Single Audit Update Sadie Mayle - CACUBO

 
Single Audit Update Sadie Mayle - CACUBO
Single Audit Update
Sadie Mayle
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Single Audit Update Sadie Mayle - CACUBO
Agenda
Compliance Supplement Update
Data Collection Form
Uniform Guidance
Private Colleges
Perkins Loan Program
Federal Single Audit Roundtable
Department of Education
Future of Funding

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Single Audit Update Sadie Mayle - CACUBO
Compliance
Supplement

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Single Audit Update Sadie Mayle - CACUBO
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

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Single Audit Update Sadie Mayle - CACUBO
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

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Single Audit Update Sadie Mayle - CACUBO
DoE: Anticipated Changes

• Compliance involves MANY departments across
  campus
• Article:

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Single Audit Update Sadie Mayle - CACUBO
DoE:            ifap.ed.gov
      Cybersecurity

•   Ifap.gov
2019 Data
Collection Form

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2019 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

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2019 Data Collection Form

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2019 Data Collection Form

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2019 Data Collection Form

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2019 Data Collection Form

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Uniform Guidance
(UG)

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UG 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

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Private Colleges

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Private 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

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Private 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

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Private 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

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Private 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

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Private 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

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Private 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

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Private 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

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Private 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

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Private 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

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Private 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

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Private 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

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Private 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

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Private Colleges – Composite Score
Proposed changes
  •   Example from NACUBO

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Perkins Loan
Program

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Perkins Loan Program
• Topics to Cover
  •   Update
  •   Summary of the Liquidation Process
  •   Strategies during Phase-Out

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Perkins 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

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Perkins 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

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Perkins 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)

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Summary 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

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Summary of Liquidation Process

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Summary of Liquidation Process

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Summary of Liquidation Process

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Summary of Liquidation Process

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Strategies 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

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Continuing 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

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Single Audit
Round Table

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SART 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

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Department of
Education

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DoE:
 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."

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DoE: 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)

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DoE: 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

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Future of Federal
Funding

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Higher 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

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Higher 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

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Higher 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

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Higher 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

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FY20 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

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Questions?

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