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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, or (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 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, 2021, and the HEERF I and HEERF II websites.

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.

(NEW) 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]

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

  • The OIG Non-Federal Audit Team participated in webinars on the HEERF Audit Guide on April 13, 2020 and April 15, 2020 and are making the webinar presentation slides available here [PDF Slides]

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 Regarding Audit Submission Extensions Due to COVID-19: The Department of Education published, in a document in Federal Register Volume 85, Number 239, waivers and modifications of statutory and regulatory provisions applicable to the SFA programs to assist those impacted by COVID-19. The document provides an extension of up to 6-months (provided that reports are submitted no later than 30 calendar days after the date of the audit report) to institutions of higher education and other entities that do not submit single audits but are required to submit annual audits under 34 CFR 668.23 (proprietary schools, foreign schools, and third-party servicers). The extension applies to any audits that are due to be submitted from March 1, 2020, through December 31, 2020 (September 1, 2019 through June 30, 2020 year-ends). See the published document for more information.

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.

  • 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.

2020 Foreign School Audit Guide:

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) made changes to the financial statement audit reporting requirements, and those changes were originally effective for audits of financial statements for periods ending on or after December 15, 2020, but were delayed to December 15, 2021, in order to provide more time for firms to implement the standards in light of the effect of the coronavirus pandemic. 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:

Non-Federal Audit Main page



   
Last Modified: 05/03/2021