Preparing for the Initial Title IV Compliance Attestation Examination

After successfully completing the first two financial audits required for Title IV funding, it’s time to transition to a new goal: preparing for a compliance examination in addition to the required annual financial statement audit. For schools that are new to this, the next step can feel overwhelming and it’s often hard to even know exactly how to start. The following guidance highlights what to expect and some best practices to navigate these compliance examinations with clarity.

THE MAIN RESOURCE: THE DEPARTMENT OF EDUCATION’S (DOE) TITLE IV AUDIT GUIDE 2023

A foundational resource for understanding this compliance examination process is chapter three of the 2023 edition of the DOE’s Title IV audit guide.¹ Audit firms are required to base their testing on this guide, so it’s an essential starting point to get a basic understanding of what will be tested.

KEY COMPLIANCE REQUIREMENTS

All compliance examinations will involve procedures on the following core requirements:

• Institutional Eligibility and Participation
• Reporting
• Student Eligibility
• Disbursements
• Return of Title IV Funds
• Cash Management
• Administrative Requirements

Additionally, requirements may include the following, depending on the school’s specific situation:

• Perkins Loan Program
• Zone Alternative
• Close Out

WHAT TO EXPECT FROM THE AUDITOR

For schools undergoing this process for the first time, identifying where to start and what to do next is tough. This is where the auditor comes in. They should reach out in advance, providing guidance on how to prepare and specifying documentation required. At Sikich, auditors use a program called Suralink to create an online checklist of required items for the examination. Each checklist item includes basic explanations and examples of the documentation expected. Schools can then securely upload materials directly to the checklist. 

The auditor should also confirm whether the examination will be conducted on-site or remotely.

STUDENT FILES: THE LARGEST COMPONENT

The most time-consuming part of a compliance examination typically involves compiling student files, which are a collection of records maintained for each student receiving Title IV funding. The school must compile a list of students who received or refunded Title IV funds during the examination period, along with their enrollment statuses on the final day of this period. Additional information – such as student identification number, program of study, verification status or transfer status – may also be included.

If the school uses student management software, this relevant data can often be generated and exported into Excel for the audit firm’s efficient sorting and reconciliation. Before compiling student file samples, auditors typically request that the school or its third-party Title IV servicer (TPS) provide DOE records from its G5/G6 software for the relevant fiscal year. This ensures the student population information provided is reconciled and accurate. Failure to do so may result in sample adjustments later, which can waste time and add cost to the examination.

The audit firm will use this listing to define two populations and pull the following corresponding samples:

• Students who were enrolled, graduated or are on an approved leave of absence (Universe 1)
• Students who withdrew (officially, unofficially or administratively) or enrolled but never began attendance (Universe 2)

Once populations are formed and samples chosen, the auditor should provide a checklist of what it will review in each student file. Schools should clarify questions early while preparing the first few files. This ensures they’re on the right track and avoids needed fixes later.

WORKING WITH THIRD-PARTY SERVICERS (TPS)

Schools can legally outsource any part of their Title IV responsibilities to a TPS. While only contracted by some schools, they assist with various portions of their Title IV responsibilities. This can typically include performing reconciliations, drawing down funds, performing Return to Title IV refund calculations, verification, assisting with loan counseling, default management, serving as temporary school staff and more. These services should be clearly defined in the contract with the TPS.

Prior to the start of a compliance examination, schools using a TPS should contact them to confirm they’re providing the required records for the examination. These records typically include universe populations, G5/G6 fiscal year cumulative summaries/details, Direct Loan School Account Statements, contracts and sometimes even federal bank statements. This list represents most of the required records to reconcile the populations and test the timing of payments moving through the system. However, the schools themselves must provide nearly all information from Institutional Eligibility and Participation and Administrative Requirements records.

BEST PRACTICES FOR PLANNING AHEAD

As with many things in life, the best way to get prepared for something new is to ask questions early and often. The audit firm should work closely with the school to ensure readiness and recognize that this may be the institution’s first experience with this process.

These compliance examinations require extensive supporting documentation, so it’s advisable to take notes throughout the process and organize relevant materials in digital folders throughout the year. Retaining information along the way will make the annual compliance examination much easier.

Since this process is annual, it’s best to form good practices and maintain open communication from the outset. Poor practices can cause delays, potentially resulting in late compliance examination submission. Proper planning almost always leads to superior outcomes and helps provide a pathway for a timely and professional process.

Another key to success is allocating sufficient time for the examination. Financial aid and other involved staff should be notified of their required labor hours to meet response expectations. Even if the examination is done remotely, staff should treat it with the same care and responsiveness as a fully on-site review.

For institutions that haven’t visited the DOE’s Knowledge Center, now is a great time to bookmark it. It offers everything from current regulatory changes to past and present student handbooks, along with links to the Code of Federal Regulations.

Speak with a Sikich Expert

Schools are always welcome to reach out to their auditor or examiner with questions throughout the year. We’ll take the time to guide you through preventative measures to help ensure continued compliance.

1. Guide for Financial Statement Audits of Proprietary Schools and For Compliance Attestation Examination Engagements of Proprietary Schools and Third-Party Servicers Administering Title IV Programs, DOE. https://oig.ed.gov/sites/default/files/document/2023-03/title_iv_audit_guide_march_2023.pdf