# Presentation: 659449

## <date/time>

## Session 19

***Cash Management Overview ***
***A - Z***

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##   CASH MANAGEMENT       	   PURPOSES

**Promote Sound Cash Management**
**Minimize Costs to Federal Government**
**Minimize (Loan) Costs to Student**

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##        SUBPART KCASH MANAGEMENT 34 CFR 668.161 - 167

- For Title IV HEA Programs,
-    _**the Institution**_ has to:
- 	**Request**
- 	**Maintain**            **Funds**
- 	**Manage  **
- 	**Disburse**

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## REQUESTING FUNDS

_**Secretary has Sole Discretion**_
- 	Payment Methods
- Advance
- Reimbursement
- Just-in-Time
- Cash Monitoring

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##  ADVANCE PAYMENT 

_**Institution requests**_ funds from Secretary
- For amount needed _**immediately**_ for disbursements made or to be made
_**Secretary initiates**__ __**EFT**_
_**School disburses within 3 business days**_

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## JUST-IN-TIME      PAYMENT

- Institution electronically transmits program award information _**for each student**_
- Date & Amount of Disbursement
_**EFT**_ on or before that date
- Disbursement based on information _**at time of record transmission to Secretary**_
- Institution reports** **_**adjustments**_

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##  REIMBURSEMENT 

_**Disbursements made first**__ __**by institution**_
- Credit to student’s account, or
- Payment to student with institutional funds
_**Request**_ for funds from the Secretary
- Identifies students
- Has _**documentation**_ showing eligibility and that student has been paid

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##   CASH MONITORING          	   PAYMENT

_**Disbursements made first by institution**_
_**Institution**_** **
- requests amount of funds needed to cover those disbursements, or
- seeks reimbursement , but
_**Secretary may**__ __**modify documentation requirements and review procedures**_

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##    BANK OR  INVESTMENT            ACCOUNT

**Federally insured**, or
**Secured by collateral**
**Identify that Title IV funds are in account**
- “Federal Funds” in name, or
- Notify Bank or I.A. and retain record, and
-    file UCC-1 and maintain copy (except for a public institution)

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## SEPARATE BANK      ACCOUNT

_**Secretary will require one**__, __**if he determines**_
_**that**__ _**:**
- The Institution failed to comply with –
- Cash Management rules,
- Record keeping / Reporting, or
- Applicable program regulations

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## INTEREST-BEARING  OR INVESTMENT       ACCOUNT

_**Perkins Fund **_§674.8(a)
_**Direct Loan, Pell, FSEOG, & FWS**__ __**program funds**_, unless –
- Institution drew down _< $3 million_ in prior and current award year,
- Institution will not earn _> $250_, or
- Institution uses _Just-In-Time_ method
- Funds in an Investment Account must be in _**low risk, income producing  securities**_

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##    ACCOUNTING & INTERNAL CONTROL    SYSTEMS AND FINANCIAL RECORDS

**Identify Cash Balances** (as if in separate accounts)
**Identify Earnings**
**Financial Records** per §668.24
- Reflect each Title IV program transaction
- General ledger control accounts & related subsidiary accounts

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##   EXCESS CASH

- Any amount not disbursed by end of the
-     _**3**__**rd**__** business day**_ (**except for Perkins**)
_**Institution may**_ maintain excess cash if
- In previous award year, the excess cash was:
-  (_**for peak enrollments**_)
_**< 3%**_ of its total prior year drawdowns
-  (_**for other periods**_)
_**< 1%**_ of its total prior year drawdowns, and
- The  excess cash is disbursed _**within 7 days**_

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## DISBURSING FUNDS

_**Funds from ED**_, _**Lender**_, or _**Institution**_
_**Credit**_ the student’s account
- If institution credits account early with _**institutional funds**_, the disbursement is considered to be made on the _**10**__**th**__** day before**_, or _**30**__**th**__** day after**_.
_**Pay**_ student _**directly**_ by
- Releasing check from lender
- Mailing institutional check
- Notifying student that check is available
- EFT to student’s bank
- Cash (with signed receipt

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##         CREDITING STUDENT’S ACCOUNT

_**Without authorization**_
- Current tuition and fees
- Current room & board charges
_**With authorization**_
- Additional current (educational) charges
- Prior year charges (<$100 or amount that does not prevent payment of current charges)

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##  CREDIT BALANCES

- Occur when credited _**Title IV funds**_ exceed authorized institutional charges
- Pay _**as soon as possible**_
- No later than
_**14 days**_ after balance occurs, or
_**14 days**_ after first day of class

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##           LATE DISBURSEMENTS

- Ineligible students
_**FFEL and DL**_ – no longer 1⁄2 time
_**Pell, SEOG, & Perkins**_ – no longer enrolled
- Qualify if, before the student was ineligible,
- (**Except for** **PLUS** **loans**) SAR/ISIR with official EFC processed &
_**FFEL & DL**_ – loan certified / originated
_**Perkins & FSEOG**_ – made the award

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## 	    MAKING LATE    	 DISBURSEMENTS

_**Student withdraws**_ – _**must**_** **make required post-withdrawal disbursement_** **_
_**Student completes**_** – **_**must**_ credit, pay, or offer the amount the student was eligible for while enrolled
- For _**FFEL and DL**_, where student < 1⁄2 time, **-** _**may**_ disburse for costs incurred while student was eligible _  _

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##        LIMITATIONS

_**Generally**_ must be _**within 120 days**_ of
- Date institution determined student withdrew
- Date the student otherwise became ineligible
_**Exception**_, with the approval of the Secretary,
- May make _**after 120 days**_ if it was not student’s fault
_**FFEL / DL**_
- No 2nd late disbursements, unless student completed
- 	No late disbursements for 1st yr, 1st time students, unless 30 days completed

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##       NOTICES & AUTHORIZATIONS

_**Before disbursement**_,
-  Amount, how, and when to be disbursed
-  Amounts Subsidized and Unsubsidized
_**When crediting account with loan funds**_
- Date and amount of disbursement
- Student’s right to cancel loan
- The procedures and timeframe for canceling
_**Notice**_ must be sent in writing
-  No earlier than _**30 days before**_, and
-  Not later than _**30 days after**_
-     crediting the account

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##             STUDENT’S  NOTIFICATION RE:      CANCELLATION

_**Institution must**_ return loan proceeds/cancel loan if it receives a cancellation request
- Within _**14 days**_ of date institution sent notice regarding student’s right to cancel
- By the _**1**__**st**__** day of the payment period**_ if institutional notice is sent more than 14 days prior to 1st day of the payment period
_**Institution**__ __**may**_** **return loan proceeds/cancel loan if student requests cancellation after that
_**Institution must**_ inform the student of the outcome

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##        STUDENT AUTHORIZATIONS

_**Student may**_ authorize the institution to
- Disburse funds to student’s bank account
- Pay for charges other than tuition & fees, and room & board
- Hold cash balances
_**Student may**_ give authorization for entire time
_**Student’s modification of authorization**_ effective on date institution receives such notice

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## AUTHORIZATIONS        (CONTINUED)

_**Institution**_
_**May not**_ require or coerce the student to give one
_**Must**_ allow the student to cancel or modify it
_**Must**_ explain how it will carry out the activity
_**May not**_ use funds to pay for “other” charges incurred after the student cancels an authorization to pay for such charges
_**Must**_ pay the student _**as soon as possible**_, but no later than _**14 days**_ after the student cancels an authorization to hold funds

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##       HOLDING       CASH BALANCES

_**Institution must**_
- Identify amount of funds in a subsidiary ledger account
- Maintain cash in its bank account = the amount of funds it is holding for the student
- Pay loan funds by the end of the loan period and pay other funds by the end of the last payment period in the award year

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##                  REQUESTS TO THE            LENDER

- (_**EFT or Master Check**_), no earlier than
- 27 days after 1st day of classes
- 13 days before the first day of classes
- (_**Funds by check to borrower**_)
- 1st day of classes
- 30 days before the 1st day of classes
- (_**PLUS**_)
- EFT or Master Check - 13 days before the first day of classes
- Funds by check to the borrower – 30 days before the first day of classes

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## RETURNING FUNDS 

**If** **$** **not disbursed**
- w/n 3 business days (EFT / Master Check) or w/n 30 days, if check payable to borrower or
- w/n 10 extra days for clock hour completion or
- w/n 10 extra days to become eligible or
- w/n 30 extra days for reimbursement,
**Then, institution must return $** promptly, but within another 10 days
**But, institution can disburse $** within above time frame if it determines that the student is eligible

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##            REIMBURSEMENT

**Secretary must** approve disbursement
- If prohibited, **school may not** certify
**School must** submit documentation
**Secretary may**
- prohibit endorsement of Master Check or borrowers check
- require separate bank account for EFT funds
- Prohibit school from certifying loan application
- If school in only in the FFELP, same restrictions possible
- If school is on Cash Monitoring, ditto.

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## Common Origination and Disbursement

**COD supports cash management compliance**

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## Overview of COD

- Redefines aid origination and disbursement processes for Pell Grants and Direct Loans, and provides optional common reporting opportunities for campus-based programs
- Integrates a common process with a system designed to support origination, ***disbursement,*** and reporting
- Increases accountability and program integrity

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## Funding in COD

- Funds Delivery
- Schools can draw down in GAPS
-    the cash  they will need to disburse
-    within the next 3 business days.
- Schools can choose to have COD initiate drawdowns on the school’s behalf based on accepted actual disbursement records.

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## Funding in COD

- Advance Payment -- Pell Program
- Initial CFL created in Spring
- Schools cannot draw cash in GAPS that exceeds their CFL.
- Schools submit disbursement records to COD that adjusts CFL.
- CFL level in  GAPS is not increased until initial CFL has been exceeded.

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## Funding in COD

- Advance Payment Method – Direct Loan
- Initial CFL created at Beginning of Program Year (Feb.)
- CFL increases as a school submits disbursement records to COD.
- Schools draw down their current cash needs in GAPS.

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## Funding in COD 

- Just in Time/Pushed Cash Method
- Funding driven by actual disbursement records
- “Actual” = 7 days in advance
- Funded Disbursement Listing (FDL) is Generated by COD (under development for Pell)
- Cash sent electronically to school’s bank account.

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## Funding in COD

- Funds are available based on actual disbursement records
- Records are accepted 30 days out for Pell
- CFL is increased 7 days out

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## Funding in COD

- Heightened Cash Monitoring and 	Reimbursement Schools
- Must pay students in advance
- Disbursement records accepted on or after disbursement date

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## Cash Management Requirements

- 30-Day Reporting Requirement
- 	-685.301(d) Direct Loan
- 	-685.83 Pell (and annual deadline notice)
- 3-Day Cash Rule
- 	-668.162(b)
- Monthly Reconciliation
- 	-685.102(b) Direct Loan

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## Closeout

- Direct Loan
- 2001-02 = 12/31/02
- 2002-03 = 7/31/04
- Pell Program
- 2001-02 = 9/30/02
- 2002-03 = 9/30/03
- Extended Processing
- Borrower Based AY (DL)
- Administrative Relief
- Will accommodate new regulations

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## COD Cash Management Tools

- COD Web Pages
- Provide up to date information about funds drawn by school
- Allow for easy comparison of accepted student level disbursement records to funds
- Allow easy view of Current Funding Level
- Show GAPS activity
- Provide for self-assessment of cash management compliance

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## COD Cash Management Tools

- Aging of Drawdowns
- Each drawdown is aged to see how long it takes to “substantiate” the draw
- Lets a school know at any point how much funds have not been substantiated
- Funds are available based on actual disbursement records
- Records are accepted 30 days out
- CFL is increased 7 days out

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## COD Cash Management Tools

- Customer Service assistance
- Primary representative for each School/Servicer
- Performs outreach activities including for funding issues (calls & warning messages)
- Reconciliation Team
- Provides Funds Management Support to Schools
- Has access to GAPS information

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## COD Web Pages

- School Summary Information
- School Funding Information
- School Summary Financial Information
- Refunds of Cash Information
- Cash Activity
- Yearly Totals

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## COD Cash Management Tools

- COD Web Pages
- Provide up to date information about funds drawn by school
- Allow for easy comparison of accepted student level disbursement records to funds
- Allow easy view of Current Funding Level
- Show GAPS activity
- Provide for self-assessment of cash management compliance

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## Main contact information

- Summary of financial information

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## Shows funding information

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## More detailed funding information.

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## Shows draw downs and any cash activity

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## Slide 48

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## Shows by program:

- Total dollar amount for awards
- Total dollar amount for actual disbursements
- Total number of recipients for the selected school

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## QUESTIONS

- We appreciate your feedback and comments.  You can reach –
-              **Brian Kerrigan       Kathy Wicks**
- _Phone_: **(202) 377-4291     (202) 377-3110**
- _Fax_:      **(202) 275-4552     (202) 275-0111**
- _E-mail_:  **Brian.Kerrigan@ed.gov**
-              **Kathleen.Wicks@ed.gov**

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