Building a ‘Perfect’ File For Your Audits

Building a ‘Perfect’ File

For Your Audits

Presented by

Erich McElroy

Global Education Management Services

Session Goals

Understand the key elements of the yearly audit

Review of the audit package

Tips on how to have ‘perfect’ files

Resolving common problems

Resources


Do we have to do it?

Yes

The requirement applies to all institutions in the Stafford and PLUS programs whether you process one loan or hundreds.


Where do we start?

The Foreign School Audit Guide

The Student Financial Aid Handbook for Foreign SchoolsChapter 2 – Page 57

These are ‘must’ reads


Why do they ask for it?

In order to ensure the program’s integrity with the Stafford and PLUS loan programs.

Remember - these are ‘taxpayers’ monies you are administering, so they must be able to say these funds are being awarded lawfully.


What is required?

There are two types of audits that are requested each year.

Depending on the volume of aid you process will determine how the audits must be presented

A ‘year’ is equal to your institution’s fiscal year


Compliance Element

Compliance Audit The compliance audit reviews the

day to day processing of your files, including whether you follow required procedures and have administered the programs correctly

Conducted by an external auditor

Will involve reviewing a sample or perhaps all of your individual student files


Two types of Compliance Audit

Standard Compliance Audit For institutions that process more

than $500,000 Full review of policies and

procedures

Alternative Compliance Audit For institutions that process less

than $500,000 Slightly less involved, but key

elements the same


Financial Element

Financial AuditThe financial statement for

the applicable yearConducted by an external

auditorDifferent requirements

based on aid each yearAmount of aid is

determined by the Department of Education


Two types of Financial Statements

Process less than $500,000 per year These institutions are exempt from filing a financial statement

Process more than $500,000 per year but less than $3,000,000 Your normal financial statement may be submitted according to local standards Must be submitted with a full English translation

Process more than $3,000,000 per year but less than $10,000,000 Financial statement must be translated to provide statements

that: Conforms to U.S. GAAP every three years Must be stated in U.S. Dollars Must be submitted with a full English translation

Process more than $10,000,000 per year Financial statement must be translated to provide statements

that: Conforms to U.S. GAAP every year Must be stated in U.S. Dollars Must be submitted with a full English translation


Getting Started – Compliance Audits

Engaging an auditor Can be same auditor that

does your financials Requirements of engagement

letter in The Guide Must follow it precisely – Standard letters, statements

and assertions listed

Knowing which years? Any requested


Getting ‘The List’ of files to be reviewed

Request as a report in NSLDS and will be transmitted to you via EdConnect


The Compliance Audit

Review will be either a sample or all of files in a year depending on numbers of students

Reviews system of internal controls

Compliance with general requirements

Visit each site Any Location where more than 50%

of a course is taught should be listed with the Department

Review institution approval and key documents Such as ECAR and PPA View prior audits


The Compliance Audit - Key factors

General School Eligibility and participation

Student Status Confirmation Reporting

Student eligibility

Processing loan proceeds and counselling borrowers

Treatment of Title IV (Stafford and PLUS) funds for withdrawn students

Administrative capability


The Compliance Audit - Key factors (cont.)

Eligible Programs Check that the program is listed on

the ECAR ECAR: Eligibility and Certification

Approval Report www.eligcert.ed.gov

Legal Authority to operate

Satisfactory Academic Progress Policy in place and test how used


Note on SSCR Reporting

SSCR – is a report to update agencies on students’ enrolment status Will review accuracy and timeliness

The Guide specifically instructs the auditor to list a finding even if no SSCR was ever received for a student Solutions for SSCR Reporting

NSLDS registration – when selected by Department

Clearinghouse


Foreign Medical Schools Only

Must have appropriate approval

Must provide clinical and classroom medical instruction of not less than 32 months in length

Must have appropriately approved clinical training unless 60% of students not US

classified 60% of students pass ECFMG

test


The Compliance Audit - Key factors (cont.)

Auditor may review Accounting of funds Timing of fund receipt and

delivery Appropriate notifications Funds should not be paid to an

account more than 10 days before the start of a payment period

Return any credit balances to student within 14 days


Return of Title IV Funds

Auditor will want to review procedures and polices for Return of Funds (Stafford and PLUS).

Auditor will need to review sample of withdrawn students.

Note: Now have 45 days to return funds, extended from 30.


Key Factor – Testing Overall Administrative Capability

Capable individual administering aid

SAP Policy

Notify ED of changes within 10 days

Adequate checks and balances

Procedure to notify ED Office of Inspector General of fraud

Participate in mandatory electronic processes

Making available school’s completion rate, graduate rate and other information as applicable


Student Eligibility

Going for the

‘Perfect’ File


Student Eligibility Going for the ‘Perfect’ File

SAR or ISIR – Required for each student Needs a valid EFC

00000 to 99999 Review Comments

Page Three of Eight Page Original SAR

Watch out if ‘C’ next to EFC Sample: 00000 C


Student Eligibility (cont.)

At least ½ time enrolled and attended ½ time is determined by your institutional

policy Guide states that an institution:

“Be able to document that each student who received FFELP funds actually attended class…during the period of enrolment for which the loan was made.” FSAG page 3 – 15

Loan Amounts Test that student received correct

amounts of Subsidized Stafford, Unsubsidized Stafford and PLUS based on Cost of Attendance, EFC and other aid.


Student Eligibility (cont.)

Verify Student was: A regular student In an eligible program (as listed on

ECAR) In Satisfactory Academic Progress

during enrolment Completed Secondary School Is a US Citizen or Eligible Non-Citizen Valid Social Security Number (SSN) Not in Overpayment or Default on

Prior Loans No Current Drug Conviction Registered with Selective Service

(Male Students only)


Resolving Common Conflicts

The Student Aid Report (SAR) Flags discrepancies in the systems

which the institution is asked to resolve

Most common flags seen by foreign schools Citizenship Name and SSN matching Prior Overpayments or Defaults on

Federal Loans Nearing aggregate Stafford loan

maximums Registered with Selective Service

(Male Students only) Others?


Resolving Common Conflicts (cont.)

Citizenship Request copy of passport or birth

certificate If student is not yet a citizen may be

see the current year School Handbook

Name and SSN Matching Have student check to make

corrections Have them correct the FASFA if

necessary Request applicable documentation

(including SSN card)


Resolving Common Conflicts (cont.)

Overpayments or Defaults and Aggregate Issues Review NSLDS record for borrower if

you have access Contact guarantee agency and

request borrower history

Selective Service – Males only If not listed as check www.sss.gov Must then instruct student to register If too old to register (26 and older)

may be ineligible to received Federal loans


Loan Counselling

Will examine SAR/ISIR to see if student has borrowed before, if hasn’t Entrance Counselling required

For students who have ceased to attend at least ½ time Exit Counselling must be demonstrated


Example - An Ideal File

A file that is ‘audit’ friendly would contain Valid Original SAR/ISIR Checklist and Calculation Summary Master Promissory Notes (MPN) for each

Federal Loan School Certifications for each loan Proof of Loan counselling Entrance - if required Exit – required for all

Clear Notes on student or email correspondence

Other forms required by university (Award letter, additional applications, etc.)

Proof of resolution of any ‘C’omments or conflicts


After the Audit Takes Place


Auditor’s Report

Auditor needs to take information and create report.Audit guide has very

specific templates auditor can use.

Failure to follow correct format will result in the audit being rejected.


Findings

Findings Institution must submit to the

auditor a ‘Corrective Action Plan’ for each finding

If no ‘Corrective Action Plan’ is submitted the audit will be returned

Plan should state Institutions concurrence with

finding Action plan to address issues Status of previous findings and

action plans


Alternative Compliance Audit

For institutions below $500,000 Audit guide mistakenly lists

$300,000.

Difference with Alternative Very similar review of files except:

Different Attestation Statements used

Auditor is not required to follow-up on prior audit findings


What will be submitted?

You must submit the compliance audit and the financial audit together. Including the Corrective

Action Plan

The financial audit must be ‘signed’ by the auditing firm.


Where to submit audits?

Once both Compliance and required Financial Statements are ready follow submission directions in Foreign School Guide Chapter 2, page 2-60.

Institution is responsible for sending audits – not the auditor

Financial statement must be ‘signed’

Due 6 months after end of institutions fiscal year


After Submission

Audit is received by Document Control and Receipt Reviewed for correct presentation

and completeness Approved – sent to case manager Rejected – sent back to institution

Foreign School Team Reviews audits Reviews findings and accesses

liability if applicable Contacts institution with questions


Resources

Resources Foreign School Audit Guide

http://www.ed.gov/about/offices/list/oig/nonfed/Fgn092402.pdf

Dear Colleague Letter August 2003 http://ifap.ed.gov/dpcletters/GEN0310.html

Dear Colleague Letter June 2006: www.ifap.ed.gov/dpcletters/attachments/GEN0611.pdf

Foreign School Handbook http://www.ifap.ed.gov/eannouncements/0909foreignschools.html


Questions

????

Erich McElroy Email: [email protected]


Documents

Building a ‘Perfect’ File For Your Audits