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REPORT ON EXAMINATION
NATIONAL DIRECT STUDENT LOAN PROGRAM COLLEGE WORK-STUDY PROGR&~
SUPPLEMENTAL EDUCATIONAL OPPORTUNITY GRfu~TS PROGRAM PELL GRJU~T PROGRAM
GUARANTEED STUDENT LOAN PROGRAM MICHIGAN TECHNOLOGICAL UNIVERSITY HOUGHTON, MICHIGAN
Entity No. 1386005955AI Year Ended June 30, 1984
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Report on Examination
NATIONAL DIRECT STUDENT LOAN PROGRAM COLLEGE WORK-STUDY PROGRAM
SUPPLEMENTAL EDUCATIONAL OPPORTUNITY GRANTS PROGRAM PELL GRANT PROGRAM
GUARANTEED STUDENT LOAN PROGRAM MICHIGAN TECHNOLOGICAL UNIVERSITY Year Ended June 30, 1984
Auditors' Report • • • • • • • • • • • • • • • • Statement of Changes in Student Financial Assistance
Program Fund Balances • • • • • • • • • • • • • • Notes to Statement of Changes in Student Financial
Assistance Program Fund Balances • • • • • • • • Schedule of Disbursements and Expenditures for Each Student Financial Assistance Program • • • •
Auditors' Report on Internal Accounting and Administrative Controls and Compliance • • • • • • • • •
Auditors' Comments on Compliance • • • Schedule of Findings and Questioned Costs
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Ernst & Whinney
Board of Control
Michigan Technological University Houghton, Michigan
210 N. Front Street
Marquette, Michigan 49855 906/228-3600
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We have examined the accompanying statement of changes in Student Financial Assistance (SFA) Program fund balances of Michigan Technological University for the year ended June 30, 1984. Our examination was made in accordance with generally accepted auditing standards and with the audit requirements set forth in the Audit Guide dated March 1984 prescribed by the Department of Education and, accordingly, included such tests of the accoun~ing records and such other auditing procedures as we considered necessary in the
circumstances.
In our opinion, the financial statements referred to above present fairly the changes in SFA Program fund balances of Michigan Technological University for the year ended June 30, 1984, on the basis of accounting described in Note A, which basis has been applied in a manner consistent with that of the preceding year.
The supplemental information contained in the Schedule of Disbursements and Expenditures is presented for purposes of additional analysis and is not considered necessary for fair presentation of changes in fund balances.
The information contained in the schedule has been subjected to the auditing procedures applied in our examination of the accompanying statement of changes in SFA Program fund balances and, in our opinion, is fairly stated in all material respects in relation to the accompanying statement taken as a whole.
l1arquet te, Hichigan August 15, 1984
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STATEMENT OF CHANGES IN STUDENT FINANCIAL ASSISTANCE PROGRAM FUND BALANCESMICHIGAN TECHNOLOGICAL UNIVERSITY June 30, 1984
Grants and College-Work Study
Pell SEOG CWS
Student Loans
NDSL Total
Fund balances--June 30, 1983 $ -0- $ -0- $ -0- $2,268,276 $2,268,276
Additions:
Federal awards--Note D
Pell funds carried over from 1982-83--Note D Interest income on loans
Reimbursement of loan cancellations by the Federal government
Other
TOTAL ADDITIONS
1,835,255 30,474
531 1,866,260
89,488 279,953
89,488 279,953
71,295 34,924
4,403 110,622
2,275,991 30,474 34,924
4,934 2,346,323
313,886 86,000
Deductions:
Grants
N Wages--Note F Loan cancellations
Pell funds to be used in 1984-85--Note D CWS funds to be used in 1984-85--Note F Loan collection or litigation expense Administrative expenses--Note C
TOTAL DEDUCTIONS Other changes:
Institution--matching grant Interest on loans cancelled
Interest on loans assigned to the Federal government
Other
TOTAL OTHER CHANGES Net increase (decrease) in fund balances
Fund balances--June 30, 1984
1,864,608
1,652
1,866,260
-0-
$ -0-
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$3,488 89,488
-0- -0- $
13,150 15,694 342,730
62,777
62,777 -0- -0-
1,655
29,385 19,171 50,211
7,921
7,921 68,332
$2,336,608
1,950,608 313,886 1,655 1,652 13,150 29,385 38,353 2,348,689
70,698
70,698 68,332
$2,336,608
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NOTES TO STATEMENT OF CHANGES IN STUDENT FINANCIAL ASSISTANCE PROGRAM FUND BALANCES MICHIGAN TECHNOLOGICAL UNIVERSITY
June 30, 1984
NOTE A--The accompanying statement of changes in SFA program fund balances ("Statement") has been prepared in accordance with generally accepted accounting principles and the format as set forth in the publication, Audit Guide for Student Financial Assistance Programs. The purpose of the Statement is to present, in summary form, SFA activities of Michigan Technological University for the year ended June 30, 1984, which have been financed by the U.S. Department of Education (NDSL, SEOG, Pell, and CWS). Except as described in the following paragraph, generally accepted accounting principles are in agreement with the accounting practices prescribed for such programs by the Department of Education's fiscal control and fund accounting procedures.
The prescribed practices for the NDSL Program do not provide for accrual of interest on student loans receivable or for a provision of allowance for doubtful loans. Accordingly, interest on loans is recorded as received; uncollectible loans are not recognized until the loans are cancelled or written-off in conformity with NDSL Program requirements.
These practices do not conform with generally accepted accounting principles.
No recognition is given to accrued interest on student loans; however, such practice does not have a significant effect on the financial statements.
NOTE B--The University is on the cash demand method for funding Department of Education programs; funds provided by the Federal government are recognized and charged against the pooled cash account to the extent of deductions.
Because the Statement presents only a selected portion of the activities of Michigan Technological University, it is not intended to and does not present either the financial position, changes in fund balances or the ,current funds, revenues, expenditures, and other changes in fund balances
of Michigan Technological University.
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Experience indicates that there will be collection losses.
recognition of such losses, which at present can only be estimated, University has recorded an allowance for losses of $125,000 in its fund financial statements reported under a separate cover.
In the all
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NOTES TO STATEMENT OF CHANGES IN STUDENT
FINANCIAL ASSISTANCE PROGRAM FUND BALANCES--Continued MICHIGAN TECHNOLOGICAL UNIVERSITY
NOTE C--The programs provide for government reimbursement of administrative expense based on a sliding percentage of total expenditures for all campus-based programs except for the CWS Community Service Learning Program which is calculated separately at 10% of total expenditures. The administrative expense can be charged to one or more of the campus-based programs that have had activity during the award year.
NOTE D--Total grant award authorizations for the Department of Education programs for the year were: $279.953 for CWS and $89.488 for SEOG. The Pell Grant Program grant award authorization was $1.864.608. The University used $28.822 of the June 30. 1983. pell fund balance in making 1983-84 Pell Grants. The remaining fund balance will be used for student grants for the 1984-85 award year.
NOTE E--No adjustments to the Applications and Fiscal Operating Report (FISAP. ED Form 646). relating to the National Direct Student Loan.
Supplemental Educational Opportunity Grant. and College Work-Study Programs were necessary for the year ended June 30. 1984.
NOTE F--Up to 10% of the funds provided by the Federal government for the CWS Program for a specified award period may be carried back or carried forward for expenditures in another award period.
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SCHEDULE OF DISBURSEMENTS AND EXPENDITURES FOR EACH STUDENT FINANCIAL ASSISTANCE PROGRAM MICHIGAN TECHNOLOGICAL UNIVERSITY
Year Ended June 30, 1984
Disbursements:
National Direct Student Loan Program Expenditures:
College Work-Study Program
Supplemental Educational Opportunity Grant Program
Pell Grant Programs
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$ 443,845
342,730 89,488 1,866,260
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Ernst & Whinney
AUDITORS' REPORT ON INTERNAL ACCOUNTING AND ADMINISTRATIVE CONTROLS AND COMPLIANCE
Board of Control
Michigan Technological University Houghton, Michigan
210 N. Front Street
Marquette, Michigan 49855 906/228-3600
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We have examined the statement of changes in Student Financial Assistance Program fund balances of Michigan Technological University for the year ended June 30, 1984, and have issued our report thereon dated August 15, 1984. As part of our examination, we made a study and evaluation of the system of internal accounting control of Michigan Technological University to the extent we considered necessary to evaluate the system as required by generally accepted auditing standards and the standards for financial and compliance audits contained in the U.S. General Accounting Office's Standards for Audit of Governmental Organizations, Programs, Activities and Functions.
Under these standards the purpose of such evaluation is to establish a basis for reliance thereon in determining the nature, timing, and extent of other auditing procedures that are necessary for expressing an opinion on the financial statements. For the purpose of this report, we have identified the significant internal accounting controls to be in the cash receipts and disbursements areas.
Our study included the significant control areas indicated above and also a study of those internal accounting control and administrative control procedures of Michigan Technological University that we considered relevant to the criteria established by the Department of Education as set forth in its Audit Guide dated March 1984. Our study included tests of compliance with such procedures during the period from July 1, 1983 through June 30, 1984.
The objective of internal accounting control is to provide reasonable, but not absolute. assurance as to the safeguarding of assets against loss from unauthorized use or disposition. and the reliability of financial records for preparing financial statements and maintaining accountability for assets. We understand that the objective of those administrative control procedures comprehended in the Department of Education criteria is to provide similar assurance as to compliance with its related requirements. The concept of reasonable assurance recognizes that the cost of a system of internal control should not exceed the benefits derived and also recognizes that the evaluation of these factors necessarily requires estimates and judgements by managemen t •
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Ernst&~'hinney
Board of Control
There are inherent limitations that should be recognized in considering the potential effectiveness of any system of internal accounting control. In the performance of most control procedures, errors can result from misunderstanding of instructions, mistakes of judgement, carelessness, or other personal factors. Control procedures whose effectiveness depends upon segregation of duties can be circumvented by collusion. Similarly, control procedures can be circumvented intentionally by management with respect either to the execution and recording of transactions or with respect to the estimates and judgements required in the preparation of financial statements.
Further, projection of any evaluation of internal accounting control to future periods is subject to the risk that the procedures may become inadequate because of changes in conditions and that the degree of compliance with the procedures may deteriorate.
We understand that procedures in conformity with the criteria referred to in the second paragraph of this report are considered by the Department of Education to be adequate for its purpose in accordance with the provisions of the Higher Education Act of 1965 and related regulations, and that procedures not in conformity therewith indicate some inadequacy of such purposes. Based on this understanding and on our study which would not necessarily disclose all weaknesses in the system, we believe the Michigan Technological University procedures were adequate for the Department's purpose.
This report is intended solely for the use of Michigan Technological University and the U.S. Department of Education and should not be used for any other purpose.
Marquette, Michigan August 15, 1984
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Ernst & Whinney
AUDITORS' COMMENTS ON COMPLIANCE
Board of Control
Michigan Technological University Houghton, Michigan
210 N. Front Street
Marquette, Michigan 49855 906/228-3600
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We have examined the accompanying statement of changes in SFA program fund balances of Michigan Technological University for the year ended June 30, 1984, and have issued our report thereon dated August 15, 1984. As part of our examination, we made a study and evaluation of those internal administrative methods and procedures established by Michigan Technological University to administer and account for Student Financial Assistance Programs in accordance with the significant administrative requirements of the Department of Education's ( .. Education") March 1984 Audit Guide for Student Financial Assistance Programs ("Guide") Section II and the following compliance requirements:
I CASH t£~AGEMENT
II FINANCIAL REPORTING
III INSTITUTIONAL ELIGIBILITY fu~D PARTICIPATION IV COORDINATION OF STUDENT AID PROGR&~S
V STUDENT FILE MAINTENANCE FISCAL PROCEDURES AND RECORD KEEPING
VI STUDENT ELIGIBILITY
VII INSTITUTIONAL DISBURSE~lliNTS TO A\~~D RECIPIENTS
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VIIIREFUND CALCULATION A.t~D OVERPAYMENT DETERllINATION PROCEDURES Other Compliance Requirements Specific to Each SFA Program.
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We understand that procedures and systems in conformity with the criteria contained in these significant administrative requirements are considered by Education to be adequate for its purposes in accordance with the provisions of The Higher Education Act as amended. Based on this understanding and our study and evaluation, we believe the Institution's procedures and systems were adequate for Education's purposes.
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Ernst&Whinney
Board of Control
In addition, our examination also included test of controls to determine compliance with the provisions of certain major program terms and conditions identified in Section II--Compliance Requirements of the Guide. Based upon our examination, we found that for the items tested, the Institution complied with the material terms and conditions of the SFA award agreements.
Further, based on our examination and the procedures referred to above, nothing came to our attention to indicate that Michigan Technological University had not complied with the material terms and conditions (identified in the first paragraph above) of Michigan Technological University's SFA programs.
This report is intended solely for the use of Michigan Technological University, the cognizant audit agency, and other Federal audit agencies and should not be used for any other purpose.
Marquette, Michigan August 15, 1984
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SCHEDULE OF FINDINGS AND QUESTIONED COSTS MICHIGAN TECHNOLOGICAL UNIVERSITY
During our examination of the National Direct Student Loan, College Work-Study, Supplemental Educational Opportunity Grant, and Pell Grant Programs for the year ended June 30, 1984, we noted no material violations of Federal regulations.
Auditors' Comments on Audit Resolution Matters Relating To The SFA Programs
Michigan Technological University has taken corrective action on findings of the U.S. Department of Education Office of Inspector General, Audit Control Number 05-41115:
Finding No. 1 - Administrative expense in award period 1982-83 exceeded the maximum allowable.
Action Taken - Administrative expense for the current award period (1983-84) was reduced by the amount over-expended in the prior year.
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