Cash Management Requirements
Tammy Hansen
Iowa State University
David Bartlett
Federal Student Aid
Cash Management
Requirements
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


School is a trustee of federal funds



Subject to the highest standards of care and
diligence in administering the programs and
accounting for the funds received
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
7
34 CFR 668.24(b)
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,
14
October 1 following end of award year
Funding Process – Direct Loans and Grants
School makes or
schedules actual
disbursements to
student accounts
School reports
actual
disbursements to
COD
COD accepts actual
disbursement records
and raises Current
Funding Level (CFL) to
amount of accepted
actual disbursements
G5 transfers funds
to school’s federal
funds account
School transfers
funds from federal
funds account to
operating account
School requests
funds from G5 for
transfer to school’s
bank
School funds actual
disbursements to
student accounts
COD sends CFL
amount to G5. G5
adjusts
authorization to
match COD CFL
amount
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:


17
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
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
What
Type and amount of
Title IV funds student
will receive
Who is
Notified
Student
When
Credit of any loan
funds to student’s
account if affirmative
confirmation
obtained*
Student (or
parent, if
Parent PLUS
loan)
Within 30 days of
disbursement
(either before or
after the
disbursement)
Type and amount of Title IV funds
available; How and when funds will
be disbursed; If Direct Loan funds,
amount of subsidized and
unsubsidized
Date and amount of
disbursement; Right of borrower to
cancel all or portion of loan;
Procedures and deadlines for
borrower to cancel the loan
Credit of any loan
funds to student’s
account if affirmative
confirmation is NOT
obtained
Student (or
parent, if
Parent PLUS
loan)
No earlier than 30
days before, and
no later than
seven days after
disbursement
Date and amount of disbursement;
Right of borrower to cancel all or
portion of loan;
Procedures and deadlines for
borrower to cancel the loan;
26
Prior to
disbursement
Required Elements
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
Title IV funds
credited exceed
total allowable
charges
assessed by the
institution
37
Institutional Charges = $ 3,000
Credits to account
= $ 6,172
Pell
$1,900
Direct Loans$3,272
Scholarship $1,000
Title IV Credit Balance = $ 2,172
Institutional Charges = $ 9,738
Credits to account
= $ 9,000
Pell
$3,500
Direct Loans$5,500
Scholarship $1,000
Title IV Credit Balance = $ 0
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 201314 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
43
34 CFR 668.164(i)
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/StoredValue 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
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
 Card






47
Card Requirements - More
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
 School
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
51
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
 Returned funds that cannot be disbursed to
another eligible student must be returned to ED
 This
52
is referred to as a refund in both G5 and COD
Returned Title IV Funds
 ED
considers a school to have returned Title IV
funds when the school has –
 Deposited or transferred the funds into its
federal funds account
 Initiated an electronic funds transfer to ED
using the “Refund” function in G5
 Issued a check to ED
 A school
has not satisfied this requirement until the
bank used by ED has processed the check
Reconciliation Completion
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
 Reconciliation
54
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 2013-2014 is July 31, 2015
55
Regulatory References
 34
CFR 668.16(c); Standards of
Administrative Capability
 34 CFR 668.24(b); Record Retention, Fiscal
Records
 34 CFR 668.82; Standard of Conduct
 34 CFR 668 Subpart K (668.161 to 668.166);
Cash Management
56
Cash Management Resources
 The
Blue Book
 http://www.ifap.ed.gov/ifap/BlueBook.jsp?year=2013
 FSA Handbook,
Volume 2, Chapter 3; Volume 4
 Direct Loan Reconciliation and Program Year
Closeout Start to Finish (recorded webinar)
 http://www2.ed.gov/offices/OSFAP/training/specific.ht
ml
 Click on the left sidebar on “Materials and
Recordings” > “Direct Loan Reconciliation and
Program Year Closeout”
57
Important Phone Numbers
 COD School Relations Center
 1-800-848-0978
 G5 Helpdesk
 1-888-336-8930
 Campus Based Call Center
 1-877-801-7168
58
Contact Info
Tammy Hansen
Iowa State University
hansent@iastate.edu
515-294-5413
David A. Bartlett
U.S. Department of Education
david.bartlett@ed.gov
816-268-0434
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61