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The 2019 OMB compliance supplement has new reporting requirements for Pell Grants and Direct Loans, a revised “pick six” list, and several changes to the special tests and provisions section.

Regulations

At a Glance: 2019 Student Financial Aid (SFA) Audit Changes

  • Kyla Greenhoe
  • Brenda Scherer
  • 7/5/2019

The Office of Management and Budget (OMB) has issued its 2019 compliance supplement, which includes significant changes to the single audit requirements for student financial assistance (SFA) programs. Here’s a brief overview of those changes for higher education institutions.

New reporting requirements for Pell Grant and Direct Loan programs

The Department of Education (ED) has designated the Pell Grant and Direct Loan programs as susceptible to improper payments and is now requiring that additional information be presented within the audit results when exceptions are reported. This information will help ED gain a full picture of the audit results and help identify ways it can work with institutions to reduce such instances.

For audit procedures related to disbursements of returns of Pell Grants and Direct Loans, this additional detail includes descriptions of:

  • The sample
  • Population from which the sample was drawn
  • Office of Postsecondary Education Identification (OPEID) number
  • Total number of students receiving Pell Grants or Direct Loans for the sample
  • Total amount of Pell Grants or Direct Loans disbursed for the sample
  • Total number of students receiving Pell Grants or Direct Loans for the population
  • Total amount of Pell Grants or Direct Loans disbursed for the population

For each exception related to disbursements or returns of Pell Grants and Direct Loans, this additional detail includes:

  • Finding number
  • Student identifier
  • OPEID number
  • Pell Grant or Direct Loan amount disbursed
  • Pell Grant or Direct Loan under-payment
  • Pell Grant or Direct Loan over-payment

For exceptions under the $25,000 threshold, reporting this information is still optional; however, including this in the report help will prevent subsequent information requests.

“Pick six” options selected by ED

In the 2019 supplement, OMB has instructed agencies to only pick six compliance requirements from the extended list that auditors would be required to test. ED selected the following:

(A) Activities allowed or unallowed
(C) Cash management
(E) Eligibility
(G) Matching, level of effort, earmarking
(L) Reporting
(N) Special tests and provisions

Previously, requirements also included the period of performance for Department of Health and Human Service (HHS) funding and program income, but these were removed with the “pick six” option above.

Most of the selected compliance requirements have not changed significantly in the 2019 Compliance Supplement, with the exception of special tests and provisions.

Special tests and provisions overhaul

The special tests and provisions section includes the removal of some requirements, reorganization of others, and the addition of a few new ones.

Several requirements have been removed:

  • Ensuring separate funds established for Health Professions Student Loans (HPSL/PCL/LDS), Nursing Student Loans (NSL), and Federal Perkins Loans (FPL)
  • Testing written agreements for off-campus employers under the Federal Work Study program
  • Zone alternative testing
  • Written arrangements with another institution, consortium, or organization to provide educational programs testing
  • FPL liquidation testing

Testing repayment, deferments and cancellations, and defaulted loans have not changed and are still an applicable required testing.

There are three changes to the existing requirements:

  • Verification — An additional procedure is added to ensure that a student’s verification status is correctly coded within the Common Origination and Disbursement (COD) system
  • Implementation for a quality assurance system — Additional guidance is added to ensure that borrowers are not charged any additional fees for Direct Loan program administration, and two additional audit steps described for auditors are added to ensure compliance with this requirement
  • Satisfactory academic progress (SAP) — Additional guidance is added to clearly define that all disbursements made to students determined ineligible for Title IV funds (per the institution’s SAP and regulatory standards) are considered questioned costs and are reportable

The new requirements are:

  • Excess cash — Emphasizes the institution’s drawdown process to ensure funds are disbursed as soon as administratively feasible to minimize excess cash on hand at the institution. Auditors must now test at least one drawdown during the fiscal year by obtaining the disbursement roster and confirming that the student accounts were credited within the requirements.
  • General program eligibility — Requires the auditor to review the institution’s accreditation and licensure documentation and compare it to the institution’s Eligibility and Certification Approval Report (ECAR).
  • Distance education programs — Requires auditors to review the accreditation documents related to the distance education programs and verifying the accreditors are listed on the ECAR.
  • Gramm-Leach-Bliley Act (GLBA) — Student Information Security — This long-awaited and often-discussed section focuses on the protection of sensitive data, including institutional security programs and internal risk assessment in three required areas: employee training and management; information systems (including network and software design, information processing, storage, transmission, and disposal); and detecting, preventing, and responding to attacks, intrusions, or other system failures. Three auditing procedures added to the testing verify that the institution has designated an individual to coordinate the information security program, that the institution has performed a risk assessment that addresses the three required areas, and that the institution has documented a safeguard for each identified risk.

How we can help

Changes in the 2019 supplement will require your institution to make more preparations for your annual compliance audit. CLA’s higher education professionals can help you understand their impact on your college or university and plan accordingly.