CHAPTER 3 PARAMETERS OF THE AUDIT
CHAPTER 3 PARAMETERS OF THE AUDIT
The purpose of the audit is to ascertain the fiscal condition and soundness of financial management practices pertaining to health professions and nursing student assistance programs at participating institutions. Everything pertaining to these programs is within the purview of the auditor's investigation.
Care should be taken during an audit that health professions and nursing student assistance programs are not confused with similar programs sponsored by the U.S. Department of Education.
Internal controls may be defined as all the coordinated methods and measures used by the institution to safeguard its assets, check the accuracy and reliability of accounting data, promote operational efficiency, and encourage adherence to prescribed management policies and procedures.
Auditing the system of internal control usually involves three phrases:
Internal controls for financial aid programs for students in nursing and health professions should be established for all of the following operations:
The Chart of Accounts and descriptions shown in Fiscal Management, Accounting Procedures, Chapter 3 provide examples of such controls.
During the audit, lack of written procedures or lack of adequate controls will be noted and recommendations for improvements will be included in the audit report.
The auditor will consider the results of the review of the system of internal controls to determine the extent of testing needed to evaluate the effectiveness of the established procedures. The audit report may address any weakness in internal controls and recommend improvements.
The auditor will review the most recent previous audit report and note any finding; ascertain whether corrective action was taken by the institution; and comment on the actions needed to strengthen the institution's system for acting on audit findings. Current findings should indicate whether similar deficiencies were reported previously.
Tests of accounting records will be made to establish that the system is adequate for recording all transactions related to the health professions and nursing student assistance programs. Separate accounting records are required for each program. See Fiscal Management, Accounting Procedures, Chapter 3 of this book.
Trial balances of end-of-year program accounts maintained by the institution will be compared with amounts reported on the reports required to be filed with the Department of Health and Human Services for each program.
The institution's reconciliation of cash in the bank and cash invested for the health professions and nursing student assistance programs will be reviewed on a selective basis. Reconciliations should be performed monthly. When an institution has not performed reconciliation monthly, a cut-off bank statement may be requested and reconciled with the balance shown on the books. The request for cut-off statement must be signed by the official at the institution responsible for the funds, but the statement should be mailed directly to the auditor.
The auditor will determine that the institutional funds deposited are at least one-ninth (1/9) of the Federal funds drawn down and deposited in the applicable health professions and nursing student assistance programs.
Where cash transfer authorizations are allowed, the auditor will request a copy of the Federal Capital Contribution Award Notices; evidence of Federal funds drawn down; and cash transfer authorization relating to specific Department of Health and Human Services student assistance programs. Funds transferred from cash control accounts to program accounts will be compared with expenditures from the program cash accounts to determine whether excess funds were maintained in the latter accounts during the applicable period. The auditor will determine that all Federal funds received by the institution in connection with health professions and nursing student assistance programs are fully accounted for.
Each student borrower file must contain a national need analysis form and any other documents that were used by the school to determine the student's eligibility. These documents must show the income, assets and other resources of the student, the student's family, the student's spouse, and be reviewed and compared with the student's budget. A determination must have been made that the total resources of the student do not exceed the accepted student budget.
A sample of records of awards to students from the loan and/or scholarship program(s) will be selected. The auditor will confirm with the student that an award letter was received, signed and returned to the school by the student signifying acceptance of the award. The auditor will then compare the advances to the student against the amounts stated on the award letter to ensure that the amount advanced does not exceed the award.
A sample of promissory notes for advances made to students and Truth-in-Lending statements will be examined to ensure that they were properly completed and signed. Determinations shall be made that the correct interest rate is stated on the note; that the total advances were equal to the face amount of the note; and that the notes are properly safeguarded in fireproof containers.
A representative sample of advances to students from Federal funds will be reviewed to determine whether the advances were properly recorded in individual student loans receivable accounts in the subsidiary ledgers. Canceled checks for disbursements to students will be examined to determine whether they were made out to the student, endorsed in the student's name, and processed by a financial institution. In cases where actual funds are not disbursed to students but credit is given through transfer vouchers, the vouchers will be examined for authorizing signatures and credit to the proper accounts.
A representative sample of records of collections from borrowers will be examined to determine whether collections were properly credited to individual loan ledgers and collections were properly allocated to principal, interest, and penalty charges.
Loans for which repayment has been deferred will require a review of the Certification of Deferment Status form to certify that the borrowers meet the requirements stipulated in the regulations.
Loan accounts for which a partial cancellation has been granted in lieu of repayment will be examined to determine whether:
A sample of delinquent student loan accounts will be examined to determine whether:
A review will also be made of loans deemed uncollectible by the school and written off.
Use of the Alternate Uncollectible Loan Audit process by schools requires compliance with the parameters defined in Fiscal Management, Collections, Chapter 3, section 1B for each loan written off. During the biennial audit a school must comply with the following requirements:
