# Presentation: 684545

## Top 10 Findings in Audits and Program Reviews

- NASFAA
- 2008

## Your Presenters Today Are

Tom Beckerle, Institutional Improvement Specialist, Kansas City

Laura Hall, Institutional Improvement Specialist, Atlanta

- Tom Beckerle, Institutional Improvement Specialist, Kansas City
- Laura Hall, Institutional Improvement Specialist, Atlanta

## External Review Process

- Audits - Annual and OIG
- Program Reviews - ED and GA
- Purpose
- Ensure institutions properly administer Title IV programs
- Fulfill oversight responsibilities for Title IV programs

## Audit Findings: Most Common

- Late Refund/Returns to Title IV Account
- Incorrect Return of Title IV Funds Calculation
- Entrance/Exit Counseling Deficiencies
- Enrollment Report (SSCR) Issues
- Repeat Finding-Failure to Take Corrective Action
- Auditor Opinion Cited in Audit
- Student Credit Balance Deficiencies
- Verification Violations
- Pell Over/Under Payments

**Notes:**
We reviewed our most recent Final Audit Determination letters and concluded the following as the most common audit findings.  We will cover the most common program review findings later in this presentation.  Read slide and tell trainees findings will be covered in more detailed following this slide.

## Maximum timeframe for institution to return unearned funds is 45 days
Applies to program funds and lenders
34 CFR 668.22(j) changed from 30 days per HERA 
Timeliness generally determined by examination of institutional ledgers
Have funds been restored to program account?

- Applies to program funds and lenders
- 34 CFR 668.22(j) changed from 30 days per HERA
- Timeliness generally determined by examination of institutional ledgers
- Have funds been restored to program account?

- Late Refund/Returns to Title IV Account

**Notes:**
Under 34 CFR 668.22 (j), an institution must return the amount of Title IV funds for which it is responsible no later than 45 days after the date of the institution’s determination that the student withdrew.  This applies to returning program funds to the Secretary and to the lenders.  So the date on the canceled check or EFT must show the receipt of these funds no more than 45 days after the date the institution determined the student withdrew.  Reviewers may examine institutional general ledgers, canceled checks (front and back), or other appropriate documentation as determined during the review of the audit to ensure the funds have been restored to the program account.

## Late Return/Refund - Consequences

- School may fail Financial Responsibility
- Financial Responsibility
- School must meet Refund Reserve Standards in 34 CFR 668.173
- Satisfy the requirements for a public institution;
- Be located in a state with a tuition recovery fund and be contributing to that fund; _or_
- Make returns in a timely manner - most schools meet this requirement

**Notes:**
Paying refunds/returns late can be an indicator that a school is not in compliance with the financial responsibility requirements that an institution must have sufficient cash reserves 34 CFR 668.173.  

The Secretary considers that an institution has sufficient cash reserves if it meets one of the following: satisfies the requirements for a public institution [668.171(c) (1)] or is located in a State that has a tuition recovery fund approved by ED and the school contributes to that fund or makes timely returns of unearned Title IV HEA program funds.  Most schools meet the requirement of timely returning unearned funds.  

## Late Return/Refund - Consequences

- Compliance thresholds for making timely returns
- School is not in compliance with Refund Reserve requirements if untimely returns were made for 5% or more of students in an audit or program review student sample

**Notes:**
There are compliance thresholds established in the regulations under 668.173(c) that state an institution does not comply with the refund reserve standard if in an audit (Annual or OIG) or program review (ED or GA) a determination is made that in the audit/review sample the institution did not return unearned Title IV funds within the timeframes for 5% or more of the students.  For purposes of determining this percentage, the samples includes only the students for whom the institution was required to return unearned funds during its most recently completed fiscal year. 

## Late Return/Refund - Consequences

- Student Sample
- Sample includes only students for whom school was required to make a return
- No violation if school is cited for one or two students or less than 5 % of sample

**Notes:**
There is no compliance violation with the reserve standard if the school is cited in the report because it did not return unearned funds in a timely manner for one or two students, or for less than 5% of the students in the sample.  

## Late Return/Refund - Consequences

- Irrevocable letter of credit (LOC)
- Required if school fails 5% compliance threshold and is not a public school or in a state with a tuition recovery fund
- LOC is 25% of the unearned Title IV funds the school was required to return in latest fiscal year

**Notes:**
The SPT must determine if the late refund finding requires a letter of credit.  The LOC is required if the schools fails the 5% compliance threshold and is not a public school or participating in its State tuition recovery fund.

The amount of the LOC required is 25% of the total amount of unearned Title IV funds that the school was required to return during the school’s most recently completed fiscal year.

## Late Return/Refund - Consequences

- If LOC is required and school agrees with finding
- Submit LOC
- If school disagrees with finding, may delay submission of LOC by submitting documentation
- Showing timely returns
- Showing the failure was beyond the school’s control (34 CFR 668.173(e)(2))
- Must be submitted within timeframe for LOC
- If denied, school is given new LOC due date

**Notes:**
If the LOC is required and the school agrees with the finding, the LOC must be submitted no later than 30 days after the institution is required to submit its compliance audit.  This is a self reporting requirement. For example, if the school’s audit is due 6/30, the LOC must be submitted by 7/31.  Otherwise ED could require a more strict LOC requirement of 50% of all Title IV funding received in the most recently completed fiscal year. If this is an audit issued by the Inspector General the 30 days is calculated once the OIG has issued its final audit. For program reviews the 30 days begins once the FPRD is issued.

If the school disagrees with the untimely refund/return finding, it may delay the submission of the LOC if the school submits the appropriate documentation that reflects the refund/return was timely or there were exceptional circumstances beyond the school’s control that caused the school to exceed the compliance threshold.  The school’s disagreement or challenge to the LOC requirement must be submitted within the 30 day timeframe.  Most school’s will include this documentation with its institutional response to the audit or program review.  If ED denies the school’s request for an exception to the LOC requirement, a new LOC due date is provided.  

An LOC is not required if the LOC amount required is less than $5,000 and the institution can demonstrate it has cash reserves of at least $5,000 available at all times.  If not already included in the audit, that documentation must be submitted within the 30 day timeframe.

## Design processes to
Ensure timely communication between offices
Identify official and unofficial withdrawals
FSA Assessments: Managing Funds
Fiscal Management
Monthly Reconciliation Worksheets

- Ensure timely communication between offices
- Identify official and unofficial withdrawals
- FSA Assessments: Managing Funds
- Fiscal Management
- Monthly Reconciliation Worksheets

- Compliance Solutions

**Notes:**
Tom: Add your notes to lead into using FSA Assessments as a compliance Solution.

## FSA Assessments

**Notes:**
What  are they?
Tools to prevent and/or identify compliance issues, and implement Management Enhancements (Action Plans) for problem areas
Where are they?
ifap.ed.gov/Tools For Schools

The Assessments are part of some Tools developed by FSA to help schools prevent and/or identify compliance issues, and implement Management Enhancements for noted problems.

We will talk about Management Enhancements later in this presentation.

## Slide 13

**Notes:**
The Management Enhancement Form/corrective action is important to the success of the FSA Assessments. It allows schools the opportunity to identify enhancements and to follow through on completing the enhancement action. This form can be completed on line and saved to your computer or you can download blank copies as a word document.  

## R2T4 Calculation Not Performed/Documented

- Why not?
- Cash Flow
- Lack of Administrative Capability
- No acceptable justification
- Serious consequences including potential Inspector General criminal investigation

**Notes:**
Another common finding is not performing or documenting an R2T4 calculation.  The reviewer must determine why the calculation was not performed. Was it because the school did not have the cash flow to make the returns? Was it due to an institution staff or system error?  Was there potential fraud involved? 

There is no acceptable justification for not performing R2T4.  In fact, an institution’s failure to calculate and pay required repayments as directed constitutes a serious violation of Federal statutes and regulation.  Such a pervasive failure call the institution’s ability and willingness to act as a fiduciary into serious question and potentially a referral to the Inspector General for a criminal investigation. In some instances of this violation, school have had to perform total file reviews of all students that withdrew, dropped or otherwise experienced a break in attendance to determine the extent of the violation.   

## Compliance Solutions 

- FSA Assessments: Managing Funds
- R2T4 module
- Timely communication between offices
- Use R2T4 Worksheets
- Electronic Web Application
- Paper
- 2007-2008 FSAH, Volume 5, Chapter 2

## Entrance/Exit Counseling Deficiencies

- Seek support from lenders/GAs or ED (Direct Loan Schools)
- Exit counseling material must be mailed to students who did not participate in person within 30 days of learning they did not complete
- Certified mail not required but materials proving information was sent is required

**Notes:**
34 C.F.R. § 682.604(f) states that a school must ensure that initial counseling is conducted with each Federal Stafford loan borrower either in person, by audiovisual presentation, or by interactive electronic means prior to its release of the first disbursement, unless the student borrower has received a prior Federal Stafford loan.

34 C.F.R. § 682.604(g) states that a school must ensure that exit counseling is conducted with each Federal Stafford loan borrower either in person, by audiovisual presentation, or by interactive electronic means.  In each case, the institution must ensure that this counseling takes place shortly before the student borrower ceases at least half time study at the school.  If a student borrower withdraws from school without the school’s prior knowledge or fails to complete an exit counseling session as required, the school must ensure that exit counseling is provided through either interactive electronic means or by mailing written counseling materials to the student borrower at the student borrower’s last known address within 30 days after learning that the borrower has withdrawn from school or failed to complete the exit counseling as required. Certified mail is not required, but schools must have documentation proving the information was sent as required.

There is a lot of assistance available to help institutions comply with this requirement.  Your lenders, GAs, and ED for Direct Loan schools.

## Compliance Solutions

- FSA Assessments: Schools
- Default Prevention & Management
- Process for documenting student completion
- Communication between:
- Registrar, Educational and Financial Aid Offices
- FSA Coach, Module 4
- Loan Counseling Requirements

## Enrollment Reporting (SSCR)

- Use of third-party servicers
- Ensure transmittal of NSLDS roster is synchronized with delivery of school file to servicer
- Failure to return submittal file within 30 days results in an overdue letter - school responsible for timely response to NSLDS
- Enrollment Reporting documentation
- Acknowledgement/Error File is adequate proof
- Retain record of file for audit purposes

**Notes:**
34 C.F.R. § 682.610 requires that a school must review, correct, and send a student status confirmation report (SSCR) form (or other similar status confirmation report- the SSCR Submittal File) within 30 days of its receipt of the SSCR Roster File.  Further, the institution must promptly notify the lender when a recipient's status drops below half time and it does not expect to submit its next enrollment reporting (SSCR) within the next 60 days. 
SSCR data is stored in the NSLDS system and is used to calculate grace periods, repayment schedules, default timeframes, and interest subsidy payments.  Therefore, schools must When the school uses a third party servicers to perform these functions, the school must ensure the transmittal of the NSLDS roster is synchronized with the delivery of the school file to the servicer.  When the submittal file is not returned in 30 days an overdue letter is sent to the school.  Even if the school uses a third party servicer, it is still responsible for the timely response to NSLDS.
Documentation of the required submission and contacts is necessary to provide for a clear audit trail. Using the Acknowledgement/Error file is adequate proof of documentation.  Just make sure you retain a copy of the file for audit purposes.  

## Enrollment Reporting (SSCR)

- Use proper status code: A, D, F, G, H, L, W, X
- Graduated student reported as G _not_ L or W
- Graduated effective date- date student completed course requirements, _not_ date diploma/degree presented
- Summer break–do not report students who intend to return in fall as W (withdrawn)
- Student who fails to return must be reported as W within 60 days of fall term start (effective date is last date of attendance)

**Notes:**
Use the proper status codes when reporting; e.g. your students that graduate must be reported as a “G” not a “W” (withdrawn)

When reporting the graduated effective date, report the date the student completed the course requirements, not the date the diploma or degree is presented to the student.

A summer break is not counted as the student withdrawing or dropping if the student intends to return in the fall.  However, if the student does not return in the fall, the student must be reported as withdrawn within 60 days of the fall term start date, however, the effective date of withdrawal is the last date of attendance.

## Compliance Solutions

- Understand the different status codes
- Use the correct status code
- Keep good enrollment records
- Return report by due date
- Maintain adequate number of personnel
- FSA Assessments
- Management Enhancement Worksheet

## Repeat Finding-Failure to Take Corrective Action 

- Indicates Lack of Administrative Capability
- Corrective Action Plan (CAP) should have indicated corrective steps taken
- What procedures are in place to ensure CAP is carried out?

**Notes:**
When an auditor identifies a specific finding as a repeat finding or the institution failed to take corrective action on a prior audit finding, it can be a clear indication of Lack of Administrative Capability.  If a finding is determined to be systemic or repetitive in nature that places or may continue to place Federal funds at risk, or cause harm to the students, a referral for an administrative action (L, S, T, or F) can be made.  Further, if repeat findings are significant enough, the institution may be considered to have a past performance issue and therefore not meet financial responsibility requirements. [668.174(a)(4)]

Schools must ensure that the corrective action presented previously to ED is taken and should establish procedures to ensure all items presented in a corrective action plan are carried out.

## Compliance Solutions

- Follow up from prior audit
- Address Repeat Findings
- Accountability
- Compliance with PPA and Accurate ECAR
- Corrective Action Plans
- Make adjustments to improve process
- Keep checks and balances in place

## Auditor’s Opinion Cited in Audit

- Attestations
- Areas of concern in financial statements
- Areas of concern in compliance audit
- For A-133 schools, opinion could be on anything the auditor is reviewing
- Not limited to Title IV issues

## Compliance Solutions

- Assessment of _Entire Process_
- Design a plan of action – Institutional
- Have internal controls in place
- On going checks and balances
- Training
- FSA Coach, 9 modules, IFAP website
- FISAP: Web based training, IFAP website
- Fundamentals of Title IV

## Student Credit Balance Deficiencies

- Credit balance must be eliminated within 14 days after balance occurred (34 CFR 668.164(e))
- If before 1st day of classes of payment period, 14 days from start of payment period
- ED rules cover only *Title IV *credit balances
- Credit balances that result from retroactive withdrawals are still subject to rules

**Notes:**
34CFR668.164(e) Federal regulations require that whenever an institution disburses Title IV program funds by crediting a student’s account and the total amount of all Title IV funds credited exceeds the amount of tuition and fees assessed the student, the institution must pay the resulting credit balance no later than 14 days after the balance has occurred.  The only exception is if a student has authorized the school to retain a credit balance in order to assist the student in managing those funds for the remainder of the academic year.

These regulations only pertain to Title IV credit balances. If a student ceases to be enrolled, the school is responsible for returning credit balances to the student or lender (which ever appropriate).  If a credit balance results from a retroactive withdrawal, these requirements still apply.

## Compliance Solutions

- FSA Assessments: Managing Funds
- Fiscal Management
- Process in place to know when:
- A credit balance is created
- If authorized to retain funds, is authorization in file
-  Tracking systems to know:
- Student attendance
- Number of days remaining before noncompliant

## Verification Violations

- Verification requirements are well known
- Errors generally the result of an oversight
- Verification regulations are specific as to untaxed income that must be verified
- SS benefits, IRA/Keogh deductions, foreign income exclusion, EIC, interest on tax-free bonds

**Notes:**
Because students sometimes make errors on their FAFSA information, schools must have procedures for verifying the reported information.  [34CFR 668.51-.61]  Verification requirements are very well known and the errors identified are generally the result of an oversight.  Schools must secure additional documentation to ensure the accuracy of the information provided on: household size, number in college, adjusted gross income, U.S. income taxes paid, and untaxed income.

Some of the errors identified have been on not properly verifying untaxed income, which is required.  These include: Social Security benefits, IRA/Keogh deductions, foreign income exclusion, Earned Income Credit, interest on tax-free bonds, child support.

## Compliance Solutions

- Use Verification Worksheets
- School developed, or
- Department of Education’s Worksheets
- FSA Assessments: Students
- FSA Verification
- Three Activities: 1, 2 and 4
- Helpful tools: ISIR Comparison Chart and IRS forms

## Pell Grant Over/Under Payment

- Generally the result of improper determination of enrollment status
- Example:  Student was full-time in fall, drops to half-time in spring, but receives a full-time disbursement for the spring term

**Notes:**
Pell Grant over or under payments can be the result of the school using the wrong EFC, an invalid student aid report or using the wrong enrollment status.  Example: Student was full-time in fall and then drops to half time in the spring, but receives a full time disbursement for the spring term.  School needs to have safeguards in place to ensure proper payments to students.  Regardless of the error over and under payment, it must be resolved.

Under 34CFR 690.83(d), if an institution demonstrates to the satisfaction of the Secretary that the institution has correctly provided Federal Pell Grant funds to it students, but it has not received credit or payment for these grants, the institution may receive payment or a reduction in accountability for those grants.  The institution must demonstrate that it qualifies for a credit or payment by means of a finding contained in an audit report of an award year that was the first audit of that award year and proof that the audit was submitted timely.

## Compliance Solutions

- Use correct enrollment status
- Use correct Pell Formula
- Use correct Pell Payment Schedule
- If program is offered in modules or compressed courses, make sure student began attendance in all classes
- Prorate when needed

## Other Audit Findings-High Dollar

- Loan Discharges Paid due to Closed Additional Location
- FISAP Reporting Errors
- 90/10 Requirement Not Met – For Profit Schools
- FFEL Not Prorated
- Overaward – Financial Need Exceeded
- SAP Requirement Not Met
- Audit Report Not Submitted – Closed School

**Notes:**
Loan Discharges Paid due to Closed Additional Location-If closed school loan discharges are paid to students because an additional location closed, the main location that remained open will be assessed a liability for the funds paid by ED.                                                                                                     
FISAP Reporting Errors- We continue to see errors made on the income grid data provided on the school FISAP, special care must be taken to ensure the accuracy of the data reported.                                                                     
90/10 Requirement Not Met – For Profit Schools-Fortunately not frequently violated however, when this is identified, the school can incur extremely high liabilities and lose its eligibility to participate in  Title IV programs.                                                    
FFEL Not Prorated – Institutions continue to not appropriately prorated a student’s loan when the student in in attendance for less than full time.                                                                                
Overaward – Financial Need Exceeded -                                                                                
SAP Requirement Not Met – Generally the school has not consistently applied the SAP standards to all students within categories of students (e.g., full-time, part-time, undergraduate and graduate) or its policy is not adequately developed. [34 CFR 668.16(e)]
Audit Report Not Submitted – Closed School – anytime a close-out audit is not received from an institution that has closed, the institution will be assessed a liability based on all the unaudited funds received.  That liability is established with our Finance Office and referred to the Department of Justice if not paid.

## Audit – Finding Incorrect

- Ask auditor which regulation or law has been violated/discuss a reasonable resolution
- Indicate in CAP reasons why the exception is erroneous
- Necessary for audit resolution process
- Cite regulation or law in support of your assertion
- Explain in detail why the exception is incorrect

**Notes:**
If an institution feels the finding the auditor has cited is incorrect, it should ask the auditor to identify the exact regulation or law that has been violated and then discuss a reasonable resolution.  The institution should then indicate in its Corrective Action Plan the reasons it disagrees with the auditor’s conclusions and provide a detailed reason(s) the auditor’s exception is incorrect.  

This information will be reviewed along with the auditor’s finding during the audit resolution process performed by ED.  Be sure to include all regulatory or statutory citations that apply in support of your assertion.  

## Program Review: Common Findings

- Verification Violations
- Late Refund or Incorrect R2T4 Calculation
- Student Credit Balance Deficiencies
- Lack of Administrative Capability
- Inconsistent/Missing Information in Student File
- Account Records Inadequate or Not Reconciled
- Leave of Absence Deficiencies
- Improper Disbursement-Pell Disbursed Before Midpoint
- Independent Student Status Not Documented
- Not Meeting Campus Crime/Clery Act Requirements

**Notes:**
Program Review, Most common findings.

The first three common findings were also identified in the top Audit findings.  So in this section we’ll cover the rest, which include Lack of Administrative Capability, Inconsistent or Missing Information in Student’s File, Account Records Inadequate or Not Reconciled, Leave of Absence Deficiencies, Improper Pell Disbursement, Independent Status Not Documented, and School Failed to Meet Campus Crime/Clery Act Requirements.

## Lack of Administrative Capability

- Indicates numerous/significant findings
- Most common areas of noncompliance involve
- Separation of duties
- Adequate checks and balances
- System of internal controls
- Adequate staffing
- Satisfactory Academic Progress

**Notes:**
The administrative capability regulations in 34 CFR 668.16 address numerous areas in which a school must demonstrate that it is capable of administering the Title IV programs.  The list of administrative responsibilities is quite long and includes electronic processes, consistency of information, adequate staffing, checks and balances, separation of duties, sharing student information with NSLDS, Direct Loan Servicing, and guarantors, satisfactory academic progress, tracking withdrawal rates, and cohort default rates.  

When a finding of lack of administrative capability is cited, it most often is the result of the school failing to comply with one or more of the following: separation of duties, adequate checks and balances, system of internal controls, adequate staffing, or satisfactory academic progress 

## Hire and retain adequate number of experienced personnel
Establish a process of timely communication between all relevant offices
Ensure that no one person or office has the ability to award and disburse aid
Electronic systems can make this more difficult

- Establish a process of timely communication between all relevant offices
- Ensure that no one person or office has the ability to award *and* disburse aid
- Electronic systems can make this more difficult

- Compliance Solutions

**Notes:**
Schools are required to have capable individuals in the financial aid office. A capable individual is one who has successfully completed FSA program training provided by or approved by the Department and has previous experience and documented success in FSA program administration. Too often we see people hired as financial aid administrators who have little or no experience in Title IV programs, or in the types of programs offered at that school.  One time I received a phone call from a woman who identified herself as the newly-hired financial aid director of XYZ school, and she wanted to know where she could obtain copies of ‘IZERS’ because someone told her she needed those to get government money for the school’s students.  Needless to say, by hiring as the financial aid officer someone who didn’t know what an ISIR is, this school was not meeting the requirements of administrative capability.

Another important aspect of administrative capability is to establish an internal process whereby all offices at the school are sharing relevant information about students.  Financial aid doesn’t exist in a vacuum, and we hold the school as a whole responsible for the administration of Title IV aid, not just the financial aid office.  For instance, if the student is receiving veteran’s benefits out of one office and Title IV aid out of another, the school must have procedures in place for information to be shared.  So it’s very important to have open and timely communication between the various offices.  

Failure to ensure a separation of duties is another area where we continue to see problems.  Sometimes schools think that ‘disbursing aid’ means drawing down the funds from GAPS or transferring the funds from the federal account to the school’s operating account.  So they designate one person to fill that duty and then allow the financial aid office to create the award and post the funds to the student’s account.  This is a clear violation of the separation of duties requirement.  And while automation had enhanced the efficiency of financial aid operations, it has also blurred the lines between awarding and disbursing.  However, a school must still develop internal controls to prevent one individual or office from having the authority, or the ability, to perform both functions, even in a highly automated system.  

## SAP
Follow your policy!
Document each student’s file
Internal controls
Report reliable information
Maintain effective and efficient operations
Ensure compliance with applicable laws and regulations

- Follow your policy!
- Document each student’s file
- Internal controls
- Report reliable information
- Maintain effective and efficient operations
- Ensure compliance with applicable laws and regulations

- Compliance Solutions

**Notes:**
While schools are provided a lot of flexibility in designing their SAP policies, we do expect those policies to be followed.  We don’t very often cite the school for having an inadequate or incorrect policy; instead, we cite the school’s failure to 1) apply its own policies as they are written;  2) to determine and document whether or not the students are meeting the SAP minimum requirements, or 3) to withhold aid from students who failed to meet the standards.  So be sure to follow your policy, document your SAP determinations, and ensure that students are eligible to receive their disbursements.

Internal controls is a very wide-reaching requirement that basically says that you have policies, procedures, and operations in place that will ensure compliance with all the rules and regulations.  Having those internal controls in place will ensure that any mistakes that are made can be attributed to human error rather than a failure to maintain controls in the first place. 

## Compliance Solutions

- FSA Assessments: Schools
- Automation
- Default Prevention & Management
- FSA Assessments: Students
- Satisfactory Academic Progress

**Notes:**
The FSA Assessments relating to administrative capability are Automation and Default Prevention & Management, located under the ‘School’s module, and SAP, located under the “Student’s’ module.

## Slide 38

**Notes:**
Activity #1 under Administrative Capability provides an opportunity to assess all the areas for which your institution is responsible and includes some very good suggestions for how you can ensure compliance.

## Inconsistent Information in Student’s File

- Resolve all conflicting information prior to disbursing aid - 34 CFR 668.16(f)
- Review all subsequent ISIR transactions
- Discrepant tax data – school must know:
- Whether person was required to file
- Correct filing status
- An individual may not be claimed as an exemption by more than one person

**Notes:**
Resolving conflicting information is also one of the aspects of administrative capability.  Schools must have a system in place to identify and resolve all discrepancies with any information received by any office at the school as it relates to Title IV eligibility.  And remember that conflicting information must always be resolved before disbursing aid, whether or not the student is selected for verification.  

Automation has also, I think in many cases, resulted in more ISIRs being created.  Students can go out to Corrections on Web and input their own changes totally independent of any school activities.  While this may result in additional work for the financial aid office, it does not relieve you of your responsibility to review every ISIR you receive for a student, even if you’ve previously verified a transaction, and resolve any discrepancies in the data.

You are also required to have a fundamental understanding of basic tax issues that might affect the needs analysis calculation, such as whether or not the applicant was required to file a tax return based on income, the tax filing status that should have been used, and the fact that an individual cannot be claimed as an exemption by more than one person.  If you discover issues in any of these areas, as well as any other discrepant tax data, you are required to resolve the discrepancy prior to disbursing Title IV aid.

## If school collects W-2s, tax schedules, tax returns etc. for those not selected for verification, it is responsible for all information

- Inconsistent Information in Student’s File

**Notes:**
Another issue that comes up is that some schools are collecting tax returns or other income documentation for all students, perhaps as part of the FAFSA application process or as a head-start if the student is later selected for verification.  It’s important to know that if you do this, you are responsible for reviewing all the data on the tax return and to resolve any discrepancies, even if the student is never selected for verification.  So if you retain those documents, make sure you have a system in place to document that you reviewed them for accuracy.   

## Compliance Solutions

- Pay attention to student files – if you see differences, follow up
- Perform your own ‘review’ of student files
- FSA Assessments: Verification
- Activity 4: Conflicting Information

**Notes:**
Inconsistent information in student files is in most cases the cause of either not paying attention to what’s in a student’s file, or failing to review and follow up on information from all relevant offices.  One suggestion would be to ask someone who is knowledgeable about financial aid but who doesn’t normally deal with student files to do an internal ‘review’ of a random sample of student records.  Ask this person to review the files as if he or she were an auditor or program reviewer.  It’s amazing how  a fresh pair of eyes can identify issues that might be missed by someone who deals with student files on a daily basis.

The FSA Assessment that would prove most helpful in this area is Verification, Activity 4: Conflicting information.

## Account Records Inadequate or Not Reconciled

- Maintain all student eligibility documents
- Maintain financial records that reflect all program transactions
- Account for the receipt and expenditures of all Title IV funds

**Notes:**
Under the Recordkeeping regulations in 34 CFR 668.24, institutions are required to maintain all student eligibility documents used in the awarding process, to maintain financial transaction records, and to be able to account for all financial aid funds received and to whom those funds were disbursed. Program and fiscal records must demonstrate the school is capable of meeting the administrative and fiscal requirements of participating in the FSA programs.  The records must demonstrate that FSA program funds were administered correctly and show a clear audit trail for the receipt and expenditure of program funds.  

## Compliance Solutions

- Reconcile monthly GAPS, general ledgers, COD, NSLDS, bank statements
- Assign responsibility for this process and follow up to ensure it is being done
- Develop procedures to ensure cash is returned timely
- FSA Assessments: Fiscal Management
- Reconciliation Worksheets

**Notes:**
Just as we would not open a checking account and then never reconcile our check registers with our bank statements, how much more important is it to reconcile the often very large amounts of federal funds received by schools on a monthly basis.  Institutions need to reconcile all the different systems to ensure they correctly reported all expenditures and, when necessary, to return funds timely.  If you don’t already have a staff member assigned to perform monthly reconciliation, doing so should be a top priority.

The FSA Assessments, Fiscal Management module, include several reconciliation worksheets that could prove helpful when developing a reconciliation process. 

## Slide 44

**Notes:**
Here’s a sample of some of the reconciliation worksheets available under this Assessments module.

## Leave of Absence Deficiencies

- LOA vs. withdrawal - 34 CFR 668.22(d)
- School must have a formal policy
- Written and publicized
- Students must provide reason: written, signed, and dated request
- Must be a reasonable expectation that student will return

**Notes:**
If a student leaves the program prior to the end of the payment period, the student is considered to have withdrawn and a Return of Title IV funds calculation must be performed unless the student was on an approved leave of absence that meets the requirements of 34 CFR 668.22(d).  The regulations include 8 requirements, some of which are that the policy must be written and publicized, the student must request the LOA in writing and include the reason for the request, and there must be a reasonable expectation that the student will return from the LOA as scheduled.  Some of the reasons this finding has occurred include:
school doesn’t have an approved LOA policy and failed to perform R2T4;
 the policy was approved but the student didn’t return as scheduled and the school failed to perform R2T4;
 the school placed the student on an LOA without a written request from the student  

## Compare your policy with the regulations; if it doesn’t meet the conditions, you must perform R2T4
If you have an approved policy, develop a process to track the scheduled return date
Document the beginning and ending dates of the LOA

- If you have an approved policy, develop a process to track the scheduled return date
- Document the beginning and ending dates of the LOA

- Compliance Solutions

## Improper Disbursement-PELL Disbursed Before Midpoint

- School must have written procedures to ensure students are paid the correct PELL award in each payment period
- Schools may not disburse more than 50% of annual award prior to student completing 50% of the academic year

**Notes:**
This finding can encompass different situations, to include the correct calculation of a Pell disbursement for each payment period, ensuring the student has completed the prior payment period before disbursing aid, and the prohibition against disbursing more than 50% of the award prior to the student completing 50% of the weeks of instructional time in the program’s academic year.

## Track each student
If students progress at different rates, ensure each student is eligible for disbursement
FSA Assessments: Fiscal Management
Activity 4: Disbursing Aid File Review Worksheet

- If students progress at different rates, ensure each student is eligible for disbursement
- FSA Assessments: Fiscal Management
- Activity 4: Disbursing Aid File Review Worksheet

- Compliance Solutions

**Notes:**
The most important thing you can do to ensure you don’t have this finding is to develop and follow correct disbursement rules for each student.  This is especially important if you have programs wherein students progress at different rates and therefore are completing payment periods at different times.  The FSA Assessments includes excellent worksheets you can use to perform an internal review of your disbursement process to ensure you are in compliance.

## Slide 49

**Notes:**
Here’s some of the info provided on the Disbursement Review Worksheet.

## Independent Student Status Not Documented

- School must document reason for dependency override
- Case by case based on unusual circumstances
- Examples that are *not *unusual
- Parents refusing to pay or unwilling to provide verification documentation
- Parents not claiming student for IRS
- Student demonstrates self sufficiency

**Notes:**
Dependency override guidance has been around for a long time, yet this finding remains in the top ten for program reviews.  The most common reasons for this finding include 1) failure to document the reason for the dependency override; 2) unacceptable reason for performing the dependency override, specifically, that the student is self-sufficient; and 3) school carrying over a dependency override from one year to the next without obtaining documentation each year to support that the unusual condition still exists.

## Develop written procedures/possible unusual circumstances for a D/O
Assign a committee to make decisions rather than one individual
Ensure your process does not allow for ‘mass’ D/O based on similar situations
Large employer closed in your area
Many students from the same country
Document, document, document!

- Assign a committee to make decisions rather than one individual
- Ensure your process does not allow for ‘mass’ D/O based on similar situations
- Large employer closed in your area
- Many students from the same country
- Document, document, document!

- Compliance Solutions

**Notes:**
If you perform dependency overrides, you should have written procedures that outline the possible unusual circumstances for which you might perform the override, the documentation you will collect, and who will be responsible for reviewing the supporting documentation and making the decision.  It’s a good idea to have a committee make the decision rather than one individual, as this will provide a more balanced approach to the process.  Also, you’ll want to avoid the appearance of making ‘mass’ dependency overrides based on similar situations, such as automatically performing the overrides because the parents for a certain group of students generally reside in another country.  The important things to remember are case by case and document, document, document.

## Not Meeting Campus Crime/ Clery Act Requirements

- All schools required to provide annual Campus Security Report to students and employees
-  Campus crime policies
- 3 most recent years of statistics
- Statistics from campus security authority or local police agencies
- occurrences on campus, in or on non-campus property, or public property

**Notes:**
I think we’re all pretty familiar with the requirements of the Clery Act and we’re certainly aware of the recent violent crimes that have been committed on college campuses recently.  So it’s more important than ever for you school to meet the requirements of the Clery Act.  Some of the issues we’ve found in Program Reviews are 1) the statistics were reported as required but the school failed to develop and distribute campus security policies and procedures to current students and staff and, if requested, to prospective students; and 2) the school failed to report statistics or reported incorrect statistics

## The Handbook for Campus Crime Reporting

www.ed.gov/admins/lead/safety/campus.html

Regulations: 34 CFR Section 668.46

- _[www.ed.gov/admins/lead/safety/campus.html](http://www.ed.gov/admins/lead/safety/campus.html)_
- Regulations: 34 CFR Section 668.46

- Compliance Solutions

**Notes:**
If you’re having trouble developing a campus crime report or in understanding the definition of your campus or which crimes need to be tracked and reported, you can download a copy of the Handbook for Campus Crime Reporting from the website listed on this slide.

## Other PR Findings-High Dollar

- Ineligible Program/ Location -Approval Requirements Not Met
- Loan Discharge Paid (CL, FC, Refund)
- Ability to Benefit Violations
- SAP Policy Not Adequately Developed or Monitored

## PR -Finding Incorrect

- Ask program reviewer which law or regulation has been violated/discuss a reasonable solution
- Indicate in Program Review Response why finding is erroneous
- Final Program Review Determination will inform school of ED’s decision – Appeal Rights

## Questions??