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Financial Responsibility Supplemental Schedule

Financial Responsibility Supplemental Schedule

By: Dean Dorton | December 16, 2020

Non-for-profit higher education institutions must comply with new financial responsibility rules, effective July 1, 2020. This article summarizes common questions about the new policy that have been asked during recent consultations.

Higher Education

Effective July 1, 2020, not-for-profit higher education institutions must comply with new financial responsibility rules. Audited financial 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 per the Office of Management and Budget’s Uniform Guidance.

Dean Dorton has helped multiple institutions to implement these schedules and we have developed the following brief list of questions that arose during those consultations.

FAQ Regarding Implementation of the Financial Responsibility Supplemental Schedule

  1. What is the date of implementation? These rules will be implemented as of July 1, 2020, meaning any audits submitted after July 1, 2020 must comply.
  2. If an institution does not have one of the components listed on the Section 2 of the FRSS do we exclude that line from our presentation? The answer is no, if an amount listed on the FRSS is zero, the institution should identify the source of the amount as NA and show zero as the amount.
  3. What should we do if a component listed on FRSS is not explicitly disclosed in the financial statements or the notes to the financial statements? The regulations require that all components listed on the FRSS be explicitly disclosed in either financial statements or the notes to the financial statements. In some cases an institution will need to disaggregate lines in their disclosures in order to facilitate the direct linking of the FRSS and the financial statements and notes to the financial statements. An institution can also create a separate disclosure to provide the disaggregated information necessary to comply with these requirements.
  4. What is included in “debt obtained for long-term purposes”? The rules for debt obtained for long-term purposes are all follows:
    1. Limited to net property, plant and equipment and can include liabilities related to construction in progress and capital leases/right of use assets.
    2. Includes two separate components, each with their own rules and each component will need to tracked separately
      • Debt acquired prior to implementation
      • Debt acquired after implementation
  5. What is included in the “losses without donor restrictions” component of “total expenses and losses without donor restrictions”. Add the “losses without donor restrictions” only if you have net losses on unrestricted investments. All net investment gains and all net losses on investments with donor restrictions are excluded.

NACUBO has also developed a Tutorial and Crosswalk between the FRSS and the Department of Education’s eZ-Audit which can be a helpful aid during implementation. Additionally, NACUBO has reached out to the Department of Education for clarification concerning how annuities, net assets released from restriction, and gains and losses on investments are recorded in the FRSS and input in the eZ-Audit system. We will keep you advised as answers to those questions and any additional guidance become available.

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