When the U.S. Department of Education finds compliance issues at a college, one of the first things they do is place the school on one of the Department’s Heightened Cash Monitoring (HCM) payment methods. This allows FSA to provide additional oversight of the college’s administration of Federal Student Aid Funds.

There are two levels of Heightened Cash Monitoring; Heightened Cash Monitoring 1 (HCM1) and Heightened Cash Monitoring 2 (HCM2).

Heightened Cash Monitoring 1 is the less onerous of the two statuses. After a school makes disbursements to eligible students from institutional funds and submits disbursement records to the Common Origination and Disbursement System, it draws down FSA funds to cover those disbursements in the same way as a school on the Advance Payment Method. HCM 1 requires a school to pay closer attention to its authorization and disbursement practices to ensure compliance. The goal for colleges placed on HCM1 is to nip problems in the bud and ensure that the school doesn’t end up on HCM2.

Heightened Cash Monitoring 2 is known as “reimbursement” and is much tougher than HCM1. Under reimbursement, a school no longer receives funds under the Advance Payment Method. After a school on HCM2 makes disbursements to students from its own institutional funds, a Reimbursement Payment Request must be submitted to the Department, usually along with student financial aid files before any funds can be drawn down. The files are reviewed by a payment analyst at ED and funding is only approved to be drawn down if everything in the student files checks out.

If you read our first post Ten Reasons schools are placed on Heightened Cash Monitoring, we’ve got eight more reasons you should be aware of.

  1. Financial Statements Late/Missing – Financial statements were not submitted to FSA by a specific due date, depending on the institution’s type (public, private non-profit, proprietary).
  2. Financial Responsibility – School has a failing or a zone composite score or other concerns such as unreconciled accounts.
  3. Office of the Inspector General – Under investigation by the Office of the Inspector General.
  4. Common Ownership Problems – The common ownership of certain institutions that had issues identified at some of their schools.
  5. Outstanding Liability/Offset – School has outstanding liabilities that resulted from an audit or program review.
  6. Provisional Certification – School is participating in Title IV programs under a provisional certification which imposes certain restrictions.


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.


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.