Finding 1137714 (2024-001)

Finding 2024-001: Cash Management Federal Agency: U.S. Department of Education Federal Program: Federal Direct Student Loans (ALN 84.268) Award Year: September 1, 2023 to August 31, 2024Criteria or Specific Requirement Per 2 CFR 200.303, a non-Federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Per 34 CFR 685.300(b)(50), schools participating in the Direct Loan program are required to perform monthly Direct Loan reconciliations. Electronic Announcements DL-22-07 and GENERAL-22-86 explain that a school must reconcile the funds it received from G5 with actual disbursement records the school submitted to Common Origination and Disbursement (COD). Each month, COD sends the school a School Account Statement, which is the Department of Education’s (ED’s) official record of the school’s cash and disbursement records and identifies the difference between the net draws from G5 and the actual disbursement information reported to COD by the school. The school is required to account for any differences by reconciling ED’s records (School Account Statements) with the school’s financial and business records. Condition Found The reconciliation between ED’s records (School Account Statements) and the school’s financial and business records were prepared timely throughout the year; however, the differences identified in the reconciliation were not accounted for and no review or segregation of duties was documented as part of that process. Cause and Possible Asserted Effect The control to ensure that the reconciliation between the ED’s records and the school’s financial and business records was performed and reviewed by an individual separate than that who prepared it and that any differences identified were investigated was not operating effectively. As a result and based on the documentation provided, the monthly reconciliations were not reviewed by an individual separate than that who prepared them and any differences identified during the reconciliation process were not investigated. Questioned Costs None. Whether the Sample Was a Statistically Valid Sample The sample was not intended to be, and was not, a statistically valid sample. Identification of Whether the Audit Finding Was a Repeat Finding in the Immediately Prior Audit Not at repeat finding. Recommendation We recommend that the University strengthen controls over the management review process over the monthly reconciliations between the ED’s records and the school’s financial and business records to ensure there is a segregation of duties in the review and approval process, and any differences within management’s prescribed level of precision are investigated and documented.View of Responsible Officials The finding was primarily caused by an unforeseen staff shortage. This led to one person being the preparer and reviewer with no segregation of duties. Although the differences were identified, they were not documented on the reconciliation form. To resolve this finding, the Office of Financial Aid (OFA) has hired new employees and implemented a new process. The Financial Operations Team is now fully staffed with two senior accountants and one senior director. As part of our ongoing efforts to strengthen internal controls and ensure the integrity of our processes, we have implemented a segregation of duties framework. This approach will help us clearly define roles and responsibilities, ensuring that critical tasks are divided among different individuals. By doing so, we will meet compliance requirements, reduce errors, and promote accountability within our office. One senior accountant will prepare the monthly reconciliation by the 10th of the following month. The senior director will review the monthly reconciliation by the 15th of the following month. In the absence of the initial preparer/reviewer, the executive director of OFA will take on the reviewer role. We understand that proper documentation is crucial for clarity, tracking, and future troubleshooting. The differences/discrepancies that are identified in the reconciliation process will be accounted for through proper documentation on the reconciliation form, which will be reviewed/investigated by a second reviewer. The Financial Operations Team within the OFA will continue to create timely and accurate monthly Federal Direct Student Loan reconciliations that compare OPUS (Emory), General Ledger (Emory), Student Account Statement-SAS (U.S. Department of Education), and GS (U.S. Department of Education).