Regulations require schools and colleges to meet standards of administrative capability. There are a number of important requirements written into the Code of Federal Regulations which require schools to have strong internal controls such as having a well-organized financial aid office staffed by qualified personnel. This system of checks and balances is fundamental. At a minimum, it requires institutions to separate the functions of authorizing payment and disbursing or delivering funds, so that no single person or office exercises control of both functions for any student receiving FSA funds.
For example, the FA office which generally authorizes payment of FSA funds, may not also post those funds to the students account or ledger. Instead these functions must be done by someone in a separate office like the business office or bursar.
Meeting this component of administrative capability is a requirement of all institutions participating in Title IV programs, regardless of their size or number of employees. Individuals working in either authorization or disbursement may perform other functions as well but not both authorization and disbursement. Keep in mind, these two functions must be performed by individuals who are not members of the same family and who do not together exercise substantial control over the school.
If a school performs any aspect of these functions via computer, no one person may have the ability to change data that affect both authorization and disbursement. Schools must set up controls that prevent an individual or an office from having the authority or the ability to perform both functions.
In addition, schools should also have controls that prevent cross-functional tampering. For example, financial aid office employees should not be able to change data elements that are entered by the registrar’s office. Finally, your system should only allow individuals with special security classifications to make changes to the programs that determine student need and awards, and it should be able to identify the individuals who make such changes.