Are private schools required to have an audit?

No single federal rule requires every private school to be audited. Audits or reviews are commonly required by accrediting associations, state programs, lenders and bond documents, foundations and major donors, or the school’s own board. A Single Audit applies only if the school expends $1,000,000 or more in federal awards in a fiscal year (2 CFR 200.501).

Do Title I equitable services count toward the Single Audit threshold?

Generally no. Title I and similar equitable services for private school students are provided by the local school district, which keeps control of the funds and property. Because the private school does not receive or expend the award, those services generally do not count as the school’s federal expenditures. Programs a school participates in directly, such as the National School Lunch Program, can count.

How is tuition revenue recognized?

Tuition is revenue from contracts with customers under FASB ASC 606. It is recognized over the school year as instruction is provided, so tuition collected before the year begins is reported as deferred revenue. Enrollment deposits and fees are evaluated under the same framework.

How are tuition discounts and financial aid reported?

Financial aid and tuition remission funded by the school are generally reported as a reduction of tuition revenue, not as an expense, so tuition is presented net of institutional aid. Scholarships funded by donor-restricted gifts still reduce tuition revenue, while the related gift is recorded as a contribution and released from restriction when used.

What is UPMIFA and why does it matter in a school audit?

The Uniform Prudent Management of Institutional Funds Act governs how charities manage, invest, and spend endowment funds. Maryland, Virginia, and the District of Columbia have adopted it. Auditors review the spending policy, donor agreements, and FASB ASC 958 endowment disclosures, including any funds whose value has fallen below the original gift.

Should our school choose an audit or a review?

Start with the requirement. If an accreditor, lender, or state program specifies an audit, a review will not satisfy it. Where the requirement allows it, a review under AR-C 90 gives limited assurance at a smaller scope. We confirm the requirement in writing before recommending an engagement.

Does a church-affiliated school file Form 990?

A school below college level that is affiliated with a church or operated by a religious order is generally excepted from filing Form 990 (Treas. Reg. §1.6033-2(g)(1)(vii)). Independent schools generally file Form 990, including Schedule E on racially nondiscriminatory policies.

Private School Audit & Review Services

A private school audit is an independent CPA’s examination of an independent, faith-based, or other nonpublic school’s financial statements. It covers tuition revenue under ASC 606, financial aid, endowments governed by UPMIFA, restricted gifts, and capital campaigns. Audits and reviews are commonly requested by accreditors, lenders, donors, and boards.

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Does a private school need a Single Audit?

Only if the school itself expends $1,000,000 or more in federal awards in a fiscal year, the threshold in 2 CFR 200.501 for fiscal years beginning on or after October 1, 2024. Title I and similar equitable services provided by the local school district generally do not count, because the district controls those funds.

Tuition discount: A tuition discount is financial aid or tuition remission funded by the school that reduces the price a family pays. Under GAAP it is generally reported as a reduction of tuition revenue rather than as an expense.

Why private schools get audited

Most private schools are nonprofit organizations, and the demand for audited or reviewed financial statements usually comes from outside the school. Accrediting associations may ask for financial statements during self-study or renewal. State scholarship, voucher, or grant programs may require financial reporting from participating schools. Banks and bond documents for new buildings often require annual audited statements and covenant certificates. Foundations and major donors frequently ask for audited financials before a significant gift, and many boards simply want independent assurance.

Requirements differ by accreditor, program, and lender, so we start by reviewing the actual language that applies to your school. If it calls for an audit, we perform an audit under the AICPA’s auditing standards. If it allows a review, a review under AR-C 90 may be appropriate; see our compilation and review services. Schools that are Maryland-registered charities should also check the audit and review thresholds in Md. Code, Bus. Reg. §6-402, which apply to gross income from charitable contributions.

What a private school audit covers

Tuition and fees (ASC 606)

Enrollment contracts, deferred tuition, refund and withdrawal policies, payment plans, and receivables collectibility.

Financial aid and tuition discounts

Need-based aid, merit awards, and employee tuition remission, presented as reductions of tuition revenue and supported by approvals.

Endowments and UPMIFA

Donor agreements, spending policy, investment returns, underwater funds, and the endowment roll-forward required by FASB ASC 958.

Restricted gifts and annual giving

Purpose- and time-restricted gifts, unconditional pledges, and releases from restriction when conditions are met.

Capital campaigns

Multi-year pledges and discounting, construction in progress, related financing, and debt covenants tied to new facilities.

Federal and state program funds

Direct awards such as school meal reimbursements, state scholarship or grant programs, and whether a Single Audit is triggered.

Tuition revenue and financial aid under ASC 606

Tuition is an exchange transaction, so it follows FASB ASC 606 rather than the contribution guidance in ASC 958-605. The performance obligation is instruction delivered over the academic year, so revenue is recognized over time. When the fiscal year ends June 30 and the school year runs August to June, most tuition falls in one year, but summer programs and prepaid tuition for the next year create deferred revenue that auditors test at year-end.

Financial aid is where schools most often need adjustments. Institutional aid and tuition remission for employees’ children reduce the transaction price and are presented as a reduction of tuition revenue. Auditors trace aid awards to approved award letters, compare them to the aid policy, and confirm the net tuition figure agrees with the student billing system.

Endowments, restricted gifts, and capital campaigns

Endowment funds are governed by the Uniform Prudent Management of Institutional Funds Act, which Maryland, Virginia, and the District of Columbia have adopted. UPMIFA sets the standard of prudence for investing and spending donor-restricted endowment funds. FASB ASC 958 requires disclosure of the school’s spending policy, the endowment composition, a net asset roll-forward, and information about underwater endowments whose fair value has fallen below the original gift amount.

Capital campaigns bring multi-year pledges, which are recognized when unconditional and discounted to present value if collected over more than one year, and conditional pledges, which are not recognized until the condition is met. Auditors also look at construction in progress, related debt, and whether campaign gifts were spent as donors specified.

Federal funds and the Single Audit

Under 2 CFR 200.501, a nonfederal entity that expends $1,000,000 or more in federal awards in a fiscal year beginning on or after October 1, 2024 must have a Single Audit. For many private schools the question turns on who controls the money. Under the Elementary and Secondary Education Act, equitable services for eligible private school students, such as Title I services, are provided by the local educational agency, which keeps title to materials and control of the funds. Those services generally are not federal awards expended by the private school.

Programs in which the school participates directly, such as school meal reimbursements passed through a state agency, or federal grants awarded to the school, are federal awards and count toward the threshold. We review each funding source and tell you whether a Single Audit applies. Public charter schools have different rules; see our charter school audit page.

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Private School Audit FAQs

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Share your accreditor, lender, or board requirement and your funding sources, and a CPA will tell you whether you need an audit, a review, or a Single Audit.

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