Questions and Answers
Archived Information

The following questions and answers are ones that IPOS receives frequently, either internally, externally, or both. The general topics are the new financial responsibility regulations authorized November 25, 1997, the revised OMB A-133 Circular, the July 1997 SFA Audit Guide, and other miscellaneous topics. In many cases, several related questions have been consolidated into one question.

Questions and Answers

  1. Question:
    How will the changes made by the new financial responsibility regulations affect decisions already implemented regarding an institution by IPOS?

    IPOS will not revisit decisions already implemented under the current regulations. These decisions, including a submission of a letter of credit, will remain in effect until the next time IPOS reviews that institution's financial status.

  2. Question:
    What is the "transition year" as it relates to the new financial responsibility regulations?

    An institution's transition year will be the institution's fiscal year that begins between July 1, 1997 and June 30, 1998, inclusive. The transition-year alternative will be available to an institution only once.

    For its transition year, the institution will have the benefit of both the current and new general standards of financial responsibility. If the institution satisfies either set of standards, the Secretary will consider the institution financially responsible. If the institution satisfies neither set of standards, the institution will have to satisfy one of the alternative standards available under either the current or the new regulations.

    The following table lists the transition-year situations in which an institution might find itself and the resulting outcomes.

Transition-Year Situations and Outcomes
(for an institution that is satisfying its administrative
and financial obligation requirements)

If an institution achieves a composite score of: And the institution (satisfies/does not satisfy) the current tests of its financial condition The result will be that the institution:
1.5 or higher Irrelevant Will be considered financially responsible
1.0 to 1.4 Satisfies Will be considered financially responsible
1.0 to 1.4 Does not satisfy Will be eligible for the Zone Alternative under the new standards
0.9 or lower Satisfies Will be considered financially responsible
0.9 or lower Does not satisfy Must satisfy an alternative standard under either the new or current regulations to participate in the title IV, HEA programs

  1. Question:
    Under what conditions are the new financial responsibility regulations and/or the old regulations used?

    As an administrative matter, effective November 25, 1997, the new financial ratio methodology will generally be used for internal evaluations of institutional financial statements. If the school composite score is 1.5 or above, the Department will ordinarily deem that institution to be financially responsible for purposes of determining whether additional analysis will be made. If the score is below 1.5, the case team is to perform an analysis under the old regulations, and take actions under the authority of the old regulations. No consideration of implementing procedures for schools scoring in the zone is planned before July 1, 1998,the effective date of the new regulations.

  2. Question:
    Is a public or private non-profit institution required to file an audit under the Single Audit Act?

    According to the revised OMB Circular A-133, non-federal state, local government, and other non-profits that expend $300,000 or more in a year in Federal awards shall have a single or program-specific audit conducted for that year. Qualifying institutions under A-133 that expend less than $300,000 of Federal awards during the year are exempt from submitting the annual A-133 audit, but are required to submit annual financial statements to the Department in accordance with the Department's reporting regulations.

  3. Question:
    Does any non-profit, non-federal entity that expends Title IV funds have the option of submitting a single audit or a program-specific (ED Audit Guide) audit?

    No. According to OMB Circular A-133, Subpart B, .200, (b), (c), only those non-federal, non-profit entities that expend funds in only one Federal program, AND the program's regulations do not require a financial audit, may elect to submit a program-specific audit. Because the SFA regulations do require a financial audit, the non-profit entity does not have the option to have a program-specific (ED Audit Guide) audit.

  4. Question:
    Is the Department required to provide the provisional certification alternative described in Section 668.175 (f) of the new financial responsibility regulations?

    No. Provisional certification is an alternative that may be offered to schools instead of granting or denying an application for recertification. However, ED is not required to offer provisional certification to institutions.

  5. Question:
    What is the definition of the "stub period" as it relates to the July 1997 Audit Guide change to a fiscal year reporting period for the compliance attestation audit?

    The "stub period," as it relates to the July 1997 Audit Guide change to a fiscal year reporting period for the compliance attestation audit, is the one- time period that covers the period from the date of the last compliance report (usually the period ending June 30, 1995) to the end of the fiscal year prior to the first fiscal year compliance audit.

  6. Question:
    May the compliance attestation report be separate or must it be combined with the financial statement audit report?

    The compliance attestation and financial statement audit reports must be submitted together per the July 1997 update of ED's Audit Guide. However, different auditors may be engaged for each report.

  7. Question:
    Are Stafford Loans included in compliance attestation audits?

    Yes. All Title IV programs the institution participates in must be included in the compliance attestation audit.

  8. Question:
    Does ED have examples of the 85/15 footnote disclosures?

    No. However, sufficient guidance is contained in the July 1997 Audit Guide, page I-8, and in 34 CFR 600.5 and the appropriate accounting references.

  9. Question:
    What is the phone number for requesting a copy of the current Audit Guide?

    The number for requesting the Audit Guide is: 1-800-4 FED AID

  10. Question:
    To what address should the financial statement audit report and compliance attestation audit report be sent?


    By U.S. Postal Service:

    U.S. Department of Education
    Institutional Participation and
        Oversight Service
    P. O. Box 44805
    L'Enfant Plaza Station
    Washington, D.C. 20026-4805

    By commercial overnight
    mail/courier delivery:

    U.S. Department of Education
    Institutional Participation and
        Oversight Service
    7th & D Streets, S.W.
    GSA Building, Room 3514
    Washington, D.C. 20407

  11. Question:
    To whom do institutions and/or their auditors report errors concerning the revised Audit Guide?

    Mr. Jim Burley of the ED-OIG Dallas Office at (214) 880-3005.

  12. Question:
    Is a close-out audit required if the school closes one of its branch campuses?

    No, a separate close out audit is not required because the next due compliance audit for the institution must report on the use of federal funds at the closed location. However, the school must notify ED of the branch closure.

  13. Question:
    Can the institutions' auditor use the same sample for the regular period of the compliance audit and also for the "stub period"? If not, will ED reimburse the school for the additional cost of drawing and auditing two different samples?

    No. A separate sample needs to be used for each audit period. The audit for the regular period should be a separate audit from the "stub period" audit, and therefore should utilize different samples. ED will not reimburse the school for any costs as a result of complying with this requirement.

  14. Question:
    What are the new filing requirements under the July 1997 ED Audit Guide including due dates for compliance attestation audits and for financial statement audits?

    Under the July 1997 ED Audit Guide, a combined financial statement and compliance attestation report package is due six months following the fiscal year end. A one-time separate compliance report for the "stub period" is also due.

  15. Question:
    What is the internet address where the SFA Audit Guide can be obtained?

    The Audit Guide can be downloaded from the internet at:

  16. Question:
    What is the internet address for the Department of Education regulations that are published in the Code of Federal Regulations?

    The CFR internet address is:

  17. Question:
    What are the IPOS Case Management Teams contacts and their phone numbers?

    The contact offices and their phone numbers are listed in the preamble to the new financial responsibility regulations. They are:

    Boston Team (617) 223-9338 Dallas Team (214) 880-3044
    New York City Team(212) 264-4022 Kansas City Team(816) 880-4053
    Philadelphia Team (215) 656-6442 Denver Team (303) 844-3677
    Atlanta Team (404) 562-6315 San Francisco Team (415) 437-8276
    Chicago Team (312) 886-8767 Seattle Team (206) 287-1770

  18. Question:
    Under the new Financial Responsibility Standards (FRS) that were published in the Federal Register on November 25, 1997, do public institutions have to prepare their financial statements in accordance with GAAP and on the accrual basis; and are public institutions subject to the general standards of the FRS?

    The FRS in CFR 668.171(c) allow public institutions to be considered financially responsible if the institution provides to the Department a letter from an official of the State or other governmental entity confirming that the institution is a public institution; and if the institution is not in violation of any past performance requirement under 34 CFR 668.174. Public institutions are still subject to the Department's reporting requirements in CFR 668.23(d) which require the financial statements to be prepared in accordance with GAAP and on the accrual basis, and to the responsible state or government unit's reporting requirements.

    Public institutions are not subject to the general standards of the FRS.

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Last Modified: 05/16/2005