Effective July 1, 2020, not-for-profit institutions must comply with new financial responsibility rules included in the September 23, 2019 borrower defense to repayment regulation. These financial responsibility accounting tutorials provide analysis and guidance for substantial new requirements.
eZ-Audit and the Supplemental Schedule
Addresses allowable modifications to the financial responsibility supplemental schedule and how to report non-operating gains and losses (i.e. investments, pension, swaps, and more). A related excel tool helps calculate and display non-operating gains and losses for eZ-Audit reporting.
Crosswalk: financial statements, supplemental schedule, and eZ-Audit
Audited financial statements (the recommendation is single audit statements) released after July 1, 2020 must include a financial responsibility supplemental schedule (FRSS). Institutions must input FRSS information into the Department of Education’s eZ-Audit system and file by their single audit due date. The accompanying excel spreadsheets provide an illustrative set of financial statements, an FRSS, and a crosswalk to the eZ-Audit reporting templates.
Understanding Debt Obtained for Long-term Purposes (DOLP)
DOLP cannot exceed net property, plant, and equipment, and can include liabilities related to construction in progress and capital lease / right-of-use assets. This tutorial covers pre and post-implementation rules, where to categorize leased / ROU liabilities, how DOLP is used to calculate expendable net assets (the numerator of the primary reserve ratio), and addresses presentation and documentation requirements in the new Financial Responsibility Supplemental Schedule. This tutorial is designed for institutions that do not elect to grandfather their operating leases.
Leases and the Transition Election
The financial responsibility rules allow a grandfathering transition election for all operating leases entered into before December 15, 2018. The election is related to the conversion of all leases to right-of-use assets when FASB ASU 2016-02, Leases,
is implemented -- which for some will negatively impact composite scores. This tutorial explains the transition election, how to assess if it's beneficial, how to report ROU assets on the Financial Responsibility Supplemental Schedule after the election is made, and what to disclose about leases entered into before and after December 15, 2018.