10 Ways to Pass/ Prepare for an Audit

February 1, 2022, By Robert Wright

Higher-education institutions that participate in federal Title IV programs must submit compliance and financial audit reports annually to the Department of Education. Here are ten ways to prepare for a winning audit.

One of the critical challenges is proper reporting. In general, institutions must notify The Department of Education within 30 days if a student receiving aid ceases to be enrolled at least half-time or changes their permanent address. About 13 percent of schools fail to timely report student enrollment status and about 4 percent fail to report disbursements accurately. Colleges can meet this challenge by improving the efficiency of their reporting operations.

An essential step in preparing for the current audit is ensuring you’ve corrected any faults cited in previous audits. This may seem obvious; however, the most frequently cited finding is failure to implement corrective action.

Establish a system of checking and rechecking calculations throughout the process. A common finding is a mistake in an R2T4 calculation for a student who withdraws from all classes during a payment period. Examples include using a wrong withdrawal date, using an incorrect number of days in a reporting period, or math errors.

If an institution credits a student with Title IV funds that exceed the amount of tuition and fees, it must release the funds within 14 days. To meet this challenge, institutions must establish appropriate internal controls to release the funds promptly.

A common challenge is the proper disbursement of Pell Grant funds. To avoid this finding, establish operational checks and balances to ensure that your institution has not overpaid or underpaid Pell funds, particularly with enrollment changes affecting eligibility.

To comply, an institution must require the selected student to verify the information on the FAFSA. Institutions that participate in Title IV programs must establish and follow policies and procedures to ensure this verification is completed timely and accurately.

Another common challenge among institutions of higher learning is managing the G5 expenditures timely and correctly. To meet this challenge, institutions must ensure disbursement dates and amounts follow policies and procedures and accounts are named accurately with regular reconciliation processes between all systems.

Institutions must counsel students about the debts before disbursing direct loan funds. They also must advise students before they cease at least half-time study, withdraw or graduate. Failure to adequately conduct or document these interviews is a common audit mistake.

Institutions participating in federal student aid programs must file an Annual Security Report and implement specific safety policies, procedures, and programs. Understanding these policies is one key to meeting these challenges. Increasing operational efficiencies is another.

10. Seek Help

An outside consulting firm can examine your operations to help you ensure compliance. The firm also can help you maximize your institutional resources, as well.

At FA Solutions, we’ve helped many institutions with understanding compliance, processes & procedures, and staff management. Talk to us about our ‘mentoring’ support service that matches you with a senior-level director for ongoing development. Visit GetFASolutions.com
today.