Compliance Audit – Information Request Letter Changes & Impact on Schools

By Luke Hoey, CFAA | June 13, 2017

To build on our recent communications regarding the Department of Education’s newly revised guide for audits of proprietary schools, we wanted to provide this advanced notice of some new items we will be requesting – beginning with our audits for clients with fiscal years ending June 30, 2017. If you have not obtained a copy already, the updated version of the audit guide can be found here.

1.) The Title IV population list, or what we refer to as an “award roster”, is typically the first item on our Information Request Letters. This is the listing of all students who received any type of Title IV aid during your school’s most recent fiscal year, and is the list from which we determine our student sample size. Previously, we only requested that you specify the type and amount of aid each student received during the fiscal year and their enrollment status at fiscal year-end. Given that we will now be required to send positive written confirmations to the students in our sample for verification of their attendance at your institution, going forward we will request that you include contact information for each student on the award roster, or provide it in a separate spreadsheet. In addition, per the audit guide we must now also examine the academic records of one graduated student from each Title IV eligible program to assess whether the programs were conducted at the stated lengths (in credit or clock hours) and durations (number of weeks and/or months) on your school’s ECAR. Thus, we will request that you indicate each student’s degree or certificate program on the award roster as well.

2.) We will be testing the accuracy and completeness of your annual gainful employment reporting data, using the academic and financial information that you provide for the students in our sample. For the audits we perform this fall, we will need to collect both the 2014-2015 award year data that would have been reported by October 1, 2015, and the 2015-2016 award year data that would have been reported by October 1, 2016. We must also verify that 1.) Your GE disclosures are up to date, 2.) You are using the correct version of the Department’s GE Disclosure Template on your website, and 3.) We must, to a certain degree, substantiate the information contained in those disclosures. Because the deadline for updating your website with the 2017 Disclosure Template was pushed back to July 1 of this year, this procedure will not be applicable for our June 30 year-end clients. Finally, if an institution has any programs which failed the debt-to-earnings rate metric and was therefore required to provide warnings to currently enrolled and prospective students, we will be requesting documentation that the warnings were made in the appropriate manner and within the timeframes required. Please ensure the gainful employment reporting information is available for us to review. We are working with some clients to obtain this information in order to provide more specifics as to the exact information we need.

3.) On page 134 of the audit guide it states that we are to “determine if the school has written procedures as required by ED regulations relating to responsibilities for Title IV funds and reports.” On its own this seems to be a rather broad audit objective, therefore we recommend that you review the FSA Handbook guidance cited underneath which gives context to what we’ll be examining. Ensure that you have written procedures regarding the consistency of information and the resolution of conflicting information, making referrals to ED’s Office of Inspector General, designating an official who will coordinate receipt of aid from non-federal sources in conjunction with administering federal student aid, and maintaining a system of checks and balances for the authorization and disbursement of federal student aid.

These are just a few of the new areas we will be requesting and testing in our compliance audits moving forward. We will communicate the other items during the planning stages of your audit, and we would welcome any questions before then. In case you missed it, McClintock & Associates recently co-hosted a webinar with Thompson Coburn LLP to outline these and some other changes contained in the audit guide. A recording of this webinar can be found here.

Need help?

Schedule an appointment with one of our industry experts.