Single Audit: Don’t Be Scared… Be Prepared!
Lisa DiGiusto Manager, CPA
25 October 2022
If you work in upper management of higher education, there are two words that will scare you more than any ghost or goblin this Halloween season…Single…Audit. There is nothing more frightening than an auditor rummaging through your files looking for mistakes you’ve made (or at least that’s exactly what it feels like). There are some tips and tricks I am going to share that will help you be pro-active, take control of the process, and look like an all-star to your auditors.
If you’re a new controller, CFO, or financial aid director or haven’t had the pleasure of participating in the process before, here’s some background. In order to participate in the federal aid programs, an institution receiving federal funds must annually submit an audit report prepared by an independent audit firm that assesses the institution’s financial position and its management of federal funds. The report is due within nine months of the end of the institution’s fiscal year to the Federal Audit Clearinghouse. There are some exceptions to the requirement based on the amount of funds received and the type of institution.
As the saying goes, “By failing to prepare, you are preparing to fail.” Since we are all winners, here are some steps you can take ahead of time to make sure your audit experience is as smooth as silk.
• Review your current Program Participation Agreement to make sure it is up-to-date. This is particularly important if there have been personnel or academic program changes at your school.
• Review your current Eligibility and Certification Approval Report (“ECAR”) to make sure it is up-to-date. Pay particular attention to the ‘Servicer Information Section.’ If you no longer use a third party service provider that is listed, get it removed. Ensure you have an up-to-date SOC-1 Report for all servicers that you do utilize. Your institution is responsible for their compliance too.
• If you haven’t updated your policy and procedure manual in a while, it’s a good time to check and make sure it is current and is being followed by all. Documentation and knowledge of even the smallest internal control processes within each department are vital.
• Make sure that the setup/programming in your Financial Aid processing system is consistent with your written policies and procedures (i.e. SAP standards).
• Make sure you are familiar with any prior audit findings and do your own internal audit to ensure whatever process changes made in response to that audit have been successful. One of the top ten audit findings is failure to take corrective action on a prior finding.
• Ensure strong lines of communication between cross-functional departments of the audit and recommend they prepare as well (think student account records, official/unofficial withdrawal documentation, NSLDS reports, transcripts, etc.). The annual Single Audit is not just the responsibility of the financial aid director; it is the responsibility of many members of upper level management that need to come together.
• Make sure any professional judgement decisions are “reasonable” and clearly documented in the students’ files.
Lastly, in an effort to keep you in the know, the most common audit findings for Institutions of Higher Education (“IHE”) are listed below in descending order of frequency of occurrence.
• Repeat Finding – Failure to Take Corrective Action (when a compliance audit identifies consecutive years of noncompliance in the same area)
• Student Status – Inaccurate/Untimely Reporting (when an IHE does not report student enrollment status information timely or accurately to the DOE)
• Return to Title IV (R2T4) Calculation Errors (when an IHE makes a mistake in an R2T4 calculation for a student who withdraws from classes during a payment period)
• Return of Title IV Funds Made Late (when an IHE fails to return Title IV, HEA program funds timely to the DOE)
• Verification Violations (when an IHE does not fully or timely complete the process to verify student aid application data)
• Student Credit Balance Deficiencies (when an IHE does not appropriately administer Title IV credit balances on behalf of students or parent borrowers)
• Qualified Auditor’s Opinion Cited in Audit (when an IHE’s auditor expresses an opinion that noncompliance has occurred at a rate that exceeds materiality thresholds)
• Pell – Overpayment/Underpayment (when an IHE makes an error in disbursing Federal Pell Grant Program funds)
• G5 Expenditures – Untimely/Incorrectly Reported (when an IHE makes an error in reporting disbursement and payment information to the DOE)
• Entrance/Exit Counseling Deficiencies (when an IHE does not ensure that all student loan counseling requirements are timely met and documented
At the end of the day, this annual process is really to assess your institution’s administrative capability and that includes all departments involved in the administration of Federal aid. Your audit findings will help focus your attention on where changes need to be made. Appropriately executed responses to annual audit findings will go a long way in avoiding more serious actions like the Department of Education’s program review, corrective action, fines and loss of eligibility to participate in one or more programs.