ON BUREAUCRACY AND COLLEGE ADMINISTRTATION

Financial Aid Consultants

I often go back to Max Weber’s 1922 essay on Bureaucracy. Weber, a sociologist, described how an administrator should run a bureau, referring to an actual desk, or, as the Germans called it, a “Bureau” (see picture here http://bit.ly/2ou5e8P ). As an aid administrator, I used to think about how old Max missed his calling. He would have made a great Financial Aid Director. In my mind, I could see him sitting at his desk verifying ISIRs or signing his approval to disbursements and forwarding them to the business office. Time stamped and archived for the sake of keeping sound records. In fact, he could easily fit in in any number of campus administrative departments, because college administration is synonymous with bureaucracy.

According to Weber, an ideal bureaucracy has five characteristics:
1. Division of Labor by functional specialization
2. Hierarchal structure of authority
3. Clear rules of rights and responsibilities of employees
4. Written policies, rules, regulations that guide behavior
5. Competence based career progression, career longevity, education and training determine qualifications of employees etc.

It sounds a lot like a typical college administrative structure doesn’t it? That’s because bureaucracy is actually quite efficient. Even though it’s a term often used pejoratively, when we discuss bureaucracy in terms of its impact on risk, internal controls and compliance, we are speaking about it as a means of efficiently organizing our business operations to ensure consistency not only for ensuring compliance, but also for keeping cash flow consistent.

Whether I’m doing an operational review or consulting on a compliance matter, I’ll often first ask, “What is your school’s policy”?

All too often, school officials don’t know.

When we dig in, we find polices either don’t exist or haven’t been updated since Max Weber wrote his famous essay. Sure, keeping up with the regs can be a full-time job in itself, but if your policy still refers to the Basic Educational Opportunity Grant (BEOG), it’s time to update them. Even the most talented bureaucrat can’t function without clear expectations.

Experience shows us that schools with well documented, up-to-date policies and procedures tend to adhere to adhere to them. And if the procedures are any good, the school has few compliance problems and processes aid efficiently resulting in strong cash flow. The benefits to having good policies and procedures are numerous beyond allowing a school to be a good steward of Federal Financial Aid dollars. For example they help streamline audits and program reviews. They can be a great tool to help bring new employees on board faster and ensure continuity in processes when turnover occurs. Conversely, non-existent or out of date polices simply invite chaos. https://youtu.be/5ilGGP9BDZs

Having written policies and procedures isn’t just a good idea, it’s a requirement. Federal regulations require schools to have written policies and procedures for the administration of the Title IV programs. During a program review, ED typically asks for policies describing the institution’s Satisfactory Academic Progress, Admissions, Refunds, Return to Title IV, Consumer Information, Verification, Campus Based selection and awarding (FWS, FSEOG, Perkins), but there are dozens of other policies that are necessary.

Written policies are essential for maintaining compliance because they provide structure for rules and guidelines and describe key internal control activities. ED also recommends that schools conduct internal compliance reviews at least twice a year. One of those reviews should be focused on keeping policies up to date.


This is an excerpt from our April 2017 Newsletter.  Sign up here.


Our Policies and Procedures Assessment and Development services can help you draft new policy statements and procedural documentation or help you review and update existing ones to comply with best practices and current regulations.

ED DEFINES THIRD PARTY SERVICER ACTIVITIES IN RECENT Q & A

In January 2015, the U.S. Department of Education published Dear Colleague Letter GEN 15-01 which provided guidance for institutions which contract with “Third-Party Servicers” to provide outsourced services such as Default Management and Financial Aid Disbursement processing. At the time, the Department was concerned that a number of third party servicers were telling institutions that they were not in fact a third party servicer so as to avoid oversight and audit requirements. Recently, the Department published a FAQ which provides much needed clarity in defining what exactly a third-party servicer is and examples of the type of functions and services they perform.

A third-party servicer is an entity or individual that administers any aspect of an institution’s participation in the Title IV programs, including, but not limited to, services and functions necessary:

  • For the institution to remain eligible to participate in the Title IV programs,
  • To determine a student’s eligibility for Title IV funds,
  • To account for Title IV funds,
  • To deliver Title IV funds to students, or
  • To perform any other aspect of the administration of the Title IV programs.

If your institution uses a consultant to do any of the following, you should review the Q & A to determine if it is necessary to report your contracted relationship to ED:

  • Processing FAFSA Applications, Providing Financial Aid Counseling
  • Determining Student Eligibility; Verification, SAP Evaluation, Calculating Awards, Packaging, R2T4, Reconciliation
  • Processing, Certifying, Originating FSA Awards, Including Advanced or Reimbursement Funding Preparation
  • Preparing or submitting E-App, FISAP, IPEDS or Enrollment Reporting to NSLDS
  • Preparing consumer information disclosures, Security Reports, Biennial review of drug & alcohol abuse prevention programs, graduation and transfer rates, job placement rates, gainful employment disclosures, entrance / exit loan counseling, preferred lender lists
  • Default prevention, default aversion
  • Cash Management
  • Perkins loan servicing or collection.

 

For more details you can read the full Q&A here: http://bit.ly/2bskhLM

ACHIEVING ADMINISTRATIVE CAPABILITY REQUIRES A SYSTEM OF CHECKS AND BALANCES

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.