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Proprietary Schools, Foreign Schools, and Third-Party Servicer Audits

HEERF Audits

The Higher Education Emergency Relief Fund (HEERF) program, funded under multiple Acts, uses funds to prevent, prepare for, and respond to coronavirus through grants to eligible schools. Any proprietary institution that either (1) expends $500,000 or more in HEERF grant funds during its fiscal year, (2) was on Federal Student Aid’s Heightened Cash Monitoring 1 or 2 lists in a fiscal year in which it expended any HEERF grant funds, or (3) have closed or are in the process of closing must submit a compliance audit covering the institution’s administration of the entire HEERF grant program. For additional details, see the HEERF Grant Program Auditing Requirements letter dated March 8, 2021and March 23, 2022, and the HEERF I , HEERF II , and HEERF III website.

The HEERF compliance audit must be conducted in accordance with the HEERF Audit Guide, which will require an examination-level attestation engagement to satisfy the HEERF audit requirement.

2021 HEERF Audit Guide Guide for Compliance Attestation Engagements of Proprietary Schools Expending Higher Education Emergency Relief Fund Grants (March 31, 2021) [PDF Guide] [Transmittal Letter]

  • **NEW** Dear CPA Letter CPA-22-02: Identifying School’s Unique Entity Identifier in Report Packages (Issued May 13, 2022)[PDF]
  • Dear CPA Letter CPA-22-01: Reporting Grant Award Numbers in Higher Education Emergency Relief Fund Compliance Attestation Engagement Report Packages (Issued February 28, 2022) [PDF]
  • Dear CPA Letter CPA-21-06: Proprietary School Higher Education Emergency Relief Fund Compliance Engagement Example Practitioner’s Reports Reflecting Changes for SSAE No. 21 (Issued October 26, 2021) [PDF]
  • The OIG Non-Federal Audit Team participated in webinars on the HEERF Audit Guide on April 13, 2021 and April 15, 2021 and are making the webinar presentation slides available here [PDF Slides]

The 2021 HEERF Audit Guide and associated Dear CPA Letters remain in effect for fiscal year ends before June 30, 2022.

**New** 2022 HEERF Audit Guide Guide for Compliance Attestation Engagements of Proprietary Schools Expending Higher Education Emergency Relief Fund Grants (May 2022) [PDF Guide] [Transmittal Letter]

The 2022 HEERF Audit Guide is effective for fiscal years beginning after June 30, 2021 (June 30, 2022 fiscal year ends), and supersedes the 2021 HEERF Audit Guide and associated Dear CPA Letters

Title IV Audits

Section 487(c) of the Higher Education Act of 1965, as amended (HEA), and Section 668.23 of Title 34 of the Code of Federal Regulations (C.F.R.) require all schools participating in the Federal Student Financial Assistance (SFA) programs to have an annual financial and compliance audit performed by an independent auditor. Schools that participate in the SFA programs frequently engage third-party servicers to perform certain functions related to the administration of the SFA Programs. Section 487(c) of the HEA and 34 C.F.R. § 668.23 require third-party servicers to have an annual compliance audit of the servicer’s administration of the SFA Programs.
Audit requirements of proprietary schools (as defined at 34 C.F.R. § 600.5) and third-party servicers (as defined 34 C.F.R. § 668.2(b)) are combined into one audit guide, while audit requirements of foreign schools (as defined 34 C.F.R. § 600.52) are contained in a separate audit guide.

Important Note for Proprietary and Foreign Schools Regarding the Financial Responsibility Supplemental Schedule: On September 30, 2021, the Department of Education issued Dear Colleague Letter GEN-21-07: Financial Responsibility Supplemental Schedule Audit Requirements, to communicate its expectation regarding auditor’s evaluating and reporting on the Financial Responsibility Supplemental Schedule. See the Dear Colleague Letter for details.

Current Proprietary School and Third-Party Servicer Audit Guide: Guide For Audits of Proprietary Schools and For Compliance Attestation Engagements of Third-Party Servicers Administering Title IV Programs (September 2016) [PDF] [Transmittal Letter]
(Important note: In February 2020, the Department made changes to its Information for Financial Aid Professionals (IFAP) website which caused all IFAP website URLs to change. Our audit guide includes many links to handbooks, Dear Colleague Letters, and electronic announcements found on IFAP, now FSA Partner Connect Knowledge Center. The Department has developed crosswalks to assist the financial aid community in finding the new URLs. The crosswalks are attached to a February 2020 electronic announcement.

We are currently working to update this audit guide. It is projected to be effective for FY23 audits.

  • **NEW** Dear CPA Letter CPA-22-02: Identifying School’s Unique Entity Identifier in Report Packages (Issued May 13, 2022)[PDF]
  • Dear CPA Letter CPA-21-02: Proprietary School Example Auditor’s Reports Reflecting Changes for 2018 Government Auditing Standards revision and SAS Nos. 134-140 (Issued October 26, 2021 and reposted February 7, 2022 with technical corrections made to reports D.8-2, D.8-3.a, and D.8.3b to refer to SFA Programs and the Guide, rather than to major programs and Uniform Guidance) [PDF]
  • Dear CPA Letter CPA-21-01: Extension of Site Visit Exemption During COVID-19 National Emergency (Issued January 20, 2021) [PDF]
  • Dear CPA Letter CPA-20-01: Site Visit Exemption During COVID-19 Outbreak (Issued March 10, 2020, Revised July 14, 2020, Expired January 20, 2021 with issuance of CPA-21-01) [PDF]
  •  Dear CPA Letter CPA-19-01: Amendments to September 2016 Audit Guide – Student Information Security (Issued October 30, 2019) [PDF] Note: On February 28, 2020, the Department issued an electronic announcement that explains the Department’s procedures for enforcing the cybersecurity requirements under the Gramm-Leach-Bliley Act, and the consequences for institutions or servicers that fail to comply.
  • Frequently Asked Questions for the Guide for Audits of Proprietary Schools and For Compliance Attestation Engagements of Third-Party Servicers Administering Title IV Programs (Revised July 31, 2019) [PDF]
  • Archived Web Event: Department of Education's Guide for Audits of Proprietary Schools: This archived web event was co-sponsored by ED-OIG and the AICPA’s Government Audit Quality Center to assist auditors in better understanding recent revisions to the Guide, as well as other important auditing considerations. You will hear directly from ED-OIG subject matter experts and firm representatives with experience in performing these audits (Presented December 13, 2017) [Audio Playback]

The guide requires a financial statement audit and compliance audit of proprietary schools and an examination-level compliance attestation engagement of third-party servicers that are engaged by a school to administer certain functions of the SFA programs.

Current Foreign School Audit Guide:

  • Guide for Financial Statement Audits and Compliance Attestation Engagements of Foreign Schools (March 2020) [PDF, 4.3MB]
  • Transmittal Letter [PDF, 208KB]
  • **NEW** Dear CPA Letter CPA-22-02: Identifying School’s Unique Entity Identifier in Report Packages (Issued May 13, 2022)[PDF]
  • Dear CPA Letter CPA-21-03: Foreign School Example Auditor’s and Practitioner’s Reports Reflecting Changes for 2018 Government Auditing Standards revision, SAS Nos. 134-140, and SSAE Nos. 19 and 21 (Issued October 26, 2021) [PDF]
  •   Dear CPA Letter CPA-21-01: Extension of Site Visit Exemption During COVID-19 National Emergency (Issued January 20, 2021) [PDF]

This guide is effective for fiscal years ending on or after December 31, 2020. Please note that, in order to make this Guide available to the audit community with sufficient time prior to its effective date, this Guide was published without illustrative financial statement audit reports. The illustrative financial statement audit reports, along with updated illustrative compliance engagement reports, have now been published in Dear CPA Letter CPA-21-03, linked to above.

The guide requires a financial statement audit and a compliance attestation engagement of foreign schools. The level of compliance engagement depends on the amount of funds certified by the foreign school during the school’s fiscal year.

For copies of superseded audit guides, send a request to OIGNon-FederalAudit@ed.gov.

The following resources are available to assist auditors that perform proprietary school, foreign school, or third-party servicer audits:



Non-Federal Audit Main page



   
Last Modified: 05/18/2022