ACCBO – Fall 2009ACCBO – Fall 2009OFFICE OF THE STATE OFFICE OF THE STATE

AUDITORAUDITOR

Carol Smith, Audit ManagerCarol Smith, Audit Manager

Audit Strategy UpdateAudit Strategy Update

Timing of auditsTiming of audits Type of auditsType of audits New initiatives?New initiatives?

Timing of AuditsTiming of Audits

- 24 Colleges scheduled for this year- 24 Colleges scheduled for this year

- As is typical, after CAFR work and - As is typical, after CAFR work and universitiesuniversities

- Internal control - interim at many colleges- Internal control - interim at many colleges

- SACS colleges have priority- SACS colleges have priority

Types of AuditsTypes of Audits

- Financial audits – based on risk factors- Financial audits – based on risk factors

- Last audit- Last audit

- Audit findings- Audit findings

- Changes in personnel, systems,- Changes in personnel, systems, programs, processes programs, processes

- Single Audit – Student Financial Assistance and - Single Audit – Student Financial Assistance and Federal Career and Technical Education (VOED)Federal Career and Technical Education (VOED)

- Fiscal Control- Fiscal Control

- Not likely this year- Not likely this year

Audits for FYE 2009Audits for FYE 2009

Colleges with SACS requirementsColleges with SACS requirements Fayetteville Technical CCFayetteville Technical CC Halifax CCHalifax CC McDowell CCMcDowell CC Nash CCNash CC

All of these colleges will be audited for the fiscal All of these colleges will be audited for the fiscal year end to achieve compliance with SACS year end to achieve compliance with SACS requirements. requirements.

Audits for FYE 2009Audits for FYE 2009

Single Audit – Student Financial Aid – 3 Single Audit – Student Financial Aid – 3 CollegesColleges

Statewide selection of audits – both colleges Statewide selection of audits – both colleges and universities and universities

Selection is risk based – by federal Selection is risk based – by federal requirements we must continue to audit this requirements we must continue to audit this major program annually until it is no longer major program annually until it is no longer high risk in the Statehigh risk in the State

Audits for FYE 2009Audits for FYE 2009

Single Audit - Federal Career and Technical Single Audit - Federal Career and Technical Education (VOED) Education (VOED)

This program is one which is typically audited every This program is one which is typically audited every 3 years due to its large dollars in the State of North 3 years due to its large dollars in the State of North Carolina.Carolina.

We have selected 3 Colleges to audit.We have selected 3 Colleges to audit.

Audits for FYE 2008Audits for FYE 2008

Reporting for Single Audit workReporting for Single Audit work Separate reportSeparate report Separate management letter and letter of Separate management letter and letter of

representationrepresentation

Submission of FinancialsSubmission of Financials

Who submitted electronically to OSA?Who submitted electronically to OSA? Concerns? Concerns?

carol_smith@ncauditor.net

Submission of FinancialsSubmission of Financials

Email from OSA Requesting the following:Email from OSA Requesting the following: copy of CAFR documents as submitted to copy of CAFR documents as submitted to

OSC (August deadline)OSC (August deadline)

September deadlines:September deadlines: Individual financial statement Exhibits (based Individual financial statement Exhibits (based

on pro forma on OSC’s website)on pro forma on OSC’s website) Management’s Discussion and AnalysisManagement’s Discussion and Analysis Notes to the Financial Statements Notes to the Financial Statements

Submission of FinancialsSubmission of Financials

It is also helpful to submit the Cash Flow It is also helpful to submit the Cash Flow template and the Foundation Conversion template and the Foundation Conversion template in September. template in September.

Submit as required by the letter of Submit as required by the letter of representation that each college signs and representation that each college signs and submits to OSC. submits to OSC.

Submission of Data File Submission of Data File

Data file submission is necessary every year.Data file submission is necessary every year. Routine written to somewhat automate processRoutine written to somewhat automate process Must hit ENTER or RETURNMust hit ENTER or RETURN Do not TABDo not TAB Password obtained from OSA IS auditPassword obtained from OSA IS audit One password used for all CollegesOne password used for all Colleges Entering “wrong” password 3 times requires Entering “wrong” password 3 times requires

that the password be changedthat the password be changed

Submission of Data FilesSubmission of Data Files

Obtain password at the point that you are Obtain password at the point that you are ready to submitready to submit

Waiting after obtaining password may mean Waiting after obtaining password may mean that the password has had to be changedthat the password has had to be changed

Causes Delays for allCauses Delays for all College receives no notification that file is College receives no notification that file is

successfully transmittedsuccessfully transmitted

Proposed Solutions to SubmissionsProposed Solutions to Submissions

College should College should build file, log in, transmit, send build file, log in, transmit, send email to OSA. email to OSA. OSA will verify that OSA will verify that transmission was received.transmission was received.

OSA sets a schedule for each College to OSA sets a schedule for each College to submit - viable?submit - viable?

Colleges download files to NCCCS – OSA Colleges download files to NCCCS – OSA obtain from NCCCSobtain from NCCCS

OSA may set up individual FTP server and OSA may set up individual FTP server and passwordspasswords

Scope of Audits FYE 6/30/08Scope of Audits FYE 6/30/08

Financial statement audits performed at 28 Financial statement audits performed at 28 collegescolleges

Audits of Student Financial Aid Cluster Audits of Student Financial Aid Cluster performed at 7 institutions (statewide sample)performed at 7 institutions (statewide sample)

Results of AuditsResults of Audits

All colleges received an unqualified opinionAll colleges received an unqualified opinion 8 colleges had no findings in the financial 8 colleges had no findings in the financial

statement auditstatement audit 17 colleges had a finding of deficiencies in 17 colleges had a finding of deficiencies in

financial reportingfinancial reporting 10 colleges had a finding of improper system 10 colleges had a finding of improper system

access to support segregation of dutiesaccess to support segregation of duties Other deficiencies identified – not common to Other deficiencies identified – not common to

multiple collegesmultiple colleges

Results of AuditsResults of Audits

Capital AssetsCapital Assets Failure to reconcile general and subsidiary ledgerFailure to reconcile general and subsidiary ledger Depreciation errors – calculationDepreciation errors – calculation Omission of capital assets- failure to capitalizeOmission of capital assets- failure to capitalize Fully depreciated capital assets – failure to Fully depreciated capital assets – failure to

reevaluate useful lives reevaluate useful lives Errors in recording CIPErrors in recording CIP

Results of AuditsResults of Audits

Depreciable Capital Assets and reevaluation of useful Depreciable Capital Assets and reevaluation of useful liveslives Typically capital assets should be evaluated each year and Typically capital assets should be evaluated each year and

useful lives adjusted as it is determined that the previous useful lives adjusted as it is determined that the previous estimate will not reflect actual usage. The change in estimate will not reflect actual usage. The change in estimate is then reflected in current and future depreciation. estimate is then reflected in current and future depreciation.

When the annual evaluation has not taken place and the When the annual evaluation has not taken place and the assets have become fully depreciated, there is an error in assets have become fully depreciated, there is an error in applying an accounting principle. This requires a applying an accounting principle. This requires a restatement of net assets. If there is no significant impact, restatement of net assets. If there is no significant impact, the adjustment can be recorded prospectively.the adjustment can be recorded prospectively.

Results of AuditsResults of Audits

CashCash Interfund BorrowingInterfund Borrowing Duplication between cash and investmentsDuplication between cash and investments Duplication between College and CUDuplication between College and CU

MisclassificationsMisclassifications County Capital Aid recorded as State Capital AidCounty Capital Aid recorded as State Capital Aid Net Assets Net Assets State bond proceeds recorded as Capital Grants State bond proceeds recorded as Capital Grants

instead of State Capital Grantsinstead of State Capital Grants

Results of AuditsResults of Audits

Accounts ReceivableAccounts Receivable Subsidiary and General Ledger did not agreeSubsidiary and General Ledger did not agree No allowance for doubtful accountsNo allowance for doubtful accounts Allowance for doubtful accounts – documentation Allowance for doubtful accounts – documentation

of accounting estimate - historicalof accounting estimate - historical AR and unearned revenue overstated – Fall AR and unearned revenue overstated – Fall

registrationsregistrations

Ready for Audit?Ready for Audit?

Grouping Sheets/ supporting schedules for statements Grouping Sheets/ supporting schedules for statements ready and available ready and available

Documentation for note disclosures availableDocumentation for note disclosures available Auditors will need College staff to be responsive to Auditors will need College staff to be responsive to

questionsquestions College assistance may reduce audit time and bills for College assistance may reduce audit time and bills for

auditaudit Auditors should be located close to business officeAuditors should be located close to business office

QUESTIONS?QUESTIONS?