Audit Best Practices: Is Your Institution Audit Ready?

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Reality check: If a federal auditor were to contact your financial aid office right now with a surprise audit, how ready would you be for it?

If that question is a bit nerve-wracking for you as a financial aid administrator, you are not alone. Many of your counterparts find it hard to keep up with federal regulations and complete accurate reports within deadlines. Unannounced federal audits are an inevitability, and if they catch something you missed, it can jeopardize your institution.

At Financial Aid Services, we have your back. Here are the three most common financial aid audit findings, and how to avoid them.

FINDING: Failure to Take Corrective Action (Repeat Finding)

According to the U.S. Department of Education, 13.4% of audited schools in FY 2020 had repeat findings. The same finding in two consecutive audits alerts the office of Federal Student Aid that the institution is either unable or lacks the administrative capacity to resolve the deficiency.

SOLUTION: Turn Your Preventative Action Plan into an Educational Opportunity

Carefully review your previous audit. For each finding, review your preventative action plan. Have you followed the plan and addressed the issue?

Then, be proactive with your staff. If you don’t hold frequent, continued training with them on your policies and preventative actions, now is the time to start. This not only updates the newer team members but stops the development of bad habits for everyone. Include a policy-training segment into orientation for new hires, and plan refreshers every 6 months for all team members.

Finally, invest in technology that will do a lot of the work for you. Mistakes happen, so bring on a reliable software system to catch any issues before the Feds do.

FINDING: Inaccurate / Untimely Reporting on Student Status

In FY 2020, 13.2% of schools received a finding of inaccurate or untimely reporting of student status. It’s no surprise! Keeping track of these changes can be a painstaking and time-consuming process, and the deadlines are tight.

SOLUTION: Make Time Twice a Month to Report Changes

Your office must report enrollment data to the National Student Loan Data Systems (NSLDS) at least every 60 days, so you already know the deadlines.

Block off time twice a month to confirm enrollment levels, ensure attendance data is up-to-date, and note any address changes. Building this into your calendar like you would a staff meeting is what helps you avoid a backlog. When you need to report to NSLDS, you’ll be prepared, confident and on time.

FINDING: Return to Title IV (R2T4) Calculation Errors

Any student who has received Title IV Federal funds must return a portion of these funds if they withdraw from the program—and your office is responsible for calculating that amount and returning it. Due to mathematical errors, inaccurate withdrawal dates, or the outdated attendance record, 7.4% of schools received this finding during the 2020 FY.

A finding here has a big cost: Not only is it a red flag, but your institution is also liable to return unearned Title IV funds at the expense of both your financial aid department and individual students.

SOLUTION: Complete Your R2T4 Calculations Accurately. Every Time.

Ensure your R2T4 calculations are accurate and timely. Attendance records must be up-to-date: especially important for clock-hour schools! Double-check every data point for accuracy and currency, and keep a close eye on your own timeline.

Unless you have a staff member entirely dedicated to this, your best bet in maintaining accuracy and meeting deadlines is a third-party financial aid servicer like FAS. FAS catches patterns of mistakes, educates your staff, and helps you stick to the federal timeline.

BONUS SOLUTION: Get a mock audit.

If you’re not sure how your office would hold up to a surprise audit, there’s a way you can find out for sure. FAS’ financial aid experts can come in just like an official reviewer and go through the official steps a federal reviewer would follow:

  • Entrance and Exit Analysis
  • Audit/Review of all School Financial Aid Procedures
  • Audit/Review Financial Aid Policies
  • Interview School Staff
  • Full Student Financial Aid File Review
  • Academic File Review
  • Fiscal Procedure Analysis
  • Finding Report and Written Evaluation

FAS is meticulous and always up-to-date on federal regulations, so no detail is overlooked. Your “auditor” will make you aware of any potential findings in files, policies, or your staff. The mock audit will help the school to make corrections and be ready for a finding-free audit.

With audits looming, check in with your team on their confidence and readiness. If you have uncertainties, contact us for a mock audit, to learn more about our financial aid software or to generally streamline your financial aid processes.

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