Posted Date:August 5, 2016
|Author:||Robin Minor, Chief Compliance Officer, Federal Student Aid|
Subject: Applicability of Single Audit Act Regulations to the Title IV Student Aid Programs
The Department has received questions concerning audit requirements for institutions that are covered by the Single Audit Act (Single Audits) when it has been determined, pursuant to Single Audit Act regulations that no Single Audit of the Title IV student assistance programs needs to be conducted because the program did not meet the “high-risk” threshold of those regulations. The questions are the result of the Single Audit Act regulatory provisions that were published in the Federal Register on December 26, 2013 (see Federal Register Vol 78, No 248, pages 78590–78691).
Single Audit Act Regulations
Pursuant to language included at 2 CFR 200.518(c)(1) of the December 26, 2013 Single Audit Act regulations (effective for non-Federal entities with fiscal years beginning on or after December 26, 2014), if certain conditions are met, the Single Audit need only be conducted every three years and not annually. Generally those conditions relate to (1) whether, for the entity subject to the audit, there has been a determination that its participation triggers the “major program” provision of 2 CFR 200.518 (related to the total dollar amount), and (2) whether the auditor has identified the major program as a low-risk program (see 2 CFR 200.518(c)). In summary, a low risk program exists when it had been audited as a major program in at least one of the two most recent audit periods and the program did not have any “internal control deficiencies which were identified as material weaknesses”.
Higher Education Act Provisions:
Section 487(c) of the Higher Education Act of 1965, as amended (the HEA) requires each Title IV participating institution to submit to the Department a financial audit and a compliance audit “on at least an annual basis” [emphasis added]. This statutory provision provides that the audit requirements can be met by submission of either an audit conducted under the Title IV Audit Guide issued by the Department’s Office of the Inspector General (OIG) or, if the institution is eligible, by submission of the results of an audit of the institution conducted under the Single Audit Act (Single Audit).
The Title IV implementing regulations at 34 CFR 668.23(a)(5) state that the institution “. . . must at least annually [emphasis added] have an independent auditor conduct a compliance audit of its administration of that program [one or more of the Title IV student assistance programs] and an audit of the institution's general purpose financial statements”. As does the statute, the regulation further provides, that the Secretary considers the compliance audit and audited financial statement submission requirements to be satisfied by an audit of the institution conducted in accordance with the audit guides developed by and available from the Department's Office of the Inspector General (OIG) or under the Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations [now the OMB Compliance Supplement]), whichever is applicable to the entity.
Whether, for an institution covered by the Single Audit Act and 2 CFR 200, the HEA audit requirements are satisfied for a year in which, pursuant to the December 26, 2013 Single Audit Act regulations, no compliance audit of the institution is performed because the institution’s participation in the Title IV HEA programs has been determined to be “low-risk” and therefore need only be audited once every three years.
It is clear that the provisions of both the HEA and the implementing regulations require annual submissions of not only the institution’s audited financial statements but also of the compliance audit of the institution’s administration of the Title IV student aid programs. Therefore, an institution may meet this annual submission requirement by submitting annual audited financial statements and a compliance audit of the institution that were prepared either in accordance with the OIG audit guides or in accordance with the Single Audit Act requirements. In either case, the compliance audit must be submitted annually. Therefore, a submission prepared under the Single Audit Act requirements that does not include a compliance audit does not meet the HEA audit requirement.
The Department continues to review issues related to the frequency of audit submissions and plans to include additional guidance in the 2017 Compliance Supplement applicable to audits of fiscal years beginning after June 30, 2016. Until further guidance is issued, institutions may continue to provide Single Audit submissions that were prepared using the standards in place prior to the Single Audit Act regulatory change referenced above. In addition, any institution that has already had an auditor prepare a Single Audit under the new OMB guidance referenced above, with a determination that the Title IV programs were low risk, should contact their respective School Participation Division.