August 21, 2020
2017-18 Financial Responsibility Scores Being Reviewed by Department of Education
Because of a series of mistakes in the 2017-18 Financial Responsibility Standards (FRS) composite scores posted on the Department of Education’s website, the file has been pulled from public view as the Education Department attempts to find the source of the problem.
The problem came to the Education Department’s attention when several member institutions brought the matter to NAICU’s attention.
The variance in the institutions’ scores was quite wide. While some institutions’ scores were accurate and lined up with the scores their accountants had predicted, others had scores that showed a wide gap that could not be explained even by the long standing debate over proper accounting standards. One institution had a posted score of 0.1 while their own accountant predicted they had a perfect 3.0. NAICU verified the accuracy of several institutions’ projected scores through an outside accountant who reexamined their paperwork at NAICU’s request.
In a related matter, this week the Education Department announced a new ez-Audit template to accommodate the new Financial Responsibility reporting requirements stemming from changes in accounting standards and recommendations. The changes were part of set of recommendations developed by a 2019 negotiated rulemaking sub-panel that NAICU was instrumental in helping to create.
The FRS have been fraught with problems for many years. Despite widespread agreement that the system is not working, the use of scores has become even more important, particularly as incorrect scores are made public and set off media scrutiny of institutions considered to be in financial trouble.
Of particular consequence is the reliance by National Council for State Authorization Reciprocity Agreements (NC-SARA) on a federal FRS composite score level above that required by the federal government to stay in the national state reciprocity agreement for distance education. NC-SARA also allows fewer alternatives than the federal government for institutions whose scores are below the required minimum. Given the national move to distance education to answer the public health needs caused by the pandemic, those requirements could put many institutions in a strait jacket in the months ahead.
Public colleges are not required to meet a FRS composite score threshold to be eligible for NC-SARA.
The problem came to the Education Department’s attention when several member institutions brought the matter to NAICU’s attention.
The variance in the institutions’ scores was quite wide. While some institutions’ scores were accurate and lined up with the scores their accountants had predicted, others had scores that showed a wide gap that could not be explained even by the long standing debate over proper accounting standards. One institution had a posted score of 0.1 while their own accountant predicted they had a perfect 3.0. NAICU verified the accuracy of several institutions’ projected scores through an outside accountant who reexamined their paperwork at NAICU’s request.
In a related matter, this week the Education Department announced a new ez-Audit template to accommodate the new Financial Responsibility reporting requirements stemming from changes in accounting standards and recommendations. The changes were part of set of recommendations developed by a 2019 negotiated rulemaking sub-panel that NAICU was instrumental in helping to create.
The FRS have been fraught with problems for many years. Despite widespread agreement that the system is not working, the use of scores has become even more important, particularly as incorrect scores are made public and set off media scrutiny of institutions considered to be in financial trouble.
Of particular consequence is the reliance by National Council for State Authorization Reciprocity Agreements (NC-SARA) on a federal FRS composite score level above that required by the federal government to stay in the national state reciprocity agreement for distance education. NC-SARA also allows fewer alternatives than the federal government for institutions whose scores are below the required minimum. Given the national move to distance education to answer the public health needs caused by the pandemic, those requirements could put many institutions in a strait jacket in the months ahead.
Public colleges are not required to meet a FRS composite score threshold to be eligible for NC-SARA.
For more information, please contact:
Sarah Flanagan