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Cash Management Requirements

Session 20. Cash Management Requirements. Jeff Baker | Dec. 2013 U.S. Department of Education 2013 FSA Training Conference for Financial Aid Professionals. Agenda. General Funding Process Disbursing Title IV Funds Prepaid Debit Cards & Stored-Value Cards Managing Title IV Funds Q & A.

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Cash Management Requirements

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  1. Session 20 Cash Management Requirements Jeff Baker | Dec. 2013 U.S. Department of Education 2013 FSA Training Conference for Financial Aid Professionals

  2. Agenda • General • Funding Process • Disbursing Title IV Funds • Prepaid Debit Cards & Stored-Value Cards • Managing Title IV Funds • Q & A

  3. General

  4. Standards of Conduct • School is a fiduciary of Title IV funds • Subject to the highest standards of care and diligence in administering the programs and accounting for the funds received • School is a trustee of federal funds • May not use Title IV funds for other than their intended purposes • May not use Title IV funds as collateral • Applies to school’s third-party servicer

  5. Separation of Duties and Internal Controls • Schools must divide the functions of authorizing payments and disbursing funds • Organizationally independent • Not members of the same family • Schools must have adequate systems of internal controls • See 34 CFR 668.16(c)

  6. Accounting and Recordkeeping • School must maintain financial records that reflect all Title IV program transactions • General ledger control accounts and related subsidiary accounts must identify all program transactions and separate those transactions from all other transactions • See 34 CFR 668.24(b)

  7. Accounting and Recordkeeping • School must maintain documentation relating to each student’s (or parent borrower’s) receipt of Title IV funds • The date and amount of each disbursement of Title IV grant or loan funds • The date and amount of each payment of FWS wages • The payment of any overpayment or return of Title IV funds

  8. Federal Funds Account • Schools must maintain Title IV funds in a federally insured account that is identified as containing federal funds • Perkins Loan Revolving Fund must always be in an interest-bearing account • Other Title IV funds must be in an interest bearing account unless the school drew down less than $3 million in Title IV funds in prior award year and expects to draw down less than $3 million in current award year

  9. Garnishment of Title IV Funds Prohibited • No Title IV grant, loan, or work assistance can be subject to garnishment or attachment • Schools must oppose any garnishment order they receive • Schools must notify any off-campus FWS employers of this requirement Note: FWS wages may, with the student’s authorization, be used to pay any costs of attendance the student owes the school or that will become due and payable during the period of the award

  10. Escheating of Title IV Funds Prohibited • Schools must return any Title IV program funds it attempts to disburse directly to a student if the student does not receive the funds • Schools must have a process to ensure Title IV funds never revert to the school, escheat to the state or to any party • If a credit balance check is not cashed, schools must return the funds no later than 240 days after issuing the check - See 34 CFR 668.164(h)

  11. Funding Process

  12. Funding Basics – Pell, TEACH, and IASG • Generally, funding is not student specific, allocations based on COD-G5 processing • Timelines and deadlines for reporting disbursements to the Common Origination & Disbursement (COD) System • Actual disbursements may be reported up to seven days prior to disbursement date and must be reported no later than 15 days after the disbursement date or change to previously reported disbursement

  13. Funding Basics – Campus-Based • Funding is specific for each program and for each award year – not student specific • School allocations are the result of FISAP data • No student level reporting except for Perkins Loans reported to NSLDS • Campus-Based program level data reported through the eCampus-Based system, including the FISAP • Generally, October 1 following end of award year

  14. Funding Process – Direct Loans and Grants School makes or schedules actual disbursements to student accounts G5 transfers funds to school’s federal funds account School transfers funds from federal funds account to operating account School reports actual disbursements to COD School requests funds from G5 for transfer to school’s bank School funds actual disbursements to student accounts COD accepts actual disbursement records and raises Current Funding Level (CFL) to amount of accepted actual disbursements COD sends CFL amount to G5. G5 adjusts authorization to match COD CFL amount

  15. Methods for Requesting Funds • Method is determined by ED • Advance • Heightened Cash Monitoring 1 (HCM 1) • Heightened Cash Monitoring 2 (HCM 2) • Reimbursement • HCM1, HCM2, and Reimbursement require the school to disburse student’s eligible funds to student’s account and then request Title IV funds from ED - See 668.162(e)

  16. Funding – Advance Pay • Pell, TEACH, and Iraq-Afghanistan Service Grant are records first: • COD must accept actual disbursement records to create funding in G5 • Schools may submit actual disbursements or change anticipated disbursements to actual disbursements up to seven calendar days prior to actual disbursement date

  17. Funding – Advance Pay • Direct Loan • Schools with prior year history of disbursements in spring received initial G5 authorization in late March/early April • All other schools received initial G5 authorization in June, based on prior year disbursements

  18. G5 Payment System – ED OCFO • Provides financial management support services • Provides online capability for schools to • Request payments • Adjust drawdowns • Access current grant and payment information • Return funds • All transactions by Title IV program and award year designation

  19. Managing Federal Title IV Funds • Schools must not request Title IV funds that exceed their immediate need for those funds • Funds must be disbursed to students within three business days of receipt

  20. Excess Cash • Any amount of Title IV funds not disbursed to students by the end of the third business day after receipt • For circumstances beyond the school’s control (change in enrollment status, change in award because of verification), school may maintain excess cash to make disbursements within seven additional days

  21. Excess Cash • Allowable excess cash tolerances • School may maintain for up to seven days funds that do not exceed 1% of total amount the institution drew down in the prior year • Consequences for retaining excess cash • Require school to reimburse ED for costs ED incurred in making those funds available to the school • Put the school in HCM 1, HCM 2, reimbursement payment method

  22. Disbursing Title IV Funds

  23. Disbursement • Defined as the date a school credits a student’s account at the school or pays a student or parent directly with – • Title IV funds received from the ED • School funds used in advance of receiving funds from the Department • Disbursement date reported to COD must be the actual date of disbursement

  24. Disbursement Reporting Deadline • Actual disbursement records reported to COD must be submitted to COD no later than 15 calendar days after making the disbursement or adjustment to a previously reported disbursement • Applies to the 2013-14 award years – will likely apply to subsequent award years • See July 8, 2013 Federal Register Notice

  25. Required Notices

  26. Required Notices • Affirmative confirmation • School obtains written confirmation that the student wants the loan before the school credits the student’s account with loan funds • Borrower must be given at least 14 days from the date of notification to respond • If affirmative confirmation is not received, borrower must be given at least 30 days from date of notification • See 34 CFR 668.165(a)

  27. Required Authorizations • Use of Title IV funds to pay for allowable charges other than tuition, fees, and room and board • Holding Title IV credit balances • Disbursing Title IV funds by EFT to a bank account designated by the student or parent • Use of a stored-value card or a similar instrument for issuing a Title IV credit balance • See 34 CFR 668.165(b)

  28. Required Authorizations • Language must be clear and conspicuous • Authorization must be voluntary • Must be completed prior to action • Valid for student’s entire enrollment • Student (or parent) can refuse, cancel, or modify at any time

  29. Notices and Authorizations • Generally, schools may provide notice or receive authorizations electronically • May direct students to secure website that contains the required information • Must notify each student every year that function is performed electronically • Identify information to be provided • Provide address where information can be found

  30. Allowable Charges • May only credit account for allowable charges • Current charges for tuition, fees, and room and board if contracted with the school • Other current institutional charges if the student and/or parent provides written authorization • Includes books, supplies, and other equipment

  31. Prior-Year Charges • Title IV funds can be used to pay minor prior year institutional charges up to $200 • Student/Parent cannot provide authorization to pay for more than $200 • For Title IV grants, the year is the award year • For Direct Loans, the year is the loan period

  32. Early Disbursements • Term-based credit-hour program • 10 days before the first day of classes of the term • Clock-hour and non-term credit-hour programs • Later of – • 10 days before the first day of classes of the payment period, OR • The date the student completed the previous payment period

  33. Late Disbursements • If student no longer eligible and only if – • School received an ISIR with an official EFC while the student was still eligible and - • For Direct Loans and TEACH, the school originated the loan while the student was still eligible • For FSEOG and Perkins, the school awarded the aid while the student was still eligible

  34. Late Disbursements • Must be made no later than 180 days after the student became ineligible • If student is eligible, school must attempt to make late disbursement

  35. Late Disbursements • For Direct Loan recipients, a disbursement made after the student is no longer enrolled at least half-time • May not originate a new loan or increase an existing loan amount • May not make a second or subsequent disbursement unless student completed the loan period • First-time first-year borrowers must complete 30 days of program

  36. Title IV Credit Balance Institutional Charges = $ 3,000 Credits to account = $ 6,172Pell $1,900 Direct Loans $3,272Scholarship $1,000 Title IV Credit Balance = $ 2,172 Title IV funds credited exceed total allowable charges assessed by the institution Institutional Charges = $ 9,738 Credits to account = $ 9,000Pell $3,500 Direct Loans $5,500 Scholarship $1,000 Title IV Credit Balance = $ 0

  37. Paying Title IV Credit Balances • School must pay credit balance to student/parent no later than – • 14 calendar days after balance occurs, if it occurs after first day of classes of payment period • 14 calendar days after first day of classes if it occurs on or before the first day of classes of payment period • Payments via check are considered paid on date school mails check or notifies student

  38. Paying Title IV Credit Balances • Schools are prohibited from charging students a fee for receiving Title IV funds • If students/parents are required to open a bank account, or the school opens a bank account for the student, student/parent consent is required

  39. Paying Title IV Credit Balances • If a school delivers Title IV funds by crediting funds to a school-issued debit card, students cannot be charged a fee for making withdrawals of Title IV funds from the card • Student must not incur any cost in making cash withdrawals from convenient bank branch or ATM • See 34 CFR 668.164(c)(3) and page 4-42 of 2013-14 FSA Handbook

  40. Holding Title IV Credit Balances • Student or parent may voluntarily authorize school to hold credit balance • School must – • Identify amount of funds held for each student/parent in subsidiary ledger account • Maintain cash equal to credit balances held • School may retain interest earned on retained funds

  41. Holding Title IV Credit Balances • School must release any remaining Title IV credit balance upon request of the student (parent) • School must release any remaining Title IV credit balance of- • Direct Loan funds by the end of the loan period • Grants and Perkins Loans by the end of the award year • See 34 CFR 668.165(b)(5)(iii)

  42. Disbursements for Books & Supplies • Must provide a method for Pell-eligible students to obtain books & supplies no later than the seventh day of a payment period if - • Title IV funds could have been disbursed 10 days before beginning of payment period, and • All Title IV aid would have created a Title IV credit balance • See 34 CFR 668.164(i)

  43. Disbursements for Books & Supplies • Must provide the lesser of: • The Title IV credit balance, or • Amount needed by student, as determined by the school • Must determine the method(s) for assisting students with purchasing books & supplies • If student utilizes the method, the student is considered to have authorized the use of funds, for this purpose only

  44. Prepaid Debit/Stored-Value Cards

  45. Prepaid Debit/Stored-Value Card A prepaid debit/stored-value card may be used to disburse FWS wages or a Title IV credit balance if the school is in compliance with the regulations at 34 CFR 668.164(c) and the information on page 4-46 of 2013-14 Federal Student Aid Handbook

  46. Card Requirements - Overview • Card must be – • Free to student/parent • Widely accepted • Able to be converted to cash • May not be a credit card • Able to withdraw cash from an easily accessible ATM • Able to be used to purchase goods from a merchant

  47. Card Requirements - More • School must have student’s authorization to use the prepaid debit/stored-value card for paying FWS wages or Title IV credit balances • Value of card must be convertible to cash • Student must not incur any fees for withdrawing cash • Student must not be charged for having card issued

  48. Card Requirements - More • Underlying account must be Federally insured and must be unique to each student • School must not be able to make claims against the funds on the card • Card must not be marketed as a credit card • School must inform student of any terms or conditions associated with accepting or using the card

  49. Card Requirements - More • Use of card must comply with all timeframes associated with disbursing FWS wages or Title IV credit balances • Student’s access to funds cannot be conditional upon continued enrollment, academic status, or financial standing with the school

  50. Managing Title IV Funds

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