David B. McClintock, CPA
May 19, 2020
The U.S. Department of Education (ED) released updated guidance regarding interruptions of study related to the coronavirus (COVID-19) late in the day on May 15. The update covers a wide range of topics, which are summarized here. While the announcement provided some new answers, we have included follow up questions for many of them.
Audit Deadline Extensions
Financial Statement and Compliance Audit Due Dates: According to the electronic announcement, “The Secretary is exercising her authority under Section 2 of the HEROES Act to extend the financial statement and compliance audit deadlines by six months.” Our interpretation is that the extension applies for schools beginning with December 31, 2019 fiscal year ends through and including June 30, 2020 fiscal year ends.
Which fiscal year ends are included under this directive?
Will other entities (accreditors and states) follow suit and extend their deadlines?
What is the impact on tax returns that will be due, even on extension, prior to the newly extended financial statement due date?
It appears that if an institution takes advantage of the six-month delay and submits their annual audited financial statements to ED after June 30, 2020, this impacts their determination pre-implementation qualified long-term debt in the composite score calculation under the new Borrower Defense to Repayment regulations, which take effect on July 1, 2020. This won’t impact the current year’s composite score ratio but could impact the ratio in future years. See M&A’s recent Q&A guidance on the composite score ratio changes, which take effect on July 1, 2020.