As part of the Office of Management and Budget’s (OMB) 2017 Compliance Supplement (used by independent auditors to test the Student Financial Aid Cluster) to federal audit requirements, the Department of Education (ED) recently announced that it will pursue an annual audit mandate for FY17. The policy does not apply to FY16. ED began reaching out to educational institutions and their auditors earlier this month to hold “listening” meetings to go over the Compliance Supplement and identify potential improvements to be made.
ED issued a Notice of Proposed Rulemaking (NPRM) in June of 2016 that outlined proposed regulations for both for profit and private institutions. The proposed regulations would introduce new financial responsibility indicators beyond the current composite score requirements. If indicators are triggered, the regulations would demand colleges and universities obtain letters of credit or provide other surety and extensive disclosures to enrolled and prospective students. NACUBO has many concerns with the new regulations; one being that they would penalize nonprofit colleges and universities for circumstances that are unrelated to student outcomes and not indicative of potential risk to the federal government. Other concerns, summarized in NACUBO’s response document, were submitted to ED in August 2016. See below for some of the most pressing concerns:
- Unreasonably short reporting timelines.
- Disclosure requirements based upon the faulty triggers could threaten enrollment, donor relationships, and access to capital.
- Accounting term usage and materiality thresholds that are not in line with, nor can logically be applied to, nonprofit institutions.
On Aug. 2, the Department of Treasury and the IRS published a Notice of Proposed Rulemaking (NPRM) that revise the rules from the PATH Act for reporting qualified tuition and related expenses under section 6050S on the Form 1098-T “Tuition Statement”. The proposed rulemaking also conforms the regulations to the changes made to section 6050S by the Protecting Americans from Tax Hikes Act of 2015. The proposed regulations affect certain higher educational institutions required to file Form 1098–T and taxpayers eligible to claim an education tax credit. The regulations would now require Form 1098-T reporting for groups of student populations for whom institutions have not previously been required to report (e.g., nonresident aliens, individuals whose qualified tuition and related expenses are paid entirely with scholarships, individuals whose qualified tuition and related expenses are paid under a formal billing arrangement).
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