It was not an uncommon mistake. When Yellowstone Christian College (YCC) achieved candidacy with their accrediting agency, they chose a highly recommended third party servicer to help with the complexity of launching Federal Student Financial Aid. They expected the servicer to do the heavy lifting. What they did not expect was to be told they could not begin yet because the perfectly acceptable, opinioned audit statements they had been submitting to their accrediting agency were not adequate for their application for HEA Title IV financial aid programs. Before they could launch Federal Student Financial Aid, they had to deal with an unexpected auditing issue.
The third party servicer connected YCC’s CPA with an accounting firm that specializes in Title IV–approved audits. The result — YCC is paying to have a little more work done on the last two audits they submitted to their accrediting agency.
To qualify to participate in Title IV financial aid programs, a school must demonstrate that it is financially responsible. As part of the application process, the school must provide the two most recently completed full fiscal years’ financial statements prepared according to Generally Accepted Accounting Principles, (GAAP) and audited according to Generally Accepted Government Auditing Standards (GAGAS).
In a nutshell: even though accrediting agencies only require a GAAP audit, HEA Title IV financial aid programs require a GAAP audit in GAGAS format.
The problem is that sometimes, auditors new to the Title IV process will tell an institution that they cannot do a GAGAS audit because the school has never had federal funds. Don’t believe this. Obviously, you do not have to launch Federal Student Financial Aid programs to do the audit needed to launch Federal Student Financial Aid.
The reality is that the audit must follow GAGAS procedures and format, and then footnote that there has never been any prior federal funding.
Sometimes, the auditor does not have the credentials to do a GAGAS formatted audit, so they may deter you from getting one. But now you know that you do need an auditor with both GAAP and GAGAS expertise.
If your school expects to apply to participate in Title IV programs within the next two years, do not sabotage your efforts at launching the program. It is time to begin compiling GAGAS audits. One of the reasons that schools hire third party servicers like Weber and Associates is so they can avoid such frustrating and unnecessary delays.
Harry V. Weber, President
Weber & Associates