The Department of Education (the Department) published a final regulation that revises financial responsibility, administrative capability, certification procedures, and ability to benefit programs for institutions that participate in Title IV under the Higher Education Act. This new regulation also significantly expands the information that is required to be disclosed for related-party transactions.
Related parties are defined in the accounting standards as: affiliates of the entity, principal owners of the entity and members of their immediate families, management of the entity and members of their immediate families, and other parties that can significantly influence the entity, to name a few. Related parties can include donors or grantors of the entity as well.
Under the new regulation, the Department now requires the following to be disclosed:
- Name of the related party
- Location of the related party
- Description of the related party
- Nature and amount of any transactions between the related party and the institution, financial or otherwise, regardless of when they occurred and regardless of amount
Additionally, if there are no related party transactions during the audited fiscal year or related party outstanding balances reported in the financial statements, then management must add a note to the financial statements to disclose this fact.
How to Prepare
To prepare for these new regulations, we recommend that institutions review internal control procedures to identify related parties and transactions. Related party transactions include balance sheet and income statement items as well as off-balance sheet agreements with identified related parties.
How Can We Help?
The Bonadio Group has professionals who are experienced with the new regulations for colleges and universities and can assist with implementation of these new regulations. Please reach out to our experts for more information.
This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Should you require any such advice, please contact us directly. The information contained herein does not create, and your review or use of the information does not constitute, an accountant-client relationship.
