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
Global Education Management Services
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.
Global Education Management Services
Where do we start?
 The Foreign School Audit Guide
 The Student Financial Aid
Handbook for Foreign Schools
 Chapter 2 – Page 57
 These are ‘must’ reads
Global Education Management Services
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.
Global Education Management Services
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
Global Education Management Services
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
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
Financial Element
 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
Global Education Management Services
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
Global Education Management Services
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
Global Education Management Services
Getting ‘The List’ of files
to be reviewed
 Request as a report in NSLDS
and will be transmitted to you via
EdConnect
Global Education Management Services
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


Global Education Management Services
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
Global Education Management Services
The Compliance Audit Key factors (cont.)

Eligible Programs

Check that the program is listed on the
ECAR

ECAR: Eligibility and Certification
Approval Report


Legal Authority to operate

Satisfactory Academic Progress

Global Education Management Services
www.eligcert.ed.gov
Policy in place and test how used
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
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
Global Education Management Services
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

Global Education Management Services
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.
Global Education Management Services
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
Student Eligibility
Going for the
‘Perfect’ File
Global Education Management Services
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

Global Education Management Services
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

Global Education Management Services
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:









Global Education Management Services
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






Global Education Management Services
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.)
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)
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
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
Example - An Ideal File
 A file that is ‘audit’ friendly would contain








Global Education Management Services
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
Global Education Management Services
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.
Global Education Management Services
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



Global Education Management Services
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:


Global Education Management Services
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.
Global Education Management Services
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
Global Education Management Services
After Submission

Audit is received by Document Control and
Receipt

Reviewed for correct presentation and
completeness



Global Education Management Services
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




Global Education Management Services
Foreign School Audit Guide
http://www.ed.gov/about/offices/list/oig/nonfed/F
gn092402.pdf
Dear Colleague Letter August 2003
http://ifap.ed.gov/dpcletters/GEN0310.html
Dear Colleague Letter June 2006:
www.ifap.ed.gov/dpcletters/attachments/GEN06
11.pdf
Foreign School Handbook
http://www.ifap.ed.gov/eannouncements/0909fo
reignschools.html
Questions
????

Global Education Management Services
Erich McElroy
 Email: [email protected]