The U.S. Department of Education (ED) has announced that the “threshold” for the amount of Federal funds that will require a “Uniform Guidance Audit” (or “Single Audit”) will be moved up from annual expenditures of $750,000 to $1,000,000 for fiscal years beginning October 1, 2024 or after. This can be good news for numerous schools and could result in less complicated – and potentially cheaper – annual audits for those institutions.
The past five years have seen several new hurdles/traps for schools that participate in Title IV funding (Federal Student Aid). For many schools, receiving Higher Education Emergency Relief (HEERF) funds resulted in their exceeding the $750,000 threshold – in some cases for just a few years. Beginning July 1, 2020, participants were required to provide additional data in their annual audit reports that would allow ED employees to more readily calculate the school’s financial responsibility score.
Then, the 2020 Isakson/Roe Act changed the requirements for access to VA funding in that schools had to be participating in Title IV rather than simply being eligible to participate in Title IV (hopefully this will be rectified by Congress soon). And, most recently, ED has required amplified reporting for related party transactions (that is generally not in accordance with generally accepted accounting principles).
Institutions that have been over the $750,000 threshold in recent years have generally been required to upload their audit reports in two places – 1) the Federal Clearinghouse; and 2) the “EZ Audit” (Federal Student Aid) website
Now, we would like to call attention to a couple of traps that have been plaguing below-threshold institutions…
First, ED has begun to enforce a “hidden” edict which requires schools below the $750,000 threshold to upload their audit reports to the EZ Audit website within six months of the school’s year-end. Historically, the understanding had been that the deadline was nine months after the close of their fiscal year – the same timeframe as schools who are required to submit Uniform Guidance audits. In fact, the EZ Audit website still appears to allow nine months.
The narrative from the Federal Student Aid Handbook is as follows:
As explained in the section on waivers and exemptions, a public or private, nonprofit school that expends less than $750,000 of federal funds during a fiscal year is exempt from submitting an annual compliance audit. However, it is still required to submit financial statements to the Department within six months after the close of its fiscal year. The financial statement does not have to be audited by a CPA and may be created as compiled or reviewed statements. If the school has prepared a set of audited financial statements for its own use or for another entity, it must submit those statements to the Department. [underline added]
Below-threshold schools who do not file/upload their audit reports within six months of the close of their fiscal year will be consider by ED to “not be financially responsible” – resulting in heightened cash monitoring status for 60 months. We have heard from several schools who are in this situation.
Another trap to be wary of for below-threshold schools is the situation where a school fails to submit an annual “compliance audit waiver letter.” The letter should be uploaded via EZ Audit soon after your fiscal year end - see the menu item for this upload – and will generally be approved/disapproved within 7 days. The letter should look something like:
U.S. Department of Education, FSA
EZ-Audit
Online Submission Portal
To Whom It May Concern:
This letter is submitted in support of a Waiver/Exemption Request for COLLEGE, OPE ID: ########.
The Office of Management and Budget (OMB) Circular A-133 (Audits of States, Local Governments and Non-Profit Organizations) states that Non Federal entities that expend less than $750,000 a year in Federal awards are exempt from Federal Audit Requirements that year. However, records must be available for review or audit by appropriate officials of the Federal agency and the General Accounting Office (GAO). The recipient hereby certifies that less than $750,000 has been expended in Federal awards from all sources during the specified audit period.
Audit Period Beginning: 07/01/202X Ending: 06/30/202Y
Contact Person: [NAME]
Address: [STREET, CITY, STATE, ZIP]
Phone: [PHONE NUMBER]
Email: name@college.edu
Individual Certifying: [NAME] (President or CFO)
Title: [PRESIDENT, COO, CFO, etc.]
Signature: ___________________________
Date of Certification: [DATE]
Written by David C. Moja, CPA www.mojacompany.com The information provided herein presents general information and should not be relied on as accounting, tax, or legal advice when analyzing and resolving a specific tax issue. If you have specific questions regarding a particular fact situation, please consult with competent accounting, tax, and/or legal counsel about the facts and laws that apply.
Comments