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This resource is being maintained for historical purposes only and is not currently applicable.

Institutional Eligibility and Administrative Requirements - Program Reviews and Audits

AwardYear: 1998-1999
EnterChapterNo: 3
EnterChapterTitle: Institutional Eligibility and Administrative Requirements
SectionNumber: 6
SectionTitle: Program Reviews and Audits
PageNumbers: 137-152


The Department uses several methods to ensure that schools, lenders,
and guaranty agencies are using correct procedures to award,
disburse, and account for the use of federal funds. In this section we
will discuss audits and program reviews that are conducted at schools
that participate in the SFA Programs, as well as other quality control
measures.

If in a program review or audit a school is identified as having
disbursed improperly SFA funds, the school must restore those funds
as appropriate. Program reviews and audits are not conducted solely
to recover funds, but also to identify procedural problems at the
school and recommend solutions. Several other ways for a school to
obtain technical assistance are discussed at the end of the section.

If a school is cited for fraud or other serious program abuses in a
program review or audit, the school may be subject to corrective
action and/or sanctions, such as fines, emergency action, or
limitation, suspension, or termination (see Section 9).


AUDIT REQUIREMENTS FOR SCHOOLS
----------------------------------

The law requires that a school that participates in any SFA Program,
including participating foreign schools, must have an independent
auditor conduct, at least once a year, an audit of a school's
compliance with the laws and regulations that are applicable to the
SFA Programs, and an audit of the school's financial statements. A
compliance audit covers the school's administration of the SFA
Programs. The auditor will examine whether the school is complying
with the laws and regulations that are applicable to the SFA
Programs. A financial audit provides the Department with
information necessary to evaluate a school's financial responsibility
(see Section 2.)

As in the past, schools can meet these audit requirements by having
an audit performed under the guidelines of the Department's SFA
Audit Guide, Compliance Audits, Attestation Engagements of
Federal Student Financial Assistance Programs at Participating
Institutions
or, if applicable, by having an audit performed under the
guidelines of the Single Audit Act (known as A-133 audits). Single
Audit Act audits are discussed later in this section.

[[Combined audit submission]]
A school that has an audit performed under the SFA Audit Guide
must submit simultaneously both the compliance and financial audit
within six months of the end of the school's fiscal year. Both the
compliance audit and the financial statement audit must be
performed on a fiscal year basis. In addition, both audits must be
prepared in accordance with Generally Accepted Government
Auditing Standards (GAGAS). The compliance audit and financial
statement audit may be performed by different auditors. However,
both audits must be submitted as one package and must cover the
school's fiscal year.

The compliance audit of a school that has a fiscal year that does not
coincide with an award year will cover parts of two award years (see
the example below).

[[This file contains "Example - Fiscal year not equal to
award year" on page 3-138 in Portable Document Format (PDF). It can
be viewed with version 3.0 or greater of the free Adobe Acrobat Reader
software.]]

The definition of independent auditor makes clear that the
compliance and financial audit submitted under these regulations
must be performed by independent certified public accountants
(CPAs) or by government auditors that meet certain governmental
standards.

[[Definition of independent auditor]]
Independent Auditor-An independent CPA or a
government auditor, except that a government auditor must meet
the Government Auditing Standards qualification and
independence standard, including standards related to
organizational independence.

[[Audits by Inspector General]]
The Office of Inspector General (OIG) also conducts audits, usually
in cases where there may be concern over the school's administration
of the SFA Programs. A federal audit such as this does not satisfy the
requirement that a school have an annual compliance and financial
audit.


TYPES OF AUDIT GUIDELINES
-----------------------------

[[Single Audit Act]]
As mentioned previously, in addition to audits performed under the
SFA Audit Guide, audits performed under the guidelines of the
Single Audit Act (chapter 75 of Title 31, U.S.C.) will also meet the
Department's audit requirements. Under the Single Audit Act, certain
types of schools must have an audit performed in accordance with a
circular prepared by the Office of Management and Budget (OMB).

[[NEW]]
Previously, OMB Circular A-128 applied to public schools that are
state entities and OMB Circular A-133 applied only to nonprofit
postsecondary schools. The Single Audit Act Amendment of 1996
substantially revised various provisions of the 1984 Act. On June 30,
1997, the Office of Management and Budget (OMB) published in the
Federal Register revisions to OMB Circular A-133 to implement the
1996 Amendments, including extending OMB Circular A-133's
coverage to States, local governments, and Indian tribal
governments, and rescinding OMB Circular A-128. Circular A-133
is re-titled Audits of States, Local Governments, and Non-Profit
Organizations
. For many schools, this is a combined audit of all the
federal programs at that school. OMB circular A-133 is available
through the OMB Home Page at http://www1.whitehouse.gov/WH/
EOP/OMB/html/circulars/a133/a133.html
, or by calling OMB's
Publication Office at (202) 395-7332.

Audits performed under the Single Audit Act have distinct auditing
and submission requirements. A school submitting an audit under the
guidelines of the Single Audit Act must use the submission deadlines
established by the Single Audit Act.

[[Audit options depend on control]]
The type of audit a school or servicer may have depends on its
method of control: public, for profit, or nonprofit. All for-profit
schools must comply with the audit requirement by having an SFA
compliance audit under the criteria of the Department's SFA Audit
Guide. All public and nonprofit schools must comply with OMB
Circular A-133, which allows an SFA compliance audit under the
criteria of the Department's Audit Guide under limited
circumstances.


AUDIT SUBMISSION DATES
-------------------------

As mentioned earlier, beginning with the 1997-98 award year, a
school's or servicer's annual compliance and financial audit
performed under the SFA Audit Guide must be based upon the
fiscal year and submitted to the Department within six
months
after the end of the school's or servicer's FISCAL YEAR.
(As discussed previously, these requirements do not apply to audits
performed under the Single Audit Act, which are already based on a
school's fiscal year. Single Audit Act audits are due as specified in
OMB Circular A-133.)

[[Audit submission deadlines for SFA Audits]]
This requirement is effective for audits submitted on or after July 1,
1997. Because the period of time being audited for a compliance
audit has changed to the fiscal year, a school's first combined
submission may need to include an additional partial year report as
part of its compliance audit. For example, for a school with a fiscal
year end of December 31, the first combined submission (due June
30, 1998) must include a financial audit covering January 1, 1997 to
December 31, 1997 (the school's fiscal year), and a compliance audit
with two reports: one for the period July 1, 1996 to December 31,
1996, and another for the period January 1, 1997 to December 31,
1997. The school's next combined submission, due June 30, 1999,
must include both a financial and compliance audit for January 1,
1998 to December 31, 1998. The chart that follows lists audit due
dates and what period the audit must cover for two fiscal years.

[[This file contains the chart "Audit submission due
dates for 1998 and 1999" on page 3-140 in Portable Document Format
(PDF). It can be viewed with version 3.0 or greater of the free Adobe
Acrobat Reader software.]]

Generally, a school's first audit performed under these requirements
must cover the entire period of time since the school began to
participate in the SFA Programs. Each subsequent audit must cover
the period since the preceding audit that is accepted by the
Department.


COMPLIANCE AUDIT SUBMISSION REQUIREMENTS
----------------------------------------------

The compliance audit must be conducted in accordance with

- the general standards and the standards for compliance audits
contained in the U.S. General Accounting Office's (GAO's)
Government Auditing Standards, and

- applicable audit guides from the Department's Office of the
Inspector General.

In conducting an audit, a school or servicer and its auditor should use
the Department of Education's latest SFA Audit Guide, the
accounting and recordkeeping manual for the SFA Programs (known
as The Blue Book), and the ED Payment System Users Manual or
GAPS Users Guide, as applicable.

The Blue Book is developed under contract with the Office of
Student Financial Assistance. The full title is The Blue Book:
Accounting, Recordkeeping, and Reporting by Postsecondary
Educational Schools for Federally-Funded Student Financial Aid
Programs
. Schools may request copies of the Department's Audit
Guide
and The Blue Book by writing to: Federal Student
Information Center, P.O. Box 84, Washington, DC 20044.

The auditor or auditing firm the school or servicer uses for its
required nonfederal audit may be the same one that usually audits the
school's or servicer's fiscal transactions. To produce unbiased
conclusions, the auditor must be independent of those authorizing the
expenditure of SFA Program funds. The criteria for independence
are given in Chapter IV Section B of the GAO Standards for Audit of
Governmental Organizations, Programs, Activities, and Functions
.
The most important sections of the Standards are published as
Appendices B and C of the December 31, 1980 Student Assistance
General Provisions regulations. An audit conducted by a state auditor
will also satisfy the nonfederal audit requirement.

[[Access to audit results]]
The Department may require a school to provide a copy of its
compliance audit report to guaranty agencies, lenders, state agencies,
the Department of Veterans Affairs, or accrediting agencies.


FINANCIAL STATEMENT SUBMISSION REQUIREMENTS
-------------------------------------------------

[[Additional information]]
A school's audited financial statement must cover the school's most
recently completed fiscal year. The Department uses the information
in a school's audited financial statement to evaluate the school's
financial responsibility (see Section 2). In addition to a school's
financial statements, the Department may request that the school
submit additional information. For example, the Department may
require a school to submit or provide access to the accountant's work
papers. Also, if the Department finds it necessary to evaluate a
particular school's financial condition, the Department can require a
school to submit an audited financial statement more frequently than
once a year.

Financial statements must be prepared on an accrual basis in
accordance with generally accepted accounting principles (GAAP),
and audited by an independent auditor in accordance with GAGAS
and other guidance contained in OMB Circular A-133, or in audit
guides from the Department's Office of the Inspector General, as
applicable.

[[Consolidated statements]]
In some cases, a school's relationship with another entity may cause
the Department to require a school to submit additional financial
statements of the school and the entity, such as: audited consolidated
financial statements; audited full consolidating financial statements;
audited combined financial statements; or, under certain
circumstances, audited financial statements of one or more related
parties. This occurs when the Department determines that the
activities or financial health of another entity may impact upon the
school's total financial health. So that the Department can make this
determination, a school must include in its audited financial
statement a detailed description of related entities based on the
definition of a related entity in the Statement of Financial
Accounting Standards (SFAS) 57. In addition, the description must
include all related parties and a level of detail that would enable the
Department to identify readily the related party. This information
may include, but is not limited to, the name, location, and description
of the related entity, including the nature and amount of any
transaction between the related party and the school, financial or
otherwise, regardless of when it occurred.

[[Reporting for 85/15 Rule]]
A proprietary school must disclose the percentage of its revenues
derived from the SFA Programs that the school received during the
fiscal year covered by the audit as a footnote to its audited financial
statement. This is a change in the way a school is required to provide
the information necessary to assess compliance with the 85/15 Rule.
Previously, a proprietary school was required to have the CPA who
prepared the audited financial statement report on the accuracy of the
school's determination by performing an examination level
attestation engagement. Information regarding the calculation of this
percentage is found in Section 1.


AUDITS FOR FOREIGN SCHOOLS
------------------------------

Foreign schools must also submit annual compliance and financial
audits. However, because financial responsibility requirements vary
for foreign schools based on the amount of SFA Program funds
received by the school, the requirements for preparation of the
financial statement also vary. A school that received less than
$500,000 (in U.S. dollars) in SFA Program funds during its most
recently completed fiscal year may have its audited financial
statement prepared according to the standards of the school's home
country. A foreign school that received $500,000 or more in SFA
Program funds during its most recently completed fiscal year must
have its audited financial statement translated and presented for
analysis under U.S. Generally Accepted Accounting Principles
(GAAP) and Generally Accepted Government Auditing Standards
(GAGAS). See Section 2 for more information on financial
responsibility determinations for foreign schools.


AUDITS FOR THIRD-PARTY SERVICERS
-------------------------------------

[[Exceptions for some servicers]]
There are also annual financial and compliance audit requirements
for third-party servicers. A third-party servicer must submit an
annual compliance audit. However, if a servicer contracts with only
one SFA school, and that school's own audit sufficiently covers all
the functions performed by the servicer, the servicer does not have to
submit a compliance audit. If a servicer contracts with several SFA
schools, a single compliance audit can be performed that covers all
its administrative services for each school. A servicer must submit its
compliance audit within six months after the last day of the servicer's
fiscal year. The Department may require a servicer to provide a copy
of its compliance audit report to guaranty agencies, lenders, state
agencies, the Department of Veterans Affairs, or accrediting
agencies.

In addition to submitting a compliance audit, a servicer that enters
into a contract with a lender or guaranty agency to administer any
aspect of the lender's or guaranty agency's programs must submit
annually an audited financial statement. This financial statement
must be prepared on an accrual basis in accordance with generally
accepted accounting principles (GAAP) and audited by an
independent auditor in accordance with GAGAS and any other
guidance contained in audit guides issued by the Department's Office
of the Inspector General.

Guidance for audits of third-party servicers is found in the Lender-
Servicer Audit Guide, published in December 1996 and in the July
1997 revisions to the SFA Audit Guide.

A school may never use a third-party servicer's audit in place of its
own required audit, because the school is ultimately liable for its own
violations as well as those incurred by its third-party servicers. See
Section 2 for more information on third-party servicers.


HAVING THE AUDIT PERFORMED
------------------------------

[[Scope of the audit]]
The school or servicer must make its program and fiscal records, as
well as individual student records, available to the auditor. (Required
recordkeeping is discussed in Section 7.) Both the financial aid and
business offices should be aware of the dates the auditors will be at
the school, and make sure that someone is on hand to provide
requested documents and answer questions during that period.

[[Exit interview]]
At the end of the on-site review, the auditor will hold an exit
interview. At a school, this exit interview is usually conducted with
the personnel from the school's financial aid and other relevant
offices. The exit interview is not only an opportunity for the auditor
to suggest improvements in procedures, but it also gives the school
or servicer a chance to discuss the draft report and review any
discrepancies cited in the report. The exit interview is a good time to
resolve any disagreements before the final report is prepared.

[[SFA Audit report]]
The final report will be prepared by the auditor and submitted to the
school or servicer. The school or servicer must submit five copies of
the SFA Audit Guide audit report and the school's or servicer's
Correction Action Plan (CAP) to the Department's Data Management
and Analysis Division at the following address:

U.S. Department of Education
Office of Postsecondary Education
Institutional Participation and Oversight Service
Data Management and Analysis Division
600 Independence Avenue, SW
ROB 3, Room 3012
Washington, DC 20202-5402

[[A-133 audits]]
A-133 audits must be submitted to the

Federal Audit Clearinghouse
Bureau of the Census
P.O. Box 5000
Jeffersonville, Indiana 47199-5000

The Federal Audit Clearinghouse will process these audits for the
Department. Although the OIG is not the submission point for these
audits, the OIG will provide technical assistance on these audits to
schools and auditors.

For an audit performed under the Department's SFA Audit Guide, the
Department reviews the audit report for format, completeness, and to
ensure that it complies with the government's auditing standards.

Based on the audit findings and the school's or servicer's written
explanation, the Department will determine if any funds were spent
improperly. The school or servicer must repay any improperly spent
funds within 45 days, unless the school or servicer has properly
appealed the decision.

[[Access to records]]
Once the audit is complete, the school or servicer must give the
Department and the OIG access to any records or other documents
necessary to review the audit. A school that uses a third-party
servicer must also give the Department and the OIG access to records
or other documents necessary to review a third-party servicer's
compliance or financial statement audit. In addition, the school's or
servicer's contract with the auditor must specify that the auditor will
also give the Department and the OIG access to the records and
documents related to the audit, including work papers. In all cases,
access to records includes the ability of the Department or OIG to
make copies of the records.

[[Full cooperation is required for all examination actions]]
Throughout the audit process, and for other examinations such as
program reviews and state reviews, the school or servicer is required
to cooperate fully with its independent auditor, the Department and
its Inspector General, the Comptroller General of the United States,
the appropriate guaranty agency and accrediting agency. Cooperation
includes timely and reasonable access to records (including computer
records) for examination and copying, and to personnel for the
purpose of obtaining relevant information.

Access--Includes the right to copy records (including computer
records), to examine computer programs and data, and to
interview employees without the presence of management or the
presence of the school's or a servicer's tape recorder.


PROGRAM REVIEWS
-----------------

In addition to reviewing audits, the Department conducts its own
program reviews to identify possible problems in schools' SFA
administration. A program review covers many of the same areas as
an audit, including fiscal operations and accounting procedures, as
well as the school's compliance with the specific program
requirements for student eligibility and awards. However, program
reviews tend to focus more on regulatory requirements that are
specific to the SFA Programs. For example, the program review team
will examine student records and admissions records, fund requests
and transfers, records pertaining to due diligence and the collection
of Federal Perkins Loans, time sheets and pay rates for the Federal
Work-Study (FWS) Program, and documents related to the reporting
process for the Federal Pell Grant and campus-based programs.

[[Written report]]
The program review team prepares a written report that will be sent
to the school within approximately 60 days of the review. The school
may respond to this report if it wishes to offer additional information
to support its position, or if it disagrees with any of the report's
conclusions. When the Department has fully considered the school's
response and all issues have been resolved, the Department official
will send a copy of the final program review determination to the
school.

It may occasionally be necessary for Department officials to perform
an unannounced program review. The General Provisions regulations
stipulate that Department officials provide a school with a written
request for a program review, but do not preclude the Department
from providing such a request at the time the reviewers arrive at the
school.

[[Emergency action]]
In an unannounced program review, the Department reviewers will
present a written request to school officials before beginning the
review. The school is expected to have its records organized and
readily available, without objection to providing access to those
records. However, because certain school officials may not be
immediately available during the review, the school may be afforded
additional time to submit information regarding the review findings.
The Department has regulatory authority to take an emergency
action if a school denies access to reviewers performing an
unannounced program review. School officials will be informed
if an emergency action is to be taken.


Emergency Action--upon the recommendation of the case
management team performing the program review, the
Department may withhold SFA Program funds from the school or
its students, and/or withdraw the school's authority to obligate or
disburse SFA funds.


GUARANTY AGENCY REVIEWS
--------------------------

The FFEL Program regulations also require guaranty agencies to
conduct program reviews at postsecondary schools. A guaranty
agency must conduct biennial (once every two years) on-site reviews
at the 10 schools with the highest loan volume through that agency,
as well as at any school whose loan volume is 2% or more of the
guaranty agency's total loan volume. A guaranty agency is also
required to conduct biennial program reviews of schools in its state
that have a default rate over 40%, and any school with a default rate
over 20% if the Department notifies the agency that the school does
not have a default reduction plan. A program review conducted by a
guaranty agency is similar to a Department program review,
consisting of an entrance interview, a review of student records, an
exit interview, and a written report. However, the guaranty agency's
review will focus on how the school meets FFEL-specific
requirements, such as

[[Focus of guaranty agency review]]
- certification of the loan application,

- maintenance of records supporting the student's loan eligibility,

- processing procedures and payment of loan monies, and

- prompt lender notification when the student changes enrollment
status, such as complete withdrawal.

Two copies of the guaranty agency's report are forwarded to the
Department, including the school's payment if liabilities were
assessed.


APPEALING AUDIT AND PROGRAM REVIEW DETERMINATIONS
--------------------------------------------------------

[[Only final determinations may be appealed]]
The law allows for appeals of final audit or program review
determinations. Note that only a final determination may be
appealed. The letter conveying a final audit determination is clearly
identified as a "FINAL AUDIT DETERMINATION LETTER"
(FAD) and explains the appeals procedures. For a program review,
the final determination letter is marked "FINAL PROGRAM
REVIEW DETERMINATION LETTER."

[[Review by impartial hearing official]]
If a school or servicer wants to appeal an audit or program review
determination, it must appeal, in writing, to the Departmental official
identified in the determination within 45 days after it receives the
determination. If the school or servicer makes such a request, the
determination will be reviewed by an impartial hearing official
appointed by the Department. In most cases, an oral hearing will not
be required. The school or servicer and the Department must submit
briefs with any accompanying materials to the official, and provide
the other party with a copy of its submission at the same time. If the
final decision is appealed by either party, the Secretary will review it.

[[Repayment of liability]]
If the hearing official (or the Secretary) finds that the school or
servicer improperly expended funds or otherwise failed to comply
with applicable program rules and requirements, the Department will
collect the liability owed, if any. The school or servicer must repay
the funds within 45 days of the Department's notification of the
liability, unless the Department grants an extension. At its option, the
Department may elect to use an administrative offset to collect the
funds owed.


QUALITY ASSURANCE PROGRAM
-----------------------------

Under the Quality Assurance Program (QAP), schools design and
establish a comprehensive quality improvement program to increase
award accuracy and strengthen their administration and delivery of
SFA Programs and services. The emphasis of this program is on
prevention or up-front correction and partnerships. It provides
schools with the tools and incentives to accurately and effectively
deliver student aid and to improve their service to students. It is
based on the principles of Total Quality Management, with an annual
cycle of assessment and problem identification with measurement,
solution design and implementation, and monitoring of results for
continuous improvement.

QAP schools are exempt from certain verification requirements
because they develop a school-specific program based on data
gathered in the cycle of QAP activities. Annual reporting
requirements and periodic Quality Assurance site visits help ensure
accountability and program integrity, and provide technical
assistance. Schools that are interested in QAP participation should
contact the Performance and Accountability Improvement Branch at
the following address or phone number:

U.S. Department of Education/OPE/SFAP/IPOS
Performance and Accountability Improvement Branch
600 Independence Ave., SW
ROB-3, Room 3925
Washington, DC 20202-5232
(202)260-4788

[[Self assessment]]
If a school is interested in conducting a self assessment of its
policies, procedures, and overall compliance with SFA requirements,
it can use the "Comprehensive Management Assessments"
instrument used in the QAP. This assessment is universally
applicable, helping any school determine its strengths and
weaknesses in the following areas: institutional participation, fiscal
management, recipient eligibility, award calculation and
disbursement, and reporting and reconciliation.

Even if a school is not interested in participating in the QAP, it
would benefit from this self-assessment exercise. This assessment
was made available to all schools during the 1997-98 award year.

[[Consultants & peer review]]
A school can take other steps to improve its operating procedures,
such as contracting with an independent consultant to review its
financial aid office to ensure compliance with federal and state
requirements, and to recommend improvements. Or, it might
undertake a "peer review" by arranging for a financial aid
administrator at another school to visit and review office procedures.


EXPERIMENTAL SITES INITIATIVE
---------------------------------

If a school believes that it has a better way to administer aspects of
the SFA Programs than the way required by statute or regulation, it
may apply to be an "experimental site." Using the authority under
section 487A(d) of the Higher Education Act, the Department has
approved exemptions to a variety of SFA statutory and regulatory
requirements. So far, over 130 schools have been designated as
experimental sites.

Ten areas of experimentation have been approved since the 1995-96
award year. They are

[[Approved areas of experimentation]]
- entrance loan counseling,

- exit loan counseling,

- multiple disbursement for single term loans,

- thirty-day delay in loan disbursements for first-time, first-year
borrowers,

- loan fees in cost of attendance,

- loan proration for graduating borrowers,

- crediting SFA funds to prior year charges,

- crediting SFA funds to institutional charges,

- overaward tolerance, and

- accelerated EDExpress processing.

The effective dates for the first nine experiments are July 1, 1995 to
June 30, 2000. The effective dates for the accelerated EDExpress
processing (a short-term experiment) were from March 1, 1996 to
September 30, 1996.

[[How to apply]]
Schools may still apply to be experimental sites. Additional areas of
experimentation are being reviewed continuously. The notice
inviting applications appeared in the Federal Register on April 25,
1995.

If a school would like to apply to conduct experiments in other areas,
they should send their proposals to

Experimental Sites Initiative
Student Financial Assistance Programs/IPOS/PAIB
U.S. Department of Education
600 Independence Avenue SW
ROB-3, Room 3925
Washington, DC 20202-5232

The proposal should include the following information:

[[Information to be included in proposal]]
- What problems experienced by the school, its students, or both
does the proposal address?

- What is the school's proposed solution to the problem?

- From which specific statutory or regulatory requirements does the
school seek relief in order to test its proposed solution?

- What performance measures or alternative actions does the school
propose to use to fulfill the underlying purpose of the
requirements from which relief is sought?

- For what period is the experiment proposed?

- When and how will the results of the experiment be reported to
the Department?

- For an experiment proposed by a group of schools, how will the
group monitor and aggregate the results of the experiment?

[[Review process]]
Applications are subject to a two-step review process. First, a
screening is conducted looking at such areas as audits or default rates
to determine if there are any outstanding problems with the school.
Once the school clears all of the check points, a committee of
Department staff is convened to recommend approval or disapproval
of the proposal. The committee may choose to approve the proposal
as is, with no significant changes, or it may take ideas from several
similar proposals and blend them. For example, the committee may
decide to develop common performance measures for all
experiments in a particular area so that data collected for the
experiment will be comparable.

[[Notification]]
When a proposal is approved, the Department sends a letter to the
applicant schools. The letter includes a brief one-page summary of
the approved experiment. This summary specifies the statutory or
regulatory requirements that are being waived, the performance
measures for the experiment, the reporting requirements, and, in
some cases, any additional requirements that the school must adhere
to as a condition of the experiment.

After the letters are sent out, an amendment to the school's program
participation agreement (PPA) is developed. The PPA amendment is
based on the information in the initial letter.

[[Reporting requirements]]
The school is required to submit an annual report on the experiments
in which it participates. The report generally requires a description of
the results of the experiment, any corrective actions taken by the
school, and specific information relating to each experiment.

[[Termination of experiments]]
Both the school and the Department may terminate the experiment at
any time. If an experiment is terminated, the school must comply
with all of the reporting requirements relating to the experiment for
the period during which it was in effect. Beginning with the effective
date of the termination, the school must comply with all statutory and
regulatory requirements from which it was previously exempted.

[[Outcomes]]
The Department hopes that the results of these experiments will help
in identifying unduly burdensome requirements that may be
unnecessary for effective management of SFA Programs. The
Department plans to use the information gathered through this
initiative to revise existing regulations and to make recommendations
to Congress for statutory changes.

The Experimental Sites Initiative will also encourage schools to
develop alternative approaches to the current prescriptive
requirements. By allowing flexibility in how entrance loan
counseling is handled, for example, schools might develop methods
that are less administratively burdensome, but more effective in
providing loan information.

[[For further information]]
For further information on the experimental sites initiative, please
call the Performance and Accountability Improvement Branch at
202-260-4788.