Don't get distracted: top audit issues in financial aid

University Business, Sept, 2007 by Samantha Veeder

GIVEN THE RECENT STUDENT loan controversy in financial aid, many campuses have been focused on reviewing preferred-lender list criteria (including a formal RFP process at some institutions), meeting with campus leadership to discuss office policy, and communicating with constituencies, both on and off campus, regarding the situation. Yet, at the same time, aid offices can't pay any less attention to the standard regulatory requirements that can emerge as compliance issues and eZ-Audit submission errors during annual audits and program reviews. Therefore, aid officers should keep in mind the following top regulatory compliance issues, as reported by the U.S. Department of Education Federal Student Aid (FSA) programs, and suggestions included for avoiding these common pitfalls.

SATISFACTORY ACADEMIC PROGRESS

Arguably the most burdensome regulatory requirements are those concerning satisfactory academic progress (SAP). Besides following specific SAP regulations, institutions need to be aware of the impact of SAP on student aid eligibility, which brings another set of compliance issues.

Developing an appropriate institutional policy is challenging, as it requires that academic leadership play a role in defining standards that are the same as or stricter than those applicable for students enrolled in the same educational programs who are not receiving Title IV assistance. The policy must also be consistent with other similar institutional policies, such as NCAA guidelines imposed on student athletes. Since SAP regulations are two-pronged--qualitative and quantitative--IHEs often make the mistake of strictly monitoring one element at the expense of the other.

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RECERTIFICATION PROCESS

During the Title IV recertification process, there are certain changes that require written approval from the U.S. Department of Education before the disbursement of Title IV aid.

These include changes to the state authorizing agency or accrediting agency; changes to program offerings (including the addition of nondegree programs); and changes to institutional structure (nonprofit versus for-profit). These must be submitted, along with supporting documentation, to receive approval.

FISCAL RECONCILIATION OF TITLE IV ACCOUNTS

To participate in Title IV aid programs, IHEs must demonstrate financial responsibility and annually submit audited financial statements and a compliance audit.

Financial responsibility is demonstrated by the ability to provide the services offered in official publications, properly administer FSA programs (if applicable), and meet financial obligations.

Failure to reconcile Title IV accounts is a common compliance issue. Both the financial aid and business offices must work together to compare records of disbursed amounts for each federal program.

These amounts must also be reconciled to the amounts drawn down and reported to the Grants Administration and Payment System (GAPS) for campus-based aid, and the Common Origination and Disbursement (COD) system for Pell Grants and Direct Loans.

If the net expended amounts differ--which is likely based on timing issues related to the reporting of disbursements by the financial aid office and the actual draw down of cash by the business office--discrepancies should be noted and resolved.

To help schools comply, the U.S. Department of Education Federal Student Aid program provides monthly reconciliation worksheets for each program.

RETURN OF TITLE IV FUNDS

Just as time consuming to administer as SAP regulations, return of Title IV funds requires coordination with state or accrediting agency policy requirements, as well as coordination with key campus officials, to develop procedures (which may or may not be the same) for recipients and non-recipients of Title IV aid.

Instead of dictating an institutional policy, federal regulations require the institution to determine the earned and unearned Title IV aid as of the date enrollment ceases, up to the 60 percent point in each payment period.

The most common compliance issue related to Title IV refunds involves late refunds made to FFEL lenders. Generally, schools must complete the refund calculation and return any unearned funds within 30 days of the student's official withdrawl.

Again, the U.S. Department of Education has developed worksheets and software to help institutions with these calculations.

INELIGIBLE SCHOOL

Another example of a common deficiency, most often cited as a result of a program review, is the processing of Title IV aid at an ineligible location.

An institution's eligibility to participate in FSA programs does not automatically include separate locations and extensions.

The Eligibility and Certification Approval Report (ECAR) that the U.S. Department of Education sends to the institution lists the locations that are approved under the Program Participation Agreement (PPA).

To award FSA funds to students where 50 percent or more of an eligible program is offered, the institution must gain approval and appropriate accreditation for each site.