comply with the requirements of Title IV aid. Views of Responsible Officials – The University concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the University’s Corrective Action Plan which is attached as Appendix B to the Single Audit Report. University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Schedule of Findings and Questioned Costs For the Year Ended September 30, 2020 34 Finding Number: 2020-012 Prior Year Finding Number: N/A Compliance Requirement: Special Tests and Provisions - Federal Perkins Loan Liquidation Information on Federal Program(s) - U.S. Department of Education Direct Program: Student Financial Assistance Cluster CFDA Number: 84.007, 84.033, 84.038, 84.063, 84.268 Criteria or Specific Requirement – As per the compliance supplement, an institution that decided to stop participating in the Federal Perkins Loan program (Perkins) (CFDA 84.038), the institution is responsible for returning any unspent funds (34 CFR section 668.14(b)(25)). The institution must perform the end-of-participation procedures in which it must (a) notify ED of the intent to stop participating in Perkins (34 CFR section 668.26(b)(1)); (b) inform ED of how the institution will provide for the collection of any outstanding loans made under the program (34 CFR section 668.26(b)(4)); (c) purchase any outstanding loans left in its Perkins portfolios or assign them to ED (34 CFR sections 674.8(d), 674.17(a)(2), and 674.45(d)(2)); and (d) maintain program and fiscal records of all Perkins funds since the most recent Fiscal Operations Report (FISAP) was submitted, and reconcile this information at least monthly (34 CFR section 674.19(d)). Condition – There was no documentation provided supporting whether the University had ceased to participate in the Perkins loan program and had properly performed the end-of-participation procedures or not. Questioned Costs – Not determinable. Context – This is a condition identified per review of the University’s compliance with the specified requirements using a statistically valid sample. Effect – The University is not compliance with the stated provisions and inaccurate information may have been reported to the Federal government. Cause – It appears that administrative and internal control oversight were not functioning as intended. Recommendation – The University should immediately undertake a process to review its procedures and internal controls to ensure that they comply with the parameters stated in the Compliance Supplement. Views of Responsible Officials – The University concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the University’s Corrective Action Plan which is attached as Appendix B to the Single Audit Report. University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Schedule of Findings and Questioned Costs For the Year Ended September 30, 2020 35 Finding Number: 2020-013 Prior Year Finding Number: N/A Compliance Requirement: Special Tests and Provisions - Disbursement to or on behalf of Students (Loan Disbursement Notification Testing) Information on Federal Program(s) - U.S. Department of Education Direct Program: Student Financial Assistance Cluster CFDA Number: 84.007, 84.033, 84.038, 84.063, 84.268 Criteria or Specific Requirement – The institution must notify the student, or parent, in writing of (1) the date and amount of the disbursement; (2) the student’s right, or parent’s right, to cancel all or a portion of that loan or loan disbursement and have the loan proceeds returned to the holder of that loan or the TEACH Grant payments returned to ED; and (3) the procedure and time by which the student or parent must notify the institution that he or she wishes to cancel the loan, TEACH Grant, or TEACH Grant disbursement. The notification requirement for loan funds applies only if the funds are disbursed by EFT payment or master check (34 CFR 668.165). Institutions that implement an affirmative confirmation process (as described in 34 CFR 668.165 (a)(6)(i)) must make this notification to the student or parent no earlier than 30 days before, and no later than 30 days after, crediting the student’s account at the institution with Direct Loan or TEACH Grants. Institutions that do not implement an affirmative confirmation process must notify a student no earlier than 30 days before, but no later than seven days after, crediting the student’s account and must give the student 30 days (instead of 14) to cancel all or part of the loan. Condition – We sampled and selected 25 out of 1,309 files and noted no evidence provided that students or parents have been notified in writing of the date and amount of the disbursement, no earlier than 30 days before and no later than 30 days after a disbursement. Questioned Costs – Not determinable. Context – This is a condition identified per review of the University’s compliance with the specified requirements using a statistically valid sample for 25 of 25 students selected for testing. Total fiscal year 2020 loan disbursements were $3,234,152. Effect – The University is not in compliance with the stated provisions and inaccurate information may have been reported to the Federal government. Cause – It appears that administrative and internal control oversight were not functioning as intended. Recommendation – The University should immediately undertake a process to review its procedures and internal controls to ensure that they comply with the parameters stated in the Compliance Supplement. Views of Responsible Officials – The University concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the University’s Corrective Action Plan which is attached as Appendix B to the Single Audit Report. University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Schedule of Findings and Questioned Costs For the Year Ended September 30, 2020 36 Finding Number: 2020-014 Prior Year Finding Number: N/A Compliance Requirement: Special Tests and Provisions - Disbursement to or on behalf of Students (Federal Work Study Program) Information on Federal Program(s) - U.S. Department of Education Direct Program: Student Financial Assistance Cluster CFDA Number: 84.007, 84.033, 84.038, 84.063, 84.268 Criteria or Specific Requirement – The student’s wages are earned when the work is performed. The institution shall ensure that the student is paid at least once per month. The federal share must be paid by check or similar instrument the student can cash on his or her endorsement, or as authorized by the student, by crediting FWS funds to a student’s account or by EFT to a bank account designated by the student. The institution may only credit the account for tuition, fees, institutional room and board, and other institution-provided goods and services (34 CFR 675.16). Condition – We sampled and selected 18 out of 179 work study students’ timesheets and noted 2 timesheets were not approved/certified by the student’s supervisor in accordance with the internal control and compliance requirements. Questioned Costs – Below reporting threshold. Context – This is a condition identified per review of the University’s compliance with the specified requirements using a statistically valid sample for 2 of 18 students timesheets selected for testing. The total amount of expenditures charged to the program during fiscal year 2020 were $53,865. The total sampled amount was $5,244. The known amount of the 2 timesheets amounted to $660. Effect – The University is not in compliance with the stated provisions and inaccurate information may have been reported to the Federal government. Cause – It appears that administrative and internal control oversight were not functioning as intended. Recommendation – The University should immediately undertake a process to review its procedures and internal controls to ensure that they comply with the parameters stated in the Compliance Supplement. Views of Responsible Officials – The University concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the University’s Corrective Action Plan which is attached as Appendix B to the Single Audit Report. University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Schedule of Findings and Questioned Costs For the Year Ended September 30, 2020 37 Finding Number: 2020-015 Prior Year Finding Number: N/A Compliance Requirement: Special Tests and Provisions – Enrollment Reporting Information on Federal Program(s) - U.S. Department of Education Direct Program: Student Financial Assistance Cluster CFDA Number: 84.007, 84.033, 84.038, 84.063, 84.268 Criteria or Specific Requirement – Institutions are required to report enrollment information under the Pell grant and the Direct and FFEL loan programs via the National Student Loan Data System (NSLDS) (OMB No. 1845-0035), although FFEL loans are no longer made or a part of the SFA Cluster, a student may have a FFEL loan from previous years that would require enrollment reporting for that student (Pell, 34 CFR 690.83(b)(2); FFEL, 34 CFR 682.610; Direct Loan, 34 CFR 685.309). Unless an institution expects to submit its next updated enrollment report to the Department within the next 60 days, an institution must notify NSLDS within 30 days after the date that the institution discovers that (1) a Direct loan was made to or on behalf of a student who was enrolled or accepted for enrollment at the institution, and the student has ceased to be enrolled on at least a half-time basis or failed to enroll on at least a half-time basis for the period for which the loan was intended; or (2) a student who is enrolled at the institution and who received a loan under Title IV of the Act has changed his or her permanent address. (34 CFR 685.309(a)(2) and 34 CFR 682.610(c)(2)) Condition – We sampled and selected 39 out of 383 students that had changes in their enrollment status and noted that 5 out of 39 students’ enrolment status had been reported or certified beyond the required 60-day period. Questioned Costs – Not determinable. Context – This is a condition identified per review of the University’s compliance with the specified requirements using a statistically valid sample. Effect – The University is not in compliance with the stated provisions and inaccurate information may have been reported to the Federal government. Cause – It appears that administrative and internal control oversight were not functioning as intended. Recommendation – The University should immediately undertake a process to review its internal control procedures to ensure its compliance with the parameters stated in the Compliance Supplement. Views of Responsible Officials – The University concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the University’s Corrective Action Plan which is attached as Appendix B to the Single Audit Report. University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Schedule of Findings and Questioned Costs For the Year Ended September 30, 2020 38 Finding Number: 2020-016 Prior Year Finding Number: N/A Compliance Requirement: Procurement and Suspension and Debarment Information on Federal Program(s) - U.S. Department of Education Direct Program: Higher Education Emergency Relief Fund CFDA Number: 84.425E, 84.425F, 84.425J Criteria or Specific Requirement – The Uniform Guidance in 2 CFR Section 200.318-326, General Procurement Standards, requires that recipients of Federal awards must have adequate policies and controls in place to ensure that the procedures are properly documented in the entity’s files, provide full and open competition supported by a cost or price analysis, provide a vendor debarment or suspension certification, provide for retention of files, and that supporting documentation corroborate compliance with these requirements. Condition – In our review of 4 out of 8 procurement transactions, we noted 2 samples totaling $40,491 did not have evidence of sole source justification before a vendor was selected. Questioned Costs – $40,491. Context – This is a condition identified per review of the University’s compliance with the specified requirements using a statistically valid sample for 2 of 4 selected procurement transactions for testing. We reviewed 4 procurement files with expenditures totaling $218,696 out of the total population of $237,497 for fiscal year 2020. Effect – The University is not compliance with the stated provisions. Failure to perform procurement procedures in accordance with University’s documented policies and Procurement Procedures as outlined in the Uniform Administrative Requirements could result in the procurement being disallowed. Cause – It appears that administrative and internal control oversight were not functioning as intended. Recommendation – We recommend that the University enhance its procedures and internal controls to ensure adherence to Federal regulations relating to the procurement of goods and services. Views of Responsible Officials – The University concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the University’s Corrective Action Plan which is attached as Appendix B to the Single Audit Report. University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Schedule of Findings and Questioned Costs For the Year Ended September 30, 2020 39 Finding Number: 2020-017 Prior Year Finding Number: N/A Compliance Requirement: Reporting Information on Federal Program(s) - U.S. Department of Education Direct Program: Higher Education Emergency Relief Fund CFDA Number: 84.425E, 84.425F, 84.425J Criteria or Specific Requirement – Each institution must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. Condition – We selected and reviewed 3 reports out of a population of 3 submitted during the fiscal year and noted the following: • 2 reports did not agree to the underlying financial records. • 3 reports did not contain evidence of review and approval prior to submission. Questioned Costs – Not determinable. Context – This is a condition identified per review of the University’s compliance with the specified requirements using a statistically valid sample for 3 of 3 reports selected for testing. Effect – The University is not in compliance with the stated provisions and inaccurate information may have been reported to the Federal government. Cause – It appears that administrative and internal control oversight were not functioning as intended. Recommendation – We recommend the University enhance its procedures and internal controls to ensure proper retention, monitoring, and review of the required reports by an appropriate official to ensure that information submitted is complete, accurate, consistent, and submitted within the required timeframe. Views of Responsible Officials – The University concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the University’s Corrective Action Plan which is attached as Appendix B to the Single Audit Report. Management’s Appendices #2 John Brewers Bay, St. Thomas, U.S. Virgin Islands 00802-9990 - Tel. (340) 693-1403 – Fax (340) 693-1405 – www.uvi.edu September 8, 2023 BDO USA, P.A. 12505 Park Potomac Ave, Suite 700 Potomac, MD 20854 In connection with the Single Audit of the University of the Virgin Islands’ (the University) for the year ended September 30, 2020, transmitted herewith is the Fiscal Year 2020 Status of Prior Audit Findings and a Corrective Action Plan in accordance with 2 CFR §200.511, Audit Findings Follow- Up. These schedules provide the status of the Government Auditing Standards and the Single Audit findings for the prior years. The University is focused on improving its procedures to ensure that these findings are resolved. If you have any questions, please contact us. Respectfully, ___________________________________ Mr. David Hall, SJD President Ms. Shirley L. Lake-King, CGFM Vice President of Administration and Finance Ms. Stacey Chados Interim Controller Historically American. Uniquely Caribbean. Globally Office of the Vice President for Administration & Finance DocuSign Envelope ID: 68C5086F-6E66-463B-BB8F-86CE312AE6D3 University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Appendix A: Status of Prior Audit Findings For the Year Ended September 30, 2020 40 Finding 2019-001 and 2018-002: Financial Reporting Requirements Current Status: Repeated. Finding 2020-002. Reason for recurrence: The University is focused on improving its procedures. There are areas that were addressed and other areas that are still in the process of implementing new internal controls and procedures. Further, various employee transition issues have impacted the continued progression towards completed remediation. Corrective Action Plan: The Acting Controller has commenced additional review and revision of the accounting and financial reporting structure. The Director of Accounting will be implementing a process to reconcile and analyze material transactions on a monthly basis and the University will provide Banner Finance training to Controller office personnel, grant administrators and support staff. In addition, the Acting Controller is working with the Director of Grants to implement a formal process to review and reconcile grant activity on a quarterly basis. Finding 2019-002 and 2018-001: Financial Reporting for Postemployment Benefit Plan Other Than Pension Plans Current Status: Corrective action was taken. Finding 2019-003: Special Reporting Requirements - Federal Pell Grant Program Federal Program: CFDA Number 84.063, Federal Pell Grant Program Current Status: Corrective action was taken. Corrective Action Plan University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Appendix B: Corrective Action Plan For the Year Ended September 30, 2020 41 Page Number Finding Responsible Officials Estimated Completion Date Corrective Action 21 2020-001: Financial Position • Deficits in Unrestricted Net Position Vice President for Administration and Finance/CFO and Vice Provost for Access and Enrollment October 2022 The University is continuing its efforts of improving financial controls, monitoring cash flows, working with federal partners, and rebuilding equity. 22 23 2020-002: Year- End Close Process • Timeliness and Methodology of Close Process • Accuracy and Timing of Interim Financial Statements Interim Controller Interim Controller Immediately Immediately The Interim Controller will implement a proactive monitoring process to review all accounts, accruals, and reconciliations periodically, and will implement a year-end closing schedule to include cash reconciliations, accounts receivable and allowance, prepaid insurance, long-term debt, deferred tuition and grant revenue, accounts payable, and construction in progress. In addition, the Interim Controller will ensure that all post-closing adjustments are properly reviewed and timely entered. The University will review all audit adjustments made to the year-end statements, ensure that the adjustments had the intended impact on the financial statements, and incorporate the activity into the periodic closing process. University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Appendix B: Corrective Action Plan For the Year Ended September 30, 2020 42 Page Number Finding Responsible Officials Estimated Completion Date Corrective Action 23 • Debt Covenants Interim Controller June 2023 The University will implement a policy to monitor and evaluate its debt covenants. 24 2020-003: Capital Assets and Related Expenditures • Record Keeping Interim Controller September 2023 The Interim Controller will implement a process to proactively tag capitalizable assets upon receipt and ensure the assets are properly reflected in the financial management system and will implement a process at year- end to accurately account for all open and unpaid invoices pertaining to capitalizable assets. 25 2020-004: Grants Management • Control Systems Director of Accounting for Grants and Contracts and the Interim Controller September 2023 The Grants Management unit is filling two vacant grant accountant positions, and once properly staffed, the unit will implement proactive and effective monitoring of all restricted funds activities, including outstanding federal receivables and deferrals. The Director of Accounting for Grants and Contracts will implement a summary schedule of grants to include the grant award amount, receipt of drawdowns against the grant, grant reporting requirements, special terms and conditions, and any other pertinent information. University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Appendix B: Corrective Action Plan For the Year Ended September 30, 2020 43 Page Number Finding Responsible Officials Estimated Completion Date Corrective Action The Director will also provide the Interim Controller with quarterly updates of grant award activity. 26 2020-005: Accuracy of Liabilities • Review and Reconciliation Director of Accounting for Operations; Interim Controller; and the Vice President for Administration and Finance/CFO. July 2023 The Director of Accounting for Operations will implement a process to ensure that accrual entries are properly accounted for and that principal and interest for debt transactions are properly recorded. The Director will provide the Interim Controller with all journal entries to record and follow up on accruals as well as work collaboratively to enhance the control system over debt transactions to ensure timely and accurate reporting of all categories of debt. 27 27 2020-006: Net Position Restriction and Designations • Review and Reconciliation • Restrictions and Designations Interim Controller Vice President for Administration and Finance/CFO and Executive Director December 2023 October 2023 The Interim Controller will implement a net position/net asset roll forward analysis. The University will work with the Foundation to properly identify restrictions and designations related to net position. The FUVI will adopt an endowment policy and perform periodic reviews to ensure compliance with donor agreements and the release of funds. University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Appendix B: Corrective Action Plan For the Year Ended September 30, 2020 44 Page Number Finding Responsible Officials Estimated Completion Date Corrective Action 29 2020-007: Bank Accounts • Strengthen Controls Over Bank Reconciliations Director of Accounting for Operations July 2023 The Director of Accounting for Operations will ensure that bank reconciliations are timely performed, all receipts are properly recorded to the University’s books and records, and that unclaimed checks are properly accounted for. In addition, the Director will provide the Interim Controller with a copy of the monthly bank reconciliation and each journal entry record of bank receipts. 30 2020-008: Data Collection Form and Single Audit Reporting Package Vice President for Administration and Finance June 2023 The University remains committed to and is focusing its efforts towards timely submission of the Data Collection Form and Reporting Package. 31 2020-009: Cash Management Interim Controller June 2023 The Interim Controller will ensure that the Director of Accounting for Grants and Contracts proactively monitors the receipt of advanced funds and ensures that the funds are timely disbursed for program costs or returned to the grantor agency if not expended. The Interim Controller will also ensure that waivers or updated award documents are received from the grantor, to serve as evidence of changed terms. 32 2020-010: Procurement and Suspension and Debarment Director of Purchasing, Interim Controller, Director of Accounting for Grants and Contracts, and Grant Accountants June 2023 The Director of Purchasing will review the controls established for procurement at the University, and consistently apply the controls established to all purchases. University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Appendix B: Corrective Action Plan For the Year Ended September 30, 2020 45 Page Number Finding Responsible Officials Estimated Completion Date Corrective Action Additionally, the Director of Purchasing will review all purchases considered sole source to validate the required justification is secured before moving forward with the purchase, and all necessary supporting documents are secured, and verification processes are completed before submitting for final processing. Also, all Grant Accountants will perform a review of the vendor invoices received for processing, to confirm the vendor is properly not included on the Excluded Parties List System on sam.gov. 33 2020-011: Special Tests and Provisions - Borrower Data and Reconciliation Financial Aid Director September 2023 Financial Aid will conduct an internal comparative analysis of Banner student disbursements to the extracted batch records for transmission to COD to ensure no student records are skipped during the extraction process. 34 2020-012: Special Tests and Provisions – Federal Perkins Loan Liquidation Interim Controller, Director of Accounting for Operations June 2023 The University is actively working with the U.S. Department of Education to pay off outstanding loan balances not previously turned over to the USDOE. To further implement the recommendation, the University’s Director of Accounting for Operations will conduct a reconciliation of loan balances previously turned over to the USDOE and will subsequently conduct reconciliations monthly. In addition, the University is in contact with the USDOE and a third-party loan servicing provider to determine whether the University previously performed end of participation procedures, and if not, to ensure compliance with such procedures. University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Appendix B: Corrective Action Plan For the Year Ended September 30, 2020 46 Page Number Finding Responsible Officials Estimated Completion Date Corrective Action 35 2020-013: Special Tests and Provisions - Disbursement to or on behalf of Students (Loan Disbursement Notification Testing) Director of Financial Aid December 2023 The University has identified the following steps to be implemented to address the finding, as outlined: When Direct Loan funds are being credited to a student’s ledger account, the school will also notify the borrower in writing (paper or electronically) of the • anticipated date and amount of the disbursement • student’s or parent’s right to cancel all or a portion of a loan, loan disbursement and have the loan proceeds returned to the Department; and • procedures and deadlines by which the student or parent must notify the school that he or she wishes to cancel the loan or loan disbursement. 36 2020-014: Special Tests and Provisions - Disbursement to or on behalf of Students (Federal Work Study Program) Director of Financial Aid Dean of Students September 2023 New Timesheets will be created for the 2023-24 aid year to identify the specific types of work study programs and new routing processes. All timesheets being transmitted electronically via email to Payroll must be forwarded/copied to the Offices of Career and Placement Services and Financial Aid. • Timesheets will be amended with specific headings i.e., Federal Work-study Program/Title IV Aid with a notation of the routing process. • No Payroll Authorization will occur without a Valid Timesheet being on file at the payroll office. • For check and balances, once a timesheet is received it will be matched and placed with the student record of appointment in the Offices of Career and Placement Services and Financial Aid. University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) Appendix B: Corrective Action Plan For the Year Ended September 30, 2020 47 Page Number Finding Responsible Officials Estimated Completion Date Corrective Action 37 2020-015: Special Tests and Provisions – Enrollment Reporting Registrar December 2023 The University will review the reports deemed late and work with NSLDS to ensure the files are accurately reported. The University will also strengthen controls related to the Enrollment Reporting Process by reviewing best practices and implementing any necessary changes to the current process. 38 2020-016: Procurement and Suspension and Debarment Director of Purchasing, Interim Controller, Director of Accounting for Grants and Contracts, and Grant Accountants June 2023 The Director of Purchasing will review the controls established for procurement at the University, and consistently apply the controls established to all purchases. Additionally, the Director of Purchasing will review all purchases considered sole source to validate the required justification is secured before moving forward with the purchase, and all necessary supporting documents are secured, and verification processes are completed before submitting for final processing. Also, all Grant Accountants will perform a review of the vendor invoices received for processing, to confirm the vendor is properly not included on the Excluded Parties List System on sam.gov. 39 2020-017: Reporting Interim Controller June 2023 The Interim Controller will work with the Director of Accounting for Grants and Contracts to ensure that there is an appropriate, documented review process for Federal financial reports. Specifically, the Director will ensure that the grant accountants are cognizant of the reporting requirements and the special terms and conditions associated with a grant and that financial and other reports comply with the special terms and conditions. In addition, the Interim Controller will ensure that the grant accountant who prepares the financial report affixes his/her signature or initials; and the Director similarly affixes his signature or initials subsequent to a review of the report.