![](media/image1.png){width="6.0875in"
height="3.2465277777777777in"}Program Review Guide

![](media/image2.png){width="1.5in" height="1.4222222222222223in"}

**U.S. Department of Education**

**Prepared by:**

**Case Management and Oversight**

**Schools Channel**

**Student Financial Assistance**

**August 31, 2001**

We Help Put America Through School

Notice

This Program Review Guide is designed to set forth the guidelines and
procedures of the U.S. Department of Education intended for Department
officials conducting institutional reviews of Title IV student financial
assistance programs.

The Guide is not intended to create any substantive or procedural rights
enforceable at law. It does not establish any procedures, requirements,
or standards for the operations of student financial assistance
programs, nor does it bind the Department to particular procedures,
requirements, or standards. For any relevant procedures, requirements,
and standards, the reader should refer to applicable statutes and
regulations and to applicable agreements between institutions and the
Department.

This Guide shall be made available to institutions participating in
programs authorized under Title IV of the Higher Education Act in
accordance with Section 494 of the Higher Education Amendments of 1998,
PL 105-244.

**Table of Contents**

#  {#section .TOC-1 .unnumbered}

## Introduction [i](#introduction)A. Purpose of the Guide [ii](#a.-purpose-of-the-guide) {#introduction-ia.-purpose-of-the-guide-ii .TOC-2}

## B. Additional Publications for Reference [ii](#b.-additional-publications-for-reference) {#b.-additional-publications-for-reference-ii .TOC-2}

## C. List of Acronyms Used in the Guide [iii](#c.-list-of-acronyms-used-in-the-guide) {#c.-list-of-acronyms-used-in-the-guide-iii .TOC-2}

# Chapter I Purpose, Mission, and Scope of Program Reviews [1](#chapter-i-purpose-mission-and-scope-of-program-reviews) {#chapter-i-purpose-mission-and-scope-of-program-reviews-1 .TOC-1}

## A. Purpose [1](#a.-purpose) {#a.-purpose-1 .TOC-2}

### 1. General [1](#general) {#general-1 .TOC-3}

### 2. Congressional Priorities [1](#congressional-priorities) {#congressional-priorities-1 .TOC-3}

### 3. Other Sources of Information [2](#other-sources-of-information) {#other-sources-of-information-2 .TOC-3}

## B. Mission [2](#b.-mission) {#b.-mission-2 .TOC-2}

## C. Scope [3](#c.-scope) {#c.-scope-3 .TOC-2}

### 1. Options in Planning the Scope of Program Reviews -- A Continuum [3](#options-in-planning-the-scope-of-program-reviews-a-continuum) {#options-in-planning-the-scope-of-program-reviews-a-continuum-3 .TOC-3}

### 2. Focused Reviews [4](#focused-reviews) {#focused-reviews-4 .TOC-3}

### 3. Overall Assessment Reviews [4](#overall-assessment-reviews) {#overall-assessment-reviews-4 .TOC-3}

### 4. Expanded Reviews [5](#expanded-reviews) {#expanded-reviews-5 .TOC-3}

# Chapter II Review Preparation [1](#chapter-ii-review-preparation) {#chapter-ii-review-preparation-1 .TOC-1}

## A. Review Information in ED Databases [1](#a.-review-information-in-ed-databases) {#a.-review-information-in-ed-databases-1 .TOC-2}

### 1. PEPS (Postsecondary Education Participants System) [1](#peps-postsecondary-education-participants-system) {#peps-postsecondary-education-participants-system-1 .TOC-3}

### 2. Institutional Assessment Model [4](#institutional-assessment-model) {#institutional-assessment-model-4 .TOC-3}

### 3. NSLDS (National Student Loan Data System) [4](#nslds-national-student-loan-data-system) {#nslds-national-student-loan-data-system-4 .TOC-3}

### 4. Grants Administration and Payment System (GAPS) [5](#grants-administration-and-payment-system-gaps) {#grants-administration-and-payment-system-gaps-5 .TOC-3}

### 5. Fiscal Operations Report and Application to Participate (FISAP)/Campus Based-Windows [6](#fiscal-operations-report-and-application-to-participate-fisapcampus-based-windows) {#fiscal-operations-report-and-application-to-participate-fisapcampus-based-windows-6 .TOC-3}

### 6. Recipient Financial Management System (RFMS) [6](#recipient-financial-management-system-rfms) {#recipient-financial-management-system-rfms-6 .TOC-3}

### 7. Direct Loan System [6](#direct-loan-system) {#direct-loan-system-6 .TOC-3}

## B. Access to Other Case Team Records/Resources [7](#b.-access-to-other-case-team-recordsresources) {#b.-access-to-other-case-team-recordsresources-7 .TOC-2}

### 1. Prior Reviews [7](#prior-reviews) {#prior-reviews-7 .TOC-3}

### 2. Prior Audits [8](#prior-audits) {#prior-audits-8 .TOC-3}

### 3. Complaint Profiles [8](#complaint-profiles) {#complaint-profiles-8 .TOC-3}

### 4. Case Team Files [8](#case-team-files) {#case-team-files-8 .TOC-3}

### 5. AAAD Liaison [8](#aaad-liaison) {#aaad-liaison-8 .TOC-3}

### 6. Contacts with Other Agencies [9](#contacts-with-other-agencies) {#contacts-with-other-agencies-9 .TOC-3}

### 7. The Internet [9](#the-internet) {#the-internet-9 .TOC-3}

## C. Announced/Unannounced Reviews [9](#c.-announcedunannounced-reviews) {#c.-announcedunannounced-reviews-9 .TOC-2}

## D. Coordination of Review Schedules [10](#d.-coordination-of-review-schedules) {#d.-coordination-of-review-schedules-10 .TOC-2}

## E. Sample Selection [11](#e.-sample-selection) {#e.-sample-selection-11 .TOC-2}

## F. Notice of Visit Letter [12](#f.-notice-of-visit-letter) {#f.-notice-of-visit-letter-12 .TOC-2}

## G. Incorporating the SFA Assessment in the Case Management Process [13](#g.-incorporating-the-sfa-assessment-in-the-case-management-process) {#g.-incorporating-the-sfa-assessment-in-the-case-management-process-13 .TOC-2}

### 1. What is the SFA Assessment? [13](#what-is-the-sfa-assessment) {#what-is-the-sfa-assessment-13 .TOC-3}

### 2. Ways to Use the SFA Assessment in the Case Management/ Program Review Process [14](#ways-to-use-the-sfa-assessment-in-the-case-management-program-review-process) {#ways-to-use-the-sfa-assessment-in-the-case-management-program-review-process-14 .TOC-3}

# Chapter III On-Site Review Procedures [1](#chapter-iii-on-site-review-procedures) {#chapter-iii-on-site-review-procedures-1 .TOC-1}

## A. Entrance Conference [1](#a.-entrance-conference) {#a.-entrance-conference-1 .TOC-2}

### 1. Topics to Discuss [1](#topics-to-discuss) {#topics-to-discuss-1 .TOC-3}

### 2. Request for Documents [3](#request-for-documents) {#request-for-documents-3 .TOC-3}

## B. Program Review Process [4](#b.-program-review-process) {#b.-program-review-process-4 .TOC-2}

## C. Interviewing [5](#c.-interviewing) {#c.-interviewing-5 .TOC-2}

## D. Documenting Program Review Findings [7](#d.-documenting-program-review-findings) {#d.-documenting-program-review-findings-7 .TOC-2}

## E. Expanding the Program Review [8](#e.-expanding-the-program-review) {#e.-expanding-the-program-review-8 .TOC-2}

### 1. Expanded Program Review Process [8](#expanded-program-review-process) {#expanded-program-review-process-8 .TOC-3}

### 2. Expanded Review Team Members [9](#expanded-review-team-members) {#expanded-review-team-members-9 .TOC-3}

### 3. AAAD/OGC Involvement in Expanded Reviews [10](#aaadogc-involvement-in-expanded-reviews) {#aaadogc-involvement-in-expanded-reviews-10 .TOC-3}

## F. Detecting and Documenting Suspected Fraud and Abuse [11](#f.-detecting-and-documenting-suspected-fraud-and-abuse) {#f.-detecting-and-documenting-suspected-fraud-and-abuse-11 .TOC-2}

### 1. Indicators of Fraud and Abuse [11](#indicators-of-fraud-and-abuse) {#indicators-of-fraud-and-abuse-11 .TOC-3}

### 2. If Fraud is Suspected [12](#if-fraud-is-suspected) {#if-fraud-is-suspected-12 .TOC-3}

### 3. Documenting Suspected Fraud [12](#documenting-suspected-fraud) {#documenting-suspected-fraud-12 .TOC-3}

### 4. Areas for Potential Fraud [13](#areas-for-potential-fraud) {#areas-for-potential-fraud-13 .TOC-3}

## G. Administrative Action Issues [15](#g.-administrative-action-issues) {#g.-administrative-action-issues-15 .TOC-2}

### 1. Referral to AAAD [16](#referral-to-aaad) {#referral-to-aaad-16 .TOC-3}

### 2. AAAD Action [16](#aaad-action) {#aaad-action-16 .TOC-3}

## H. Evaluating Program Review Results [17](#h.-evaluating-program-review-results) {#h.-evaluating-program-review-results-17 .TOC-2}

### 1. File Reviews [17](#file-reviews) {#file-reviews-17 .TOC-3}

### 2. Corrective Action Plans [18](#corrective-action-plans) {#corrective-action-plans-18 .TOC-3}

### 3. Technical Assistance [19](#technical-assistance) {#technical-assistance-19 .TOC-3}

## I. Exit Conference [20](#i.-exit-conference) {#i.-exit-conference-20 .TOC-2}

# Chapter IV Program Review Items [1](#chapter-iv-program-review-items) {#chapter-iv-program-review-items-1 .TOC-1}

## A. Selecting Which Items to Review [1](#a.-selecting-which-items-to-review) {#a.-selecting-which-items-to-review-1 .TOC-2}

## B. Conflicting Information [1](#b.-conflicting-information) {#b.-conflicting-information-1 .TOC-2}

## C. Program Review Items as Guidance [2](#c.-program-review-items-as-guidance) {#c.-program-review-items-as-guidance-2 .TOC-2}

## D. Program Review Items [3](#d.-program-review-items) {#d.-program-review-items-3 .TOC-2}

### 1. Institutional Eligibility [3](#institutional-eligibility) {#institutional-eligibility-3 .TOC-3}

### 2. Fiscal [3](#fiscal) {#fiscal-3 .TOC-3}

### 3. Student Eligibility [3](#student-eligibility) {#student-eligibility-3 .TOC-3}

### 4. Awarding/Disbursement [3](#awardingdisbursement) {#awardingdisbursement-3 .TOC-3}

### 5. Other [4](#other) {#other-4 .TOC-3}

# Chapter V Office Systems and Coordination [1](#chapter-v-office-systems-and-coordination) {#chapter-v-office-systems-and-coordination-1 .TOC-1}

## A. Offices [1](#a.-offices) {#a.-offices-1 .TOC-2}

## B. Computer Systems [2](#b.-computer-systems) {#b.-computer-systems-2 .TOC-2}

# Chapter VI Special Focus on Default Prevention [1](#chapter-vi-special-focus-on-default-prevention) {#chapter-vi-special-focus-on-default-prevention-1 .TOC-1}

## A. Reviews at Schools With High Cohort Default Rates [1](#a.-reviews-at-schools-with-high-cohort-default-rates) {#a.-reviews-at-schools-with-high-cohort-default-rates-1 .TOC-2}

## B. Review Items [1](#b.-review-items) {#b.-review-items-1 .TOC-2}

## C. Cohort Default Rate [2](#c.-cohort-default-rate) {#c.-cohort-default-rate-2 .TOC-2}

### 1. Formulas Used to Calculate a School's Official Cohort Default Rate [2](#formulas-used-to-calculate-a-schools-official-cohort-default-rate) {#formulas-used-to-calculate-a-schools-official-cohort-default-rate-2 .TOC-3}

## D. Sanctions and Benefits for Cohort Default Rates [3](#d.-sanctions-and-benefits-for-cohort-default-rates) {#d.-sanctions-and-benefits-for-cohort-default-rates-3 .TOC-2}

### 1. Sanctions Associated with High CDRs (effective 7/1/01) [3](#sanctions-associated-with-high-cdrs-effective-7101) {#sanctions-associated-with-high-cdrs-effective-7101-3 .TOC-3}

### 2. Benefits Associated with Low CDRs [3](#benefits-associated-with-low-cdrs) {#benefits-associated-with-low-cdrs-3 .TOC-3}

## E. Changes in School Status [4](#e.-changes-in-school-status) {#e.-changes-in-school-status-4 .TOC-2}

# Chapter VII Special Considerations for Direct Loan Schools [1](#chapter-vii-special-considerations-for-direct-loan-schools) {#chapter-vii-special-considerations-for-direct-loan-schools-1 .TOC-1}

## A. Background [1](#a.-background) {#a.-background-1 .TOC-2}

## B. School Origination Options [1](#b.-school-origination-options) {#b.-school-origination-options-1 .TOC-2}

## C. School Responsibilities [2](#c.-school-responsibilities) {#c.-school-responsibilities-2 .TOC-2}

## D. Review Procedures [3](#d.-review-procedures) {#d.-review-procedures-3 .TOC-2}

### 1. Loan Origination [3](#loan-origination) {#loan-origination-3 .TOC-3}

### 2. Drawdowns and Disbursements [4](#drawdowns-and-disbursements) {#drawdowns-and-disbursements-4 .TOC-3}

### 3. Loan Counseling [6](#loan-counseling) {#loan-counseling-6 .TOC-3}

### 4. Reconciliation [7](#reconciliation) {#reconciliation-7 .TOC-3}

### 5. Administration, Fiscal Control and Fund Accounting [8](#administration-fiscal-control-and-fund-accounting) {#administration-fiscal-control-and-fund-accounting-8 .TOC-3}

### 6. Reporting Changes in Borrower Enrollment Status to ED [10](#reporting-changes-in-borrower-enrollment-status-to-ed) {#reporting-changes-in-borrower-enrollment-status-to-ed-10 .TOC-3}

### 7. Implementing a Quality Assurance System [11](#implementing-a-quality-assurance-system) {#implementing-a-quality-assurance-system-11 .TOC-3}

## E. Other References for Direct Loans [11](#e.-other-references-for-direct-loans) {#e.-other-references-for-direct-loans-11 .TOC-2}

# Chapter VIII Special Focus on Campus Security [1](#chapter-viii-special-focus-on-campus-security) {#chapter-viii-special-focus-on-campus-security-1 .TOC-1}

## A. Annual Security Report -- Contents [1](#a.-annual-security-report-contents) {#a.-annual-security-report-contents-1 .TOC-2}

### 1. Crime Statistics [1](#crime-statistics) {#crime-statistics-1 .TOC-3}

### 2. Campus Security Authority [2](#campus-security-authority) {#campus-security-authority-2 .TOC-3}

### 3. Policy Statements [3](#policy-statements) {#policy-statements-3 .TOC-3}

## B. Annual Security Report -- Method of Distribution [3](#b.-annual-security-report-method-of-distribution) {#b.-annual-security-report-method-of-distribution-3 .TOC-2}

## C. Reviewing Accuracy of Reporting [4](#c.-reviewing-accuracy-of-reporting) {#c.-reviewing-accuracy-of-reporting-4 .TOC-2}

## D. Sources of Data [4](#d.-sources-of-data) {#d.-sources-of-data-4 .TOC-2}

### 1. Institutional Offices [5](#institutional-offices) {#institutional-offices-5 .TOC-3}

### 2. Campus Police/Security Department [5](#campus-policesecurity-department) {#campus-policesecurity-department-5 .TOC-3}

### 3. Local Police [6](#local-police) {#local-police-6 .TOC-3}

# Chapter IX After the Site Visit [1](#chapter-ix-after-the-site-visit) {#chapter-ix-after-the-site-visit-1 .TOC-1}

## A. The Program Review Report [1](#a.-the-program-review-report) {#a.-the-program-review-report-1 .TOC-2}

### 1. Report Preparation [1](#report-preparation) {#report-preparation-1 .TOC-3}

### 2. Timelines for Issuing the Program Review Report [2](#timelines-for-issuing-the-program-review-report) {#timelines-for-issuing-the-program-review-report-2 .TOC-3}

## B. Final Program Review Determinations [3](#b.-final-program-review-determinations) {#b.-final-program-review-determinations-3 .TOC-2}

### 1. Expedited Determination Letter (EDL) [4](#expedited-determination-letter-edl) {#expedited-determination-letter-edl-4 .TOC-3}

## C. PEPS Data Entry and File Maintenance [6](#c.-peps-data-entry-and-file-maintenance) {#c.-peps-data-entry-and-file-maintenance-6 .TOC-2}

### 1. PEPS Data Entry [6](#peps-data-entry) {#peps-data-entry-6 .TOC-3}

### 2. Level of Review Seriousness [6](#level-of-review-seriousness) {#level-of-review-seriousness-6 .TOC-3}

### 3. Deficiency Codes [6](#deficiency-codes) {#deficiency-codes-6 .TOC-3}

### 4. File Maintenance [6](#file-maintenance) {#file-maintenance-6 .TOC-3}

## D. Appeals [7](#d.-appeals) {#d.-appeals-7 .TOC-2}

# List of Appendices  {#list-of-appendices .TOC-1}

# Introduction

***We help put America through school***. We do this by monitoring
schools and their use of Federal Student Financial Assistance (SFA)
funds -- funds intended to provide equal access to education and to
promote educational excellence.

As in the cases of initial participation screening, audit resolution,
financial analysis and recertification, program review is a tool
available to the Case Management Team (CMT) to assess the performance of
our schools. Congress mandated that we use this tool "... to strengthen
the administrative capability and financial responsibility provisions
of" the Higher Education Act. HEA Section 498A(a).

Prepared by a team of central and regional office staff, this major
revision of the Guide reflects significant changes to the program review
process. Numerous staff within Case Management and Oversight (CMO) and
Direct Loan School Relations provided valuable input to this Guide.

The Guide serves as a first point of reference in preparing for and
conducting a program review. It is a compendium of procedures to cover
many different school situations. Some of these procedures are
appropriate only for the most egregious compliance issues. It is the
responsibility of the CMT to select those procedures that best fit the
individual school being reviewed.

Recognizing that most schools make a good faith effort to be in
compliance with the legislation and regulations, this Guide tries to
provide a balance between assisting schools in improving compliance
through development of corrective action plans, and assessing
liabilities resulting from non-compliance. Because of CMO's fiduciary
responsibility to ED, Congress, the taxpayer, and the students and their
families, we can not ignore instances of non-compliance. However, it is
the CMT's responsibility to assess the nature of the non-compliance, the
severity, the harm to the student and the programs caused by the
non-compliance, and to determine the appropriate resolution. While there
needs to be consistency in treatment for similar instances of
non-compliance, we must also recognize that one-size fits all monitoring
doesn't work.

The Guide is designed to be updated regularly, and will be responsive to
regulatory developments and the changing review process. Staff is
encouraged to provide comments and suggestions to their supervisors and
Performance Improvement and Procedures (PIP) on how to make the Guide a
more effective program review resource.

## A. Purpose of the Guide 

The purpose of this guide is to assist CMTs in conducting reviews of the
SFA programs at participating institutions. Also, it is intended to
provide guidelines for consistency in the conduct of SFA program reviews
nationwide, as mandated by Congress.

## B. Additional Publications for Reference

Staff can find additional review guidance in the publications listed
below and in PIP Procedures, Mailbox Messages, and IRB procedures
memoranda. Many references will be available on the Department's web
sites. The most valuable resource, however, will be the knowledge of CMO
staff experienced in program reviews.

-   Higher Education Act of 1965, as amended (HEA)

-   Federal Registers

-   Code of Federal Regulations (CFR)

-   Compilation of Federal Regulations

-   Federal Student Financial Aid Handbooks

-   Counselor\'s Handbooks

-   Dear Colleague Letters (Questions & Answer Bulletins)

-   Verification Guides

-   Audit Guides

-   The Blue Book (Accounting, Recordkeeping, and Reporting by
    Postsecondary Educational Institutions)

-   ED Guide to Payment Management System

-   Delivery System Training Materials

-   Expected Family Contribution Formula

-   Direct Loan Bulletins

## C. List of Acronyms Used in the Guide

**AAAD** Administrative Actions & Appeals Division

**ACD** Area Case Director

**ATB** Ability to Benefit

**CMD** Case Management Division

**CMDD** Case Management Division Director

**CMO** Case Management and Oversight

**CMT** Case Management Team

**COA** Cost of Attendance

**CPA** Certified Public Accountant

**CPS** Central Processing System

**CTL** Co-Team Leader

**DCL** \"Dear Colleague\" Letter

**DMS** Default Management System

**ED** U.S. Department of Education

**EDL** Expedited Determination Letter

**EDPMS** Education Payment Management System

**EFC** Expected Family Contribution

**ESAR** Electronic Student Aid Report

**FAA** Financial Aid Administrator

**FAT** Financial Aid Transcript

**FCC** Perkins Loan Federal Cash Contribution

**FPRD** Final Program Review Determination letter

**GA** Guaranty Agency

**GAPS** Grant Administration and Payment System

**GED** General Equivalency Diploma

**HEA** Higher Education Act, as amended

**IIS** Institutional Improvement Specialist

**IPS** Institutional Payment Summary

**ISIR** Institutional Student Information Record

**LDA** Last Date of Attendance

**LOA** Leave of Absence

**NSLDS** National Student Loan Data System

**OGC** Office of the General Counsel

**OHA** Office of Hearings and Appeals

**OIG** Office of the Inspector General

**PEPS** Postsecondary Education Participants System

**PIP** Performance Improvement and Procedures

**QAP** Quality Assurance Program

**SAP** Satisfactory Academic Progress

**SAR** Student Aid Report

**SOA** Statement of Account

**SSCR** Student Status Confirmation Report

**SFAP** Student Financial Assistance Programs

**SPS** Student Payment Summary (Federal Pell Grant)

**WIA** Workforce Investment Act

**X-Sites** Experimental Sites Initiative

# Chapter I Purpose, Mission, and Scope of Program Reviews

## A. Purpose

Although program reviews are only one of the many tools available to a
Case Management Team (CMT), they frequently are the only face-to-face
contact between school officials and the Department. As such, a CMT
needs to take advantage of this opportunity to establish a partnership
with the school to help it strengthen its administration of the Title IV
programs.

### 1. General

The purpose of a program review is to promote and improve compliance by
improving institutional performance. The reviewer(s) will:

-   analyze institutional data and records and identify any weaknesses
    in the institutional procedures for administering SFA program funds;

-   determine the extent to which any weaknesses in the school's
    administration of SFA funds may subject students and taxpayers to
    potential or actual fraud and abuse;

-   frame corrective actions that will strengthen the school's future
    compliance with SFA rules;

-   quantify any harm resulting from the institution\'s impaired
    performance and identify liabilities where non-compliance results in
    loss, misuse, or unnecessary expenditure of Federal funds; and

-   refer schools for administrative action to protect the interests of
    students and taxpayers, when necessary.

### 2. Congressional Priorities

Congress outlined specific priorities[^1] for selecting schools for a
program review:

-   high cohort default rates (over 25 percent);

-   significant fluctuation in FFEL volume or Pell awards between years;

-   serious deficiencies as reported by state licensing agencies or
    accrediting agencies;

-   high withdrawal rates; and

-   a significant risk of noncompliance with administrative capability
    or financial responsibility provisions of SFA programs, as
    determined by the Secretary.

Case Management Teams (CMTs) routinely address the issues of default
rates, fund fluctuations and risk in case management (eligibility
determinations, audit resolution, financial analysis, and risk
management through use of the Institutional Assessment Model). Where the
Institutional Assessment Model indicates a high probability of impaired
performance or the CMT becomes aware through case management that the
school may seriously lack adequate administrative or financial
capability, the CMT should use the program review tool to assess the
institution's performance. In addition, CMTs may use program reviews to
validate information that a school has submitted to ED that is included
in the Institutional Assessment Model. During most program reviews,
reviewers should provide corrective action guidance if appropriate, and
consider whether additional administrative protection for the SFA
programs is advisable.

### 3. Other Sources of Information

A CMT may become aware of the need for further school assessment because
of:

-   reports from agency partners, such as state licensing agencies,
    guaranty agencies and accrediting agencies;

-   referrals from OIG; and/or

-   student and/or institutional employee complaints.

## B. Mission 

The mission of a program review is to:

-   strengthen administrative capability and financial responsibility
    under Title IV statutes and regulations through on-site assessments
    of and technical assistance on institutional administration of the
    SFA programs.

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-   address financial harm to the taxpayer through liability
    assessments.

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-   tend to those institutions that are seriously mismanaging or abusing
    the SFA programs through referral for administrative action,
    including emergency action, and referrals to the Inspector General -
    Investigative Services when appropriate.

## C. Scope

The CMT, relying on its experience and professional judgment, must
consider not only whether a program review should take place, but also
the scope of review likely to actually strengthen the school's
compliance performance. The program review team plans and conducts a
review based on the needs and directions provided by the CMT consistent
with the information contained in this guide and PIP Procedures
Memoranda.

### 1. Options in Planning the Scope of Program Reviews -- A Continuum

Typically, the overall assessment of an institution's administrative and
financial capability is determined by examining an institution's SFA
policies, procedures and records, using selected program review items
from Chapter IV as a checklist of issues. To economize resources (both
of the CMT and institutions) and to meet the objective of strengthening
compliance by improving institutional performance, the CMT should
consider whether a review should be limited to specific areas. On the
other hand, when the CMT determines that substantial, identifiable
weaknesses exist in an institution's administrative or financial
capacity and AAAD involvement appears probable, the CMT may find it
necessary to expand the review.

The scope of a program review prior to the site visit is determined by
the CMT in consultation with the Co-Team Leaders (CTLs) and Area Case
Director (ACD). During or after the program review, the review team, in
consultation with the CTLs and ACD, may modify the review to expand the
scope based on information discovered on site. Review teams must always
anticipate the possibility of redefining the review strategy and scope.
Thus, the review may change from a focused review to an overall
assessment or from overall assessment to a focused review while on site.
The change of strategy and scope are decisions within the professional
discretion of the review team, but the ACD and CTLs should be consulted
regarding the change in scope.

Regardless of the scope of the review, the CMT should assure that the
team is comprised of members having sufficient experience and knowledge
in the areas within the program review's initial review scope. At all
stages, the CTLs' role is that of resource management to assist the CMT
and review team in completing its task.

###  2. Focused Reviews

Where a program review is needed to address specific issues known to the
CMT, it is more appropriate to narrow the scope of the review to focus
on those issues, and expanding the review as needed. The CMT should
decide the specific issues to be addressed during the program review.

The following are some examples of when a focused review would be
appropriate (this is not an exhaustive list):

-   confirming documentation for institutions on the reimbursement
    system of payment;

-   determining the extent of compliance and corrective action needed
    under the Campus Security Act;

-   verifying cohort default data;

-   determining whether an institution should be removed from the
    reimbursement system of payment.

If the review reveals only insignificant findings, the review team
completes the review, returns to the office, and discusses the findings
with the CMT. In consultation with the ACD and CTL, the review team
determines when the program review report will be issued. (See section
on Timelines for Issuing the Program Review Report.) In general, the
team will notify the school, within 15 days of the date that the on-site
review ends, when it can expect to receive the report.

###  3. Overall Assessment Reviews

An overall assessment review is normally chosen when the CMT seeks a
general evaluation of the school's performance in meeting its
administrative and financial obligations relative to the SFA programs.
In conducting an overall assessment, the review team examines the
institution\'s SFA records, policies, and procedures keeping in mind the
reasons the school was selected for review and checking the key cohort
of program review Items selected from Chapter IV, as appropriate. In
addition, the review team must check on any serious deficiencies noted
in previous audits or reviews, as well as on any negative reports
received locally. The review team will also examine other compliance
issues that reveal themselves during the review.

If the review reveals only insignificant findings, the review team
completes the review, returns to the office, and discusses the findings
with the CMT. In consultation with the ACD and CTL, the review team
determines when the program review report will be issued. (See section
on Timelines for Issuing the Program Review Report.) In general, the
team will notify the school, within 15 days of the date that the on-site
review ends, when it can expect to receive the report.

### 4. Expanded Reviews

Expanded reviews should be conducted when a CMT has information that
significant compliance problems may exist at a school, or when other
areas of concern are identified. The need for an expanded review may be
established during initial case research, upon receipt of information
indicating that probable concerns exist, or during a focused or overall
assessment review.

During or after an overall assessment or focused review, if the review
team concludes that an expanded review is needed, it must consult with
the CTLs and ACD. The expanded review may include notice to other ACDs
or CM Division Directors requesting assistance of other CMO staff (such
as expansion of the review to include additional locations of national
chain schools).

The review team leader must assure that the appropriate staff (CMT
functional area experts, CMT adjuncts and CMO leadership) are fully
apprised of all facts and circumstances indicating the need for further
action or review expansion.

#### a. Example of an Expanded Review

> *Distance education school:* A school participating in the Distance
> Education Demonstration Program (DEDP) was scheduled for a program
> review due to allegations of substantial improper financial aid
> administration by a former employee. The allegations involved the
> distance education program and FFEL administration. The CMT prepared a
> program review plan that included participation by three CMT
> reviewers, a DEDP team member, and guaranty agency reviewers. AAAD and
> OIG were also involved and kept apprised of the issues and program
> review plan.
>
> While on site, the staff focused on both the specific allegations of
> wrong-doing, as well as the review items. The DEDP team member
> analyzed the institution's administration of the DEDP and advised the
> review team on DEDP specific issues. The guaranty agency reviewers
> were able to coordinate and provide GA data and information to the
> Case Team.
>
> As a result of findings by the review team, the DEDP chose to
> terminate the institution's participation in the Pilot Program prior
> to issuance of the program review report. AAAD and OIG worked with the
> review team to obtain the evidence sufficient to support the
> termination.
>
> Chapter III includes more detailed information on procedures for
> conducting and documenting an expanded program review.

# Chapter II Review Preparation

A program review is a very complicated undertaking that involves the
management of a great deal of information and may require the
involvement of many people. Proper preparation and planning is therefore
essential to maximize the efforts of everyone involved. This chapter
summsarizes some of the resources available to reviewers when preparing
for a program review, and also discusses some logistical issues that
should be considered.

To assist reviewers with pre-review planning, a sample Program Review
Preparation Worksheet is included in Appendix A. Here the reviewer can
record and summarize general information about the school, reasons a
school was selected for review, results of research, issues to review
while on-site, etc.

## A. Review Information in ED Databases

ED has many sources for information on schools. By reviewing these
sources, reviewers will gain additional insights about the school, and
may even be able to conduct some evaluations of the school's processes
before the on-site visit. Make a list of any areas of concern or
suggested concentration that are identified during the review
preparation stage and record them in the Program Review Preparation
Worksheet.

### 1. PEPS (Postsecondary Education Participants System)

PEPS is the most comprehensive single source of information regarding
schools participating in the Title IV programs. It serves as the initial
data entry point for most information that SFA receives (e.g., school
eligibility applications, audit data, etc.), and also serves as a source
of information for other data systems (e.g., Institutional Assessment).
Following is a discussion of data available in certain sections of PEPS.

[CMIS (Case Management Information System):]{.underline} The CMIS
section is used to document the case management of schools, relating to
their participation in the Title IV programs. As such, it can be a rich
source of information when preparing for the program review.

In most cases, the decision to conduct a program review was based on the
results of case managing the school. Therefore, there should be notes
for the applicable school in CMIS that document the results of the
research performed by various team members (e.g., audit, eligibility,
program reviews, financial analysis, etc), and the reasons for
recommending that a program review be conducted. This information should
provide insight into areas of particular concern.

However, CMIS is generally only updated as cases are discussed.
Therefore entries may not be all-inclusive, or may not be the most
up-to-date information available to the reviewer.

Additionally, CMIS should be updated to establish a "program review"
case record for the school.

[Eligibility:]{.underline} This section contains information about a
school that may be helpful in planning the program review, such as
additional locations that have been reported to the Department or
whether the school participates in the Quality Assurance Program or
Experimental Sites Initiative. Other types of useful information
include:

-   School's e-mail address;

-   Length of academic programs;

-   Whether the school operates with clock or credit hours (or both);
    and

-   Identity of third-party servicers.

If not already discussed in case managing the school, reviewers can also
identify conditions of any provisional recertification as a possible
area of concentration during the review. Additionally, reviewers could
perform searches based on ownership listings, to identify if there are
other schools with common ownership.

Note that much of this information is summarized in the [Detailed School
Report]{.underline} available from PEPS.

[Program Review]{.underline}: Although CMIS should contain information
about prior program reviews, more detailed information about the types
of findings and associated liabilities can be found in the program
review section of PEPS. Generally, information is maintained for reviews
closed within the last five years.

[Audit:]{.underline} As with program reviews, CMIS should contain
information about recent Title IV audits conducted at the institution.
However, the audit section of PEPS will provide a more detailed record
of the school's audit history. Reviewers may check PEPS or consult their
team's audit resolution specialists for additional information on prior
non-federal audits and audits by OIG staff. Serious audit findings,
especially recurring violations in program review focus items, should be
noted, added to the reviewer\'s on-site checklist, and reviewed for
corrective action.

If the team\'s audit research suggests required audits have
[not]{.underline} been submitted, the Department's Document Receipt and
Control Center (DRCC) or the Federal Audit Clearinghouse (for public and
private/non-profit schools), may show that the audits have been
submitted, but not yet released. If there is no record that audits have
been submitted by required deadlines, this must be discussed with the
school -- non-submission of audits is a significant issue.

[Default Management]{.underline}: This section provides a history of an
institution's official Cohort Default Rates (CDRs). It provides, for
each official CDR, the number of borrowers in repayment and the number
of borrowers in default that were used to calculate the institution's
CDR. If an institutions's CDRs will be reviewed as part of the program
review, the CMT should notify its Default Management Adjunct of the
intended review and request all relevant information on the school, such
as rate trends, program eligibility status, appeal status, and any other
special circumstances related to calculation of the default rate.

[Direct Loan:]{.underline} This section will identify the school's
origination option, which determines such things as whether the school
controls the draw down of Direct Loan funds, and when a school can
disburse funds to students.

[Financial Partners]{.underline}: This section of PEPS contains general
information about guaranty agency reviews.

[Experimental Sites:]{.underline} The Experimental Sites Initiative is a
partnership for regulatory improvement and streamlining experiments
between ED and approximately 135 schools. The schools are exempt from
certain statutory and regulatory requirements while using alternative
approaches for each requirement. Thirteen experiments are being
conducted in financial aid processes related to loan management, award
packaging, and eligibility. The outcome of this initiative is to assist
ED in its continuing efforts to improve Title IV program administration.
The experiments are:

-   Federal Work-Study Time Records

-   Exit Counseling

-   Credit Title IV Aid to Institutional Charges

-   Entrance Counseling

-   Multiple Disbursement for Single Term Loan

-   Overaward Tolerance

-   Thirty-Day Delay for First-time, First-year Borrowers

-   Ability-to-Benefit

-   Loan Fees in Cost of Attendance

-   Federal Work-Study Payment

-   Loan Proration for Graduating Borrowers

-   Credit Title IV Aid to Prior Term Charges

-   Academic Term (Definition)

An overview of this initiative, including a description of each
experiment, the statutory/regulatory citations, and goal of the
experiment will be available soon on the PIPD intranet website at
[Experimental-sites](http://awaipos01/pipd/Perform/Experimental-sites/exp-sites.htm).

Additionally, information relative to the participants and the
experiments is entered into PEPS and updated as changes occur. This will
alert the teams as it does its review preparation what, if any,
exemptions the school has been granted as an experimental site. While in
PEPS, on the school information screen, click on the Experimental Sites
box. This will take you to the Experimental Sites screen that lists the
experiment type, start date and end date (if applicable).

Two of the areas of experimentation, 30 day delay and multiple
disbursement, were included in reauthorization for a broader group of
institutions. Through reauthorization, institutions with default rates
below 10 percent are eligible for these exemptions. These schools are
not reflected in this screen. However, some schools that are eligible
for the exemptions through reauthorization, elected to continue as an
experimental site to assist us in obtaining additional performance data.
ED has extended the experiments until the next reauthorization.

Keep in mind that PEPS is most valuable as a [starting
point]{.underline} for researching institutional information. If
necessary, staff may also check the source documents.

### 2. Institutional Assessment Model

The Department's Institutional Assessment Model provides information
about possible risk factors at each school. It also contains other
information that may be useful, such as comparisons to like institutions
and economic factors of the local area. The institutional assessment
data is only updated periodically and is considered as part of the case
management process. Therefore, evaluations of this data may be included
in CMIS for schools.

### 3. NSLDS (National Student Loan Data System)

NSLDS is the single most complete picture of aid awarded and disbursed
at a school that can be obtained within the Department. NSLDS can
provide summary and detail funding reports for the FFEL and Direct Loan
Programs, the Pell Grant Program, and the Perkins Loan Program. The
detail funding report includes student names and funds disbursed to each
student, which can be useful in preparing a statistical sample. Schools
and approximately 20 servicers (including the National Student
Clearinghouse) send Student Status Confirmation Reports (SSCRs) to
NSLDS. Thus, complete information on student attendance can be retrieved
from NSLDS. 1-800-999-8219 or
[www.nsldsfap.ed.gov](https://www.nsldsfap.ed.gov/secure/logon.asp)

In addition to the standard queries described above, NSLDS can be
queried for specific information on a school. For example, a reviewer
could identify all FFEL lenders and guaranty agencies doing business
with a school during a given time frame, or demographic information such
as age and dependency status could be requested from NSLDS. For such
specialized queries, reviewers should consult their local systems
coordinator.

When using NSLDS data, reviewers should remember that while NSLDS is the
best single source of data on a particular school, it might not be the
best source for each data element. Because NSLDS is a repository that
collects data from many other systems, it provides a one-stop source for
data that may not be easily obtainable otherwise. Reviewers should
consider it a starting point for research, but should exercise caution
when drawing conclusions about data contained in NSLDS and should verify
the data with an independent source before using it as the basis for a
program review finding. Exceptions to this would be SSCR data, Perkins
Loan data, and Pell and FSEOG overpayment data for which schools are
responsible for reporting to NSLDS.

###### Guaranty Agencies For schools that participate in the FFEL program, guaranty agencies can often provide information very similar to the information that can be obtained from the Direct Loan system. Query NSLDS to find which guaranty agencies have loans for the school and contact them to request the information.

### 4. Grants Administration and Payment System (GAPS)

Information about the amount of funds drawn by an institution can be
retrieved from GAPS (e-Payments). This information can be used to
reconcile the cash records at the school. The [Reports]{.underline}
section of GAPS allows the reviewer to request the following reports:

-   Activity Report -- shows the amount of cash drawn down for each
    "award," or document number (including Direct Loans, if the school
    is a Direct Loan participant), along with individual cash request
    dates and amounts;

-   Refunds Report -- identifies the amount of funds the school has
    returned to the Federal programs through GAPS (but does not
    necessarily reflect all actual Title IV refunds); and

-   Award Balances Report -- summarizes the authorization, net draws,
    and available balance for each award.

The [Payment Requests]{.underline} section of GAPS also contains an
Authorization History section, where the reviewer can access information
about the changes in the authorization level for each award.

The data on GAPS only goes back to the spring of 1998, the date of
conversion from EDPMS. For fund activity prior to that, the reviewer
should check EDCAPS at
[http://edcapsrpt.ed.gov:90](http://edcapsrpt.ed.gov:90/)/ Choose the
"Reports" option, then under Reporting Categories choose the [Education
Payment Management System]{.underline} (EDPMS) option.

### 5. Fiscal Operations Report and Application to Participate (FISAP)/Campus Based-Windows

The FISAP reports are now available in electronic format for schools
participating in the Campus-Based Programs. This report contains
important information about the school's management of Campus-Based
Programs. In addition to information about the allocation of funds, and
status of the school's Perkins Loan portfolio for prior years, Part II,
Section E also provides some student enrollment numbers.

### 6. Recipient Financial Management System (RFMS)

RFMS is the successor to the Pell Grant Financial Management System. As
such, it can provide reviewers with information about which students
received Pell Grant funds from a school, and the amounts they were paid.
Therefore, this system could be used to identify the aid recipient
population in a school that only participates in the Pell Grant Program.

Student applicant information is also available through RFMS, which may
be helpful later in the program review process. For example, RFMS may be
able to provide reviewers with students' address information, if there
is a need to conduct off-site interviews. (NSLDS has limited address
information.) Also, it may be possible for schools to change
Institutional Student Information Record (ISIR) information that resides
in institutional databases. Based on other problems identified,
reviewers may decide to test the applicant data in RFMS against what is
found in institutional records.

The need to access specific student data from the system should be rare.
Pell Operations Office can generate reports from the RFMS database -- on
a limited basis as a special request. If necessary, you can request them
through <PellSystems@ed.gov>. There are several initiatives under way
that will hopefully provide staff with easier access to RFMS data.

### 7. Direct Loan System

If the school being reviewed is a Direct Loan participant, reviewers may
find that the Direct Loan System can provide very valuable data. The
Direct Loan System data is similar to the data in the NSLDS in many
ways; however it has the advantages of being more accurate, more
current, and more complete. Unlike NSLDS data that can be retrieved with
very short notice, some planning is required to get Direct Loan System
data. (For more information, see [PIP Memo
00-03](http://awaipos01/pipd/Procedures/download.htm).)

In addition to having more accurate and complete loan amounts, dates,
disbursement information, and refund/cancellation information than
NSLDS, the Direct Loan System can provide reviewers with student contact
information such as addresses and phone numbers. If fraud is suspected
at a school and it is a Direct Loan participant, this information could
be very useful to conduct student interviews or analyze student
demographics.

Another source is
[http://lo-online.ed.gov](http://lo-online.ed.gov/unsecure/index.shtml).
This site provides a variety of reports at both the institution and
student specific level. Information such as batch status, entrance
interview results and school processing status by award year including
cash receipts, ending cash balance and un-booked loans can be accessed
for a particular school. The site also contains student specific data by
individual loan such as Master Promissory Note status and actual
disbursement data. All DL School Relations staff have access to this
site and can provide assistance in running reports.

Furthermore, the Direct Loan School Relations staff maintains a limited
database for schools that participate in the program. Input from the
Direct Loan staff must be obtained during the case management of the
school. Also, reviewers should consider requesting from the Direct Loan
staff any pertinent information that might be available in their
database.

## B. Access to Other Case Team Records/Resources

There are other sources of information available to reviewers other than
those contained on the Department's databases. Some examples are noted
below.

### 1. Prior Reviews

PEPS research will identify the type of findings, and associated
liabilities. However a review of the actual program review records,
especially the correspondence, will provide more in-depth insight into
past problems at the school. Even if there were no resultant
liabilities, past findings may have indicated serious problems that
reviewers may want to look at more closely. For example, the only
finding in a prior review may have identified problems that resulted in
students being [under]{.underline}-awarded, with the resulting
resolution that the institution agreed to retrain staff to prevent a
reoccurrence. That review, as reflected on PEPS (one finding, no
liability) may appear to have insignificant issues, but it is important
to verify that the school is not still under-awarding students.
Reviewers who conducted any recent reviews may provide valuable
information about the school's organization and procedures.

### 2. Prior Audits

As with program reviews, the amount of information found in PEPS is
limited to classifying the finding, and identifying associated
liabilities. Reviewers are encouraged to take special note during
pre-review planning of an institution\'s audit activity and corrective
action plans. The details of the corrective action plans can be found in
actual audit correspondence. While on-site, reviewers should check to
ensure that these corrective action plans have been implemented.
Recurrent and overlapping audit and program review findings should be
noted and referenced in the program review report.

### 3. Complaint Profiles 

Each CMT may have different methods of tracking the receipt and
resolution of complaints and referrals. Ideally, there should be a
method for reviewers to identify and research all recent complaints and
referrals. Even if complaints have been successfully resolved, they may
provide some insight into operations at the school.

### 4. Case Team Files 

Each CMT may maintain various records that may provide additional useful
information. CMT files may also contain information from accrediting and
licensing bodies. For example, the CMT may keep an "institutional file"
in which it files all miscellaneous information that comes to the CMT
about each school (e.g., Campus-Based Allocation Letters that identify
the institution's authorizations, and Perkins Loan authorizations).

### 5. AAAD Liaison

Reviewers should check with their respective AAAD liaison to see if
there are any AAAD records of past administrative actions, appeals of
FPRDs/FADs, and/or debarment or suspension actions against school
officials. AAAD maintains a database of all referrals and resolutions of
administrative actions, appeals, debarments and suspensions, as well as
other miscellaneous information on schools that may not be recorded
elsewhere. In addition, AAAD maintains copies of all settlement
agreements. The AAAD liaison may also be aware of any information from
OGC regarding prior actions.

AAAD staff also have access to the Lexis-Nexis system, which contains
information on case law, news articles and a variety of public records,
including bankruptcy petitions, corporation registrations, judgments,
tax liens, uniform commercial codes (contains information on parties
that have security interests, such as liens, against an individual or
corporation), verdicts and settlements.

### 6. Contacts with Other Agencies

If there is a history of problems -- whether with program reviews,
audits, or complaints -- other agencies may also be aware of problems of
which the Department is unaware. In that case, it may be wise to check
with **state licensing agencies** for complaints or other adverse
institutional information on file. If related to Federal student aid,
these complaints may help identify areas of program review focus. Note
that state agencies may be concerned primarily with academic and
instructional issues.

Similarly, **accrediting bodies** may conduct reviews of their member
institutions. Reviewers might check with accrediting agency personnel to
seek information on student or staff complaints and obtain copies of
institutional annual reports or copies of accrediting agency reviews of
member institutions. The reviewer also has the option to request these
documents directly from the school while on-site.

In addition, reviewers may check with State Attorney General Offices,
the State Comptroller (or other offices that may oversee state grant
programs), offices of consumer affairs, state or local labor department
offices (to check coordination with JTPA program), and legal aid
agencies regarding records of student complaints against institutions.

### 7. The Internet

This discussion must begin with the caveat that reviewers should be very
circumspect about information gathered from the Internet and use only
reliable sources. That being said, there may be some useful information
on the Internet about an institution; for example, discovering through
newspaper links that a school scheduled for a program review was in the
process of being sold.

If the school maintains a website, the reviewer should look it over.
This may provide additional information about the school, -- or may
reveal potential conflicts with information that the school has reported
to ED. Also, a website is information that is being provided to the
consumer, and should be reviewed in the same manner as printed consumer
information to ensure that there is no misrepresentation.

## C. Announced/Unannounced Reviews

In general, all program reviews will be **announced,** although a CMT
may depart from this policy after the ACD consults with the Division
Director. If a review will be announced**,** the institution should be
better prepared to have staff and records available at the agreed-upon
dates of the on-site review. In addition, information on institutional
administration of the Title IV programs may be requested in advance
(typically 2 - 4 week notice). Information requested should include a
complete list of Title IV recipients for the years to be reviewed,
preferably in an electronic format (see Section E regarding sample
selection).

For an unannounced review, the school will **not** be providing Title IV
administration information in advance. Therefore, reviewers must invest
additional time in pre-visit planning and information gathering. This
more extensive advance planning for unannounced reviews includes an
emphasis on gathering information through **indirect** sources \--
everything from the precise route to the institution, to ascertaining
academic schedules so as not to arrive in the midst of registration or
school vacation, to preparation of the statistical sample using data
available from within ED (such as NSLDS or RFMS).

## D. Coordination of Review Schedules

To promote orderly management of the review process and minimize
simultaneous review visits by different review teams to the same
institution, review schedules must be coordinated with other agencies,
as well as other offices within ED. For example, advance communication
with **OIG** on review schedules can help prevent simultaneous,
uncoordinated, multiple review team visits. At the same time, early
coordination may provide reviewers with useful school information held
by OIG or other entities.

Generally, the CMT will have already solicited information during the
case management process from adjunct team members from offices such as
AAAD, Direct Loan, and Quality Assurance. However, once a final decision
is made to conduct the program review, it is advisable to contact those
offices again before scheduling the review. For example, the Direct Loan
Client Account Managers (CAMS) often visit participating schools, so it
is advisable to check with that office to avoid simultaneous visits.

If a school is a Quality Assurance (QA) Program participant, the CMT
must coordinate with the QA Program adjunct team member who can provide
additional input to reviewers. If, after the case management process is
completed, the CMT feels a program review is necessary at a QA school,
the CMT must coordinate with the QA adjunct team member who can assist
them throughout the review process. Since the CMTs are responsible for
oversight of all Title IV institutions, QA schools are not exempt from
program reviews.

Pre-review school information may be sought from each relevant guaranty
agency, state licensing agency, and accrediting agency. Scheduling
details may be shared to promote maximum coordination, including the
possible planning of joint-agency team reviews. However, for unannounced
visits, reviewers might request general information while omitting the
specific review visit dates.

[Note on coordination with non-federal auditors on-site:]{.underline} If
the reviewer arrives unannounced at the school to find that an auditor
will be on-site simultaneously, it is recommended that the reviewer meet
with the auditor and attempt to coordinate document requests as much as
possible. This should minimize inefficiencies and time delays caused by
conflicting need for school documents at the same time.

## E. Sample Selection 

Most program reviews will entail reviewing student files to evaluate the
school's procedures for awarding and disbursing Title IV funds. The
basic guideline is that reviews should cover the **two most recent
closed** award years. In addition, some files from the current award
year should be examined. However, the CMT may decide that a shorter
timeframe is appropriate.

Except for schools with very small Title IV populations (under 100 per
award year), reviewers should prepare a statistical sample list in
advance of the review. To identify a sample of student files to review
on-site, reviewers first select from the population of Title IV
recipients under review a valid **statistical sample** list. From the
statistical sample, the reviewer then selects a smaller, random sample
list. The file review portion of the review begins with this random
sample.

The best source of information about the Title IV recipients is that
institution's records. Many schools maintain databases that identify
Title IV recipients for each award year. To maximize the accuracy of the
sample selection, ask the institution to submit a **complete,
unduplicated, reconciled list (in an electronic database format, if
possible) of all Title IV recipients, by award year.** Ideally, the list
should be sorted alphabetically or by social security number, and should
also identify the amount of Title IV funds received in each program by
each student in the applicable award year. Using a complete,
unduplicated list is important because the results of the review will be
more accurate, and liability extrapolations more comprehensive, if based
on the entire universe of Title IV recipients.

If the reviewer is able to obtain a complete list of Title IV recipients
from the school, he or she will select a statistical sample, using the
[CMO Statistical Sampling
Template](http://awaipos01/pipd/Perform/non-pipd-guid.htm) (an Excel ©
Spreadsheet).

This program works best with a listing provided in a spreadsheet or
database electronic format, primarily because it makes sorting and
eliminating duplicate records easier. However, if the school is able to
provide a hardcopy listing, the statistical sampling template will
function using that data. Reviewers should consult their systems
coordinator if they have any questions about this sampling procedure.

If the institution is unable to submit an acceptable list, the reviewer
may generate an unduplicated aid recipient report from the NSLDS that
will provide a list of Pell and Loan recipients as well as dollar
amounts of aid given to those recipients during a given time frame.
While it may not be inclusive of a school\'s entire Title IV population,
the NSLDS is considered the best currently available resource for the
advance preparation of the statistical sample list. (Due to current
NSLDS querying limitations, some of the loan recipients on the list may
not match the award year designations used by the school. NSLDS queries
for unduplicated aid recipients currently identify loans based on the
loan period start date, so all funds disbursed for that loan will be
included for the award year in which the start date fell. Accordingly, a
loan with a loan period beginning date in June may have been disbursed
in its entirety in the following award year, but those disbursements
will still be included in the totals for the preceding award year.

From the universe of all Title IV recipients for an award year, the
Statistical Sampling Spreadsheet will provide a report that identifies
the random statistical sample of students from that universe. The
software then identifies a further random sub-sample of 15 student
records from the statistical sample group. These records are identified
with an asterisk on the report generated by the software. These student
records will be the initial focus of work for the review. Reviewers may
find that they need to expand the statistical sample to increase the
number of files to be examined.

When conducting a program review that focuses on a very specific area,
reviewers may choose to generate the statistical sample using a
specialized universe. For example, if the review is focused on Pell
Grant recipients, the universe may include only those Title IV
recipients in the applicable award year who received Pell Grant
disbursements.

Additionally, there may be times when reviewers might consider selecting
a judgmental sample. This may be appropriate to augment a statistical
sample, or in certain cases where there is a need to focus on a
particular item. Refunds may be the best example of this, because they
reflect a specialized population (students who withdrew), and because
any liabilities found in the review sample would not usually be
extrapolated (since loan refunds must be attributed for particular
students).

## F. Notice of Visit Letter

The Notice of Visit Letter constitutes the official written request for
access to records, required under 668.23(g), to initiate the program
review process. A standard format for the Notice of Visit letter for
both announced and unannounced reviews is provided in Appendix B.
Reviewers must adjust the text in advance, adding information relevant
to the particular school. Information to be added must include the name
of the chief administrative officer, OPEID numbers, review team
member(s), and award years to be reviewed.

The letter provides a general description of the scope of the program
review, and lists the documents the school is requested to provide for
the review. The letter also discusses the logistical needs of the
reviewers, such as the need for access to copiers, and read-only access
to computer databases.

After the Notice of Visit letter has been sent, reviewers should contact
the institution to arrange an entrance conference to initiate the
program review. It is preferable that managers of the primary offices
involved in the review be present at the entrance conference. This is
usually beneficial, in that it allows the reviewers to become acquainted
with school officials they may be interacting with over the course of
the program review, provide an overview of the review process, and
discuss logistical issues (e.g., copier and computer access, record
availability, etc.).

If the program review is unannounced, reviewers should present the chief
administrative officer with the Notice of Visit letter (see Appendix B)
upon arrival at the institution, and have copies of the letter available
for distribution to other institutional officials. This letter will
introduce the reviewers, inform the institution of the Department\'s
authority to review Title IV records, and provide a comprehensive list
of documents to be provided to the reviewers.

## G. Incorporating the SFA Assessment in the Case Management Process

Reviewers may find the SFA Assessment useful as a tool in the case
management process, and as an information resource. Therefore, reviewers
should become familiar with the SFA Assessment to help determine its
applicability to the circumstances of any school that is being
evaluated. Then, at the reviewers' discretion, and based on the
particulars of the review, decide when/if the SFA Assessment can help at
some point during the review process.

### 1. What is the SFA Assessment?

The SFA Assessment is the starting point for any institution\'s quality
improvement initiatives. The SFA Assessment is designed around the
concept of self-assessment. An institution evaluates and analyzes its
aid delivery system (the existing policies, procedures, and practices)
to determine strengths and weaknesses. The benefit from this process is
that the institution assesses its own systems and identifies areas that
need improvement. The SFA Assessment is designed to strengthen a
trusting relationship with our partners as we strive toward better
service, and to improve overall performance in delivering aid and
serving students.

The SFA Assessment consists of a comprehensive set of activities and
questions designed to help institutions assess current operations in
eight major areas in the delivery of student aid. The SFA Assessment
activities complement the review items discussed in Chapter IV of this
guide. The assessments were selected because they represent areas where
serious deficiencies often result in significant liabilities to schools
for improper use of Federal funds or cause harm to former or current
students. Some of the assessments may require that the institution
select a few files to review in order to complete the exercises.

Each assessment contains the major functional requirements, as well as
suggested assessment steps. The assessments give an institution the
opportunity to take a \"snapshot\" of its current Title IV management.
The end result is a better understanding of not only what the
requirements are, but how well they are being met at the institution and
what improvements need to be made in order to meet the requirements as
outlined in the regulations. The areas covered include Institutional
Participation, Fiscal Management, Recipient Eligibility, Award
Requirements, Disbursement, Reporting and Reconciliation, Automation,
and other administrative practices. Since financial aid is an
**institutional** responsibility, some assessments may need the
involvement of other offices on campus to assist in the completion of
the assessment.

### 2. Ways to Use the SFA Assessment in the Case Management/ Program Review Process

There are different ways that the SFA Assessment can be used throughout
the case management/ program review process.

**During the case management process/prior to the program review** The
motto should be Technical Assistance + Corrective Action = Better
Compliance. The Case Management Teams (CMTs) may find the SFA Assessment
as a useful resource as part of their case management evaluation, before
a program review is conducted. For example, the CMT may determine that a
program review is not warranted, but technical assistance may be needed.
The CMT could then ask the school to complete the SFA Assessment and
return it either to the CMT, or possibly directly to the IIS (after
consulting with the IIS). The IIS could then use the information
supplied by the school to determine what level of technical assistance
is appropriate. This process benefits the CMT because it helps manage
time and resources as we work proactively with the institutions to
assist them to continuously self evaluate their operations.

**Using the SFA Assessment while on-site** The SFA Assessment can be an
effective tool to use while on-site. If reviewers have time to spare
during the review, a portion of the SFA Assessment can be used at the
beginning of the review to help the reviewers and the institution
determine areas that might need improvement. Technical assistance and
recommendations can be provided prior to the reviewers leaving the
campus. This is a proactive approach that benefits both the institution
and SFA.

**Using the SFA Assessment after the review** The SFA Assessment can be
an effective tool to use after the review is conducted. Reviewers could
have an institution complete a section of the SFA Assessment in response
to the exit interview to strengthen areas of non-compliance and to
determine if the findings can be resolved prior to the report being
written. This would be a proactive step toward achieving a mutual
respect and trusted partnership.

Further, the SFA Assessment can be an effective tool to use after the
review is closed. Often times, program reviews are conducted, the
findings are resolved, the reviews are closed, and the institution
begins making similar mistakes in the same areas that resulted in the
findings of the review. Reviewers can encourage the institution to use
the SFA Assessment after the review is closed to continuously evaluate
its procedures to ensure that the findings do not reoccur. If an
institution uses the SFA Assessment to continuously evaluate its Title
IV processes and to make improvements based on the results of the SFA
Assessment activity, then the likelihood of future findings and
liabilities should be reduced.

The SFA Assessment is available on the QA Website [QA
Program](http://qaprogram.air.org/about.html).

# Chapter III On-Site Review Procedures

This chapter provides a framework and compendium of suggestions for
conducting the on-site review. A program review is a fluid process that
often requires reviewers to adjust their initial action plans based on
circumstances encountered on-site. Therefore, reviewers may use their
professional discretion and deviate from some of the procedures
discussed herein.

Reviewers are responsible for ensuring that a reasonable and appropriate
level of testing has been performed to determine the institution's
compliance with Title IV requirements in the areas selected for review
[and]{.underline} for documenting that those tests were performed.
Therefore, reviewers should exercise due care in performing and
evaluating the results of the review while employing an appropriate
degree of investigation and research.

Ideally, the program review should be a cooperative effort between the
reviewers and institutional officials. It is important that each
understands and respects the other's constraints. The reviewers need to
understand and evaluate numerous and complex procedures and records
within a short time span. At the same time, the school's staff usually
still needs to address students' needs during the on-site visit.
Therefore, it is important to establish a framework to maximize the
efforts of everyone involved in the process, and to allow for effective
communication between the reviewers and institutional officials.

Generally, the program review will be conducted by at least one team
member experienced in program reviews. However, the Case Management Team
(CMT) may decide to assign additional team member(s) to a review.

## A. Entrance Conference

During the entrance conference, reviewers should have the opportunity to
meet institutional officials, state the objectives of the program
review, discuss general organizational structure, and establish time
frames required for the retrieval of documents. The president/owner,
school director, financial aid officer, business manager, admissions
director, and registrar should be present at the entrance conference.
Additional institutional officials may attend, depending on the type of
institution being reviewed.

### 1. Topics to Discuss

a.  Reviewers should explain the following to institutional officials:

-   **[Purpose]{.smallcaps}** - The purpose of the program review is to
    evaluate the institution\'s administration of the Title IV programs,
    and to provide guidance and technical assistance.

-   **[Scope]{.smallcaps}** - The scope of the review will generally
    encompass the two most recent closed award years and the current
    award year. Also inform the institution that the review could be
    expanded to encompass up to a three-year period. (Note
    record-retention regulatory requirements.)

-   **[Reason for review]{.smallcaps}** - Reviewers may state the most
    significant factors that contributed to the institution\'s selection
    for a review (e.g., repeat audit findings, results of the
    Institutional Assessment Model (IAM)), unless there is a need to
    withhold the reason, such as student or employee complaints, or
    suspected criminal activity. However, a detailed discussion of the
    Department's IAM is not appropriate.

-   **[Time frame]{.smallcaps}** - Reviewers should provide
    institutional officials with an estimate of the length of the
    program review. In the past, standard reviews generally lasted a
    week, although this may now vary, based on the focus that the case
    team has decided on. Upon completion of the review, an **exit
    conference** may be held to discuss preliminary, summary information
    on deficiencies noted and required institutional actions. The
    reviewer should emphasize that the review report, not the exit
    conference, will provide a more definitive analysis of the findings
    noted in the program review.

b.  Discuss any exemptions from standard regulatory provisions noted in
    the pre-review research (e.g., Quality Assurance Program,
    Experimental Sites, Distance Ed Demo Program, Campus-Based match
    exemption).

c.  Discuss the institution\'s general administration of the Title IV
    programs. For example, departmental interrelationships,
    organizational structure, and basic responsibilities of departments.
    (For more suggestions on Title IV administration and institutional
    office relationships, see Chapter V, Office Systems and
    Coordination.) Some key areas for discussion:

-   admissions process;

-   financial aid packaging process;

-   ability to benefit procedures, if applicable;

-   academic year definition;

-   payment period definition;

-   award authorization/disbursement process;

-   staff roles and specific procedures (take notes on who, what, when
    and how);

-   institutional computer systems and how they affect the Title IV
    awarding/disbursing process.

d.  Discuss the availability of staff in key areas for interviews. At
    this point, reviewers may want to actually schedule interview times,
    or just establish general timeframes when certain staff would be
    available. If necessary, establish procedures for interviewing
    students.

e.  Request that a suitable work area and reasonable access to a
    photocopy machine be provided.

f.  Discuss the general process for communicating about possible issues,
    that in many cases the school will be given a reasonable timeframe
    to resolve deficiencies (and possibly collect missing
    documentation), and the method for school officials to apprise the
    reviewers of their resolution attempts. For example, if the school's
    Satisfactory Academic Progress (SAP) policy was missing a minor
    element, school officials might offer to develop one by the next day
    to avoid (possibly) having the finding included in the program
    review report. Reviewers should explain that such a deficiency might
    be included in the review report even if corrected procedures are
    implemented during the visit. Reviewers will evaluate the financial
    harm to taxpayers and students of the finding, and be open to prompt
    corrective action, if appropriate. Discuss that the school's
    resolution efforts will be noted but, because of time constraints,
    may not be fully evaluated until after returning to the office.

g.  Allow for a question and answer period.

### 2. Request for Documents

Ideally, records requested in the notice of visit letter will be
available when reviewers arrive at the school. At the entrance
conference, reviewers should confirm whether all requested documents are
ready, and identify any additional records that are needed. Each request
for documents should be made in writing, and reviewers should make note
of each record that is received from, or returned to school officials --
especially with student files.

If all the records are not ready at the start of the review, determine
in the conference which documents may be obtained quickly and which
documents may take longer to gather. Reviewers should set specific
deadlines to receive documents. The availability of the documents will
help reviewers establish the structure of the program review. For
example, if student files are not available the first day, reviewers may
want to begin reviewing available fiscal records, or interviewing staff,
or if necessary, students.

Keep in mind that some institutions may have their documents at their
corporate offices or with consultants or servicers. However, the
institution is still responsible for having all records available for
review at the geographical location of instruction. To facilitate
document delivery, reviewers may recommend overnight express of the
documents. In some cases (where photocopies are acceptable), reviewers
may require the institution to have the documents faxed to the review
site.

If the reviewer is **denied access** to records or institutional
officials refuse to cooperate at any time during the program review,
reviewers should remind the school's chief administrator of the
regulation cited in the notice of visit letter (668.23), and discuss the
implications of their decision (reimbursement, and the possibility of
administrative action). If the school officials persist, reviewers
should immediately notify the ACD or CTLs to discuss what action should
be taken. Once this action is determined, the reviewers will inform the
school's chief administrator.

## B. Program Review Process

The purpose of the program review is to make an assessment of the
institution\'s administration of the Title IV programs in the selected
program review focus areas (see Chapter IV), as well as other areas of
concern identified during review preparation, determine if a more
expansive review of the institution's records and procedures is required
and, if not, determine appropriate corrective actions for any
deficiencies noted. The following are general steps in the review
process:

-   Obtain necessary documents from institutional officials, ensuring
    timely delivery. Collect all relevant documents prior to examining
    each review item, so that reviewers may examine that item in its
    entirety. [Example]{.underline}: to examine the institution\'s
    compliance with Ability to Benefit (ATB) requirements, gather the
    test, test score, test key, and the publisher\'s established minimum
    passing scores; identify the test administrator and determine if
    that person is independent of the institution. Check the test
    administrator\'s registration with the test publisher.

-   Interview administrators, staff, and possibly servicers (such as the
    ATB test administrator discussed above) who work in key areas
    relating to the administration of Title IV programs. As discussed
    elsewhere in this guide, the movement of information between people,
    departments, and systems is critical. Discussing the flow of
    information through the school's process can provide quick insight
    into where potential problems may occur. Additional suggestions for
    conducting interviews are included in the next section of this
    chapter, and in Appendices C and D.

-   Interview students. Talking to students allows reviewers to possibly
    confirm information that is reflected in school records, and to
    identify any other areas of concern from their perspective.

-   Analyze institutional documents for compliance with the regulations
    and determine if any deficiencies exist.

-   In general, apprise school officials of apparent deficiencies as
    soon as possible to allow the opportunity to track down mis-filed
    documents, or provide other types of clarifications that may show
    there really is no problem. Provide a brief explanation of the
    possible actions needed to resolve any deficiencies, and explain
    that specific details will be provided in the review report.
    Reviewers should not wait until the exit conference to discuss all
    the review findings (although some last-minute findings may occur).

-   Document each deficiency completely. As a general guideline,
    reviewers should document their reviews as if **each** finding will
    be challenged before a hearing officer. See Section D below for more
    detailed information on documenting findings.

-   Analyze the deficiencies to determine if they are systemic or if
    they are isolated instances.

-   Determine if the random sample needs to be expanded. Reviewers need
    to determine, based on their professional judgment, whether any
    deficiencies are material and systemic in order to determine the
    appropriate corrective action (refer to Section H). If reviewers
    feel they cannot make such a determination based on the results
    found in the initial sample, additional records may need to be
    reviewed. Any expanded random sample should be selected from within
    the original statistical sample.

-   If serious and systemic deficiencies are noted in administrative
    systems, or deliberate misuse of funds is indicated, consult the
    CTL/ACD to determine the next step. This critical decision requires
    the best judgment of an experienced reviewer. If reviewers do not
    uncover any serious violations, they should proceed with a normal or
    expedited program review closure, as discussed in Chapter IX.

As noted in the beginning of this chapter, reviewers have to balance
trying to minimize the interruptions to school staff in their day-to-day
activities, with the need to conduct a swift -- but thorough -- on-site
review. Therefore, in addition to scheduling interviews for detailed
discussions, it may be advantageous to schedule brief meetings at the
beginning or end of each day (perhaps with just one school official
acting as a review coordinator) to quickly discuss possible findings or
questions that need clarification.

## C. Interviewing

A critical element of the review process is the interview. The
information gathered in student and staff interviews can provide a
valuable perspective on the institution\'s Title IV administrative
practices.

In addition, such interview statements may reveal aspects of
noncompliance not evident from the file review. Appendices C and D
provide examples of questions that might be asked during student and
staff interviews. However, above and beyond the questions asked,
reviewers are encouraged to **listen with great care** to the responses
offered, and follow up with additional questions until the facts are
clear.

For example, much can be learned by asking open-ended questions,
questions that do not presuppose a given answer or lead the respondent
in a particular direction.

**[Examples of open-ended questions]{.smallcaps}**:

**Question for staff:** How do you admit students under the Ability to
Benefit provisions? **Question for student:** Can you tell me about the
financial aid you received and how your aid was processed?

Take detailed notes at interviews, sign and date them. The reviewer\'s
own signature and date on detailed interview notes provides some
documentary support in a hearing. Also, reviewers must take necessary
safeguards to protect all workpapers, including sensitive or
controversial interview notes.

Reviewers should strive to include in their notes and observations the
basic ingredients of who, what, where, when, why, and how. Specify for
every statement how the respondent knows what he or she is saying, who
did what, when, where and how.

The obvious issues reviewers face regarding interviews are *who* to
interview, and *when* to conduct the interviews.

Managers of the school's various offices involved in the Title IV
process should be able to provide a basic understanding of the school's
processes. However, a more in-depth picture of a school's procedures may
be gathered by interviewing people at different levels of authority. For
example, a financial aid director may explain the process based on his
or her wishes/understanding of office procedures, but a counselor or
data input clerk might actually follow a more expedient process.

Other parties that may not work directly for the institution that may be
interviewed include:

-   independent ability-to-benefit test administrator;

-   representative of consultants or third-party servicers who perform
    Title IV related functions (e.g., Perkins due diligence, cash
    management, etc.), and

-   managers at internship/externship sites (especially if there is one
    site where numerous students work).

On those occasions when you need to interview students, if reviewers are
seeking to verify accuracy of school records (e.g., whether they took an
ATB test or whether the test was timed), try to interview students from
the review sample. Otherwise reviewers could choose to interview
students at random, possibly requesting their records afterward, if
there were some issues the students raised.

Time permitting, students should be interviewed outside of their
scheduled class times. Students should be interviewed without school
officials present. Students may feel intimidated about being
interviewed. *If applicable*, begin by assuring the students that the
interview is only to confirm how the [school]{.underline} is following
procedures, that they are not being "investigated." The decision of how
many students to interview, or whether to interview any students at all,
may vary, based on the scope of the review or the issues identified
during the review.

There may be times when students approach reviewers to discuss problems
they may be having at the school. Reviewers should always be attentive
to student issues, but if time constraints prevent speaking to all
students while on-site, reviewers should make arrangements for the
students to contact them after the on-site visit is completed.
Additionally, student concerns often relate to quality of education
issues (e.g., broken equipment, teacher quality) that are best addressed
by accrediting or licensing agencies. Therefore, reviewers are advised
to be prepared with the phone numbers and addresses of those agencies
for student referrals.

The best time in the process to interview school officials may vary
depending on their position. For example, it might be necessary to talk
to someone from the fiscal office at the start of the program review to
get an understanding of how the disbursement/drawdown process works, and
to identify what specific records need to be reviewed (since this
process can be vastly different at each school). However, reviewers
might want to wait until they have reviewed some actual records before
meeting with staff from the financial aid office.

## D. Documenting Program Review Findings

Program review findings must be thoroughly documented. Each deficiency
that supports the finding must be associated with specific student
files, school files, checks, documents, etc. It is insufficient to state
a conclusion that a violation exists; reviewers must be able to
substantiate the facts and basis of that conclusion. It is essential
that documentation (copies of relevant correspondence, forms, checks,
memos, attendance sheets, logbooks, registers, etc.) be clear and
readable. If conflicting documents are at issue, reviewers must identify
the documents and the specific information that is in conflict. All
copies should be one-sided, on regular size paper, not stapled.

Reviewers should sign and date notes taken during a review, to help
authenticate them as contemporaneous with the review.

If an OGC or AAAD staff member is assigned to the review, he or she will
provide further guidance on what constitutes adequate and persuasive
documentation. If they are not assigned to the review and you have
questions while on-site, call an OGC or AAAD liaison for guidance.

## E. Expanding the Program Review

As discussed in Chapter I, reviewers must determine during the program
review if a more comprehensive review of the institution's records is
warranted. Generally, this step is taken when reviewers determine that
there are severe administrative problems at the institution or
indications of possible fraud or abuse.

To justify expanding the program review, there should be significant
evidence of serious, recurring or systemic problems relating to the
program review items that might result in referrals to AAAD or OIG.
Additional deficiencies reviewers have noticed outside of the basic
review item list should also be taken into consideration when
determining the need for an expanded review.

In such cases, reviewers should contact the CTL and/or ACD to confirm
the need for an expanded review, and discuss strategies. Depending on
the types of problems identified, further discussions may be held with
AAAD or other Department personnel with particular expertise (e.g.,
Default Management). A work plan can then be developed that best
addresses the circumstances.

If reviewers see no evidence of broad, systemic violations, an expanded
program review may not be warranted. However, if an expanded program
review appears to be justified, the following scenario is an example of
how the new program review process should work.

### 1. Expanded Program Review Process

A review team determines on-site that a school has violated a number of
program requirements. In addition, the team finds that the school has
routinely misapplied Federal refund requirements and has calculated
lower or no refund amounts. Although checks were prepared for the
incorrect refund amounts, there is evidence that the business manager of
the school withheld most checks. In addition, funds are unavailable to
support payment at this time. Therefore, a substantial number of
students (or their loan holders) have not received proper refunds.

From an off-site location, the review team contacts the CTL and/or ACD
to explain why an expanded review is needed. During this contact, the
team identifies areas of non-compliance, what needs to be done, if
there's a need for heightened cash monitoring and other assistance
needed. Based on this, an action plan is developed and the team proceeds
to take steps to gather documentation to substantiate the violations.

Shortly after the expanded review ends, the team provides a written
summary that describes the key findings, citations and recommended
actions to the CMT, CTL, and ACD. After discussion and consultation with
the CTL and ACD, the CMT will decide what actions are appropriate (such
as reimbursement, referral for administrative action, or referral to OIG
for potential fraud).

If the action is to refer the school to AAAD, the review team prepares a
memo, for the ACD's signature, to CMDD and AAAD stating the findings and
pertinent regulatory provisions, and ensures that it is then e-mailed or
faxed to both Divisions. The review team must also mail to AAAD copies
of documentation that substantiate the findings that justify the
referral for administrative action.

The ACD's memo will request AAAD to evaluate the case for administrative
action, identifying the team members who observed and collected
documentation on the findings. The memo also requests AAAD to discuss
the findings with the review team and provide a preliminary assessment
of the case, including any additional information that may be helpful to
AAAD.

For potential fraud, the review team also provides a brief memo to OIG
noting the nature of the case and the findings prompting the referral
for possible investigation. The referral to the OIG is in addition to
the referral to AAAD for administrative action. Copies of the memo to
AAAD or CMDD should be attached to the OIG memo.

### 2. Expanded Review Team Members

In addition to team members experienced in program review, members of
the expanded review team may include CMT members with experience in
financial analysis, institutional eligibility, recertification and audit
analysis. Moreover, expanded reviews will often involve staff from
various offices within CMO (AAAD, DMD, PIP) and/or may also include
staff from other components of OSFA, OGC, or the OIG, depending on the
expertise needed. In addition, personnel from state agencies, guaranty
agencies, or accrediting agencies may also accompany team members on the
review.

Expanded review teams do not necessarily need to be composed of staff
from the same CMT. Since expanded reviews may last several days or
weeks, the review teams should also draw upon staff resources from other
CMTs, based on review experience, language skills and availability.
Whenever possible, if the expanded review is to be conducted at a school
with a large percentage of students whose native language is not
English, at least one member of the review team should be able to
converse with the students in their language. A list of ED staff with
foreign language skills may be found on the ConnectEd web site at
[http://connected1.ed.gov/ref/expert]{.underline}.

The actual composition of the expanded review team will depend upon the
issues identified during the review preparation process or on the
findings discovered during a review. As with all reviews, the team
should examine all available information, prepare a written work plan,
and, if necessary, call in specialists in other functional areas before
beginning the review.

### 3. AAAD/OGC Involvement in Expanded Reviews

Depending on the nature of the expanded review, staff from AAAD and OGC
may accompany the review team on the review. Where appropriate, AAAD and
OGC may take the lead in locating, contacting, and meeting with current
and former students, instructors, school personnel and other potential
material witnesses. If necessary, AAAD and OGC will draft affidavits for
signature by these individuals. This will enable the review team to
concentrate on conducting the review. In addition, AAAD and OGC may
assist in the acquisition of evidence necessary to support grounds for
an administrative action.

Generally, the team members will meet each evening to discuss the
outcome for that day, and to determine the next steps. This will ensure
that the review team obtains the strongest evidence possible to enable
AAAD and OGC to proceed quickly with an administrative action (if
warranted), to protect the student aid programs, students, and taxpayers
from further harm.

If, as a result of any review, AAAD determines that an administrative
action is necessary, additional work may be required from the review
team to document fully the scope and severity of findings which may lead
to such action, including emergency action. The work to be performed by
the review team must be defined case by case, and will vary, depending
on the findings relied upon to justify the appropriate administrative
action.

The review team, ACD, CTL, AAAD, and OGC must communicate closely in
selecting the key findings and in identifying the relevant documentation
that must be examined to sustain an administrative action. If the
Department has decided to take an emergency action and subsequent
termination, the team\'s initial task is to support that effort. After
addressing the need for effective support of any administrative action,
the primary task of the expanded review team, is to evaluate thoroughly
the school\'s compliance with the SFA regulations and agreements with
the Department, and determine the status of its administrative and
fiscal systems.

## F. Detecting and Documenting Suspected Fraud and Abuse

Reviewers should be aware that what might appear to be programmatic
deficiencies resulting from oversight or misunderstanding of the
regulations may, in fact, be part of the institution\'s plan for doing
business. Considerations such as who benefits from the error, whether or
not the error is a deliberate act, and the frequency and consistency
with which the error occurs, determine whether the set of facts observed
by reviewers is an oversight or an indication of fraud or abuse.

In instances where frequent errors sometimes result in an advantage to
the institution and sometimes result in an advantage to the student or
the Title IV programs, the errors are probably indicative of a lack of
administrative capability rather than deliberate abuse or fraud. For
example, if a school\'s refund calculations are found to be timely but
mathematically incorrect, so that sometimes the institution benefits,
but other times the Title IV programs benefit, it is most likely the
institution is not being careful enough with its calculations.

However, if the incorrect calculations [consistently]{.underline} result
in a benefit to the institution, reviewers should attempt to determine
whether apparent errors are actually attempts by the institution to
avoid having to repay refunds.

### 1. Indicators of Fraud and Abuse

Reviewers should be aware of the factors that may lead a school to
engage in program abuse or fraudulent activities:

-   An institution that is experiencing cash flow problems may overlook
    or suspend administrative procedures that would reduce enrollment,
    and therefore, institutional income. Some examples include not
    following admission policies, not enforcing satisfactory academic
    progress standards, and /or not verifying enrollment.

-   In more extreme cases, an institution that is experiencing cash flow
    problems may falsify attendance records to enable it to claim a
    larger portion of a student\'s financial aid, or to falsely claim
    disbursements subsequent to the initial disbursement, retain refund
    checks or not pay refunds, and/or drawdown and maintain excess cash.

-   Additional abuses may include manufactured high school diplomas or
    GED certificates, falsified ATB tests, falsified enrollment
    agreements, or evidence of \"ghost\" students \-- students who never
    attended class, yet on whose behalf the institution obtains Title IV
    funds.

There are many other factors that can become indicators of fraud and
abuse to be tested by reviewers. Prior to any review, the CMT should
ascertain the financial condition of the school, past performance of the
institution, and the school\'s default rate status.

In addition, potential problems may exist at institutions whose primary
source of income comes from a public agency based on the number of
students enrolled at the school. A cash flow squeeze could lead to
institutional reluctance to take actions that will reduce its full-time
equivalent (FTE) student count. For example, schools may fail to
determine whether students actually ever attend courses for which they
register; fail to enforce satisfactory academic progress policies that
could reduce enrollment; and generally not have a system for determining
a student\'s last date of attendance.

It is also possible that institutional policies for rewarding employee
performance will encourage employees to abuse or defraud the Title IV
programs. For example, an admissions representative may coach students
to falsify by understating their income information on the FAFSA so that
they will qualify for Title IV aid.

### 2. If Fraud is Suspected

If reviewers suspect fraud, they should first contact the CTL and/or ACD
to discuss review observations. Any contacts should be made away from
the school. If not already involved with the review, reviewers should
also contact the CMT's AAAD liaison. Together, these individuals can
discuss the types of documentation necessary to sustain the finding and
the manner in which it should be documented. To protect Title IV
programs from further loss in cases of fraud, it is the responsibility
of the reviewers and CMT to work closely with AAAD and OGC in initiating
the appropriate administrative action. Joint consultations with AAAD and
OGC are recommended to assist reviewers and CTls/ACD in providing
necessary documentary support for an administrative action.

Reviewers and CTLs/ACD should also contact the Office of the Inspector
General for Investigation (OIGI). Although the OIGI has the primary
responsibility for investigating fraud and abuse, reviewers can provide
valuable preliminary information and documentation.

### 3. Documenting Suspected Fraud

Reviewers should fully document any program exceptions serious and
pervasive enough to warrant administrative action or which may represent
fraudulent activity on the part of the school. These include, but are
not limited, to the following items:

-   Any institutional documents that support the findings of fraud or
    abuse must be photocopied. Reviewer must initial and date the back
    of each photocopy so that they can attest to when the document was
    copied and by whom, in the event of a future administrative or
    criminal hearing. The AAAD liaison to the CMT, or OGC, should be
    consulted regarding documentation requirements before photocopying
    documents, if possible.

-   In cases of suspected fraud, staff and student interviews are
    critical. Interviews of both current and former students will be
    necessary in most cases. If AAAD and OGC staff are not present
    during the review, reviewers should conduct interviews of students
    and staff. The interviews should be summarized and the respondent
    should be asked to read the statement, make corrections, and sign,
    with the attestation that the document is true and accurate
    representation of the interview. Ideally, the document should be
    typed; however, it can be handwritten, if necessary. Where possible,
    interviews should be conducted in teams, with one person asking the
    questions and the other taking notes and asking follow-up questions.
    In some cases, students or staff may be more willing to discuss
    questions away from the school location.

Reviewers perform an important function in preserving the integrity of
the Title IV programs. To perform effectively, reviewers must be able to
identify and test areas of program vulnerability or risk. The Title IV
programs are designed to be administered by the institution acting as a
steward of Federal funds. When an institution violates this trust, the
Title IV programs and Federal funds are at risk.

### 4. Areas for Potential Fraud

The following areas identify fraud situations that have been discovered
during recent program reviews. Note that these are some areas for
potential fraud and abuse:

a.  Ability to Benefit (ATB)

Students who are enrolled under ATB standards must pass an
independently- administered admissions test that is approved by the
Department. Reviewers should check for the following:

-   Tests that have been altered to show that the student passed.

-   Tests not scored properly. Be sure to examine tests with scores
    exceeding the passing score by only one or two points.

-   Tests completed with a pencil and obvious changes made.

-   Discrepancies between test proctor's listings of students tested (if
    available), and students who took ATB test.

-   On a timed test, all students routinely answered every question.

h.  Attendance Records

Federal financial aid disbursements are contingent upon a student\'s
attendance at the institution. Check for the following items:

-   Attendance records are altered or missing.

-   Discrepancies in the supporting documents maintained for attendance
    records.

-   Extended leaves of absence followed by one or two days of attendance
    (that coincide with the disbursement dates of funds), followed by a
    final withdrawal.

-   Majority of students taking leaves of absence.

-   An unusually high number of make-up hours for many students in
    classes that are not self-directed.

-   Majority of withdrawal students with hours supporting full year
    disbursements and/or no refunds due.

i.  Signatures

Many documents in the students\' files require student certifications
and signatures. Examine them closely:

j.  Refund Checks

Verify original refund checks for the bank\'s processed date.

k.  Misrepresentation

Some institutions may:

-   Lure students to attend their schools by misrepresenting the
    educational program or the opportunities a student may have after
    completion of the educational program. Check for these items:

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-   Offering recruiting \"gimmicks\" to encourage students to sign up
    family and friends. Check with state licensing agency for improper
    referral practices.

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```
-   Providing prospective students with erroneous placement and
    completion statistics.

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```
-   Using job placement agencies, making false job placement promises,
    or placing blind advertisements in help-wanted section of newspapers
    to attract students looking for employment (students think they are
    applying for jobs, not to go to schools).

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-   Promising full transferability of credits.

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```
-   Misrepresent the costs of tuition and fees; the catalog may state
    one cost while the contract may indicate another.

-   Describe availability of the latest equipment in advertising, but
    provide inferior equipment on-site; malfunction or disrepair of
    equipment.

-   Promise internship/externship opportunities for professional
    development, but refer students to positions that are menial and are
    not program-related.

## G. Administrative Action Issues

The Department has the authority to take various administrative actions
against a school, whenever a school \"...violates any Title IV, HEA
program statute, regulation, special arrangement, agreement or
limitation prescribed under the authority of Title IV of the HEA." The
authority to take these actions is found in Subpart G - Fine,
Limitation, Suspension and Termination Proceedings at 34 CFR
668.81-668.98. Subpart G also authorized the imposition of emergency
actions.

In addition, the Higher Education Amendments of 1998 also granted the
Secretary authority to issue administrative subpoenas to obtain
documents, reports, answers, records, accounts, papers, and other
documentary evidence pertaining to a school\'s participation in any SFA
program.

AAAD is the entity within OSFA that is responsible for taking these
administrative actions. In addition, AAAD is also responsible for
initiating suspension and debarment actions against individuals. AAAD
staff works closely with attorneys in OGC.

### 1. Referral to AAAD

The CMT should consult with the AAAD liaison to determine whether a
referral is appropriate. If a referral is appropriate, reviewers should
prepare a \"Case Team Referral\" form for their Area Case Director\'s
signature that is then forwarded to the Director of AAAD.

If there is reason to suspect fraud in the administration of Title IV
funds by an institution, referral to AAAD (and notification to the OIG)
should be made without hesitation. In addition, referrals to AAAD for
administrative action are encouraged if reviewers suspect that a school
is either unwilling or unable to properly administer Title IV funds;
specifically, with findings that appear to be systemic or repetitive in
nature and have placed, or may continue to place, Federal funds at risk,
or cause harm to students. Finally, referrals may also be appropriate
if, in the course of resolving a review, the institution has failed to
respond timely and in good faith to the required corrective actions
specified in the program review report and/or corrective action plan.

For AAAD referrals, the review team working with its AAAD liaison, must
ensure that specific findings and backup documentation are prepared and
promptly forwarded to the AAAD Director for evaluation and subsequent
action. AAAD will evaluate for appropriate administrative action. The
ACD should notify the Case Management Division Director (CMDD), or the
designee, of the referral to AAAD because this could affect the scope,
planning and scheduling of any expanded team review activity. AAAD and
CMDD should coordinate their subsequent activities to ensure that any
pending administrative action can proceed swiftly.

### 2. AAAD Action

AAAD will impose or initiate an action after evaluating the referral,
and after consulting with reviewers, CTLs and ACD, and personnel from
OGC. Although the regulation authorizing AAAD to take action requires
only that a school violate any Title IV regulatory provision, obviously
AAAD will not take action against every school that makes a mistake.

There are many circumstances under which AAAD will take action without
reviewers completing the program review report. The guiding regulation
for AAAD to take action only requires the finding of any regulatory
violation; it does not require a written program review report or any
notice to the school, of any kind, prior to AAAD\'s administrative
action notice, which must cite the violations on which the action is
based.

As with Subpart H actions, reviewers must be able to support their
findings with documentation and testimony that will convince a hearing
official that their findings are correct and accurate, and that they
followed appropriate and reasonable procedures. Generally, this means
following normal program review procedures, taking reliable notes of
interviews with school personnel and students, and making legible copies
of pertinent documents.

## H. Evaluating Program Review Results

Once the program review site visit is completed, the CMT must evaluate
the results. Reviewers should consult with the CMT, CTLs/ACD, and AAAD
liaison, to determine the appropriate course of action. Depending on the
severity of any violations, actions may include:

-   referral to the IIS for technical assistance;

-   development of a corrective action plan to rectify the problem;

-   assessment of liabilities;

-   immediate transfer to the reimbursement system of payment or to
    heightened cash monitoring;

-   referral to AAAD for administrative action, including emergency
    action, when appropriate; and/or

-   immediate notification of the Office of Inspector General (OIG), if
    fraud is suspected.

### 1. File Reviews

As previously noted, reviewers can require that an institution perform
reviews of its records (file reviews) to ascertain the extent of a
deficiency that appears to be systemic and material. Generally, an error
rate of greater than **10 percent** for any given award year would
signal a systemic problem. (Refer to IRB Memorandum [Target Numbers and
Reviewer
Discretion](http://awaipos01/pipd/Perform/non-pipd-guid.htm).issued
12/6/95.)

A material deficiency is one which may result in funds payable to the
Title IV programs or students, or one in which the nature and frequency
of the problem may be serious enough to warrant a fine or other
administrative action. For example, reviewers discover in the file
review that tax returns were not being collected for most students who
were selected for verification. The school should be required to review
all students who were selected for verification in the applicable award
year(s), and identify funds that were disbursed without verification
being completed. In an expanded review, reviewers (having discussed time
and staff availability with the supervisor) may decide to review the
files for the students in the statistical sample, instead of having the
school do it.

In most cases, to determine liabilities payable to the Title IV
programs, an institution should be offered the choice of performing file
reviews using the students included in the valid statistical sample that
was identified at the beginning of the program review. Reviewers would
then extrapolate any liability amounts determined for students in the
statistical sample over the total universe of students for the
applicable period(s).

There are situations where it is not appropriate to permit the
institution to review only those students contained in the statistical
sample. This is in cases where the school will be required to repay
monies directly to students or to students' loan holders (e.g., unpaid
FFEL/DL refunds, underpayment of FWS, unpaid credit balances). In such
cases, schools would be required to review all students in a given time
period to determine the extent of non-compliance and resultant
liabilities.

In either case, file reviews often require an extensive amount of work
for schools. Careful consideration should be given to whether a file
review is appropriate and if so, what the scope of that file review
should be. For example, if the program review encompassed two award
years, but a majority of the problems were found in one year, reviewers
should ascertain (ideally while still on-site) if there was a systemic
problem in the other year to determine if a file is required for both
years. This might involve expanding the review sample to look at a few
more cases from both years, and/or talking to school officials to find
if there was a particular problem that could be traced to one award year
(e.g., staff turnover resulted in inadequately trained staff). This
could also help reviewers determine what type of corrective action is
most appropriate.

Finally, reviewers must determine whether any verification of the file
review results is required. The two most common methods are:

-   require that the school have an independent CPA attest to the
    accuracy of the results of the file review, or

-   schedule a follow-up visit to the school to test the results.

Reviewers should specify in the program review report whether a CPA
review is needed (especially because the school will have to pay for
this), or that a follow-up visit may be scheduled.

### 2. Corrective Action Plans

In addition to determining whether there are any potential liabilities
resulting from deficiencies noted during the program review, it is
important to work with the school to develop corrective action plans to
ensure that the problems do not reoccur.

The corrective action process can begin during the on-site program
review. Some problems may simply be the result of a misunderstanding of
a regulatory requirement. For example, reviewers may find that a school
is still taking 60 days to pay FFEL refunds for students who withdrew
from school, instead of 30 days under current regulations. Identifying
the revised regulation when discussing the issue with school officials
during the review should ensure that procedures are changed immediately.

In many cases, however, the causes of the non-compliance are not so
readily apparent; and reviewers' ability to prescribe specific
corrective actions is limited. If possible, reviewers should try to
determine the cause of a problem, to facilitate identifying the best
resolution. However, the realities of time constraints and internal
school dynamics may prevent this.

For instance, the specific cause of a finding that a school took 120
days to pay FFEL refunds may be more difficult to identify. The refund
process generally requires communication between different offices at a
school, and poor communication could cause refunds to be paid late -- or
not at all. Trying to identify exactly where the bottleneck occurred
could become very time-consuming and involve reviewers in inter-office
conflicts at the institution. In this case, the best corrective action
may be to have the institution develop and describe its enhanced student
withdrawal/refund process from the time a student's withdrawal is
identified through the date the refund is paid (identifying timeframes
and lines of communication) that meets the 30 day regulatory
requirement.

Then, there are more complex problems that may require a much broader
approach. For example, systemic problems with awards to ineligible
students, incomplete verification, and improper loan certification may
be the result of a total breakdown in the financial aid office. There
may be inadequate staffing and training. In such a case, it may be
appropriate to require the school to perform an evaluation to determine
the cause of the problem, and have them propose a solution.

In all cases, reviewers should consider what Department resources might
assist the school in implementing the corrective action plan(s). This
may include reviewer suggestions, utilizing the Institutional
Improvement Specialist, the SFA Assessment, or other ED training
materials/activities.

### 3. Technical Assistance

CMT staff should always try to assist schools by offering technical
assistance or responding to school requests for technical assistance.
The commitment to addressing a school's technical assistance questions
should be discussed at the entrance and exit conferences.

Any clarification of regulations and statutes that reviewers provide
regarding review findings is a form of technical assistance, and it is
important to ensure that schools are provided complete and accurate
regulatory and statutory references for each issue identified. However,
there may also be opportunities during a program review to provide
information and advice separate from findings.

Additionally, reviewers may discuss some "best practices" that they have
observed at other schools, which might ease some organizational or
administrative burden they have identified. HOWEVER, in doing so, the
reviewers must stress that they, and the Department, are not endorsing
any product or service provided by any entity. Also, reviewers should
confirm the willingness of the person/institution with the "best
practices" to be referred to others.

## I. Exit Conference

The exit conference is considered a courtesy to institutional officials;
the Department is **not required** to provide an exit conference.
However, it provides an opportunity to share information with school
officials and seek additional information from them, including their
comments/responses to the deficiencies summarized by reviewers. The
president/owner, school director, financial aid officer, business
manager and registrar should be present at the exit conference. Other
institutional officials may attend the exit conference (depending on the
type of institution reviewed).

During the exit conference, reviewers should:

-   Discuss the scope of the program review (e.g., award years and
    number of student files reviewed).

-   Summarize the deficiencies identified.

-   Discuss the possible scope of required corrective actions.

-   Advise the institutional officials of the time frames for issuing
    and responding to the program review report or issuance of the
    expedited determination letter. Mention that reasonable dialog
    regarding the findings and questions of regulatory interpretation
    will be considered, but a timely resolution of program review issues
    will be expected. Also, explain the final program review
    determination, with a brief discussion of the formal appeal process.

-   Remind officials that the deficiencies noted and corrective actions
    required are [preliminary]{.underline}, that consultation with the
    supervisors and final review of the information collected may result
    in additional findings. However, as a courtesy, schools generally
    should be apprised of any substantial findings not noted in the exit
    conference before the issuance of the review report.

-   Reiterate the commitment of the Case Management Team to provide
    technical assistance.

-   Thank the officials for their cooperation during the review process.

As a general rule, the exit conference should be brief, avoiding
excessive detail in describing deficiencies, but emphasizing that the
review report will provide additional information.

# Chapter IV Program Review Items

## A. Selecting Which Items to Review

The following program review items represent areas where serious
deficiencies often result in significant liabilities to schools for
improper use of Federal funds or cause harm to past or current students.
Reviewers are not required to focus on all of these items. Rather, in
conjunction with the case management process, reviewers may select any
items applicable for the program review being conducted.

Also, each review item has direct links to SFA Assessment activities
that can assist the school in correcting identified deficiencies on a
continual basis, even after the review is closed. If reviewers find
discrepancies in the review item, the SFA Assessment reference is
related to that item and the school should be encouraged to complete
that entire SFA Assessment. Often, the discrepancy is related to
systemic problems and the SFA Assessment is designed to encourage
schools to assess the entire operation related to the item in order to
identify and correct the \"root\" of the problem. Please refer to
Chapter II of this guide for further guidance regarding how the SFA
Assessment can be used throughout the program review process.

By using the case management process to determine areas of deficiencies
at a particular institution, it is envisioned that reviewers will be
better able to

-   identify the most serious deficiencies and compliance issues;

-   use limited staff time and resources more productively; and

-   avoid duplication of effort between ED-conducted reviews, and
    reviews/audits conducted by independent auditors, guaranty agencies,
    state entities, and accrediting agencies.

Although reviewers may choose to not review all of the program review
items identified, the list is formatted to serve also as a checklist to
guide reviewers on-site.

## B. Conflicting Information

Reviewers should test for inconsistent or conflicting information when
examining any of the review items. An institution must maintain accurate
and consistent data in order to support the eligibility of each aid
recipient; therefore, reviewers should identify any discrepancies in
student and institutional records and ensure they are properly resolved.
The following are some examples of conflicting information:

-   Some schools ask the student to provide similar information on
    different forms. For instance, the admissions application may ask
    students about their employment history. Often, students report
    employment here, but may show no wages for the same period on their
    financial aid application.

-   A parent\'s tax return reports significant interest income for four
    consecutive years, but the aid applications reflect minimal assets
    [every]{.underline} year. (Since interest income is reported for the
    *prior year* and assets are reported for *the current period*, a
    correlation needs to be drawn over more than one year).

## C. Program Review Items as Guidance

The following discussions summarize key issues associated with a review
of any of the items. These summaries are not meant to be all-inclusive.
For instance, if there is a serious problem with a school\'s
satisfactory academic progress policy not specifically discussed here,
continue to review the issue based on regulatory or statutory
requirements. Also, the summaries do not include all possible
considerations reviewers must address. For example, in examining NSLDS
data to determine past financial aid history of a student, reviewers may
note that financial aid was disbursed, even though NSLDS history showed
the student was in default. However, reviewers must determine whether
the school performed additional follow-up to show that the defaulted
loan was resolved. There might be documentation in the student\'s file
showing the student had made satisfactory arrangements to repay the
defaulted loan, and was therefore an eligible student. The summaries are
meant to provide guidance to reviewers, but do not replace reviewers'
discretion and professional judgment.

Even if it is not listed as a review item, reviewers should not ignore a
serious problem that becomes obvious in the review process, especially
if it may represent potentially significant liabilities or may have
affected many students adversely.

References are provided in a concise format at the end of each review
item to guide reviewers to the appropriate regulatory or statutory
authority. Dates are provided only for newly issued regulations. (The
web version of the Guide is embedded with internet-links that connect
you to the citations for easy reference.)

Although the Guide will be updated regularly, reviewers are reminded of
the continuing importance of remaining current on regulatory and
statutory requirements.

## D. Program Review Items

# ![](media/image3.emf)  {#section-1 .Chapters}

### 1. Institutional Eligibility

 1. Reporting Institutional Changes to ED

 2. Campus Security

 3. Consumer Information

 4. Program Eligibility

 5. Eligible School/Location

### 2. Fiscal

 6. Fiscal Records/Audit Trail

 7. Excess Cash

 8. GAPS Report

 9. Use of Cash Advances

 10. Matches for Campus-Based Programs

 11. Return of Title IV Funds

 12. Student Credit Balances

 13. FFEL/Direct Loan Disbursements (Payment Periods)

### 3. Student Eligibility

 14. Ability to Benefit

 15. Satisfactory Academic Progress Standards

 16. Student Eligibility

 17. Attendance Records

### 4. Awarding/Disbursement

 18. Verification

 19. Professional Judgment

 20. Timecards for FWS Students

 21. Pell Calculations/Disbursements

 22. Disbursements

 23. Enrollment Status

 24. Need Analysis

 25. FFEL/Direct Loan for Programs \< One Year

 26. FFEL/Direct Loan Amounts for Grade Level

 27. Direct Loan Reporting/Reconciliation

### 5. Other

 28. Items from Past Reviews/Audits

 29. FISAP Income Grid

 30. Federal Perkins Loan Due Diligence and Promissory Notes

 31. Commissioned Sales

 32. Clock/Credit Hour Conversion

 33. Student Status Confirmation Report

 34. Default Management (Entrance/Exit Counseling, Withdrawal Rate)

 35. NSLDS Security Issues

 36. Third Party Servicer Contract

1\. Reporting Institutional Changes to ED

  -----------------------------------------------------------------------
  **[GEN 2300, 9999]{.smallcaps}**

  -----------------------------------------------------------------------

An institution is required to report changes to certain information
relating to its Title IV eligibility. Some of these changes require ED's
written approval before the institution may disburse the SFA program
funds; others do not.

**Changes that require ED's [written]{.underline} approval. (The number
in parentheses refers to the number of the question on the electronic
application, known as the e-app.)**

**All Institutions:**

-   Change in accrediting agency (15). The institution must notify the
    Department when it BEGINS ANY change that deals with its
    institution-wide accreditation.

-   Change in institutional structure (change in ownership and control)
    (18)

-   Change in educational programs outside the scope of current approval
    (26)

-   Addition of nondegree programs outside the scope of current approval
    (27)

-   Addition of a location at which 50 percent or more of the program is
    offered and meets one or more of the conditions listed in
    600.20(c)(1)(30)

-   Change in the type of ownership (change in ownership and control)
    (22)

-   Change in ownership that results in change in control (24)

When one of these changes occurs, an institution must notify ED by:

1.  reporting the change and the date of the change to ED via the e-app
    within 10 calendar days of the change, and

2.  as soon as the institution has received approvals for the change
    from its accrediting agency and state authorizing agency, it must
    send to ED:

-   copies of the approval for the change,

-   any required documentation, and

-   Section L of the application containing the original signature of
    the appropriate person.

**Changes NOT requiring ED's written approval**

**All Institutions:**

-   Change to institution's name (2). As soon as it has received
    approvals for the change from its accrediting agency and state
    authorization agency, an institution must send ED copies of the
    approvals.

-   Change of or change to the name of a CEO, president, chancellor (10)

-   Change of or change to the name of the chief fiscal officer (11),
    financial aid officer (2)

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-   Change in state authorizing agency (17)

-   Change course measurement (from or to clock hours or credit hours)
    (27)

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-   Address change for a principal location (29). As soon as it has
    received approvals for the change from its accrediting agency and
    state authorization agency, an institution must send the Department
    copies of the approvals for change.

-   Address change for other locations (30). As soon as it has received
    approvals for the change from its accrediting agency and state
    authorization agency, an institution must send the Department copies
    of the approvals.

-   Change to the institution's third-party servicers that deal with the
    SFA program funds (58)

-   Addition of a location and does not meet conditions of 600.20(c)(1)
    (30)

Foreign institutions only (including foreign graduate medical
institutions):

-   Change to postsecondary authorization (42)

-   Change to degree authorization (43)

-   Change to program equivalence (44)

-   Change to program criteria (45)

-   Change to U.S. administrative and/or recruitment offices (46)

**Foreign graduate medical institutions only:**

-   Change to facility at which institution provides graduate medical
    instruction (47)

-   Change to authorizing entity (48)

-   Change to approval of authorizing entity (49)

-   Change to length of program (50)

-   Change to programs located in the United States (51)

When one of these changes occurs, an institution must notify ED by
reporting the change and the date of the change to ED via the e-app
within 10 calendar days of the change. In addition, an institution must
send:

-   any required supporting documentation, and

-   Section L of the application containing the original signature of
    the appropriate person.

Note that for a change requiring ED's written approval (unless otherwise
noted) and for some changes that do not require ED's written approval,
an institution must obtain approval from the appropriate accrediting
agency and state authorizing agency.

-   Institutions about to undergo a change of ownership/control may now
    submit a "preacquisition review" application up to 45 days prior to
    the change of ownership.

-   Institutions that submit a materially complete application within 10
    business days of the change may be eligible to receive a temporary
    PPA to continue to participate while CMO is reviewing the
    institution's application.

-   Initial participation institutions that are approved for the first
    time receive provisional certification for one complete award year.

-   Institutions approved after a change of ownership receive
    provisional certification for up to three years.

**References:**

Section 498(b), Application Form

34 CFR § 600.20 Application procedures

34 CFR § 660.21 Updating application information

34 CFR § 668.25 Contracts between an institution and a 3^rd^ party
servicer

HEA 1998, effective October 1, 1998

[2001-2002 SFA Handbook, Institutional and Program Eligibility Section,
Chapter 1 and Chapter
10](http://ifap.ed.gov/sfahandbooks/0102Vol2InstEligibility.html)

[Dear Colleague Letter,
97-6](http://ifap.ed.gov/dev_csb/new/drcollg.nsf/95a1a6295a6abd548525650e005f038f/852565a7005d6b9285256538007cb332?OpenDocument)

[Electronic Application for Approval to Participate (E-App)
(eligcert.ed.gov)](http://eligcert.ed.gov/)

[SFA Assessment Worksheet, Assessment A, Institutional
Participation](http://qaprogram.air.org/AssessmentA.html)

2\. Campus Security

  -----------------------------------------------------------------------
  **[GEN 2113]{.smallcaps}**

  -----------------------------------------------------------------------

By October 1 of each year, an institution must publish and distribute
its annual security report. The report must contain, at a minimum, the
following information:

1.  statistics for the three most recent calendar years on:

-   criminal homicide,

-   murder and non-negligent manslaughter,

-   negligent, manslaughter,

-   forcible and non-forcible sex offenses,

-   robbery,

-   aggravated assault,

-   burglary,

-   motor vehicle theft,

-   arson,

-   arrests for liquor law violations, drug law violations and illegal
    weapons possession,

-   persons who were not arrested but were referred for campus
    disciplinary action for liquor law violations, drug law violations
    and illegal weapons possession,

-   the crimes above by category of prejudice and any other crime
    involving bodily injury reported to local police agencies or to a
    campus security authority that shows evidence that the victim was
    intentionally selected based on the victim's race, gender, religion,
    sexual orientation, ethnicity or disability.

2.  a statement of current campus policies regarding procedures for
    students and others to report criminal actions or other emergencies
    occurring on campus. This statement must include the institution's
    policies concerning its response to these reports, including:

-   policies for making timely warning reports to members of the campus
    community regarding the occurrence of crimes described above,

-   policies for preparing the annual disclosure of crime statistics,
    and

-   a list of the titles of each person or organization to whom students
    and employees should report the criminal offenses described above.

3.  a statement of current policies concerning security of and access to
    campus facilities, including campus residences and security
    considerations used in the maintenance of campus facilities.

4.  a statement of current policies concerning campus law enforcement
    that:

-   addresses the enforcement authority of security personnel, including
    their relationship with state and local police agencies and whether
    those security personnel have the authority to arrest individuals,

-   encourages accurate and prompt reporting of all crimes to the campus
    police and the appropriate police agencies, and

-   describes procedures, if any, that encourage pastoral counselors and
    professional counselors, if and when they deem it appropriate, to
    inform the persons they are counseling of any procedures to report
    crimes on a voluntary, confidential basis for inclusion in the
    annual disclosure of crime statistics.

5.  a description of the type and frequency of programs designed to
    inform students and employees about campus security procedures and
    practices and to encourage students and employees to be responsible
    for their own security and the security of others.

6.  a description of institutional programs designed to inform students
    and employees about the prevention of crimes.

7.  a statement of the policies concerning the monitoring and recording
    (through local police agencies) of student criminal activity at
    off-campus locations of student organizations recognized by the
    institution, including student organizations with off-campus housing
    facilities.

8.  the policies concerning the possession, use and sale of alcoholic
    beverages and the enforcement of state underage drinking laws.

9.  a statement of institutional policies concerning the possession, use
    and sale of illegal drugs and the enforcement of state and Federal
    drug laws.

10. a description of any drug and alcohol-abuse education programs
    available to students and employees, as required under Section
    120(a) through (d) of the Higher Education Act.

11. a statement of policy regarding the institution's campus sexual
    assault prevention programs and the procedures to be followed when a
    sex offense occurs including:

-   a description of educational programs to promote the awareness of
    rape, acquaintance rape and other forcible and nonforcible sex
    offenses,

-   procedures a student should follow if a sex offense occurs (who to
    contact and how to contact them, the importance of preserving
    evidence for proof of a criminal offense),

-   options for the notification of appropriate law enforcement
    officials (including on-campus and local police) and a statement
    that institutional personnel will assist the student in notifying
    these authorities, if requested by the student,

-   availability of on and off-campus counseling, mental health, or
    other student services for victims of sex offenses,

-   notice to students that the institution will change a victim's
    academic and living situations after the alleged sex offense and of
    the options for changes, if changes are requested by the victim and
    are reasonably available,

-   procedures for campus disciplinary actions in cases of an alleged
    sex offense, including a clear statement that both the accuser and
    the accused:

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-   are entitled to the same opportunities to have others present during
    a disciplinary proceeding, and

-   will be informed of the institution's final determination of any
    institution disciplinary proceeding with respect to the alleged sex
    offense and any sanction that is imposed against the accused,

-   sanctions the institution may impose following a final determination
    of an institution disciplinary proceeding regarding rape,
    acquaintance rape, or other forcible or nonforcible sex offenses.

The final regulations published on November 1, 1999, made the following
changes to the requirements for an institution's annual security report:

-   hate crime disclosure.

-   crime by locations.

-   crimes must be reported for the calendar year in which the crime was
    reported to a campus security authority.

-   institutions are specifically prohibited from identifying the victim
    or the alleged perpetrator of the crime in the institution's
    disclosure of its crime statistics.

-   institutions were required to begin collecting statistics using the
    new categories effective for calendar year 1999.

-   Institutions are not required to include in their reported
    statistics crimes that are reported solely to a pastoral counselor
    or a professional counselor who is functioning within the scope of
    his or her license or certification.

-   institutions may rely on statistical information supplied by local
    and State police agencies, as long as the institution makes a
    reasonable, good faith effort to obtain these statistics.

-   the definition of a campus security authority is broadened, SFA
    Handbook, Chapter 7, page 2-202 and 668.46(a).

-   institutions with a campus police or campus security department of
    any kind must maintain a daily, easily-understood, written crime log
    of any crime reported to that department that occurred on campus, in
    or on a non-campus building or property, on public property or
    within the patrol jurisdiction of the campus police or campus
    security department.

-   daily logs must include the nature, date, time and general location
    of the crime and the disposition of the complaint and must be open
    to public inspection within two business days of the report except
    where

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-   prohibited by law,

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-   disclosure jeopardizes a victim's confidentiality, or

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-   disclosure hinders the investigation.

-   campus crime statistics must be categorized on the basis of where a
    criminal offense occurs:

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-   on campus, in dormitories or other residential facilities for
    students on campus

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-   in or on a non-campus building or property,

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-   on public property, and

Each institution must annually submit the statistical section of its
security report to ED. There is no requirement that an institution
submit statistical information in the crime log to ED. The institution
must maintain campus security records to document the information
included in its annual security report.

Technical assistance to institutions in administering the campus
security regulations is available from the Department's Customer Support
Branch at 1-800-433-7327.

**References:**

HEA, § 485(f)

[34 CFR § 668.46 Student Assistance General
Provisions](http://ifap.ed.gov/regcomps/doc4101_bodyoftext.htm)

[2001-2002 SFA Handbook, Institutional and Program Eligibility Section,
Chapter
7](http://ifap.ed.gov/sfahandbooks/attachments/0102Vol2Ch7ConsumerInformation.pdf)

[Dear Colleague Letter
GEN-00-11](http://ifap.ed.gov/dpcletters/doc0689_bodyoftext.htm)

[SFA Assessment Worksheet, Assessment A, Institutional
Participation](http://qaprogram.air.org/AssessmentA.html)

3\. Consumer Information

  -----------------------------------------------------------------------
  **[GEN 2110]{.smallcaps}**

  -----------------------------------------------------------------------

**Please refer to Appendix L for a helpful chart regarding consumer
information requirements.**

**Basic Consumer Information requirements:**

Subpart D of the General Provisions lists basic information about the
institution and about financial aid that must be available to enrolled
and prospective students. That information includes the following.

**Financial Aid Information**

-   What need-based and non-need-based Federal financial aid is
    available to students

-   What need-based and non-need based state and local aid program,
    institution aid programs and other private aid programs are
    available

-   How students apply for aid and how eligibility is determined

-   How the institution distributes aid among students

-   The rights and responsibilities of student receiving aid

-   How and when financial aid will be disbursed,

-   The terms and conditions of any employment that is part of the
    financial aid package,

-   The terms of, schedules for, and the necessity of loan repayment and
    required loan exit counseling,

-   The criteria for measuring satisfactory academic progress and how a
    student who has failed to maintain satisfactory progress may
    re-establish eligibility for Federal financial aid,

-   Information regarding the availability of SFA program funds for
    study abroad program, and

-   That a student may be eligible for SFA program funds for attending a
    study abroad program that is approved for credit by the home
    institution,

-   The terms and conditions under which a student receiving Federal
    education loans may obtain deferments while serving (a) in the Peace
    Corps, (b) under the Domestic Volunteer Service Act, and (c) as a
    volunteer for a tax exempt organization of demonstrated
    effectiveness in the field of community service

-   Information on availability of community-service CWS jobs.

**General Information about the institution**

-   The names of associations, agencies, and/or governmental bodies that
    accredit, approve, or license the institution and its programs, and
    the procedures by which a student may receive a copy for review of
    the institution's accreditation licensure, or approval,

-   Special facilities and services available to disabled students,

-   The costs of attending the institution and any additional costs of
    the program in which the student is enrolled or has expressed an
    interest,

-   A statement of the requirements for the return of SFA program funds
    when a student withdraws from the institution, information about any
    refund policy with which the institution must comply, and the
    requirements for officially withdrawing from the institution,

-   The degree programs, training and other education offered,

-   The availability of a GED program, if the institutions admits
    students who do not have a high school diploma or equivalent,

-   The instructional, laboratory and other physical plant facilities
    associated with the academic programs,

-   A list of the faculty and other instructional personnel,

-   The satisfactory progress standards that students must maintain and,

-   Who to contact for information on student financial assistance and
    on general institutional issues,

-   The institution's annual campus security report in its entirety,

-   The institution's completion or graduation rate, and if applicable,
    its transfer-out rate, effective July 1, 2000,

-   Information about students' right to know under the Family Education
    Rights and Privacy Act (FERPA),

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-   Information about athletic program participation rates and financial
    support, Equity in Athletics Disclosure Act (EADA), effective July
    1, 2000,

-   Loan counseling general information for Federal Perkins, FFEL or
    Federal Direct Loan borrower,

-   Drug and alcohol abuse prevention information.

The institution must have someone available during normal operating
hours to help persons obtain consumer information.

**References:**

Family Education Right to Privacy Act (FERPA), HEA Section 485(a)

[34 CFR §§ 668.41 -- 668.48 Institutional and Financial Assistance
Information for
Students](http://ifap.ed.gov/regcomps/doc4096_bodyoftext.htm)

[Public Law 101-690 and
101-226](http://ifap.ed.gov/regcomps/doc4096_bodyoftext.htm)

[SFA Assessment Worksheet, Assessment A, Institutional
Participation](http://qaprogram.air.org/AssessmentA.html)

[2001-2002 SFA Handbook, Institutional and Program Eligibility Section,
Chapter 7](http://ifap.ed.gov/sfahandbooks/attachments/0102Vol2Ch7ConsumerInformation.pdf)

4\. Program Eligibility

  -----------------------------------------------------------------------
  **[GEN 2180]{.smallcaps}**

  -----------------------------------------------------------------------

**Please refer to Appendix M for a helpful chart on Program
Eligibility.**

An eligible program is an educational program that meets the
requirements of §668.8.

An individual must be enrolled or accepted for enrollment as a regular
student in an eligible program in order to receive SFA funds (with two
exceptions: preparatory coursework (FFEL and DL) and teacher
certification FFEL, DL, CWS, and Perkins)). A regular student is
enrolled or accepted for enrollment for the purpose of obtaining a
degree or a certificate offered by the institution.

The institution must determine separately for each individual student
taking courses that are part of an eligible program if that student is a
regular student. The institution must document each student's status in
the student's files. The institution is only required to document a
student's enrollment in an eligible program at the time of admission.
However, it must be able to notify the financial aid office should the
student leave the program at any time during the course of enrollment.

The educational program, if offered by an institution of higher
education, must be a legally authorized postsecondary program of
organized instruction or study that leads to an academic, professional,
or vocational degree, or certificate, or other recognized educational
credential. However, the Secretary does not consider that an institution
provides an educational program if the institution does not provide
instruction itself (including a course of independent study), but merely
gives credits for one or more of the following: instruction provided by
other institutions or schools, examinations provided by agencies or
organizations, or other accomplishments such as "life experience".

**Program, if offered by proprietary institution of higher education or
postsecondary vocational institution, must meet the criteria of at least
one category below:**

-   Provides at least a 15-week instructional time undergraduate program
    of 600 clock hours, 16 semester or trimester hours, or 24 quarter
    hours. May admit students without an associate degree or equivalent.

-   Provides at least a 10-week instructional time program of 300 clock
    hours, 8 semester or trimester hours, or 12 quarter hours. Must be a
    graduate/professional program or must admit only students with an
    associate degree or equivalent.

-   Provides at least a 10-week instructional time undergraduate program
    of 300-599 clock hours. Must admit at least some students who do not
    have an associate degree or equivalent and must meet specific
    qualitative standards. **Note:** These programs are eligible only
    for FFEL and Direct Loan participation.

**Definitions:**

-   The Secretary considers the "equivalent of an associate degree" to
    be an associate degree or the successful completion of at least a
    two-year program that is acceptable for full credit toward a
    bachelor's degree and qualifies a student for admission into the
    third year of a bachelor's degree program.

-   A week is a consecutive seven-day period, and

-   For an educational program using a semester, trimester, or quarter
    system or an education program using clock hours, the Secretary
    considers a week of instruction to be any week in which at least one
    day of regularly scheduled instruction, examinations, or study for
    examinations occurs, or

-   For an education program using credit hours but not using a
    semester, trimester, or quarter system, the Secretary considers a
    week of instruction to be any week in which at least 12 hours of
    regularly scheduled instruction, examinations, or study for
    examination occurs, and

-   Instruction does not include periods of orientation, counseling,
    vacation, homework, or other activity not related to class
    preparation or examinations.

**Recommended Review Procedures**

-   Confirm with school officials that all programs of study are listed
    in the catalog, and that they are all approved programs (schools
    sometimes add new or pilot programs prior to getting approval).

-   Ensure the program meets the minimum program length requirements as
    specified in statute and regulation.

-   Verify that English as a Second Language-only courses admit students
    who already possess work skills.

-   Check that off-site laboratory work at a clock-hour school is
    faculty-supervised.

**References:**

[34 CFR §§ 668.1-668.4 and 34 CFR §§ 668.8-668.9, Student Assistance
General
Provisions](http://ifap.ed.gov/IFAPWebApp/currentRegCompsYear3Pag.jsp?p1=31-DEC-1999&p2=c&p3=668&p4=STUDENT ASSISTANCE GENERAL PROVISIONS&p5=General&p6=A)

[34 CFR § 600.2, Institutional
Eligibility](http://ifap.ed.gov/regcomps/doc3958_bodyoftext.htm)

[2001-2002 SFA Handbook, Institutional and Program Eligibility Section,
Chapter 1 and Chapter
10](http://ifap.ed.gov/sfahandbooks/0102Vol2InstEligibility.html)

[2001-2002 SFA Handbook, Student Eligibility Section, Chapter
1](http://ifap.ed.gov/sfahandbooks/attachments/0102Vol1Ch1schoolbased.pdf)

Higher Education Act of 1965, Section 481

Dear Colleague Letter, GEN 92-21, October 1992

IRB Memo 93-6, 4/28/93

[Current List of Nationally Recognized Accrediting Agencies, September
1998](http://ifap.ed.gov/aagencies/attachments/brochure.pdf)

[SFA Assessment Worksheet, Assessment A, Institutional
Participation](http://qaprogram.air.org/AssessmentA.html)

5\. Eligible School/Location

  -----------------------------------------------------------------------
  **[GEN 2170, 2300]{.smallcaps}**

  -----------------------------------------------------------------------

**Please refer to Appendix M for a helpful chart regarding institutional
eligibility.**

Three types of postsecondary institutions are eligible to participate in
the SFA programs:

-   institutions of higher education,

-   proprietary institutions of higher education, and

-   postsecondary vocational institutions

An institution of higher education is a public or private nonprofit
educational institution that:

1.  is in a state, or for purposes of the Federal Pell Grant, FSEOG, FWS
    and Federal TRIO programs may also be located in the Federated
    States of Micronesia or the Marshall Islands,

2.  admits as regular students only persons who

-   have a high school diploma

-   have the recognized equivalent of a high school diploma, or

-   are beyond the age of compulsory school attendance in the state in
    which the institution is physically located

3.  is legally authorized to provide an educational program beyond
    secondary education in the state in which the institution is
    physically located.

4.  provides an educational program

-   for which it awards an associate, baccalaureate, graduate, or
    professional degree,

-   that is at least a two academic year program acceptable for full
    credit toward a baccalaureate degree, or

-   that is at least a one academic year training program that leads to
    a certificate, degree, or other recognized educational credential
    and prepares students for gainful employment in a recognized
    occupation, and

5.  is

> • accredited or pre-accredited; or
>
> • approved by a state agency listed in the Federal Register in
> accordance with 34 CFR part 603, if the institution is a public
> postsecondary vocational educational institution that seeks to
> participate only in Federal assistance programs.

A proprietary institution of higher education is an educational
institution that

1.  is not a public or private nonprofit educational institution;

2.  is in a state;

3.  admits as regular students only persons who

> • have a high school diploma;
>
> • have the recognized equivalent of a high school diploma; or
>
> • are beyond the age of compulsory school attendance in the state in
> which the institution is physically located;

4.  is legally authorized to provide an educational program beyond
    secondary education in the state in which the institution is
    physically located;

5.  provides an eligible program of training, as defined in 34 CFR
    668.8, to prepare students for gainful employment in a recognized
    occupation;

6.  is accredited;

7.  has been in existence for at least two years; and

8.  has no more than 90 percent of its revenues derived from title IV,
    HEA program funds.

A postsecondary vocational institution is a public or private nonprofit
educational institution that

1.  is in a state;

2.  admits as regular students only persons who

> • have a high school diploma;
>
> • have the recognized equivalent of a high school diploma; or
>
> • are beyond the age of compulsory school attendance in the state in
> which the institution is physically located;

3.  is legally authorized to provide an educational program beyond
    secondary education in the state in which the institution is
    physically located;

4.  provides an eligible program of training, as defined in 34 CFR
    668.8, to prepare students for gainful employment in a recognized
    occupation;

5.  is

> • accredited or pre-accredited; or
>
> • approved by a state agency listed in the Federal Register in
> accordance with 34 CFR part 603, if the institution is a public
> postsecondary vocational educational institution that seeks to
> participate only in Federal assistance programs; and

6.  has been in existence for at least two years.

An institution is physically located in a state if it has a campus or
other instructional site in that state.

The Secretary does not recognize the accreditation or pre-accreditation
of an institution unless the institution agrees to submit any dispute
involving the final denial, withdrawal, or termination of accreditation
to initial arbitration before initiating any other legal action.

The type of institution is defined mainly by how the institution is
controlled (public, private for-profit, nonprofit) and by the minimum
program length offered by the institution. Proprietary institutions have
an additional eligibility requirement called the "90/10" rule.

The "90/10" rule means that no more than 90 percent of a proprietary
institution's revenue from tuition and other charges necessary to
educational programs in a fiscal year may be derived from Title IV
program funds; at least 10 percent must come from non-Title IV program
funds.

-   An institution that determines it satisfied the 90/10 rule during
    its most recently completed fiscal year must have the auditor
    preparing its audited financial statement report on the accuracy of
    that determination as a footnote to the audited financial statement.

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-   Institutions must report to the Department within 90 days of the end
    of their fiscal year when they do not satisfy this requirement.

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-   Must use cash basis of accounting.

-   Describe treatment of scholarships, tuition waivers and
    institutional loans.

**Conditions of Institutional Eligibility for All Schools**

A school does not qualify to participate if, for the latest complete
award year,

-   more than 25 percent of regular enrolled students were incarcerated
    (waived for non-profit institutions that provide a 2 or 4 year
    program for which it awards a BA, AA or a "postsecondary diploma").

-   more than 50 percent of regular enrolled students were ATB students,

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-   more than 50 percent of the school's courses were correspondence
    courses, or

-   50 percent or more of the school's regular enrolled students were
    enrolled in correspondence courses.

Certain schools under certain conditions may receive waivers for the
above requirements. Check PEPS to see if the school was granted any
waivers. If not, determine whether school is eligible for a waiver, and
request that the school apply for the appropriate waivers.

**Additional Locations**

34 CFR 600.20(c)(1) provides if a school meets one of the following
conditions, it must apply AND wait to receive our written approval
before it can disburse Title IV funds to students at the new location:

-   • provisionally certified

> • is funded under the reimbursement or cash monitoring payment method
>
> • acquired the assets of another location during the preceding year
>
> • assets can include program, building or lease, students, teachers,
> equipment, etc.

• the school is subject to loss of eligibility under 34 CFR 668.188

> • avoiding sanctions via change in status:
>
> • the school is subject to a loss of eligibility that has already been
> imposed against another institution, if the applicant institution and
> the ineligible institution are both parties to a transaction that
> results in a change including:
>
> • acquisition or merger of Institutions;
>
> • acquisition of additional location;
>
> • location becomes main (location to freestanding)
>
> • if the school offers an educational program at substantially the
> same address at which the ineligible institution had offered an
> education program before the change and there is a commonality of
> ownership or management between the applicant and the ineligible
> institution.

-   ED tells the school it must "apply"

> • examples of when we would tell a school it has to apply and wait for
> our approval
>
> • program review revealed severe deficiencies
>
> • audit report showed severe findings
>
> • OIG audit found severe deficiencies
>
> • GA reported significant problems at the school
>
> • state agency reported significant problems at the school
>
> • accreditor placed the school on "show cause".

Under §600.21, most schools will be able to report a new location and
then begin disbursing Title IV aid immediately, if:

-   it does not meet any of the conditions in §600.20(c)(1)

-   the location is licensed & accredited

-   the school reported the location on the application

-   the school submitted all required supporting documents.

If the institution has other locations offering 50 percent or more of an
educational program, those locations must be reported to the Department
and be approved by the Department to be eligible. Recommended procedures
for additional locations are:

-   Make sure that all school locations (main school and any additional
    locations requiring ED approval) are included on the ECAR.

-   Check to see that all licensing and accreditation for each location
    is current

-   Verify that locations that are not included on the ECAR are not
    teaching 50 percent or more of any programs offered by the
    institution.

NOTE: If the team finds significant problems with a school, it needs to
notify the school immediately, advising the institution that if it opens
a new location that offers 50 percent or more of an education program
and it wants to give students at the location Title IV funds, it must
apply for approval AND wait for written approval from ED for the new
location.

**Recommended Review Procedures**

Examine all appropriate documents to verify the eligibility of the
school and all its additional classroom locations. The type of documents
will vary, but the school should have documentation from accrediting and
licensing bodies that describes the school and its programs of study.
Compare the licensing/accrediting documents with the institution\'s
latest ECAR from the Department.

**References:**

[34 CFR §§ 600.1 through 600.11, Institutional
Eligibility](http://ifap.ed.gov/IFAPWebApp/currentRegCompsYear3Pag.jsp?p1=31-DEC-1999&p2=c&p3=600&p4=INSTITUTIONAL ELIGIBILITY UNDER THE HIGHER EDUCATION ACT OF 1965, AS AMENDED&p5=General&p6=A)

[34 CFR § 600.20 Application
procedures](http://ifap.ed.gov/IFAPWebApp/currentRegCompsYear3Pag.jsp?p1=31-DEC-1999&p2=c&p3=600&p4=INSTITUTIONAL ELIGIBILITY UNDER THE HIGHER EDUCATION ACT OF 1965, AS AMENDED&p5=General&p6=A)

34 CFR § 600.21 Updating application information

[34 CFR §§ 600.30 and 600.32, Institutional
Eligibility](http://ifap.ed.gov/IFAPWebApp/currentRegCompsYear3Pag.jsp?p1=31-DEC-1999&p2=c&p3=600&p4=INSTITUTIONAL ELIGIBILITY UNDER THE HIGHER EDUCATION ACT OF 1965, AS AMENDED&p5=Maintaining Eligibility&p6=C)

[34 CFR §§ 603.2 through 603.24, Secretary\'s Recognition Procedures for
State
Agencies](http://ifap.ed.gov/IFAPWebApp/currentRegCompsYear3Pag.jsp?p1=31-DEC-1999&p2=c&p3=603&p4=SECRETARY'S RECOGNITION PROCEDURES FOR STATE AGENCIES&p5=Criteria for State Agencies&p6=B)

HEA, § 102(b) and § 481(a)(3)(A) and (B)

[2001-2002 SFA Handbook, Institutional and Program Eligibility Section,
Chapter 1, Chapter 10, and Chapter
12](http://ifap.ed.gov/sfahandbooks/0102Vol2InstEligibility.html)

[SFA Assessment Worksheet, Assessment A, Institutional
Participation](http://qaprogram.air.org/AssessmentA.html)

6\. Fiscal Records/Audit Trail

  -----------------------------------------------------------------------
  **[FIS 3050,3060]{.smallcaps}**

  -----------------------------------------------------------------------

The term "fiscal operations" encompasses a broad range of processes.
These include, but are not limited to:

-   requesting funds from ED,

-   disbursing funds to eligible students and parents,

-   keeping accurate and auditable financial records,

-   managing cash,

-   accounting for funds and financial activities, and

-   reporting on these activities.

Managing Title IV programs is an institution-wide responsibility.
Institutions organize and manage their fiscal operations differently,
depending on the size of the school, administrative structure, staffing,
automation, and Federal program participation. However, there are three
main functional areas for any school.

> **The president's office must ensure that a school**

-   is financially responsible to administer Title IV programs,

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-   is administratively capable of administering Title IV programs,

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-   has a capable individual to administer and coordinate Federal and
    non-Federal financial aid programs,

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-   has an adequate number of qualified staff,

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-   has established clear lines of responsibility among the pertinent
    school offices,

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-   maintains effective record-keeping systems for both student records
    and financial records,

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-   has an adequate system of checks and balances to ensure separation
    of award functions from disbursement functions,

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-   has an independent auditor perform an annual non-federal audit of
    the school's Title IV financial operations. (Exception: if a school
    receives less than \$200,000 in Title IV funds annually in each of
    the two award years prior to the audit period, ED may authorize it
    to have audits every two years or every three years, depending on
    circumstances, if the school submits a letter of credit for 10
    percent of all Title IV funds disbursed by the school in the award
    year preceding the waiver request. In addition, schools that are
    subject to A-133 and have under \$300,000 in combined funds from all
    Federal agencies are completely exempt from an annual audit).

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```
-   has no criminal or fraudulent activities occur as it manages Federal
    funds and administers Title IV programs, etc.

**The financial aid office must**

-   determine student's eligibility for financial aid,

```{=html}
<!-- -->
```
-   coordinate financial aid activities with those of other school
    offices in administering financial aid programs,

```{=html}
<!-- -->
```
-   maintain school records and student records that document activities
    of the financial aid office and provide data for reports,

```{=html}
<!-- -->
```
-   assist in reporting Pell Grant expenditures,

```{=html}
<!-- -->
```
-   manage and report on activities that involve financial aid funds,

```{=html}
<!-- -->
```
-   assist in reconciling loan records ( for schools that participate in
    the FDSLP),

```{=html}
<!-- -->
```
-   reconcile student financial aid data provided to the business office
    to ensure that all payments have been made, refunds have been
    accounted for and expenditures have been reported

```{=html}
<!-- -->
```
-   adhere to the principle of separation of functions

```{=html}
<!-- -->
```
-   authorize payment of Title IV funds to student accounts or to
    students directly

```{=html}
<!-- -->
```
-   authorize refunds to students

```{=html}
<!-- -->
```
-   authorize refunds to Title IV program

```{=html}
<!-- -->
```
-   ensure that the school collects any required repayments

```{=html}
<!-- -->
```
-   coordinate submission of the FISAP

**The business office must coordinate activities and cooperate with the
FAO in:**

-   processing cancellations and refunds

```{=html}
<!-- -->
```
-   obtaining authorization to pay Title IV funds

```{=html}
<!-- -->
```
-   submitting accurate and timely reports

```{=html}
<!-- -->
```
-   reconciling with the FAO to ensure that all financial aid
    adjustments have been properly recorded

```{=html}
<!-- -->
```
-   maintaining a system of internal controls that includes adequate
    checks and balances

```{=html}
<!-- -->
```
-   ensuring that the functions of authorizing and disbursing Title IV
    funds remain separate

```{=html}
<!-- -->
```
-   maintaining records according to Federal and generally accepted
    accounting procedures

```{=html}
<!-- -->
```
-   maintaining records to ensure a clear audit trail

```{=html}
<!-- -->
```
-   requesting and returning Title IV funds

```{=html}
<!-- -->
```
-   disbursing funds to eligible students from Title IV program accounts

```{=html}
<!-- -->
```
-   maintaining individual student accounts that record changes, credits
    and amounts due (if the school uses individual student accounts)

```{=html}
<!-- -->
```
-   delivering FFEL Program loan proceeds

```{=html}
<!-- -->
```
-   collecting Federal Perkins Loans

```{=html}
<!-- -->
```
-   establishing and implementing the institution's refund policy

```{=html}
<!-- -->
```
-   establishing and monitoring the FWS payroll and timesheets

```{=html}
<!-- -->
```
-   processing refunds and credit balances according to institution's
    refund policy and applicable Federal laws and regulations

```{=html}
<!-- -->
```
-   assisting in reporting Title IV expenditures to ED in a timely
    manner

```{=html}
<!-- -->
```
-   reconciling accounts

```{=html}
<!-- -->
```
-   reconciling cash between school records and bank statements

```{=html}
<!-- -->
```
-   reconciling Federal funds between bank statements and Federally
    reported balances

```{=html}
<!-- -->
```
-   assisting in completing applications and fiscal reports for Federal
    funds

```{=html}
<!-- -->
```
-   maintaining a cash management system to meet disbursement
    requirements and Federal laws and regulations

```{=html}
<!-- -->
```
-   providing general stewardship for Federal funds, including
    maintaining bank accounts and investments as appropriate

```{=html}
<!-- -->
```
-   preparing for and participating in program reviews and audits

**Required General Fiscal records**

-   records of all Title IV program transactions

```{=html}
<!-- -->
```
-   bank statements for accounts containing Title IV funds

```{=html}
<!-- -->
```
-   student accounts, including institutional charges, cash payments,
    Title IV payments, cash disbursements, refunds

```{=html}
<!-- -->
```
-   general ledger and related subsidiary ledgers that identify each
    program transaction and separate those transactions from the
    institution's other financial transactions,

```{=html}
<!-- -->
```
-   FWS payroll records,

```{=html}
<!-- -->
```
-   records that support data that appear on required reports

```{=html}
<!-- -->
```
-   FISAP

```{=html}
<!-- -->
```
-   Federal Pell Grant Program Electronic Statements of Account (ESOAs)

```{=html}
<!-- -->
```
-   ED's Payment Management System cash requests and quarterly or
    monthly reports,

```{=html}
<!-- -->
```
-   Grant Administration and Payment System (GAPS) cash requests,

```{=html}
<!-- -->
```
-   reconciliation reports for Title IV programs

```{=html}
<!-- -->
```
-   Federal, state and independent audit reports and school responses

```{=html}
<!-- -->
```
-   state grant and scholarship award rosters and report, and

```{=html}
<!-- -->
```
-   accrediting and licensing agency reports.

Specific fiscal record keeping requirements for each Title IV program
are discussed in that program's regulations.

**References:**

[34 CFR §§ 668.16](http://ifap.ed.gov/regcomps/doc4074_bodyoftext.htm);
[668.24](http://ifap.ed.gov/regcomps/doc4082_bodyoftext.htm);[668.171](http://ifap.ed.gov/regcomps/doc4184_bodyoftext.htm);
[668.173](http://ifap.ed.gov/regcomps/doc4186_bodyoftext.htm);
[668.175](http://ifap.ed.gov/regcomps/doc4188_bodyoftext.htm), Student
Assistance General Provisions

[34 CFR § 674.19, Federal Perkins Loan
Program](http://ifap.ed.gov/regcomps/doc4263_bodyoftext.htm)

[34 CFR § 675.19, Federal Work Study
Program](http://ifap.ed.gov/regcomps/doc4217_bodyoftext.htm)

[34 CFR § 676.19, Federal Supplemental Educational Opportunity
Grant](http://ifap.ed.gov/regcomps/attachments/676.pdf)

[34 CFR § 682.610, Federal Family Education Loan
Program](http://ifap.ed.gov/regcomps/doc4406_bodyoftext.htm)

[34 CFR § 685.309, William D. Ford Federal Direct Loan
Program](http://ifap.ed.gov/regcomps/doc4528_bodyoftext.htm)

[2001-2002 SFA Handbook, Institutional and Program Eligibility Section,
Chapter
5](http://ifap.ed.gov/sfahandbooks/attachments/0102Vol2Ch5CashManagement.pdf)

[Blue
Book](http://ifap.ed.gov/IFAPWebApp/currentBBooksYearPag.jsp?p1=JUN-1999&p2=c)

[SFA Assessment Worksheet, Assessment B, Fiscal
Requirements](http://qaprogram.air.org/AssessmentB.html)

7\. Excess Cash

  -----------------------------------------------------------------------
  **[FIS 3110]{.smallcaps}**

  -----------------------------------------------------------------------

The Secretary considers excess cash to be any amount of Title IV program
funds, other than Federal Perkins Loan Program funds, that an
institution does not disburse to students or parents by the end of the
third business day following the date the institution received those
funds from the Secretary. (There are some exceptions for peak periods,
as described in excess cash tolerances,

[34 CFR
668.166(b)](http://ifap.ed.gov/regcomps/doc4182_bodyoftext.htm).)

Payees should reconcile their grant awards on a regular basis and are
required to resolve any excess cash balances throughout the year. A
payee can resolve an excess cash balance by:

-   Returning excess to ED or

-   Reallocating drawn funds among grant awards in GAPS to comply with
    immediate cash needs.

If an institution must return funds to ED, the following procedure is
used: funds that are under \$100,000 are returned by check; funds that
exceed \$100,000 by FEDWIRE.

If an institution maintains excess cash balances, the Secretary requires
the institution to reimburse the Secretary for the costs the Secretary
deems to have incurred in making those excess funds available to the
institution and may initiate a proceed to fine, limit, suspend or
terminate the institution\'s participation in one or more Title IV
programs.

References:

[34 CFR § 668.166, Student Assistance General
Provisions](http://ifap.ed.gov/regcomps/doc4182_bodyoftext.htm)

[Blue
Book](http://ifap.ed.gov/IFAPWebApp/currentBBooksYearPag.jsp?p1=JUN-1999&p2=c)

[2001-2002 SFA Handbook, Institutional and Program Eligibility Section,
Chapter
5](http://ifap.ed.gov/sfahandbooks/attachments/0102Vol2Ch5CashManagement.pdf)

IRB Memos 91-22 and 93-7

[SFA Assessment Worksheet, Assessment B, Fiscal
Requirements](http://qaprogram.air.org/AssessmentB.html)

8\. GAPS Report

  -----------------------------------------------------------------------
  **[FIS 3102]{.smallcaps}**

  -----------------------------------------------------------------------

GAPS provides full financial management support services in a single
system. Functions supported by GAPS include everything from award
authorizations to disbursing funds and to final grant close out.

GAPS is the central repository for payment transactions of schools that
receive funds from ED through the Office of the Chief Financial Officer
(OCFO). OCFO is the office within ED that administers the system. GAPS
controls funds for both Title IV and non-Title IV programs. An
institution uses GAPS to request funds for the:

-   Federal Pell Grant Program

-   Federal SEOG Program

-   FWS Program

-   Federal Perkins Loan Program

-   Federal Direct Loan Program (Option 2 schools only)

GAPS uses the latest in funds-delivery systems and financial management
technologies (such as relational databases, Internet technology and
Windows environment). Using these technologies allows for such
customer-service improvements as easy system access to request funds and
request expenditures, user-friendly retrieval of award and payment
histories and immediate update and notification of changes in awards,
such as authorization changes.

Institutions request Federal funds electronically via GAPS External
Access System. The institution then requests funds by program. The
screen contains the amount of Title IV funds the institution has
available to draw down. Alternatively, institutions can call the GAPS
Payee Hotline at 1-888-336-8930 to request funds. Requests made after 2
p.m.(eastern time) are not processed by GAPS until the next business
day.

For purposes of this reporting, a grantee is an organizational component
that applies for and receives a grant award from ED. For Title IV
purposes, the grantee is the FAO. A payee is an organizational component
identified by the grantee to request and manage Federal funds on behalf
of the grantee. For Title IV purposes, the payee is the business office.

**Method of Receiving Funds**

Schools can receive funds from ED using Automated
Clearinghouse/Electronic Funds Transfer (ACH/EFT) or FEDWIRE.

**Payment Methods**

-   Advance

-   Just-in-time (available for Pell & FDL for the first time in AY
    99-00)

-   Reimbursement

-   Cash monitoring

**References:**

[34 CFR § 668.162, Student Assistance General
Provisions](http://ifap.ed.gov/regcomps/doc4178_bodyoftext.htm)

[2001-2002 SFA Handbook, Institutional and Program Eligibility Section,
Chapter
5](http://ifap.ed.gov/sfahandbooks/attachments/0102Vol2Ch5CashManagement.pdf)

GAPS Payee Guide

[The Blue
Book](http://ifap.ed.gov/IFAPWebApp/currentBBooksYearPag.jsp?p1=JUN-1999&p2=c)

[http://gapsweb.ed.gov](http://gapsweb.ed.gov/)

[SFA Assessment Worksheet, Assessment B, Fiscal
Requirements](http://qaprogram.air.org/AssessmentB.html)

[SFA Assessment Worksheet, Assessment F, Reporting and
Reconciliation](http://qaprogram.air.org/AssessmentF.html)

9\. Use of Cash Advances

  -----------------------------------------------------------------------
  **[FIS 3040, 3170]{.smallcaps}**

  -----------------------------------------------------------------------

Funds received by the institution under the Title IV programs are held
in trust for intended Title IV aid recipients and the Department.

With co-mingled accounts, verify that the total account balance did not
go below the balance of Federal funds present in the account.

**Federal Perkins Loan Program**

An institution shall deposit the funds it receives under the Federal
Perkins Loan program into its Fund. It may use these funds only for:

-   making loans to students

-   administrative expenses

-   capital distributions provided for in Section 466 of the Act

-   litigation costs

-   other collection costs

-   repayment of any short-term, no interest loans made to the Fund by
    the institution in anticipation of collections or receipt of FCC.

An institution may transfer up to 25 percent of the sum of its initial
and supplemental Perkins Loan allocations for an award year to the FWS
program or FSEOG program, or to both.

An institution may transfer up to the total of the sum of its initial
and supplemental Federal Perkins Loan allocations for an award year to
the Work-Colleges program.

An institution shall transfer back to the Federal Perkins Loan program
any funds unexpended at the end of the award year that it transferred to
the FWS program, the FSEOG program or the Work-Colleges program from the
Federal Perkins Loan program.

**Federal Work-Study**

An institution may use its FWS allocation only for:

-   paying the Federal share of FWS wages

-   paying administrative expenses

-   meeting the cost of a Work-Colleges program

-   meeting the cost of a Job Location and Development program

-   transferring a portion of its FWS allocation to its FSEOG program.
    An institution may transfer up to 25 percent of the sum of its
    initial and supplemental FWS allocations for an award year to its
    FSEOG program.

-   carry forward funds. An institution may carry forward and expend in
    the next award year up to 10 percent of the sum of its initial and
    supplemental FWS allocations for the current award year. Before an
    institution may spend its current year FWS allocation, it shall
    spend any funds carried forward from the previous year.

-   carry back funds. An institution may carry back and expend in the
    previous award year up to 10 percent of the sum of its initial and
    supplemental FWS allocations for the current award year.

-   carry back funds for summer employment. An institution may carry
    back and expend in the previous award year any portion of its
    initial and supplemental FWS allocations for the current award year
    to pay students wages earned on or after May 1 of the previous award
    year but prior to the beginning of the current award year.

-   community service. For the 2000-2001 award year and subsequent award
    years, an institution must use at least 7 percent of the sum of its
    initial and supplemental FWS allocations for an award year to
    compensate students employed in community service activities

```{=html}
<!-- -->
```
-   payment for time spent in training and travel for any award year:

-   an institution may pay students for a reasonable amount of time
    spent for training that is directly related to FWS employment.

-   beginning with the 1999-2000 award year, an institution may pay
    students for a reasonable amount of time spent for travel that is
    directly related to employment in community service activities
    (including tutoring in reading and family literacy activities).

**Federal SEOG**

An institution may use its FSEOG allocation and reallocation only for:

-   making grants to eligible students

-   paying administrative expenses

-   transferring back funds to FWS. An institution shall transfer back
    to the FWS any funds unexpended at the end of the award year that it
    transferred to the FSEOG program from the FWS program.

```{=html}
<!-- -->
```
-   carrying forward funds.

-   An institution may carry forward and expend in the next award year
    up to 10 percent of the sum of its initial and supplemental FSEOG
    allocations for the current award year.

-   Before an institution may spend its current year FSEOG allocation,
    it must spend any funds carried forward from the previous year.

```{=html}
<!-- -->
```
-   carry back funds:

> • An institution may carry back and expend in the previous award year
> up to 10 percent of the sum of its initial and supplemental FSEOG
> allocations to the current award year.

-   carry back funds for summer FSEOG:

> • An institution may carry back and expend in the previous award year
> any portion of its initial and supplemental FSEOG allocations for the
> current award year to make awards to eligible students for payment
> periods that begin on or after May 1 of the previous award year, but
> end prior to the beginning of the current award year.

Disallowed Program Expenditures:

-   funds drawn down and not used in accordance with immediate need
    rules; liability for costs incurred for excess funds

-   the institution owes ED with respect to disallowed program
    expenditures found during an audit or program review. However, the
    disallowed expenditures are not always a dollar for dollar
    liability.

-   the institution draws down more money than it spends

-   the institution draws down funds and disburses them improperly

**References:**

[34 CFR § 668.16 , Student Assistance General
Provisions](http://ifap.ed.gov/regcomps/doc4074_bodyoftext.htm)

[34 CFR §§ 668.161 - 166, Student Assistance General
Provisions](http://ifap.ed.gov/regcomps/doc4177_bodyoftext.htm)

[34 CFR §673.7, General Provisions for the Federal Perkins Loan Program,
Federal Work-Study Program and FSEOG
Program](http://ifap.ed.gov/regcomps/doc4520_bodyoftext.htm)

[34 CFR §§ 674.8(b); 674.18, 674.19(d), Federal Perkins
Loan](http://ifap.ed.gov/IFAPWebApp/currentRegCompsYear3Pag.jsp?p1=31-DEC-1999&p2=c&p3=674&p4=FEDERAL PERKINS LOAN PROGRAM&p5=General Provisions&p6=A)

[34 CFR § 675.18, Federal
Work-Study](http://ifap.ed.gov/regcomps/doc4216_bodyoftext.htm)

[34 CFR § 676.18,
FSEOG](http://ifap.ed.gov/regcomps/attachments/676.pdf)

[34 CFR § 690.81 Federal Pell
Grant](http://ifap.ed.gov/regcomps/doc4449_bodyoftext.htm)

[2001-2002 SFA Handbook, Campus-Based Programs
Section](http://ifap.ed.gov/sfahandbooks/0102sfahbcbcommonprovisions.html)

[SFA Assessment Worksheet, Assessment B, Fiscal
Requirements](http://qaprogram.air.org/AssessmentB.html)

10\. Matches For Campus-Based Programs

  -----------------------------------------------------------------------
  **[FWS 1090, FPERK 8190, FSEOG 9010]{.smallcaps}**

  -----------------------------------------------------------------------

The program participation agreement with the Secretary provides that the
institution shall use the funds it receives solely for the purposes
specified in 34 CFR parts 674, 675, 676 and the Student Assistance
General Provisions regulations, 34 CFR part 668. The agreement
specifically provides, among other things, that for:

**Federal Perkins Loan Program**

The institution shall establish and maintain a Fund and shall deposit
into it the following

1\. Federal Capital Contribution (FCC) received under this subpart

2\. Institutional Capital Contribution (ICC) equal to at least one-third
of the FCC

3\. ICC equal to the amount of FCC for an institution that has been
granted permission by the Secretary to participate in the ELO under the
Federal Perkins Loan program

**Federal Work-Study Program**

The Federal share of FWS compensation paid to a student employed other
than by a private for-profit organization, as described in 675.23, may
not exceed 75 percent unless the Secretary approves a higher share;
however

-   The Federal share of the compensation paid to a student may exceed
    75 percent, but may not exceed 90 percent if the student is employed
    at a private nonprofit organization or a Federal, State, or local
    public agency that:

```{=html}
<!-- -->
```
-   is not a part of, and is not owned, operated, or controlled by, or
    under common ownership, operation, or control with, the institution;

-   is selected by the institution on an individual case-by-case basis;

-   would otherwise be unable to afford the costs of this employment;
    and

-   the number of students compensated is not more than 10 percent of
    the total number of students paid under the FWS Program at the
    institution

```{=html}
<!-- -->
```
-   The Federal share of the compensation paid to a student employed by
    a private for-profit organization may not exceed 50 percent

-   An institution may not use FWS funds to pay a student after he or
    she has, in addition to other resources, earned \$300 or more over
    his or her financial need.

The institution may not include the following when determining the
Federal share:

-   fringe benefits such as paid sick days, paid vacations, or paid
    holidays

-   the employer's share of social security, workers' compensation,
    retirement, or any other welfare or insurance program that the
    employer must pay on account of the student employee

If an institution receives more money under an employment agreement from
an off-campus employer than the required employer costs, its non-federal
share, and any share of administrative costs that the employer agreed to
pay, the excess funds must be

-   used to reduce the Federal share on a dollar-for dollar basis,

-   held in trust for off-campus student employment next year, or

-   refunded to the off-campus employer

For each award year, the Secretary authorizes a Federal share of 100
percent of the compensation earned by a student under this part if

-   the work performed by the student is for the institution itself, for
    a Federal, Sate, or local public agency, or for a private nonprofit
    organization, and

-   the institution in which the student is enrolled

```{=html}
<!-- -->
```
-   is designated as an eligible institution under the Developing
    Hispanic-Serving Institutions Program 34 CFR 606, the Strengthening
    Institutions Program, 34 CFR 607, the Strengthening Historically
    Black Colleges and Universities Program, 34 CFR 608, or the
    Strengthening Historically Black Graduate Institutions Program, 34
    CFR 609, and

-   requests that increased Federal share as part of its regular FWS
    funding application for that year;

```{=html}
<!-- -->
```
-   The student is employed as a reading tutor for preschool age
    children or children who are in elementary school;

```{=html}
<!-- -->
```
-   The student is performing family literacy activities in a family
    literacy project that provides services to families with preschool
    age children or children who are in elementary school;

-   The student is employed as a mathematics tutor for children who are
    in elementary school through the ninth grade.

**Federal SEOG Program**

The Federal share of the FSEOG awards made by an institution may not
exceed 75 percent of the amount of FSEOG awards made by that
institution.

The Secretary authorizes, for each award year, a Federal share of 100
percent of the FSEOGs awarded to students by an institution that

-   is designated as an eligible institution under Developing
    Hispanic-Serving Institutions Program 34 CFR 606, the Strengthening
    Institutions Program, 34 CFR 607, the Strengthening Historically
    Black Colleges and Universities Program, 34 CFR 608; and

-   requests that increased Federal share as part of its regular SEOG
    funding application for that year.

The non-federal share of FSEOG awards must be made from the
institution's own resources, which includes:

-   institutional grants and scholarships

```{=html}
<!-- -->
```
-   tuition or fee waivers

-   state scholarships and

-   foundation or other charitable organization funds

**Recommended Review Procedures**

-   Verify that the institution has made the proper institutional match
    from institutional funds at the time the funds were transferred from
    GAPS.

```{=html}
<!-- -->
```
-   Verify the accuracy of the institutional match calculations.

-   Verify the entry on the institution's ledger.

-   Verify that the match is a debit against the program account.

-   Review the institution's written procedures for matching, i.e., does
    the institution draw down a percentage of the full amount based on
    the Federal share.

**References:**

34 CFR § 606, Developing Hispanic-Serving Institutions Program

34 CFR § 607, Strengthening Institutions Program

34 CFR § 608, Strengthening Historically Black Colleges and Universities
Program

34 CFR § 609, Strengthening Historically Black Graduate Institutions
Program

[34 CFR § 674.8, Federal Perkins Loan
Program](http://ifap.ed.gov/regcomps/doc4252_bodyoftext.htm)

[34 CFR § 675.26, Federal Work-Study
Program](http://ifap.ed.gov/regcomps/doc4224_bodyoftext.htm)

[34 CFR § 676.21, FSEOG
Program](http://ifap.ed.gov/regcomps/attachments/676.pdf)

[Higher Education Act of 1965 as Amended, §§ 413(c)-FSEOG,
443(b)(5)-FWS, and
463(a)-Perkins](http://ifap.ed.gov/regcomps/attachments/676.pdf)

[2001-2002 SFA Handbook, Campus-Based Programs
Section](http://ifap.ed.gov/sfahandbooks/0102sfahbcbcommonprovisions.html)

[The Blue
Book](http://ifap.ed.gov/IFAPWebApp/currentBBooksYearPag.jsp?p1=JUN-1999&p2=c)

[SFA Assessment Worksheet, Assessment B, Fiscal
Requirements](http://qaprogram.air.org/AssessmentB.html)

11\. Return of Title IV Funds

  -----------------------------------------------------------------------
  **[GEN 2350, 2360, 2371, 2372, 2380]{.smallcaps}**

  -----------------------------------------------------------------------

When a recipient of Title IV grant or loan assistance withdraws from an
institution during a payment period or a period of enrollment in which
the recipient began attendance, the institution must determine the
amount of SFA program assistance (not including FWS or the non-federal
share of FSEOG) that the student earned as of the student's withdrawal
date.

Reviewers should check the institution's refund policy to ensure that it
includes the following:

-   the conditions under which Title IV program funds would be required
    to be returned and the conditions under which a student would be
    owed a disbursement of Title IV program funds upon withdrawal of a
    student

```{=html}
<!-- -->
```
-   the requirements for making a post-withdrawal disbursement of Title
    IV program funds to a student

-   a system to determine the withdrawal date for a student who
    withdraws officially or unofficially

```{=html}
<!-- -->
```
-   procedures for the calculation of the amount of Title IV program
    funds that a student has earned upon withdrawal, including
    differences in the calculation for clock-hour, credit-hour,
    non-term, and term programs offered at the institution

-   procedures to ensure that credit balances are promptly delivered to
    students

-   guidelines pertaining to the timeframe for the return of Title IV
    program funds

-   guidelines pertaining to the order in which Title IV program funds
    must be returned

The amount of SFA program assistance that is earned by the student is
calculated by:

-   determining the percentage of the payment or enrollment period that
    the student has completed, and

```{=html}
<!-- -->
```
-   applying this percentage to the total amount of Title IV grant or
    loan assistance that was disbursed (and could have been disbursed)
    to the student, or on the student's behalf, for the payment period
    or period of enrollment as of the student's withdrawal date.

Percentage earned by the student is:

1.  equal to the percentage of the payment period or period of
    enrollment that the student completed as of the student's withdrawal
    date, if this date occurs on or before completion of 60 percent of
    the:

-   payment period or period of enrollment for a program that is
    measured in credit hours; or

-   clock hours scheduled to be completed for the payment period or
    period of enrollment for a program that is measured in clock hours;
    or

2.  100 percent if, the student's withdrawal date occurs after
    completion of 60 percent of the:

-   payment period or period of enrollment for a program that is
    measured in credit hours, or

-   clock hours scheduled to be completed for the payment period or
    period of enrollment for a program that is measured in clock hours.

Percentage unearned by the student is calculated by determining the
complement of the percentage of Title IV grant or loan assistance earned
by the student.

The unearned amount of SFA program assistance to be returned is
calculated by subtracting the amount of SFA program assistance earned by
the student from the amount of SFA program assistance that was disbursed
to the student as of the date of the institution's determination that
the student withdrew.

Use of payment period or period of enrollment:

-   The treatment of SFA program assistance if a student withdraws must
    be determined on a payment period basis for a student who attended a
    standard term-based (semester, trimester, or quarter) educational
    program.

-   The treatment of SFA program assistance if a student withdraws may
    be determined on either a payment period basis or a period of
    enrollment basis for a student who attended a non-term based
    educational program or a nonstandard term-based educational program.

-   An institution must consistently use either a payment period or
    period of enrollment for each of the following categories of
    students who withdraw from the same non-term based or nonstandard
    term-based educational program:

1.  Students who have attended an educational program at the institution
    from the beginning of the payment period or period of enrollment

2.  Students who re-enter the institution during a payment period or
    period of enrollment

3.  Students who transfer into the institution during a payment period
    or period of enrollment

Percentage of payment period or period of enrollment completed that is
measured in:

Credit hours:

By dividing the total number of calendar days in the payment period or
period of enrollment into the number of calendar days completed in that
period as of the student's withdrawal date. For non-standard terms, the
institution must use the number of calendar days in the payment period
or period of enrollment based upon when the student would have been
projected to complete that period at the time of withdrawal.

Clock hours:

> By dividing the total number of clock hours in the payment period or
> period of enrollment into the number of clock hours:

-   completed in that period as of the student's withdrawal date
    (excused absences don't count as hours completed); or

-   if the clock hours completed in the period are **not** less than 70
    percent of the hours that were scheduled to be completed by the
    student as of the student's withdrawal date, the institution may use
    scheduled hours in lieu of completed hours to calculate percentage
    of the period completed.

Exclude:

-   scheduled breaks of five or more days

-   all days between last day of classes before break and first day
    classes resume

-   days in which the student was on an approved leave of absence

**Amount of unearned Title IV aid due from the institution is the lesser
of:**

Institutional charges x percentage of unearned Title IV aid (% of
unearned Title IV aid = 100%Title IV aid disbursed - % of earned Title
IV aid) or total amount of unearned Title IV aid to be returned

**Initial amount of unearned aid due from the student**

Amount of Title IV aid to be returned **minus** the institution's
responsibility **equals** the student's responsibility.

Loans are repaid in accordance with the terms of the promissory notes.

Grant repayments are adjusted/reduced to 50 percent of the unearned
grant received.

Institution's responsibilities for Grant Overpayments:

-   Within 30 calendar days of determining student's withdrawal, the
    institution must send the student a notice advising that a grant
    repayment is owed.

-   Student retains eligibility for Title IV funds for an initial 45 day
    period from the date of the notice in order to do one of the
    following:

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-   repay in full

-   make satisfactory repayment arrangement with institution

-   make satisfactory repayment arrangement with ED.

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```
-   The institution must report overpayment to NSLDS within 30 calendar
    days after:

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```
-   student fails to repay overpayment or sign agreement with
    institution within 45 day period, or

-   student fails to meet terms of agreement signed with institution

An institution must return funds due to the Title IV programs no later
than 30 days after it determines that a student has withdrawn.

**References:**

[34 CFR §§ 668.22 General
Provisions](http://ifap.ed.gov/regcomps/doc4080_bodyoftext.htm)

[2001-2002 Student Financial Aid Handbook, Institutional and Program
Eligibility Section, Chapter
6](http://ifap.ed.gov/sfahandbooks/attachments/0102Vol2Ch6aReturnOfFunds.pdf)

R2T4 Worksheets, [http://ifap.ed.gov](http://ifap.ed.gov/)

R2T4 Software, [http://sfadownload.ed.gov](http://sfadownload.ed.gov/)

[SFA Assessment Worksheet, Assessment F, Reporting &
Reconciliation](http://qaprogram.air.org/AssessmentF.html)

12\. Student Credit Balances

  -----------------------------------------------------------------------
  **[GEN 2385]{.smallcaps}**

  -----------------------------------------------------------------------

If an institution credits a student's account with Title IV program
funds, it may apply those funds only to the following allowable charges:

-   tuition and fees

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-   board, if the student contracts with the institution for board

-   room, if the student contracts with the institution for room

If an institution obtains a student's or parent's written authorization
to use Title IV program funds to pay other costs, allowable charges may
also include:

-   institutional charges that were incurred by the student for
    educationally- related activities in addition to those not requiring
    an authorization

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```
-   minor prior year charges if these charges are less than \$100 or if
    the payment of these charges does not, or will not, prevent the
    student from paying his or her current educational costs.

In general, Title IV program funds are only used to pay for educational
expenses a student incurs in the period for which these funds are
provided.

An institution may not require a student or parent to authorize the use
of Title IV funds to pay for other costs. Students or parents may modify
or rescind their written authorization at any time.

An institution may at the student's request, make FWS payments directly
to the student's bank account or may credit a student's account at the
institution for tuition and fees, room and board and other
institutionally provided goods and services.

When an institution disburses Federal Direct Loan funds by crediting a
student's account at the institution, it must first credit the student's
account with those funds to pay outstanding, current and authorized
charges.

When an institution credits a student's account with Federal Perkins
Loan funds (whose promissory notes contain provisions effective on July
1, 1996), Federal Direct Loan funds, or FFEL funds received by EFT or
master check, it must notify the student or parent 30 calendar days
after crediting the student's account of

-   the date and amount of the disbursement,

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```
-   the borrower's right to cancel all or a portion of the loan, and

-   the procedures and time by which the borrower must notify the
    institution that he or she wishes to cancel all or a portion of the
    loan.

If the institution sends the notice electronically, it must require the
recipient of the notice to confirm receipt of the notice and the
institution must maintain a copy of the confirmation.

When an institution applies Title IV funds to a student's account and
determines that the amount of the funds exceeds allowable charges the
institution assessed the student, the institution must pay the credit
balance directly to the student or parent borrower as soon as possible,
but no later than the 14-day deadline. The only exception is when the
institution has the student's permission to hold credit balances.

An institution must pay a credit balance to a student or notify the
student or parent that the check is available on request within 14 days
of:

-   the date the balance occurs, if it occurs on or after the first day
    of class of a payment period, (example: first day of class, 01/15;
    credit balance occurs, 01/28; 14 days from date of credit balance
    occurs, 02/11), or

-   the first day of class of a payment period, if it occurs before the
    start of class of that payment period, (example: credit balance
    occurs, 01/11; first day of class, 01/15; 14 days from date of
    credit balance occurs, 01/29), or

-   the date the student rescinds authorization given to the institution
    to hold Title IV credit balances.

**Recommended Review Procedures:**

Review the institution\'s policy and procedures for applying payments to
students\' accounts, monitoring whether students\' disbursements exceed
costs, and providing budgetary assistance to students. Some schools
don\'t keep individual student account records. ED does not require them
to do so, but the school must have a system for determining when
disbursements exceed costs, and promptly delivering the excess funds to
the students.

Review records for sampled students to determine if credit balances were
held without students\' permission. If credit balances are currently
being held, check if school has enough funds in operating accounts to
make disbursements to students.

**References:**

[34 CFR § 668.164](http://ifap.ed.gov/regcomps/doc4180_bodyoftext.htm)
and [668.165](http://ifap.ed.gov/regcomps/doc4181_bodyoftext.htm),
Student Assistance General Provisions

[34 CFR § 690.78 Federal Pell
Grant](http://ifap.ed.gov/regcomps/doc4446_bodyoftext.htm)

[2001-2002 SFA Handbook, Institutional and Program Eligibility Section,
Chapter
5](http://ifap.ed.gov/sfahandbooks/attachments/0102Vol2Ch5CashManagement.pdf)

HEA, § 445(c)

[SFA Assessment Worksheet, Assessment E, Disbursement
Requirements](http://qaprogram.air.org/AssessmentE.html)

[SFA Assessment Worksheet, Assessment F, Reporting &
Reconciliation](http://qaprogram.air.org/AssessmentF.html)

13\. FFEL/Direct Loan Disbursements (Payment Periods)

  -----------------------------------------------------------------------
  **[FFEL 5271]{.smallcaps}**

  -----------------------------------------------------------------------

The rules for awarding FFEL and Direct Loans are a little different than
for Pell Grants and Campus Based programs. In particular, the
definitions of a "loan period" and the disbursements within that period
may not always fit the academic year and payment period measurement used
for Pell.

Institutions must define the period of enrollment or loan period at the
outset, because the length of the loan period will determine the amount
and frequency of disbursements. If an institution uses semester,
trimester, quarter or nonstandard terms, the loan period must coincide
with one or more of its academic terms. Loan periods for institutions
that do not use terms are generally based on the length of the program
or academic year.

For programs using terms and credit hours, the **minimum** loan period
is a single academic term. For example, if a student enrolls in a fall
semester to complete his/her requirements for graduation, the
institution may certify a loan for that term alone.

For a clock-hour institution or a credit hour institution that does not
use terms, the **minimum** period for which the institution may certify
a loan is the shortest of the following three periods:

-   the academic year as defined by the institution (but not less than
    30 weeks of instruction providing 900 clock hours, 24 semester
    hours, or 36 quarter hours)

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-   scheduled academic year (SAY) is a fixed period of time that
    generally begins and ends at the same time each calendar year. The
    SAY generally corresponds to the academic year or calendar that is
    published in the institution's catalog.

-   borrower-based academic year (BBAY) is **NOT** a fixed period of
    calendar time. The BBAY's beginning and end dates depend on an
    individual student's enrollment and progress.

-   treatment of summer terms & "crossover periods." An institution can
    establish a policy that designates its summer term as either a
    trailer or header, or it can make different determinations for
    different educational programs or for each student on a case-by-case
    basis. However, if a student in a summer session that overlaps two
    award years also receives campus-based aid, the institution must use
    the same EFC (from the same application year) for both the
    campus-based aid and the FFEL/DL loan.

```{=html}
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```
-   An institution must use BBAYs for clock-hour and nonterm credit hour
    programs. The institution may use either type of academic year for
    term-based credit hour programs where the academic year provides at
    least 30 weeks of instruction.

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```
-   The length of the student's program at the institution. (A program
    at a proprietary institution or a postsecondary vocational
    institution must include at least 10 weeks of instruction providing
    at least 300 clock hours, 9 semester hours or 12 quarter hours.)

-   The remaining portion of the student's program that exceeds the
    institution's academic year.

The **maximum** loan period is generally the institution's academic year
but cannot exceed a 12-month period in an academic year. It is possible,
but not typical, to have more than one loan in an academic year. A
student who has already received one FFEL or Federal Direct within an
academic year may receive additional loan funds if he or she has not yet
reached the annual limit.

**References:**

[34 CFR § 600.2, Institutional
Eligibility](http://ifap.ed.gov/regcomps/doc3958_bodyoftext.htm)

[34 CFR §§ 668.2](http://ifap.ed.gov/regcomps/doc4061_bodyoftext.htm)
and [668.4](http://ifap.ed.gov/regcomps/doc4063_bodyoftext.htm), Student
Assistance General Provisions

[34 CFR § 682.204,
FFEL](http://ifap.ed.gov/regcomps/doc4318_bodyoftext.htm)

[34 CFR § 685.203,
FDL](http://ifap.ed.gov/regcomps/doc4521_bodyoftext.htm)

[2001-2002 SFA Handbook, FFEL/DL Section, Chapter
3](http://ifap.ed.gov/sfahandbooks/attachments/0102Vol8Ch3loanperiodamts.pdf)

[SFA Assessment Worksheet, Assessment D, Award
Requirements](http://qaprogram.air.org/AssessmentD.html)

[SFA Assessment Worksheet, Assessment E, Disbursement
Requirements](http://qaprogram.air.org/AssessmentE.html)

14\. Ability-to-Benefit

  -----------------------------------------------------------------------
  **[GEN 2002]{.smallcaps}**

  -----------------------------------------------------------------------

To be eligible to receive SFA, the HEA requires persons who do not have
a high school diploma or its recognized equivalent and are beyond the
age of compulsory school attendance to pass, within 12 months before the
date the student initially receives SFA program assistance, an
independent state test or an independently administered test approved by
the Secretary.

Documentation needed to determine if a student qualifies under ATB:

-   approved test taken

-   date test taken

-   score received

-   passing score received

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```
-   is a copy of the student's scored test on file at the institution

**Recommended Review Procedures**

Confirm the school\'s determination that students who do not possess a
high school diploma or its equivalent (GED) have demonstrated the
ability to benefit (ATB). Review all information about the test used by
the school, including the test itself, an answer key, scoring guide, and
instructions explaining the procedures for administering the test.

Other recommended review procedures are as follows:

-   Ensure that any test used for all Title IV recipients is one of the
    approved tests listed in the Federal Register.

-   Verify that the *complete* approved test was administered; the
    school cannot use only selected parts of the test.

-   Ascertain whether the tester meets the independence criteria in
    Section 668.51 (review the tester\'s contract with the school). For
    degree-granting institutions the independent tester can be another
    internal office, as long as that office is separate from admissions.

-   Confirm whether test meets licensing and accrediting requirements
    (some agencies approved only certain ATB tests, even before the
    Department did so).

If students fail the ATB test and then submit documentation of high
school graduation or GEDs, reviewers may want to verify the authenticity
of that information.

When discussing the process with officials and the tester, determine how
the documentation that the student passed the test is maintained. Is
there a certification for each student who passed, signed by the tester?
Does the test administrator keep a roster of all students tested to be
checked against the results noted in students\' files? There are no
specific measures required by the Department, but there have been some
cases where test administrator records showed students failed their ATB
tests, but the file documentation showed they passed. Refer to Appendix
C for recommended questions to ask regarding the ATB process.

Finally, since students who cannot demonstrate ATB can still be admitted
to the institution, verify that the school has a method to identify such
students to ensure they do not receive Title IV assistance.

**References:**

[34 CFR §§ 668.32, 668.141 -- 668.156 General
Provisions](http://ifap.ed.gov/regcomps/doc4087_bodyoftext.htm)

[2001-2002 SFA Handbook, Student Eligibility Section, Chapter
1](http://ifap.ed.gov/sfahandbooks/attachments/0102Vol1Ch1schoolbased.pdf)

[SFA Assessment Worksheet, Assessment C, Student
Eligibility](http://qaprogram.air.org/AssessmentC.html)

15\. Satisfactory Academic Progress Standards

  -----------------------------------------------------------------------
  **[GEN 2390, 2400]{.smallcaps}**

  -----------------------------------------------------------------------

**See Appendix G\--Satisfactory Academic Progress (SAP) Policy
Checklist**

SAP is a measure of whether a student is progressing adequately toward
completion of his or her course of study. It is determined in terms of
grade point average and course completions.

An institution's SAP policy must

-   be published and made available to all current students and to
    prospective students upon request

-   be as least as strict as the institution policy for students not
    receiving SFA program assistance

-   provide for consistent application of standards to all students
    within categories

-   provide for a determination of whether a student has met standards
    at the end of an established increment.

An institution's satisfactory academic progress policy must contain the
following components:

-   Qualitative measurement

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```
-   must consist of grades, work projects completed, or other factors
    measurable against a norm

-   institution may establish fixed standard or graduated standards

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```
-   Quantitative measurement

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```
-   maximum time frame for completion of the certificate or degree
    program, not to exceed 150 percent of the published length of the
    program

-   division of time frame into increments (may not exceed the lesser of
    one academic year or one-half of the published program length)

-   schedule of work designating a minimum amount of work a student must
    successfully complete during each increment in order to complete
    within the maximum time frame.

-   institutions must determine how it will treat the following:

-   periods when a student doesn't receive Title IV aid (must be counted
    toward maximum time frame)

-   probation

-   transfer students (how will accepted transfer credits be treated
    with regard to maximum time frame)

-   changes in majors or degrees

-   pursuit of a second degree

-   summer term(s)

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```
-   Specific policies defining the effect of incompletes, course
    repetitions, withdrawals and noncredit remedial courses

    • Incompletes

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```
-   policy must state how the incomplete grade will affect the measures
    of quantitative and qualitative progress

-   policy should specify how a grade change will be handled

-   when will progress be re-assessed?

-   how will the aid office be notified of a grade change?

    • Repeated Courses

> • ability to repeat a course may be tied to the grade received for
> that course
>
> • schools may limit the number of times a course may be repeated
>
> • schools may limit the number of courses students may repeat. Note:
> If repeated courses are allowed, the policy should clearly state how
> they will affect the qualitative and quantitative components.

• Withdrawals

> • courses that a student withdraws from are usually considered in
> "hours attempted"
>
> • if a school measures time frame in years or terms, policy must state
> effect of withdrawals on maximum time frame
>
> • policy should specify treatment of different types of withdrawals,
> for example, withdrawn/passing or withdrawn/failing

• Noncredit remedial courses

> • policy must address whether these courses will count toward maximum
> time frame and/or GPA) Note: Title IV funds may be received for up to
> one year of remedial coursework (30 semester or trimester hours, 45
> quarter hours or 900 clock hours)
>
> • credit value must be assigned to noncredit remedial coursework for
> determining enrollment status

-   Specific appeal procedures:

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```
-   does the institution choose to specify in its policy the mitigating
    circumstances that will be evaluated?

-   does the policy include specific procedures to be followed after an
    adverse determination for the evaluation of a student's mitigating
    circumstances when presented on appeal?

-   does the policy detail the student's responsibilities during the
    probationary period due to mitigating circumstances?

-   specific procedures to re-establish eligibility

-   does the institution choose to include in its policy a blanket
    probationary period?

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```
-   does the policy detail the student's responsibilities during the
    probationary period?

-   does the policy include specific procedures and minimum requirements
    for reinstatement of aid after a student's aid has been terminated
    for lack of satisfactory academic progress?

If a student loses his or her eligibility for failing to satisfy
satisfactory progress, the student does not regain that status merely by
dropping out and then re-enrolling.

There is no requirement that the incremental period for evaluating
satisfactory progress coincide with a payment period.

**Programs less than two academic years**

Increments may not exceed one-half of published length of the program
measured in years, terms, credit hours attempted, clock hours completed
or any other appropriate measure. If an increment length equal to
one-half published program length does not correspond to grading period
or payment period, logic dictates more increments than the regulatory
minimum.

**Programs longer than two academic years**

If a student is enrolled in a program of study more than two academic
years, to be eligible for SFA program assistance after the second year,
the student must be making satisfactory academic progress.

A student is making satisfactory progress if, at the end of the second
year, the student has a grade point average of at least a "C" or its
equivalent or has academic standing consistent with the institution's
requirements for graduation.

**References:**

[34 CFR § 668.16 Student Assistance General
Provisions](http://ifap.ed.gov/regcomps/doc4074_bodyoftext.htm)

[34 CFR § 668.20 Student Assistance General
Provisions](http://ifap.ed.gov/regcomps/doc4074_bodyoftext.htm)

[34 CFR § 668.34 Student Assistance General
Provisions](http://ifap.ed.gov/regcomps/doc4089_bodyoftext.htm#http://ifap.ed.gov/regcomps/doc4089_bodyoftext.htm)

[2001-2002 SFA Handbook, Student Eligibility Section, Chapter
1](http://ifap.ed.gov/sfahandbooks/attachments/0102Vol1Ch1schoolbased.pdf)

[SFA Assessment Worksheet, Assessment A, Institutional
Participation](http://qaprogram.air.org/AssessmentA.html)

[SFA Assessment Worksheet, Assessment C, Student
Eligibility](http://qaprogram.air.org/AssessmentC.html)

16\. Student Eligibility

  -----------------------------------------------------------------------
  **[GEN 2150, 2190, 2200, 2210,2220, 2221]{.smallcaps}**

  -----------------------------------------------------------------------

To be eligible for SFA, a student must be a regular student enrolled or
accepted for enrollment, in an eligible program at an eligible
institution for the purpose of obtaining a degree or certificate offered
by the school. There are two exceptions: preparatory coursework and
teacher certification and remedial coursework.

**General student eligibility requirements:**

-   The student must have a valid social security number.

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```
-   The student must be a U.S. citizen or eligible noncitizen.

-   The student must be a regular student enrolled or accepted for
    enrollment in an eligible program for the purpose of obtaining a
    degree or certificate. At schools that admit students who are not
    seeking a degree or certificate, ensure that the school has
    procedures to track this so that aid is not awarded to those
    students. See loan and teacher certification exceptions below.

-   The student must meet the academic qualifications for study at the
    postsecondary level. (Student has a high school diploma or
    recognized equivalent or is beyond the age of compulsory school
    attendance, has passed an ability to benefit test, completed an
    approved state process, or completed secondary school by home
    schooling approved under or excepted from state regulation.)

-   The student has not been convicted of a drug-related offense that
    affects eligibility for SFA aid.

-   The student (if male) must be registered with Selective Service.

-   The student must not be enrolled solely in a remedial program.

-   The student must be maintaining satisfactory academic progress.

-   The student must not be in default and must not owe an overpayment
    on a Title IV loan or grant (NSLDS history on ISIR or FAT).

-   The student must not have borrowed in excess of loan limits (NSLDS
    history), unless excess amount inadvertently obtained and already
    repaid.

-   The student must not be a member of a religious order.

-   If enrolled in a correspondence course, that course must be part of
    an eligible program.

-   The student must have financial need. (Need is not required for
    unsubsidized and PLUS loans).

-   Verification must have been completed, if required.

-   Is not enrolled in elementary or secondary school.

-   Is not incarcerated (loans) nor incarcerated in a Federal or state
    penal institution (all programs).

**Program specific student eligibility criteria**

Federal Pell Grant (690.6 and 690.75)

-   Undergraduates only

-   May not have a bachelor's or first professional degree, except for
    students seeking teacher certification at schools not offering
    undergraduate degrees in education

-   Students must have a SAR or ISIR on file with the school

-   Less-than-full-time, including less-than-half-time students are
    eligible

FSEOG (676.9)

-   Undergraduates only

-   May not have bachelor's or first professional degree

-   Must be awarded first to students with exceptional financial need
    (lowest EFC)

-   Priority to students with exceptional financial need who are
    eligible for Federal Pell Grants

Federal Perkins Loan (674.9)

-   Undergraduates

-   Graduate students

-   Professional students

-   Priority to students with exceptional financial need as defined by
    the school

-   Students must be willing to repay their loans

-   Must have determination of Federal Pell Grant eligibility

-   May not be in medical internship or residency

FWS (675.9)

-   Undergraduates

-   Graduate students

-   Professional students

-   Demonstrate need according to Federal need analysis methodology

-   Less-than-full-time students are eligible. A reasonable share of a
    school's allocation of campus-based funds must be awarded to
    less-than-full-time students and nontraditional students

FSEOG\*, Federal Perkins Loan and FWS

-   Demonstrate need according to Federal need analysis methodology

-   Less-than-full-time students are eligible. A reasonable share of a
    school's allocation of campus-based funds must be awarded to
    less-than-full-time students and nontraditional students

Federal Subsidized Loan and Federal Direct Subsidized Loan (682.201,
685.200)

-   Undergraduates

-   Graduate students

-   Professional students

-   Students enrolled in courses prerequisite to enrollment in a degree
    or certificate program

-   Students enrolled in a teacher certification program

-   Student must be enrolled at least half-time and demonstrate
    financial need according to the Federal need analysis methodology

-   Eligibility for Federal Pell Grants must be determined prior to
    certifying loan applications and, if eligible, students must apply
    for Federal Pell Grants

Federal Unsubsidized Loan and Federal Direct Unsubsidized Loan

-   Undergraduates

-   Graduate students

-   Professional students

-   Students enrolled in courses prerequisite to enrollment in a degree
    or certificate program

-   Students enrolled in a teacher certification program

-   Student must be enrolled at least half-time

-   Students do not have to demonstrate financial need

-   Student eligibility for Federal Pell Grant and Federal Subsidized or
    Federal Direct Subsidized must be determined

-   Student must apply for Federal Subsidized or Federal Direct
    Subsidized first (EFA includes subsidized loan amount for which
    students are eligible

Federal PLUS Loan and Federal Direct PLUS Loan

-   Parents of eligible dependent undergraduate students

-   Students for whom parents borrow must be eligible, regular students
    enrolled at least half-time

-   Parents must:

-   Meet same citizenship requirements as an eligible student

-   Not be in default on a SFA loan

-   Not owe an overpayment on a SFA grant or loan

-   Not have an adverse credit history

The ISIR plays a very important role in identifying possible eligibility
problems. When reviewing the ISIR, reviewers should look for "C"
codes/comments and check the NSLDS section.

**References:**

[34 CFR § 668.19, Student Assistance General
Provisions](http://ifap.ed.gov/regcomps/doc4077_bodyoftext.htm)

[34 CFR §§ 668.32 -
39](http://ifap.ed.gov/IFAPWebApp/currentRegCompsYear3Pag.jsp?p1=31-DEC-1999&p2=c&p3=668&p4=STUDENT ASSISTANCE GENERAL PROVISIONS&p5=Student Eligibility&p6=C);
[668.130
-139](http://ifap.ed.gov/IFAPWebApp/currentRegCompsYear3Pag.jsp?p1=31-DEC-1999&p2=c&p3=668&p4=STUDENT ASSISTANCE GENERAL PROVISIONS&p5=Immigration-Status Confirmation&p6=I),
Student Assistance General Provisions

[34 CFR § 674.9, Federal Perkins
Loan](http://ifap.ed.gov/regcomps/doc4253_bodyoftext.htm)

[34 CFR § 675.9,
FWS](http://ifap.ed.gov/regcomps/doc4207_bodyoftext.htm)

[34 CFR § 676.9, FSEOG](http://ifap.ed.gov/regcomps/attachments/676.pdf)

[34 CFR § 682.201,
FFEL](http://ifap.ed.gov/regcomps/doc4315_bodyoftext.htm)

[34 CFR § 685.200,
FDL](http://ifap.ed.gov/regcomps/doc4411_bodyoftext.htm)

[34 CFR §§](http://ifap.ed.gov/regcomps/doc4411_bodyoftext.htm)
[690.6](http://ifap.ed.gov/regcomps/doc4537_bodyoftext.htm) and
[690.75](http://ifap.ed.gov/regcomps/doc4443_bodyoftext.htm), Federal
Pell Grant

[2001-2002 SFA Handbook, Student Eligibility Section, Chapters
1-5](http://ifap.ed.gov/sfahandbooks/0102VOL1StudentElig.html)

DCL [GEN-00-12](http://ifap.ed.gov/dpcletters/doc0693_bodyoftext.htm)
and [GEN-00-18](http://ifap.ed.gov/dpcletters/gen0018.html)

[SFA Assessment Worksheet, Assessment C, Student
Eligibility](http://qaprogram.air.org/AssessmentC.html)

17\. Attendance Records

  -----------------------------------------------------------------------
  **[GEN 2050]{.smallcaps}**

  -----------------------------------------------------------------------

Complete and accurate attendance records are essential for evaluating
students\' Title IV eligibility. Although there is no regulation
specifically requiring attendance records, institutions must have a
system in place to verify student enrollment status, course length,
eligibility for subsequent payments, and refund calculations.

Discuss with institutional officials the process for recording the
classes or number of hours students attend each day. Is attendance taken
periodically during the day, or are there sign-in/sign-out sheets? How
is partial attendance recorded, rounded to the nearest hour, half hour,
etc.? For externship sites, how are records kept?

Compare attendance records to any other records or reports kept for
other agencies, such as JTPA and VA. Test the cumulative attendance list
against source records. Check that hours have been properly compiled,
including the actual addition for manual systems or the data entry for
computerized systems.

Other recommended review procedures are as follows:

-   Add up the hours offered to students who have completed the program
    to verify that the school really offers the total number of hours
    for which the program is licensed/approved.

-   Look closely at attendance records with excessive white out,
    especially if the student withdrew. Try to contact students to
    verify information.

-   Ask students about absences (especially extended periods) and verify
    that the attendance records correspond.

-   Determine how make-up hours are documented. Some schools do not
    differentiate between make-up hours spent working on specific
    coursework, and extra time students may spend at school practicing
    on their own.

-   Look for cases where all students sign in and out at exactly the
    same time every day. Also, check holiday schedules, doctor\'s notes
    and other notations in students\' files to confirm deviations in
    attendance are accurately recorded. Many discrepancies of this kind
    may signal the attendance records were hastily created after the
    fact.

Missing or inaccurate attendance records may mean the undocumented
classes or hours cannot be counted for purposes of determining
students\' eligibility.

**References:**

[34 CFR § 668.24 General
Provisions](http://ifap.ed.gov/regcomps/doc4082_bodyoftext.htm)

[34 CFR §§ 674.19 Federal Perkins
Loan](http://ifap.ed.gov/regcomps/june12000part67419.html), [675.19
FWS](http://ifap.ed.gov/regcomps/doc4217_bodyoftext.htm) and [676.19
FSEOG](http://ifap.ed.gov/regcomps/attachments/676.pdf)

[34 CFR § 682.610,
FFEL](http://ifap.ed.gov/regcomps/doc4406_bodyoftext.htm)

[34 CFR § 685.309,
FDL](http://ifap.ed.gov/regcomps/doc4528_bodyoftext.htm)

[34 CFR § 690.82, Federal Pell
Grant](http://ifap.ed.gov/regcomps/doc4450_bodyoftext.htm)

[2001-2002 SFA Handbook, Institutional and Program Eligibility Section,
Chapter
8](http://ifap.ed.gov/sfahandbooks/attachments/0102Vol2Ch8RecordKeeping.pdf)

[SFA Assessment Worksheet, Assessment E, Reporting and
Reconciliation](http://qaprogram.air.org/AssessmentE.html)

18\. Verification

  -----------------------------------------------------------------------
  **[GEN 2492]{.smallcaps}**

  -----------------------------------------------------------------------

The information to be verified and the specific types of required
documentation are listed in [Federal Student Financial Aid Handbook,
Student Eligibility Section.]{.underline}

Reviewers should ensure that the school has written policies on the
following verification issues:

-   Deadlines for students to submit documentation and consequences of
    the failure to meet those deadlines

-   Method of notifying students of award changes resulting from
    verification

-   Correction procedures for students

-   Means of publicizing requirements and procedures, and

-   Standard procedures for referring overpayment cases to the
    Department.

Additionally, the school must give each applicant a written account of
the following information:

-   **Documentation requirements.** A clear explanation of the
    documentation needed to satisfy the verification requirements;

-   **Student responsibilities.** An explanation of the student\'s
    responsibilities with respect to the verification requirements,
    including the deadlines for completing any actions required, the
    consequences of missing such deadlines, and required correction
    procedures; and

-   **Notification methods.** The means by which the school will notify
    a student if his or her award changes as a result of verification,
    and the time frame for such notification.

Schools participating in the Quality Assurance (QA) Program are exempt
from selected Sections of the General Provisions regulations. QA schools
should not be cited for failure to complete verification of a student
selected by the processor. A basic premise of the QA Program is to allow
schools to design their own verification programs, based on problem
areas identified as critical at their schools. All current requirements
for disbursement, updating, and deadlines-and the consequences for
failing to provide requested documents-still apply to QA schools.

Generally, a school must verify all applications the Central Processing
System (CPS) selects for verification; however, the Department doesn\'t
require a school to verify more than 30 percent of its total number of
applicants for Federal student assistance. If more than 30 percent of
the school\'s applicants have been selected by the CPS for verification,
the school may choose to verify all the selected applications, but the
Department doesn\'t require it. Instead, the school can choose to stop
verifying once 30 percent of its applicants have been verified
(applications a school selects and applications with conflicting
information don\'t count toward the 30 percent level). If the total
number of selected applications is less than 30 percent of the school\'s
total number of applicants for Federal student aid, the school must
verify **all** selected applications.

Many schools have requested interpretation from the Department regarding
the definitions of \"applicant\" and \"applicant pool.\" However the
Department does not define these terms. Each school must develop its own
definitions and apply them **consistently**.

Other recommended review procedures are as follows:

-   Carefully check untaxed income items identified on tax returns
    (these are often misreported).

-   Ensure the verification documentation collected is complete (e.g.,
    all required signatures are present on documents).

-   Check that the school identified any revised information on
    documents collected, and performed any required need analysis.

Reviewers must remember that beginning with the 2001-2002 award year, an
asterisk (\*) will no longer be printed on the SAR or the SAR
acknowledgement next to the EFC of students selected for verification.
Instead, information regarding whether the student has been selected for
verification will be included within the text message to the student on
the SAR acknowledgement. Action Letter #4 (GEN-00-22) published in
November 2000, contains additional information regarding the
Department\'s plans for the redesign of the SAR for the 2001-2002 and
subsequent years.

Note that some schools may collect verification worksheets, tax returns,
etc. for all students, even those not selected for verification. If the
school has such documents, it must ensure that the information on those
documents is considered. If it is not and the student was not selected
for verification, there would not be a verification finding, but there
would be a finding for failure to resolve conflicting information.

**References:**

[34 CFR § 668.51 through 668.61 Student Assistance General
Provisions](http://ifap.ed.gov/IFAPWebApp/currentRegCompsYear3Pag.jsp?p1=31-DEC-1999&p2=c&p3=668&p4=STUDENT ASSISTANCE GENERAL PROVISIONS&p5=Verification of Student Aid Application Information&p6=E)

[2001-2002 SFA Handbook, Application and Verification Guide Section,
Chapter
3](http://ifap.ed.gov/sfahandbooks/attachments/0102AVGCh3wkverif.pdf)

[SFA Assessment Worksheet, Assessment C, Student
Eligibility](http://qaprogram.air.org/AssessmentC.html)

[Action Letter #4
(GEN-00-22](http://ifap.ed.gov/dpcletters/GEN0022.html)

19\. Professional Judgment

  -----------------------------------------------------------------------
  **[GEN 2161]{.smallcaps}**

  -----------------------------------------------------------------------

Financial Aid Administrators (FAA) may use professional judgment, only
on a case-by-case basis, to either increase or decrease one or more of
the data elements used to calculate the EFC. The reason must be
documented in the student\'s file, and it must relate to that student\'s
special circumstances that differentiate the individual student from a
class of students, (not to conditions that exist for a class of
students). Professional judgment (PJ) cannot be retroactively documented
or justified.

An FAA can also use professional judgment to adjust the student\'s cost
of attendance. The FAA must resolve any inconsistent or conflicting
information shown on the output document before making any adjustments.

Because the purpose of PJ is to allow FAAs to accommodate unusual
circumstances, the Department does not provide detailed information on
when the FAA may make adjustments. However, effective October 1, 1998,
Section 479A contains some examples of special circumstances schools
might consider. Examples of special circumstances listed in the law
include elementary or secondary school tuition, medical or dental
expenses not covered by insurance, unusually high child care costs,
recent unemployment of a family member, or other changes in the
family\'s income or assets. Use of professional judgment is neither
limited to the situations mentioned nor required in those situations.

The law does not allow schools to modify either the formula or the
tables used in the EFC calculation; schools can only change the cost of
attendance or the values of specific data items used in the calculation
of the EFC. In addition, an FAA cannot adjust data elements or the cost
of attendance solely because he or she believes the tables and formula
are generally not adequate or appropriate. The data elements that are
adjusted must relate to the student\'s special circumstances.

An FAA cannot exercise professional judgment to waive general student
eligibility requirements or to circumvent the intent of the law or
regulations. The Department specifically prohibits the use of PJ to
change FSEOG selection criteria. Nor can the FAA include post-enrollment
activity expenses in the student\'s COA. (For example, professional
licensing exam fees are not allowable costs.)

Reviewers should check to ensure that the FAA did not make decisions
contrary to the professional judgment provision\'s intent. These
**unreasonable** judgments have included, for example, the reduction of
EFCs based on reoccurring costs such as vacation expenses, tithing
expenses, and standard living expenses (related to utilities, credit
card expenses, children\'s allowances, and the like). Another example of
inappropriate use of professional judgment would be a school changing a
student to independent because he or she was not claimed on his or her
parents' tax returns with no other circumstances documented. FAAs, to
whom the Department grants significant latitude in exercising
professional judgment, are required to make **reasonable** decisions
that support the intent of the provision. The school is held accountable
for all professional judgment decisions made, and each decision must be
fully documented.

If an FAA uses professional judgment to adjust a data element, he or she
must use the resulting EFC consistently for all Federal student aid
awarded to that student.

**References:**

HEA, § 479A

[2001-2002 SFA Handbook, Application and Verification Guide Section,
Chapter
4](http://ifap.ed.gov/sfahandbooks/attachments/0102AVGCh4updatecorr.pdf)

[2001-2002 SFA Handbook, Federal Pell Grant Section, Chapter
1](http://ifap.ed.gov/sfahandbooks/attachments/0102Vol3Ch1Eligibility.pdf)

[SFA Assessment Worksheet, Assessment F, Reporting and
Reconciliation](http://qaprogram.air.org/AssessmentF.html)

20\. Timecards for FWS Students

  -----------------------------------------------------------------------
  **[FWS 1041, 1050,]{.smallcaps}**

  -----------------------------------------------------------------------

Verify that for each student paid under FWS there is a record showing
the number of hours he or she worked each day. The institution is liable
for all Federal funds disbursed for the period if a timesheet is not
maintained.

Check that timesheets are supported by a certification from the
student\'s supervisor that the student worked and earned the amount
paid.

Collect the timesheets for a sample of the payroll periods in the year
under review, and cross-reference those with payroll records. If student
class schedules are available, compare them to students\' work hours to
ensure students did not work when they were supposed to be in class.

**References:**

[34 CFR § 675.19
FWS](http://ifap.ed.gov/regcomps/doc4217_bodyoftext.htm)

[2001-2002 SFA Handbook, Campus-Based Programs
Section](http://ifap.ed.gov/sfahandbooks/0102sfahbcbcommonprovisions.html)

[SFA Assessment Worksheet E, Disbursement
Requirements](http://qaprogram.air.org/AssessmentE.html)

21\. Federal Pell Grant Calculations/Disbursements

  -----------------------------------------------------------------------
  **[PELL 4020, 4030, 4040, 4050, 4060 ,4080, 4085, 4090, 4130, 4131,
  4140]{.smallcaps}**

  -----------------------------------------------------------------------

An institution must determine a student\'s Federal Pell Grant
eligibility, taking into account the student\'s expected family
contribution, enrollment status, budget, and award year/payment period
duration.

The 1992 Reauthorization added a minimum duration requirement (30 weeks)
to the academic year definition. The specific procedures for the
eligibility calculation are provided the [2000-2001 Federal Student
Financial Aid Handbook.]{.underline}

Reviewers must verify that the scheduled award and payment amount were
properly calculated. Schools may miscalculate these figures for award
periods of less than a full academic year.

There are two types of output documents: ISIRs and SARs. An ISIR is a
computer-generated electronic record sent to a school by the CPS. The
SAR is a paper document sent to the student by the application
processor. These output documents (ISIRs and SARs) contain the
student\'s application information, the EFC, and the results of the
database matches.

To pay a student a Federal Pell Grant, the school must have appropriate
documentation of the student\'s eligibility. In particular, the school
must have a valid output document for the student. A valid output
document is one where all of the information used to calculate the EFC
is complete and accurate. The school must have received a valid output
document containing an eligible nine-month EFC while the student is
enrolled and eligible.

Other recommended review procedures are as follows:

-   Check award calculations for non-standard payment periods.

-   Verify that the proper calculation was performed when the financial
    aid history from a prior school shows the student received Federal
    Pell Grant funds at another institution in the same award year.

-   Check special consideration issues, especially for incarcerated
    students and students receiving Workforce Investment Act funding, as
    discussed in the [SFA Handbook]{.underline}.

-   Review the elements used in constructing the COAs. The components
    that are allowed under the cost of attendance are now the same for
    all Title IV programs. These components can be found in the [SFA
    Handbook]{.underline}.

**References:**

34 CFR §§ [690.61 --
690.67](http://ifap.ed.gov/regcomps/doc4436_bodyoftext.htm),
[690.75](http://ifap.ed.gov/regcomps/doc4443_bodyoftext.htm), and
[690.83](http://ifap.ed.gov/regcomps/doc4451_bodyoftext.htm), Federal
Pell Grant

[2001-2002 SFA Handbook, Federal Pell Grant Section, Chapters
3-5](http://ifap.ed.gov/sfahandbooks/0102Vol3Pell.html)

[SFA Assessment Worksheet E, Disbursement
Requirements](http://qaprogram.air.org/AssessmentF.html)

22\. Disbursements

  -----------------------------------------------------------------------
  **[PELL 4040]{.smallcaps}**

  -----------------------------------------------------------------------

Students in non-term (clock or credit hour) programs must complete the
payment period for which they have already been paid before they can
receive additional Federal Pell Grant disbursements. Some schools
schedule payments for the date students are **expected** to reach the
midpoint, based on the original class schedule. The school then might
make the payment without verifying whether the students actually
completed the required hours. The student may then drop out without
completing the required number of clock or credit hours, having
therefore received an overpayment.

Reviewers should compare the account records with attendance/academic
records for all students in the program review sample. Verify whether
subsequent disbursements were made only after the students completed the
required number of clock or credit hours. For example, a school\'s
academic year is divided into two 450-hour payment periods. The school
cannot make the second disbursement until the student has completed the
450th, and started the 451st clock hour.

An institution may consider excused absences when determining the number
of clock hours completed. Excused absences refer to missed classes that
are not required to be made up, and must be based on the school\'s
documented policy. Excused absences may not exceed 10% of the hours in a
payment period (or less, as required by accrediting agency or state
agency requirements). Excused absences may not be considered if students
must eventually complete all clock hours in their program of study
(e.g., cosmetology programs with state requirements for actual hours
completed).

A similar determination must be made when students are enrolled in a
non-term program measured in credit hours. Where an academic year is
defined as 30 credit hours, the second disbursement cannot be made until
the completion of at least 15 credit hours. If a student has completed
14 credit hours, and then begins the next segment of the program
encompassing 6 credit hours, the payment cannot be made until the
student has completed that segment. Please note that this does not apply
to FFEL disbursements. For FFEL, a second disbursement may be made after
the calendar mid-point, even though the student has not completed the
academic work.

For FSEOG and FWS, funds can be credited to students\' accounts up to 10
days prior to the beginning of classes for a payment period, [as long as
the student has registered for that payment period]{.underline}. If the
student never enrolls for the payment period, the funds must be returned
to the program.

FSEOG regulations allow the student\'s entire annual award to be
disbursed at one time if the award amount is less than \$501.

**References:**

34 CFR §§ 668.164, 682.604, 676.16

[34 CFR § 690.62, Federal Pell
Grant](http://ifap.ed.gov/regcomps/doc4434_bodyoftext.htm)

[34 CFR § 690.75, Federal Pell
Grant](http://ifap.ed.gov/regcomps/doc4443_bodyoftext.htm)

[2001-2002 SFA Handbook, Federal Pell Grant Section, Chapters
2-5](http://ifap.ed.gov/sfahandbooks/0102Vol3Pell.html)

[SFA Assessment Worksheet E, Disbursement
Requirements](http://qaprogram.air.org/AssessmentE.html)

23\. Enrollment Status

  -----------------------------------------------------------------------
  **[GEN 2130, FFEL 5100]{.smallcaps}**

  -----------------------------------------------------------------------

An institution may award Title IV funds only to eligible students.
Verify that student enrollment status was confirmed before Title IV
funds were disbursed. In instances where the institution determined
eligibility based on the classes in which the student was registered
(whether the funds were disbursed before or after classes started),
there must be a system in place to verify that the student actually
attended all of the classes in which he or she was registered. If the
classes the student actually attended would have an effect on the
student's eligibility, the institution must adjust the student's award.

Compare disbursement records with attendance records and academic
transcripts to confirm students\' enrollment status at the time of
disbursement.

Check that disbursements have not been made in the following
circumstances:

-   student not registered for classes.

-   FWS payments made to a student for work performed after the
    student's withdrawal date.

-   Federal Pell Grant payments made after a student\'s last date of
    attendance (LDA) without a valid ISIR or other official notification
    of the student\'s EFC.

-   FSEOG and Federal Perkins Loan disbursements made after students LDA
    (unless the student meets the criteria for late disbursement). Late
    disbursement criteria can be found in the Financial Aid Handbook,
    Campus-Based reference.

-   FFEL disbursed after LDA without late disbursement approval (late
    disbursement rules specified at 668.164(g)).

Reviewers should also verify that the correct enrollment status was used
in determining a student\'s eligibility for Federal Pell Grant
disbursements before a disbursement is made. Schools are required to
ensure that disbursements are based on a correct enrollment status, and
therefore must have a system to monitor changes prior to payment
(different rules apply if the enrollment status changes after payment
has been made).

**References:**

34 CFR § [668.21](http://ifap.ed.gov/regcomps/doc4079_bodyoftext.htm)
and [668.164](http://ifap.ed.gov/regcomps/doc4180_bodyoftext.htm),
Student Assistance General Provisions

34 CFR §§ [674.9, Federal Perkins
Loan](http://ifap.ed.gov/regcomps/june12000part6749.html), [675.9
FWS](http://ifap.ed.gov/regcomps/doc4207_bodyoftext.htm) and [676.9
FSEOG](http://ifap.ed.gov/regcomps/attachments/676.pdf)

34 CFR §§ [682.604](http://ifap.ed.gov/regcomps/doc4379_bodyoftext.htm)
and [682.605](http://ifap.ed.gov/regcomps/doc4380_bodyoftext.htm) FFEL

[34 CFR § 690.75 Federal Pell
Grant](http://ifap.ed.gov/regcomps/doc4443_bodyoftext.htm)

[Higher Education Amendments of 1992, (P.L. 102-325), §
411](http://ifap.ed.gov/regcomps/doc4443_bodyoftext.htm)

[2001-2002 SFA Handbook, Institutional and Program Eligibility Section,
Chapter
8](http://ifap.ed.gov/sfahandbooks/attachments/0102Vol2Ch8RecordKeeping.pdf)

[2001-2002 SFA Handbook, FFEL and Direct Loan Section, Chapter
6](http://ifap.ed.gov/sfahandbooks/attachments/0102VolCh6Borpayment.pdf)

[2001-2002 SFA Handbook, Federal Pell Grant Section, Chapters 2, 4 and
5](http://ifap.ed.gov/sfahandbooks/0102Vol3Pell.html)

[SFA Assessment Worksheet, Assessment E, Disbursement
Requirements](http://qaprogram.air.org/AssessmentE.html)

24\. Need Analysis

  -----------------------------------------------------------------------
  **[GEN 2222, 2270, 2290]{.smallcaps}**

  -----------------------------------------------------------------------

An institution must receive an official Expected Family Contribution
(EFC) processed through the CPS to document a student\'s Title IV
eligibility. Reviewers must ensure that the EFC calculation has been
processed through the CPS. Although an institution may have software to
calculate an EFC using the correct formula, that calculation is not
official unless it has been processed through the CPS. Remember, the CPS
has data matches with areas that effect a student\'s eligibility such as
citizenship, financial aid history (default, loan limits, overpayments,
and other loan problems), correct SSN, and Selective Service
requirements.

Errors on a student aid application may occur either because the student
entered the wrong information or because there was a data entry error.
Generally, the school must have correct data before it can pay the
student. In some cases, the school can take the changes into account
without sending in a correction or can pay the student without
corrections. However, even if the student\'s application is otherwise
accurate, corrections to the SSN must always be submitted for processing
through the CPS for data match purposes. Corrections may also have to be
processed through the CPS if there were problems with other data
matches, such as the citizenship match.

To award aid from the Federal Pell Grant Program, corrections have to be
processed through the CPS for recalculation of the EFC (unless the
corrections do not effect the Pell Grant amount). For the Federal
campus-based and loan programs, the school can recalculate the
student\'s EFC without reprocessing through the CPS. However, if the
school\'s recalculation is incorrect, the school will be liable for any
resulting overpayments.

Other recommended review procedures are as follows:

-   Confirm EFCs were properly calculated when need analysis data was
    changed.

-   Ensure the correct procedure was used to determine EFCs for other
    than standard nine-month duration.

-   Confirm that there is adequate documentation in file for FAFSA data
    corrected by school.

-   Check a few student files to verify that data matches what is on the
    paper FAFSA.

If the school entered student FAFSA data through EDE-Initial (formerly
stage-zero), the original FAFSA must be on file at school.

**References:**

HEA, Sections 471 through 480, Part F

[34 CFR § 668.59](http://ifap.ed.gov/regcomps/doc4112_bodyoftext.htm)

[The EFC Formula (contained in the 2001-2002 SFA Handbook Student
Eligibility
Section)](http://ifap.ed.gov/sfahandbooks/attachments/0102Vol1Ch6EFC.pdf)

[SFA Assessment Worksheet, Assessment D, Award
Requirements](http://qaprogram.air.org/AssessmentD.html)

25\. FFEL/Direct Loans For Programs Less Than One Year

  -----------------------------------------------------------------------
  **[FFEL 5141]{.smallcaps}**

  -----------------------------------------------------------------------

Schools must prorate a student\'s loan made for a program of study or
the final period of a program of study if either is shorter than an
academic year. A final period of study is one at the end of which a
student will complete a program. At a term-based credit hour school
(where the academic year is measured in semesters, trimesters, quarters,
or other terms), a final period of study is considered shorter than an
academic year if the final period consists of fewer terms than the
school\'s scheduled academic year. At a term-based clock hour school
(where the academic year is measured in semesters, trimesters, quarters,
or other terms), a final period of study is considered shorter than an
academic year if the final period consists of fewer terms than the
school\'s scheduled academic year or fewer clock hours than the minimum
statutory requirements for a full academic year. Terms within the same
academic year as the student\'s final term are considered part of the
final period of study, even if separated from the final term by a term
in which the student is not enrolled.

At a non-term school (where programs are measured only in clock or
credit hours), a final period of study is considered less than an
academic year if the final period consists of fewer clock or credit
hours than the minimum statutory requirements for a full academic year,
regardless of length of the school's academic year.

To prorate the loan for a program that exceeds an academic year but has
a final period of study less than a full academic year in length,
schools must calculate what proportion of a full academic year the final
period of study represents. The loan amount is then prorated on that
basis.

If a student drops or adds a course after the school has originated a
prorated loan, the school may readjust the loan amount but is not
required to do so. Of course, a student who drops courses must still be
enrolled at least half time to be eligible for any loan amount.

Note: Prior to the enactment of the Higher Education Amendments of 1998,
schools used fixed proration that divided the standard full academic
year into thirds to determine the fraction of the full annual amount
when students were enrolled in a period of study containing fewer weeks,
clock hours, or credit hours than the statutory minimum academic year.
Effective October 1, 1998, schools must use proportional proration for
loans for students enrolled in programs less than an academic year in
length.

**References:**

The Higher Education Amendments of 1992 (P.L. 102-325) § 428

The Higher Education Amendments of 1998

[34 CFR § 682.204,
FFEL](http://ifap.ed.gov/regcomps/doc4318_bodyoftext.htm)

[34 CFR § 685.203,
FDL](http://ifap.ed.gov/regcomps/doc4521_bodyoftext.htm)

[2001-2002 SFA Handbook, FFEL & Direct Loan Section, Chapter
3](http://ifap.ed.gov/sfahandbooks/attachments/0102Vol8Ch3loanperiodamts.pdf)

[SFA Assessment Worksheet, Assessment D, Award
Requirements](http://qaprogram.air.org/AssessmentD.html)

[SFA Assessment Worksheet, Assessment E, Disbursement
Requirements](http://qaprogram.air.org/AssessmentE.html)

26\. FFEL/Direct Loan Amounts For Grade Level

  -----------------------------------------------------------------------
  **[FFEL 5220]{.smallcaps}**

  -----------------------------------------------------------------------

Verify that the academic level on the FFEL application/Direct Loan
origination record corresponds to the school\'s documented grade-level
progression criteria. Some schools incorrectly certify grade levels on
the loan application or Direct Loan origination record based on the
number of years the student has been present at the institution, without
consideration of the grade level progression criteria, or incorrectly
report a higher grade level based on past educational experience
unrelated to the student\'s current program.

Compare the academic record/transcript showing the number of credits or
hours the student had completed as of beginning of loan period with the
loan period reported on the loan application/loan origination record.

Note: For students in the sample that are Federal Direct Loan
recipients, reviewers must retrieve the student\'s loan origination
record to obtain the information that is usually collected on an FFEL
application; e.g., loan amounts (approved and requested), grade level,
loan period, enrollment status, student\'s dependency status, promissory
note status, etc. Reviewers may ask the school to produce screen
printouts or electronic copies of the loan origination records for
students in the sample and verify the data on the loan origination
record.

**References:**

[34 CFR § 682.603,
FFEL](http://ifap.ed.gov/regcomps/doc4378_bodyoftext.htm)

[34 CFR § 685.301,
FDL](http://ifap.ed.gov/regcomps/doc4423_bodyoftext.htm)

[2001-2002 SFA Handbook, FFEL & Direct Loan Section, Chapter
3](http://ifap.ed.gov/sfahandbooks/attachments/0102Vol8Ch3loanperiodamts.pdf)

[SFA Assessment Worksheet E, Disbursement
Requirements](http://qaprogram.air.org/AssessmentE.html)

27\. Direct Loan Reporting/Reconciliation

  -----------------------------------------------------------------------
  **[DL 5510, 5610, 5653]{.smallcaps}**

  -----------------------------------------------------------------------

Each month, the Loan Origination Center (LOC) sends a Direct Loan School
Account Statement (DLSAS) to the school. This report is generated by the
LOC during the first weekend of the month following the reported month
(for example, the first weekend in September, the LOC generates a report
for August and sends it to the school). The school is required to
reconcile the information on the DLSAS report to its internal records on
a monthly basis.

-   If the school\'s internal systems match all the totals on the DLSAS
    cash summary, the reconciliation has been successfully completed.

-   If the cash balances do not match, the school must continue with the
    reconciliation process.

-   There may be discrepancies in one or more areas between the DLSAS
    and the school\'s records. The initial analysis of the cash summary
    information should narrow the field for detailed analysis to those
    areas in which the school has identified discrepancies.

-   Each of the three systems - the school\'s business office system,
    the school\'s Direct Loan System, and the LOC - may account for cash
    receipts, excess cash, and disbursement transactions in different
    ways. Schools must take this into account when conducting their
    reconciliation.

-   When reconciling the DLSAS cash summary with the school\'s internal
    cash records, the school must allow for any timing differences
    caused by transaction dates that fall close to the beginning or the
    end of the month.

There are many possible reasons for apparent discrepancies between the
school\'s internal systems and the DLSAS cash and loan detail records.
Some examples include:

-   timing of drawdowns

-   timing of booked loans

-   drawdowns allocated to the wrong academic year

-   drawdowns split between academic years

-   excess cash in the wrong year or disbursed to a student in a
    different academic year

-   unsent/unacknowledged disbursement batches

-   disbursements recorded in the school\'s business office system but
    not in its Direct Loan System

-   excess cash returned that should have been a payment

-   a payment sent that should have been excess cash

-   school data loss, and

-   unbooked records.

In the reconciliation process, cash detail information should generally
be compared directly to the school\'s internal business office records,
such as bank statements and canceled checks. Cash reports may be run
from the school\'s Direct Loan System, but the school should use its
business office records as the final authority.

Schools may be receiving DLSAS reports for up to three academic years
each month. The concurrent reconciliation efforts may result in
overlapping cash detail data, such as when a drawdown has been split
between award years. Schools should ensure that there is good
communication among the staff members responsible for reconciling the
different academic years. These multiple-year reconciliation efforts
will sometimes reveal global issues at the school that need to be
resolved.

A school has completed its monthly reconciliation when:

-   All differences between the DLSAS and the school\'s internal records
    (Direct Loan System and business office system) have been resolved
    or documented.

-   Timing issues have been identified and will be tracked for
    reconciliation in the next month\'s DLSAS.

-   Any necessary corrective actions have been taken to ensure that all
    the prior month\'s issues will reconcile in the following month.

-   All reconciliation efforts have been documented for future reference
    and review.

Documenting monthly reconciliation efforts is strongly recommended and
will be extremely useful to schools as a record that they have met their
reconciliation requirement. ED does not regulate specific types of
documentation for school reconciliation activities. However, monthly
documentation shows that the school has made a good faith effort to
reconcile its records to ED\'s records, according to program
requirements. It also provides very useful reference materials for the
end-of-year reconciliation and closeout for the academic year. The
format of the documentation is not as important as what is documented.

**References:**

[34 CFR 685.301 (d),
FDL](http://ifap.ed.gov/regcomps/doc4423_bodyoftext.htm)

[SFA Assessment Worksheet, Assessment B, Fiscal
Requirements](http://qaprogram.air.org/AssessmentB.html)

[SFA Assessment Worksheet, Assessment F, Reporting &
Reconciliation](http://qaprogram.air.org/AssessmentF.html)

[Direct Loans School Guide, Chapter 9, Reconciling Direct
Loans](http://ifap.ed.gov/IFAPWebApp/currentDLSGuidesPag.jsp)

28\. Items From Past Reviews/Audits

  -----------------------------------------------------------------------
  **[GEN 2241, 2330]{.smallcaps}**

  -----------------------------------------------------------------------

Verify that all issues identified in past program reviews and audits
have been completely resolved by the institution. Previous reviews may
include those conducted by guaranty agencies or state agencies. In cases
where prior audits or reviews are still open, confirm that the school is
pursuing resolution of the outstanding issues. This involves more than
the school taking the necessary action to resolve the specific problems
from the reviews/audits. The school should have also taken measures to
prevent a reoccurrence of the identified problems.

Repeat findings of a systemic nature usually means that the school
either ignored findings and requirements of prior reviews and audits, or
did not have the capability to make the required corrections. These
types of problems may demonstrate a lack of overall capability to
adequately administer the Title IV programs.

If an institution is part of a chain of schools with centralized
administration, systemic problems previously identified at other
locations may be considered repeat violations if uncovered at the school
currently under review.

**References:**

[34 CFR § 668.174 Past
performance](http://198.77.163.160/regcomps/doc4187_bodyoftext.htm)

[34 CFR § 668.16, Student Assistance General
Provisions](http://ifap.ed.gov/regcomps/doc4074_bodyoftext.htm)

29\. FISAP Income Grid

  -----------------------------------------------------------------------
  **[GEN 2010]{.smallcaps}**

  -----------------------------------------------------------------------

Review the FISAP applications to verify the figures reported by the
institution for the number of eligible aid applicants enrolled at least
half-time during the applicable award year at Part III, Section E. The
FISAP uses eligible aid applicant information from the recently
completed year to determine whether the institution will receive any
\"fair share\" funding in FSEOG, FWS, and Perkins for the following
year. For example, schools filed the FISAP application for the 2000/01
award year in October 1999, using eligible applicant data from the
1998/99 award year.

Careful consideration should be given to the definitions and
instructions that accompanied each application concerning \"eligible aid
applicants\" and \"application.\" Please note that students cannot be
counted in the income grid figures if they do not have all information
needed to perform an approved needs analysis on file with the
institution.

Request documentation supporting the dependency status and total family
income for all students included on the income grid for eligible aid
applicants. Test the supporting documentation to confirm that students
from the review sample are correctly reported. Make sure all income used
in the need analysis is included. Schools may have omitted parents\'
untaxed income or all dependent students\' income.

Next, test the documentation against what was reported on the income
grid itself. Confirm the number of students reported in some of the
lower income categories. For example, count the number of dependent
students with family incomes between \$6000 and \$8999, and verify that
the number matches with what was reported on the grid. If students are
incorrectly reported (especially when included in [lower]{.underline}
[income]{.underline} [categories]{.underline} than they should be), the
student body appears to look needier, and the school might get more fair
share funding than appropriate.

Additional points to note:

-   Ensure the institution included all changes to students\' income and
    dependency status, including professional judgment.

-   Students with prior bachelor degrees are considered graduate
    students on the grid, even if they are in an undergraduate program.

-   Check the figures reported in Section D (tuition and fees, and Pell
    Grant disbursements) against fiscal records.

-   Verify that no-show students have been excluded from the grid
    (schools that use reports generated by a processor sometimes fail to
    screen out the no-shows).

-   Look over the documentation for cases where students are included
    twice under different social security numbers.

Please note that errors in the income grid might change an
institution\'s campus-based allocation [only]{.underline} if the
institution received fair-share funding for the applicable award year.

**References:**

34 CFR §§ 673.3, 673.4

HEA § 413D (SEOG)

HEA § 442 (CWS)

HEA § 462 (Perkins)

[2001-2002 SFA Handbook, Institutional and Program Eligibility Section,
Chapter
8](http://ifap.ed.gov/sfahandbooks/attachments/0102Vol2Ch8RecordKeeping.pdf)

[SFA Assessment, Worksheet F, Reporting &
Reconciliation](http://qaprogram.air.org/AssessmentF.html)

30\. Federal Perkins Loan Due Diligence and Promissory Notes

  -----------------------------------------------------------------------
  **[PERK 8090, 8140, 8180, 8200, 8210]{.smallcaps}**

  -----------------------------------------------------------------------

**See Appendix I \-- Perkins/NDSL Due Diligence Checklist.**

Reviewers must verify whether an institution is correctly performing due
diligence procedures for its Perkins Loan borrowers. Many institutions
contract with outside agencies to service their Perkins Loan collection
efforts. In these cases, reviewers should review a copy of the contract
or other documents that specify the services these agencies perform to
verify they cover the regulatory requirements. At a minimum, the
institution should be providing the required exit counseling for
students who withdraw or graduate.

If school staff perform due diligence procedures themselves, reviewers
must discuss the process with school officials to ensure all regulatory
requirements are met. Trace some of the students in the review sample
who have entered repayment to see actual records and to verify that the
process works as designed. The school must be able to document its
compliance with all due diligence requirements.

Following are some deficiencies that may be discovered:

-   inadequate exit counseling

-   inadequate contact with borrower during grace period

-   inadequate billing procedures, including late charges

-   inadequate address searches, skip-tracing

-   inadequate collection procedures/student not reported to credit
    agencies, and loan not accelerated, and

-   improper deferments granted.

Confirm that signed, complete, and valid promissory notes are on file
and securely stored for all sampled Federal Perkins Loan recipients.
Discuss with appropriate school officials the system for having students
sign promissory notes. There should be a control to ensure that no funds
are disbursed until a note is signed, and that each disbursement is
signed for on the schedule of advances at the time the disbursement is
made. Schools may improperly make the disbursement first, and then have
the student sign the note. Then, the school may fail to reverse the
disbursement if the student withdraws without signing the note, creating
ineligible disbursements.

Certified true copies are acceptable in lieu of an original note, if the
original has been lost or destroyed; other photocopies are not
acceptable.

Reviewers should examine the relationship between the school and any
collectors and billing contractors.

> • how are payment and activities monitored and reconciled?
>
> • how are payments handled?
>
> • are required bonds in place?

**References:**

34 CFR §§ [674.16](http://ifap.ed.gov/regcomps/june12000part67416.html),
[674.31](http://ifap.ed.gov/regcomps/june12000part67431.html), and
674.33 - 674.50, Federal Perkins Loan

[2001-2002 SFA Handbook, Federal Perkins Loan
Section](http://ifap.ed.gov/sfahandbooks/0102Vol5Perkins.html)

[SFA Assessment Worksheet, Assessment E, Disbursement
Requirements](http://qaprogram.air.org/AssessmentE.html)

Perkins Focus Module

31\. Commissioned Sales

  -----------------------------------------------------------------------
  **[GEN 2097]{.smallcaps}**

  -----------------------------------------------------------------------

Under 34 CFR § 668.14, an institution cannot provide, nor contract 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 persons or entities engaged in any student
recruiting or admissions activities or in making decisions regarding the
awarding of student financial assistance. This requirement does not
apply to the recruitment of foreign students residing in foreign
countries who are not eligible to receive Federal student assistance.
This provision does not apply to giving token gifts to students or
alumni for referring students for admission to the institution as long
as: the gift is not in the form of money, check or money order; no more
than one such gift is given to any student or alumnus, and the gift has
a value of not more that \$25.

Reviewers should interview a sales representative to verify compensation
policies, and ask what part they play in providing students with
information financial aid availability. This should also be discussed
with school administrators. Additionally, reviewers should ask students
and other school personnel, especially financial aid staff, how
financial aid information is provided. Violations reflect on the
administrative capability of the institution, and could possibly affect
Title IV eligibility.

**References:**

HEA, § 487(a)(20)

The Higher Education Amendments of 1992 (P.L. 102-325)

[34 CFR § 668.14, Student Assistance General Provisions (Program
Participation
Agreement)](http://ifap.ed.gov/regcomps/doc4072_bodyoftext.htm)

[2001-2002 SFA Handbook, Institutional and Program Eligibility Section,
Chapter
2](http://ifap.ed.gov/sfahandbooks/attachments/0102Vol2Ch2ParticipatnRequiremnts.pdf)

32\. Clock/Credit Hour Conversion

  -----------------------------------------------------------------------
  **[GEN 2112]{.smallcaps}**

  -----------------------------------------------------------------------

The clock hour/credit hour requirements affect both program eligibility,
and the determination of the amount of SFA program funds a student who
is enrolled in the program may receive.

Schools must determine whether an undergraduate program measured in
credit hours qualifies as an eligible program in credit hours *for SFA
purposes* after using the required conversion formula unless:

-   The program is at least two academic years in length and provides an
    associate, bachelor\'s, or professional degree (or a degree that the
    Department has determined to be equivalent to one of these degrees),
    or

-   Each course within the program is acceptable for full credit toward
    one of these degrees at the school, and the degree requires at least
    two academic years of study.

Note that the exemption for programs that lead to a degree that is
equivalent to an associate, bachelor\'s or professional degree program
of at least two years does not permit a school to ask for a
determination that a *nondegree* program is equivalent to a degree
program.

Also, public or private nonprofit hospital-based diploma schools of
nursing are exempt from using the clock-to-credit hour conversion
formula to calculate awards for the SFA programs.

To determine the number of credit hours in a program for SFA purposes,
schools must use the appropriate formula.

**For a semester or trimester hour program:**

[Number of clock hours in the credit-hour program]{.underline}

30

**For a quarter hour program:**

[Number of clock hours in the credit-hour program]{.underline}

20

See § [668.8(d)](http://ifap.ed.gov/regcomps/doc4067_bodyoftext.htm) for
definitions of vocational educational program.

**References:**

[34 CFR §§668.8](http://ifap.ed.gov/regcomps/doc4067_bodyoftext.htm) and
[668.9](http://ifap.ed.gov/regcomps/doc4068_bodyoftext.htm), Student
Assistance General Provisions

[2001-2002 SFA Handbook, Institutional and Program Eligibility Section,
Chapter
1](http://ifap.ed.gov/sfahandbooks/attachments/0102Vol2Ch1InstitutionalProgElig.pdf)

[SFA Assessment Worksheet, Assessment A, Institutional
Participation](http://qaprogram.air.org/AssessmentA.html)

33\. Student Status Confirmation Report

  -----------------------------------------------------------------------
  **[FFEL 5210, 5260]{.smallcaps}**

  -----------------------------------------------------------------------

Schools are required to report the status of FFEL/Direct Loan borrowers
to the National Student Loan Data System (NSLDS). Institutions will
receive Student Status Confirmation Reports (SSCR) from the NSLDS on a
cycle that the institution established. A school can schedule up to six
reporting cycles per year, but it must complete at least one per term
(excluding summer terms) if it is a term-based school, or two per year
if it is not. A school has 30 calendar days from the date it receives
the SSCR to return it to the NSLDS. All NSLDS reporting is done
electronically.

Schools normally have 30 calendar days to report changes in a student's
enrollment status. However, if the school has an SSCR scheduled to be
processed within 60 days of the change of status, the school can use
that method to report the change. If not, the school must do an ad-hoc
change of status report using the web interface with the NSLDS.

Reviewers should obtain student status report data from the NSLDS before
the site visit portion of a review commences. This data would consist of
a list of students for whom a school reported status changes in a given
period of time and can be compared to enrollment information that the
school has on campus. They can also contact the NSLDS to inquire about
the timely and accurate submission of SSCRs. The NSLDS does track this
and sends warning letters to schools if they do not submit the reports
timely.

On site, reviewers should determine which office at the school is
responsible for the SSCRs. If the financial aid office is responsible,
verify that there is a system by which that office is provided
up-to-date information from the registrar about student status. Many
schools use the National Student Clearinghouse as a servicer to complete
their SSCRs, but the school is still ultimately responsible for ensuring
that the SSCR is completed timely and accurately. If the Clearinghouse
or another third party servicer is used, reviewers should examine the
process used to submit records to the servicer.

**References:**

[34 CFR § 682.610](http://ifap.ed.gov/regcomps/doc4406_bodyoftext.htm),
FFEL

[2001-2002 SFA Handbook, FFEL & Direct Loan Section, Chapter
7](http://ifap.ed.gov/sfahandbooks/attachments/0102VolCh7Loanfollowup.pdf)

[DCL, GEN-99-9](http://ifap.ed.gov/dpcletters/doc0528_bodyoftext.htm)

DCL, GEN-96-5 and DCL, GEN-96-17

[SFA Assessment Worksheet, Assessment F, Reporting and
Reconciliation](http://qaprogram.air.org/AssessmentF.html)

[SSCR
Guide](http://ifap.ed.gov/IFAPWebApp/currentSSCRGuidesYearPag.jsp?p1=DEC-1999&p2=c)

34\. Default Management (Entrance/Exit Counseling, Withdrawal Rate)

  -----------------------------------------------------------------------
  **[FFEL 5040, 5132]{.smallcaps}**

  -----------------------------------------------------------------------

Applicable default reduction and prevention measures must be examined at
institutions with high cohort default rates (CDRs) during reviews.
During the review, the reviewer should examine the following items:

-   High Withdrawal Rate(s) -- Borrowers who do not complete programs of
    study are at a higher risk of defaulting on loans. Determine if the
    school has and is implementing measures to reduce high withdrawal
    rates.

-   Adequate Consumer Information -- Determine if the school has and
    provides consumer disclosure information to students in accordance
    with regulatory requirements.

-   Job Placement Rates -- Borrowers who cannot find employment are at a
    higher risk of defaulting on loans. Determine if the school has and
    is implementing a job placement program.

-   Entrance and Exit Counseling -- Determine if the school has adequate
    entrance and exit counseling that provides students with
    accurate/current information on student responsibilities/rights,
    repayment options, and deferment options. The following requirements
    pertain to all loan programs as applicable:

> **Entrance Counseling:** Reviewers must ensure that every school
> conducts entrance counseling before releasing the first loan proceeds
> to any first-time borrower. This requirement applies to the FFEL and
> Direct Loan programs. The counseling must be conducted in person, by
> audiovisual presentation, or by computer-assisted technology, and a
> person knowledgeable about SFA program must be available for questions
> shortly after the counseling session. (685.304(a); 682.604(f)).
>
> The requirements are a little different for Federal Perkins Loans.
> Before an institution makes its first disbursement to a student, the
> student must sign the promissory note and the institution must provide
> the student with certain information (very similar to the entrance
> requirements for other loan programs). See 674.16 for specific
> requirements for Federal Perkins Pre-Loan Counseling.
>
> **Exit Counseling:** Reviewers must also ensure that every school
> conducts exit counseling shortly before a borrower ceases
> at-least-half-time study. There are many different means a school can
> use to conduct this counseling. As of October 1, 1998, a school can
> conduct exit counseling either in person individually or in groups, or
> by electronic means. Reviewers must ensure that the school maintains
> in each borrower\'s file documentation verifying the school\'s
> compliance with the Department\'s counseling requirements.
> (685.304(b), 682.604(g), and 674.42)

-   NSLDS/SSCR Reports -- Determine if the school has adequate systems
    and controls to report SSCR data timely and accurately.

-   Available Resources for Default Reduction and Prevention -- This is
    an institutional responsibility and not restricted to the functions
    of the financial aid office. Determine if the institution has
    adequate resources available and committed to this initiative
    (personnel, administrative, and financial resources).

-   Process to Ensure Accuracy of Cohort Default Rates -- Schools that
    are eligible should exercise CDR rate challenge and appeal process
    options to ensure that the CDRs are accurate. Determine if schools
    are aware and utilizing these options.

-   Approved Default Reduction and Prevention Plan(s) -- All new schools
    and schools undergoing changes of ownership must implement approved
    default management plans for two years after they become eligible to
    participate in the Title IV Financial Aid Programs. Determine if the
    school has an approved plan and that it is implementing the plan.

-   Changes in Status -- Certain status changes affect the cohort
    default rates (calculations) and possible Title IV program
    eligibility. Review for any status changes and determine if

```{=html}
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```
-   changes have been approved by Case Management Team(s), and

-   a CDR calculation has been made by Default Management.

```{=html}
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```
-   Sanction/Benefit Requirements -- A school's cohort default rate(s)
    will determine if the school is eligible for sanctions or benefits.
    Review the school's most recent correspondence from Default
    Management to ensure compliance with the regulatory requirements.

```{=html}
<!-- -->
```
-   For FFEL/Direct Loans, proceeds must be disbursed in two or more
    installments, regardless of the amount of the loan or the length of
    the enrollment period for which the loan is made. No disbursements
    may exceed half of the loan amount. **A school with a cohort default
    rate of less than 10 percent for each of the last three years for
    which rates have been calculated is allowed to make single
    disbursements for single-term loans. A school with a cohort default
    rate of less than five percent for the most recent year is allowed
    to disburse loans in a single disbursement for students enrolled in
    a study abroad program at that institution.**

-   An FFEL/Direct Loan Borrower who is entering the first year of an
    undergraduate program - and who has not previously received a
    Stafford Loan - may not receive the first installment of loan
    proceeds until 30 calendar days after the first day of the program
    of study. **However, a school that has a cohort default rate of less
    than 10 percent for each of the last three years for which rates
    have been calculated is exempt from the 30-day requirement for
    first-time, first-year borrowers.**

**References:**

[34 CFR § 685.304(a), 685.304(b),
FDL](http://ifap.ed.gov/regcomps/doc4426_bodyoftext.htm)

[34 CFR § 682.604(f), 682.604(g),
FFEL](http://ifap.ed.gov/regcomps/doc4379_bodyoftext.htm)

[34 CFR § 674.16](http://ifap.ed.gov/regcomps/june12000part67416.html),
and [674.42](http://ifap.ed.gov/regcomps/doc4270_bodyoftext.htm),
Federal Perkins Loan

[34 CFR § 668.17, Student Assistance General
Provisions](http://ifap.ed.gov/regcomps/doc4075_bodyoftext.htm)

[2001-2002 Student Financial Aid Handbook, FFEL & Direct Loan Section,
Chapter
5](http://ifap.ed.gov/sfahandbooks/attachments/0102VolCh5Counseling.pdf)

[2001-2002 Student Financial Aid Handbook, Campus-Based Programs,
Federal Perkins Loan Section, Chapters 3 and
7](http://ifap.ed.gov/sfahandbooks/0102Vol5Perkins.html)

[SFA Assessment Worksheet, Assessment E, Disbursement
Requirements](http://qaprogram.air.org/AssessmentE.html)

35\. NSLDS Security Issues

  -----------------------------------------------------------------------
  **[GEN 2241]{.smallcaps}**

  -----------------------------------------------------------------------

Reviewers must ensure that each participating institution has proper
security procedures for all users of the National Student Loan Data
System (NSLDS). The requirements are very strict. All users must have
their own unique user ID and password. NSLDS requirements do not allow
users of the system to share user IDs and passwords.

The following information should be considered:

-   The user ID and password are for official Department of Education
    business only.

-   The Privacy Act of 1974 (as amended) governs the use of NSLDS data.

-   The user ID and password cannot be given to another individual for
    any reason.

-   Users are not allowed to permit another individual to use an on-line
    session that has been initiated with their own user ID.

Many schools make it a practice to share NSLDS user IDs and passwords.
Remember, too much information is included on NSLDS and schools should
take these requirements seriously. Although these requirements are based
on the Privacy Act, schools who do not follow these requirements show a
lack of administrative capability under Title IV regulations.

**References:**

Privacy Act of 1974, as amended

[34 CFR § 668.16, Student Assistance General
Provisions](http://ifap.ed.gov/regcomps/doc4074_bodyoftext.htm)

[SFA Assessment Worksheet, Assessment G,
Automation](http://qaprogram.air.org/AssessmentG.html)

36\. Third Party Servicer Contract

  -----------------------------------------------------------------------
  **[GEN 2246]{.smallcaps}**

  -----------------------------------------------------------------------

Schools are permitted to contract with consultants for assistance in
administering the SFA programs. However, the school ultimately is
responsible for the use of SFA funds and is accountable if the
consultant mismanages the programs.

Section 668.25 of the General Provisions regulations contains
requirements for all participating institutions that contract with
third-party servicers. As defined by regulation, a third-party servicer
is an individual or organization that enters into a contract (written or
otherwise) with a school to administer any aspect of the institution\'s
SFA participation. If the school uses such servicers, reviewers should
ensure that the contracts contain the required provisions.

**Examples of functions that are covered include:**

-   processing student financial aid applications, performing need
    analysis, and determining student eligibility or related activities;

```{=html}
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```
-   certifying loan applications, servicing loans, or collecting loans;

-   processing output documents for payment to students, and receiving,
    disbursing, or delivering SFA funds;

-   conducting required student consumer information services;

-   preparing and certifying requests for advance or reimbursement
    funding, preparing and submitting notices and applications required
    of eligible and participating schools, or preparing the Fiscal
    Operations Report and Application to Participate (FISAP); and

-   processing enrollment verification for deferment forms or student
    status confirmation reports.

**Examples of functions that are not covered include:**

-   performing lock-box processing of loan payments,

```{=html}
<!-- -->
```
-   performing normal electronic fund transfers (EFTs),

-   publishing ability-to-benefit tests,

-   performing functions as a Multiple Data Entry Processor (MDE),

-   financial and compliance auditing,

-   mailing documents prepared by the institution, or warehousing
    institutional records, and

-   providing computer services or software.

A school may only contract with an eligible third-party servicer, as
defined by specific regulatory criteria. Although an eligible servicer
must meet all these and other requirements, the school remains liable
for any and all SFA-related actions taken by the servicer on its behalf,
under the terms of the contract.

In its contract with the institution, the third party servicer must
agree to:

-   comply with all statutory or regulatory provisions of or applicable
    to Title IV of the HEA and any special arrangements that apply to
    the school under the HEA;

```{=html}
<!-- -->
```
-   refer to ED's Office of Inspector General for investigation any
    information indicating there is reasonable cause to believe that the
    institution might have engaged in fraud or other criminal misconduct
    in connection with the institution\'s administration of any Title
    IV, HEA program or an applicant for Title IV, HEA program assistance
    might have engaged in fraud or other criminal misconduct in
    connection with his or her application;

-   be jointly and severally liable with the institution to the
    Secretary for any violation by the servicer of any statutory
    provision of or applicable to Title IV of the HEA, any regulatory
    provision prescribed under that statutory authority, and any
    applicable special arrangement, agreement, or limitation entered
    into under the authority of statutes applicable to Title IV of the
    HEA;

-   in the case of a third-party servicer that disburses funds
    (including funds received under the Title IV, HEA programs) or
    delivers Federal Stafford Loan Program proceeds to a student:

-   confirm the eligibility of the student before making that
    disbursement or delivering those proceeds;

-   calculate and return any unearned title IV, HEA program funds to the
    title IV, HEA program accounts and the student\'s lender, as
    appropriate;

```{=html}
<!-- -->
```
-   if the servicer or institution terminates the contract, or if the
    servicer stops providing services for the administration of a Title
    IV, HEA program, goes out of business, or files a petition under the
    Bankruptcy Code, return to the institution all records and Title IV,
    HEA funds in the servicer\'s possession pertaining to the
    institution\'s participation in the program or programs for which
    services are no longer provided.

Schools should already have notified the Department of all existing
third-party servicer contracts via the E-app. If a school has not
notified the Department, the school is not in compliance with the
regulations and must immediately notify the applicable Case Management
Team with the following information for each third-party servicer with
which the school contracts: name, address, employer identification
number, telephone number, fax number, and Internet address.

Reviewers should also remind the school to notify the Department if it
enters into a new contract with a third-party servicer; it significantly
modifies a contract with an existing third-party servicer; the school or
one of its third-party servicers terminates a contract, or a third-party
servicer ceases to provide contracted services, goes out of business, or
files for bankruptcy. Notification to the Department must be made within
10 days of the date of the change or action through the E-app process.

**References:**

[CFR § 668.23 Compliance audits and audited financial
statements](http://ifap.ed.gov/regcomps/doc4081_bodyoftext.htm)

[34 CFR § 668.25, Student Assistance General
Provisions](http://ifap.ed.gov/regcomps/doc4083_bodyoftext.htm)

[2001-2002 Student Financial Aid Handbook, Institutional and Program
Eligibility Section, Chapter
2](http://ifap.ed.gov/sfahandbooks/attachments/0102Vol2Ch2ParticipatnRequiremnts.pdf)

[SFA Assessment, Worksheet A, Institutional
Participation](http://qaprogram.air.org/AssessmentA.html)

# Chapter V Office Systems and Coordination

An essential part of performing a thorough program review is to evaluate
an institution\'s systems and procedures for administering Title IV
funds to determine if there are any systemic weaknesses. Discussions
should be held with appropriate managers to identify how systems work,
and whether there are any obvious weaknesses. The review of the
school\'s records and processes will demonstrate whether the systems
work as they are intended.

## A. Offices

The following is a basic overview of the responsibilities of offices
involved in the Title IV process at an institution:

**The Admissions Office** usually makes the initial determination of who
is eligible to enroll, based on institutional, accrediting, or licensing
requirements.

**The Academic Advising/Student Counseling Office** usually decides what
program of study students are accepted into, based on information
provided in the admissions process. This office may require adjustments
to students\' programs (e.g., requiring remedial coursework).

**The Registrar/Records Office** usually confirms enrollment criteria
(e.g., confirms high school graduation), records and tracks students\'
status throughout their enrollment at the school.

**The Financial Aid Office** determines eligibility, awards financial
aid, and authorizes the disbursement of funds;

**The Bursar/Business Office/Student Account Office/Fiscal Office/
Comptroller\'s Office** usually bills students, disburses funds to
students and/or their accounts, draws Federal funds, maintains fiscal
records, and reports on the use of Federal funds;

A very small school may have two people coordinating all these
processes, whereas a larger school will have a more complex and
segmented organization. For example, a large school may have a Bursar\'s
Office to handle student charges, disbursements, payments and refunds.
However, a separate Comptroller\'s Office may be responsible for taking
student disbursement information from the Bursar\'s Office in order to
draw Federal funds, and for completion of reports. The school may even
have a separate payroll office that maintains the records of payments
made to students under FWS.

At some larger schools, reviewers may see several or all of the offices
mentioned above combined into an enrollment management office. In such
an office, staff is trained in all functions (admissions, financial aid,
bursar, etc.) and is rotated to balance workloads. When reviewers
encounter such schools, they should ensure that the school has
considered some of the ramifications of this arrangement. An obvious
example is the potential lack of separation of duties between awarding
and disbursing of funds. Other possible ramifications could include
conflicts of interest for individual staff members, such as an
admissions counselor who also does financial aid giving preferential
treatment to students that he or she has recruited.

Reviewers should determine as quickly as possible the structure of the
organization to plan staff interviews. It is important to discuss with
different managers how information passes between the various offices,
and which office is responsible for what tasks (e.g., which office
determines satisfactory academic progress? Is it the financial aid
office, the registrar, or perhaps the bursar?)

Coordination of information [within]{.underline} offices is also
important. For example, many schools have students complete statements
authorizing the retention of funds in excess of direct charges for
budgeting assistance. How does the school track which students *don\'t*
complete the retention authorization? The school may assume most
students will sign the statement, and not worry about the few that
don\'t. If the school doesn\'t track the students who did not sign this
authorization and does not give those students their money, the school
will have a credit balance problem.

## B. Computer Systems

An institution must have systems that allow for the coordination of
information between and within different offices. In many cases,
computer systems will play a significant role in this coordination. All
schools are now required to use computer systems to process financial
aid. Some schools may only use Department-provided software such as
EDExpress and the Return to Title IV software for the relatively limited
functions of calculating, processing, and disbursing Title IV aid. Other
schools may have elaborate systems of their own that contain such
information as grades, attendance records, student accounts, etc.

While the purpose of a program review is not an in-depth technical
evaluation of a school's computer systems, it is important for reviewers
to evaluate the interaction between automated systems and the financial
aid process. In particular, reviewers should be looking for things that
may impact the quality of the data contained in those systems. Reviewers
should have school officials explain the major systems in use at the
school and how those systems interact with each other. It may be helpful
to ask for copies of any documentation that the institution may have on
its systems, such as training manuals, data flow diagrams, etc. If an
institution does not have such documentation, or the documentation does
not adequately explain the procedures for putting data into the system
or the data contained in the system, the data may not be reliable. Some
specific questions that need to be answered are:

-   Who uses the different systems at the school and what do they use
    them for? If different offices use the same system, does everyone
    have access to the same data? (An example would be a mainframe
    system that has all of the school's records. Can financial aid
    officials see grades, attendance, or bursar's office data? If they
    can, how do they use this information?)

-   Do the systems have security measures in place to protect the
    integrity and privacy of the data stored in them? For example, if
    the systems are on a network, are they password protected? Are data
    files stored on a secure server that would not allow unauthorized
    access? Do the applications that the school uses have safeguards to
    prevent users from changing data, such as ISIR data, that should not
    be changed? Does a segregation of duties exist at the system level?
    For example, if aid is both awarded and disbursed by a computer
    system, does this system have any safeguards in place that prevent
    the same person from awarding and disbursing aid?

-   How does the school ensure that data is updated accurately and
    timely? If there are multiple systems that store the same data, how
    does the school ensure that those systems are synchronized? For
    example, some schools have instructors record attendance in paper
    books, but also have a computer system that records student
    attendance. How does the school get the records from paper to the
    electronic system? Does it do any verification that the electronic
    records are accurate? Other schools may have similar information on
    two different computer systems. If so, how do they ensure that both
    systems have accurate, up-to-date data?

Many schools use automated disbursement systems. Reviewers need to
discuss with school officials how aid is identified for the computer to
allow disbursement. For example, is it based on someone actually putting
in an identifier to make an award disbursable? If so, what do they
consider before they do that? Or, is it based on an automatic trigger --
for example a previously missing verification document is coded as
received, and the automated system moves the award(s) into the
disbursement queue. If so, how do they control it to ensure the document
is completely reviewed to make sure it confirms the student's
eligibility, before the disbursement is triggered?

Reviewers should also determine how the school interacts with ED's
systems such as the NSLDS, RFMS, and the Title IV WAN. In particular,
reviewers should ask the school who accesses each of these systems and
ensure that the rules for accessing them are followed. For example,
NSLDS requires that each individual who accesses it has his or her own
user ID and password. To verify that this rule is being followed,
reviewers could ask the school for a list of people who use the NSLDS
and verify with NSLDS that those people have IDs and passwords.

In many cases, it will be necessary for reviewers to retrieve records
from a school's electronic system to validate it themselves. When
reviewing the school's electronic systems, it is extremely important
that reviewers not do anything that could compromise the systems
themselves or create the appearance that reviewers compromised the
school's systems. Reviewers should avoid using the systems themselves
and should have school officials perform all actions required to
retrieve data from the systems. It may be beneficial for reviewers to
directly observe this process, both to ensure the validity of the data
being given to reviewers and to better understand the systems
themselves.

Understanding the institution\'s procedures may help determine the cause
of a problem when the responsibility for performing the task resides
with more than one office. For example, untimely refunds may be the
result either of 1) the registrar office\'s delayed determination that a
student dropped out; 2) the FAO\'s delay in calculating the refund; 3)
the business office\'s delay in issuing the refund check; or 4) possibly
all of the above!

The complexity of the Title IV regulations and statutes requires
continuous coordination of information between offices. The discussions
of the focus review items in this guide provide some insight into
specific systemic problems commonly encountered.

# Chapter VI Special Focus on Default Prevention

## A. Reviews at Schools With High Cohort Default Rates

Reviews of institutions with high Federal Family Education Loan (FFEL)
and William D. Ford Federal Direct Loan (DL) Program cohort default
rates (CDR) will also focus on default management. Applicable default
reduction and prevention measures must be examined at institutions with
high CDRs during reviews. Reviewers should notify their Default
Management adjunct of the scheduled review and request all relevant loan
information on the school (CDR rate trends, loan program eligibility
status, and appeal status.)

Every year, ED notifies each institution of its official fiscal year
cohort default rate on loans to students for attendance at that
institution through the FFEL and DL programs. (Although the Federal
Supplemental Loan for Students (SLS) program has been phased out, some
SLS loans still appear in the calculation.) The institutional profile
will list the three most recent official cohort default rates and dates
of notification.

A new comprehensive Cohort Default Rate Guide, combining the separate
Draft and Official Cohort Default Rate Guides is available with the
release of the FY 99 Official Cohort Default Rates. The guide should be
used as a reference tool for institutions desiring to challenge the
draft cohort default rate and/or request an adjustment to and/or appeal
the official default rate(s). The review should refer to the *Cohort
Default Rate Guide* for detailed information on CDRs and related topics.

## B. Review Items

During the review of a high CDR institution, a new institution, or an
institution under new ownership, reviewers should examine the following
items.

-   high withdrawal rates

-   adequate consumer disclosure information

-   low job placement rates

-   adequate entrance and exit counseling

-   accurate and timely SSCR reporting

-   adequate resources committed to default reduction\*

-   adequate process to ensure accuracy of CDR\* (review of Loan Record
    Detail Report data at draft and official notification)

-   any school payments to avoid delinquent loans going into default

-   default management plans for institutions undergoing changes in
    ownership

-   compliance with sanction/benefit requirements

-   changes in status

# \* although beneficial to reducing CDRs, not mandatory {#although-beneficial-to-reducing-cdrs-not-mandatory .TOC-1}

For new institutions, reviewers should examine their default management
plans.

## C. Cohort Default Rate

Schools will receive Cohort Default Rates (CDRs) twice a year: first, as
a [draft]{.underline} CDR, and then as an [official]{.underline} CDR.
The draft CDRs are calculated and mailed to schools in January/February.
The draft process is an opportunity for schools to review and correct
data prior to the calculation of the official CDR. The official CDRs are
calculated and mailed to schools in August/September. The Default
Management Division makes sanction and benefit status decisions based on
the official CDRs and not the draft CDRs. However, a school has limited
opportunities to request an adjustment or appeal its CDR, prior to
implementation of an official action.

### 1. Formulas Used to Calculate a School's Official Cohort Default Rate

A CDR is the percentage of a school's borrowers who enter repayment on
certain FFEL and/or DL program loans during a fiscal year and default or
meet other specified conditions within the fiscal year in which the
loans entered repayment or within the next fiscal year. Two types of
formulas are used to calculate a school's official CDR:

-   Non-Average Rate: For a school with 30 or more borrowers entering
    repayment during a fiscal year.

-   Average Rate: For a school with 29 or fewer borrowers entering
    repayment during a fiscal year that had a CDR calculated for the two
    previous fiscal years.

A school with 29 or fewer borrowers entering repayment during a fiscal
year that did not have a CDR calculated for either or both of the two
previous fiscal years will be notified of its unofficial CDR. No
sanctions or benefits are associated with unofficial CDR calculations.

## D. Sanctions and Benefits for Cohort Default Rates

### 1. Sanctions Associated with High CDRs (effective 7/1/01)

-   Three most recent CDRs of 25.0 percent or greater will result in the
    loss of FFEL/DL and Federal Pell Grant Program eligibility. (Schools
    meeting certain conditions may retain Pell Grant Program
    eligibility.)

-   Most recent official CDR that is greater than 40.0 percent will
    result in the loss of FFEL/DL eligibility.

For both sanctions, the loss of eligibility is for the remainder of the
fiscal year in which the school was notified that it was subject to loss
of eligibility and for two subsequent fiscal years. Loss of eligibility
is effective upon notice from the Default Management Division that the
school can no longer participate in these programs. Schools can continue
to participate while certain appeals are pending in Default Management,
but liabilities will be charged if the appeal is not successful.

In accordance with 34 CFR 668 Subpart M Section 668.198, special
institutions (Historically Black Colleges or Universities as defined in
Section 322(2) of the HEA; Tribally Controlled Community College as
defined in Section 2(a)(4) of the Tribally Controlled Community College
Assistance Act of 1978; and Navajo Community Colleges under the Navajo
Community College Act) are exempt from these sanctions if they meet the
exemption criteria. This exemption is due to expire June 30, 2004. For
information on special institutions qualifying for this exemption,
please contact the Default Management adjunct.

### 2. Benefits Associated with Low CDRs 

-   Three most recent official CDRs of less than 10.0 percent, the
    institution may choose to deliver/disburse loan proceeds in a single
    installment for single-term loans and not delay the
    delivery/disbursement of the first installment for first-year,
    first-time borrowers. **This benefit is scheduled to expire on
    September 30, 2002.**

-   The most recent CDR that is less than 5 percent, and the institution
    is an eligible home institution certifying/originating loans for a
    study abroad program, the institution may choose to deliver/disburse
    loan proceeds in a single installment and not delay the
    delivery/disbursement of the first installment for first-year
    first-time borrowers.

Schools must cease exercising these benefits beginning 30 calendar days
after receiving notice from the Default Management Division of a CDR
that causes the school to no longer meet the established thresholds.

## E. Changes in School Status

If it is discovered that an institution changes its status through
consolidation, additional location, becoming free standing, mergers,
changes of ownership, or other means, but no change of affiliation or
comments exist in PEPS, nor does the school have a "P" or "C" rate in
PEPS, reviewers should contact their Default Management adjunct with
updated information for the institution. The Default Management Division
will review the information provided and notify reviewers if a revision
to the CDR is necessary. Further, if it can be determined that an
institution may be attempting to avoid sanctions or obtain benefits by
manipulating its CDRs, reviewers should immediately notify their Default
Management adjunct. The Default Management Division will evaluate the
allegation and determine the action(s) to be taken against the school.

**References:**

[Cohort Default Rate
Guide](http://ifap.ed.gov/IFAPWebApp/currentDRMaterialsYearPag.jsp?p1=1999&p2=c)

[Official Cohort Default Rate for
Schools](http://www.ed.gov/offices/OSFAP/defaultmanagement/)

34 CFR Part 668 Subpart M Sections 668.181 through 668.198;
682.604(b)(5)

Appendices A and B of Subpart M of Part 668

Dear Colleague Letter GEN-01-08 Sample Default Management Plan

<http://ifap.ed.gov/dpcletters/gen0108.html>

.

# Chapter VII Special Considerations for Direct Loan Schools

## A. Background

Schools that participate in the Federal Direct Loan program have similar
requirements as those that participate in FFEL. However, because there
are differences in the process, the following information may be helpful
to reviewers. Since the case management process includes gathering all
relevant information pertaining to the school, reviewers are to contact
the school's client account manager to gather information pertaining to
Direct Loan participation at the school prior to the program review.

## B. School Origination Options

Reviewers should determine the origination option in which the school
participates. There are three school origination options: Standard
Origination, Origination Option 1, and Origination Option 2. These
options define which loan processing functions a school performs and
which functions ED\'s Loan Origination Center (LOC) performs. The
origination option of the school is available on PEPS. A brief
explanation regarding each option follows.

Any school approved by ED to participate in the Direct Loan Program may
participate as a **Standard Origination** school. At this level,
responsibility and control are shared between the school and the LOC.

-   **Origination Option 1** schools perform more loan processing
    functions than Standard Origination schools, but the LOC still
    controls certain functions.

-   **Origination Option 2** schools have the most responsibility, but
    can choose to have the LOC do certain loan processing functions for
    them.

The main difference between Option 1 and Option 2 schools is that Option
1 schools may process prom notes, and Option 2 schools may process both
prom notes and draw down cash.

The following chart shows how responsibility for processing Direct Loans
is divided between schools and the LOC for each school origination
option:

+--------------------------------+-----------+-----------+-----------+
| **Responsibility**             | *         | **Or      | **Or      |
|                                | *Standard | igination | igination |
|                                | Orig      | Option    | Option    |
|                                | ination** | 1**       | 2**       |
+--------------------------------+-----------+-----------+-----------+
| Create loan origination        | -         | -         | -         |
| records                        |           |           |           |
+--------------------------------+-----------+-----------+-----------+
| Transmit loan origination      | -         | -         | -         |
| records to LOC                 |           |           |           |
+--------------------------------+-----------+-----------+-----------+
| Prepare promissory note        | **LOC**   | -         | -         |
+--------------------------------+-----------+-----------+-----------+
| Obtain completed/signed        | **LOC**   | -         | -         |
| promissory note                |           |           |           |
+--------------------------------+-----------+-----------+-----------+
| Send promissory note to LOC    | **N/A**   | -         | -         |
+--------------------------------+-----------+-----------+-----------+
| Calculate need for Direct Loan | **LOC**   | **LOC**   | -         |
| funds                          |           |           |           |
+--------------------------------+-----------+-----------+-----------+
| Request Direct Loan funds from | **LOC**   | **LOC**   | -         |
| GAPS                           |           |           |           |
+--------------------------------+-----------+-----------+-----------+
| Receive funds from GAPS        | -         | -         | -         |
+--------------------------------+-----------+-----------+-----------+
| Disburse loan funds to         | -         | -         | -         |
| borrowers                      |           |           |           |
+--------------------------------+-----------+-----------+-----------+
| Create disbursement records    | -         | -         | -         |
+--------------------------------+-----------+-----------+-----------+
| Transmit disbursement records  | -         | -         | -         |
| to LOC                         |           |           |           |
+--------------------------------+-----------+-----------+-----------+
| Perform reconciliation         | -         | -         | -         |
+--------------------------------+-----------+-----------+-----------+
| **Legend:**                    |           |           |           |
|                                |           |           |           |
| -   **= school\'s              |           |           |           |
|     responsibility**           |           |           |           |
|                                |           |           |           |
| **LOC = LOC\'s                 |           |           |           |
| responsibility**               |           |           |           |
|                                |           |           |           |
| **N/A = not applicable**       |           |           |           |
+--------------------------------+-----------+-----------+-----------+

## C. School Responsibilities

Schools are responsible for assuring that only students and parents who
are eligible to borrow Direct Loans receive funds from the program.
There are numerous borrower eligibility requirements outlined in 34 CFR
685.200, 34 CFR 685.300 (b) and 34 CFR 668, Subpart C. These
requirements are similar to the eligibility requirements for other Title
IV programs. Although the list is not all-inclusive, reviewers should be
aware of the following school responsibilities. These responsibilities
will be explained in further detail in this section:

a.  Originating Direct Loans (34 CFR 685.301)

```{=html}
<!-- -->
```
l.  Drawing down and disbursing Direct Loan proceeds (34 CFR 685.303
    (b), 34 CFR 685.303(c), and 34 CFR 668.164)

m.  Counseling students (34 CFR 685.304 (a) and 34 CFR 685.304 (b))

n.  Reconciling school-based Direct Loan records with records in ED\'s
    Direct Loan database (34 CFR 668.21 (b))

o.  Carrying out administrative and fiscal management functions (34 CFR
    668 Subparts B, K and L; 34 CFR 685.309)

p.  Reporting changes in borrower enrollment status to ED (34 CFR
    685.309 (b))

q.  Implementing a quality assurance system, as established by ED (34
    CFR 685.300 (b)(9))

For a complete listing of school functions see 34 CFR 685.300.

## D. Review Procedures

To become the official and legally binding obligation between the
borrower and ED, a note must be executed by the borrower and funds
disbursed to the borrower. A loan must also be "booked." There are three
components needed to book a loan:

-   the LOC accepts a loan origination record;

-   the LOC accepts a promissory note; and

-   the LOC accepts a disbursement record.

### 1. Loan Origination 

Procedure: Reviewers should check loan origination information for each
Federal Direct Loan recipient in the sample (34 CFR 685.301).

Regardless of their origination option, all Direct Loan schools are
responsible for originating loans. The Direct Loan origination process
is similar to the loan certification process in the FFEL Program. In
both cases, schools provide loan data on the eligibility of borrowers to
receive loans.

Schools originate a Direct Loan by first creating a loan origination
record (LOR) and then \"originating\" it in the software. This stamps
the LOR with the important \"origination date.\" (Note: It is possible
to create an LOR and save it, but not originate it.) The process of
originating a Direct Loan, as opposed to simply creating it, can be
likened to the actual certification of an FFEL program loan. The loan
origination record is the foundation for any Direct Loan. Without it, no
other processing can take place.

Schools (or their third party servicers) send loan origination records
directly to the LOC. When a loan origination record is accepted by the
LOC, two events occur:

a.  The LOC sends a disclosure statement to the borrower. (Schools can
    request ED to authorize them to print and distribute disclosure
    statements to borrowers, rather than having the LOC do it).

```{=html}
<!-- -->
```
r.  Depending upon the school\'s origination option, either the school
    or the LOC prints promissory notes and collects the signed notes
    from borrowers.

-   The LOC prints and collects signed promissory notes for Standard
    Origination schools.

-   Origination Option 1 schools and Origination Option 2 schools have
    the authority to print and collect signed promissory notes, although
    they can allow the LOC to do it for them. If these schools collect
    signed promissory notes from borrowers, they must forward the notes
    to the LOC.

When the LOC accepts a completed and signed promissory note, whether it
comes from a borrower or a school, it sends an acknowledgement to the
school.

***Helpful Hints for Origination:***

The Direct Loan Software contains useful information regarding the
origination and disbursement information for each Direct Loan student.
If the school is an EDExpress user, reviewers may find it helpful to
have the school print information from the origination and disbursement
tabs for each Direct Loan student in the sample. This will show the
borrower information, promissory note information, and the loan
information for **each** loan (the student may have Sub, Unsub, and/or
PLUS).

There is also a report that can be run from the Direct Loan Software
called the Origination Report. The report can be printed using the
\"multiple student\" option on the software. The SSN of every Direct
Loan student in the sample can be entered into the software to receive
origination information for **each** Direct Loan originated.

Reviewers should be aware that many schools do not use EDExpress, nor is
it required. If the school is not an EDExpress user, reviewers should
ask the school to provide the origination information for each student
in the sample from whatever system the school uses. This information
should include the loan information for **each** loan borrowed by the
student.

### 2. Drawdowns and Disbursements

Procedure: Reviewers should check disbursement information for each
Federal Direct Loan recipient in the sample (34 CFR 685.303 (b), 34 CFR
685.303(c), and 34 CFR 668.164).

When a school is ready to receive Direct Loan funds, it (or the LOC on
the school\'s behalf), makes a drawdown request to ED\'s Grant
Administration and Payment System (GAPS). The large percentage of Direct
Loan schools are Option 2 and thus make their own drawdowns. The
following is the process for all schools:

-   Origination Option 2 schools have the authority to make their own
    drawdown requests. Requests are made on the basis of estimates for
    disbursing Direct Loan funds. Requests for funds do not have to be
    borrower-specific.

-   The LOC must make drawdown requests for Standard Origination schools
    and Origination Option 1 schools. The requests must be
    borrower-specific.

Before disbursing any funds, schools must verify that:

-   a signed, completed promissory note has been returned by the
    borrower;

-   the borrower remains eligible to receive Direct Loan funds; and

-   the borrower is eligible to receive the amount of Direct Loan funds
    disbursed.

For a disbursement to be made, a valid, completed promissory note
(signed, dated, any changes initialed and dated) must be on file at the
school or the LOC. If a valid, completed promissory note is not on file,
the school may be liable for any disbursements. Reviewers should be
aware about the use of the Master Promissory Note (MPN), since
multi-year schools may have the student sign one note for their entire
borrowing career. Under the multi-year feature many students will be
able to obtain additional loans without having to sign a new MPN for
each academic year. Multi-year schools can accept a promissory note from
a previous year or a previous Direct Loan school. Single-year schools
can only accept a promissory note from the current academic year at that
school. Reviewers should be aware that there are differences between
multi-year and single-year schools. For more information regarding the
use of MPN, please refer to 34 CFR 685.102, Dear Colleague GEN-98-25, 34
CFR 685.402 (f), Dear Partner Letter GEN 00-03, and Direct Loan
Bulletins DLB 00-05 and 00-11.

Standard Origination schools and Origination Option 1 schools must
disburse funds to specific borrowers for whom drawdown requests were
made. If a school doesn\'t disburse funds to the intended borrower, the
funds must be returned to ED.

Origination Option 2 schools should time their requests for funding on
the basis of when they expect to disburse funds. These schools may
disburse available Direct Loan funds to any eligible borrower.

All schools must send their disbursement records to the LOC within 30
days of the disbursement date. In addition, if Direct Loan funds are not
disbursed within three business days of the date they were received from
ED, a school must either return the funds promptly, or if the school
meets the criteria for excess-cash tolerances in 34 CFR 668.166(b),
within seven days.

***Helpful hints for Disbursement:***

Again, remember that many schools do not use EDExpress. Some schools may
use their own system or private vendors. Other schools may use a
combination of EDExpress and their own system. In these cases, reviewers
should ask the school to provide them with the Origination and
Disbursement information from their own system that would be found on
the Origination and Disbursement Tabs of the Direct Loan Software (if
the school were an EDExpress user). This information should include the
disbursement information for **each** loan borrowed by the student.

For schools that do use EDExpress, reviewers may find it useful to have
the school print out the disbursement screen of the Direct Loan Software
for each Direct Loan recipient in the sample. This screen will show the
anticipated disbursements and the actual disbursements for each loan.

Reviewers may also request a \"List-Actual Disbursement\" report from
the Direct Loan software. This report can be produced for single
students or multiple student records. This report will provide reviewers
with a disbursement history for all students in the sample.

*Other Reports in EDExpress that may be helpful for reviewers:*

-   ***Measurement-Booked Status Report*** - This report can be run from
    the EDExpress Software. It contains a list of disbursement
    transactions with status flags for origination, promissory note, and
    disbursements.

### 3. Loan Counseling

Procedure: Reviewers should check to ensure that loan counseling
requirements have been met (34 CFR 685.304 (a) and 34 CFR 685.304 (b)).

Schools participating in the Direct Loan Program are required to conduct
entrance loan counseling and exit loan counseling for students.
Reviewers should ensure that these requirements are met at a Direct Loan
School just as they need to be met at an FFEL school. Since many
processes are becoming electronic, loan counseling is not necessarily a
paper process. Both FFEL and Direct Loan schools can access web-based
programs provided by FFEL lenders or the Direct Loan Program to conduct
loan counseling.

### 4. Reconciliation 

Procedure: Reviewers should check to ensure that the school has
reconciled Direct Loan funds (34 CFR 668.24 (b)).

Reconciliation is a process by which a school verifies that its Direct
Loan records match the LOC\'s.

**Monthly reconciliation:** There is a monthly reconciliation process
using a Direct Loan School Account Statement (DLSAS). The DLSAS is
similar to a bank statement. It contains cash and loan record
information that schools can use to compare the information in their
databases with the information that the LOC has. The LOC sends the DLSAS
to each school on a monthly basis. Since reviewers will ultimately be
reviewing the past two academic years at a school, they should request
the latest DLSAS from the school for the current academic year to
determine if the school is current in the reconciliation requirements.
The school has completed its monthly reconciliation when:

-   All differences between the DLSAS and the school\'s internal records
    (Direct Loan System and business office system) have been resolved
    or documented.

-   Timing issues have been identified and will be tracked for
    reconciliation in the next month\'s DLSAS.

-   Any necessary corrective actions have been taken to ensure that all
    the prior month\'s issues will reconcile in the following month.

-   All reconciliation efforts have been documented for future reference
    and review.

If the report shows the school is not in balance, reviewers should take
a closer look at the monthly reconciliation process by reviewing the
reconciliation history at the school to determine what process and
procedures are in place at the school for monthly reconciliation
requirements. Reviewers can also refer to Appendix P for more detailed
information and helpful tools about the reconciliation process.

Schools may be receiving DLSAS reports for up to three academic years
each month. The concurrent reconciliation efforts may result in
overlapping cash detail data, such as when a drawdown has been split
between award years. These multiple-year reconciliation efforts will
sometimes reveal global issues at the school that need to be resolved.

*If reviewers determine that Direct Loan reconciliation is an issue that
needs to be included as a finding, please refer to Program Review Item
\# 27.*

**Year-end closeout:** There is also an annual reconciliation process,
which is called the \"year-end closeout.\" It is similar to monthly
reconciliation because the main purpose is for schools to match their
internal records with the LOC\'s. However, instead of focusing on a
single month, it addresses the entire academic year. Closing out is the
process of reconciling all school information at the LOC and of bringing
all ending cash balances to \$0.

The year-end closeout process is complete when:

-   The school and the LOC each show a cash balance of \$0, indicating
    that the school has accounted for all Direct Loan funds received
    from ED.

-   All LOC transaction records match up to all school Direct Loan
    System transactions and business office transactions.

-   All actual disbursement records are booked at the LOC, so that the
    DLSAS reflects a \$0 unbooked balance.

Reviewers can determine if the school has reconciled prior award years
by reviewing a copy of the school\'s 732-LOS file. This file provides
ED\'s official ending cash balance for the school as of the date of the
report, based on the LOC\'s records. The 732-LOS file is sent by the LOC
to the school and comes as two text files-a summary file and a loan
detail file. The chief distinction between the DLSAS and the 732-LOS is
that the DLSAS contains data for a specific month, while the 732-LOS
contains year-to-date cumulative data. If this file indicates that the
school is in balance, this would be a good indicator that reconciliation
is not a major problem.

If the report is not in balance, reviewers should take a closer look at
the monthly reconciliation process by reviewing the reconciliation
history at the school to determine what process and procedures are in
place at the school for monthly reconciliation requirements.

Reviewers can also refer to Appendix P for more detailed information and
helpful tools about the DL reconciliation process.

*If reviewers determine that Direct Loan reconciliation is an issue that
needs to be included as a finding, please refer to Program Review Item
\# 27.*

### 5. Administration, Fiscal Control and Fund Accounting 

Procedure: Reviewers should check to ensure that the school is in
compliance with requirements for administrative capability, fiscal
responsibility, and fund accounting can be found in 34 CFR 668, Subparts
B, K, & L and 34 CFR 685.309. Reviewers should consider these
requirements when conducting the fiscal portion of the review.

The fiscal responsibility requirements for Direct Loans are similar to
that of all other Title IV programs. Some of the highlights of the
requirements related to maintaining and accounting for funds at Direct
Loan schools are as follows:

**Maintaining and Accounting for Funds -** All Direct Loan schools must
maintain a bank account into which ED transfers or the school deposits
Direct Loan funds. The account must be Federally insured or secured by
collateral of value reasonably equivalent to the amount of Direct Loan
funds in the account.

-   A school is not required to maintain a separate account for Direct
    Loan funds unless ED specifies otherwise.

-   Although Direct Loan funds may be kept in the same account with
    other Title IV funds, ED recommends that a separate account be
    established for Direct Loan funds. This separation of funds will
    help the school\'s cash management of Direct Loans. Reference: 34
    CFR 668.163(a)(1)

**Interest-Bearing or Investment Account -** Except in certain
instances, the account in which Direct Loan Program funds are deposited
must be an interest-bearing account or an investment account. Please
refer to 34 CFR 668.163(c) for specific requirements.

As with other Title IV programs, Direct Loan schools must maintain their
financial records in accordance with the record-keeping requirements in
the Title IV General Provision regulations (34 CFR 668.24).

**Excess Cash -** Excess cash is any amount of Direct Loan funds that a
school does not disburse to students or parents by the end of the third
business day after the school received the funds from ED. Unless a
tolerance applies, a school must promptly return to ED any amount of
excess cash in its bank account. Reference: 34 CFR 668.166

**Tolerances -** If a school draws down Direct Loan funds in excess of
its immediate cash needs, the school may maintain the excess cash
balance in its bank account only under the following situations:

-   During peak enrollment periods, a school may maintain excess cash in
    amounts of less than 3 percent of the school\'s total prior-year
    drawdowns.

-   For periods other than peak enrollment, a school may maintain excess
    cash in amounts of less than 1 percent of the school\'s total
    prior-year drawdowns.

For both these tolerances, a school must eliminate the excess cash
balance by disbursing funds to students or parents within seven calendar
days.

-   This means the school has a maximum of 10 calendar days to eliminate
    excess cash that qualifies under tolerance rules: the three business
    days plus the seven calendar days.

Note: Standard Origination schools and Origination Option 1 schools
receive funds that are borrower specific. These schools cannot disburse
funds to any borrower other than the borrower for whom the funds were
intended.

**Idle Cash -** Cash that has been disbursed becomes idle cash if and
when it is returned to the school\'s Title IV account(s). This return
may be due to a refund or other circumstances. For example, a student
might receive a disbursement, but later decides to return all or a
portion of the loan proceeds to the school.

A school may maintain idle cash in its Federal bank account for up to
seven calendar days to disburse it to, or on behalf of, the student. An
Origination Option 2 school also may disburse idle cash to other
borrowers. Provisions concerning excess cash in 34 CFR 668.166(b) do not
apply to idle cash.

**Returning Direct Loan Funds -** When Direct Loan funds are returned by
a school to comply with the HEA or applicable regulations (for example,
dealing with excess cash or a refund) the loan fee and any interest that
has accrued on all or the appropriate portion of the funds is refunded
to the borrower.

When funds are returned as a payment by a school, and it is more than
120 days after they were disbursed, the borrower still must pay the loan
fee and interest on the amount.

*Reviewers should refer to Program Review Item #11 for further
information regarding Return of Title IV (including Direct Loan funds).*

### 6. Reporting Changes in Borrower Enrollment Status to ED 

Procedure: Reviewers should check to ensure that the school has complied
with the reporting requirements for the Student Status Confirmation
Report (SSCR).

Federal law requires all Title IV schools-including Direct Loan schools-
to verify and/or complete and return any Student Status Confirmation
Report (SSCR) that ED sends it (34 CFR 685.309 (b)).

Within 30 calendar days of the date the SSCR Roster File is placed in a
school\'s Title IV WAN electronic mailbox, the school must review the
data, make any needed changes, and send NSLDS an SSCR Submittal File
through Title IV WAN.

See Program Review Item 33 for more information regarding SSCR Reporting
for both FFEL and Direct Loan Schools.

### 7. Implementing a Quality Assurance System

Procedure: Reviewers should ensure that the school has a quality
assurance system with both a qualitative and quantitative assessment.

Schools must develop and maintain a Direct Loan quality assurance
system. The quality assurance (QA) component of the Direct Loan Program
is a requirement of all institutions participating in the program. QA is
included in the statute authorizing the Direct Loan Program, as well as
in the regulations, 34 CFR 685.300 (b) (9), as part of the Program
Participation Agreement.

The quality assurance component of the Direct Loan Program is being
revisited and new guidance will be provided to schools in the near
future. In the meantime, reviewers should ensure that Direct Loan
institutions have a quality assurance component that includes a
qualitative and quantitative assessment.

## E. Other References for Direct Loans

[Direct Loan
Bulletins](http://www.ifap.ed.gov/IFAPWebApp/currentDLBulletinsListPag.jsp?p2=c)

[Federal Direct Loan
Regulations](http://www.ifap.ed.gov/IFAPWebApp/currentRegCompsYear2Pag.jsp?p1=31-DEC-1999&p2=c&p3=685&p4=WILLIAM+D.+FORD+FEDERAL+DIRECT+LOAN+PROGRAM)

[Cash Management
Regulations](http://www.ifap.ed.gov/IFAPWebApp/currentRegCompsYear3Pag.jsp?p1=31-DEC-1999&p2=c&p3=668&p4=STUDENT ASSISTANCE GENERAL PROVISIONS&p5=Cash Management&p6=K)

[2001-2002 Student Financial Aid Handbook, FFEL and Direct Loan
Section](http://ifap.ed.gov/sfahandbooks/0102Vol8DLFFEL.html)

Direct Loans School Guide (A Better Way to Borrow), Available from the
Direct Loan Staff or SFA Publications,

[Electronic Version of Direct Loan School
Guides](http://www.ifap.ed.gov/IFAPWebApp/currentDLSGuidesYearPag.jsp?p1=1998-1999&p2=c)

Appendix C (for Direct Loan sample Interview Questions)

[EDExpress Software](http://www.sfadownload.ed.gov/)

<http://lo-online.ed.gov./>

# Chapter VIII Special Focus on Campus Security

When conducting a review that focuses on compliance with the Campus
Security Act, the annual security report will be a major item to review.
Also see Item 2 in Chapter IV for additional information on reviewing
campus security.

## A. Annual Security Report -- Contents

Reviewers should ask for a copy of the institution's most recent annual
security report, as well as copies of the two preceding reports.
Reviewers should check the reports' completeness and that they are
prepared in accordance with the regulatory requirements. The annual
security report must contain crime statistics for the three previous
calendar years and must contain the required policy statements outlined
in 34 CFR 668.46(b).

### 1. Crime Statistics

The crime statistics must disclose crimes that are reported to local
police agencies or to a campus security authority in the following
categories, by location of occurrence:

-   on-campus (along with a sub-category of the number of crimes that
    took place in dormitories or other student housing on campus)

-   in or on a non-campus building or property

-   on public property

The regulations require institutions to comply with the campus security
reporting requirements for each separate campus.

An institution may have a campus map available to define the boundaries
of campus property and to identify non-campus building/property. If an
institution has a campus police force, maps or other documents should
exist which outline the campus or jurisdictional boundaries of that
police force. If a question arises concerning the boundaries of an
institution's campus, there should be insurance documents or property
deeds that delineate the campus boundaries. Reviewers might check for
these documents in the office that handles the physical plant or the
dean of operations.

The Higher Education Act (HEA) requires schools to report occurrences of
manslaughter in addition to murder. The annual security report should
include a category of "criminal homicide," with sub-categories of (1)
murder and non-negligent manslaughter and (2) negligent manslaughter.
Also, institutions must report incidents of arson.

The HEA also requires statistics of arrests for liquor law, drug law and
weapons possession violations to be disclosed for the **three** most
recent years. Schools must also disclose the number of persons who were
referred for campus disciplinary action for liquor law, drug law and
illegal weapons possession.

The annual security report must disclose, by category of prejudice,
which of the reportable crimes (**AND** any other crime involving bodily
injury) show prejudice based on race, gender, religion, sexual
orientation, ethnicity or disability.

In addition to checking the actual annual security reports, reviewers
should check to see that the institution has documentation to support
the statistics for the calendar years covered by the current report as
well as the two preceding annual security reports.

For example, the October 1, 2000, annual security report was required to
disclose crime statistics from the 1999, 1998 and 1997 calendar years.
As of that date, under the record retention requirements of 34 CFR
668.24, the institution was required to retain the annual security
reports from the three preceding years (in this example, the reports for
September 1, 1999, September 1, 1998 and September 1, 1997). The
September 1, 1997 report must disclose crime statistics for the 1996,
1995, and 1994 calendar years. Therefore, the institution would need to
keep the records supporting the incidents reported in the 1994 calendar
year crime statistics until October 1, 2000.

Note: A crime statistic is recorded in the annual security report for
the calendar year in which the crime was **reported** to a campus
security authority, not the calendar year in which the crime occurred.

### 2. Campus Security Authority

A campus security authority could include any of the following:

a.  A campus police department or campus security department of an
    institution.

```{=html}
<!-- -->
```
s.  Any individual(s) who have responsibility for campus security but
    who do not constitute a campus police department or campus security
    department (i.e., an individual who is responsible for monitoring
    the entrance into institutional property).

t.  Any individual or organization specified in an institution's
    statement of campus security policy as an individual or organization
    to which students and employees should report criminal offenses.

u.  Any institutional official having significant responsibility for
    student and campus activities. This could include officials in such
    areas as student housing, student discipline, and campus judicial
    proceedings.

Note: If an official is a pastoral or professional counselor, the
individual is not a campus security authority when he or she acts as a
pastoral or professional counselor. The annual security report
statistics do **not** have to include crimes reported to pastoral or
professional counselors. *The annual security report should, however,
describe any procedures the institution has that encourage pastoral or
professional counselors, if and when they deem it appropriate, to inform
the persons they are counseling of any procedures to report crimes on a
voluntary, confidential basis for inclusion in the crime statistics.*

### 3. Policy Statements

The annual security report must contain the required policy statements
outlined in 34 CFR 668.46(b). [34 CFR § 668.46, Student Assistance
General Provisions](http://ifap.ed.gov/regcomps/doc4101_bodyoftext.htm)

Among other things, the regulations require an institution to include in
its annual security report the institutional policies for preparing the
disclosure of crime statistics. The regulations also require an
institution to list in its annual security report the titles of each
person or organization to whom students and employees report criminal
offenses.

## B. Annual Security Report -- Method of Distribution

Reviewers should check the institution's method for distributing its
annual security report. The regulations require the report to be
distributed to all enrolled students and current employees by October 1
of each year.

Current students and employees must receive the annual security report
through (1) direct mail to each individual, or (2) a publication
provided directly to each individual, or (3) posting the information on
an Internet or Intranet website.

Prospective students and employees must be given notice that includes a
statement of the report's availability, a description of its contents,
and an opportunity to request a copy. A copy must be provided upon the
request of a prospective student or employee.

The information distributed to prospective students would likely be
found in the school's admissions office. The information distributed to
prospective employees would likely be located in the human resources
department.

If the annual security report is posted on an Internet or Intranet
website:

-   The institution must distribute a notice to current students that
    includes (1) the exact electronic address at which the information
    is posted, and (2) a statement that the institution will provide a
    paper copy of the information upon request.

-   The notice to current employees must include (1) a statement of the
    report's availability, (2) the exact electronic address at which the
    report is posted, (3) a brief description of the report's contents,
    and (4) a statement that the institution will provide a paper copy
    of the report upon request.

-   The notice to prospective students and employees must include (1)
    the exact electronic address at which the report is posted, (2) a
    brief description of the report, and (3) a statement that the
    institution will provide a paper copy of the report upon request.

Reviewers should also confirm that the institution submitted its
statistical disclosures to the Secretary as required by the regulations.
The website to check submitted statistics is
<http://ope.ed.gov/security>.

## C. Reviewing Accuracy of Reporting

To confirm or disprove allegations of incorrect reporting of statistical
data in the annual security report, reviewers should determine the
office and/or individual staff members in charge of compiling the annual
security report. The regulations require an institution to include in
its annual security report the institutional policies for preparing the
disclosure of crime statistics. The regulations also require an
institution to list in its annual security report the titles of each
person or organization to whom students and employees report criminal
offenses.

The people involved in the process of compiling the annual security
report will likely vary from institution to institution, depending on
the type, size, and location of the school. The offices most likely to
be involved would be the campus police, a campus security department,
campus disciplinary boards, the director of student housing, and the
dean of students/student affairs.

Reviewers should discuss with the office/individual(s) compiling the
report the sources of information used to calculate the reported
statistics and the communication processes used to obtain statistical
information from these sources. The specific incidents that comprise the
annual security report's statistical data should be detailed somewhere
in the files of the entity/individual compiling the annual security
report. The institution should be able to document what incidents were
disclosed in the statistical section of the annual campus security
report.

## D. Sources of Data

Once reviewers have determined the primary sources of data, they should
review that source documentation and compare it with the actual
disclosed statistics.

### 1. Institutional Offices

Records from institutional offices that could support the disclosed
crime statistics may include

-   incident reports to the campus police or campus security department;

-   actions by/minutes of proceedings conducted by the campus
    disciplinary authority;

-   incident reports to or disciplinary action taken by student housing
    officials; and

-   statistical reporting by campus counseling offices.

Reviewers should review reports from a specific data source listed above
to determine if all incidents from that source were included in the
institution's statistical disclosure in its annual security report.

### 2. Campus Police/Security Department

The HEA requires that an institution that maintains a campus police or
campus security department must maintain a written, easily understood
daily crime log. The crime log must record, by date reported, any crime
that is reported to the campus police or the campus security department
and which occurs (a) on campus, (b) on a non-campus building or
property, (c) on public property, or (d) within the patrol jurisdiction
of the campus police or the campus security department.

If there is a campus police force or campus security department at the
institution, reviewers should check the crime log to test if the
appropriate incidents were included in the disclosed statistics.

Reviewers should also check to see if crimes reported by these entities
meet the Federal Bureau of Investigation's Uniform Crime Reporting (UCR)
Program. The UCR definitions are provided in Appendix E to 34 CFR Part
668. Copies of the UCR Handbooks may be obtained from the FBI
Communications Unit at 304‑625-2823.

CDs containing UCR information for the years 1995 - 1999 can also be
obtained from the FBI's Communications Unit or via
[www.fbi.gov](http://www.fbi.gov/). There are currently technical
problems with the 1998 and 1999 statistics when using Internet Explorer
as your browser. One of the summary schedules in the FBI's UCR report
contains information regarding colleges and universities. If the
institution actually has a campus police force, reviewers should
reconcile the statistical numbers reported on the institution's annual
security report with the statistical numbers listed on UCR reports filed
by the school.

### 3. Local Police

Reviewers should check the institution's communication system with local
law enforcement agencies and determine how the institution discovers
incidents reported to local law enforcement that are not otherwise
reported to a campus security authority. Particularly if the institution
does not have a campus police force, reviewers may want to check and see
if the institution receives local law enforcement police reports or
incident summaries.

During the review, reviewers may want to contact the local law
enforcement agency officer/supervisor in charge of the area(s) for which
crimes are to be reported (on-campus, non-campus building or property,
adjacent public property). Reviewers should ask for any
summaries/reports that the local law enforcement agency may have
regarding the affected areas and time period. Reviewers should compare
the information received from local law enforcement agencies against the
statistical information included in the institution's annual security
report.

Note: If an institution makes a reasonable, good faith effort to obtain
the required statistics, it may rely on information supplied by a local
or state police agency. If such an effort is made, the institution would
not be deemed responsible for the failure of local or state police
agencies to supply the required statistics.

# Chapter IX After the Site Visit

Upon returning from the on-site visit, reviewers should discuss the
findings with the CMT, including the Co-Team Leader (CTL), and determine
the appropriate next steps. These next steps will include preparation of
the program review report, but might also include referral for technical
assistance or development of a corrective action plan. In consultation
with the ACD and CTL, reviewers determine when the program review report
will be issued. In general, reviewers will notify the school, within 15
days of the date that the on-site review ends, when it can expect to
receive the report.

If no administrative action is pending, a program review report is
prepared and is normally sent to the school within approximately 30 to
60 days after the site visit ends. However, if an administrative action
is pending, the ACD/CTL, in consultation with AAAD and OGC may elect
**not** to issue a program review report at all, so as not to prejudice
the case for administrative action. The ACD/CTL may choose to issue a
final program review determination letter in lieu of the program review
report. There is no legal requirement that the Department issue a
program review report.

Prior to issuing any type of report following an expanded review, a copy
of such report must be sent to AAAD and OGC for comment. This will
ensure that the findings and citations are accurate and enforceable,
should the institution choose to contest any asserted liabilities. Any
such report or final determination (like the finding relied upon to
justify administrative action) must contain logical narratives of
observed violations and must include accurate citations and be supported
by relevant documentation.

## A. The Program Review Report

### 1. Report Preparation

The program review report is the official ED notification to the
institution of the findings discovered during the on-site visit. The
report lists the regulatory and statutory findings and establishes a
prima facie case. The report also specifies required corrective actions,
including a time frame for institutional response.

Appendix N provides an example of a program review report, including a
cover letter, institutional review data sheet, and an appendix of
students sampled. Reviewers should be guided by this example. Items to
be included in the report and in supporting documentation are:

**Type of file sample used** Describe the type of file sample and how
the sample was derived. The recommended language is as follows:

> [Example:]{.underline} "A sample of XX student files was selected for
> the review, X each for the 200X-0X and 0X-0X award years. The files
> were selected randomly from a statistical sample of the total
> population receiving Title IV student financial assistance for each
> award year, valid to a 95 percent confidence level with a plus or
> minus five percent confidence interval.

If additional files were selected on a judgmental basis, describe the
number of files, method of selection and purpose of the selection.

The structure for reporting findings is described below.

**Finding** - Describe the statutory or regulatory violation; provide
sufficient detail in order to build a strong case. The report should
describe the regulatory violations in a way that would be clear to a
third-party reader who may have only limited knowledge of Title IV
programs. For example, for a finding of unpaid refunds, do not just
indicate the school failed to pay a certain refund; include each
student\'s start date, withdrawal date, refund amount, and date due.

**Requirement** - Describe what the statute and/or regulations require
and the corrective action to be taken by the institution to return it to
compliance.

**Reference** - List the statutes, regulations, and policy issuances
supporting the requirement. However, **do not cite a policy issuance
alone without a supporting regulation or statute.** Make sure the
document cited is in final form, not a draft policy.

**Harm statement** - Include in the finding a concise statement
identifying the harm to ED or to students that results from the specific
violation. Example, \"The institution\'s failure to make timely refunds
of Title IV loans may contribute to an increase in student defaults and
cause financial harm to the U.S. Department of Education and students.\"

Reviewers should state in the program review report whether the school
must have a CPA review any required file review results, because the
school will have to pay for this. For A-133 schools, however, consistent
with PIP Mailbox Message #191, we [cannot]{.underline} request any
auditor follow-up of program review findings. In addition, the program
review report should notify the school that a follow-up visit may be
scheduled to test or sample the school's file review results.

### 2. Timelines for Issuing the Program Review Report

Program review reports should be reviewed by the CTL and in most cases,
issued **no later than 30 days** after conclusion of the review visit,
or as determined after consultation with the CTL. When the level of the
review is more serious or when the case has been referred to AAAD for an
administrative action, the Area Case Director (ACD) may approve an
extension of an additional 30 days.

Program review reports requiring greater than 60 days should be
discussed with the Case Management Division Director.

Similar timelines also apply to the process of reviewing institutional
responses to the program review report. School requests for extensions
should also be discussed with the CTL/ACD.

## B. Final Program Review Determinations 

PIP 98-02 [PIP Procedures
Memo](http://awaipos01/pipd/Procedures/download.htm) provides guidance
on preparing the Final Program Review Determination letter (FPRD),
including FPRD procedures and models. As with the program review report,
a guiding principle for FPRD preparation is to describe the items
identified at the institution that did not comply with the Department's
regulations in sufficient detail both as to the facts and the legal
requirements to state a prima facie case in the FPRD itself.

The cover letter provides the dates of the review and a summary of the
findings. The structure for reporting findings is the same as for a
program review report.

**Finding** - Describe the statutory or regulatory violation; provide
sufficient detail to build a strong case. The FPRD should describe the
regulatory violations in a way that would be clear to a third-party
reader who may have only limited knowledge of Title IV programs. For
example, for a finding of unpaid refunds do not just indicate the school
failed to pay a certain refund; include each student\'s start date,
withdrawal date, refund amount, and date due. If a large number of
students are involved, this can be done in a chart and included as an
attachment.

Reviewers should document fully in the work-papers, and summarize in the
FPRD, the reasons supporting resolution of certain findings (i.e.,
reasons for not including certain program review report findings in the
FPRD).

**Requirement** - Describe what the statute and/or regulations require
and the corrective action to be taken by the institution to return it to
compliance.

**Reference** - List the statutes, regulations, and policy issuances
supporting the requirement. However, **do not cite a policy issuance
alone without a supporting regulation or statute.** Make sure the
document you use is in its final form, not a draft policy.

**Harm statement** - Include in the finding a concise statement
identifying the harm to ED or to students that results from the specific
violation. Example, \"The institution\'s failure to make timely refunds
of Title IV loans may contribute to an increase in student defaults and
cause financial harm to the U.S. Department of Education and students.\"

# Summary of liabilities - Include a summary of liabilities by finding and by program, with a total for each program. {#summary-of-liabilities---include-a-summary-of-liabilities-by-finding-and-by-program-with-a-total-for-each-program. .TOC-1}

**Payment instructions** -- As necessary, include specific instructions
on the amount of funds due to current loan holders for applicable
students or on funds due to ED or the program accounts. Include
applicable mailing addresses.

However, if the total liability resulting from the review is less than
\$1000, the liability should be asserted in the FPRD, but the reviewer
should not include instructions for payment to ED. Instead, the reviewer
should include a statement that mirrors the language for FADs, as shown
in PIP 97-20, Procedures for Resolving Deficient Audits. The FPRD should
read:

"Since this liability amount is minimal, we will not require repayment
at this time. However, the institution must ensure that it has corrected
its procedures, so this type of finding does not recur. If similar
findings are noted in future program reviews, we will require repayment
of those improper amounts, as well as the amount noted here. In
addition, we may refer the matter to Administrative Actions and Appeals
for a possible adverse administrative action."

This minimum liability only applies to funds owed to ED, not to
students, or lenders/noteholders on behalf of students. See [PIP Mailbox
Message 233](http://awaipos01/pipd/PIP-Messages/pm-233.htm)

**Appeal procedures** - Include detailed information on timelines,
documents that must be submitted, and applicable addresses for mail and
overnight delivery.

Appendix O contains an example of an FPRD.

### 1. Expedited Determination Letter (EDL)

To save time for reviewers and for school staff when reviews uncover
only minor deficiencies, the Expedited Determination Letter (EDL) is
recommended. This combination program review report/FPRD eliminates the
need for ED to generate two separate documents and simplifies the
response process for school officials.

The EDL consists of three parts: a cover letter, an attachment that
describes the findings noted, and an Appendix that lists the students in
the sample. The findings are written just as in a conventional program
review report with a description of the finding, an explanation of the
harm and the regulatory reference, but no required actions. It is an
expedited process because ED does not require a written school response
to the report, and no final determination is issued.

There are two types of EDLs:

**Version A** - The first type is designed to be used when the
liabilities identified are minimal and the school corrects the
problem(s) identified while the reviewers are on-site or shortly
thereafter (before the report is issued). Reviewers can use it for a
school that has isolated, minimal liabilities, and funds are due to a
student or payable against a student's loan. Reviewers could ask the
school to either:

-   make the required payment and notify ED of same; or

-   make the required payment and submit documentation of same.

The school does not have to provide a detailed response to each finding
as is required with the conventional program review report. However, any
final determination that contains a requirement that a school repay
funds must contain appeal language. (PIP Memo 98-02). Since schools are
not necessarily required to submit verifying documents in response to
this type of EDL, reviewers should advise them of the follow-up
accountability requirements, in accordance with the guidance contained
in PIP Mailbox Message #191 dated 3/10/99. [Audit Follow-up of FPRD
Findings](http://awaipos01/pipd/PIP-Messages/pipd-mailbox.htm)

**Version B** - The second type of EDL that reviewers can use is for
schools with isolated problems with no or small liabilities. Version B
can be used if liabilities or potential liabilities identified during a
site visit are cured or the liabilities are paid **while the reviewer is
on site**. Version B cannot be used if funds are owed to students or are
payable (on a loan) on their behalf. Version B is also not appropriate
if the school is directed to take any action resulting in a payment of
liabilities.

Version B of the EDL is used to document the site visit and to make any
errors found a part of the official record. The fact that the
liabilities were identified and promptly cured or repaid should be
included in the EDL. Since no liabilities are assessed in the EDL, do
not include the appeal language.

An example of an EDL is included in Appendix J. Please note that the
contents must be modified to fit the situation.

**Time frame for EDL issuance** - The Expedited Determination Letter
should be reviewed and approved by the ACD/CTL and issued no later than
30 work days, or as determined after consultation with the CTL, after
conclusion of the review visit.

## C. PEPS Data Entry and File Maintenance

### 1. PEPS Data Entry

Reviewers play a vital role in maintaining the integrity of PEPS. Basic
information on entering data into PEPS is found in the PEPS user's
manual. It is important that staff enter program review information into
PEPS at key points in the process: at the conclusion of the on-site
visit, issuance of the review report, issuance of the final program
review determination, and closure of the review. The CMIS module should
also be updated at the time reviewers return from the review to the
office.

### 2. Level of Review Seriousness

The following PEPS codes indicate the five levels of review:

-   0 No regulatory violations

-   1 Moderate deficiencies

-   2 Serious deficiencies

-   3 Very serious deficiencies

-   4 Fraud/abuse: OIG referral/emergency action

### 3. Deficiency Codes

CMO uses deficiency codes for classifying regulatory violations.
Entering deficiency codes into PEPS is vital for tracking and analysis.
Codes may be entered into PEPS as soon as possible after a review, but
no later than issuance of the program review report. Since findings may
change, reviewers must assure that the findings in PEPS match the
findings in the program review report.

At the issuance of the FPRD or EDL, the lead reviewer should ensure that
the deficiency codes and the liability amounts are updated. Should a
school appeal and successfully reduce its liability, the lead reviewer
will be notified by AAAD and should ensure that PEPS deficiency codes
are again updated. Also, revised liability (accounting documents) should
be updated and submitted to Finance.

### 4. File Maintenance

Reviewers should maintain a record of work performed during the program
review. This includes notes of pertinent discussions with school staff,
notes from the entrance and exit conferences, interview notes, work
papers, and information on resolved findings. Please refer to the
section in Chapter III on Documenting Program Review Findings for
additional information. In summary, everything that supports the
conclusions of the review should be maintained in the Case Team's files.

Copies of the program review report and the FPRD should continue to be
submitted to the Document Receipt and Control Center for filing in the
school's file.

## D. Appeals

Although technically not a part of the program review process, the
following information is provided to assist reviewers in understanding
the appeals process. The quality of the work performed and the documents
prepared during a program review are vital to the appeal process, and
reviewers are needed to assist during the entire review process.

Under the Subpart H, General Provisions Regulations, an institution may
file a formal appeal if it disagrees with the monetary liabilities
asserted in a final program review determination (FPRD). To preserve its
appeal rights, the institution must file an appeal within 45 days of its
receipt of the FPRD. Standard language in the FPRD contains instructions
to the institution for filing an appeal. The institution appeals by
submitting a written request for review to the Director of AAAD. The
request must state the basis for the appeal, and include any documents
that the institution may wish to present to support its case.

Upon receipt of the appeal, the AAAD staff member who is handling the
appeal will notify the reviewers, the Co-Team Leaders, and the Area Case
Director that a Subpart H appeal has been received. In most instances,
the AAAD staff member that is handling the appeal will also be the AAAD
liaison to that particular Case Management Team. AAAD will provide a
copy of the appeal to the reviewer who prepared the FPRD and request
that he/she prepare a detailed assessment of the school\'s arguments and
documentation.

These assessments serve as a valuable aid to AAAD and OGC in litigating
administrative appeals. The written assessment must include an analysis
and evaluation of the issues that the institution disputes in its
appeal. The assessment should not be a synopsis or recapitulation of the
institution\'s appeal letter and/or the FPRD. The reviewer must
determine for each finding under appeal, whether the claims or arguments
raised by the institution have merit and satisfactorily resolve, or
reduce, the liabilities associated with the findings. If the
documentation does or does not support the finding, the reviewer must
clearly state the reasons why in the assessment. The written assessment
must reflect the total amount appealed. In general, the written
assessment must be reviewed by the CTL and transmitted to AAAD within 15
days of the date the reviewer received the appeal from AAAD. However,
additional time may be provided depending on work constraints and/or the
complexity of the appeal. The assessment may be submitted to AAAD
electronically, via e-mail, or in hard copy format.

Frequently, an institution may submit documents as part of an appeal
package that, for whatever reason, were not made available to the
reviewer earlier in the program review process. The fact that
documentation could or should have been submitted earlier in the review
process is not a valid reason for failing to prepare an assessment or
failing to evaluate the school\'s arguments and exhibits.

Reviewers may also be asked to answer questions or prepare charts,
especially when OGC and AAAD are preparing briefs and exhibits for
filing with the hearing official.

AAAD must transmit the administrative record of the appeal, including
the request for review and supporting documents, to the Office of
Hearing and Appeals (OHA) within 30 days of receipt of the appeal. If,
after the assessment, it is determined that satisfactory documentation
was submitted with the institution\'s appeal request, and the reviewer
and AAAD staff member agree that the submitted documentation resolves
the appealed liabilities, AAAD will resolve the appeal without
forwarding it to OHA and OGC. However, if contested liabilities still
exist, AAAD will forward the appeal to OHA. The appeal and the
reviewer\'s assessment will also be forwarded to OGC at the same time.

From this point, either a settlement between the institution and the
Department is reached, or the hearing official issues an initial
decision. Either party may appeal such decisions to the Secretary within
30 days of receipt of the hearing official\'s decision. Once an appeal
has been resolved (either by AAAD, settlement, or final decision), the
AAAD staff person will notify the reviewer, the Co-Team Leaders, and the
Area Case Director of the resolution, and will provide the appropriate
documentation to the reviewer. PIP 98-01 provides further guidance on
the Subpart H appeal process. [PIP Procedures
Memo](http://awaipos01/pipd/Procedures/download.htm)

# List of Appendices

Appendix A Program Review Preparation Worksheet

Appendix B Notice of Visit Letter

Appendix C Staff Interview Questions

Appendix D Student Interview Questions

Appendix E Fiscal Review Worksheet

Appendix F Sample Student File Worksheet

Appendix G Satisfactory Academic Progress (SAP) Policy Checklist

Appendix H Default Management Checklist

Appendix I Perkins/NDSL Due Diligence Checklist

Appendix J Sample Expedited Final Program Review Determination Version B

Appendix K PIP Guidance Available on Web Site

Appendix L Consumer Information Resource

Appendix M Program Eligibility

Appendix N Sample Program Review Report

Appendix O Sample Final Program Review Determination

Appendix P Direct Loan Reconciliation

[^1]: [See]{.underline} Section 494 of Higher Education Amendments of
    1998, PL 105-244 \[HEA §498A(1)(a)\]