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Accreditation Problems – Includes accreditation actions such as the school’s accreditation has been revoked and is under appeal, or the school has been placed on probation.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

 

COMMON THIRD PARTY SERVICER PROGRAM REVIEW FINDINGS

Many schools believe that using a third party financial aid servicer protects them from compliance problems. The surprising truth is that often the likelihood of compliance problems actually increases when schools engage a third party processor. At the most recent FSA conference in Atlanta, ED was very clear that they do not endorse or approve third party servicers, and only recently began auditing them in program reviews.

The U.S. Department of Education has found as part of their third party servicers program reviews that many servicers share the same kinds of findings and violations and institutions that contract with third parties to perform some aspect of administering aid to students, are severally liable for any issues resulting from their servicers improper practices and shortfalls.

ED put together a top 16 list of findings common among third party servicers citing too many problems that put schools at risk.

If you use a third party servicer now or are considering using one, be sure to ask them for a copy of their most recent program review report before you get locked into a contract that may be difficult to break.

  1. Inadequate Contract / Written Policies and Procedures
  2. Inadequate Record Keeping
  3. Failure to Maintain Adequate Audit Trail
  4. Failure to Perform Proper Reconciliation
  5. Satisfactory Academic Progress Deficiencies
  6. Failure to Resolve Conflicting Information
  7. Verification Violations
  8. Student Credit Balance Deficiencies
  9. Return of Title IV Deficiencies
  10. Leave of Absence Deficiencies
  11. COD – Inaccurate/Untimely Reporting
  12. NSLDS – Inaccurate/Untimely Reporting
  13. Entrance/Exit Counseling Deficiencies
  14. Inadequate Notices and Authorizations (Required Disclosures)
  15. Failure to Report Third-Party Servicer
  16. Standards of Administrative Capability

Want to learn more about managing your institution’s risk? Click here

TOP TEN SFA COMPLIANCE AUDIT FINDINGS

The Higher Education Act of 1965, as amended,  requires annual financial and compliance audits of Title IV HEA programs for all institutions that participate in in FSA programs. Schools are required to arrange for regular independent audits that include the operation of the Federal Student Aid programs.
According to the U.S. Department of Education, these are the top ten audit findings from institutions annual FSA Audits conducted by IPAs and CPAs.
  • Repeat Finding – Failure to Take Corrective Action
  • NSLDS Roster Reporting – Inaccurate/Untimely Reporting
  • Return to Title IV (R2T4) Calculation Errors
  • Return to Title IV (R2T4) Funds Made Late
  • Verification Violations
  • Pell Grants – Overpayment/Underpayment
  • Qualified Auditor’s Opinion Cited in Audit
  • Entrance/Exit Counseling Deficiencies
  • Student Credit Balance Deficiencies
  • Improper Origination of Direct Loans

Want to learn more about managing your institution’s risk? Click here

OIG AUDIT GUIDE FOR PROPRIETARY SCHOOLS AND SERVICERS

NEW AUDIT GUIDE FOR PROPRIETARY SCHOOLS AND THIRD PARTY SERVICERS

For the first time in sixteen years, the U.S. Department of Education Office of Inspector General (OIG) has released a new Audit Guide for Proprietary Schools and Third Party Servicers. The guide replaces the version last updated in year 2000 and contains new instructions for how independent auditors should audit proprietary schools and colleges compliance with federal financial aid regulations.

Proprietary schools and colleges are required to have an annual financial and compliance audit conducted by an independent auditor each year.

The new guide instructs auditors perform a compliance audit of proprietary schools annually, not just an examination-level attestation engagement of the school’s management’s assertions of compliance as previously required. The guide also expands sample size and procedures for testing a consumer information, gainful employment, placement rates and several other items not typically audited except during a program review conducted by the Department of Education.

The new guide also provides more instruction for how independent auditors should evaluate third-party servicers defining which activities they perform are audit-able, while continuing to require annual compliance attestation engagements.

The new Audit Guide for Proprietary Schools and Third Party Servicers and is effective for fiscal years that begin after June 30, 2016 and can be found here: http://bit.ly/2dzHbCX