Foreign Schools: Program Integrity

1. Session #52 Foreign Schools: Program Integrity Trevor Summers, Marcia Fediw, and Mike Stein | Dec. 2014 U.S. Department of Education 2014 FSA Training Conference for Financial Aid Professionals

2. Agenda • Program Integrity • Resolving Problematic ISIRS • Satisfactory Academic Progress • Repeated Coursework • Return to Title IV Funds • Foreign School Participation Data • Financial Statements and Analysis • Compliance Audits • Method of Payment • Returning Title IV Funds

3. What Is Program Integrity? • Program Integrity means that all aspects of the Federal Student Aid system are administered with proper controls, statutory and regulatory adherence, and accountability • When we keep Program Integrity intact on our campuses, it means the FSA systems are doing what Congress wants them to do • We want the FSA programs and systems to help students pay for the cost of higher education • We want an educated workforce • We want all parties involved to be better off because the student chose to enroll at your institution

4. Why Is Program Integrity Important? • The stakes are very high • The investment from the U.S. taxpayers is immense • The FSA Programs award roughly $150 billion in aid annually • We must ensure the right amount of money goes to the right student at the right time • If Program Integrity is lost then any federal program administered by any federal agency would be subject to funding loss

5. Common Program Integrity Issues • What can you and I do to keep these Program Integrity issues in focus? • We can be aware of some common Program Integrity issues to ensure such deficiencies do not exist on our campus • If such issues currently exist, they must be resolved now • If not addressed and resolved, these issues will lead to students receiving Direct Loan funds that they are not eligible for • This could lead to audit findings and financial liabilities or worse

6. General Program Integrity Topics

7. Resolving Problematic ISIRs • An ISIR (Institutional Student Information Record) is what is produced by ED and sent to your campus electronically when an applicant submits a FAFSA with your school code on it • Most ISIRs will be neat, tidy, clean and easy to read, easy to manage and easy to use to determine a student’s FSA awards (loans) • Some ISIRs are not so tidy or easy and require resolution before you disburse any Direct Loan funds to the student

8. Resolving Problematic ISIRs What is the EFC on this ISIR?

9. Resolving Problematic ISIRs • If an ISIR has no EFC displayed then it is a rejected ISIR • This means the CPS could not process it or calculate an EFC because some required information was missing • Do not award a student any Direct Loans if the ISIR is rejected • The student has not yet established eligibility • Read the ISIR comments to determine why it was rejected • Counsel and assist the student on how to correct the ISIR

10. Resolving Problematic ISIRs • How can I counsel and assist the student on how to correct the ISIR? • Use the ISIR Guide and the SAR Comments Code and Text Guide • These are available on ifap.ed.gov under Publications, Processing Publications

11. Satisfactory Academic Progress (SAP) • Why is this an important Program Integrity topic? • To be eligible for Direct Loan funds, a student must make satisfactory academic progress -and- • Your institution must have a reasonable policy for monitoring that progress • The Department of Education (ED) considers a satisfactory academic progress policy to be reasonable if it monitors both the qualitative and quantitative aspect of the student’s academic progress

12. Satisfactory Academic Progress • Are you monitoring your FSA recipients’ academic progress for FSA purposes? • This type of progress monitoring is different than your typical institutional academic progress monitoring • Your institution’s FSA SAP policy must review the student’s qualitative progress and quantitative progress • If you have a U.S. student that is paying cash (no FSA funds involved) then this policy does not apply, although your institutional academic progress policy may apply • Since SAP is one item criteria that establishes student eligibility, it must be monitored either annually or at the end of every payment period

13. Satisfactory Academic Progress • What is the qualitative component of SAP? • This is usually the grade point average (GPA) that a student must have at each evaluation or, if GPA is not an appropriate qualitative measure, a comparable measure against a norm • Think of it this way: • A student with all A’s and B’s will have a higher qualitative factor than a student with C’s and D’s • Your SAP policy must state the minimum qualitative benchmark (or measure) a student must meet at each SAP evaluation

14. Satisfactory Academic Progress • What is the quantitative component of SAP? • This is the pace at which students must progress through their program to ensure that they will graduate within the maximum timeframe • Each academic progress check must measure this rate • Calculate this by dividing the total number of hours the student has successfully completed by the total number attempted • Think of it this way: • A student who has attempted 24 credit hours and passed all 24 hours will have a 100% pace of progression • Your SAP policy must state the minimum quantitative benchmark (or measure) a student must meet at each SAP evaluation

15. Satisfactory Academic Progress • You have options when it comes to crafting your FSA Satisfactory Academic Progress policy • You can review SAP annually or at the end of every payment period (semester/ quarter/term) • You can consider SAP appeals or not • If your SAP policy allows for SAP appeals, remember that you do not have to approve every appeal • Your policy must explain how GPA and pace of completion are affected by course incompletes, withdrawals, and repetitions, and by transfer credits from other schools

16. Satisfactory Academic Progress Question: Where can I get more information on SAP? Answer: • Session #2 - Basics of Student Eligibility • Session #3 - Basics of Satisfactory Academic Progress • Session #4 – Basics of Direct Loans (credit hours)

17. Repeated Coursework • When determining how many hours a student is enrolled in, you must give special attention to students who repeat classes • If a student passes a class but takes it a second time, you can only count the repeated class in the student’s total enrollment one time • If a student fails a class and takes it a second time, you can count the repeated class in the student’s enrollment status more than once • This is important for Cost of Attendance calculation and determining if the student is enrolled half-time or greater

18. Repeated Coursework Example 1 – Johnny In the first term Johnny is taking: • Math 101 (3 credit hours) • History 101 (3 credit hours) • Science 101 (3 credit hours) • Literature 101 (3 credit hours) This totals 12 credit hours of enrollment

19. Repeated Coursework Example 1 – Johnny • Math 101 (3 credit hours) Final grade: A • History 101 (3 credit hours) Final grade: B • Science 101 (3 credit hours) Final grade: B • Literature 101 (3 credit hours) Final grade: D • Johnny earned 12 credit hours in his first term • Johnny is unhappy with the grade of D in Literature 101 • Johnny wants to retake Literature 101 to improve his grade

20. Repeated Coursework Example 1 – Johnny In the second term Johnny is taking: • Math 201 (3 credit hours) Final grade: B • History 201 (3 credit hours) Final grade: A • Science 201 (3 credit hours) Final grade: A • Literature 101 (3 credit hours) Final grade: D • This totals 12 credit hours of enrollment • Johnny makes a D in Literature 101 for a second time

21. Repeated Coursework In the thirdterm Johnny is taking: • Math 301 (3 credit hours) • History 301 (3 credit hours) • Science 301 (3 credit hours) • Literature 101 (3 credit hours) • This totals 9 credit hours of enrollment for FSA purposes • You cannot count Literature 101 in his total enrollment status because he previously passed it and the course was used in his enrollment status for a second time • Johnny is only ¾ time for FSA purposes

22. Repeated Coursework Example 2 – Susie In the first term Susie is taking: • Math 101 (3 credit hours) • History 101 (3 credit hours) • Science 101 (3 credit hours) • Literature 101 (3 credit hours) This totals 12 credit hours of enrollment

23. Repeated Coursework Example 2 – Susie • Math 101 (3 credit hours) Final grade: A • History 101 (3 credit hours) Final grade: B • Science 101 (3 credit hours) Final grade: B • Literature 101 (3 credit hours) Final grade: F Susie earned 9 credit hours in their first term She failed Literature 101

24. Repeated Coursework Example 2 – Susie In the second term Susie is taking: • Math 201 (3 credit hours) Final grade: B • History 201 (3 credit hours) Final grade: A • Science 201 (3 credit hours) Final grade: A • Literature 101 (3 credit hours) Final grade: F • This totals 12 credit hours of enrollment • Susie makes a F in Literature 101 again

25. Repeated Coursework Why is this important? If a student is taking : • English 101 (3 credit hours) • Math 101 (3 credit hours) Then the student is half-time and should be eligible for a Direct Loan HOWEVER…….

26. Repeated Coursework • If Math 101 is the student’s third attempt, and he/she previously passed the first two attempts, you cannot count that class in the student’s enrollment status • This means the student would be enrolled less than half- time for FSA purposes and would not be eligible for a Direct Loan • If Math 101 is the student’s third attempt, and he/she failed the first two attempts, you CAN count that class in the student’s enrollment status • This means the student would be enrolled half-time for FSA purposes and WOULD be eligible for a Direct Loan

27. Repeated Coursework Where can I get more information? ifap.ed.gov

28. Return To Title IV Funds • A Return To Title IV Funds (R2T4) calculation is required whenever a student does not complete a payment period (e.g., term, semesters, trimester) • The R2T4 calculation and your institution’s Refund policy calculation are two very different things • These two calculations don’t interact at all • Your institution’s Refund policy will determine how much money the student will get back (be refunded) • Your R2T4 calculation will determine how much Direct Loan funds the student has earned (is entitled to)

29. Return To Title IV Funds • Direct Loan funds are awarded with assumption that student will attend for entire period for which they are awarded • If student ceases attendance prior to planned ending date, student may not be eligible for full amount of Title IV funds student was scheduled to receive • The student earned the funds through attendance • The R2T4 calculation determines what portion of the Direct Loan the student earned and what portion is unearned • The unearned portion may have to be returned to the source

30. Return To Title IV Funds Helpful Hints: • Use the R2T4 worksheets provided on ifap.ed.gov • Study Volume 5 of the Federal Student Aid Handbook • Attend Session #7 - Basics of R2T4 Using Credit-Hour Calendar • Attend Session #13 – Return of Title IV Funds – Programs of Study Taught in Modules

31. Important Program Integrity Data And Specific Program Integrity Topics

32. Foreign School Participation Data • Participating Institutions • Domestic 5729 • Foreign 399 • 2012-13 Award Year Funding • Domestic $137 Billion • Foreign $1 Billion • Foreign Funding by School Type • For-Profit 57% • Non-Profit 14% • Public 29%

33. Foreign School Participation Data • 399 Institutions • 38 Countries • 23,296 Students • $1 Billion USD annually • Foreign CDRs (Sector rates) • FY2011 (3-yr): 3.8% • FY2010 (3-yr): 4.6% • FY2009 (3-yr): 7.3%

34. Financial Statement Reporting

35. Financial Analysis • Assessment of institutional financial viability and health using financial ratios that are weighted & combined into a single composite score of financial responsibility • Composite scores range from negative 1.0 through positive 3.0. Less than 1.5 is a failing score, but some schools may qualify for “zone” if score is at least 1.0

36. Financial Analysis • Other considerations • Past performance (including timely submission of acceptable compliance audits and audited financial statements) • Going concern statements • Qualified, Adverse, Disclaimed Auditor Opinions • Failure to repay Title IV, HEA program liabilities owing to ED

37. Financial Analysis • In general, “No news is good news” • For Currently Participating Institutions, if a problem:Zone Alternative (Score 1.0 – 1.4, not exceed 3 consecutive years), Zone reporting requirements, Restricted Method of Payment HCM1 & audit attestation. Provisional Certification10% LOC (minimum), Provisional certification, Zone reporting requirements, Restricted Method of Payment HCM1 or HCM2, audit attestation. Letter of Credit only 50% LOC (minimum), can be considered financially responsible. No “Zone” reporting, no Method of Payment restrictions, no audit attestation. • New / Reinstatement Institutions Letter of Credit onlyas above.

38. Compliance Audits

39. Compliance Audit Reporting • Conducted by Certified Independent Auditor • Due no later than six months after the end of the institution’s fiscal year • Alternative Compliance Audit Institution received less than $500,000 in U.S. Dollars in Title IV, HEA Program Funds • Standard Compliance Audit Institution received more than $500,000 in U.S. Dollars in Title IV, HEA Program Funds

40. Compliance Audit Reporting • A Reminder Notice is e-mailed 60 days prior to the audit due date • A Reminder Notice is e-mailed 30 days prior to the audit due date • A Missing Compliance Audit letter is e-mailed if the audit has not been submitted and accepted by the due date • A Citation Letter is mailed, via courier, and electronic copies are e-mailed to the institution  • Once cited, the institution will be placed on Heightened Cash Monitoring, required to submit a Letter of Credit on a U.S. Bank for 5 years, and be Provisionally certified

41. Compliance Audit Reporting Purpose of Compliance Audit Reporting • Ensure an institution is taking corrective action to administer Title IV programs correctly, and • Ensure recipients have received all Title IV, HEA programs funds they are entitled to receive, and • Ensure ED is reimbursed for the cost of any errors in program administration caused by the institution

42. Compliance Audit Resolution • Compliance Audit Resolution is a process that normally occurs after an institution submits an acceptable compliance audit report • Compliance audits ensure that Title IV, HEA funds have been expended correctly, but auditors may identify weaknesses and errors in Title IV, HEA program administration • Schools are expected to implement corrective action for each finding of non-compliance to prevent recurrence • Compliance audit reports containing more serious findings are flagged for additional resolution by the Multi-Regional and Foreign School Participation Division

43. Compliance Audit Resolution • Final Audit Determination Letter completes compliance audit resolution process • Letter may assess a monetary liability to recover unauthorized costs incurred by ED or borrower due to incorrect administration of Title IV, HEA programs. Liabilities are not punitive and there are not fines • School may appeal liabilities, if any, if it has evidence to indicate that the auditor’s finding was incorrect or if ED’s determination was incorrect • Letter provides payment instruction and appeal instruction, if liabilities asserted

44. Top Ten # of Foreign School Audit Findings FY 2014

45. Method of Payment • “Method of Payment” refers to the way an institution receives Title IV, HEA program funds • The Secretary of Education has the sole discretion to determine the method under which Title IV, HEA program funds are provided to an institution. • Types: • Advanced Payment • Heightened Cash Monitoring 1 (HCM1) • Heightened Cash Monitoring 2 (HCM2)/Reimbursement • HCM1, HCM2, and Reimbursement used to mitigate risk and protect the federal interest in Title IV, HEA funds

46. Method of Payment • Advanced Payment: Institutions may draw down Title IV funds prior to disbursing funds to eligible students and parents. Draw down may not exceed actual or expected disbursement amount • HCM1: Institutions must make disbursements before drawing down funds. Afterwards, the institution initiates drawdowns exactly as it would under the Advance payment method. As part of the institution’s annual compliance audit, its auditor is required to express an opinion on the institution’s compliance with HCM1. Additional documentation may be required to be reviewed before school is approved to draw down funds

47. Method of Payment • HCM2/Reimbursement: An institution must first disburse funds to students and then submit a request for reimbursement of those funds to ED. In its request, the institution must submit all requested documentation to ED showing that each student included in its request for funds was eligible for, and received, those funds • The difference between HCM2 and Reimbursement relates to procedures the Department uses when reviewing submissions

48. Returning Title IV Funds • Electronic Announcement, February 26, 2014 • January 1, 2015 returning funds via paper check will no longer be accepted • Schools must return funds electronically • Review “Funding Process Overview” document on the Foreign Schools Page of IFAP • U.S. Bank account • Foreign Bank Account

49. Contacting Us • E-mail: FSA.Foreign.Schools.Team@ed.gov • Phone: 202-377-3168 • Fax: 202-377-3486 • Mail: U.S. Department of Education Multi-Regional and Foreign School Participation Division Union Center Plaza, 7th Floor 830 First Street, NE Washington DC, 20202 (20002 if overnight/courier)

50. QUESTIONS?