The outbreak of the COVID-19 pandemic in the first quarter of 2020 resulted in a massive growth in student numbers at OTVOU in 2021, as the importance of e-learning was emphasized. To address the growth in student numbers, specialist support staff were employed to administer and operate the systems. Therefore, despite still being involved at a high level, many of the directors’ former administrative and management responsibilities have now been delegated to employees. The new resourcing plan, coupled with the financial loss incurred in 2020, resulted in changes to the system, procedures, and controls. The existing systems were adapted to accommodate the additional staff, the increase in student numbers and a more efficient and effective student fee accounts system. Details of the new system: All student registrations are processed on the student system, which is integrated into the student fees system. At the end of each month, an automated program is run, which accumulates the relevant subject fees from the integrated student system for all student registrations during that month. Prior to implementation, the integration of the student system and the student fees system and the transfer of data between the two systems were extensively tested, with no errors being noted. The study fees for all subjects offered by OTVOU are the same, namely R5 000 each. In other words, where a student registers for five subjects, the study fees for that student will be R25 000 for the year. As part of the registration process, each student must either present a valid credit card, provide credit card details to guarantee payment or complete a credit application form. The credit application form must be signed either by themselves, their parents, sponsors or employers (whoever will be responsible for payment of the account). After approval and finalisation of a student’s registration on the student system, that student’s information is automatically transferred to the integrated financial system. Based on the student registration information, including the cost of the respective subjects, the financial system automatically performs a credit rating on each registration. Where the credit scoring yields a positive result, the financial system automatically credits the student fee account and debits the individual student fee debtor’s account. Where the credit application is rejected, the potential student is requested to provide additional information/documentation and/or guarantees. After processing the registration application, each student’s file is sent to the student fee accounts department. On a weekly basis, the student fees manager reviews all student fee accounts that have passed the initial credit rating and provisionally approves the student’s registration. In addition, all rejected applications are also reviewed against the additional documentation (where provided), also on a weekly basis.

Based on the review of rejected credit applications, the student

fees manager may override the previously rejected application by entering his or her unique user identification and password. Monthly statements reflecting student indebtedness are sent to all students with outstanding fees. A letter of demand is sent to all students with accounts outstanding for more than 60 days. A final letter of demand is sent to all students with accounts outstanding for more than 90 days. Accounts outstanding for more than 180 days are handed over to the university’s attorneys for collection. In terms of OTVOU’s credit policy, all accounts settled in full within 30 days of registration will attract no interest. Thereafter, any outstanding accounts will attract interest calculated at prime plus 5%. Accounts outstanding for more than 180 days (that have been handed over to the attorneys) will attract penalty interest of an additional 5%, as well as the direct costs of any legal fees. At the end of each month, the student fees manager reviews the aging of the student fee debtors’ accounts and determines whether the relevant sections of the policy have been applied consistently. The student fees manager considers the substantiation for any exceptions to the established credit policy accounts before approving or rejecting the deviation. At the end of each month, the director of students reviews and approves all changes to the subject price master file. To ensure that the new system is addressing the operational risk of increased student debt and subsequent financial loss, the board of directors requested the internal audit activity to perform an internal audit on revenue and accounts receivable, based on the new system that has now been operational for 12 months.

REQUIRED

Describe six (6) analytical procedures that can be performed to assess the reasonableness of the student fees revenue recorded for the current year.

 

 

Answer rating: 100% (QA)

Analytical procedures involve the examination of relationships among financial and nonfinancial data The goal is to identify and explain fluctuations ... View the full answer