Common Findings Corner: Top 10 Compliance Findings

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As much as everyone wants a clean audit each year, chances are that most audits will contain at least one finding. Title IV is a complicated arena – there are a lot of moving parts and rules are constantly getting updated. Recently, at the 2020 Virtual FSA Training Conference for Financial Aid Professionals, the Department of Education provided the following listings:

Top 10 Compliance Audit Findings:

  1. Student Status – Inaccurate/Untimely Reporting
  2. Repeat Finding – Failure to Take Corrective Action
  3. Return to Title IV (R2T4) Calculation Errors
  4. Return to Title IV (R2T4) Funds Made Late
  5. Verification Violations
  6. Qualified Auditor’s Opinion Cited in Audit
  7. Student Credit Balance Deficiencies
  8. Entrance/Exit Counseling Deficiencies
  9. G5 Expenditures Untimely/Incorrectly Reported
  10. Pell Grants – Overpayment/Underpayment

Top 10 Program Review Findings:

  1. Student Status – Inaccurate/Untimely Reporting
  2. Return to Title IV (R2T4) Calculation Errors
  3. Entrance/Exit Counseling Deficiencies
  4. Verification Violations
  5. Consumer Information Requirements Not Met
  6. Satisfactory Academic Progress Policy Not Adequately Developed/Monitored
  7. Student Credit Balance Deficiencies
  8. Lack of Administrative Capability
  9. Account Records Inadequate/Not Reconciled
  10. Crime Awareness Requirements Not Met

It’s no coincidence that these listings share a lot of the same findings, as these are areas that do tend to make it onto a lot of reports. I would have to agree that our top 10 finding listing would look pretty similar to these as well. So, what can schools do to help eliminate some of these top findings?

Student Status – Inaccurate/Untimely Reporting

Magnifying glass on a mustard yellow backgroundStudent Status – Inaccurate/Untimely Reporting is at the top of the list for a reason. This is the process of updating student statuses in the National Student Loan Data System (NSLDS), which is typically done in batches every 60 days or less. The process requires the school to look at the status for all students to make sure they are accurate prior to reporting these batches back to NLSDS. Once the batches are uploaded to the school, they have 15 days to respond – so the process needs to be addressed fairly quickly. It’s easy enough to miss a date or use the wrong status. This process is often handled by a third-party servicer as well, so there can certainly be oversights on their end. The best way to work towards eliminating these findings is to make sure you are starting the process soon enough to meet the 15-day response deadline and to implement a review process that looks at each student, even if a servicer is assisting in the process. Remember, servicers can make mistakes, too, and you will be the one with the finding in the end.

Return to Title IV (R2T4)

Return to Title IV (R2T4) findings have historically been at the top of these lists. There are a lot of variables that play into performing a R2T4, so you have to be on top of your game when filling these out to make sure the outcomes are accurate and timely. It’s fairly simple to address the timely aspect, as you have almost two months to perform the R2T4 and refund the appropriate amounts to the Department of Education. Start this process early to allow enough time to move through the system, and don’t put them off for another time. Addressing the accuracy portion means being up-to-date on how to adjust your R2T4s for various situations that might arise. Are you required to take attendance? Did the aid come in after the last day of attendance? Did you retain more Title IV aid than you had prorated charges for a payment period? These questions will all come into play when performing R2T4s, so do the footwork to gain a solid understanding of what will impact the accuracy of your R2T4s.

Verification violations

Verification violations are another common issue, as they certainly can get complicated at times. You are working with the student to make sure the information they provided when filling out the Free Application for Federal Student Aid (FAFSA) is accurate. As these inputs will determine how much federal assistance the student will end up receiving, it’s easy to see why they might be complicated. If you are having consistent issues with verifications, it might be time to do some research and shore up your process. If you are using a servicer, they should help provide a layer of assurance, as another set of eyes is looking over the documentation as well. As with most other areas, it can be beneficial to use a servicer to assist in these processes, but don’t just rely on them to do it all; you need to be involved to assure the process is accurate.

Be Prepared

The best way to start to eliminate these findings from your audits on a yearly basis is to understand why these findings occur in the first place. Do your homework by using IFAP.ed.gov, as you can locate the annual Title IV handbooks here, as well as other publications and guidance. If you aren’t signed up for their weekly email, do that now. You want to be aware of what’s discussed on a weekly basis and think about how these changes might impact your school. If you aren’t sure about something, reach out to your servicer or auditor and ask the question. Most people would rather address a question before it becomes a finding. 

Corrective Action Plan

If you do end up with findings on your audit, don’t stress too much, as many people have some findings most years. Although, don’t let a statement like this make you complacent either. Just because findings happen doesn’t mean you shouldn’t do what you can to avoid them or fix them moving forward. This is what your Corrective Action Plan (CAP) allows you to do. Use your CAP as a tool to improve your audits moving forward, not just a requirement you have to quickly fill out and throw on the back of the report. The days of just stating, “we will increase controls,” is over. Use the CAP to identify how and why the error occurred. What policies and procedures were not followed? What change in procedures could help prevent these errors from reoccurring? Who is responsible for implementing these changes? Have the issues been resolved? These are just some of the questions to consider when writing your CAP.

Even in the best systems, findings do happen, but you can play a vital role in how often they occur and how impactful they are. Take the time to address issues in a timely manner, use the proper channels to research or answer questions and use your CAP as a tool to a brighter, cleaner future. You might not be able to guarantee a clean audit, but everyone can start working their way towards one.

This publication contains general information only and Sikich is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or any other professional advice or services. This publication is not a substitute for such professional advice or services, nor should you use it as a basis for any decision, action or omission that may affect you or your business. Before making any decision, taking any action or omitting an action that may affect you or your business, you should consult a qualified professional advisor. You acknowledge that Sikich shall not be responsible for any loss sustained by you or any person who relies on this publication.

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