CUAV 2019 – APA Update _____________________________________ May 6, 2019 Eric Sandridge, Audit Director Auditor of Public Accounts
Presentation Objectives • Common Findings during Financial Audits • Higher Education Legislative Impacts • Student Financial Assistance Compliance Report • Higher Education Comparative Report • Federal Audit Update • Other Office initiatives • Stay Awake throughout the presentation WWW.APA.VIRGINIA.GOV Page 2
Higher Education Workplan • How many hours does it take us to complete our Higher Education Workplan? • How many higher education related reports did we issue since the last CUAV update? WWW.APA.VIRGINIA.GOV Page 3
Higher Ed Workplan Higher Education Workplan 18 45,000 42,755 16 40,000 14 35,000 12 30,000 10 25,000 8 20,000 6 15,000 4 10,000 3,295 2 3,550 5,000 580 205 0 0 Review Reports Special Reports/Letters NCAA Agreed Upon Federal Reports Financial Statement Audits Procedures Hours Reports Released WWW.APA.VIRGINIA.GOV Page 4
Common Audit Findings – Universities • What is the number one, most common audit finding area for Higher Education institutions during fiscal year 2018? WWW.APA.VIRGINIA.GOV Page 5
Common Audit Findings ‐ Universities Of course ‐ Information Technology! WWW.APA.VIRGINIA.GOV Page 6
University Results – Fiscal Year 2018 30 25 20 15 10 5 0 Human Expenses & Financial Information Revenue & Capital Assets Federal Resources & Reconciliations Payables Reporting Technology Receivables Payroll Findings 4 2 18 3 7 27 6 3 Universities 4 2 9 3 6 9 4 3 WWW.APA.VIRGINIA.GOV Page 7
University Results – Fiscal Year 2018 • Now that you’ve seen the results, what was the most common audit finding during the year? WWW.APA.VIRGINIA.GOV Page 8
University Results – Fiscal Year 2018 • Trick Question – It’s Improve Enrollment Reporting Process , related to federal compliance and not information technology. • Honorable Mention: Improve Processes for Employment Eligibility (I‐9 forms) WWW.APA.VIRGINIA.GOV Page 9
University Results – Fiscal Year 2018 • What do these findings have in common? • They’re compliance findings • Knowledge of regulations ‐ complexity • They require communication between departments • Internal controls over compliance functions may not be as strongly defined WWW.APA.VIRGINIA.GOV Page 10
Report on NCAA Subsidy Percentage Requirements • Initial calculations performed following review of each institutions fiscal year 2017 NCAA Schedule of Revenues and Expenses • All institutions met applicable subsidy percentage requirements provided in the Code section following exclusion of certain allowable items • Second report/letter to be issued in June WWW.APA.VIRGINIA.GOV Page 11
Report on NCAA Subsidy Percentage Requirements § 23.1‐1309 D Each fiscal year, any percentage increase in the subsidy at an institution that complies with subsection C shall be matched by a like percentage increase in generated revenue, except that each such institution shall utilize a rolling average of the change in generated revenue and student fees over the immediately preceding five years for the purposes of such calculation. WWW.APA.VIRGINIA.GOV Page 12
Report on Implementing JLARC Recommendations • Most institutions have completed implementation of the specific JLARC recommendations outlined in Chapter 836, 2017 Acts of Assembly • Work remains in progress for a few institutions, particularly related to increasing spans of control • We plan to issue a follow‐up report/letter during Summer 2019 to address outstanding items WWW.APA.VIRGINIA.GOV Page 13
Comparative Report on Higher Education • How many of you are aware of whether your institution is performing ratio analysis? • Are they using Composite Financial Index (or some derivation)? • How many of you read the APA’s Comparative Report on Higher Education when it was published last Fall? WWW.APA.VIRGINIA.GOV Page 14
Comparative Report on Higher Education • Planned annual report approved by JLARC as part of APA’s workplan • Uses ratio analysis to understand differences in financial activity, performance, and stability • Analyzes trends in performance to assess impacts of shifting trends in higher education on institution finances WWW.APA.VIRGINIA.GOV Page 15
Comparative Report on Higher Education • Analysis excludes VCCS • For purposes of the report, UVA includes Academic, Medical Center, and College at Wise divisions • VCU excludes VCU Health System Authority as it is considered a component unit under accounting standards • The College of William and Mary includes Richard Bland College and the Virginia Institute of Marine Science WWW.APA.VIRGINIA.GOV Page 16
Comparative Report on Higher Education • Compares institutions in the context of peer groups – Highest Research – Higher Research – Master’s and Baccalaureate • Financial Resource ratios ‐ Resources available and how they are used • Activity‐Based ratios ‐ Current year spending/revenue performance WWW.APA.VIRGINIA.GOV Page 17
Comparative Report on Higher Education • Financial Resource ratios – Primary Reserve – Viability – Return on Net Position – Age of Facilities • Activity‐Based ratios – Functional Classification – Net Operating Revenues – Auxiliary Income WWW.APA.VIRGINIA.GOV Page 18
Comparative Report on Higher Education • Composite Financial Index – Weighted combination of Primary Reserve, Viability, Return on Net Position, and Net Operating Revenues ratios – Designed by Prager, Sealy & Co., LLC as a means of providing a total metric by which to gauge institution health and is widely accepted WWW.APA.VIRGINIA.GOV Page 19
Institution Endowment Data FY17 Fall 2016 Endowment Endowment FTE per FTE (in millions) 1 Enrollment 2 Classification Institution Student Highest Research GMU $ 77.7 29,377 $ 2,645 Highest Research UVA 6,400.0 24,329 263,061 Highest Research VCU 1,840.0 28,496 64,570 Highest Research VT 995.8 33,675 29,571 Higher Research CWM 874.1 8,610 101,521 Higher Research JMU 93.1 20,837 4,468 Higher Research ODU 213.5 20,031 10,658 Master’s and Baccalaureate CNU 24.1 4,986 4,834 Master’s and Baccalaureate LU 51.8 4,705 11,010 Master’s and Baccalaureate NSU 19.5 4,800 4,063 Master’s and Baccalaureate RU 50.1 9,165 5,466 Master’s and Baccalaureate UMW 47.9 4,296 11,150 Master’s and Baccalaureate VMI 435.1 1,953 222,785 Master’s and Baccalaureate VSU 36.1 4,505 8,013 Exceeds National Average WWW.APA.VIRGINIA.GOV Page 20
Primary Reserve Ratio WWW.APA.VIRGINIA.GOV Page 21
Viability Ratio WWW.APA.VIRGINIA.GOV Page 22
Return on Net Position Ratio WWW.APA.VIRGINIA.GOV Page 23
Age of Facilities Ratio WWW.APA.VIRGINIA.GOV Page 24
Composite Financial Index (CFI) WWW.APA.VIRGINIA.GOV Page 25
Composite Financial Index (CFI) Including Component Units WWW.APA.VIRGINIA.GOV Page 26
Federal Audit Update • Latest draft version of the 2019 compliance supplement includes some interesting changes: • “Pick Six” Initiative • Reporting results and statistics • Securing Student Information WWW.APA.VIRGINIA.GOV Page 27
Cycled Agencies • Approximately 70 agencies – No mandatory annual audit requirement – Generally, do not support the CAFR or Statewide Single Audit of federal funds • Beginning with last work plan year, began new approach for cycled agencies by dividing into two pools based on risk WWW.APA.VIRGINIA.GOV Page 28
Impact of Legislation on Cycled Agencies • Acts of Assembly Chapters 57 and 307 – Changed the audit requirement for 16 entities from annual to when determined necessary by the Auditor of Public Accounts – This allows us to use our risk analysis process to determine how often to audit these agencies – Time saved will be shifted to more risky agencies WWW.APA.VIRGINIA.GOV Page 29
Cycled Agencies Pools Risk Analysis – All Cycled Agencies Pool I – Low Risk Pool II – High Risk • Special Project on • Agency Audit of Specific Cycle Specific Cycle(s) • Annual Project • 3 Year Rotation • Single Report • Multiple Reports • ICQ • ICQ WWW.APA.VIRGINIA.GOV Page 30
Cycled Agencies – Internal Control Questionnaire • Agency completes questionnaire and provides supporting documentation – Covers key internal controls over significant organization areas • APA reviews responses and supporting documentation to determine nature, timing and extent of additional procedures • Includes on‐site visit WWW.APA.VIRGINIA.GOV Page 31
Cycled Agencies – Internal Control Questionnaire • Agencies receive a letter summarizing results • Results used in future risk analysis for determining pools • Annually issue a report summarizing results of all ICQs WWW.APA.VIRGINIA.GOV Page 32
Summary of Results – ICQ Process 12 10 8 7 6 6 6 5 4 4 3 2 0 Policies and ARMICS Reconciliations Payroll/HR Miscellaneous Information Procedures Security Agencies Reviewed Findings WWW.APA.VIRGINIA.GOV Page 33
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