Thieves on Campus Could Target Credit Balance Checks

A college financial aid office employee was once charged with stealing financial aid. It was difficult to identify because the aid was being disbursed to students in the form of checks for credit balances, sometimes refered to as stipends. Colleges are required to abide by the federal regulations which include procedures about how FSA funds must be managed. Id a college fails to have adequate systems in place, it runs the risk of administrative capability citations in annual audits and program reviews. A college must have a process that ensures FSA funds never escheat to a state, or revert to the school, or any other third party. All Title IV Credit Balances therefore must be returned to the student or to the Department of Education.

All Title IV funds, except FWS Program funds that it attempts to disburse directly to a student or parent must be returned to the Department of Ed if the student or parent does not receive the funds or cash the check. For FWS Program funds, a college is required to return only the Federal portion of the payroll disbursement. If it attempts to disburse a credit balance by check or EFT and the check is not cashed or the EFT is rejected,it must return the funds no later than 240 days after the date it issued that check or made the EFT. Therefore, colleges should have a process to ensure that all student disbursement checks are cashed within 240 days or otherwise returned to the department. This rule is applicable to all credit balances of one-dollar or more.