Cash Management Requirements

Cash Management RequirementsTammy Hansen

Iowa State UniversityDavid Bartlett

Federal Student Aid

Agenda

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

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General

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

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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)

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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)

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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

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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

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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

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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)

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Funding Process

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

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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

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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

COD sends CFL amount to G5. G5 adjusts authorization to match COD CFL amount

School requests funds from G5 for transfer to school’s bank

G5 transfers funds to school’s federal funds account

School transfers funds from federal funds account to operating account

School funds actual disbursements to student accounts

Funding Process – Direct Loans and Grants

Methods for Requesting Funds Method is determined by ED

Advance Heightened Cash Monitoring 1 (HCM 1) Heightened Cash Monitoring 2 (HCM 2) ReimbursementHCM1, 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)

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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

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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

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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

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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

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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

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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

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Disbursing Title IV Funds

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

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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

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Required Notices

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What Who is Notified

When Required Elements

Type and amount of Title IV funds student

will receive

Student Prior to 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

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)

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;

Required Notices

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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)

Required Authorizations

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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)

Required Authorizations

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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

Notices and Authorizations

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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

Allowable Charges

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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

Prior-Year Charges

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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

Early Disbursements

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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

Late Disbursements

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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

Late Disbursements

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Must be made no later than 180 days after the student became ineligible

If student is eligible, school must attempt to make late disbursement

Late Disbursements

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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

Title IV Credit Balance

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Title IV funds credited exceed total allowable charges assessed by the institution

Institutional Charges = $ 3,000 Credits to account = $ 6,172 Pell $1,900

Direct Loans$3,272Scholarship $1,000

Title IV Credit Balance = $ 2,172

Institutional Charges = $ 9,738 Credits to account = $ 9,000 Pell $3,500

Direct Loans$5,500Scholarship $1,000

Title IV Credit Balance = $ 0

Paying Title IV Credit Balances

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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


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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


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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

Holding Title IV Credit Balances

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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

Holding Title IV Credit Balances

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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)

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)

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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

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Prepaid Debit/Stored-Value Cards

Prepaid Debit/Stored-Value CardA 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

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Card Requirements - Overview Card must be –

Free to student/parent Widely accepted Able to be converted to cash May not be a credit cardAble to withdraw cash from an easily accessible ATM

Able to be used to purchase goods from a merchant

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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

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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

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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

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Managing Title IV Funds

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 is referred to as a refund in both G5 and COD

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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 EDA school has not satisfied this requirement until the bank used by ED has processed the check

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

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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 yearDeadline for 2013-2014 is July 31, 2015

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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

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Cash Management Resources

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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

Contact Info

Tammy HansenIowa State [email protected]

David A. BartlettU.S. Department of [email protected]

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Cash Management Requirements

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