OSAP COMPLIANCE AUDITS

1
OSAP COMPLIANCE AUDITS

• Past, present future
• Presented by David McCarroll, CA to the 2005 OACC
  conference

2
Past the beginning

• 1997 Provincial Auditors Report
• Defaults on student loans causing huge losses
• High risk and costs of defaulted student loans
  had been addressed in other jurisdictions
• Examples were the Alberta system, the U.S.
  85-10 rule, others
• Ontario institutions were not being advised of
  their default rates and no enrollment statistics
  were collected by MET

3
Past - recommendations

• Provincial Auditor recommended
• Performance Requirement Agreements
• Risk-based inspection program
• Performance of regular audits
• Establish disciplinary measures for
  non-compliance
• Others (integration of OSAP need assessment OSL
  administration databases, CRA information
  sharing, electronic data interchange with
  financial institutions, enhancement of data
  exchange between provincial agencies MCSS/MET)
• Unfortunately, an ongoing issue at the time
  related to a prominent Ontario private school

4
Past - 1999

• 1991 Default Management Initiative in the USA
  resulted in about 1065 schools losing loan
  eligibility (Estimated as 50)
• 1999 Provincial Auditors follow-up
• Performance Agreements in place
• Compliance Audits commenced in 1998
• Recommendations regarding 1997 proposals
• Targeting to reduce defaults to 10 over next 5
  years
• Nov. 5, 1999 news concerning Credit Valley broke
• On the recommendation of the Council of Ontario
  Universities, the Ministry agreed to use the
  National Graduate Survey as the basis for
  developing performance indicator calculations

5
Past - 2002

• 2002 Provincial Auditors Report
• Training was audited, not OSAP
• Job Connect and Summer Jobs Service were targeted
• Apprenticeship issues discussed
• Assessment of Prior Learning and Academic
  Readiness required
• Linking Funding to Performance
• Note that the 2000 and 2001 audits focused on
  specific issues relating to school transportation
  funding, School Board grants and University
  funding

6
Past one step further

• 2003 Provincial Auditors Report issues
• Timing of payment of majority of loans to
  students (see 2006-07 changes)
• Unlikely circumstances not investigated by MTCU
  (year one - zero dependents year two three
  dependents)
• Schools lacking processes to monitor and report
  changes in academic conditions which may
  influence entitlement (academic status,
  successful completion)
• Repayment of loan overpayments where income has
  been under-reported
• Loan default rates are the only published measure
  of performance

7
Did the sector need reform?

• Marketing OSAP as a finance aid
• Funding of students enrolled in US schools
• Counseling low/no income with dependants for
  maximum assessment
• Commissions paid on volumes of student contracts
• Splitting maximum OSAP assessments 3 ways
• Fictitious students (35 seats one year, 350
  students the next)
• No credit counseling or follow-up with graduates
  for loan repayment
• Active Participation Policy (20 hours/week) was a
  surprise as no other province in Canada has
  similar requirements (closest link to legislation
  is via CSL)
• No refunds unless written notification received
• Re-introduction of old programs with new titles
• Ministry had no effective inspection process
  (T.V. story)

8
Present environment

• High costs of compliance
• OSAP Compliance Audit
• KPI Supplemental Audit
• Financial statement audits
• 90-10 verification
• Tight deadlines
• Staff training is mandatory, more lost time on
  task
• 90-10 became an issue only recently. KPI reports
  should be used.
• Promissory notes and collateral security is
  required due to issues you have no control over
  or any information regarding (COU, ACAATO,
  OASFAA)
• Not all schools have error-free Compliance Audits

9
Present environment contd

• Lower demand for technology-based programs. More
  schools transitioning to compete for health care.
  (Supply-demand?) Are these schools accepting
  students with the demonstrated ability to
  benefit?
• OSAP-eligible schools are not receiving full
  levels of support for their students. Funding is
  a split of the CSL only.
• Audit of financial statements does lend
  credibility to financial statements but is not an
  effective measure of 90-10.
• Audit of financial statements for small
  businesses is not more useful than a review
  engagement as there can be no reliance on
  internal controls. Analytical procedures result
  which are similar to review procedures.

10
Does the sector need improvement?

• Ongoing issue concerning 20 hours/week exists
  in no other province, there are other ways to
  measure active participation
• Lack of understanding of mature student status
• Default rates are high despite efforts/in spite
  of efforts?
• Are Key Performance Indicators being reported on
  the same basis?
• Is the ability to benefit being correctly
  determined?
• Poor prior learning assessments. Use of
  dishwasher tests
• Are all schools registered with MTCU?
• Does everyone understand the issues, on behalf of
  the province?
• Does everyone understand the requirements?
• Program offerings do not meet third party
  accreditation standards.

11
Future Compliance Audits

• CICA wants use of the term audit to be
  eliminated
• Specified procedures term to be used, courtesy
  of Sorbane-Oxley
• Monetary penalties to be invoked more
  aggressively (PCC Act)
• Accreditation (see Chris Hope) and affiliation
  (OACC)
• Prior Learning Assessment (see www.wes.org)
• Professional FAAs outsourced FAOs
• Authorization letters from students (see RC59,
  T1013)
• Compliance audit should be of your own policies
  and procedures
• Implementation of Best Practices Guidelines
• Unresolved issues exist over SIN card use
• Photo-id issues disappearing?

12
Future - Compliance

• Privacy laws are not helping. What is the use of
  a Confidentiality Agreement?
• Auditor may have a role in verifying procedures
  related to an OSAP re-assessment

13
Future - Environment

• Demographics imply need for more health care
  resources
• Dental Hygiene programs indicate that more
  schools are thinking outside the box (eg.
  Veterinarian Assistant)
• Prior learning assessments should be formal to
  minimize risk
• Articulation in order to compete (Universities
  partner with Colleges for delivery)
• Integration of trained professional immigrants
• Collection of debt could include defaulted loans
• Third-party reliance debt collection, KPI,
  compliance audit
• Increasing support-system availability
• Bonus award for great KPIs or high employment
  stats

14
The audit process

• Current audit requirement every three years
  unless OSAP-funding exceeds threshold or there
  are other risk-based indicators evident.
• Photo-id is an ongoing issue and will continue
  until resolved. Until then, no one is exempt!
• Auditor is being forced to determine whether
  entrance tests validate high school equivalency.
• Audit costs and hassles can be eliminated with
  proper preparation of the files. Be aware that if
  you dont properly organize the files you will
  send the wrong message to the auditor.
• More audit reliance can be placed on an original
  document. Please minimize the use of photocopied
  materials.
• With increased competition for enrolments I
  expect the admissions standards to be lowered.

15
The audit process contd

• SIN card verification is a requirement.
• Entitlements are being issued and no one knows
  how!
• Exceptions are errors which dont cause funding
  issues my opinion.
• Deficiencies are errors which (could) cause
  funding issues my opinion.
• Checklists are great but they must be living
  documents.
• Dont speculate on a students situation. If a
  withdrawal appears to be required, do it when
  required. If the student returns, work with SSB
  or OACC to properly re-instate the student with
  the correct amount of funding.
• WDR on Friday and RST on Monday will eventually
  be targeted by MTCU for appropriateness. I
  suggest you re-contract.