Gain clarity on emerging financial responsibility rules for higher education

The Department of Education (ED) released two FAQ documents supporting the Financial responsibility, administrative capability, and certification procedures regulation implementation that takes effect July 1, 2024.

These documents, released on May 20, 2024, provide sub-regulatory guidance for financial responsibility and certification procedure regulations, serving as a reference for ED when assessing specific institutional cases.

As the effective date approaches, use the following audit highlights and related-party financial statement requirements to prepare your organization for the new rules.

Background

In October 2023, the Biden-Harris Administration announced final regulations to significantly enhance oversight and accountability for higher education institutions and strengthen consumer protections for student borrowers.

The new rules will:

• Strengthen ED’s ability to protect students and taxpayers from the negative effects of sudden college closures
• Restrict colleges from withholding course credits paid for with Federal money from students’ transcripts
• Require colleges to clearly communicate to students how much financial aid they will receive — a common source of confusion and error

New regulations on financial responsibility

Below are highlights from the ED’s FAQ sheets to help you determine how to properly prepare for these new regulations.

Effective date

ED clarified that the July 1, 2024, effective date applies to financial statements submitted to the ED on or after July 1, 2024, regardless of when an institution’s fiscal year begins or ends.

Filing due date

The submission deadline for an institution to submit its compliance audit and audited financial statements is the earlier of six months after the end of the institution's fiscal year or 30 days after the date of the most recent auditor's report.