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ED Policy to Require Annual Student Aid Compliance Audits Beginning FY17

8/08/2016

Earlier this year, NACUBO learned that the Department of Education (ED) was considering a proposal to require annual compliance audits of the Student Financial Assistance (SFA) cluster for higher education institutions in 2016. Last week, ED announced that it would pursue an annual audit mandate for FY17 as part of the Office of Management and Budget's (OMB) 2017 Compliance Supplement to federal audit requirements. The policy does not apply to FY16.

In the August 5 announcement, ED revisits both the Single Audit Act and 2 CFR 200 and the Higher Education Act (HEA) audit requirements and concludes:

"It is clear that the provisions of both the HEA and the implementing regulations require annual submissions of not only the institution's audited financial statements but also of the compliance audit of the institution's administration of the Title IV student aid programs. Therefore, an institution may meet this annual submission requirement by submitting annual audited financial statements and a compliance audit of the institution that were prepared either in accordance with the OIG [Office of Inspector General] audit guides or in accordance with the Single Audit Act requirements. In either case, the compliance audit must be submitted annually. Therefore, a submission prepared under the Single Audit Act requirement that does not include a compliance audit does not meet the HEA audit requirement."

ED also states:

  1. Institutions may continue to provide Single Audit submissions that were prepared using the standards in place prior to Single Audit Act regulatory provisions that were published in the Federal Register on December 26, 2013, until further guidance is issued.
  2. Any institution that has already had an auditor prepare a Single Audit under the new OMB guidance referenced above, with a determination that the Title IV programs were low risk, should contact their respective School Participation Division.

In a letter to OMB earlier this year, NACUBO objected to this interpretation for several reasons, including increased costs and administrative burden for institutions, as well as the dubious legal authority ED had to enact such a requirement without engaging in a formal rulemaking process.

NACUBO is examining the Single Audit Act and 2 CFR 200 and the HEA audit requirements and remains concerned that this policy ignores the goals of the Single Audit Act to streamline audit requirements across federal agencies and lessen the audit burden on recipients of federal awards. 

Contact

Sue Menditto

Senior Director, Accounting Policy

202.861.2542

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