Federal Student Aid - IFAP
   
PublicationDate: 6/1/95
AuditGuideType: Audit Guide for Schools
SectionNumber: III
SectionTitle: Illustrative Reports and Appendices
PageNumbers:


SECTION III

ILLUSTRATIVE REPORTS AND APPENDICES

Financial Statements:

Example A-1 Report on the Audit of the Basic Financial
Statements

Example A-2 Report on the Internal Control Structure Based on an
Audit of the Basic Financial Statements

Example A-3 Report on Compliance Based on the Audit of the
Basic Financial Statements - No Reportable Instances
of Noncompliance


Compliance Attestation:

Example B Report Package Cover Page

Example C Auditor Information Sheet

Example D Report on Management's Assertions on Compliance
with Specified Requirements Applicable to the SFA
Programs

Example E Summary Schedules A, B, C

Example F Schedule of Findings and Questioned Costs

Example G Auditor's Comments on Resolution Matters Relating to
the SFA Programs

Example H Corrective Action Plan


Appendices:

Appendix A SFA Programs' Minimum and Maximum Amounts

Appendix B High Risk Indicators

Appendix C Regional Inspector General for Audit and Related
Offices

Appendix D Instructions for Downloading Example E

ILLUSTRATIVE REPORT ON THE AUDIT OF THE BASIC
FINANCIAL STATEMENTS

We have audited the balance sheet of [Institution] as of [Date] and
the related statements of income, retained earnings, and cash flows
for the year then ended. These financial statements are the
responsibility of the [Institution's] management. Our responsibility
is to express an opinion on these financial statements based on our
audit.

We conducted our audit in accordance with generally accepted
auditing standards and Government Auditing Standards, issued by
the Comptroller General of the United States. Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present
fairly in all material respects, the financial position of [Institution] as
of [Date] and the results of its operations and its cash flows for the
year then ended, in conformity with generally accepted accounting
principles.*1*

In accordance with Government Auditing Standards, we have also
issued a report dated [Date of report] on our consideration of the
[Institution's] internal control structure and a report dated [Date of
report] on its compliance with laws and regulations.

[Signature]

[Date]

*1* The opinion paragraph should be modified as necessary under
the circumstances.

ILLUSTRATIVE REPORT ON THE INTERNAL CONTROL
STRUCTURE BASED ON AN AUDIT OF THE BASIC
FINANCIAL STATEMENTS

We have audited the basic financial statements of the [Institution], as
of and for the year ended [Date] and have issued our report thereon
dated [Date of report]*1*

We conducted our audit in accordance with generally accepted
auditing standards and Government Auditing Standards, issued by
the Comptroller General of the United States. Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement.

The management of [Institution] is responsible for establishing and
maintaining an internal control structure. In fulfilling this
responsibility, estimates and judgments by management are required
to assess the expected benefits and related costs of internal control
structure policies and procedures. The objectives of an internal
control structure are to provide management with reasonable, but not
absolute, assurance that assets are safeguarded against loss from
unauthorized use or disposition, and that transactions are executed in
accordance with management's authorization and recorded properly
to permit the preparation of financial statements in accordance with
generally accepted accounting principles. Because of inherent
limitations in any internal control structure, errors or irregularities
may nevertheless occur and not be detected. Also, projection of any
evaluation of the structure to future periods is subject to the risk that
procedures may become inadequate because of changes in conditions
or that the effectiveness of the design and operation of policies and
procedures may deteriorate.

In planning and performing our audit of the basic financial
statements of [Institution] for the year ended [Date], we obtained an
understanding of the internal control structure. With respect to the
internal control structure, we obtained an understanding of the design
of relevant policies and procedures and whether they have been
placed in operation, and we assessed control risk in order to
determine our auditing procedures for the purpose of expressing our
opinion on the basic financial statements and not to provide an
opinion on the internal control structure. Accordingly, we do not
express such an opinion.

We noted certain matters involving the internal control structure and
its operation that we consider to be reportable conditions under
standards established by the American Institute of Certified Public
Accountants. Reportable conditions involve matters coming to our
attention relating to significant deficiencies in the design or operation
of the internal control structure that, in our judgment, could
adversely affect the entity's ability to record, process, summarize,
and report financial data consistent with the assertions of
management in the basic financial statements.

[Include paragraphs to describe the reportable conditions noted.]

EXAMPLE A-2
Page 2 of 2

A material weakness is a reportable condition in which the design or
operation of one or more of the specific internal control structure
elements does not reduce to a relatively low level the risk that errors
or irregularities in amounts that would be material in relation to the
basic financial statements being audited may occur and not be
detected within a timely period by employees in the normal course of
performing their assigned functions.

Our consideration of the internal control structure would not
necessarily disclose all matters in the internal control structure that
might be reportable conditions and, accordingly, would not
necessarily disclose all reportable conditions that are also considered
to be material weaknesses as defined above. However, we believe
none of the reportable conditions described above is a material
weakness.*2*

We also noted other matters involving the internal control structure
and its operation that we have reported to the management of
[Institution] in a separate letter dated [Date of report]*3*

This report is intended for the information of the audit committee,
management, and the U.S. Department of Education. However, this
report is a matter of public record, and its distribution is not limited.

[Signature]

[Date]

*1* Describe any departure from standard report.

*2* If conditions believed to be material weaknesses are disclosed,
the report should describe the weaknesses that have come to the
auditor's attention. The last sentence of this paragraph should be
modified as follows:

However, we noted the following matters involving the internal
control structure and its operation that we consider to be material
weaknesses as defined above. These conditions were considered
in determining the nature, timing, and extent of the procedures to
be performed in our audit of the financial statements of
(Institution) for the year ended [Date].

[A description of the material weaknesses that have come to
the auditor's attention would follow.]

*3* If a separate letter has not been issued, this paragraph should be
omitted.

EXAMPLE A-3

ILLUSTRATIVE REPORT ON COMPLIANCE BASED ON AN
AUDIT OF THE BASIC FINANCIAL STATEMENTS--NO
REPORTABLE INSTANCES OF NONCOMPLIANCE*1*

We have audited the basic financial statements of [Institution] as of
and for the year ended [Date], and have issued our report thereon
dated [Date of report]*2*

We conducted our audit in accordance with generally accepted
auditing standards and Government Auditing Standards, issued by
the Comptroller General of the United States. Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement.

Compliance with laws, regulations, contracts, and grants applicable
to [Institution] is the responsibility of [Institution's] management. As
part of obtaining reasonable assurance about whether the financial
statements are free of material misstatement, we performed tests of
[Institution's] compliance with certain provisions of laws,
regulations, contracts, and grants. However, the objective of our
audit of the basic financial statements was not to provide an opinion
on overall compliance with such provisions. Accordingly, we do not
express such an opinion.

The results of our tests disclosed no instances of noncompliance that
are required to be reported herein under Government Auditing
Standards.*3*

This report is intended for the information of the audit committee,
management, and the U.S. Department of Education. However, this
report is a matter of public record and its distribution is not limited.

[Signature]

[Date]

*1* Report should be modified as appropriate if reportable instances
of noncompliance are found.

*2* Describe any departure from the standard report.

*3* See Government Auditing Standards, Chapter 5, paragraphs
5.18-5.19, for reporting criteria

EXAMPLE D

ILLUSTRATIVE REPORT ON MANAGEMENT'S ASSERTIONS
ON COMPLIANCE WITH SPECIFIED REQUIREMENTS
APPLICABLE TO THE SFA PROGRAMS

We have examined management's assertions included in its
representation letter*1* dated [Date], that [Institution] complied with
[list specified compliance requirement or attach in accompanying
schedule], relative to participation in the Federal Student Financial
Assistance Programs during the year ended [Date]. As discussed in
that representation letter, management is responsible for
[Institution's] compliance with those requirements. Our
responsibility is to express an opinion on management's assertions
about [Institution's] compliance based on our examination.

Our examination was made in accordance with Government Auditing
Standards, issued by the Comptroller General of the United States;
standards established by the American Institute of Certified Public
Accountants; and the Audit (Attestation) Guide, Audits/Attestation
Engagements of Federal Student Financial Assistance Programs,
issued by the U.S. Department of Education, Office of the Inspector
General, June 1995 and accordingly, included examining, on a test
basis, evidence about [Institution's] compliance with those
requirements and performing such other procedures as we considered
necessary in the circumstances. We believe that our examination
provides a reasonable basis for our opinion. Our examination does
not provide a legal determination on [Institution's] compliance with
specified requirements.

In our opinion, management's assertions that [Institution] complied
with the aforementioned requirements for the year ended [Date] are
fairly stated, in all material respects.*2*

This report is intended solely for the information of an audit
committee, management, and the U.S. Department of Education.
However, this report is a matter of public record and its distribution
is not limited.

[Signature]
[Date]

*1* Alternatively, management may make it's written assertions in a
separate report. The IPA should follow the reporting guidance in
SSAE No. 3.

*2* The IPA should modify the standard report if any of the
following conditions exists:
- There is a material noncompliance with specified requirements;
- There is a matter involving a material uncertainty;
- There is a restriction on the scope of the engagement;
- The IPA decides to refer to the report (excluding servicer audit
report) of another IPA as the basis, in part, for the IPA's report;
or
- If management discloses the noncompliance and appropriately
modifies its assertion, the IPA should refer to the guidance in
paragraphs 63 - 64 of SSAE No. 3.

**[This example, "Summaries Must Be Included in the Findings
and Questioned Costs Section of the Report," is currently
unavailable for viewing. Please reference your paper document
for additional information.]**

EXAMPLE F

SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Must be Attached to Auditor's Report on Compliance)

IF THIS SCHEDULE IS NOT PREPARED IN ACCORDANCE
WITH ALL ELEMENTS DESCRIBED BELOW, THE
COMPLIANCE REPORT PACKAGE WILL BE REJECTED AND
THE INSTITUTION MAY BE SUBJECT TO ADMINISTRATIVE
SANCTIONS PURSUANT TO 34 CFR 668 SUBPART G.

This schedule should include the following:

1. The number of students and dollar value by SFA program for:

- Population;
- Selected sample;
- Instances of noncompliance;
- Information on all noncompliance findings; and
- IPA's definition of material noncompliance.

2. If the sample was expanded to evaluate statistically the projected
error rate: the sampling methodology; confidence level; precision;
expected rate of occurrence and estimated disallowances to the
population including the point estimate and lower and upper
limits.

3. Summary Schedules A, B, and C (see Example E).

GAO audit standards state that well-developed findings generally
contain these attributes:

- Statement of condition
- Criteria
- Effect
- Cause
- Recommendation

The IPA should attempt to identify the condition, criteria, effect, and
cause to provide sufficient information to ED officials to permit
timely and proper corrective action.

As part of an finding the IPA is required to make a recommendation
for corrective action to the institution. If corrective action is not
necessary, the IPA must describe the reason. The institution must
develop a SEPARATE corrective action plan (see Example H) based
on the IPA's findings and recommendations and must include this
plan when submitting the report package.

[[Example G, "Auditor's Comments On Resolution Matters Relating
To The SFA Programs," is currently unavailable for viewing. Please
reference your paper document for additional information.]]

EXAMPLE H

CORRECTIVE ACTION PLAN
(Must be on Institution's Letterhead)

Audit Firm _________________________
Audit Period ______________________________

A. Comments on Findings and Recommendations:

The institution must provide a statement of concurrence or
nonconcurrence with the findings and recommendations. If the
institution does not agree with a finding, specific information must
be provided to support its position. If the information is voluminous,
an appendix may be attached to the submission.

If the institution determines that the questioned costs are unallowable
or that the charges cannot be supported, the institution should
provide a statement to that effect in the corrective action plan.

If the institution believes a questioned cost, or a portion of that cost
is an allowable cost, the institution must identify the allowable
portion by program.*1*

B. Actions Taken or Planned:

The institution must detail actions taken or planned to correct
deficiencies identified in the report. For planned actions, institutions
must provide projected dates for completion of major tasks. If the
institution believes a corrective action is not required, a statement
describing the reasons must be included.

C. Status of Corrective Actions on Prior Findings:

For all prior audits, e.g. IPA SFA, ED OIG, ED-SFAP program
review, and State Guarantee Agency and SPRE reports, the
institution must comment on all prior findings whether or not
corrective action has been completed.*2*

The institution must provide a report on the status of corrective
actions taken on prior findings that remain open. An update must be
included on dates for completion of major tasks and responsible
officials for any actions not completed.


_________________________________________
(Signature)
Institution Official's Title

*1* The institution is required to have the IPA provide a statement
that the necessary documents were located/obtained and/or that the
actions were taken either with the CAP or during the audit resolution
process.

*2* ED may have issued a FAD for a prior audit/examination. A
FAD describes any corrective actions the institution is required to
take within 45 days of receipt (unless otherwise stated) of the FAD.

**[Appendix A, "SFA Programs' Minimum and Maximum Amounts,"
is currently unavailable for viewing. Please reference your paper document
for additional information.]**

**[Appendix B, "High Risk Indicators," is currently unavailable for viewing . Please
reference your paper document for additional information.]**

APPENDIX C

REGIONAL INSPECTOR GENERAL FOR AUDIT and RELATED
OFFICES

Regional Inspector General
for Audit
Department of Education/OIG
1200 Main Tower, Room 2130
Dallas, Texas 75202-5040
214-767-3826
FAX: 214-767-2024


RELATED OFFICES' ADDRESSES:

Director, Institutional Participation Division
Office of Student Financial Assistance Programs
P.O. Box 23800
L'Enfant Plaza Station, SW
Washington, DC 20026


Audit Resolution Branch
Department of Education-IMD
P.O. Box 23800
L'Enfant Plaza Station, SW
Washington, DC 20026

APPENDIX D
Page 1 of 3

INSTRUCTIONS FOR DOWNLOADING EXAMPLE E

Example E, Summary Schedules A, B, & C can be downloaded from
the Single Audit Bulletin Board System (SABBS). These files have
been consolidated into a single file-- SFASCHED.EXE to facilitate
downloading. Minimum requirements to access the SABBS and
download this file include:

An IBM compatible computer with a 286 microprocessor
2 MB of RAM (1 MB must be extended memory)
A Hard Disk with a minimum of 2 MB free space
A 1.44 MB Floppy drive
Printer (Hewlett-Packard LaserJet recommended or a dot matrix
printer capable of printing in pica and elite pitch {10/12 cpi}
DOS 3.3x or above
A Modem

Communications Software

The communications software should be set as follows:

Parity = N
Data Bits = 8
Stop Bits = 1
Duplex = Full
Tel. # = 202 512-4286

When accessing the SABBS, you will be prompted for your first/last
name and your organization. You will also be prompted to enter a
password for future use. Upon first entering the SABBS you are in
the "Main Menu" of the "General Public (Open) Conference Area".
To download the file-- SFASCHED.EXE, you should perform the
following procedures:

1. From the General Public (Open) Conference, Press "J" to "Join
another conference". You are prompted for the number of the
Conference you wish to join.

2. Press "9" to join the "Single Audit - Education Conference". You
will be informed that you are now in the Single Audit - Education
conference and asked to press the "Enter" key. You are now in
the "Main Menu" of this conference.

3. Press "F" to change from the "Main Menu" to the "Files Menu".

APPENDIX D
Page 2 of 3

4. Press "L" to "List" the files in this conference, and then press
"Enter" key to list all files. A list of files will appear. Press "D"
to "Download" a file. You are prompted to enter the number of
the file you wish to download. Enter the number next to the file
-- SFASCHED.EXE (for example enter the number 3).

5. You are then prompted for the next file you wish to download.
Press enter (i.e. leave blank). You are then prompted whether you
wish to log off or continue after downloading. After responding
to this question, the file should start to download at this time.

Extracting and Installing the files from SFASCHED.EXE

After downloading:

1. Create a subdirectory on your hard drive-- C:Move
the SFASCHED.EXE file from your download directory in your
communications program to the C:directory. (NOTE:
Do not move the file to a floppy drive since the extracted
programs are too large to fit).

2. After moving the file, log to the C:directory (NOTE:
If you copied instead of moving the SFASCHED.EXE file from
your communications directory to the C:directory,
you will want to delete this file from your communications
directory).

3. Type SFASCHED from the C:directory which
contains the file-- SFASCHED.EXE. Three files will be extracted
(INSTALL.FIL, INSTALL.EXE, & FINAID.PAK).

After extracting:

1. You must now "install" the program. To install, type INSTALL
from the C:directory.

2. The installation program will create another subdirectory--
C:on your hard drive and install database and program files
to it. The installation program will also copy a file-- SFA.BAT to
your root directory-- C:

APPENDIX D
Page 3 of 3

During the installation of the program you will be asked to enter:

Name of institution
Address of institution
Audit period
Employer Identification Number (EIN)

After running the Install program, simply access the root directory on
your hard drive-- C:and type SFA. This will start the program used
to complete Example E, Summary Schedules A,B, & C.

Multiple Schools

You must run the Install program (See After extracting above) for
each institution you wish to prepare Example E, Summary Schedules
A, B, & C. Data entry for an institution MUST be completed and
saved to a diskette (the Utilities Menu contains a routine to perform
this operation) prior to reinstalling the program for another
institution. Reinstalling the program deletes all Example E files
previously created.