December 18, 1998

QUESTIONS AND ANSWERS ON OMB CIRCULAR A-133 AS IT RELATES TO

U. S. DEPARTMENT OF EDUCATION PROGRAMS

The following guidance was issued by the U.S. Department of Education,
Office of Inspector General (ED/OIG) to clarify OMB Circular A-133 audit
requirements at they relate to Education programs. The opinions
expressed in this document are solely that of ED/OIG and are not
intended to reflect that of OMB or other Federal agencies.

There are several issues regarding U. S. Department of Education
programs under OMB Circular A-133. This document clarifies some of those
issues. As other issues are clarified they will be appended to this
document. Readers are advised to note the date of this document and
periodically check the date of this document. The title of this document
will not change; however, the date on the title of this document will
change as additional clarifying guidance concerning ED programs are
added. Two issues not addressed by this document but are expected to be
clarified in the near future are: (1) close out audits, and (2)
reporting language when an institution uses a servicer. Clarifying
guidance on other issues follows.

1\. Institutional eligibility is not included in the A-133 Compliance
Supplement. The Code of Federal Regulations, 34 Part 600.7(g) states
that the certified public accountant who audits the financial statements
must also perform an attestation engagement to substantiate the
required calculations in paragraph (a)(1) of this part. Does A-133
compliance supplement supercede the attestation engagement audit
requirement?

Yes. The A-133 compliance supplement supercedes the attestation
engagement audit requirement in 600.7(g). The attestation engagement
audit report is not required if an A-133 audit is performed. Under the
current A-133 Compliance Supplement, institutional eligibility is not
required to be tested.

2\. *Schedule of Expenditures of Federal Awards.* What amounts are
reported for the Federal Family Education Loan (FFELP), the William D.
Ford Direct Loan Program and the Federal Perkins Loan Programs?

Circular A-133 and the AICPA Statement of Position 98-3, 5.13 state
that loans may be reported in the Schedule of Expenditures of Federal
Awards or in the notes to the Schedule, although the Schedule is
preferable. The amounts reported for FFELP and the William D. Ford
Direct Loan Programs are the gross amount of the loans approved **by the
institution** during the audit period. Circular A-133, . 205(b) is
quite clear regarding the amount shown for the Federal Perkins Loan
program. The value shown is the value of new loans made during the
fiscal year, plus the balance of loans from previous years, plus the
administrative cost allowance received.

3\. Are the SF-SAC, Reporting on Audits of States, Local Governments and
Non-Profit Organizations, instructions (Part iii - Federal Programs,
Item 6 - Federal Awards Expended, Column (c)) correct in asking for the
outstanding balances for the loan programs?

Yes. For the Federal Family Education Loan Program and the William D.
Ford Federal Direct Loan program only the gross amount of the loans
administered by the institution during the audit period are entered. For
the Federal Perkins Loan program, the total of the administrative cost
allowance plus the value of the loan portfolio is entered.

4\. If an institution wants to cease participation in the Federal
Perkins Loan Program, where can information be obtained on how to do
this?

*[Procedures for an Institution To Liquidate Its Federal Perkins Loan
Program]{.underline}* was published in April 1995. It is available on
the Internet at: home.gvi.net/\~edoig Go the section SFA Audits,
School/School Servicer Audits. NOTE: This publication has been
superceded by Campus Based Letter CB-98-11 (LD) dated July 1998. That
letter is not available on the previously listed Internet website
because there are instructions in that letter regarding a close out
audit that conflict with the Single Audit Act and OMB Circular A-133.
When that conflict is resolved, the guidance will be posted on the
previously listed Internet website.

5\. The *Student Financial Aid Encyclopedia* is a vital source of
information on program requirements. Is this publication available to
anyone other than financial aid administrators?

Yes. The Student Financial Aid Encyclopedia is published by the National
Association of Student Financial Aid Administrators (NASFAA). The
publication is available to members and non-members alike in either
paper or CD-ROM. Contact NASFAA at:

National Association of Student Financial Aid Administrators

1920 L Street, NW Suite 200

Washington, DC 20036

Telephone: (202) 785-0453, extension 118 or 127

Internet address: www.nasfaa.org

look under members or prospective members for information on
publications.

6\. The standard of proof regarding eligibility of graduate students is
unclear. Does an institution have to have proof of a student having an
undergraduate degree before awarding aid to a student at the graduate
level?

The institution has to have proof that the student met the admission
requirements for the graduate level program. Whatever documents are
required by the institution for admission to the graduate program must
be in the students file. To award Title IV student financial
assistance, a Free Application for Student Financial Assistance must be
submitted to the central processor. The institution must consider the
resultant expected family contribution on the output document when
awarding Title IV student financial assistance.

7\. What is the Catalog of Federal Domestic Assistance number for the
School-To-Work program?

For grants funded by the U. S. Department of Education, 84.278; for
grants funded by the U. S. Department of Labor use Educations CFDA
number, 84.278 (per May 1998 OMB Compliance Supplement).

8\. Section .400(c)(5) of OMB Circular A-133 requires a federal agency
to resolve audit findings withing six months after receipt of the audit
report. Circular A-50 requires program specific audit report findings to
be resolved within six months after receipt of the audit report. From
what date is the six months measured?

For A-133 audit reports, the six months starts when ED receives a copy
of the A-133 audit report from the Single Audit Clearinghouse. The
cognizant Federal audit agency may send an assurance letter to the other
Federal Agency Single Audit Contacts advising them the audit meets
applicable single audit requirements; however, the date of that letter
does not start the six month period for audit resolution.

Likewise, for program specific audit reports, the six months starts the
date that ED accepts the program specific audit report as meeting
reporting requirements. Institutions submitting program specific audits
are sent an acceptance letter.

9\. Does an A-133 audit report satisfy the requirement for submission of
financial statements for financial responsibility?

Yes, once the required number of copies have been submitted to the
Single Audit Clearinghouse.

10\. In determining the dollar threshold Type A programs, what amount is
used for the Federal Perkins Loan Program?

The administrative cost allowance and the value of the Federal Perkins
Loan portfolio are added to all the other Student Financial Aid program
expenditures to determine the total expenditures for the student
financial aid cluster. However, the auditor must use professional
judgment in determining whether the Federal Perkins Loan program
*significantly affects* the number or size of Type A Programs. The
auditor should review the guidance in paragraph 7.7 of the AICPAs
Statement of Position 98-3, Audits of States, Local Governments, and
Not-for-Profit Organizations Receiving Federal Awards and  .520(b)(3)
of OMB Circular A-133.

11\. Did the Higher Education Act (HEA) Amendments of 1998 change the
athletic audit requirement set forth in Section 668.14 (d) of Title 34
Code of Federal Regulations?

Yes. Effective October 1, 1998, the HEA Amendments of 1998 repealed the
athletic audit requirement set forth in 34 CFR Section 668.14 (d)(1),
but did not repeal the requirement that the intercollegiate athletic
revenues and expenses be compiled annually.

The regulations, which were effective July 1, 1994, required an annual
compilation of revenues and expenses from men\'s and women\'s
intercollegiate athletic activities, and at a minimum, that every third
year\'s intercollegiate athletic revenues and expenses be audited. The
audit report previously required was to be issued to the institution and
made available for inspection by the U.S. Secretary of Education and
where allowable by State law, the public.

The HEA repealed the audit requirement, and moved the annual compilation
requirement, slightly modified, from section 487 (Program Participation
Agreements) to section 485(g) (Equity in Athletics Disclosure Act). Now,
on an annual basis, each coeducational institution of higher education
that participates in any title IV, HEA program, and has an
intercollegiate athletic program, must prepare a report of the
information described in section 485(g)(1), and upon request, make the
report available to students, potential students, and the public (and
must inform students of their right to request the information).

Also, an institution must provide to the Secretary the information
contained in the report within 15 days of the date the institution makes
the report available for viewing upon request. The Secretary will
prepare and submit a report to Congress by April 1, 2000, based on the
information received.