Change in Year-End Requirements for Title IV Schools

Effective for fiscal years beginning after July 1, 2024, for-profit education institutions’ audited financial statements submitted to the Department of Education must match the fiscal year end on its tax returns. This change affects organizations that submit tax returns based on a calendar year end and audits for Title IV purposes with a non-calendar year end.

On December 23, 2024, the Department of Education clarified the transition on this new rule.

UPDATED GUIDANCE: June to November year ends (as applicable)

For example, institutions that have traditionally used June 30 as its fiscal year for Title IV purposes and a calendar year end for annual tax returns will need to modify its fiscal year to align with its year end for all audits with fiscal years starting on or after July 1, 2024.Audited financial statements for the revised fiscal year (January 1, 2025 to December 31, 2025) will be required and due by June 30, 2026. Because of the clarification to the rule, the period from July 1, 2024 to December 31, 2024 will not be part of any audited financial statements that are submitted to the Department of Education. 

With regards to the compliance examinations, institutions will need to submit a stub compliance audit from July 1, 2024 through December 31, 2024 to transition over to a calendar year end. The due date for the stub examination will be determined by the Department’s approval letter for the change in year end, which should be requested at least 60 days prior to the end of an institution’s current fiscal year end.

January to May year ends (as applicable)

Institutions that have traditionally used March 31 as its fiscal year for Title IV purposes and a calendar year end for annual tax returns will need to modify its fiscal year to align with its year end for all audits with fiscal years starting on or after July 1, 2024. Audited financial statements for its legacy year end must be submitted for April 1, 2024 to March 31, 2025. Audited financial statements for this revised fiscal year (January 1, 2025 to December 31, 2025) will then be required and due by June 30, 2026. In this example, the period from January 1, 2025 to March 31, 2025 will be included in both the April 1, 2024 to March 31, 2025 audit and the January 1, 2025 to December 31, 2025 audited financial statements that are submitted to the Department of Education. 

With regards to compliance examinations, institutions will need to submit a stub compliance examination from March 1, 2024 through December 31, 2024 to transition over to a calendar year end. The due date for the stub examinations will be determined by the Department’s approval letter for the change in year end, which should be requested at least 60 days prior to the end of an institution’s current fiscal year end.

For any institution that has a gap, it will not be relieved from the 90/10 requirements. Once a change in fiscal year end is requested, the Department will provide further guidance on 90/10 attestations. 

Avoiding This Change 

This new rule will likely lead to changing the audit year end for most, as there are limited options for many entities to change its tax year end to comply. Institutions with non-calendar year ends that are taxed as S Corporations can consider changing its tax year to align with its current audit year end. However, institutions taxed as partnerships or sole proprietorships are required to change its audit year end to December 31, as non-calendar year ends are not an option.

If an institution is a flow-through entity with a June 30 or later year end, it should be prepared to adjust its audit year end and plan for audits and examinations accordingly.

Important to Note

While these rules apply to the submission to the Department of Education, they may not be acceptable by any other governing body that requires an audit. We encourage you to reach out to your accrediting agency and other governing bodies for clarification on the transition, especially in cases where there will be a gap in reporting.

What’s Next?

With the logistics involved in making such a change, planning and maintaining compliance are critical. Contact the experts at Sikich to discuss further information on the fiscal year changes and about year-end planning in this time of transition.