| DCLPublicationDate: 9/1/95 DCLID: 95-L-183 AwardYear: Summary: Extension for completion of lender compliance audits. SEPTEMBER 1995 95-L-183 95-G-283 Subject: Extension for completion of lender compliance audits. Dear Colleague: Section 428(b)(1)(U)(iii) of the Higher Education Act of 1965, as amended (HEA) requires all lenders participating in the Federal Family Education Loan (FFEL) Program to have an annual compliance audit. SEE 34 C.F.R. Section 682.305(c). In transmitting the Audit Guide for these audits, the Department provided that the deadline for completion and, if necessary, submission of the initial audit completed in accordance with this requirement would be September 30, 1995. SEE Dear Colleague Letter 95-L-176 (March 1995). This deadline was chosen to be consistent with the regulatory requirements for submittal. The Department has been contacted by a number of lenders with small FFEL portfolios who have complained that the cost of conducting the audit will make it cost prohibitive for them to remain in the program. In addition, the House of Representatives has approved an amendment to the Department's appropriations bill that would prohibit the Department from enforcing the audit requirement during Federal Fiscal Year 1996 against lenders with loan portfolios under $5 million. In light of the concerns expressed by the small lenders and the possible action by Congress, the Department has decided to postpone the deadline for completion of the audit to June 30, 1996 for any audit period in which the lender originated and/or held FFEL Program loans totalling $5 million or less. All other lenders must comply with the requirements as outlined in Dear Colleague Letter 95-L-176: - lenders who originated and/or held FFEL Program loans totalling $10 million or more for any audit period and other lenders whose audit report discloses findings of noncompliance must submit a complete independent audit by September 30; - lenders who originated and/or held FFEL Program loans totalling more than $5 million but less than $10 million for any audit period must have a completed audit report by September 30, but need not submit the audit to the Department unless requested to do so. These lenders must maintain the audits for three years. The Department appreciates the concerns raised by small lenders regarding the cost and burden of the audit requirement. This delay in the deadline for completion of the audit by these lenders will give the Department the opportunity to confer with Congress on this issue and will give Congress the opportunity to consider modifying the audit requirements for these lenders. Any questions regarding the audit requirement and the Audit Guide should be directed to the cognizant Regional Inspector General office listed in Appendix A to the Audit Guide. Sincerely, Leo Kornfeld Senior Advisor to the Secretary |