Facing Audit Phobia, Part I: The Latest Trends

By Parker Charlton | July 12, 2022

If we’re playing a word association game, then when a postsecondary education institution participating in Title IV aid programs hears the word “audit,” it’s likely to prompt a response of “confusion,” “anxiety” or even “fear.”

It’s understandable, but frequently unfounded. In fact, a compliance audit can be a good thing for an institution, providing an opportunity to gauge how successfully it is implementing the Department of Education’s growing and ever-shifting maze of regulations.

At McClintock & Associates, assisting institutions in understanding and correctly implementing Title IV rules is at the core of our mission. Undeniably, there’s an emotional component to relieving that compliance burden, too, and that’s why we’ve developed a three-part guide to facing “audit phobia.”

For starters, we’ll break down audit trends to watch, and in future articles, we’ll offer e-audit advice and explain what learning opportunities an institution can take from an audit.

Audit Trends

 A significant contributing factor to audit phobia is the raft of Federal Student Aid rule changes enacted last summer. While institutions have had months to implement these regulations and refine their processes, it’s possible mistakes were made or there just wasn’t time to address everything. These rule changes certainly are among the top trends to consider in upcoming audits. Read on for a more detailed list of key points:

  • Outgoing Title IV Requirements: 
    • Clery Handbook: The 2016 Handbook for Campus Safety and Security Reporting has been rescinded and replaced by the Clery Act Appendix of the FSA Handbook.
    • SULA: Students are now eligible for subsidized loans up to the aggregate limit, regardless of usage amount and current program length.
    • Selective Service: Male students no longer must register for Selective Service to be eligible for Title IV aid. C-codes will still populate on the ISIR, but they can be ignored and cleared.
    • Drug-related convictions: The eligibility restrictions for students who were convicted of a drug-related offense while receiving Title IV aid have been removed. Again, C-codes may populate, but they can be ignored.
    • Verification: 2021-22 V1 requirements were waived as of July 13, 2021. 2022-23 V1 requirements were waived as of May 18, 2022. For both award years conflicting information must still be resolved. For the 2022-23 award year, ED is removing high school completion status as a verification item under V4 and V5, although an institution must have a process to evaluate the validity of a student’s high school diploma, and high school completion (or equivalent) is still required for Title IV eligibility. 
  • SAP Flexibilities: The new FSA rules established two significant SAP flexibilities:
    •  Pace (quantitative) reviews are no longer required for subscription-based, non-term and clock-hour programs.
    • Institutions have the option to calculate the maximum timeframe for credit-hour programs by credit hours or by calendar time, provided the same measurement is used for all students in the same program. 
  • Clock-to-Credit-Hour Conversions: A semester or trimester hour must include 30 clock hours of instruction (30:1), and a quarter hour must include 20 clock hours of instruction (20:1). Outside hours and/or homework are no longer factored in the conversion. 
  • R2T4: We are seeing several issues related to the new regulations for Return to Title IV (R2T4) funds for students who withdraw from a modular-based program, which can lead to audit problems. These include mistakes in NSLDS enrollment reporting, identifying R2T4 exemptions, recalculating Pell grants and resolving Title IV credit balances. Additionally, the R2T4 changes for modular-based programs present challenges in determining when a student was scheduled for classes now that institutions have two methods to calculate the period of enrollment. 
  • Professional Judgment: ED encourages the use of professional judgment (PJ) and has previously indicated it will not currently be a consideration for determining program reviews. In December 2021, however, the Office of the Inspector General announced it would continue to focus on PJ decisions by institutions, so it seems this will remain a point of emphasis moving forward. We recommend institutions review their current PJ policies and procedures and document the reasoning behind all PJ decisions on a student-by-student basis. 
  • Annual Student Loan Acknowledgement: This item will not be required for the 2022-23 award year and beyond, although the annual student loan acknowledgement process remains available to students on StudentAid.gov. 
  • HEERF: Higher Education Emergency Relief Fund (HEERF) grants were a great relief to institutions, but they also added more auditing concerns to nonprofit and proprietary schools that met the requirements for a HEERF audit. Institutions must be accurate with their reporting to help ensure a stress-free audit.

 Understanding these topics and how they play into annual audits will go a long way toward easing “audit phobia,” as will assistance from McClintock & Associates, where our staffers specialize in Title IV compliance audits. Schedule a call today, and be sure to check out our recent webinar on facing audit phobia.

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