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
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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.
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Where do we start?
The Foreign School Audit Guide
The Student Financial Aid Handbook for Foreign SchoolsChapter 2 – Page 57
These are ‘must’ reads
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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.
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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
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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
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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
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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
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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
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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
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Getting ‘The List’ of files to be reviewed
Request as a report in NSLDS and will be transmitted to you via EdConnect
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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
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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
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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
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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
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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
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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
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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.
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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
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Student Eligibility
Going for the
‘Perfect’ File
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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
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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.
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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)
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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?
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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)
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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
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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
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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
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After the Audit Takes Place
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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.
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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
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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
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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.
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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
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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
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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
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