Verification Changes AND What does the future hold? NJASFAA January 27, 2012 Howard Leslie, VP FA Berkeley College

Agenda Some Politics – what got us here? Verification Changes (the pain) IRS Data Retrieval Tool (be careful what you ask for) Custom Verification (the end of the pain and a whole new wonderful day) 2

Why Now – per DOE?  Last comprehensive look in 1985  Need analysis changes  IRS data retrieval  Operational improvements  Right money to the right people in the right way at the right time 3

Why Now – my humble opinion?  Budget crisis  Explosion of Pell costs  Threats to eliminate DOE (as well as up to 4 other cabinet departments) 4

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VERIFICATION 7

New Verification Regulations  Part of Program Integrity Package  Notice of Proposed Rulemaking (NPRM): June 18, 2010  Final regulations: October 29, 2010 – effective July 1, 2012 which means…..  Effective for the Award Year 8

DOE communications for further reference  NPRM: June 18, 2010  Final regulations: October 29, 2010  Technical corrections: April 14, 2011  Federal Register notice: July 13, 2011  Dear Colleague letters  GEN-11-03, February 2011 (IRS)  GEN-11-13, July 2011 (Verification) 9

Major Changes ELIMINATION OF 30 PERCENT OPTION

Major Changes ELIMINATION OF $400 NET TOLERANCE SINGLE DOLLAR ITEMS $25 TOLERANCE INTRODUCED

Major Changes Removed the requirement to pay Pell Grant on the higher EFC 12

Major Changes ALL CORRECTIONS MUST BE MADE Even if there is no change to the EFC

Major Changes NEW DATA ELEMENTS FOR VERIFICATION HAVE BEEN INTRODUCED AND WILL CHANGE EVERY YEAR (See DCL GEN for the list)

Major Changes COMPLETION OF VERICATION BEFORE PJ

Major Changes EXCLUSIONS ADDED AND ELIMINATED (refer to [668.54(b)]

Major Changes UPDATING DEPENDENCY STATUS BASED ON MARITAL STATUS

Major Changes A MOMENT BEFORE WE CONTINUE Let’s discuss what was supposed to happen vs. what has happened to verification Be careful what you ask for – you just might get it and regret it. Effective Paper tax returns are no longer acceptable documentation (see DCL GEN-11-03) (see DCL GEN-11-03)

Verification Items  Annual Federal Register notice—  Items to verify  Acceptable documentation  Federal Register notice: July 13, 2011  DCL GEN-11-13, July

Verification Items  All Applicants—  Number in Household –  Not required if:  Dependent student household size reported is two and the parent is single, separated, divorced, or widowed; or three if the parent is married  Independent student household reported is one and the applicant is single, separated, divorced, or widowed; or two if the applicant is married 20

Verification Items  All Applicants —  Number in College -  Not required if reported is one  Applicant must provide the name and age of each household member who is or will be attending an eligible postsecondary educational institution as at least a half-time student in the award year and the name of the eligible institution(s) that each household member is or will be attending 21

Verification Items  All Applicants —  Food Stamps (SNAP), if receipt reported on FAFSA—  Documentation from the agency that issues Food Stamps benefit or alternative documentation as determined by the institution to be sufficient to confirm that the applicant received Food Stamps in 2010 or

Verification Items  All Applicants —  Child support paid if amount reported on FAFSA—  Statement signed by the applicant, spouse, or parent who paid child support certifying:  Amount of child support paid  Name of the person to who child support was paid  The name of the children for who child support was paid 23

Verification Items  Tax Filers — (From IRS Data Retrieval)  Adjusted Gross Income (AGI)  Taxes paid  Specific untaxed income items from tax return -  Untaxed IRA distributions  Untaxed pensions  Education credits  IRA deductions  Tax exempt interest 24

Verification Items Nontax Filers—  Copy of IRS Form W-2 for each source of employment income received for tax year 2011  A signed statement certifying—  That the individual has not filed and is not required to file an income tax return for tax year 2011  The sources of income earned from work as reported on the FAFSA and amounts of income from each source for tax year 2011 that is not on W-2s 25

Documentation  Comprehensive list in July 13, 2011 Federal Register notice  IRS Data Retrieval Process  IRS Transcript  Request  Online  Phone:  Form 4506T-EZ  IRS Tax Return: Limited conditions 26

BEFORE WE GET INTO IRS Data Retrieval – Howard’s projection ALL PELL ELIGIBLE STUDENTS WHO DO NOT USE THE IRS DR PROCESS – during the initial FOTW application process WILL BE CHOSEN FOR VERIFICATION. 27

IRS Data Retrieval  CPS will set flags and comment codes to indicate that the student and/or parent transferred IRS data into FOTW  Comment codes will appear in –  FAA Information section of the ISIR  Student Inquiry section of FAA Access  Flags and codes set based on certain conditions 28

Updated IRS Request Flags 29

IRS Data and Verification Statistics

IRS DRT Tentative - February 1 st deployment for The IRS DRT process will be enhanced to more effectively encourage users to link to and transfer data from the IRS More applications will have more accurate data, which will contribute to increased accuracy in awarding aid 31

IRS DRT Currently FOTW relies primarily on the applicant to determine whether the IRS DRT should be used FOTW will include logic to make a more accurate decision for the applicant 32

IRS Data Retrieval Tool Confirmation Page Upon submission, reminds students that the IRS DRT option is the preferred method of providing tax information and they can return when their application has been processed to use the tool Customized messaging displays when the student and/or parent was eligible to use the IRS DRT and didn’t, or the student and/or parent indicated “Will file taxes” 33

IRS Data Retrieval Tool Income Estimator Notifications Around March 15 th, students and/or parents will receive reminders to update the student’s FAFSA with filed tax information Messaging encourages the use of the IRS DRT if the option is available in FAFSA on the Web 34

IRS Data Retrieval Tool IRS DRT Eligible Filer Notifications Students and parents who were eligible to use the IRS DRT but didn’t will receive an notification encouraging them to return to FAFSA on the Web and use the tool s will be sent beginning on April 1, 2012, with subsequent messages sent every 45 days until mid- September, and then every 60 days until the end of the cycle s will only be sent once per student/parent 35

What is Berkeley doing about all this? Three campaigns Do your taxes early and electronically General FAFSA Campaign Educating students/parents about the correction option in order to perform IRS Data 36

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Customized Verification 38

Verification Selection I think we are all familiar with the current process – does anyone wish to discuss? 39

Future Verification In the future, the ISIR will indicate Whether an applicant has been selected for verification, and Specific item or items that must be verified will Serve as transition year Be a “hybrid” of the current and future verification selection processes 40

Customized Verification Like current process, applicant data will be subjected to risk model on 01 transaction Three categories of selection Targeted selection - data meets a risk criteria and record is selected for “targeted” verification Discretionary selection - data does not meet risk criteria for targeted selection, but is selected to verify a non-targeted data element Combination of targeted and discretionary selection 41

Targeted Selection Using FAFSA data elements to be verified as an example, if applicant is selected for targeted verification, he/she would verify Tax filers AGI* Taxes paid Untaxed income reported on tax returns Untaxed IRA distributions Untaxed pensions Education credits IRA deductions Tax exempt interest Family members* Number in college* * If eligible for Automatic Zero EFC 42

Targeted Selection Non-tax filers Earned income Family members Number in college 43

Discretionary Selection If not selected for targeted verification, may be selected to verify discretionary data reported on the FAFSA Using as an example, data elements would include Food stamps Child support paid In and beyond, would probably not select all applicants who reported these items on their FAFSA (i.e., would use “n” value, at least initially) 44

Targeted and Discretionary Combination of targeted and discretionary verification selection Applicant met a targeted risk criteria PLUS Was selected to verify one or more discretionary data elements from the FAFSA 45

The ISIR The Institutional Student Information Record (ISIR) would include Verification Flag (Y, N, *) Fields for all FAFSA data elements subject to verification for a given year (per FR notice) Verification codes for each of those data elements indicating verification selection status Y =Data element selected for verification N=Data element not selected for verification V=Data element selected for verification, but student transferred data using the IRS data retrieval tool and did not change it 46

The ISIR The data elements selected for verification would be based on Applicant’s dependency status Whether applicant was selected for targeted verification, discretionary verification, or both Whether applicant/parent is a tax filer or non-tax filer Whether applicant is eligible for Auto Zero EFC or not Whether applicant must verify HHS and # in college 47

Student Aid Report (SAR) The SAR will tell students that they were selected, but will not indicate the specific fields that need to be verified 48

Example 1 Dependent student, targeted selection only, parent and student both tax filers, not eligible for Auto Zero EFC, did not use IRS Data Retrieval Tool, HHS = 4, # in College = 2 FAFSA Data ElementVerification Indicator Parent AGIY Parent Taxes PaidY Parent Untaxed Income (5 elements)Y Parent Income Earned from WorkN Parent Household SizeY Parent Number in CollegeY Parent Food Stamps ReceivedN Parent Child Support PaidN Student AGIY Student Taxes PaidY Student Untaxed Income (5 elements)Y Student Income Earned from WorkN Student Household SizeN Student Number in CollegeN Student Food Stamps ReceivedN Student Child Support PaidN 49

Example 2 Dependent student, targeted selection only, parent and student both tax filers, not eligible for Auto Zero EFC, used IRS Data Retrieval Tool, HHS = 2, # in College = 1 FAFSA Data ElementVerification Indicator Parent AGIV Parent Taxes PaidV Parent Untaxed Income (5 elements)V Parent Income Earned from WorkN Parent Household SizeN Parent Number in CollegeN Parent Food Stamps ReceivedN Parent Child Support PaidN Student AGIV Student Taxes PaidV Student Untaxed Income (5 elements)V Student Income Earned from WorkN Student Household SizeN Student Number in CollegeN Student Food Stamps ReceivedN Student Child Support PaidN 50

Example 3 Dependent student, parent received food stamps, selected to verify a discretionary item only FAFSA Data ElementVerification Indicator Parent AGIN Parent Taxes PaidN Parent Untaxed Income (5 elements)N Parent Income Earned from WorkN Parent Household SizeN Parent Number in CollegeN Parent Food Stamps ReceivedY Parent Child Support PaidN Student AGIN Student Taxes PaidN Student Untaxed Income (5 elements)N Student Income Earned from WorkN Student Household SizeN Student Number in CollegeN Student Food Stamps ReceivedN Student Child Support PaidN 51

Subsequent Transactions Verification selection would generally occur on initial (01) transactions only Corrections that are processed after selection would continue to be flagged as selected If the student was not selected for verification on initial (01) transaction, selection status would not change based on a correction, unless one of the following occurs The student’s dependency status changes Eligibility for Auto Zero EFC is lost 52

Subsequent Transactions If one of these conditions is met on a correction CPS will apply risk model to corrected FAFSA information If student hits a risk criteria, he/she will be selected for verification on the resulting correction transaction Verification flag set to Y FAFSA data elements to be verified identified on ISIR 53

Subsequent Transaction In some cases, data elements subject to verification may change from one transaction to another if Dependency status changes Tax filing status changes Student/Parent changes any of the items that came from the IRS Student becomes eligible or ineligible for an Automatic Zero EFC 54

Subsequent Transactions In these cases – Verification flag would remain Y New verification tracking flag = R Reset verification indicators for appropriate data elements (Y, N, V) 55

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So in Summary In we have none of the benefits of customized verification (ALL PAIN) In we hope to have a hybrid version (MAYBE MORE PAIN – MAYBE LESS) Customized Verification (when ever it actually does come) – BEST THING SINCE…. 57

ANY QUESTIONS? 58