Creating an Internal Audit System That Actually Works
Design a proactive compliance program that catches errors before external audits do
The best compliance audits are the ones you conduct yourself—before external auditors arrive. An effective internal audit system helps you identify and correct issues proactively, demonstrates good faith compliance efforts, and provides valuable documentation during formal reviews. Yet many VASCO offices lack structured audit programs, relying instead on reactive problem-solving.
This guide walks you through building a sustainable internal audit system tailored to your institution's size and complexity, with practical tools and templates you can implement immediately.
✓ Benefits of Internal Audits
- • Catch errors before they become overpayments
- • Demonstrate due diligence during external audits
- • Identify training needs for staff
- • Improve certification accuracy over time
- • Reduce stress when formal audits occur
Audit Program Framework
Building Your Audit Schedule
Monthly Audits (High Priority)
Sample Size: 5-10 recent certifications
- ✓ Verify training time calculations
- ✓ Check term dates for accuracy
- ✓ Confirm credit hour totals
- ✓ Review benefit chapter selections
- ✓ Validate prior credit evaluations completed
Quarterly Audits (Moderate Priority)
Sample Size: 15-20 certifications from past quarter
- ✓ SAP compliance documentation
- ✓ Enrollment change reporting timeliness
- ✓ Yellow Ribbon calculations (if applicable)
- ✓ Document retention compliance
- ✓ Communication with students
Annual Comprehensive Audits
Sample Size: 50-100 certifications stratified by program
- ✓ All monthly/quarterly items plus:
- ✓ Policy compliance review
- ✓ Staff certification accuracy rates
- ✓ System and process effectiveness
- ✓ Corrective action follow-up
- ✓ Benchmarking against best practices
Risk-Based Sampling Methods
Prioritize High-Risk Areas
Don't audit randomly—focus on areas where errors are most likely or have highest impact:
High Risk = Audit More
- • New VASCO staff certifications
- • Non-standard term programs
- • Clock hour to credit conversions
- • Programs with frequent changes
- • Yellow Ribbon participants
- • Students with prior credit
- • Concurrent enrollment situations
Lower Risk = Audit Less
- • Standard semester programs
- • Experienced staff certifications
- • Continuing students (no changes)
- • Traditional credit hour programs
- • Automated certification systems
- • Programs with clean audit history
Sample Selection Strategy
Stratified Random Sampling
Divide certifications into groups (by program, staff member, student type) then randomly select from each group to ensure representation.
Judgmental Sampling
Deliberately select cases that meet high-risk criteria or where errors have occurred previously.
Systematic Sampling
Review every Nth certification (e.g., every 10th enrollment) to maintain consistency.
Documenting Audit Findings
Finding Classification System
Major Compliance Issues
Errors that result in overpayments or significant compliance violations requiring immediate correction.
Examples:
- • Incorrect benefit rate certified (full-time vs. 3/4 time)
- • Missing prior credit evaluation before certification
- • Certifying courses outside approved program
Action Required: Immediate correction, notify VA if overpayment occurred
Process Deficiencies
Errors that could lead to compliance issues but haven't yet resulted in overpayments.
Examples:
- • Incomplete file documentation
- • Delayed reporting of enrollment changes
- • Inconsistent application of policies
Action Required: Correction within 30 days, staff retraining
Administrative Improvements
Best practice suggestions that improve efficiency but don't indicate compliance failures.
Examples:
- • File organization improvements
- • Template formatting inconsistencies
- • Workflow efficiency opportunities
Action Required: Address as resources allow, track for trends
Audit Finding Template
Finding #:
[Sequential number]
Severity Level:
[Critical / Moderate / Minor]
Description:
[Clear explanation of what was found]
Criterion:
[What regulation/policy was violated]
Impact:
[Overpayment amount, students affected, etc.]
Recommendation:
[Specific corrective action needed]
Responsible Party:
[Who will fix it]
Due Date:
[When correction must be completed]
Continuous Improvement Process
The PDCA Cycle for Audit Programs
PLAN
- ✓ Design audit schedule
- ✓ Identify risk areas
- ✓ Develop checklists
- ✓ Assign responsibilities
DO
- ✓ Conduct audits
- ✓ Document findings
- ✓ Classify by severity
- ✓ Report results
CHECK
- ✓ Analyze patterns
- ✓ Identify root causes
- ✓ Measure trends
- ✓ Benchmark performance
ACT
- ✓ Implement corrections
- ✓ Provide training
- ✓ Update procedures
- ✓ Refine audit program
Metrics and Reporting
Track these key metrics to demonstrate audit program effectiveness:
% of certifications with errors
Average days to resolve findings
% of same errors recurring
Key Takeaways
- 1.Regular internal audits catch errors before external auditors do
- 2.Risk-based sampling focuses limited resources on highest-impact areas
- 3.Documented findings and corrective actions demonstrate due diligence
- 4.Continuous improvement cycles turn audit data into lasting process improvements