Foreign School Cash Management & R2T4

1. Session 44 Foreign School Cash Management & R2T4 Byron Scott | Dec. 2013 U.S. Department of Education 2013 FSA Training Conference for Financial Aid Professionals

2. Standard of Conduct – Fiduciary Duty • A school acts as a fiduciary of Title IV funds • A fiduciary is subject to the highest standards of care and diligence in administering the programs and in accounting for the funds received • A school acts with the competency and integrity to qualify as a fiduciary • Also applies to a third-party servicer

3. Use of Funds • A participating school is a trustee of federal funds • Schools may not use Title IV funds for any other than their intended purposes • Schools may not use Title IV funds as collateral for any purpose

4. Accounting and Recordkeeping • Schools must maintain, on a current basis, financial records that reflect all program transactions • General ledger control accounts and related subsidiary accounts identify all program transactions and separate those transactions from all other transactions • Program subsidiary ledgers • Credit balance ledger

5. Accounting and Recordkeeping

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

7. Disbursement Example

8. Funding Basics • Funding is specific for each program and for each award year • Funding is not student specific • Timelines and deadlines for reporting disbursements to COD • Actual disbursements may be reported up to 7 days prior to disbursement date and must be reported no later than 15 days after the disbursement date • Adjustments to previous disbursements must also be reported within 15 days of the date of adjustment

9. Managing Federal Funds • Schools must not request funds that exceed their immediate need for those funds • Funds received from G5 must be disbursed to students within three business days of receipt • Excess Cash • Any amount of Title IV funds not disbursed to students by the end of the third business day after receipt

10. Direct Loan Current Funding Level • Foreign schools operate on a “records first” basis to establish or increase Current Funding Level (CFL) • Schools submit actual disbursement records to COD • COD sends data for accepted actual disbursements to G5 to create or increase authorization • G5 makes funds available in the amount of accepted disbursements

11. Funding Process 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 raises Authorization to match CFL £ *Extra step for foreign bank accounts

12. G5 Authorization Process

13. G5 Funding Process • Foreign Bank Account • Funds are deposited by the close of business on the third business day after the request • If funds are requested prior to 1:00 p.m. Eastern US Time, the day of the request is the first business day • If funds are requested after 1:00 p.m. Eastern US Time, the day after the request is the first business day • US Bank Account • Funds are deposited by the close of business on the second business day after the request • If funds are requested prior to 1:00 p.m. Eastern US Time, the day of the request is the first business day • If funds are requested after 1:00 p.m. Eastern US Time, the day after the request is the first business day

14. G5 Funding Activity

15. Required Notices

16. Required Notices • Affirmative confirmation • School obtains written confirmation of the types and amounts of FSA program funds that a student wants for an award year before the school credits the student’s account with those loan funds • If affirmative confirmation is received, borrower must be given at least 14 days from the date of notification, or if notification is sent more than 14 days prior to the payment period start date, the borrower has until the first date of the payment period 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)

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

18. Required Authorizations • Each component and term in the authorization must be conspicuous to the reader • Authorization, and each action authorized, must be voluntary • Student (or parent) can refuse, cancel or modify at any time • Explanation of how school will carry out activity • Must be completed prior to action and can be valid for entire period of enrollment • Completed by student, or parent for PLUS

19. Notices and Authorizations • Unless postal mail is required by regulation, schools may provide notice or receive authorizations electronically • May include directing students to secure website that contains the required notifications and disclosures • Must notify each student individually every year that function is performed electronically • Identify information to be disclosed that year • Provide exact address where information can be found • State that, upon request, individuals may request a paper copy and inform students how to obtain paper copy • Notice may be provided via postal mail, campus e-mail, or other direct e-mail

20. Electronic Transaction Consent • Voluntary consent to participate in electronic transactions is required for all financial information provided or made available to student loan borrowers and for all notices and authorizations to FSA recipients required under 34 CFR 668.165

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

22. Prior-Year Charges • Title IV funds can be used to pay minor prior year charges only up to $200 • For Direct Loan recipients, the “year” is the loan period • Determine “year” for each payment period or term • Student/Parent cannot provide authorization to pay for more than $200 in prior year charges

23. 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

24. 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 if student not enrolled at least half time • Used for educational expenses incurred while student was enrolled and eligible • Must be made no later than 180 days after the student became ineligible • If student is eligible, school must attempt to make late disbursement

25. Late Disbursement Eligibility • First-time first-year borrowers must complete 30 days of program • For a second or subsequent disbursement, student graduated or complete the period for which the loan was intended

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

27. 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 • Notifies student within 14-day timeframe check is available for pick-up and provides specific location • Can hold for 21 days from notification • If not picked up, must mail, initiate EFT, or return to the Department

28. Paying Title IV Credit Balances • Schools are prohibited from charging students a fee for delivering FSA funds • If a school delivers FSA funds by crediting funds to a school-issued debit card, students cannot be charged a fee for making withdrawals of FSA funds from the card • If students/parents are required to open a bank account, or the school opens a bank account for the student, student/parent consent required • 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

29. 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

30. Holding Title IV Credit Balances • School must release any remaining Title IV credit balance of loan funds by the end of the loan period • May not go beyond this deadline even with student or parent authorization

31. Returning Funds • Direct Loan funds are school and award-year specific • Funds not disbursed to a student, or returned from a student’s institutional account, may be disbursed to another eligible student within the regulatory timeframes • Be sure to report downward adjustment to COD for student not receiving funds • Returned funds that cannot be disbursed to another eligible student must be returned to the Department • This is referred to as a refund in both G5 and COD

32. Returned Title IV Funds • The Department considers a school to have returned FSA funds when the school has – • Deposited or transferred the funds into its federal funds account • Initiated an electronic funds transfer to the Department using the “Refund” function in G5 • Issued a check • A school has not satisfied this requirement until the bank used by the Department has processed the check Remember! Once funds are deposited into the school’s federal funds account, the money must be returned to the Department or disbursed to another eligible student within the three-business day excess cash timeframe.

33. Refund Example

34. COD Downward Adjustment

35. COD Downward Adjustment

36. COD Downward Adjustment

37. Methods for Returning Funds • U.S. bank account • Use G5 e-Refunds process • The first time user access e-Refunds page, user must designate a U.S. bank account from which the funds will be returned • Can be your federal funds account • Foreign bank account • Wire refunds to G5 • Mail a check payable to U.S. Department of Education • U.S. Dollars must be written or printed on the memo portion of the check • Send separate checks for each award year if making refunds to multiple years • Include school’s OPE ID and DL award year on check or cover letter • See “Funding Process Overview” on Foreign Schools Information page for details • http://www.ifap.ed.gov/ForeignSchoolInfo/ForeignSchoolInfo.html

38. Returned Funds in G5

39. G5 Creating Refunds Tutorial • G5 contains online tutorials to teach users the various aspects of the system, including the refund functionality • To access Creating Refunds tutorial - • From G5.gov home page, select “Main” and then “Online Training” • Click on plus sign next to “G5 Payments for External Users” • Click on plus sign next to “Refund Requests” section • Click on the words “Create Refunds”

40. Direct Loan Reconciliation • Review • Title IV funds received from G5 • Actual disbursement records accepted by COD • School Account Statement (SAS) • School internal accounting records (actual disbursements posted to student accounts) • Direct Loans required to be reconciled monthly

41. Reconciliation Process

42. Reconciliation Process (continued)

43. Reconciliation Completion • Reconciliation is complete when – • All discrepancies have been identified and resolved • Timing issues are tracked for reconciliation in next month’s SAS • All monthly reconciliation efforts have been documented • Reasons for any Ending Cash Balance have been identified

44. Program Year Closeout • Should begin as soon as final disbursements are made • One final month of reconciliation • Must resolve any remaining ending cash balance • Final deadline: Last business day of July of year following the end of the award year • Deadline for 2012-13 is July 31, 2014

45. Funding Information in COD

46. Funding Information in COD

47. Regulatory References • 34 C.F.R 668.16(c) Standards of Administrative Capability • 34 C.F.R. 668.24(b) Record Retention, Fiscal Records • 34 C.F.R. 668.82, Standard of Conduct • 34 C.F.R. 668 Subpart K (668.161 to 668.166), Cash Management

48. Cash Management Resources • The Blue Book • http://www.ifap.ed.gov/ifap/BlueBook.jsp?year=2013 • FSA Handbook, Volume 2, Chapter 3; Volume 4 • IFAP Foreign Schools Information Page • http://www.ifap.ed.gov/ForeignSchoolInfo/ForeignSchoolInfo.html • Direct Loan Processing • Foreign Schools Assessment, Managing Funds • Direct Loan Reconciliation and Program Year Closeout Start to Finish (recorded webinar) • http://www2.ed.gov/offices/OSFAP/training/specific.html • Scroll down to Webinar Recording—Direct Loan Reconciliation and Program Year Closeout: Start to Finish

49. QUESTIONS?

50. Contact Information • Foreign Schools Participation Division • E-mail:    FSA.Foreign.Schools.Team@ed.gov • Phone: 202-377-3168 • Fax: 202-275-3486 • Byron Scott, Training Officer • E-mail: byron.scott@ed.gov • Phone: 312-730-1534