Building a ‘Perfect’ File For Your Audits

1. Building a ‘Perfect’ File For Your Audits Presented by Erich McElroy Global Education Management Services

2. Session Goals Global Education Management Services Understand the key elements of the yearly audit Review of the audit package Tips on how to have ‘perfect’ files Resolving common problems Resources

3. Do we have to do it? Global Education Management Services • Yes • The requirement applies to all institutions in the Stafford and PLUS programs whether you process one loan or hundreds.

4. Where do we start? Global Education Management Services • The Foreign School Audit Guide • The Student Financial Aid Handbook for Foreign Schools • Chapter 2 – Page 57 • These are ‘must’ reads

5. Why do they ask for it? Global Education Management Services 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.

6. What is required? Global Education Management Services 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

7. Compliance Element Global Education Management Services • 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

8. Two types of Compliance Audit Global Education Management Services • 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

9. Financial Element Global Education Management Services • Financial Audit • The financial statement for the applicable year • Conducted by an external auditor • Different requirements based on aid each year • Amount of aid is determined by the Department of Education

10. Two types of Financial Statements Global Education Management Services • 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

11. Getting Started – Compliance Audits Global Education Management Services • 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

12. Getting ‘The List’ of files to be reviewed Global Education Management Services Request as a report in NSLDS and will be transmitted to you via EdConnect

13. The Compliance Audit Global Education Management Services • 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

14. The Compliance Audit - Key factors Global Education Management Services 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

15. The Compliance Audit - Key factors (cont.) Global Education Management Services • 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

16. Note on SSCR Reporting Global Education Management Services • 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

17. Foreign Medical Schools Only Global Education Management Services • 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

18. The Compliance Audit - Key factors (cont.) Global Education Management Services • Auditor may review • Accounting of funds • Timing of fund receipt and delivery • Appropriate notifications • Funds should not be paid to an account more than 10days before the start of a payment period • Return any credit balances to student within 14 days

19. Return of Title IV Funds Global Education Management Services 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.

20. Key Factor – Testing Overall Administrative Capability Global Education Management Services 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

21. Student Eligibility Global Education Management Services Going for the ‘Perfect’ File

22. Student Eligibility Going for the ‘Perfect’ File Global Education Management Services • 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

23. Student Eligibility (cont.) Global Education Management Services • 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.

24. Student Eligibility (cont.) Global Education Management Services • 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)

25. Resolving Common Conflicts Global Education Management Services • 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?

26. Resolving Common Conflicts (cont.) Global Education Management Services • 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)

27. Resolving Common Conflicts (cont.) Global Education Management Services • 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

28. Loan Counselling Global Education Management Services 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

29. Example - An Ideal File Global Education Management Services • 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

30. Global Education Management Services After the Audit Takes Place

31. Auditor’s Report Global Education Management Services • 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.

32. Findings Global Education Management Services • 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

33. Alternative Compliance Audit Global Education Management Services • 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

34. What will be submitted? Global Education Management Services • 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.

35. Where to submit audits? Global Education Management Services 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

36. After Submission Global Education Management Services • 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

37. Resources Global Education Management Services • 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

38. Questions Global Education Management Services ???? • Erich McElroy • Email: erich@esmglobal.com