Sikich Title IV Common Findings Corner – February 2020 Edition

How to Avoid Late Audits

An annual compliance and financial audit performed under the Guide for Audits of Proprietary Schools and for Compliance Attestation Engagements of Third-Party Servicers Administering Title IV Programs must be based upon the fiscal year and submitted to the Department of Education within six months after the end of the fiscal year (34 CFR 668.23(4)).

Sometimes the things that seems like the easiest findings to avoid, end up coming back to bite you in the end. Nobody ever wants to submit an audit late, and most likely no one plans to, but we still do see a handful of late audits on a yearly basis. With six months to get your audit submitted, how does this happen? I will touch base on some common factors to concentrate on to avoid late audits going forward.

Tip 1: Frequently Communicate with Your Auditors

Form a game plan for your audits on a yearly basis, so you know when your audit is going to happen and how to properly prepare for it.

As your year-end is approaching, have you reviewed your composite score ratios to know where you stand financially? Have you touched base to get checklists for the upcoming audit? Do you have a date in mind when you will be ready for your annual audits?

Communication is the key to success in pretty much everything we do in life, and audits are no different. Communicate with your auditors throughout the year, don’t just wait until audit time if think of questions along the way. The best way to avoid findings is to address them before they become findings!

Tip 2: Prepare, prepare, prepare

Advice that may sound easier said than done: always be prepared! But, if you take a bit of time to properly prepare for your audits and stay ahead of the curve, you should have no issue with making sure audits are submitted timely. We typically see two things leading to late audits: 1) scheduling the audit too late in the year, and 2) scheduling the audit too early in the year when you are not prepared for it and not properly following up once fieldwork is over. Sometimes when you fall into 1) one year, you end up with a knee-jerk reaction that leads to 2) the next year.

Should I schedule my audit?

Scheduling an audit only makes sense if you are prepared for it. If you don’t have a closed trial balance and good books to provide on the financial side, having auditors come out and start the audit is just a waste of everyone’s time.

On the compliance side, if you don’t have a good Title IV Universe Population for the year (which reconciles back to G5), auditors won’t be able to select a sample of files to test when they are out in the field. If student files, ledger cards and transcripts aren’t available for auditors during fieldwork, it will be hard for them to get through the testing in order to have some meaningful discussions about what they have reviewed.

Sure, with technology these days, it’s a great tool to provide auditors information once fieldwork has concluded. If you wait several months to start uploading information, it’s going to take that much longer for auditors to review on their end. Not only do they have to test the information, but they have several stages of review the audits need to go through to get to the point where they can be released. These things don’t happen overnight.

If your audit is due on June 30, 2020 and you wait until June 20, 2020 to get your auditors a majority of the documents they have asked for months ago, you are approaching way too close to that late audit line.

Like most things in life, you just have to put a little forethought into the audit process. Six months to engage an auditor and get your audits submitted seems like a really long time, but you need to take the proper steps along the way to make sure this time is used effectively.

A Sample Audit Timeline

A reasonable audit timeline might look something like this:

  • Prior to Year End:
    • Engage an auditor.
    • Try to lockdown a time of the year, if not an exact date your audit will be scheduled.
    • Discuss with your auditor and accountant any reviews that need to happen prior to year end, leaving time for necessary adjustments.
  • After Year End:
    • Work with your accountant to get your books closed and ready to send to the audit.
    • Make sure you have a good Title IV Universe Population, which ties out to G5 (to assure the numbers make sense and are all-inclusive)
    • Contact your servicer and request an audit package.
    • Try to get good checklists from the audit at least a month prior to your audit, so you have time to prepare.
    • Upload as much information as possible prior to your audit date.
  • During Fieldwork:
    • Have sample selections auditors have provided you ready for them when they arrive for fieldwork. This time is limited and you want to use it in the most effective way possible.
    • Review the checklists that have been provided and try to have as many items addressed as possible.
    • Turn around requests as quickly as possible.
    • Be available during fieldwork. If you aren’t involved in the process, sometimes the process will stall out while people are waiting for answers and documentation.
  • After Fieldwork Ends:
    • Upload any documents that weren’t ready during fieldwork as soon as possible. Time can be your enemy: out of sight, out of mind.
    • Follow-up with your auditors.
    • Be prepared to review and sign off on documents near the end of the audit process.

If you are perpetually struggling to get audits submitted timely or are bumping up against this submission line every year, try to step back and look at your process as a whole. Is it a process that is built for success? Hopefully this article has touched on some of the simple steps you can use to improve the quality and timeliness of your yearly audits. Since you have to have audit performed every year, do what you can to make them as painless as possible.

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