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Change in Year-End Requirements for Title IV Schools

Brian Michelini

Sep 19 2024

2 min read

Effective for fiscal years beginning after July 1, 2024, for-profit educational institutions’ audited financial statements submitted to the Department of Education must match the fiscal year end on your institutions’ tax returns. This change affects organizations that submit tax returns based on a calendar year end and audits for Title IV purposes with a non-calendar year end.

Mechanics of the Rule Change and Considerations

Institutions that have traditionally used June 30 as your fiscal year for Title IV purposes and a calendar year end for annual tax returns will need to modify your fiscal year to align with your year end for all audits with fiscal years starting on or after July 1, 2024. Audited financial statements for this revised fiscal year (January 1, 2024-December 31, 2024) will be required and due by June 30, 2025. This includes submitting a stub compliance audit from July 1, 2024 through December 31, 2024 to transition over to a calendar year end.

With this change, it is important that institutions plan for both financial responsibility ratios and 90/10, as these will need to be met for the submitted audits. If your institution fails either of the ratios for the legacy year end, there are additional steps to take to remain compliant with the Department of Education.

Avoiding This Change

This new rule will likely lead to changing the audit year end for most, as there are limited options for many entities to change your tax year end to comply. Institutions with non-calendar year ends that are taxed as S Corporations can consider changing your tax year to align with your current audit year end. However, institutions taxed as partnerships or sole proprietorships are required to change your audit year end to December 31, as a non-calendar year ends are not an option.

If your institution is a flow-through entity with a June 30 or later year end, be prepared to adjust your audit year end. You should also plan to conduct multiple audits for both your 2024 fiscal and 2024 calendar year during the transition. Institutions with January through May 31 year ends will make the transition with your 2025 audit or examination.

What’s Next?

With the logistics involved in making such a change, planning and maintaining compliance is critical. Reach out to the experts at Sikich to discuss further information on the fiscal year changes and about year-end planning in this year of transition.

This publication contains general information only and Sikich is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or any other professional advice or services. This publication is not a substitute for such professional advice or services, nor should you use it as a basis for any decision, action or omission that may affect you or your business. Before making any decision, taking any action or omitting an action that may affect you or your business, you should consult a qualified professional advisor. In addition, this publication may contain certain content generated by an artificial intelligence (AI) language model. You acknowledge that Sikich shall not be responsible for any loss sustained by you or any person who relies on this publication.

About the Author

Brian Michelini

Brian Michelini, CPA, is a director with over 20 years of experience providing Title IV audit services. Brian provides extensive expertise in audit and consultation services to Title IV for-profit schools, not-for-profit schools, and local not-for-profit entities.