Institutional Eligibility Issues Every Aid Administrator Should Know About Blain B. Butner Aaron D. Lacey Eastern Association of Student Financial Aid Administrators 43rd Annual Conference Washington, DC May 18, 2009 Presented by:

2 Overview of Presentation The Program Participation Agreement ›Five institutional responsibilities worth a closer look Updating Application Information ›Locations ›Personnel ›Programs

3 Program Participation Agreement Program Participation Agreement (PPA) is fundamental agreement between ED and institution Content and function of PPA discussed at HEA §487 and 34 C.F.R. § PPA contains information concerning various matters, including: ›Institutional responsibilities ›Special restrictions ›Type of approval (provisional or regular) ›Timing of recertification

4 Program Participation Agreement Five institutional responsibilities from the PPA that are worth a closer look: 1.Administrative Capability 2.Hiring and Contracting 3.Incentive Compensation 4.Campus Crime and Security, and other disclosure requirements 5.Code of Conduct

5 Administrative Capability To begin and continue participating in Title IV programs, an institution must demonstrate that it is capable of adequately administering such programs ›Authority: 34 C.F.R. §668.14(b)(6) Institutions satisfy this “administrative capability” standard by demonstrating compliance with requirements set out at 34 C.F.R. §668.16

6 Administrative Capability 1.Administer Title IV programs in accordance with all applicable federal statutes, regulations and agreements 2.Designate capable individual responsible for administering Title IV programs 3.Communicate effectively between financial aid (“FA”) and other relevant institutional offices 4.Establish written procedures for each FA function (approval, disbursement, reporting) 5.Establish adequate checks and balances in its system of internal controls

7 Administrative Capability 6.Divide functions of authorizing payments and disbursing funds 7.Maintain all required records 8.Establish compliant Satisfactory Academic Progress policy 9.Establish adequate system to identify and resolve information discrepancies in student financial aid applications

8 Administrative Capability 10.Report to OIG any credible information that a Title IV aid applicant may have engaged in fraud or other criminal misconduct in connection with his or her application 11.Report to OIG any credible information that any employee, third-party servicer, or other agent of institution may have engaged in fraud, misrepresentation, conversion or breach of fiduciary responsibility, or other illegal conduct involving Title IV programs 12.Provide adequate financial aid counseling to Title IV applicants

9 Administrative Capability 13.Timely submit all program and fiscal reports and financial statements 14.Show no evidence of significant problems that affect school’s ability to administer Title IV programs 15.Have no principal or affiliate that is debarred or suspended or engaged in any activity that is cause for debarment or suspension 16.Satisfy cohort default rate minimum thresholds 17.Participate in all requisite ED electronic processes 18.Do not otherwise appear to lack administrative capability

10 Hiring and Contracting PPA also requires institutions to comply with certain hiring and contracting restrictions ›Authority: 34 C.F.R. §668.14(b)(18)

11 Hiring and Contracting Must not knowingly employ in financial aid office – or in other positions involving Title IV funds administration – any individual previously convicted of fraud involving federal or other public funds Must not knowingly contract with institution or third- party servicer that has been convicted of fraud or terminated from Title IV programs Must not knowingly contract with or employ any individual, agency or organization that has been (or that has an officer or employee who has been) convicted of fraud or any crime involving acquisition, use or expenditure of federal funds

12 Hiring and Contracting In complying with these requirements, institutions should: ›Conduct adequate diligence prior to entering into any contract or making any hiring decision ›Ensure adequate coordination between Financial Aid and Human Resources offices ›Emphasize to Human Resources that these restrictions are not limited to financial aid hiring

13 Incentive Compensation Institutions are prohibited from providing (or contracting with any entity that provides) any commission, bonus or other incentive payment based directly or indirectly on success in securing enrollments or financial aid to any person engaged in any student recruitment, admissions, or financial aid awarding activities ›Authority: 34 C.F.R. §668.14(b)(22)

14 Incentive Compensation This prohibition applies to all institutions, not just proprietary institutions “Incentive payments” include monetary and non-monetary incentives Also places restrictions on payment of salary to covered employees Is a “hot button” issue for ED

15 Campus Crime and Security Institutions must comply with requirements of Jeanne Clery Disclosure of Campus Security Policy and Campus Crime Statistics Act (“Clery Act”) ›Authority: 34 C.F.R. §668.14(c)(2)

16 Campus Crime and Security Institutions must: ›Have campus security policy in place ›Publish Annual Security Report ›Submit crime statistics to ED annually ›Notify campus community of certain crime-related events ›Retain certain crime-related records

17 Campus Crime and Security ED is paying increased attention to non- compliance in this area: ›Up to $27,500 fine per violation ›Eastern Michigan University was cited by ED in November 2007 for thirteen violations of the Clery Act, and fined a record $357,000

18 Campus Crime and Security 2008 HEOA modified institutional responsibilities relating to: ›Emergency response and immediate warning ›Hate crime reporting ›Campus law enforcement policy statements ›Whistleblower protection and anti- retaliation

19 Other Disclosure Requirements Student financial aid information Information about institution Information on completion or graduation rates ›Degree- or certificate-seeking, full- time undergraduate students ›Some schools must now calculate and disclose “transfer-out” rates Athletic program participation rates, and completion rates for student athletes

20 Code of Conduct All institutions must adopt a Code of Conduct ›Authority: HEA §487(a)(25)

21 Code of Conduct Code of Conduct must include specific provisions relating to: ›Conflicts of interest ›Revenue-sharing arrangements ›Gifts (inducements) ›Certain contracting arrangements ›Borrower choice ›Opportunity pool funds ›Certain staff assistance ›Certain forms of advisory board compensation

22 Code of Conduct Code of Conduct requirement is presently in effect ED has not lost interest in this area Must put into place procedures for ensuring compliance with your code of conduct Must also comply with state laws and state codes of conduct

23 Updating Application Information Each institution’s Eligibility and Certification Approval Report (ECAR) provides details of institution’s participation in Title IV programs as of specific date, including: ›Eligible locations ›Degree levels and programs ›Management, board members and owners ›State and accreditor approvals ›Third-party servicers

24 Updating Application Information Institutions must report certain changes within 10 days of their occurrence: Changes to Locations ›Adding new locations ›Updating information relating to existing locations ›Closing locations

25 Updating Application Information Changes to Management ›CEO/president/chancellor ›CFO/financial officer ›Financial aid director Changes of Ownership ›Ownership tree

26 Updating Application Information Institutions also must report certain changes to programs ›Authority: 34 C.F.R. § Examples of program changes ›Increasing level of program offering ›Adding new non-degree programs »The graduate certificate trap ›Modifying existing program information

27 Updating Application Information Consequences of failure to report: ›Adverse action (e.g., termination, limitations, fines) ›Pay-it-all-back liability

28 Program Participation Agreement (Complete List of Institutional Responsibilities) 1.Comply with all applicable federal statutes, regulations and agreements 2.Properly manage advance payment fund requests 3.Do not charge fees relating to Title IV eligibility or assistance 4.Comply with provisions relating to financial responsibility 5.Comply with provisions relating to standards of administrative capability 6.Comply with mandatory reporting requirements

29 Program Participation Agreement (Complete List of Institutional Responsibilities) 7.Do not certify students for loan amounts exceeding their eligibility 8.Disclose required institutional and financial assistance information 9.Comply with provisions relating to advertisement of job placement rates 10.Disclose information concerning availability of State grant assistance 11.Provide all required certifications 12.If applicable, implement program to assist students in obtaining recognized equivalent of high school diploma

30 Program Participation Agreement (Complete List of Institutional Responsibilities) 13.Do not deny aid based solely on student’s participation in study abroad program approved by institution 14.Comply with default management plan requirements for new participants and institutions undergoing change of ownership 15.Do not knowingly employ in financial aid office individuals previously convicted of financial aid fraud 16.Do not knowingly contract with institution or third- party servicer that has been convicted of fraud or terminated from Title IV programs

31 Program Participation Agreement (Complete List of Institutional Responsibilities) 17.Do not knowingly contract with or employ any individual, agency or organization that has been convicted of fraud or any crime involving acquisition, use or expenditure of federal funds 18.Complete and timely submit IPEDS data 19.If applicable, comply with provisions regarding athletically related aid 20.Do not penalize students for delayed disbursements attributable to institution 21.Comply with incentive compensation restrictions

32 Program Participation Agreement (Complete List of Institutional Responsibilities) 22.Satisfy state licensing requirements and accreditor standards 23.Comply with refund provisions 24.Satisfy requirements for programs preparing students for gainful employment in recognized occupation 25.Certify that institution has drug abuse prevention program 26.Comply with campus security policy and crime disclosure requirements

33 27.If applicable, comply with 90/10 requirement concerning institutional revenue 28.Develop Code of Conduct and Conflict of Interest Policy (NEW) 29.If applicable, create compliant preferred lender list and make related FFEL loan disclosures (NEW) 30.Provide required disclosures relating to private loans (NEW) 31.Develop plan to combat copyright infringement (NEW) Program Participation Agreement (Complete List of Institutional Responsibilities)

34 Contact Information Blain B. Butner ›Dow Lohnes PLLC 1200 New Hampshire Ave, NW Washington, DC ›(202) Aaron D. Lacey ›Dow Lohnes PLLC 1200 New Hampshire Ave, NW Washington, DC ›(202)