Key Takeaways from the Servicer Audit Guide Panel at #CECU17

by Brian Hurguy, Senior Compliance Auditor

Brian Hurguy | SST CPAsEarlier this week at the annual convention for the Career Education Colleges and Universities in Las Vegas, SST Partner Eileen Keller joined a panel of specialists discussing the new 2016 Proprietary School and Third-party Servicer Audit Guide, which goes into effect after June 30, 2017.


The following is a summary of the key changes under the new audit guide:

  • Financial Statement Audits – new 90/10 disclosure requirements:
    1. School must perform calculation without auditor assistance
    2. Any misstatement in school’s calculation must be disclosed as a finding
  • Career Education Colleges and Universities 2017 Annual Convention & Expo | SST CPAsTitle IV Compliance Audits
    1. Sample size maximum selection – 120 files (increase from 75 in prior audit guide – may increase audit costs by 40-60%)
    2. Site Visits
      • First year audit must be on-site
      • Each location once every two years and must always visit
        • locations where administrative functions material to TIV programs are performed
        • all locations at which on-site work will be performed to apply the required audit procedures, including those pertaining to the samples for review
    3. Servicers
      • Auditors must review servicer contracts and servicer compliance audits
      • May need to perform audit work at servicer location if audit is deficient
    4. Incentive compensation
      • Expanded information to be provided for all employees, contractors, and consultants involved in admissions, recruiting, enrollment, marketing, and/or financial aid processing or awarding.
        • Required audit procedures to be performed at the contractor location for any recruiting, admissions, enrollment, or TIV services.
        • Auditors will need to review personnel files, compensation plans, performance evaluations, and wage or salary adjustments
    5. Student Confirmations
      • Minimum of 30% of responses must be received
        • Specific information required from students
          • Dates attended
          • Types of TIV received
          • Consumer information provided
    6. Gainful Employment
      • Select programs from ECAR to ensure reporting is accurate
      • Compliance audit student sample will be traced to GE reporting file to test for accuracy
    7. Job Placement Rates
      • Auditors must review advertised placement rates
        • Verify to supporting source documents
        • Ensure prospective students are given proper disclosures
        • Review any state licensing requirements to determine accurate disclosure
  • In summary, schools should:
    1. Plan for an increased timeline for audit fieldwork and cost
    2. Work with staff/compliance team to secure appropriate support to test during audit fieldwork
    3. Be prepared by:
      • Updating written procedures
      • Having GE disclosures ready
      • Keeping evidence of GE warnings
      • Having third-party servicer contracts and audits readily available
      • Begin preparing a list of all individuals that fall under the incentive compensation guidelines
      • Having job placement rate reports ready

For more information about the new audit guide requirement please contact Eileen at or Brian Hurguy at