NACUBO Objects to Annual SFA Audits
6/27/2016
Following outreach from NACUBO and others, the Department of Education has retreated on a proposal to mandate annual compliance audits of the Student Financial Assistance (SFA) cluster for institutions of higher education in 2016.
The underlying principles of the Single Audit Act and the implementing regulations promulgated by the Office of Management and Budget (OMB) require that audit resources be used judiciously through auditor risk assessments that direct audit efforts toward higher-risk major programs. Under the Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (known as the Uniform Guidance or UG), it is possible for higher education institutions with more than one major program to have SFA audited as infrequently as every third year. Less frequent audits of SFA are most common among institutions with significant research funding or public institutions that are included in their state's annual audit.
During a regularly scheduled meeting between federal agency liaisons and external auditors, ED staff contended that SFA should be audited annually as a major program. ED expressed concern that SFA was not being tested regularly-especially at public institutions that are included in their state's audit and where other major programs compete for audit resources. Consequently, ED initiated an internal discussion to determine whether it could mandate SFA compliance audits for all colleges and universities beginning in FY16.
The proposal concerned NACUBO 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 talked with ED and OMB staff and followed up with a formal letter outlining these concerns. On June 10, ED informed NACUBO that it had backed down on its desired requirement for every higher education institution to have an SFA audit in 2016.
ED also noted that it would pursue an annual audit mandate for FY17—possibly with an added FY16 SFA inclusion (in FY17) for institutions that did not have SFA audited in FY16—likely as part of OMB's 2017 Compliance Supplement to federal audit requirements.
