Continuous Auditing. Project Report# August 28, 2015

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Course Fee Management Project Report# 15-09 August

1 Course Fee Management Project Report# August 28, 2015 "Committed to Service, Independence and Quality"

2 THE UNIVERSITY OF TEXAS AT EL PASO Office of Auditing and Consulting Services August 28, 2015 Dr. Diana Natalicio President, The University of Texas at El Paso Administration Building, Suite 500 EIPaso,Texas79968 Dear Dr. Natalicio: The has completed a continuous auditing project for course fees management. The objective of this audit was to identify high risk areas that require frequent review and to create a set of continuous auditing reports that provide timely alerts for transactions that may not be compliant with federal, state, and institutional laws and regulations. We appreciate the cooperation and assistance provided by the Office of the Provost, the Director of Student Business Services and the Vice President for Student Affairs management team during our project. Sincerely, }J;J>._-fj, Lori Wertz, CPA Interim Director Administration Bldg. Fourth Floor El Paso, Texas (915) Fax (915)

3 Report Distribution: University of Texas at El Paso Dr. Gary Edens, Vice President for Student Affairs Dr. Howard Daudistel, Interim Provost Mr. Richard Adauto, Executive Vice-President Ms. Elizabeth Flores, Associate Provost Ms. Sandra Vasquez, Assistant Vice-President for Institutional Compliance and EEO University of Texas System Dr. Stephen Leslie, Executive Vice Chancellor for Academic Affairs Mr. Alan Marks, Attorney, Office of Academic Affairs Mr. Mark Salamasick, Executive Director, Audit Academic Mr. J. Michael Peppers, Chief Audit Executive External Governor's Office of Budget Mr. Ed Osner, Legislative Budget Board Internal Audit Coordinator, State Auditor's Office Sunset Advisory Commission External Audit Committee Members Mr. David Lindau Mr. Steele Jones Auditors Assigned to the Audit: Ms. Courtney Rios, Engagement Manager Ms. Victoria Morrison, IT Auditor Ms. Narahay Buendia, Lead Auditor

4 TABLE OF CONTENTS EXECUTIVE SUMMARY. BACKGROUND. PROJECT OBJECTIVES. SCOPE AND METHODOLOGY. AUDIT RESULTS. SUMMARY APPENDIX A: Unexpended Balance Report. APPENDIX B: Questionable Expenses Report. APPENDIX C: Revenue Reasonableness Report*. APPENDIX D: New and increased fees. APPENDIX E: Three Lines Of Defense

5 EXECUTIVE SUMMARY The has completed a continuous auditing project. During the project we noted the following: Course fees management is a high risk area that benefits from continuous auditing because fee approvals, assessments, and expenditures are separate functions handled by three different departments and the information is not available in a single report. The Provost, the Vice-President for Student Affairs, the Director of Student Business Services, and other stakeholders lack the ability to monitor fees effectively due to the absence of reports that include information from other departments that is necessary for informed decision making. Four continuous auditing reports were created by the Office of Auditing and Consulting Services and may be used by management to monitor course fees more effectively. The reports allow staff to monitor the following areas: Unexpended balances Report Objective: Monitor unexpended fee balances at the end of every fiscal year to determine if fee balances reflect the cost recovery nature of the course fee Questionable expenditures Report Objective: Confirm that fee expenditures are spent in accordance with Texas Education Code 54 and Board of Regents' Rule Revenue Reasonableness Report Report Objective: Identify potential errors with fee assessment New and Increased Fees Report Objective: Verify that new and approved fees have been appropriately approved and assessed in a timely manner 2

6 BACKGROUND The Institute oflnternal Auditors' Global Technology Audit Guide 3 (IIA GTAG 3) Continuous Auditing: Implications for Assurance, Monitoring, and Risk Assessment, provides the following guidance for the development of a continuous auditing program: "Continuous auditing comprises ongoing risk and control assessments, enabled by technology and facilitated by a new audit paradigm that is shifting from periodic evaluations of risks and controls based on a sample of transactions, to ongoing evaluations based on a larger proportion of transactions. Coordinating continuous auditing, continuous monitoring, and audit testing of continuous monitoring helps internal audit and management maximize their respective returns on investment and achieve compliance objectives, and it provides the opportunity to enhance the organization's overall health and competitiveness. " GTAG 3 defines continuous assurance roles in the context of the IIA's "Three Lines of Defense" risk management and control framework: First Line of Defense: Operating management functions that own and manage risks Second Line of Defense: Functions that oversee risks, such as compliance Third Line of Defense: An internal audit function that provides independent assurance For additional detail regarding the Three Lines of Defense, see Appendix E. Based on previous audit reports and feedback from stakeholders, auditors selected course fees management as the first high risk area to address with continuous auditing reports. The decision to select course fees for the pilot project was based on the following considerations: Course fee approval, assessment, and expenditures are handled by three separate departments. Many departmental documents are not available online, making it difficult for stakeholders to capture the information necessary for timely decision making. Previous audit reports from the Texas State Auditor's Office and the University of Texas at El Paso (UTEP) include findings involving course fee management. The first UTEP continuous auditing reports were created in 2014 using data from DEFINE Business Information System and Banner Student Information System (Banner). 3

7 PROJECT OBJECTIVES The objectives of this project were to: A. develop PeopleSoft queries and Banner reports that continuously identify course fee transactions and data entries that may require further review, and B. ensure continuous auditing reports can be used by management as tools to increase awareness and compliance throughout the institution. SCOPE AND METHODOLOGY Auditors reviewed the methodology outlined in IIA GTAG 3 and IIA literature to identify high risk audit areas that would benefit from reports created automatically on a more frequent basis. The key procedural steps to implement continuous auditing include: 1. Establish a continuous auditing strategy 2. Identify continuous auditing and roles 3. Determine the frequency and distribution of the reports 4. Configure continuous audit parameters 5. Prepare and validate the data 6. Report and manage results The scope includes University course fee transactions from September 1, through February 28, The project was conducted in accordance with the International Standards for the Professional Practice of Internal Auditing issued by the Institute of Internal Auditors. 4

8 AUDIT RESULTS 1. Establish a continuous auditing strategy Auditors met with management in the following departments to discuss the content and format of the first continuous auditing reports: Office of the Provost Office of Compliance Vice-President for Student Affairs Vice-President for Business Affairs Director of Student Business Services Based on previous audit reports and the feedback from stakeholders, auditors selected course fees management as the first high risk area to address with continuous auditing reports. 2. Identify monitoring and continuous audit roles Auditors developed the reports for continuous auditing in partnership with the Information Resources and Planning (IRP) Enterprise Computing Department. The reports can provide auditors and management with the ability to drill down into University-wide detailed transactions as a means to assess information electronically and to develop a systematic process to identify exceptions timely. Continuous auditing reports are created and managed by the Office of Auditing and Consulting Services. Management may view and use the reports as needed for monitoring purposes. The reports will enable management to respond properly to identified risks and control deficiencies. Continuous monitoring is a process owned by management. Management is responsible for maintaining effective control systems. They also have the most to benefit from obtaining timely insight into transactions that could be the result of fraud, error or abuse. 5

3. Determine the frequency and distribution of the reports OACS created four reports to assist in the continuous auditing of course fee accounts.

9 3. Determine the frequency and distribution of the reports OACS created four reports to assist in the continuous auditing of course fee accounts. The objective of each report, system source, run date and the frequency of distribution is outlined in the chart below: ' 1 Name of Course Fee Report Appendix Source Frequency Issue Date Unexpended Balance Report Objective: Monitor unexpended fee balances at the end of every fiscal year to A PeopleSoft Annually October 15 determine if fee balances reflect the cost recovery nature of the course fee. Questionable Expenditures Report Objective: Confirm that fee Fall and expenditures are spent in December 31 8 PeopleSoft Spring accordance with TEC 54 and May 31 Semesters Board of Regents' Rule Revenue Reasonableness Report Objective: Identify potential errors with fee assessment Fall and One week c Banner Spring after Census Semesters Day Fee Approval and Assessment Objective: Verify that new and approved fees have been appropriately approved and assessed D Comparison of Official Incidental Fee Approval, fee rates in Banner and fee amounts on the SSS website Annually July 30 NOTE: See Appendix A, B, C, and D for additional report detail. 6

10 4. Configure continuous audit parameters Detailed documentation of the continuous auditing process and report parameters was created to ensure continuity of the process. 5. Prepare and validate the data Initial reports and queries were created, validated, and sent to management for feedback. Continuous auditing reports will be reviewed on an annual basis and updated as needed. 6. Report and manage results The continuous auditing reports were presented to the Associate Provost and College Administrative Officers at the Student Business Services Annual Fee Review Meeting held in July The first reports will be run in August when Fall fees have been updated in Banner Student Information System. After receiving feedback from all stakeholders, OACS will expand the continuous auditing reports to include major fees and incidental fees. Management Comments, Frank Grijalva, Division Administrative Officer, Vice President for Student Affairs: We concur that management should be responsible for maintaining effective controls systems and it should also be responsible in monitoring the effectiveness of these controls as the university benefits from obtaining timely insight into transactions that are the result of fraud, error or abuse. 7

11 SUMMARY Continuous auditing adds value to the University by allowing auditors and management to become more proactive in the auditing and monitoring of operations. This pilot project demonstrates the need to expand continuous auditing in other high risk areas. We wish to thank the management and staff of the Provost's Office, the Vice President for Student Affairs, the Director of Student Business Services, and IRP for their assistance and cooperation provided throughout the project. 8

12 APPENDIX A: Unexpended Balance Report SOURCE: PeopleSoft Query: UTE_IA_UNEXPENDED_BAL UNEXPENDED BALANCE REPORT Cost Revenue Revenue Expense Actual Unexpended ear Unit Centr Cost Center Descr Dept Dept Descr Budget Recognized Budget Expenses balance Enc 2014 UTEP ART COU RSE FEES Art Department $50, $ 47, $ 36, $ 32, $ 1 4, $ (1, ) FIELD DESCRIPTIONS Year - Unit - Cost Center - Department - Accounting Fiscal Year Business Unit (Always UTEPl for UTEP) Department Description - Previously known as account in DEFINE Department code corresponding to the Cost Center Name to the corresponding department code Revenue Budget -Revenue budgeted for the Cost Center Revenue Recognized - Expenses Budget - Actual Expenses - Actual revenue collected by the Cost Center Expenses budgeted for the Cost Center Actual expenses incurred Unexpended Balance -Revenue Recognized minus (-) Actual Expenses Encumbrances - Encumbrances (currently not included in unexpended balance formula) 9

13 APPENDIX B: Questionable Expenses Report SOURCE: PeopleSoft Query: UTE_IA_QUESTIONABLE_EXP l eost Centr Cost Center Description Department Department Name QUESTIONABLE EXPENSES REPORT Sum Total t ART COURSE FEES Art Department xxx SW Faculty Sal & Wage $ 5, ART COURSE FEES Art Department xxx Purchased Contract/Temp Srvcs Contracted $ 2, ART COURSE FEES M Department xxx Postal Services Materials $ ART COURSE FEES M Department xxx Furnishings & Equip Expensed Materials $ 3, ART COURSE FEES M Department xxx Maint Repair Furniture Repairs $ 2, FIELD DESCRIPTIONS Year - Accounting Fiscal Year Cost Center- Previously known as account in DEFINE Cost Center Description - Cost Center title Department - Department code corresponding to the Cost Center Department Description - Name to the corresponding department code Manager - Cost Center Manager Account - Account description - Expense account, previously known as object code in DEFINE Expense account description Short Description - Short description of expense account Sum of expenses - Total expenses incurred by Cost Center for the corresponding expense account 10

14 APPENDIX C: Revenue Reasonableness Report* SOURCE: Banner TERM COLL_DESC SUBJECT COURSE COURSE DETAIL FEE FEE COST CENTER FEE TYF FEE CENSUS ACTUAL ESTIMA. TED NUMBER REFERENCE CODE DESCRJPTKlN AWOUNT ENROLLrvENT ENROLLMENT REVENUE NLMBER ' College of Liberal Arts ART _..._ FART Fine Arts Fee FLAT $ $ FIELD DESCRIPTIONS Term - Semester that the fee is assessed College - UTEP College where course is offered Subject - Course Subject Course Number- Identifier assigned to each course offering for a subject Course Reference Number - Identifies specific days and time of class section Detail Code - Banner code assigned to course fee Fee Description - Purpose of fee Fee Cost Center - Previously known as account in DEFINE Fee Type - Flat fee is assessed per course; SCH fee is assessed per semester credit hour Fee Amount - Dollar amount assessed to students in the course Census Enrollment- Student enrollment after Census Day, the last day to receive a refund for dropped classes Actual Enrollment - Student enrollment as of the date of Revenue Reasonableness Report Estimated Revenue - Census Enrollment * Fee Amount *Additional fields appear in the actual report 11

APPENDIX D: New and increased fees SOURCE: Banner, SBS website, and the approved Incidental Fees Committee memo DETAIL COST TYPE OF ORIGINAL UT COURSE CODE CENTER CHANGE FEE NEW FEE ANTH1301 DLUG

15 APPENDIX D: New and increased fees SOURCE: Banner, SBS website, and the approved Incidental Fees Committee memo DETAIL COST TYPE OF ORIGINAL UT COURSE CODE CENTER CHANGE FEE NEW FEE ANTH1301 DLUG INCREASE $ $ ANTH1302 DLUG INCREASE $ $ / ANTH1310 DLUG INCREASE $ $ UTEP System Goldmine SBS FIELD DESCRIPTIONS Course -Course code Detail Code - Code assigned to course fee Cost Center - Previously known as account Type of Change - Increase or decrease in course fee Original Fee - Fee amount before change New Fee -Fee amount after change UTEP Approval- Was change in fee approved by University's President? UT System Approval- Was change in fee approved by Incidental Fees Advisory Committeee? Goldmine published - Was fee amount accurately published in Goldmine registration website? SBS published - Was fee accurately published in Student Business Services website? 12

16 APPENDIX E: Three Lines Of Defense Figu re 1: Foundational Conlinuous Assurance Framewor1< Continuous Monitoring The Institute of Internal Auditors Global Technology Audit Guide 3: : Coordinating and Monitoring to Provide Continuous Assurance, 2nd Edition 13

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