Cash Management

1. Module 11 Cash Management

2. Cash Management Issues • Effective cash management ensures: • Students receive money when needed • Title IV loan interest does not accrue needlessly • Only eligible students receive Title IV funds • Title IV overawards and overpayments are avoided • Institutional fiscal needs are met • No excess federal cash is held • Accounting and audit trails are clear

3. Cash Management • Review of regulatory requirements for: • Requesting Title IV funds • Disbursing Title IV funds • Maintaining Title IV funds

4. Grants Administration and Payment System • Grants Administration and Payment System (GAPS) • Financial management system for Title IV • Communicates with Common Origination and Disbursement (COD) System • Schools request funds on-line via ED’s e-Payments Web site (part of e-Grants Web site)

5. Grants Administration and Payment System • Before using GAPS, school must register with ED by: • Obtaining Data Universal Numbering System (DUNS) number • Obtaining Grant Award Number • Setting up bank information • Obtaining unique User ID and password for each authorized GAPS user

6. Common Origination and Disbursement • For Federal Pell Grants and Direct Loans, COD is used to: • Request funds • Report disbursement and origination data • Reconcile accounts

7. Payment Methods • Advance • Just-in-time • Reimbursement • Cash monitoring

8. Advance Payment Method • Funds requested to meet immediate need for: • Federal Pell Grant disbursements • Federal share of FSEOG, FWS, and Federal Perkins Loans • Net amount of Direct Loan disbursements

9. Advance Payment Method • Federal Pell Grant authorization via Electronic Statement of Account (ESOA) • Summarizes Current Funding Level (CFL) • Initial ESOA sent to school by June 1 and subsequent ESOAs sent as CFL changes • Initial ESOA is estimate of funds needed for first disbursements, based on prior year • CFL adjusted throughout the award year based on actual disbursements accepted by COD

10. Advance Payment Method • Federal Pell Grant and Direct Loan funds received via: • Advanced Funded method; or • Pushed Cash method

11. Just-in-Time Payment Method • Used for Federal Pell Grant payments at certain schools • ED provides funds to school at or near time of disbursement using Pushed Cash delivery method • Exempt from certain cash management requirements

12. Reimbursement Payment Method • ED monitors school’s use of funds • School makes disbursements before drawing down funds • School submits documented request for funds • ED may place certain restrictions on requests for FFEL disbursements or certifications

13. Cash Monitoring Payment Method • Similar to reimbursement method • 2 levels of Heightened Cash Monitoring (HCM) • HCM 1: School draws down funds or cash is deposited in school’s bank account based on modified ED review process • HCM 2: School provides documentation and funds are deposited in school’s bank account after ED’s approval

14. Crossover Period Drawdowns • Federal Pell Grants: School generally may choose to pay funds from either award year using expected family contribution (EFC) if for chosen award year: • Student has eligibility • School has valid ISIR or SAR and official EFC

15. Crossover Period Drawdowns • FSEOG and Federal Perkins Loans • School’s choice to pay from either award year, regardless of EFC used for Federal Pell Grant • Award year EFC may be different from award year allocation from which funds are paid

16. Crossover Period Drawdowns • Federal Work-Study • Pay hours worked before 7/1 from prior award year • Pay hours worked on or after 7/1 from upcoming award year • Either award year EFC may be used for enrolled student, but must match EFC used for awarding other campus-based, FFEL, or Direct Loan funds

17. Crossover Period Drawdowns • Direct Loans • No authorization level • May use either prior-year or upcoming award year EFC • If student is also receiving campus-based funds, must use same EFC as for campus-based awards

18. Excess Cash • Except for Federal Pell Grant funds received under just-in-time payment method and Federal Perkins Loan Program, funds remaining after 3 business days are “excess cash” • Excess cash must be returned immediately to program fund

19. Excess Cash • Need not return excess cash if it can be eliminated by making disbursements within next 7 calendar days and either excess cash occurs: • During a peak period and is less than 3% of total prior-year drawdowns; or • During a nonpeak period and is less than 1% of total prior-year drawdowns

20. Excess Cash • 3-business-day rule for disbursing funds satisfied on date school credits student’s account, issues check to student or PLUS borrower, or initiates EFT to student’s or PLUS borrower’s bank account • Check is considered “issued” when mailed or when student or PLUS borrower is notified of its availability

21. Payment Periods • Schools must disburse all Title IV funds (except FWS) on payment period basis • Additional rules apply to FFEL and Direct Loans • Payment period based on academic program structure: • Term-based credit-hour • Nonterm credit-hour • Term or nonterm clock-hour

22. Nonterm Credit-Hour Programs • Example—program less than or equal to academic year (AY) • 16 credit-hour and 20-week program • Payment period = 8 credit hours and 10 weeks

23. Nonterm Credit-Hour Programs • Example—program greater than AY • 48 credit-hour and 60-week program; AY = 24 credit hours and 30 weeks • First AY payment periods = 12 credit hours and 15 weeks each • Second AY payment periods = 12 credit hours and 15 weeks each

24. Nonterm Credit-Hour Programs • Example—program greater than AY; remainder less than or equal to half an AY • 34 credit-hour and 44-week program;24 credit hour and 30-week AY • First 2 payment periods = 24 credit hours and 30-weeks • Final payment period = remaining 10 credits in program

25. Nonterm Credit-Hour Programs • Example—40 credit-hour and 50-week program; 24 credit-hour and 30-week AY • First 2 payment periods: 12 credits and 15 weeks each • Remainder of program: 16 credits (40 - 24) and 20 weeks (50 - 30) • Final 2 payment periods: 8 credits and 10 weeks each

26. Nonterm Credit-Hour Programs • Other rules apply if: • School does not award credits until student completes academic year or program • School exercises option of establishing more than 2 payment periods • Students who withdraw and re-enter nonterm credit-hour programs

27. Nonterm Credit-Hour Programs • Re-entry example—48 credit-hour and 60-week program; AY = 24 credit hours and 30 weeks • Withdraws after 30 credits and 38 weeks • Re-enters same program after 185 days • Begins new payment period • Remaining credits and weeks are less than AY, but greater than half an AY • Last 2 payment periods = 9 credits and 11 weeks each

28. Clock-Hour Programs • Example—program less than or equal to AY • Program = 750 clock hours • Payment periods are each 375 clock hours • Example—program greater than AY • Program = 1,800 hours; AY = 900 hours • Four 450-hour payment periods

29. Clock-Hour Programs • Example—program greater than AY and remaining portion is less than or equal to half of AY • Program = 1,200 hours; AY = 900 hours • Payment periods = 450, 450, and 300 clock hours

30. Clock-Hour Programs • Example—program greater than AY and remaining portion is less than AY but greater than half of AY • Program = 1,500 clock hours; AY = 900 clock hours • First 2 payment periods = 900 clock hours each • Last 2 payment periods = 300 clock hours each

31. Disbursement Definition • Title IV funds are considered disbursed on date school credits student’s school account or pays student or parent (if PLUS) directly with: • Funds received from ED; • Funds received from FFEL lender; or • Institutional funds (labeled as Title IV) used in advance of receiving Title IV program funds

32. Early Disbursements • Federal Pell Grant, FSEOG, and Federal Perkins Loan for standard term credit-hour programs, earliest date: • 10 calendar days before first day of classes for term

33. Early Disbursements • Federal Pell Grant, FSEOG, and Federal Perkins Loan for nonterm, nonstandard term, and clock-hour programs, earliest date is the later of: • 10 days before first day of classes of payment period; or • Date student completed required clock or credit hours and, if applicable, weeks of instruction in previous payment period

34. Late Disbursements • Late disbursement permitted if: • Student or parent (if PLUS) meets conditions for a late disbursement • Law or regulations do not prohibit the late disbursement

35. Late Disbursements • Allowed if, before date student became ineligible, CPS processed ISIR/SAR with official EFC and: • School originated Direct Loan • School certified FFEL • School awarded FSEOG or Federal Perkins Loan • ISIR or SAR with official EFC not required if only aid is PLUS

36. Late Disbursements • School must make or offer to make late disbursement if late disbursement conditions are met • Exception: School’s option to make late FFEL or Direct Loan disbursement if student dropped to less than half time before completing loan period

37. Late Disbursements • May not pay late Federal Pell Grant disbursement if student’s valid ISIR/SAR is not received before annual deadline published in Federal Register • Late Federal Pell Grant disbursement may be paid for all completed payment periods, but amount is based on coursework completed • Without ED approval, may not make late disbursement later than 120 days after date school determined student became ineligible

38. Disbursement Methods • Cash disbursement to student or to parent borrower • Disbursement to student via stored-value card • Check or similar means of releasing funds (e.g., voucher) • EFT to student’s or parent’s bank account • Crediting student’s school account

39. Allowable Current-Year Charges • Title IV funds automatically may be applied to tuition, fees, and institutionally-contracted room and board without authorization • Authorization required for other current educationally-related charges

40. Allowable Prior-Year Charges • With student’s or parent’s (for PLUS) authorization, may pay minor prior-year charges if: • Charges are less than $100; or • Amount applied to prior-year charges will not prevent student’s ability to pay current educational expenses • If Direct Loan funds, must credit current loan period charges before prior period charges

41. Nonallowable Charges • If charges are outside realm of educational purpose, Title IV funds must not be applied • Examples: • iPODs • Vacations • Automobiles • Electronic entertainment equipment

42. Disbursement Notifications • Before disbursing Title IV funds, school must notify student or parent (for PLUS) of: • Date, amount, and method of each Title IV disbursement • Subsidized or unsubsidized loan amounts • Amount authorized to earn under FWS • Must notify dependent student and PLUS borrower separately

43. Disbursement Notifications • Must notify borrower no earlier than 30 days before or within 30 days after crediting Title IV loans to student’s school account: • Amount and date funds were credited • Right to cancel all or portion of loan, including procedures and deadline

44. Disbursement Notifications • If borrower notifies school to cancel all or portion of the loan, school must do so if request received by the later of: • First day of payment period or period covered by FFEL or Direct Loan, if school sends notice more than 14 days before first day of period; or • Within 14 days after date school sent notification

45. Disbursement Notifications • If borrower notifies school to cancel or reduce loan amount after the deadline, school may, but is not obligated to, honor request • School must inform student or parent electronically or in writing of request’s outcome

46. Disbursement Authorizations • Authorized services: • EFT • Disbursement to student’s school account • Holding excess funds

47. Disbursement Authorizations • Modification or cancellation effective on date school receives notice from student/parent • May only credit charges incurred prior to receipt of cancellation • Must pay student/parent remaining held funds within 14 days of date cancellation is received

48. General Student Eligibility Requirements • Confirm that student still meets all Title IV general student eligibility requirements • Check that student is enrolled for classes • If student never begins attending classes or school cannot document student’s attendance, all Title IV funds disbursed for period must be returned

49. Disbursement Requirements • Federal Pell Grants • FSEOG and Federal Perkins Loan funds (common requirements) • Federal Perkins Loans • FWS wages • FFEL and Direct Loans

50. FFEL and Direct Loan Disbursements • Generally disbursed in 2 or more equal installments, none of which may be more than half the loan amount • Single disbursements allowed under certain conditions