LOUISIANA OFFICE OF STUDENT FINANCIAL ASSISTANCE

STATE OF LOUISIANA

FINANCIAL AUDIT SERVICES PROCEDURAL REPORT ISSUED JUNE 8, 2016

LOUISIANA LEGISLATIVE AUDITOR 1600 NORTH THIRD STREET

POST OFFICE BOX 94397 BATON ROUGE, LOUISIANA 70804-9397

LEGISLATIVE AUDITOR DARYL G. PURPERA, CPA, CFE

ASSISTANT LEGISLATIVE AUDITOR FOR STATE AUDIT SERVICES

NICOLE B. EDMONSON, CIA, CGAP, MPA

DIRECTOR OF FINANCIAL AUDIT ERNEST F. SUMMERVILLE, JR., CPA

Under the provisions of state law, this report is a public document. A copy of this report has been submitted to the Governor, to the Attorney General, and to other public officials as required by state law. A copy of this report is available for public inspection at the Baton Rouge office of the Louisiana Legislative Auditor and at the office of the parish clerk of court. This document is produced by the Louisiana Legislative Auditor, State of Louisiana, Post Office Box 94397, Baton Rouge, Louisiana 70804-9397 in accordance with Louisiana Revised Statute 24:513. Two copies of this public document were produced at an approximate cost of $1.10. This material was produced in accordance with the standards for state agencies established pursuant to R.S. 43:31. This report is available on the Legislative Auditor’s website at www.lla.la.gov. When contacting the office, you may refer to Agency ID No. 3393 or Report ID No. 80150110 for additional information. In compliance with the Americans With Disabilities Act, if you need special assistance relative to this document, or any documents of the Legislative Auditor, please contact Elizabeth Coxe, Chief Administrative Officer, at 225-339-3800.

Louisiana Legislative Auditor Daryl G. Purpera, CPA, CFE Louisiana Office of Student Financial Assistance June 2016 Audit Control # 80150110

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Introduction

The primary purpose of our procedures at the Louisiana Office of Student Financial Assistance (LOSFA) was to evaluate certain controls LOSFA uses to ensure accurate financial reporting, compliance with applicable laws and regulations, and to provide overall accountability over public funds for the period July 1, 2013, through June 30, 2015. The mission of LOSFA is to promote and provide college access. LOSFA actively disseminates college access information explaining all of the student financial assistance programs available to Louisiana students. LOSFA’s web site, www.osfa.la.gov, contains detailed financial aid information to inform and assist students and parents.

Results of Our Procedures

We evaluated LOSFA’s operations and system of internal controls through inquiry, observation, and review of its policies and procedures, including a review of applicable laws and regulations. Based on the documentation of LOSFA’s controls and our understanding of related laws and regulations, we performed procedures on selected controls and transactions relating to the travel and petty cash fund; professional service contracts; LaCarte, travel, and fuel expenditures; and Taylor Opportunity Program for Students (TOPS) awards.

Current-year Finding Control Weaknesses over Travel Account and Fuel Card Purchases LOSFA employees did not follow established internal control policies and procedures related to the review and approval of travel account and Fueltrac card purchases, increasing the risk that unauthorized purchases could be made and that charge cards could be misused. A test of travel expenditures charged to LOSFA’s Controlled Billed Account (CBA) and fuel purchases charged to Fueltrac charge cards disclosed the following:

Monthly CBA travel logs were completed and maintained electronically but were not signed by both the cardholder and approver as required by the State Liability Travel Card and CBA Policy, and LOSFA Policy and Procedures

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Memorandum 201. In addition, seven (17%) of 42 CBA travel transactions tested did not have the approver’s signature on the associated monthly billing statement. Two of those seven also did not have the cardholder’s signature. State and LOSFA policies require that CBA transactions be documented monthly on a travel log; that cardholders and approvers review the travel logs and agree them to the monthly billing statements from the bank; and that the logs and statements are signed by both the approver and the cardholder.

Fueltrac cards are only used by LOSFA for gas in rental cars, and each division director must maintain a check out/check in sheet to track which employee has a particular Fueltrac card at any given time. However, the fuel card check out/check in sheets for one division could not be located for fiscal year 2014 and part of fiscal year 2015 (July - December 2014), with purchases during this period totaling $6,216. In addition, one Fueltrac transaction tested could not be linked to an associated car rental.

LOSFA management should place stronger emphasis on compliance with established policies and procedures through employee training, guidance, and oversight; and should ensure that travel and fuel expenditures are properly reviewed, approved, and are adequately supported. Management concurred with the finding and provided a plan of corrective action (see Appendix A).

Travel and Petty Cash Fund LOSFA uses a travel and petty cash fund to reimburse travel expenses incurred by Louisiana Tuition Trust Authority and Louisiana Student Financial Assistance Commission members, to maintain a petty cash fund, and to deposit and transfer cash receipts for the state’s 529 college savings plan. Based upon our understanding of LOSFA’s controls, we reviewed certain bank reconciliations and examined all cancelled checks for adherence to LOSFA’s dual-signature requirement. We also examined supporting documentation for selected replenishments and disbursements. Based on the results of our procedures, LOSFA had adequate controls in place to ensure that replenishments to the fund were properly supported and approved, and disbursements from the fund were properly authorized, supported, and recorded in the financial records.

Professional Service Contracts We obtained an understanding of controls over professional service contracts and examined 20 contracts for compliance with state law. Based on the results of our procedures, LOSFA had adequate controls in place to ensure that professional service contracts were properly authorized and administered in accordance with state law and that contract expenditures were made for proper business purposes and were accurately recorded in the financial records.

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LaCarte, Travel, and Fuel Expenditures LOSFA participates in the state of Louisiana’s LaCarte Purchasing Card (P-Card), Controlled Billed Account (CBA), and Fuel Card programs. We obtained an understanding of controls over the P-Card, CBA, and Fuel card programs and examined documentation for selected transactions to determine if purchases were properly authorized, made for proper business purposes, accurately recorded, and adequately supported. Based on the results of our procedures, LOSFA had adequate controls in place to ensure that P-Card purchases were properly authorized, made for proper business purposes, accurately recorded, and adequately supported; however, LOSFA did not have adequate controls in place for the CBA and Fuel Card programs. See “Current-year Finding” section.

Taylor Opportunity Program for Students Awards The Taylor Opportunity Program for Students (TOPS) is a state scholarship program established by Act 1375 of the 1997 Regular Session. TOPS scholarships may be awarded to Louisiana residents who attend either one of the Louisiana public colleges and universities, schools within the Louisiana Community and Technical College System, or state-approved proprietary and cosmetology schools or institutions. We obtained an understanding of controls over TOPS and reviewed eligibility determinations for selected scholarship awards. Based on the results of our procedures, LOSFA had adequate controls in place to ensure that TOPS awards were issued in accordance with state laws, continuing eligibility requirements were met, exceptions were granted in accordance with LOSFA policy, and awards were canceled when necessary.

Comparison of Activity between Years We compared the most current and prior-year financial activity using LOSFA’s annual fiscal reports and/or system-generated reports to identify trends and obtained explanations from management for any significant variances that could potentially indicate areas of risk. Management provided reasonable explanations for all significant variances. LOSFA’s primary sources of revenue consist of state general funds and statutory dedications appropriated mainly to fund the TOPS program. As shown in Exhibit 1, revenue from statutory dedications decreased by 38% from fiscal year 2014 to fiscal year 2015, resulting in a 70% increase in state general funds to adequately fund the TOPS Program. The decrease in statutory dedications in fiscal year 2015 was a result of one-time bond proceeds that were received in fiscal year 2014. As shown in Exhibit 2, TOPS expenditures increased 11% from fiscal year 2014 to fiscal year 2015.

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Exhibit 1 Revenue Sources - Fiscal Years 2014 and 2015

Source: Annual Fiscal Reports

Exhibit 2 Expenditures - Fiscal Years 2014 and 2015

Source: Annual Fiscal Reports

$112,843,402

$84,982,172

$317,583

$138,183,081

$191,293,794

$72,200,261

$291,755

$85,101,360

State General Fund Federal Aid Interagency Transfers Statutory Dedications$0

$25,000,000

$50,000,000

$75,000,000

$100,000,000

$125,000,000

$150,000,000

$175,000,000

$200,000,000

Fiscal Year 2014 Fiscal Year 2015

$9,342,365

$54,107,349

$29,757,510

$224,626,758

$8,832,975

$46,547,210

$28,468,303

$249,995,429

$0

$50,000,000

$100,000,000

$150,000,000

$200,000,000

$250,000,000

Administration/Support Services

Loan Operations Scholarships/Grants

TOPS Awards

Fiscal Year 2014 Fiscal Year 2015

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Under Louisiana Revised Statute 24:513, this report is a public document, and it has been distributed to appropriate public officials.

Respectfully submitted, Daryl G. Purpera, CPA, CFE Legislative Auditor

MR:CRV:BQD:EFS:aa LOSFA 2015

ENDIX B: SCOPE AND METHODOLOGY APPENDIX B: SCOPE AND METHODOLOGY

APPENDIX A: MANAGEMENT’S RESPONSE

A. 1

A. 2

B.1

APPENDIX B: SCOPE AND METHODOLOGY

We conducted certain procedures at the Louisiana Office of Student Financial Assistance (LOSFA) for the period July 1, 2013, through June 30, 2015. Our objective was to evaluate certain internal controls LOSFA uses to ensure accurate financial reporting, compliance with applicable laws and regulations, and provide overall accountability over public funds. The scope of our procedures, which are summarized below, was significantly less than an audit conducted in accordance with Government Auditing Standards issued by the Comptroller General of the United States. We did not audit or review LOSFA’s Annual Fiscal Reports, and, accordingly, we do not express an opinion on those reports. LOSFA’s accounts are an integral part of the state of Louisiana’s financial statements, upon which the Louisiana Legislative Auditor expresses opinions.

We evaluated LOSFA’s operations and system of internal control through inquiry, observation, and review of its policies and procedures, including a review of the laws and regulations applicable to LOSFA.

Based on the documentation of LOSFA’s controls and our understanding of related laws and regulations, we performed procedures on selected controls and transactions relating to the travel and petty cash fund; professional service contracts; LaCarte, travel, and fuel expenditures; and Taylor Opportunity Program for Students awards.

We compared the most current and prior-year financial activity using LOSFA’s annual fiscal reports and/or system-generated reports and obtained explanations from LOSFA’s management for any significant variances.

The purpose of this report is solely to describe the scope of our work at LOSFA and not to provide an opinion on the effectiveness of LOSFA’s internal control over financial reporting or on compliance. Accordingly, this report is not intended to be and should not be used for any other purpose.