preparing for

1. preparing for audits

2. agenda Workbook page 2

3. Workbooks

4. Preparing for an Audit

5. Workbook page 3 audits • 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 2009-2010 FSA Handbook, Vol 2, Chapter 11 and Chapter 12 34 CFR 668.23(a)(1), 34 CFR 668.23(a)(5)

6. audit preparation • Think like an auditor • Audit date • Auditors are looking at samples to extrapolate into trends • Focus on your basic processes beforethe audit • Policy and Procedures Manual • Up-to-date Workbook page 4

7. audit preparation • 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 Workbook page 4

8. audit preparation • 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 Workbook page 4

9. auditing tools • 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 Workbook page 5

13. the self-audit • 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 Workbook page 5

14. the audit • 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

15. the audit • Be prepared to respond to findings • Auditors are not alwayscorrect —findings can be an area for discussion • It is possible to discuss a potential finding before it is included in a report

16. the audit - documents • Documents examined • School catalog • Accreditation letter • Licenses, if applicable • Program Participation Agreement • Enrollment records Workbook page 5

17. the audit - documents • Loan applications and counseling documents • Award calculations • Title IV funds received and disbursed • R2T4 calculations • NSLDS reports • G5 records Workbook page 5

18. the audit • 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 Workbook page 6

19. 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 System https://ezaudit.ed.gov/EZWebApp/common/login.jsp Workbook page 6

20. Top 10 Audit Findings Workbook page 7

21. #10 Credit Balance Deficiencies Workbook page 8

22. #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 Workbook page 8

23. #10 credit balance deficiencies • Examples • Unable to determine when a credit balance occurred • Credit balances not released within 14 days • Credit balances held without student authorization Workbook page 10

24. #9 Student Status Confirmation Reporting (SSCR) Errors Workbook page 10

25. #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

26. SSCR reporting errors • Examples • File not submitted within 30 days • Using incorrect enrollment status code • Incorrect graduation effective date • Student(s) reported withdrawn incorrectly Workbook page 10

27. #8 Incorrect Pell Payments Workbook page 11

28. #8 incorrect Pell payments • Recalculation not performed • Changes in EFC due to • Corrections • Updating • Adjustments • Overpayments can be repaid by • Adjusting future disbursements • Repayment Workbook page 11

29. #8 incorrect Pell payments • 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 Workbook page 12

30. #8 incorrect Pell payments 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? T

31. #8 incorrect Pell payments TRUE or FALSE A school must have a procedure in place to know whether a student has begun attendance in all classes? T

32. #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 Workbook page12

33. #8 incorrect Pell payments • 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 Workbook page 12

34. #7 Verification Violations Workbook page 13

35. #7 verification violations • Examples • Verification worksheet • Untaxed income • Conflicting information • Required corrections • Verification • Dependency overrides not signed not verified not resolved not processed incomplete improperly/undocumented* Workbook page 14 *finding on both audits & program reviews

36. #6 Auditor’s Opinion Cited in Audit Workbook page 14

37. #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 Workbook page 14

38. #6 auditor’s opinion cited in audit Examples • Failure to reconcile program accounts • High Perkins default rates • Continuing problems with R2T4 • Inadequate accounting systems and/or procedures • Lack of internal controls Workbook page 14

39. #6 auditor’s opinion cited in audit • Lack of Administrative Capability • Incorrect R2T4 calculations • Improper academic progress standards • Inadequate accounting system Workbook page 14

40. #5 Student Status vs. Common Mistakes Workbook page 15

41. #5 student status vs. common mistakes Examples • “W” for graduated students • Incorrect graduation date • Students reported as withdrawn for summer break Workbook page 15

42. #4 Entrance and Exit Counseling Deficiencies

43. #4 entrance counseling • Entrance counseling A. First-time borrowers must complete loan counseling before first disbursement is made B. May be conducted individually, in groups or online C. Materials not received online must be mailed to borrower Workbook page 16

45. #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 Workbook page 17

46. #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 Workbook page 17

48. #4 exit counseling graduating or • You must ensure students • May be conducted • Must document withdrawing receive loan counseling individually, in groups or online that student participated in and completed counseling Workbook page 18

49. #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 file 2009-10 FSA Handbook Volume 2, Chapter 6, Pages 78-84

50. #3 R2T4 Calculation Errors Workbook page 19