An Auditor s Perspective of NCAA Agreed-Upon Procedures Ken Kurdziel, Partner Trey Long, Manager James Moore & Company, P.L.
NCAA Agreed-Upon Procedures Are they mandatory? Yes the document issued by the NCAA each year specifies the minimum procedures to be performed over the defined account line items. Additional procedures are optional.
What are the auditors looking for? General ledger roll-up into the NCAA report. Internal controls related to intercollegiate athletics. Potential trouble spots in performing the NCAA Agreed-Upon Procedures: Revenues Expenses Affiliated and outside organizations
General Ledger Roll-Up Into the NCAA Report Account groupings that make up the individual line items on the NCAA report. Reconciliation between the NCAA report and the institution s trial balance. Account detail at the transaction level.
Minimum Compliance Agreed-Upon Procedures Excerpt from page 6 of NCAA Agreed- Upon Procedures, dated September 4, 2007: Regardless of the situation, the independent accountant shall test specific elements of the control environment and accounting systems that (1) are unique to intercollegiate athletics and (2) have not been addressed in connection with the audit of the institution s financial statements (e.g., the system of accounting for revenues from ticket sales).
Significant Internal Control Issues Segregation of duties Key areas: cash receipts, cash disbursements, revenues, expenses and payroll Reconciliations Ticket office operations
Segregation of Duties Cash receipts Individuals who post cash receipts to the accounts receivable ledger should not: Open the mail or copy checks received. Prepare deposits or deposit cash receipts. Reconcile bank accounts. Edit the A/R master file.
Segregation of Duties Cash receipts Individuals who deposit cash receipts should not: Reconcile bank accounts. Post journal entries to the general ledger. Investigate discrepancies or issues related to cash.
Segregation of Duties Cash receipts Individuals who reconcile bank accounts should not: Investigate discrepancies or issues related to cash. Maintain access to cash.
Segregation of Duties Cash receipts Individuals handling ticket sales should account for all tickets sold or unsold and reconcile cash receipts to the number of tickets sold. Adjustments of cash accounts should be approved by the appropriate level of management.
Segregation of Duties Cash disbursements Individuals who review, authorize or sign checks should not: Initiate checks for expenditures. Prepare or mail checks. Edit the vendor master file. Open the mail or copy checks received. Reconcile bank statements.
Segregation of Duties Cash disbursements Management reviews supporting documentation before approving payment. Passwords are established and used for individuals authorized to make wire transfers and bank callback verifications are in place for telephone transfers exceeding a predetermined dollar amount.
Segregation of Duties Revenues The appropriate level of management or another appropriate person periodically compares actual revenue to budgeted revenue and follows-up on significant variances. There are established policies for the recording or deferral of income related to ticket sales, camp revenues, subscriptions, etc., and adherence to those policies is periodically reviewed by the appropriate level of management.
Segregation of Duties Expenses Individuals who initiate purchase orders should not: Input or approve purchase orders. Initiate checks for expenditures. Receive purchases or verify and process receipt of goods. Edit the vendor master file. Process sales orders.
Segregation of Duties Expenses Individuals who approve purchase orders should not: Initiate or input purchase orders. Initiate checks for expenditures. Mail checks.
Segregation of Duties Expenses Individuals who edit the vendor master file should not: Initiate purchase orders. Review, authorize, or sign checks. Initiate requests to alter transactional data. Edit or approve edits to transactional data.
Segregation of Duties Expenses Expenses are compared to budget and prior periods at an appropriate level of detail. Purchase orders, receiving reports, and invoice entries that do not match are investigated promptly.
Segregation of Duties Payroll Individuals who initiate payroll checks should not: Prepare, sign or disburse payroll checks. Review and authorize electronic payroll disbursements. Resolve employee payroll inquiries. Edit the payroll master file.
Segregation of Duties Payroll The appropriate level of management or another appropriate person periodically reviews the allocation of payroll costs to accounts, programs, and other functions. The appropriate level of management or another appropriate person reviews monthly payroll-related accruals for completeness and reasonableness.
Reconciliations Bank reconciliations are prepared and reviewed in a timely fashion. Cash receipts are reconciled to the general ledger postings daily. Accounts payable aging/sub-ledger is reviewed and reconciled to the general ledger. Payroll register is reconciled to the general ledger.
Ticket Office Operations Proper supervision over comp tickets. Reconciliation from attendance to revenues for each game. i.e. Total seating capacity less comps and unsold tickets. Performing deadwood counts for schools that use pre-printed tickets.
Revenue Procedures Ticket Sales NCAA Procedures: Compare tickets sold during the reporting period, complimentary tickets provided during the reporting period and unsold tickets to tie related revenue reported by the Institution in the statement and the related attendance figures. Recalculate totals.
Revenue Procedures Ticket Sales What we re looking for: Schedule indicating the number of tickets sold, times the price per ticket. This schedule is tested by taking a sample of game reports or deadwood counts and recalculating the revenue per game. What we often get: Schedule of deposits.
Revenue Procedures Student Fees NCAA Procedures: Compare and agree student fees reported by the institution in the statement for the reporting to student enrollments during the same reporting period. Obtain and document an understanding of institution's methodology for allocating student fees to intercollegiate athletics programs. Recalculate totals.
Revenue Procedures Student Fees What we re looking for: Reconciliation of student fees based on credit hours, headcounts and fee structure in effect for period under examination. What we often get: Athletic fee projections based on current budget or a detailed schedule of student fees.
Revenue Procedures Contributions Most contributions for athletics are received by a direct support organization rather than the athletic department or association directly. All Foundation activity needs to be recorded in the NCAA Report.
Revenue Procedures Contributions
Revenue Procedures Contributions In-kind contributions: Value of in-kind contributions should be included in the NCAA Report. Revenue should be offset with a corresponding expense charged to appropriate accounts. No net effect to net income (loss).
Revenue Procedures NCAA/Conference Distributions Usually confirm these with the conference and NCAA. Benefits: Efficient. Provides high quality evidence since it represents 3 rd party corroboration.
Revenue Procedures Indirect Facilities & Administrative Support Includes value of facilities usage and other services provided by Institution, but not charged to athletics. May also include allocation for other institutional administrative costs. Usually calculated by Institution s business office. Must equal the expense category for line item #32. No net effect to net income (loss).
Camps How to Account for Them Is the camp run through the athletic department? Yes The revenues and expenses should be included in the NCAA Report. No The revenues and expenses should be excluded from the NCAA Report.
Expense Procedures General Line items #24 (Recruiting) through #35 (Other expenses): Usually take a weighted average sample of 40 to 60 disbursements. Test more transactions for accounts with larger balances.
Expense Procedures General
Expense Procedures Payroll Coaches: Must select football, men s basketball and women s basketball. Select sample of paychecks issued during the fiscal year. Trace and agree to wage report and contract. Administrative staff: Select sample of paychecks issued during fiscal year. Trace and agree to wage report and personnel file.
Expense Procedures Payroll NCAA procedure Compare and agree related W-2s, 1099s, etc., to the related support staff/administrative salaries, benefits and bonuses paid by the institution and related entities expense recorded by the institution in the statement during the reporting period. We don t usually perform this procedure because most institutions report on a fiscal year basis, and W-2s and 1099s are based on the calendar year. As an alternative, we test against employment contracts.
Expense Procedures Athletic Student Aid How it s tested: Select a sample of student athletes from the squad lists obtained from Compliance Department. Usually approximately 10 for testing. Trace and agree award reported on squad list to Grant-in-Aid Agreement. Trace and agree amount from Grant-in- Aid Agreement to student account detail.
Expense Procedures Athletic Student Aid What is the value of the testing? For the purposes of an audit of the financial statements, it is of limited value. The major implication would be potential NCAA violations related to scholarships that could negatively impact a significant revenue sport.
Expense Procedures Athletic Student Aid What is the value of the testing? For the NCAA Agreed-Upon procedures it does identify some potential control deficiencies over areas that are unique to athletics and that are not normally tested in the University-wide audit.
DOE vs. NCAA The major difference between the Department of Education report and the NCAA report is that DOE does not allow the athletic department to show a net loss in current year operations.
Other Areas Capital expenditures and debt: There are no procedures related to capital expenditure or debt. This information should be included in the notes to the Statement of Revenues and Expenses
Other Areas
NCAA Agreed-upon procedures Questions?