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Association of College and University Auditors ACUA

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USA Patriot Act (enacted October 26, 2001) ... Repeals requirement to collect name / SSN of individuals claiming student as dependent ... – PowerPoint PPT presentation

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Title: Association of College and University Auditors ACUA


1
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2
Association of College and University Auditors
(ACUA)
  • James E. Morley, Jr.
  • September 23, 2002
  • Salt Lake City, Utah

3
Presentation Overview
  • Part I - Higher education in transition
  • Part II - Current national issues
  • Part III - Internal audit Today and the future

4
Higher education in transition
  • Rapid change Industry
  • Cost/price increases Funding shortfalls
  • Accountability
  • Competition
  • Rapid change Expectations

5
Higher education in transition
  • Rapid change Industry

6
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7
Growth in Higher Education
  • Square Footage
  • 1950s - 500 million
  • 1980s - 3 billion
  • 1990s - 4 billion
  • New Construction
  • Between 1994 1996 - 12 billion
  • Projections for 2010
  • Additional 200 billion to build

8
Higher education in transition
  • Cost/price increases Funding shortfalls

9
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10
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11
Average Tuition DiscountFull Time Freshmen
12
Higher education in transition
  • Accountability

13
Accountability
  • Scrutiny of costs, salaries, tenure, graduation
    rates, and curriculum
  • School-to-work transition
  • rise in professional education
  • Minority retention
  • For-profit comparisons
  • inefficient operations
  • unresponsive structure
  • underutilized technology

14
Higher education in transition
  • Competition

15
A Competitive Environment
  • Competition for students and for resources
  • Increase in tuition discounting and faculty
    salaries as a result
  • Customers (students) expecting and demanding more
    from institution
  • Increased attention to student services
  • Market segments fragmenting
  • Increasing niche competition
  • Competition from distance learning
  • Rise of for-profit schools

16
Higher education in transition
  • Rapid change Expectations

17
Higher education in transition
  • A consumer-driven marketplace
  • Consumers (better called stakeholders) place
    constant and competing demands
  • Technology overlay
  • Globalization
  • Terrorism
  • Disease
  • Culture

18
Current national issues
19
Current national issues
  • War against terrorism homeland security
  • Tax issues and accounting-related
  • Federal regulations
  • Technology

20
National issues
  • War against terrorism and
  • homeland security

21
Homeland securityImpact on colleges and
universities
  • Foreign students and visitors
  • Sharing of information with law enforcement and
    privacy concerns
  • IT security
  • Laboratory security and treatment of biohazards

22
Homeland security New federal laws
  • USA Patriot Act (enacted October 26, 2001)
  • Enhanced Border Security and Visa Entry Reform
    Act (enacted May 14, 2002)
  • Public Health Security and Bioterrorism
    Preparedness Act (enacted June 12, 2002)


23
Homeland security USA Patriot Act
  • Information sharing
  • This legislation provides simplification for
    federal officials to receive court orders for
    student records and amends FERPA to permit
    emergency disclosure.
  • Calls for full implementation of INS foreign
    student tracking system (SEVIS)
  • With court order, Feds investigating terrorism
    may obtain business and student records

24
Homeland security USA Patriot Act (contd)
  • Information sharing
  • Updates surveillance laws to cover todays
    communicationse-mail, voice mail, etc.
  • Makes it easier for law enforcement to acquire
    routing information (pen registers, trap and
    trace), and relieves institutions of liability
  • May result in increased requests for information

25
Homeland security Enhanced Border Security and
Visa Entry Reform Act
  • Enhancements to SEVIS
  • Re-certification of all institutions w/ biennial
    reviews
  • Additional information on foreign students
  • Notification requirements between Department of
    State, INS, and institutions to track student
    entry, enrollment, and changes in status
  • Interim notification system by 9/14/02
  • New background checks for visa applicants from
    countries that sponsor terrorism

26
Homeland security Student and Exchange Visitor
Information System (SEVIS)
  • Problems for campuses with large foreign student
    populations
  • Batch interface not yet available for
    institutions that will not key information
    directly into system
  • Web-based system for preliminary enrollment went
    live July 1 institutional reporting not
    mandatory before January 30

27
Homeland security Public Health Security
Bio-terrorism Preparedness Act of 2002
  • Select agent list to be reviewed at least
    biennially
  • Regulations will cover possession and use, not
    just transfers, of select agents
  • Tighter controls, including federal background
    checks on persons allowed access to select agents
  • Broad inspection authority for HHS

28
Homeland security Social security requirements
for INS verification
  • New guidance asks INS to issue verification based
    on review of passports and related documents for
    foreign applicants for SSNs
  • SSA estimates new step will add 3-12 weeks to
    receipt of SSN
  • Campus issuance of temporary nine-digit
    identifiers to address internal payroll
    unofficially acknowledged by SSA
  • Check SSA website for up-to-date guidance

29
Department of Homeland Security Proposed
  • The administrations five organizational
    categories proposed for the new department
    include 24 government entities
  • Border and Transportation
  • Emergency Preparedness and Response
  • Chemical, Biological, Radiological and Nuclear
    Countermeasures
  • Information Analysis and Infrastructure
    Protection
  • Secret Service
  • Sixty-one Congressional committees and
    subcommittees now have authority over the 24
    organizations likely to be merged into the new
    department
  • And, at present, the House Government Reform and
    Senate Governmental Affairs committees have
    general oversight authority
  • Source Congressional Quarterly

30
National issues
  • Tax issues and accounting-related

31
Tax issues Recent IRS actions
  • Memo on FICA withholding for medical residents
  • Final rules published for
  • Intermediate sanctions
  • Corporate Sponsorships
  • Re-proposed rules on 1098-T reporting

32
Tax issues FICA Rules for medical residents
  • Memo from IRS chief counsel indicates residents
    not eligible for student FICA exemption (January
    24, 2002)
  • Rationale
  • Most services provided by residents are treated
    as on-the-job training, not part of study program
  • Therefore not eligible for student FICA
    withholding exemption

33
Tax issues Final rules on corporate sponsorships
  • Safe harbor for qualified sponsorship payments
  • Exclusive sponsorships allowed
  • Exclusive provider arrangements not in safe
    harborbut not automatically subject to UBIT
  • EOs web site can link to sponsors site, but not
    endorse it
  • Rules published 4/25/02 Federal Register, and are
    applicable for payments solicited or received
    after December 31, 1997

34
Tax issues IRS Re-proposes 1098-T reporting
requirements
  • Eases reporting burden
  • Repeals requirement to collect name / SSN of
    individuals claiming student as dependent
  • Allows reporting of aggregate amount of qualified
    tuition / expenses or amounts billed
  • Prior year reporting limited to adjustments to
    amounts previously reportednot all refunds
  • Removes requirement to report on individuals
    ineligible for benefit

35
Tax issues IRS Re-proposes 1098-T reporting
requirements (contd)
  • Comments due July 29 see web site for NACUBO
    response
  • Effective date of new regulations will be for tax
    year 2003 (1098-Ts that will be filed in early
    2004)
  • Final rules expected by end of 2002

36
Accounting-related GASB Standards
  • GASB Statement No. 34
  • Basic Financial Statements-And Managements
    Discussion Analysis-for State and Local
    Governments
  • GASB Statement No. 35
  • Amends GASB34 to include Public Colleges and
    Universities

37
GASB Standards (contd)
  • GASB Reporting Model Implementation Guides
  • Two separate guides developed by GASB staff
    (April 2000 and January 2002)
  • Special NACUBO guide issued January 2001 for
    public colleges and universities
  • GASB Statement No. 37 - Omnibus Statement
  • Addresses problems created by GASB34 and GASB35

38
GASB Standards (contd)
  • GASB Statement No. 38 - Note Disclosures
  • Significantly modifies required disclosures
  • Eliminates some, adds others
  • Debt, legal issues, payables/receivables
  • GASB Statement No. 39 Affiliated Organizations
  • Applies to foundations and other entities
    supporting public institutions

39
Accounting-related GASB Projects
  • Deposit and investment risk disclosure
  • Other post-employment benefits
  • Conceptual framework

40
Accounting-related FASB Standards
  • FASB Statement No. 141 - Business Combinations
  • Excludes not-for-profits
  • FASB Statement No. 142 - Goodwill and Intangible
    Assets
  • Application to NFPs deferred until NFP
    combination project is complete

41
FASB Standards (contd)
  • Not-for-profit business combinations
  • Measuring financial instruments at fair value

42
Accounting-related AICPA Project
  • Exposure draft revises rules for Property, Plant
    Equipment accounting
  • Specifies expenditures which qualify for
    capitalization

43
Accounting-relatedSarbanes-Oxley Act of 2002
  • Creates new, independent regulatory body, the
    Public Company Accounting Oversight Board (PCOAB)
  • Changes to ensure FASB independence in setting
    national accounting standards
  • Auditor independence requirements mandated for
    audits of publicly traded companies
  • New corporate responsibilities and restrictions
    for CEOs and CFOs
  • Focus on greater disclosure and transparency in
    financial reporting, internal controls, ethics,
    audit committee expertise
  • Stricter provisions and for corporate fraud and
    white-collar crime

44
Possible future actions
  • Increased disclosure GASB Statement 39 (issued
    2002)
  • GASB performance measures experimentcoming
    (end2002)
  • FASB mandated study of principles-based
    accounting financial reporting system (due July
    2003)

45
Professional standards-setting groups
  • AICPA
  • FASB
  • GASB
  • PCAOB

46
National issues
  • Federal regulations

47
Federal regulations ED Title IV Program
eligibility rules
  • Replace the 12-hour rule with a one-day rule
  • Clarify provisions for incentive compensation and
    identifies safe harbor activities for student
    recruiters
  • Clarify need to take attendance in order to
    comply with return of Title IV funds requirements
  • Amend overpayment rules to permit students owning
    small amounts to retain their program eligibility
  • Expand from 90 to 120 days for making late
    disbursements and require institutions to offer
    them to students who complete the period of
    enrollment
  • Eliminate the rule for institutions to confirm
    the receipt of notices sent to borrowers (or
    parents for PLUS loans) that loan funds have been
    credited to students accounts

48
Federal regulationsOMB Federal Financial
AssistanceManagement Improvement Act of 1999
  • Proposed revisions to Circular A-133, Audits of
    States, Local Governments, and Non-Profit
    Organizations
  • Proposal for a standard format for federal agency
    use in announcing discretionary grant and
    cooperative agreement funding opportunities
  • Proposed standard data elements for federal
    agency use in creating grant funding opportunity
    announcement summaries under the E-Grants
    initiative
  • Proposed revisions to three OMB cost principles
    circulars (A-21, A-87, A-122) to clarify
    ambiguous language in the interpretation of
    similar costs
  • Proposed revision to Circular A-110, Uniform
    Administrative Requirements for Grants and
    Agreements with Institutions of Higher Education,
    et al

49
Federal regulations New opportunity to assess
regulatory costs, impacts
  • A new administrative policy will allow regulated
    entities and the public to challenge agency rules
    and the accuracy of the data behind them.
  • A little-known provision included as a rider in
    the FY2001 appropriations bill for Treasury and
    General Government requires all federal agencies
    to ensure the quality, objectivity, utility, and
    integrity of information they produce.

50
Issues in 2002 Status of Congress
  • Late July initiatives included approval of new
    Homeland Security Agency and passage of Corporate
    Accountability Bill
  • Corporate Accountability Bill affects only
    corporations directly, including creation of an
    independent oversight board loosely attached to
    the SEC

51
National issues
  • Technology

52
Technology 2002 Issues
  • Broadband access
  • Distance education and federal student aid
  • Information technology authorization
  • Intellectual property
  • Network security
  • Privacy
  • Workforce development
  • FY03 funding priorities

53
Technology Higher Education Information
Technology Alliance (HEIT)
  • Five years old convened by NASULGC and EDUCAUSE
  • Represents higher educations collective
    interests in federal information technology
    policy
  • Hosts annual forum to share information and
    formulate legislative issues agenda
  • USA Patriot Act, cyber security legislation, and
    homeland security activities have far-reaching
    implications for higher education

54
Technology HEIT Alliance members
55
Could there ever be a better time to be an
internal auditor?
56
Internal audit Today and the future
  • Two key themes
  • Senior financial/business officers perspectives
    on internal audit
  • Adding value as an internal auditor

57
Senior business/financial officers perspectives
  • Budget range 140 million to 2.4 billion (most
    over 1 billion)
  • Five publics, five privates
  • Staff size (professional)
  • 1-12
  • One institution fully outsourced except for
    Director
  • One institution had no internal audit function

58
Senior business/financial officers perspectives
(contd)
  • Reporting relationships
  • Nine of ten IA directors report to a senior staff
    member for administrative purposes
  • One reports directly to the Audit Committee
  • In-house or outsourced?
  • One is fully outsourced but Director is internal
    staff
  • All have considered at one time

59
Senior business/financial officers perspectives
(contd)
  • Yearly plan development
  • Internal development and review, Audit Committee
    approval
  • Each has various approaches to risk assessment
    many with multi-year planning
  • Increasing emphasis on advisory and investigation
    work
  • Proactive follow-up by senior management

60
Adding value as an internal auditor
  • Be a partner
  • Identifying risks
  • Identify solutions
  • Propose appropriate controls
  • Follow best practices
  • Be the expert on process and good management
    practices
  • Effective communications

61
Adding value as an internal auditor (contd)
  • Provide management advisory services
  • Enterprise wide risk assessment
  • Policy interpretation and early procedural
    guidance
  • Educational resource
  • Training
  • Systems development
  • Member of cross functional teams
  • Support recommendation implementation

62
Adding value as an internal auditor (contd)
  • From The Extraordinary Higher Education Leader
  • Think like the President/Chancellor/CFO
  • Unlearn what has made you successful
  • Develop your total intelligence
  • Build and manage key relationships

63
Think like the President/Chancellor/CFO
  • Effective resource gathering, allocation, and
    control
  • State and federal grants
  • Tuition discounting
  • Development
  • Compliance
  • Tax-related
  • Research
  • Social legislation
  • Technology related
  • Homeland security
  • Business continuity

64
Unlearn what has made you successful
  • Ask others for feedback
  • Let go of detail think systemically
  • Focus on design, facilitation, and motivation
  • From problem-solving to capacity-building
  • Build support before issuing a report

65
Develop your total intelligence
  • Develop and maintain a balanced lifestyle
  • Heart knowledge
  • Know yourself emotionally
  • Ability to understand others intentions and
    behaviors
  • Build on your strengths

66
Build and manage key relationships
  • Who are they? Find out!
  • Audit committee, plus
  • President
  • CFO and senior staff
  • Departmental staff
  • External auditors
  • State and federal auditors
  • Regulators

67
Success depends on
  • Regular, systematic innovation and change
  • Influencing senior management and the governance
    process

68
NACUBO Website
  • http//www.nacubo.org/presidents_corner

69
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