DCLPublicationDate: 6/1/96 DCLID: 96-L-188 AwardYear: Summary: Extension of lender audit requirement deadline. June 1996 96-L-188 SUBJECT: Extension of lender audit requirement deadline. 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. ยง682.305(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). However, the Department later extended 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. See Dear Colleague Letter 95-l-183 (September 14, 1995). The act providing Fiscal Year 1996 appropriations for the Department of Education (Pub. L. 104-134) includes a provision prohibiting the Department from using funds made available under that act to enforce the lender compliance audit requirement against lenders with loan portfolios equal to or less than $5 million. This provision only relates to Fiscal Year 1996, which ends September 30, 1996. This language, therefore, effectively extends the deadline for submission of the audit by lenders with loan portfolios equal to or less than $5 million from July 1, 1996 to October 1, 1996. This provision of the act does not eliminate the requirement that lenders with this volume of FFEL Program loans complete an annual compliance audit for all the fiscal years subject to the audit requirement, rather it simply delays the date by which the audits must be submitted. The Department is aware that Congress is still considering a permanent legislative change that would significantly modify or eliminate the audit requirement for lenders with small loan portfolios. In light of this possible further legislative action by Congress and the continued concerns raised by small volume lenders regarding the cost and burden of the audit requirement, the Department has decided to again postpone the deadline for completion of the audit until June 30, 1997 for any audit period in which the lender originated and/or held FFEL Program loans totalling $5 million or less. The Department appreciates the concerns raised by small volume lenders regarding the cost and burden of the audit requirement. The Department is committed to working with Congress to ensure that the audit requirement is implemented in a manner consistent with the goals of the statute. Sincerely, Leo Kornfeld Senior Advisor to the Secretary |