KENTUCKY STATE UNIVERSITY Schedule of Prior Year Audit Findings, continued

Year ended June 30, 2014

Finding 2013-002:

Condition:

Prompt, accurate reconciliations of the student, grant, and other accounts receivable subsidiary ledgers to the general ledger account balances should be prepared at least on a quarterly basis. Included in this reconciliation should be a review of the aging of the receivables and a calculation of the allowance that is based on University policy. This reconciliation and associated allowance calculation should be submitted for management's review and approval.

Effect:

The University posted an adjusting journal entry to reconcile student and grant accounts receivable to the general ledger account balances and to increase the allowance for doubtful accounts subsequent to year end. Increased management effort in this area can result in a reduction in the number and amount of delinquent and potentially worthless receivables. The positive results from this process may include significantly improved cash flow and profitability and should minimize the need for a year-end adjustment of this account.

Recommendation:

We recommend the University complete reconciliation's of the student, grant, and other accounts receivable subsidiary ledgers to the general ledger account balances at least on a quarterly basis and assess the collectability of all receivables, especially student receivables on a quarterly basis.

The following formal collection procedures should be established:

• The continuous review of accounts receivable for old and slow-paying accounts.
• A formal periodic review of the account receivable aged trial balance.
• The implementation of formalized procedures for contacting delinquent accounts for payment, such as sending letters to slow-paying customers.

The increased use of collection agencies and the department of revenue to aid in collecting delinquent accounts.

Current Status:

See finding 2014-001.