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 Regarding Audit Extensions for Postsecondary Institutions Impacted by the Novel Coronavirus (COVID-19): The Office of Postsecondary Education issued an electronic announcement on May 15, 2020, providing regulatory flexibilities due to the President’s declaration of a national emergency due to COVID-19. The announcement states that “The Secretary is exercising her authority under Section 2 of the HEROES Act to extend the financial statement and compliance audit deadlines by six months.” Questions about this extension should be directed to the Office of Postsecondary Education.
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. 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.
- Revised Dear CPA Letter CPA-20-01: Site Visit Exemption During COVID-19 Outbreak (Issued March 10, 2020, Revised July 14, 2020) [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.
NEW 2020 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]
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 is being published without illustrative financial statement audit reports. The Auditing Standards Board of the American Institute of Certified Public Accountants (AICPA) recently made changes to the financial statement audit reporting requirements, and those changes are effective for audits of financial statements for periods ending on or after December 15, 2020. At the time of this Guide’s publication, the AICPA had not published illustrative reports to incorporate changes resulting from the standards update and the 2018 revision of Government Auditing Standards. Once those illustrative reports are published, we will replace the version of the Guide available on our website with one that contains our own illustrative financial statement audit reports.
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.
2002 Foreign School Audit Guide: Foreign School Audit Guide (September 2002) [PDF ]
- Amendment No. 1 to Foreign School Audit Guide (August 15, 2003) [PDF]
- Amendment No. 2 to Foreign School Audit Guide (August 30, 2005) [PDF]
This guide remains effective for fiscal years ending prior to December 31, 2020.
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:
- Information for Financial Aid Professionals
- Federal Student Aid Handbook
- FSA School Participation Division Contacts