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.