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(95-L-183) Extension for completion of lender compliance audits.

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

Last Modified: 08/31/1995