Single Audit Update Sadie Mayle - CACUBO
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Single Audit Update
Sadie Mayle
1
Agenda
Compliance Supplement Update
Data Collection Form
Uniform Guidance
Private Colleges
Perkins Loan Program
Federal Single Audit Roundtable
Department of Education
Future of Funding
2
Compliance
Supplement
3
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
4
DoE: Anticipated Changes
Securing 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
5
DoE: Anticipated Changes
• Compliance involves MANY departments across
campus
• Article:
6
DoE: ifap.ed.gov
Cybersecurity
• Ifap.gov2019 Data
Collection Form
82019 Data Collection Form
Changes
• 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
92019 Data Collection Form
102019 Data Collection Form
112019 Data Collection Form
122019 Data Collection Form
13Uniform Guidance
(UG)
14UG 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
15Private Colleges
16Private Colleges – Composite Score
Title 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
17Private Colleges – Composite Score
Recent 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
Guidance from NACUBO Advisory Report 2018-05
18Private Colleges – Composite Score
US 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.
Guidance from NACUBO Advisory Report 2018-05
19Private Colleges – Composite Score
US Department of Education (ED)’s Financial
Responsibility Standards:
• Automatic Triggers
1. 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.
Guidance from NACUBO Advisory Report 2018-05
20Private Colleges – Composite Score
US Department of Education (ED)’s Financial
Responsibility Standards:
• Discretionary Triggers
1. 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.
Guidance from NACUBO Advisory Report 2018-05
21Private Colleges – Composite Score
US Department of Education (ED)’s Financial
Responsibility Standards:
• 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.
Guidance from NACUBO Advisory Report 2018-05
22Private Colleges – Composite Score
US Department of Education (ED)’s Financial
Responsibility Standards:
• Consequences
Provisional certification
Disclosure to students and prospective students
Guidance from NACUBO Advisory Report 2018-05
23Private Colleges – Composite Score
NACUBO 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.
Guidance from NACUBO Advisory Report 2018-05
24Private Colleges – Composite Score
March 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
Guidance from NASFAA guidance
25Private Colleges – Composite Score
March 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.
Guidance from NASFAA guidance
26Private Colleges – Composite Score
Impact 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
27Private Colleges – Composite Score
Proposed 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
28Private Colleges – Composite Score
Proposed changes
• Example from NACUBO
29Perkins Loan
Program
30Perkins Loan Program
• Topics to Cover
• Update
• Summary of the Liquidation Process
• Strategies during Phase-Out
31Perkins Loan Program Update
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
32Perkins Loan Program Update
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
33Perkins Loan Program Update
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)
34Summary of Liquidation Process
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
35Summary of Liquidation Process
36Summary of Liquidation Process
37Summary of Liquidation Process
38Summary of Liquidation Process
39Strategies during Phaseout
• 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
40Continuing to service Perkins
• 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
41Single Audit
Round Table
42SART 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
43Department of
Education
44DoE:
Single Audit Requirement
"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."
45DoE: Other Recent Electronic
Announcements – General
• 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)
46DoE: Other Recent Electronic
Announcements – Other
• 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
47Future of Federal
Funding
48Higher Ed Reauthorization
In 2018 both houses shared separate
initiatives:
PROPSER – Republican
AIM HIGHER – Democrat
Includes changes on:
FAFSA simplification
Need Analysis
Student Eligibility
Program Eligibility
Guidance from NASFAA 2018 comparison
49Higher Ed Reauthorization
PROSPER vs. AIM HIGHER
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, Expands current funding
eliminates eligibility for
graduate/professional students
Perkins Requires assignment to ED Creates new Federal Direct
Loans Perkins Loan program
Direct Loans Replaces with new Federal ONE Maintains current program
Loan program
Guidance from NASFAA 2018 comparison
50Higher Ed Reauthorization
PROSPER vs. AIM HIGHER
PROSPER (Republican) AIM HIGHER (Democrat)
Gainful Repeals regulations and prohibits any Maintains gainful employment
Employment future rulemaking
Verification Restores Quality Assurance Program Requires ED to annually collect &
share data on verification
selections
Loan Outcome Replaces cohort default rate with Maintains cohort default rate
Metrics program-based repayment rate
R2T4 % of aid earned based on quarterly No changes
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
Guidance from NASFAA 2018 comparison
51Higher 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
52FY20 Budget Request
Suggestions 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
53Questions?
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