ACCBO – Fall 2009 OFFICE OF THE STATE AUDITOR

1. ACCBO – Fall 2009OFFICE OF THE STATE AUDITOR Carol Smith, Audit Manager

2. Audit Strategy Update • Timing of audits • Type of audits • New initiatives?

3. Timing of Audits - 24 Colleges scheduled for this year - As is typical, after CAFR work and universities - Internal control - interim at many colleges - SACS colleges have priority

4. Types of Audits - Financial audits – based on risk factors - Last audit - Audit findings - Changes in personnel, systems, programs, processes - Single Audit – Student Financial Assistance and Federal Career and Technical Education (VOED) - Fiscal Control - Not likely this year

5. Audits for FYE 2009 Colleges with SACS requirements • Fayetteville Technical CC • Halifax CC • McDowell CC • Nash CC All of these colleges will be audited for the fiscal year end to achieve compliance with SACS requirements.

6. Audits for FYE 2009 • Single Audit – Student Financial Aid – 3 Colleges • Statewide selection of audits – both colleges and universities • Selection is risk based – by federal requirements we must continue to audit this major program annually until it is no longer high risk in the State

7. Audits for FYE 2009 Single Audit - Federal Career and Technical Education (VOED) This program is one which is typically audited every 3 years due to its large dollars in the State of North Carolina. We have selected 3 Colleges to audit.

8. Audits for FYE 2008 • Reporting for Single Audit work • Separate report • Separate management letter and letter of representation

9. Submission of Financials • Who submitted electronically to OSA? • Concerns? carol_smith@ncauditor.net

10. Submission of Financials Email from OSA Requesting the following: • copy of CAFR documents as submitted to OSC (August deadline) September deadlines: • Individual financial statement Exhibits (based on pro forma on OSC’s website) • Management’s Discussion and Analysis • Notes to the Financial Statements

11. Submission of Financials • It is also helpful to submit the Cash Flow template and the Foundation Conversion template in September. • Submit as required by the letter of representation that each college signs and submits to OSC.

12. Submission of Data File • Data file submission is necessary every year. • Routine written to somewhat automate process • Must hit ENTER or RETURN • Do not TAB • Password obtained from OSA IS audit • One password used for all Colleges • Entering “wrong” password 3 times requires that the password be changed

13. Submission of Data Files • Obtain password at the point that you are ready to submit • Waiting after obtaining password may mean that the password has had to be changed • Causes Delays for all • College receives no notification that file is successfully transmitted

14. Proposed Solutions to Submissions • College should build file, log in, transmit, send email to OSA. OSA will verify that transmission was received. • OSA sets a schedule for each College to submit - viable? • Colleges download files to NCCCS – OSA obtain from NCCCS • OSA may set up individual FTP server and passwords

15. Scope of Audits FYE 6/30/08 • Financial statement audits performed at 28 colleges • Audits of Student Financial Aid Cluster performed at 7 institutions (statewide sample)

16. Results of Audits • All colleges received an unqualified opinion • 8 colleges had no findings in the financial statement audit • 17 colleges had a finding of deficiencies in financial reporting • 10 colleges had a finding of improper system access to support segregation of duties • Other deficiencies identified – not common to multiple colleges

17. Results of Audits • Capital Assets • Failure to reconcile general and subsidiary ledger • Depreciation errors – calculation • Omission of capital assets- failure to capitalize • Fully depreciated capital assets – failure to reevaluate useful lives • Errors in recording CIP

18. Results of Audits • Depreciable Capital Assets and reevaluation of useful lives • Typically capital assets should be evaluated each year and useful lives adjusted as it is determined that the previous estimate will not reflect actual usage. The change in estimate is then reflected in current and future depreciation. • When the annual evaluation has not taken place and the assets have become fully depreciated, there is an error in applying an accounting principle. This requires a restatement of net assets. If there is no significant impact, the adjustment can be recorded prospectively.

19. Results of Audits • Cash • Interfund Borrowing • Duplication between cash and investments • Duplication between College and CU • Misclassifications • County Capital Aid recorded as State Capital Aid • Net Assets • State bond proceeds recorded as Capital Grants instead of State Capital Grants

20. Results of Audits • Accounts Receivable • Subsidiary and General Ledger did not agree • No allowance for doubtful accounts • Allowance for doubtful accounts – documentation of accounting estimate - historical • AR and unearned revenue overstated – Fall registrations

21. Ready for Audit? • Grouping Sheets/ supporting schedules for statements ready and available • Documentation for note disclosures available • Auditors will need College staff to be responsive to questions • College assistance may reduce audit time and bills for audit • Auditors should be located close to business office

22. QUESTIONS?