This is the fourth in a series of 10 blog posts related to the Top 10 Audit Findings of the U.S. Department of Education.
According to the U.S. Department of Education, one of the top 10 audit findings is R2T4 (return of Title IV funds) made late. The Department finds that many institutions are having trouble making returns within the allowable timeframe. Common reasons for late returns include an institution’s policies and procedures not followed; returns not made within the allowable 45-day time frame; inadequate system in place to identify/track official and unofficial withdrawals; and, no system in place to track number of days remaining to return funds.
With many different rules and regulations to monitor and comply, maintaining institutional eligibility can feel overwhelming. But, don’t be discouraged. You’re not alone. Avoiding unintended financial consequences related to the late return of Title IV funds seems to be one of the more common challenges for institutions of all sizes. With some refining of your existing systems these types of findings can be reduced significantly or even eliminated. Let’s consider the reasons for late returns.
School’s policy and procedures not followed
I think we all agree with the Department of Education that accounting procedures and financial management systems used by a school to record and report on the transactions in the FSA programs play a major role in the school’s management of those programs.
The Department of Education strongly encourages institution management to develop written policies and procedures about the way the school administers FSA programs with a focus on control activities. Control activities are the policies and procedures that help ensure a school’s administrative directives are followed. Control activities should be part of new employees’ orientation, and the subject of periodic training for continuing employees. When developing and/or updating policies and procedures related to Title IV administrative responsibilities institution management need to be sure to include policies and procedures for reviewing time frames for making returns, and providing staff training focusing on return of title IV funds and due dates.
Returns not made within the 45-day allowable timeframe
A school must return unearned Title IV funds it is responsible for within 45 days of the date the school determined a student withdrew. An institution must also consider the rules related to post withdrawal disbursements. A school must disburse any Title IV grant funds a student is due as part of a post-withdrawal disbursement within 45 days of the date the school determined the student withdrew and disburse any loan funds a student accepts within 180 days of the date the school determined the student withdrew.
There are basically two main deadlines that impact most Return of Title IV Funds calculations – the 45-day time frame for the return of funds, and the 30-day required notification of the need for authorization to make a post withdrawal disbursement of a Title IV loan.
Note that, according to the Department, any action taken after a deadline – even a correction – is a violation of that deadline requirement. For example, when an institution corrects a return of Title IV funds calculation and, as a result, returns funds after the 45-day deadline, it is then considered a late return. Likewise, if a school makes a correction and fails to notify a student or parent they are eligible for a post withdrawal disbursement within 30 days of the date of the institution’s determination that the student withdrew, the school has violated that deadline.
With respect to inadvertent payments, an institution is not required to return an inadvertent overpayment immediately but must return it within 45 days of the date of the institution’s determination that the student withdrew (34 CFR 668.22(j)(1)).
For a summary chart of due dates related to return of Title IV funds visit the SFA Handbook Volume 5. The chart summarizes the various due dates associated with the return of Title IV funds including the party responsible and related deadline.
Inadequate system in place to identify/track official and unofficial withdrawals
An official withdrawal occurs, for example, when a student provides official notification to the school of his or her intent to withdraw. An unofficial withdrawal is one where the school has not received notice from the student that the student has ceased or will cease attending the school. Institutions need to have adequate systems in place that can handle identification and tracking of both official and unofficial withdrawals. As a means of improvement, management may consider periodically reviewing and improving existing processes and procedures to ensure compliance with official and unofficial types of withdrawals.
No system in place to track number of days remaining to return funds
Having no or limited systems in place to track the number of days remaining to return Title IV funds can lead to unpleasant, unintended financial difficulties. There can be many reasons for this type of finding, including lack of communication within the financial aid department and between different departments, key personnel not aware of past problems, lack of knowledge, and no internal review process. One way management can minimize the possibility of this type of finding includes developing a Title IV return (R2T4) monitoring system. This can be developed in coordination with developing a system to track official and unofficial withdrawals noted above. Additional ways to improve in this area include providing staff continuing education and training as well as reference and use of FSA's R2T4 worksheets and assessment tools on the Web.
If you need assistance in calculating the return of Title IV funds or other accounting, auditing or consulting issues related to your institution of higher learning contact me at email@example.com or call 714.990.1040.