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(GENERAL-23-77) Compliance with the Change in Ownership 90-Day Advance Notification (Updated Oct. 20, 2023)

Author
Federal Student Aid
Electronic Announcement ID
GENERAL-23-77
Subject
Compliance with the Change in Ownership 90-Day Advance Notification (Updated Oct. 20, 2023)

Note

Update on Oct. 20, 2023: Schools should also refer to an Oct. 20, 2023 Electronic Announcement for information about reporting that must occur after Nov. 24, 2023, and on or before Dec. 18, 2023 as a result of the upcoming FSA Partner Connect implementation.

Effective July 1, 2023, a regulatory update requires schools to notify the Department of Education (the Department) at least 90 days in advance of a proposed change in ownership (CIO). An additional regulatory update also requires schools to notify enrolled and prospective students of the proposed change least 90 days in advance of a proposed CIO. The purpose of the 90-day advance notice is to prevent a lapse in Title IV funding which could result from an incomplete application for a CIO.

This Electronic Announcement (EA) provides guidance on the temporary process schools must follow to provide the 90-day notification. The process includes notifying the Department of the CIO via the Electronic Application for Approval to Participate in the Federal Student Aid Programs (E-App); submission of state authorization and accrediting documents; copies of audited financial statements; and a copy of the student notification that was provided to students as required by 34 CFR § 600.20(g)(4). The EA also includes information about reporting any subsequent changes to the proposed ownership structure at least 90 days prior to the date the CIO is to occur, and additional details on complying with the requirements of a materially complete application which must be submitted within 10 business days following the closing of the transaction. Future EAs will outline a permanent process.

Necessary Steps for Complying with the Notification Requirement

Until the Department releases updated instructions in a future EA, at least 90 days before a proposed CIO schools must submit notification via Question 69 on the E-App.

Below are step-by-step instructions schools must follow when completing the E-App:

  • Step 1 – Access the school’s E-App at https://eligcert.ed.gov/. In Question 1, check “Other” as the reason you are submitting the application and specify in the box that the purpose is “90-day CIO Notification.”

  • Step 2 – Scroll to the bottom of the page and select “Go to Section,” enter “K” in the box, and click “OK/Save Data.” Then, scroll to Question 69 and enter “90-day CIO Notification.” In addition, enter the anticipated closing date of the transaction. Note: The estimated date of the closing of the transaction may be no earlier than 90 days after the notification. For example, a notification reporting the CIO “transaction is expected to close on or before December 31, 2023” is not sufficient because it may or may not provide 90 days’ notice depending on when the notice is given and when the transaction closes. However, a notice which states that the “transaction is expected to close on or after December 31, 2023” would satisfy the requirement, so long as the notice is provided no later than October 2, 2023, which is 90 days before December 31.

  • Step 3 – Scroll to the bottom of the page and select “Go to Section,” enter “L” in the box, and then click “OK/Save Data.”

  • Step 4 – In Section L, check the box indicating that the President/CEO/Chancellor in Question 10 will sign the signature page and then print the required signature page for the current President/CEO/Chancellor to sign.

  • Step 5 – Scroll to the bottom of the page and select “Submit the Application” then click “OK/Save Data.”

  • Step 6 – The system will inform you if all required entries have been made on your application. If complete, click on “Submit Application.” If not, make any necessary corrections and then submit the application. The system will advise you that your application has been received by the Department.

  • Step 7 – The school must provide all information and attachments outlined in the following section.

Necessary Information and Attachments

Along with the E-App, the school must provide the Department with the information and attachments in the list below via the Common Origination and Disbursement (COD) Document Center. In the COD Document Center, under the Tools option, use the Upload Document feature and select Eligibility and Certification as the Category, Application Analysis as the Sub-Category, and the appropriate Document Type for each document.

  1. The signed and dated signature page (see Step 4 in previous section).

  2. A copy of the school’s state license or equivalent documentation that demonstrates that, as of the date of the notification, the school is authorized, or will be authorized, to provide a program of postsecondary education in the states in which it is physically located.

    NOTE: As part of its materially complete application, within 10 business days following the closing of the transaction, the school will also be required to submit the state licensing documentation required by 34 C.F.R. § 600.20(g)(3)(i) to demonstrate that – as of the day before the CIO – the school was authorized or will be authorized to provide a program of postsecondary education in the state(s) in which it is physically located. The submission of the school’s state license which is dated in advance of the CIO to meet the notification requirement does not satisfy the requirement for the purposes of submitting a materially complete application to demonstrate state authorization as of the “day before the CIO” (even if submitted as part of the 90-day notification).

  3. A copy of the accrediting agency approval that demonstrates that, as of the date of the notification, the school is accredited.

    NOTE: As part of its materially complete application, within 10 business days following the closing of the transaction, the school will also be required to submit a copy of the documentation required by 34 C.F.R. § 600.20(g)(3)(ii) to demonstrate that – as of the day before the CIO – the school was granted or will be granted accreditation status, including approval of all locations and any non-degree programs it offers. The submission of the school’s proof of accreditation which is dated in advance of the CIO to meet the notification requirement does not satisfy the requirement for the purposes of submitting a materially complete application to demonstrate accreditation as of the “day before the CIO” (even if submitted as part of the 90-day notification).

  4. Audited financial statements for the school for the two most recently completed fiscal years that are prepared in accordance with GAAP and audited in accordance with GAGAS as required by 34 C.F.R. § 668.23(d). The audited financial statements must be for the two most recently completed fiscal years prior to the anticipated CIO date. If audited financial statements are not available, unaudited financial statements and an auditor’s engagement letter may be submitted with the notification. However, audited financial statements will be required within 10 business days of the closing of the transaction to meet the requirements of a materially complete application.

    NOTE: If the CIO is consummated via a transfer or creation of a membership interest or a transfer of stock (or an elimination of such interest), the school’s financials should be submitted for the entity with the highest level of 100% ownership under the former ownership structure that will remain following the CIO. If separate financial statements for that entity do not exist, financial statements for a higher-level entity may be submitted, but only if they do not reflect any other institution, assets, operations, or activities that are not being transferred in the CIO.

    If the CIO is a sale of the school’s assets alone, and if separate school financial statements are not available, financial statements for the former Level 1 owner may be submitted, but only if the Level 1 owner’s financial statements do not reflect any other institution, assets, operations, or activities that are not being transferred in the CIO. Otherwise, separate financial statements must be submitted.

  5. Audited financial statements for the new owner for the two most recently completed fiscal years that are prepared in accordance with GAAP and audited in accordance with GAGAS as required by 34 C.F.R. § 668.23(d). The audited financial statements must be for the two most recently completed fiscal years prior to the anticipated CIO date. If audited financial statements are not available, unaudited financial statements and an auditor’s engagement letter may be submitted with the notification. However, audited financial statements will be required within 10 business days of the closing of the transaction to meet the requirements of a materially complete application.

    NOTE: The new owner financial statements should be submitted at the highest unfractured (i.e., 100% ownership) level of ownership after the change of ownership. The financial statements should demonstrate continuous active business operations for both years.

  6. Copy of the CIO notification that was provided to the students no later than 90 days prior to the change as required in 34 CFR § 600.20(g)(4).

To ensure that the correct audited financial statements are submitted with the notification, the Department also requests that the school submit the following information through the Document Center in COD:

  1. Copy of the agreement (final if available or current draft) by which the proposed CIO will be consummated. Include all schedules, appendices, exhibits, and any related documents or agreements (even if still in draft form).

  2. Ownership/interest holding structure diagram showing the current ownership structure and the proposed ownership structure (i.e., the ownership structures before and after the transaction), including any interim steps. Include both entity owners/interest holders and natural persons. Each entity in the ownership/interest holding structure should be identified by full legal name exactly as it appears in the state filing records; type of entity; state of organization or incorporation; date of organization or incorporation; and tax ID number (TIN or EIN).

The ownership/interest holding structure diagram should identify all owners/interest holders up through the highest unfractured (100%) level, as well as any higher levels where the ownership/interests include related or affiliated parties that hold a combined 100% interest.

Grace Period

The regulation became effective July 1, 2023, however, only schools with transactions closing on or after January 1, 2024 are subject to this 90-day notification requirement. Transactions that close on or after July 1, 2023, but before January 1, 2024, are relieved of the 90-day notice requirement.

Contact Information

For questions concerning the 90-day notification requirement, contact your School Participation Division using the contact information on Federal Student Aid’s Partner Connect website (cc: CaseTeams@ed.gov and CIODocuments@ed.gov).

Last Modified: 05/06/2024