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Single Audit UpdateSadie Mayle

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AgendaCompliance Supplement UpdateData Collection FormUniform GuidancePrivate CollegesPerkins Loan ProgramFederal Single Audit RoundtableDepartment of EducationFuture of Funding

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Compliance Supplement

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2019 Compliance Supplement (CS)• Expected release date: May 2019• Major changes:

Full updated version to be released Reducing compliance requirements to 6• Significant changes to Student Financial Aid

• Changes summarized in Appendix V• Appendix VII (Other Audit Advisories)• Chapter 6 Internal Controls

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DoE: Anticipated ChangesSecuring Student Data• Safeguards Rule of GLBA• Inclusion in the OMB Compliance Supplement –

inevitable!• Proposed steps, as published in November

2017 GAO report*:

*Better Program Management and Oversight of Postsecondary Schools Needed to Protect Student Information

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DoE: Anticipated Changes

• Compliance involves MANY departments across campus

• Article:

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ifap.ed.govDoE: Cybersecurity

• Ifap.gov

2019 Data Collection Form

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2019 Data Collection FormChanges

• Part II - Notes to SEFA Significant accounting policies Use of de minimis rate Loan/loan guarantee outstanding balances Other

• Part III – Financial Statements If special purpose framework used Going concern paragraph Management letter

• Part III – Text of Audit findings• Part IV – Corrective Action Plan

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Uniform Guidance (UG)

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UG Status• Funding under pre-UG rules continues to wind

down• Year 4 for audits under UG!• Procurement policy implementation

• Under current published regulations, institutions will have to adopt UG procurement policies and implement them no later than July 1, 2018

• Memo released by OMB June 20, 2018 (M-18-18): Provides clarification to institutions related to the

threshold for micro-purchases – FAR/NDAA/UG• Reminder: UG sections 200.317 – 200.326 Conflict of interest

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Private Colleges

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Private Colleges – Composite ScoreTitle IV Financial Responsibility Standards:

• Must demonstrate financial health to participate in Title IV: Intended to guard against institution closure Ensure adequate resources to provide education

• Three key ratios are calculated, weighted, and combined into a “composite score”

• Covers NFP and proprietary (for-profit) institutions with distinct definitions and formulas for each Note: Public Universities are typically exempt from this

reporting

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Private Colleges – Composite ScoreRecent Changes to Title IV Financial Responsibility Standards (effective October 17, 2018) from Obama administration

• Meant to be effective July 1, 2017

Changes made related to:• Communication/notification to US Department of

Education• Triggers for US Department of Education to

recalculate private college’s financial standing• Consequences

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Guidance from NACUBO Advisory Report 2018-05

Private Colleges – Composite ScoreUS Department of Education (ED)’s Financial Responsibility Standards:

• If US ED’s analysis shows that the school’s recalculated score is less than 1 (the “passing” grade), the institution will be determined to be “not financially responsible” and will be required to provide additional surety to ED.

• In addition, schools must notify ED when triggering events occur, generally within 10 days. Automatic Triggers Discretionary Triggers

Note: There is no materiality threshold for triggers.

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• Automatic Triggers1. Debts stemming from a judicial or administrative

proceeding or settlement.2. Borrower defense-related lawsuits.3. Other litigation.4. Accrediting agency actions requiring a teach-out plan

when an institution is closing or is closing a branch or additional location.

5. Gainful employment programs that could become ineligible for federal aid in the next award year.

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• Discretionary Triggers1. Significant fluctuation year-to-year in the amount of Pell

Grant and/or Direct Loan funds received by the institution.2. Citation by state licensing or authorizing agency for failing

requirements.3. Failing a financial stress test devised or adopted by ED (no

such test has been developed or designated to date).4. High annual dropout rates.5. Accreditation status such as probation, show-cause order, or

similar action.6. Violation of a provision or requirement in a loan agreement

that enables the creditor to increase collateral.7. Pending claims for borrower relief discharge.8. Significant borrower defense claims expected due to a

lawsuit, settlement, judgment, or finding.

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• When reporting a triggering event – consider an explanation showing: The matter has been resolved and no longer poses a

risk. The institution has insurance that will cover all or part of

the liabilities that might arise from the event. For suits by a federal or state agency, the amount

claimed is too high and exceeds the potential recovery. The creditor has waived the violation of a loan

agreement, with details on any other penalties or requirements the creditor imposed.

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• Consequences Provisional certification Disclosure to students and prospective students

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Private Colleges – Composite ScoreNACUBO recommendations (Advisory Report 2018-05)

• Become familiar with the new triggers and their potential impact on the institution’s composite score calculation.

• Establish a campus protocol to monitor and report triggers.

• Begin to consider how to handle possible future public disclosures about triggering events. While not yet required, institutions will be required in the future to disclose information to current and prospective students, both directly and on the institution’s homepage.

• Wait for guidance and delay reporting into eZ-Audit for as long as possible.

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Private Colleges – Composite ScoreMarch 15, 2019 NASFAA article

• Uncertainty about how to report triggers that occurred after July 1, 2017

• For the majority of the financial responsibility standards addressing the debts, liabilities, and losses ED will have information from the 2018 financial

statement submitted Institution will need to submit a separate notification to

ED for any event after the 2018 financial statement audit was submitted

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Guidance from NASFAA guidance

Private Colleges – Composite ScoreMarch 15, 2019 NASFAA article

• Uncertainty about how to report triggers that occurred after July 1, 2017

• For lawsuits, institutions are required to notify ED A lawsuit against the institution brought by a federal or

state authority after July 1, 2017, on claims related to the making of a Direct Loan or the provision of educational services, which has been pending for more than 120 days and which is still pending as of the date of this announcement.

A lawsuit (other than the type already noted) that is still pending as of the date of this announcement against the institution and was brought after July 1, 2017, where summary judgment motions have not been filed under certain circumstances or an institution’s summary judgment motion has been denied.

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Guidance from NASFAA guidance

Private Colleges – Composite ScoreImpact of FASB ASU 2016-14 (NFP Financial Reporting) on Composite Score

• Categories of net assets to be changed to “net assets without donor restrictions” and “net assets with donor restrictions”

• Primary Reserve Ratio –net asset categories need to be changed in the numerator of ratio and total expenses will be taken from “new functional expense statement or equivalent” for the denominator

• Equity Ratio –net asset categories need to be changed in the numerator of ratio

• Net Income Ratio –“Change in Unrestricted Net Assets” to be replaced by “Change in net assets without donor restrictions” in the numerator while “Total “unrestricted revenue” to be replaced by “total revenue and gains –net assets without donor restrictions” in the denominator

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Private Colleges – Composite ScoreProposed changes

• Trump’s administration is also looking to submit changes, however, missed the November 1, 2018 deadline to be effective for July 1, 2019 Trump’s changes may be effective July 1, 2020 at the

earliest• May include: Changes related to impact of new standards

• FASB ASU 2016-14 (NFP reporting on previous slide) • FASB ASU 2016-02 (Leases)

New Supplemental Schedule• Submitted as part of Audited Financial Statements• Includes all elements to calculate composite score

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Private Colleges – Composite ScoreProposed changes

• Example from NACUBO

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Perkins Loan Program

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Perkins Loan Program• Topics to Cover

• Update• Summary of the Liquidation Process• Strategies during Phase-Out

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September 30, 2017 – Perkins Loan Program Sunset• October 6, 2017 Dear Colleague Letter: GEN-17-10

Key Points• Graduate students – could not receive loans after 9/30/16 unless first

disbursement for 16/17 award year occurred before 10/1/16• Undergraduate students – could not receive loans after 9/30/17

unless first disbursements for 17/18 award year occurred before 10/1/17

• No Perkins Loan disbursements permitted after June 30, 2018

Perkins Loan Program Update

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October 6, 2017 Dear Colleague Letter: GEN-17-10• Key Points (continued)

Distribution of Assets – Dept of Ed will start collecting their share –Federal Capital Contribution (“FCC”) – effective with FISAP filing for 6/30/18 which is due 10/1/18• Will be similar to Excess Liquid Capital calculation• Will take into consideration the following

• Institutional Capital Contribution (“ICC”) and loans from institution to the pool

• FCC previously returned• Will NOT take into consideration unreimbursed cancellation amounts


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October 6, 2017 Dear Colleague Letter: GEN-17-10• Key Points (continued)

Institutions may continue to service loans under current federal guidelines

Institutions may not charge an administrative cost allowance to the program after June 30, 2018

More information is promised prior to due date of FISAP (10/1/18) Loans – nondefaulted and defaulted may be assigned at any time

BUT By assigning the institution loses all rights and title to the loans

without recompense (ie, lose your ICC and short term loans to the pool)


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Liquidation guidance continues to be updated –most recent guidance dated January 9, 2018 –all previous guidance continues to be superseded and updated

ALWAYS USE CURRENT GUIDANCE!Use the following document:

“Federal Perkins Loan Program – Assignment and Liquidation Guide”

Link: https://ifap.ed.gov/ifap/cbp.jsp - all the Perkins items are located along the right hand side

Summary of Liquidation Process

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https://ifap.ed.gov/ifap/cbp.jsp


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Strategies during Phaseout

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• Gather a team of institutional representatives: Student Financial Aid, Admissions, Finance, Development

• Liquidation should occur once short term loans repaid AND cost to service exceeds cash collected that the institution gets to keep (ICC)

• Strategize of if the institution needs to continue offering a lower interest rate pool for eligible students

• Weigh items and Options: Cost effectiveness, Self serviced or third party, Donor

support, Financing options

Continuing to service Perkins

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• 7/11/18 Electronic Announcement• ED required an initial distribution of assets from the

institution’s Perkins Fund for the 2018–19 Award Year• Beginning with the 2019–20 Award Year and for all

subsequent award years, ED will require a capital distribution from the institution’s Perkins Fund on an annual basis for institutions that continue participating in the Perkins Loan Program Institutions must return to the Department the federal

share and return to the institution the institutional share of an institution's Perkins Fund.

• After submission of the FISAP, institution will be notified by ED of the federal share and the deadline to return payment through G5

Single Audit Round Table

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SART Agenda Items – May 1, 2019

• OMB – 2019 Compliance Supplement updates• AICPA update• Governmental Audit Quality Center (GAQC)

Activity Status• Federal Audit Clearinghouse – 2019 DCF• DoE update• GAO - Yellow Book update

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Department of Education

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DoE: Single Audit Requirement

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"Public and non-profit entities with institutions participating in the Title IV programs that submit a Single Audit that does not include the Student Financial Assistance Cluster as a major program will no longer be required to notify their respective School Participation Division of the low-risk assessments.Reminder: Institutions must still submit (via the Department’s eZ-Audit system) their complete Single Audit each year by the due date regardless of whether the Student Financial Assistance Cluster was audited as a major program.

The impact on year three testing requirements (after two years of low risk assessments) for fiscal year 2019 audits and beyond is still under review."

DoE: Other Recent Electronic Announcements – General

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• 12/20/2018: (General) Subject: R2T4 Transition #1 –Preliminary Information: R2T4 Functions to Move to COD System in 2019

• 12/10/2018: (General) Subject: Title IV Aid Disbursement Reporting, Excess Cash, and Reconciliation Requirements

• 8/29/2018: (General) Subject: Instructions for Not-for-Profit Institutions to Input Financial Statement Data into the eZ-Audit System Due to Changes Resulting from ASU 2016-14

• 11/16/2017: (General) Subject: Availability of Updated NSLDS Enrollment Reporting Guide (November 2017)

DoE: Other Recent Electronic Announcements – Other

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• 12/21/2018: (Direct Loans) Subject: William D. Ford Federal Direct Loan Program Reconciliation

• 12/20/2018: (Campus Based) Subject: Perkins Loans Awarded or Disbursed After the Expiration of the Perkins Loan Program

• 10/4/2018: (Campus Based) Subject: Federal Perkins Loan Program Administrative Responsibilities and Reporting Requirements

Future of Federal Funding

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Higher Ed ReauthorizationIn 2018 both houses shared separate initiatives: PROPSER – Republican AIM HIGHER – Democrat

Includes changes on: FAFSA simplification Need Analysis Student Eligibility Program Eligibility

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Guidance from NASFAA 2018 comparison

Higher Ed ReauthorizationPROSPER vs. AIM HIGHER

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PROSPER (Republican) AIM HIGHER (Democrat)

Pell Maintains current funding Expands current funding

TEACH Eliminates program Expands program

FSEOG Eliminates program Expands program

FWS Expands current funding, eliminates eligibility for graduate/professional students

Expands current funding

Perkins Loans

Requires assignment to ED Creates new Federal Direct Perkins Loan program

Direct Loans Replaces with new Federal ONE Loan program

Maintains current program


Higher Ed ReauthorizationPROSPER vs. AIM HIGHER

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PROSPER (Republican) AIM HIGHER (Democrat)

Gainful Employment

Repeals regulations and prohibits any future rulemaking

Maintains gainful employment

Verification Restores Quality Assurance Program Requires ED to annually collect & share data on verification selections

Loan Outcome Metrics

Replaces cohort default rate with program-based repayment rate

Maintains cohort default rate

R2T4 % of aid earned based on quarterly assessment (rather than day-by-day calculation) Amount earned would be 0, 25, 50, or 75 percent of aid depending on timing of student’s withdrawal

No changes


Higher Ed Reauthorization• 2019 Updates (March 14, 2019) U.S. House Committee on Education and Labor has

announced a series of five bipartisan hearings Topics:

• The Cost of College: Student Centered Reforms to Bring Higher Education Within Reach

• Strengthening Accountability in Higher Education to Better Serve Students and Taxpayers

• The Cost of Non-Completion: Improving Student Outcomes in Higher Education

• Engines of Economic Mobility: The Critical Role of Community Colleges, Historically Black Colleges and Universities, and Minority-Serving Institutions in Preparing Students for Success

• Innovation to Improve Equity: Exploring High-Quality Pathways to a College Degree

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FY20 Budget RequestSuggestions related to higher education include:• Student financial assistance of $131 billion • Reducing complexity of student financial aid through reform of

the Higher Education Act• Streamlining student loan repayment and redirecting

inefficiencies to prioritize debt relief for undergraduate borrowers into a Single income-driven repayment plan

• Expanding Pell Grant eligibility to short-term programs• Reforming Federal Work Study• Eliminate FSEOG• Continues to fund Federal TRIO programs

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Questions?

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