Publication Date: August 2003
DCL ID: GEN-03-10
Reminder to foreign schools of various Title IV requirements
Posted on 08-27-2003
Subject: Reminder to foreign schools of various Title IV requirements
SUMMARY: This letter reminds foreign schools that participate in the U.S. Federal Family Education Loan (FFEL) program of various requirements that must be followed. Foreign schools that are out of compliance must take prompt corrective action as detailed below.
Dear Foreign School Colleague:
As you know, an institution’s participation in the Federal Family Education Loan (FFEL) program is governed by U. S. laws and regulations. These requirements help ensure that student financial assistance is being used for the purposes authorized by the law. The following is a summary of a number of requirements frequently overlooked by institutions located outside of the United States that participate in the FFEL program.
Required annual submission of Title IV audits
Every foreign school that enrolls U.S. students who receive FFEL program funds for attendance at that institution must submit yearly a compliance audit and audited financial statements. The annual submission of both a compliance audit and audited financial statements is required of all Title IV participating institutions by Section 487(c) of the Higher Education Act of 1965, as amended (HEA), 20 U.S.C. § 1094(c), and section 668.23 of Title 34 of the U.S. Code of Federal Regulations (CFR). Audits must be submitted no later than six months after the last day of the institution's fiscal year.
A compliance audit for a foreign school covers an institution's administration of the U.S. FFEL program, while audited financial statements provide the Department of Education (the Department) with information necessary to evaluate an institution's financial responsibility. An independent auditor must perform both audits. An "independent auditor" is an independent certified public accountant or a government auditor. A government auditor must meet the U.S. Government Auditing Standards qualification and independence standards, including standards related to organizational independence.
Audits for foreign schools must be performed in accordance with the Department's audit guide. The specific requirements are in the Foreign School Audit Guide that the Department issued in September 2002. For foreign schools, this guide replaces the guide entitled Audits of Federal Student Financial Assistance Programs at participating Institutions and Institution Servicers. The Foreign School Audit Guide is available at the following website: http://www.ed.gov/about/offices/list/oig/index.html?src=mr
If U.S. students who attended your institution received $500,000 or more (in U.S. dollars) in FFEL program funds for a fiscal year, you must:
· have your required audited financial statement translated for analysis according to U.S. Generally Accepted Accounting Principles (GAAP); and
· have your compliance audit performed under the standard compliance engagement specified in the Foreign School Audit Guide.
If U.S. students who attended your institution received less than $500,000 (in U.S. dollars) in FFEL program funds per fiscal year, you may either follow the required standards for institutions with funding levels of $500,000 or more, or:
· have your required audited financial statement prepared according to the generally accepted accounting principles and auditing standards of your institution's home country; and
· have your compliance audit performed under the alternative compliance engagement specified in the Foreign School Audit Guide.
As explained in the Foreign School Audit Guide, both the audited financial statements (if students receive more than $500,000) and the compliance audits must be audited in compliance with the generally accepted government auditing standards of the United States of America (U.S. Government Auditing Standards). These standards are developed by the Comptroller General of the United States and are published in The General Accounting Office (GAO) Government Auditing Standards. These standards are available at the following website: http://www.gao.gov/govaud/ybk01.htm
Every effort should be made to ensure that audits are conducted in accordance with U.S. Government Auditing Standards. Auditors who cannot comply with some or all of the requirements of U.S. Government Auditing Standards must identify in their reports what auditing standards were used to perform the work and identify how those standards differ from U.S. Government Auditing Standards. Auditors that identify the specific requirements from U.S. Government Auditing Standards with which they cannot comply must identify the portions of the audit related to these requirements and must indicate that they have otherwise complied with the U.S. Government Auditing Standards. Audits that do not indicate full compliance with U.S. Government Auditing Standards will be reviewed by the Department, and the Department will determine whether to accept the audits. Audits that do not provide an adequate explanation of why it was not possible to meet the audit standards set out in the regulations will be rejected.
Resolution of audits for past periods
Institutions with an FFEL loan volume of $500,000 or greater per year who have overdue audits received a letter from the Department's Federal Student Aid (FSA) office informing the institution of required actions in December 2002. This letter serves as a reminder of the urgent need for such institutions to respond promptly to the issues raised in that letter. Failure to comply may results in administrative actions.
To fulfill audit requirements for past periods, institutions with an FFEL loan volume of less than $500,000 per year that have not done so must submit compliance audits for the three most recently completed fiscal years and financial statements for the two most recently completed fiscal years. These institutions will receive a letter from the Department's FSA office specifying which of these required audits have not been submitted. The institution must submit a letter to the Department within 45 days of the date of the FSA letter demonstrating that the institution has engaged an auditor to perform all audits for these periods that have not yet been submitted. The institution must submit these audits within 90 days of the date of the FSA letter.
All participating institutions must continue to submit audits for subsequent completed fiscal years within six months of the end of the institution's fiscal year.
Responding to Student Status Confirmation Reports
A Student Status Confirmation Report (SSCR) is used to update a student’s loan record regarding enrollment and ensures that repayment of the loan begins as required. Most foreign schools will receive paper SSCRs that contain data about students who have borrowed for attendance at their school directly from the guaranty agencies guaranteeing loans for students at the school. Within 30 days of receiving the SSCR, your institution must review the data, make any necessary changes, and return the SSCR with the changes to the guaranty agency that sent it. Your institution should also document the return of the SSCRs and make this information available to your auditors as proof of compliance with the SSCR requirement. Similarly, if your institution reports SSCR data electronically through the Department’s National Student Loan Data System, you must update the data and submit changes within 30 days. Updating this information timely is one part of the institution’s requirements to demonstrate it has the administrative capability to participate in the FFEL program.
Obtaining the Student Aid Report Prior to Certifying Loans
When a student completes the Free Application for Federal Student Aid (FAFSA), the FAFSA is submitted to the Department and the information on it is matched against other federal agency data systems to ensure the accuracy of the data presented (e.g., the student’s Social Security Number (SSN) is matched against the Social Security Administration data system to ensure an accurate SSN.) Once the student’s application is received and reviewed, a Student Aid Report (SAR) is generated by the Department and sent to the student. Your institution must obtain a copy of this report for each student applying for a FFEL loan before your institution completes processing the loan application.
In the alternative, this report may be sent to the institution as an electronic file (Institutional Student Information Report - ISIR), if the institution has been granted approval to participate electronically. At this time, the Department’s computer security policy requires any user of our electronic database to have a U. S. SSN. As a result, many foreign schools are unable to participate electronically or to receive the electronic student records. Therefore, if you are not receiving ISIRs, your institution must obtain a copy of the paper SAR from the student prior to certifying or disbursing any FFEL program funds to or for his or her account.
Your institution must also review and resolve any comments on the SAR and retain a copy of the SAR in the student’s file. Please refer to Chapter 3 of the SFA Handbook for Foreign Schools for instructions in resolving all comments on the SAR prior to certifying a loan application. This handbook is posted at www.ifap.ed.gov. Your institution may be held liable for losses to the Department if it certifies an FFEL loan to an ineligible student based on the institution’s failure to obtain or review the student’s SAR or ISIR.
A lender or guaranty agency may also request a copy of the SAR from you prior to disbursing loan funds to a student. You must comply with this request. The lenders and guaranty agencies also have student eligibility requirements that must be met and may need this information to complete their process. Students provide the necessary privacy permissions on the FAFSA and FFEL loan application that allow schools, guaranty agencies, lenders and the Department to share this information.
Responding to All Requests for Information from Lenders and Guaranty Agencies
The Department is requiring guaranty agencies to verify student enrollment and eligibility with foreign institutions prior to disbursing FFEL funds to a student, who requests that the FFEL check be sent directly to him or her. In accordance with Department regulations, your institution must use an adequate number of qualified staff, which at the least must consist of one capable individual to administer the FFEL program (34 CFR 668.16(b)), and respond to these requests for information from guaranty agencies. When your institution certifies an FFEL loan application, you must ensure that the institutional contact listed on the application is the individual capable of responding to the guaranty agency when they contact you to verify acceptance for enrollment and eligibility of the student loan borrower. As we have advised you in the past, the individual who is authorized to certify FFEL loan applications for your institution must be the individual that you have listed as your institutional contact in the Department’s Postsecondary Education Participants System (PEPS) Database. If a guaranty agency receives a loan application that lists as your contact an individual other than the one you have listed in PEPS, the guaranty agency will contact your institution to resolve the discrepancy.
Submitting All Appropriate Documents for Recertification Requests
All institutions approved to participate in the FFEL program must comply with institutional recertification requirements. These requirements are described in Chapter 2 of the SFA Handbook for Foreign Schools. In general, every four to six years, a foreign institution wishing to continue participation in the FFEL program must apply for renewal of the Department’s certification of its institutional eligibility and participation. Your current Program Participation Agreement (PPA) includes the date that your current certification expires. The Department generally reminds each institution 120 days prior to the end of its period of participation that it must submit an electronic application to renew its participation in the Title IV programs. However, you are responsible for applying for recertification even if you do not receive a reminder. Your institution must comply with that submission requirement and ensure that all required documents are timely submitted. Otherwise, your participation in the FFEL program will end. To ensure that there is no lapse in your FFEL participation, you must submit your recertification application no later than 90 days before your certification expiration date. If you do, your institution’s eligibility to participate will continue until your application is either approved or not approved.
Referrals to the Department’s Office of Inspector General & Other Contacts
If your institution finds that a student may have engaged in a fraudulent submission of information or other criminal misconduct in applying for FFEL program funds, you must refer this information to our Office of Inspector General (OIG). Fraudulent activities may include the use of false identities, forgery of signatures or certifications, and false claims of income, citizenship, or independent student status. The OIG may be reached at 1-800-MIS-USED (1 800-647-8733) or 202-205-5770, by fax at 202-260-0230, and by e-mail at firstname.lastname@example.org.
It is also important that you communicate regularly with the appropriate guaranty agencies and lenders involved in making FFEL program loans to your students. If at any time you suspect unusual student actions or information provided on applications, please contact the appropriate guaranty agency to seek advice and/or clarification. These agencies are also very helpful in clarifying some of the more difficult issues involved in awarding FFEL loans to students. A complete listing of these agencies and their appropriate contact information is contained in Appendix D of the SFA Handbook for Foreign Schools.
Thank you for your continued participation in the FFEL program. If you have any questions regarding this letter, please contact the Department’s Foreign Schools staff at 202-377-3168 in the U.S. or email@example.com. Thank you again for your cooperation in complying with these requirements. We look forward to working with your institution.
Sally L. Stroup
Assistant Secretary for Postsecondary Education
cc: Financial Aid Contact Office