Cash Management 101

Except for funds received as an administrative cost allowance (ACA), FSA funds received by a school are held in trust by the school for students and the Department.

Rules and procedures also apply to third-party servicers.

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PURPOSE OF CASH MANAGEMENT REGULATIONS

The cash management regulations are intended to:

Promote sound cash management of FSA program funds by schools;

Minimize the costs to the government of making FSA program funds available to students and schools; and

Minimize the costs to students who receive FSA loans.

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To ensure adequate cash management practices;

Generally Accepted Accounting Principles (GAAP);

standards prescribed by the federal Office of Management and Budget (OMB);

U.S. Department of Treasury regulations; and U.S. Department of Education (ED/the

Department) regulations.

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Am I a grantee or a payee? A grantee (not a person) is an entity that

applies for and receives a grant award from the Department. The grantee is responsible for ensuring the grant is administered in accordance with program regulations.

A payee is an entity (designated by the grantee) to request and manage federal funds on its behalf. The grantee and payee can be the same entity.

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New schools to the process;Need to know about the EDCAPS and how it is

integrates G5, the grants Management System

EDCAPS

Grants Management system (G5)

Contracts & Purchasing software

FMS software

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What is G5?G5 is a delivery system that supports program award and payment administration. G5 provides financial management support services for the grant life cycle in a single system. It supports the planning, obligating, authorizing, disbursing, and final closing of Department of Education grant awards.

TIP! Every user must register to gain access to G5. There is no limit to the number of users an entity or organization may have with access to G5. Business officers and financial aid administrators are encouraged to use G5 to help reconcile FSA funds.

Access to G5 G5 can be accessed through the Internet at the G5 Web page www.G5.gov

The G5 Help Desk phone number is 1-888-336-8930

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What programs use G5? the Federal Pell Grant Program, the TEACH Grant Program, the Federal Supplemental Educational

Opportunity Grant (FSEOG) Program, the Federal Work-Study (FWS) Program, the Federal Perkins Loan Program, and the Direct Loan Program.

Accessing G5 www.G5.gov

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When applying for Title IV participation, your school must register with the Department.

Here is what you need:1. obtaining a Data Universal Numbering System (D-U-N-S)

number; 2. obtaining a Grant Award Number; 3. setting up Bank Information; 4. registering the D-U-N-S and Taxpayer Identification

Number (TIN) with the System for Award Management (SAM) at https://www.sam.gov/portal/public/SAM/; and

5. obtaining User ID(s) and Password(s).

Receiving funds: ACH or Fed Wire

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What is Common Origination & Disbursement (COD)?The Common Origination and Disbursement (COD) System is Federal Student Aid’s (FSA) system for creating, delivering and reporting Federal Pell Grants, TEACH Grants and Federal Direct Loans. COD provides a common process and integrated system that enables efficient delivery of Title IV Funds.

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Projecting cash needs - Immediate Need Defined – payments made within 3 business

days from when received! Otherwise Excess Cash!!!

EXCESS CASH34 CFR 668.166

Three-day rule for funds received under the advanced payment method A school must disburse FSA funds as soon as administratively feasible but no later than three business days following the date the school received those funds. Cite: 34 CFR 668.162(b)(3)

Disbursing Funds34 CFR 668.164

The disbursement occurs when the school credits the student’s account or if pays the parent or student directly with institutional funds in advance of its receipt of title IV funds

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More on Advanced Payment Method A school on the advance payment method must determine the

amount of funds it needs before it transmits a request to G5. The amount requested must be limited to the amount needed to make immediate disbursements so excess funds do not exist after disbursements are made. The amount should be enough to meet:

The federal Pell Grant, Iraq and Afghanistan Service Grant, TEACH Grant , federal share of Federal Supplemental Educational Opportunity Grant (FSEOG), federal share of Federal Work-Study (FWS) payroll, federal share of Federal Perkins Loan disbursements, and of course the Federal Direct Loan disbursements.

If it applies, all ACA payments.Helpful Equation:Anticipated Disbursements minus Balance of Cash on Hand minus Anticipated Recoveries minus ACH/EFT Cash in Transit equals Projected Immediate Need 13

Recording Draws or PaymentsPayees should keep records of submitted payment requests. The amount of each request and the corresponding control number(s) need to be carefully documented. These records will serve as an audit trail and help payees reconcile their books to the G5 Activity Report.

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Delayed, denied, or reduced payment requests An award included in your payment request is

flagged for review and approval; The Department’s accounts receivables unit

has entered an offset against one or more of the awards;

A program office has intervened as a result of a program review or audit finding.

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A SCHOOL’S FIDUCIARY RESPONSIBILITY Funds received by a school under the FSA programs are held in trust for the intended student beneficiaries. As a trustee of those funds, a school may not use (or use as collateral) FSA funds for any other purpose.

Cash management 34 CFR Subpart K

Purpose of regulations 34 CFR 668.161

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Disbursement Types Early disbursements 34 CFR 668.164(f) On-time disbursements 34 CFR 668.164 Late disbursements 34 CFR668.164(g)Disbursements start with NOTIFICATIONS & Authorizations - 34 CFR 668.135 Notification of disbursement In general, there are two types of notifications a school must provide: (1) a general notification to all students receiving FSA funds, and (2) a notice when loan funds or TEACH Grant funds are credited to a student’s account.Borrower notification via email If you are notifying the student of the next disbursement by email or other electronic means, you are encouraged to follow up on any electronic notice for which you receive an “undeliverable” message.

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AUTHORIZATIONS - 34 CFR 668.165(b)Electronic disclosures - CFR 34 668.41(b) & (c) You must obtain authorization from a student (or parent

borrower), before your school can perform any of the following activities:

Use FSA funds to pay for allowable educationally related charges other than tuition, fees, and room and board (if the student contracts with the school);

Credit FWS wages to a student’s account to pay any educationally related charges;

Disburse FWS wages by Electronic Funds Transfer (EFT) to a bank account designated by the student or parent;

Hold an FSA credit balance; Apply FSA funds (including FWS) to prior-year charges

other than for tuition, fees, room, and board.

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Using electronic processes for notifications and authorizationsThe annual individual notice must — Identify the information required to be

disclosed that year; Provide the exact Internet or intranet address

where the information can be found; State that, upon request, individuals are

entitled to a paper copy, and inform students how to request a paper copy.

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Early disbursements 34 CFR 668.164(f)For term-based schools — those that use semesters,quarters or trimesters — the institution may disburse TitleIV funds up to 10 calendar days before the beginning ofany payment period, even if the previous payment periodhas not ended.

For non-term-based and clock-hour schools, the earliest a disbursement can occur is the later of: Ten days before the first day of classes of the payment

period. The date the student completes the requirements (for

example, clock hours or lessons) for the previous payment period.

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Late disbursements 34 CFR668.164(g)To make a late disbursement the school must ensure that, prior to the date the student became ineligible: The CPS must have processed an ISIR/SAR with a validEFC. The school must have:– Created an origination record for a Federal Direct

Loan.– Awarded Federal Perkins Loan for FSEOG funds to thestudent.– Originated the record for a TEACH Grant award.

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Bill is a full-time student at My State University, completed the spring term on May 9th. On the last day of the term he submitted a loan request and the financial aid officer originated the loan.

Student submits loan request

School originates loan School makes late disbursement no later than…

Enrollment period

180 days from end of loan periodSept. 22 May 9 Nov. 5

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METHOD OF DISBURSEMENT Credit to the student’s account Direct disbursement to the student

Credit to student’s account: 34 CFR 668.164(a), (b), &(d)(1)

Direct disbursements: 34 CFR 668.164(d) Releasing a Pell check: 34 CFR 690.78(c) Prior-year charges: 34 CFR 668.164(d)(2)

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Credit Balances – 34 CFR 668.164(e)An FSA credit balance occurs whenever your school credits FSA program funds to a student’s account and the total amount of those FSA funds exceeds the student’s allowable charges.

If FSA disbursements to the student’s account create an FSA credit balance, you must pay the credit balance directly to the student or parent as soon as possible but no later than 14 days after: ◦ The date the balance occurred on the student’s account, if the

balance occurred after the first day of class of a payment period, or ◦ The first day of classes of the payment period if the credit balance

occurred on or before the first day of class of that payment period.

School responsibility to pay credit balance in time frame

34 CFR 668.164(e)(1)&(2)

School responsibility to pay credit balance by the end of

the last payment period 34 CFR 668.165(b)(5)(iii)

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ESCHEATING OF FSA FUNDS IS PROHIBITED

Time frame for returning unclaimed funds 34 CFR 668.164(h)

In order to prevent the escheating of Title IV funds, the Department encourages schools that disburse Title IV credit balances by EFT to remind students before the end of the award year (or at the time of withdrawal for students who cease attendance before completing the period for which the funds were paid) to examine the balances remaining in any accounts to which Title IV funds were transferred.

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Reconciliation 34 CFR 685.102(b) A key component of the systems we talked

about today, is the process of Reconciliation. Reconciliation is a process in which financial records are compared and discrepancies resolved. Conducting verification frequently can help ensure that your school is properly exercising its fiduciary responsibilities to safeguard federal funds and ensure that they are used as intended.

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Recommended practices A key factor in facilitating reconciliation is staying on top of the process. The Department encourages schools to: Define responsibilities of key individuals and offices; Document your reconciliation procedures; Build in regular communication between your business office,

financial aid office, and school’s technical staff; Compare internal student accounts and business office/bursar

records with financial aid office records and resolve any discrepancies;

Balance all subsidiary accounts to the general ledger; Ensure that all drawdowns and refunds of cash are accounted for

and applied to the correct program year; Ensure that all batches have been sent to and accepted by the

COD system, all disbursements and adjustments are accurately reflected on the COD system, and all responses are imported into the school’s system;

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Recommended practices cont… For Direct Loans, ensure that all unbooked loans are

booked or inactivated (reduced to $0); Resolve all outstanding rejected records; Return all refunds of cash via G5; and Request any remaining funds owed to the school based on

actual disbursements accepted by the COD System.Contact Information For disbursement reporting, excess cash, or reconciliation questions specific to the Federal Pell Grant or Direct Loan programs, contact the COD School Relations Center at 1-800-474-7268 for Grants and 1-800-848- 0978 for Direct Loans. You may also e-mail CODSupport@acs-inc.com. For reconciliation questions specific to the Federal Work-Study, Federal Supplemental Educational Opportunity Grant, or Federal Perkins Loan programs, contact the Campus-Based Call Center at 1-877-801- 7168. You may also e-mail CBFOB@ed.gov.

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RECONCILIATION IN THE PELL GRANT PROGRAM Monthly reconciliation for the Pell Grant Program should include verifying that individually and cumulatively the: 1. records of student awards and pending disbursements calculated

and maintained by the financial aid office match the records of pending disbursement data received or maintained by the business office;

2. business office records of actual disbursements posted to student accounts are consistent with financial aid office records of student eligibility and applicable award and disbursement amounts;

3. records of disbursements in the general ledger match those in subsidiary ledgers (e.g. student ledgers/accounts);

4. the actual disbursements posted to students’ accounts internally match the actual disbursements accepted in the COD system (including any adjustments to actual disbursements); and

5. cumulative school and COD records of Pell Grant disbursements match Net Draws (Drawdowns – Refunds of Cash) in G5 for the award year in the Pell Grant Program.

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Reconciling school-level data with COD Pell Grant data – here are some toolsPell Grant Reconciliation Report Pell Grant Electronic Statement of Account (ESOA) Pending Disbursement List Report Pell Grant Year-to-Date (YTD) Record

All schools must finalize reconciliation of cash and reporting of Pell Grant and Iraq and Afghanistan Service Grant disbursements and disbursement adjustments by the annual deadline of September 30 of the award year (i.e. for 2013–2014, the deadline will be September 30, 2014).

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RECONCILIATION IN THE DIRECT LOAN PROGRAM 34 CFR 685.102

Mandatory Monthly Process This is a comparison of records, both internally and externally.

Reconciliation of DL is conducted to identify and resolve differences between net draws (cash minus refunds of cash) through G5 and Net Accepted and Posted Disbursements (NAPD) (disbursements minus disbursement adjustments) reported to COD for a specific award year.

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Direct Loans tools:Direct Loan School Account Statement (SAS) Cash Summary Disbursement Summary by Loan Type Cash Detail Disbursement Detail Pending Disbursement List Actual Disbursement List

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Common Errors - here are a few of the most common mistakes schools make in managing their Direct Loan Programs. Cash transactions in wrong year or split between years Inclusion of funds from a different program Timing of cash transactions Funds sent as payment that should have been a refund of cashUnsent/unacknowledged disbursement batches Rejected disbursements Disbursements recorded in business office but not in financial aid system Unbooked records

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Financial Aid Handbook Vol. 4 Bluebook Vol. 5 NASFAA Core

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Questions

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