(GENERAL-23-121) Requirement for Institutions to Have Certain Calculations Related to Institutional and Program Eligibility Substantiated by an Independent Auditor

Under the Higher Education Act of 1965, as amended (HEA) and federal regulations under 34 CFR § 668.23, each eligible institution must meet annual compliance audit requirements unless the institution meets criteria for exemptions or waivers of those requirements. In addition, an institution’s independent auditor who prepares its annual audit report(s) must evaluate and report on the accuracy of certain calculations performed by the institution in accordance with statutory and regulatory requirements.

The Department of Education’s (Department) regulations require institutions approved to participate in the federal student aid programs to have an independent certified public accountant substantiate every year the following calculations on an award year basis for the institution and/or its programs to remain eligible:

The Department’s regulations describe the auditor’s substantiation of these calculations, and reporting thereon, as an attestation performed in accordance with the American Institute of Certified Public Accountant’s Statement on Standards for Attestation Engagements. However, the Department does accept coverage of these calculations through an institution’s annual Title IV compliance audit or Single Audit submission, even if that audit is performed in accordance with auditing standards rather than attestation standards.

The Department has become aware that some institutions are not ensuring that the required attestations are performed each year. Participating institutions are required to comply with all statutory and regulatory requirements outlined in their signed Program Participation Agreement (PPA). This announcement serves as a reminder that each eligible institution must have the required attestations on an annual basis to support its continued participation in the federal student aid programs.

These annual attestation requirements are required except to the extent that: (1) an institution is granted a waiver or exemption from the annual compliance audit requirement, or (2) in the case of an institution that, under the Single Audit, did not have its Title IV programs audited, either because the audited entity’s SFA Cluster was not a major program or because the institution was not included by the auditor for audit evaluation and testing of the administration of the Title IV programs consistent with Single Audit Act requirements under 2 CFR 200 Subpart F. However, if the institution’s Title IV programs either were audited or were required to be audited for any fiscal year, the attestations described above must be performed for that fiscal year.

The Department has become aware that there may also be confusion among participating institutions and the audit community regarding whether the attestation for completion and placement rates for short-term programs is required for institutions that meet the regulatory definition of an institution of higher education.

A short-term program is defined under 34 CFR 668.8(d)(3) as a program that provides a minimum of 10 weeks of instruction and at least 300 but less than 600 clock hours of instruction. Short-term programs qualify to participate in the Direct Loan program only. Such a program must be measured in clock hours for purposes of administration of the Title IV, HEA programs, although it may use credit hours for academic purposes. The program must admit as regular students some people who have not completed the equivalent of an associate degree. It must also have been in existence for at least one year, have verified in an annual audit completion and placement rates of at least 70%, and not be more than 50% longer than the minimum training period required by the state or federal agency, if any, for the occupation for which the program of instruction is intended. Any short-term program not meeting these requirements is not an eligible program at any institution participating in the Title IV programs.

As described above, institutions offering short-term programs must perform completion and placement rate calculations each award year, demonstrating compliance with the minimum 70% completion and placement rate threshold. The institution must also have an independent auditor provide a report attesting to the accuracy of the institution’s completion and placement rate calculations each award year. (See 34 CFR 668.8(e) through (g)).

Some institutions and independent auditors have asserted that institutions that meet the definition for institutions of higher education (34 CFR § 600.4) are not subject to the attestation requirements for short-term programs because such programs are part of the definition of postsecondary vocational institutions (34 CFR § 600.6). This is incorrect. Although the criteria for the types of institutions differ, an institution of higher education also qualifies as a postsecondary vocational institution if it offers programs that are less than an academic year in length that lead to a certificate or other nondegree recognized credential. If such programs are short-term programs, an annual audit attestation to the accuracy of completion and placement rates for those programs is required.

The Department is aware that the final regulations published on October 31, 2023 (88 FR 74568) may cause certain programs that currently include 600 or more clock hours to transition into short term programs that include between 300 and 599 hours, causing those programs to be subject to the above requirements. We plan to provide additional guidance on the implementation of those regulations, including instructions for short-term program transitions, in the near future.

Institutions should evaluate whether they have complied with the attestation requirements described above and ensure that the requirements are met. This can be done either through their annual compliance audit or a separate attestation engagement if the institution so chooses. Although a separate attestation engagement is not a requirement for any type of institution, it would be accepted if an institution elected to do so.

The eligibility of short-term programs is directly linked to meeting the minimum 70 percent completion and placement rates requirement. Having the rates substantiated provides both the institution and the Department with assurances that the institution meets these requirements. Therefore, institutions that offer approved short-term programs that are subject to the requirements of 34 CFR 668.8(e), (f), and (g) and have their Title IV programs audited for a given fiscal year must appropriately complete the annual calculations of completion and placement rates, and have those rates attested to by an independent certified public accountant. A short-term program that does not meet the completion and placement rate requirements for a given award year is considered ineligible at the beginning of the following award year.

Similarly, as described above, an institution’s eligibility is linked to the number of correspondence courses offered and students enrolled in correspondence courses, the number of its regular students who are incarcerated, and the number of its regular students lacking a high school diploma or its equivalent. Therefore, completion of annual attestations of its calculations of the percentage of correspondence students and courses, incarcerated students, and students who lack a high school diploma or its recognized equivalent provides both the institution and the Department with assurances that the institution does not exceed the thresholds outlined in the regulations.

An institution must notify the Department as soon as possible if it has determined that it meets one of the conditions for ineligibility in 34 CFR 600.7(a)(1), fails to continue to satisfy the requirements for a waiver or exception granted to the institution, or if any of its short-term programs fail to meet the required completion and placement rates. This requirement applies regardless of whether or not the rates are subject to audit or attestation by an auditor. If an institution’s calculations fail to meet the requirement outlined in the regulation, it must promptly report this to the Department using the Electronic Application for Approval to Participate in the Federal Student Financial Aid Programs (E-App). If a rate is not reviewed by an auditor but the school is aware that its rates have failed to meet the requirements, the school must still report this information.

Given the current confusion at institutions and in the audit community about the applicability of the attestation requirements, the Department does not plan to take action against an institution solely on the basis of the institution’s failure to have the rates substantiated timely by an independent auditor for award years ending on June 30, 2025 or earlier unless an institution has already been informed it needed to comply with these requirements and failed to do so. However, the requirement for an institution and its programs to show that it meets applicable eligibility requirements in those periods is still in place, and an institution could still be subject to loss of eligibility and repayment liabilities if the institution or one of its programs fails one of the metrics requiring attestation during any award year, including prior award years. Therefore, we encourage institutions to take swift action to come into compliance with these requirements as soon as possible.

After June 30, 2025, the Department will begin evaluating an institution’s past compliance with these requirements when the school submits its application for recertification. An institution will be required to demonstrate that all attestation requirements have been met for every award year since its previous certification except for those ending on June 30, 2025, or earlier unless it can demonstrate that it met the criteria to qualify for a waiver or exemption, or that its auditor was permitted to avoid auditing the institution’s Title IV programs consistent with the requirements of the Single Audit Act. In these cases, the Department may ask to review an institution’s calculations to the extent that the institution is required to maintain records under 34 CFR 668.24. An institution will be subject to loss of eligibility and financial liability if one of its programs fails any of the metrics requiring attestation during any award year even if an auditor attestation was not completed.

If you have questions about this announcement, please contact your School Participation Division using the contact information on Federal Student Aid’s Partner Connect website. You may also email FSA’s School Eligibility and Oversight Service Group at CaseTeams@ed.gov.