preparing for audits
agenda
Audit Preparation ■ Types of Audits■ Institutional Responsibility
Top 10 Audit Findings
■ Examples■ Resolutions
Program Reviews ■ Program review findings
Workbook page 2
Workbooks
Preparing for an Audit
■ Types of Audits♦ Compliance audit♦ Financial statement audit
■ Schools♦ For-profit schools (and servicers)
• Compliance audit conducted under ED’s FSA Audit Guide
♦ Public & nonprofit• Audit conducted in accordance with
Office Management and Budgets A-133
audits
2009-2010 FSA Handbook, Vol 2, Chapter 11 and Chapter 12 34 CFR 668.23(a)(1), 34 CFR 668.23(a)(5)
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■ Think like an auditor♦ Audit date
♦ Auditors are looking at samples to extrapolate into trends• Focus on your basic processes before
the audit• Policy and Procedures Manual
– Up-to-date
audit preparation
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■ Who♦ Schools must hire a qualified
independent auditor♦ State schools may use state auditors
■ When♦ Compliance and financial audits must be
conducted annually on the basis of the school's fiscal year
audit preparation
Workbook page 4
■ Policy and procedures manual
♦ Focus on functionality, not appearance
■ Emphasis on content
■ Policy and procedures manual should be the “road map” for all of your internal processing
audit preparation
Workbook page 4
■ FSA assessments toolhttp://ifap.ed.gov/IFAPWebApp/qualityassurance/SFAAssessment.jspFF
■ The assessments assist
♦ evaluating processes
♦ providing citations
♦ self-test activities and summaries to ensure completeness
auditing tools
Workbook page 5
■ Select files at the end of a term, check processes♦ Policies and procedures – up-to-date
♦ Verification – complete, correct
♦ Packaging - correct
♦ Disbursements – timely, correct
♦ Other – credit balances
the self-audit
Workbook page 5
■ Organize documents within files before the audit
■ Documents need to be in a consistent order
■ Auditors searching files for documents may encourage a more methodical review
the audit
■ Be prepared to respond to findings
■ Auditors are not always correct —findings can be an area for discussion
■ It is possible to discuss a potential finding before it is included in a report
the audit
■ Documents examined
♦ School catalog
♦ Accreditation letter
♦ Licenses, if applicable
♦ Program Participation Agreement
♦ Enrollment records
the audit - documents
Workbook page 5
■ Loan applications and counseling documents
■ Award calculations
■ Title IV funds received and disbursed
■ R2T4 calculations
■ NSLDS reports
■ G5 records
the audit - documents
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■ How♦ Schools must now use ED's eZ
-Audit Web site to submit their financial statements and compliance audits
♦ Effective June 16, 2003
FSA AUDIT GUIDE http://www.ed.gov/about/offices/list/oig/nonfed/sfa.html
the audit
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20
■ Provides Instant Audit Info
■ Identifies Overdue Audits
■ Streamlined FSA Review Process
■ Non-editable PDF file (official record) Retained & Used to Validate Data
■ Add’l Changes to Reduce Reporting Burden
Ez-Audit Systemhttps://ezaudit.ed.gov/EZWebApp/common/login.jsp
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Top 10 Audit Findings
Workbook page 7
#10 Credit Balance Deficiencies
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#10 credit balance deficiencies
■ Must pay A. Date balance , if balance
occurred after first day of class of a
B. First day of classes of payment period if occurred on or before first day of class
occurred
payment period
credit balance
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■ Examples
♦ Unable to determine when a credit balance occurred
♦ Credit balances not released within 14 days
♦ Credit balances held without student authorization
#10 credit balance deficiencies
Workbook page 10
#9 Student Status Confirmation Reporting
(SSCR) Errors
Workbook page 10
#9 SSCR reporting errors
■ Report filed late
♦ After 30 days of receipt of roster
■ Report not filed
♦ Not less than twice a year
■ Report not retained for 3 years
Workbook page 10
SSCR reporting errors
■ Examples
♦ File not submitted within 30 days
♦ Using incorrect enrollment status code
♦ Incorrect graduation effective date
♦ Student(s) reported withdrawn incorrectly
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#8 Incorrect Pell Payments
Workbook page 11
■ Recalculation not performed♦ Changes in EFC due to
• Corrections• Updating• Adjustments
♦ Overpayments can be repaid by• Adjusting future disbursements• Repayment
#8 incorrect Pell payments
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■ Change in enrollment status between terms
♦ Term-based, credit-hour programs must calculate a student’s payment for each term
♦ Enrollment status may be different in each term
♦ Must recalculate if different
#8 incorrect Pell payments
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TRUE or FALSE
A student is considered to have begun attendance in all classes if student attends at least one day of class for each course?
#8 incorrect Pell payments
T
TRUE or FALSE
A school must have a procedure in place to know whether a student has begun attendance in all classes?
#8 incorrect Pell payments
T
#8 incorrect Pell payments
■ Annual award calculated incorrectly♦ Examples
• Incorrect EFC used• Incorrect Pell formula• Inaccurate proration calculation• Adjustments not made when
enrollment status changed/courses not counted in enrollment status
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■ Interim disbursement not recovered♦ An interim disbursement allowed before
verification is complete• First payment period
♦ School is liable for interim disbursement if student• Received an overpayment• Fails to complete verification
#8 incorrect Pell payments
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#7 Verification Violations
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■ Examples ♦ Verification worksheet ♦ Untaxed income ♦ Conflicting information ♦ Required corrections ♦ Verification ♦ Dependency overrides
*finding on both audits & program reviews
#7 verification violations
not signed
not verifiednot resolved
not processed
incomplete
improperly/undocumented*
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#6 Auditor’s Opinion Cited in Audit
Workbook page 14
#6 auditor’s opinion cited in audit
■ Independent auditor’s opinion cited♦ Refers to anything other than an
unqualified opinion
♦ Indicates serious deficiencies/areas of concern in the audit
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Examples
■ Failure to reconcile program accounts
■ High Perkins default rates
■ Continuing problems with R2T4
■ Inadequate accounting systems and/or procedures
■ Lack of internal controls
#6 auditor’s opinion cited in audit
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■ Lack of Administrative Capability
■ Incorrect R2T4 calculations
■ Improper academic progress standards
■ Inadequate accounting system
#6 auditor’s opinion cited in audit
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#5 Student Status vs. Common Mistakes
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Examples
■ “W” for graduated students
■ Incorrect graduation date
■ Students reported as withdrawn for summer break
#5 student status vs. common mistakes
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#4 Entrance and Exit Counseling Deficiencies
must complete loan
counseling before first disbursement
is made
A. First-time borrowers
B. May be conducted
#4 entrance counseling
■ Entrance counseling
individually, in groups
or online
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C. Materials not received online must bemailed to borrower
#4 exit counseling
■ Required for exit counseling♦ Review of entrance counseling ♦ Consequences of default
• Adverse credit• Collection and litigation
♦ Repayment required♦ Average monthly repayment schedules♦ Repayment options
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#4 exit counseling
■ Required for exit counseling♦ Debt management strategies ♦ Forbearance, deferment and
cancellation options♦ NSLDS and FSA Ombudsman ♦ Rights and Responsibilities♦ Personal contact information
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#4 exit counseling
■ You must ensure students
■ May be conducted
■ Must document
graduating orwithdrawing receive loan counseling
individually, in groupsor online
that student participated in and completed counseling
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#4 entrance & exit deficiencies
■ What can you do♦ Without notification
• Online• Mail sent to last known address
♦ Materials must be mailed • Within 30 days
♦ Not required to use certified mail with a return receipt requested
♦ Must document student’s file2009-10 FSA Handbook
Volume 2, Chapter 6, Pages 78-84
#3 R2T4 Calculation Errors
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■ Examples
♦ Institutional charges incorrect
♦ Scheduled breaks not included
♦ Incorrect withdrawal dates
♦ Use of out-of-date R2T4 forms
♦ Mathematical errors
#3 R2T4 – calculation errors
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■ Tools to assist in R2T4
♦ Worksheets can be found athttp://www.ifap.ed.gov/ifap/titleiv.jsp
♦ Software can be accessed at
http://www/fafsa.ed.gov/FOTWWebApp/faa/faa.jsp
♦ Worksheets and software is optional
#3 R2T4 – calculation errors
2008-09 FSA HandbookVolume 5, Chapter 2, Page 119-125
#2 R2T4 Returns Made Late
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■ An institution does not satisfy the requirements if♦ Institution’s records show check was
issued more than 45 days
♦ Date on cancelled check shows bank endorsed check more than 60 days or later
#2 R2T4 returns made late
Interim Final RegulationsFederal Register, Vol 71, No 152, Page 45672
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■ Examples♦ Returns not made within 45 days♦ Inadequate system in place to
identify/track withdrawals♦ No process in place to track number
of days remaining to return funds♦ Lack of coordination between offices
#2 R2T4 returns made late
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#1 Repeat FindingsFailure to Take
Corrective Action
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■ School failed to adequately develop, implement and/or monitor procedures to ensure corrective action plan was followed
■ Same finding(s) indentified in subsequent audit(s)
#1 repeat findings
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Program Review Findings
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audit & program review findings
■ R2T4 Calculation errors■ Return of Title IV funds made late■ Pell Overpayment/Underpayment■ Verification Violations■ Entrance/Exit counseling deficiencies■ Credit Balance deficiencies
Workbook page 21
■ Consumer information requirements not met
■ Lack of administrative capability
■ Policies and procedures not developed
■ Crime statistics not reported or reported incorrectly *
■ Inadequate SAP policy
program review findings
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consumer information
■ Campus Security■ Crime statistics■ Fire Safety Report for On-campus
Housing■ Missing Persons Policies and
Procedures■ Drug Violation Notification and Penalties■ Drug and Alcohol Prevention Program
Workbook page 22 & 23 DCL 08.12
knowledge
practice
application
closing thoughts…
Thank you for joining me today!
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