1. Jeff Baker | Dec. 2013 U.S. Department of Education 2013 FSA Training Conference for Financial Aid Professionals Cash Management Requirements Session 20

2. Agenda  General  Funding Process  Disbursing Title IV Funds  Prepaid Debit Cards & Stored-Value Cards  Managing Title IV Funds  Q & A 2

3. 3 General

4. 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 4

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) 5

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 34 CFR 668.24(b) 6

7. 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 7

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 8

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 9

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) 10

11. 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 12

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, October 1 following end of award year 13

14. 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

15. 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) 15

16. 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 16

17. 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 17

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 18

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 19

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 20

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 21

22. 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 23

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 24

25. Required Notices 25 What Who is Notified WhenRequired 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;

26. Required Notices 26  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 27  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 28  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 29  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 30  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 31  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 32  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 33  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 34  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 35  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 36 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$3,272 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

37. Paying Title IV Credit Balances 37  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 38  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 39  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

40. Holding Title IV Credit Balances 40  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 41  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 34 CFR 668.164(i) 42

43. 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 43

44. 44 Prepaid Debit/Stored- Value 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 45

46. Card Requirements - Overview  Card 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 46

47. 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 47

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 48

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 49

50. 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 is referred to as a refund in both G5 and COD 51

52. 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

53. 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 53

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 54

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 55

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” 56

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 57

58. Contact Information 58 We appreciate your feedback and comments. We can be reached at: Rene Tiongquico E-mail: Rene.Tiongquico@ed.gov Rene.Tiongquico@ed.gov Kerri Moseley-Hobbs E-mail: Kerri.MoseleyHobbs@ed.gov Kerri.MoseleyHobbs@ed.gov

59. QUESTIONS? 59