TEN REASONS SCHOOLS ARE PLACED ON HEIGHTENED CASH MONITORING

West Virginia’s Public Colleges recently made the news when the Department placed more than a dozen schools in the state on Heightened Cash Monitoring after the schools failed to provide their audit on time. It’s extremely rare to see a public school placed on Heightened Cash Monitoring since public schools are backed by the “full credit and faith of the state” but the Department cited the State’s colleges for their demonstrated lack of administrative capability over the late and missing audits. So let’s look at the ten reasons a school gets placed on HCM.

10 REASONS SCHOOLS ARE PLACED ON HEIGHTENED CASH MONITORING

Accreditation Problems – Includes accreditation actions such as the school’s accreditation has been revoked and is under appeal, or the school has been placed on probation.

Administrative Capability – Concerns about the institution’s ability to manage the Title IV programs including student file maintenance, record retention, and verification. 

Audit Late/Missing – School did not submit their audit by the due date and is considered not financially responsible.

Audit (Severe Problems) – School has severe audit findings which could include financial statements, internal controls, and compliance with laws, regulations, and provisions of contract or grant agreements.

Default Rate – A school’s cohort default rate for Perkins loans made to students for attendance at the school exceeds 15% or the cohort default rate for Federal Stafford loans or for Direct Subsidized/Unsubsidized Loans made to students for attendance at the school equals or exceeds 30% for the three most recent fiscal years or if the most recent cohort default rate is greater than 40%.

Denied Recertification (PPA Not Expired) – School’s recertification was denied but its Program Participation Agreement has not yet expired.

Financial Responsibility – School has a failing or a zone composite score or other concerns such as unreconciled accounts.

Change In Ownership Problems (Eligibility) – Issues identified with information needed on a Change in Ownership application such as missing/incorrect same-day balance sheet or other needed documentation; or an unreported CIO is discovered.

Program Review – School is being reviewed by the Department as part of its normal oversight and monitoring responsibilities or as a result of concerns regarding the school’s administrative capability and financial responsibility.

Program Review (Severe Findings) – School has potential of severe program review findings such as failure to make refunds or return of Title IV funds.

 

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.