This is the third in a series of 10 blog posts related to the Top 10 Audit Findings of the U.S. Department of Education.

Steve_BastardiAccording to the U.S. Department of Education, one of the top 10 audit findings is R2T4 (return of Title IV funds) calculation errors.

From a technical standpoint, regulations require that Title IV financial aid allocated for a student who later withdraws should be returned. Specifically, 34 C.F.R. §668.22 governs the circumstances, calculation and process for when and how much Title IV financial aid should be returned. Typically, financial aid must be returned within 45 days of the date of withdrawal (34 C.F.R. §668.173(b)(4)).

According to the U.S. Department of Education common audit and program review findings include:

  • - Inadequately tracking students who withdraw;
  • - Failure to repay funds within the 45-day time period;
  • - Not following the institution’s policies and procedures for withdrawals; and,
  • - Errors in calculating the return amount.

Common calculation errors include:

  • - Incorrect number of days used in term/payment period;
  • - Actual clock-hours used instead of scheduled hours;
  • - Incorrect aid used as “could have been disbursed;”
  • - Incorrect withdrawal date; and,
  • - Mathematical and/or rounding errors.

In general, the process of determining the amount of Title IV student financial aid to return, the R2T4 process, includes:

  • - Determine student’s withdrawal date.
  • - Calculate percentage of payment period or period of enrollment completed.
  • - Determine amount earned by applying percent completed to total Title IV aid disbursed and that could have been disbursed.
  • - Decide if earned funds are due to the student through a Post-Withdrawal Disbursement; obtain permissions and credit as allowed.
  • - Decide if unearned funds are due to Title IV programs, and whether they are due from the student or the school.

Basically, a student who withdraws before completing the period for which the student has received Title IV student financial aid is considered to have “earned” those funds on a prorated basis at the time of withdrawal. A student who has completed more than 60% of the payment period has earned 100% of the financial aid that was or may still be disbursed. Up through the 60% point, financial aid is earned in proportion to the percentage of time enrolled as measured by the length of the entire payment period. For credit hour programs, number of “days” is used in the calculation, excluding scheduled breaks of at least 5 days. For clock hour programs, “scheduled hours” is used in the calculation.

The entire calculation may be challenging, but one of the more challenging parts, in my opinion, is determining the student’s withdrawal date. I don’t think I’ll get an argument from those who are involved in calculating return of Title IV funds that the process is overly complicated with built-in areas naturally prone to error. It appears that the Department of Education is the only sure authority on the subject. Since R2T4 calculation errors are such a common audit and/or program review finding, don’t feel bad if one should show up on your next audit.  I would be more concerned if one didn’t show up.

There are some basic ways to combat against return calculation errors. Some best practices available include a solid set of institution policies and procedures. Channels of communication are also important with students, institution personnel and interdepartmental. You want the right hand to be aware of what the left hand is doing. Also, prudent supervisory review and approval of return (R2T4) calculations is important.

Other areas of best practices include:

  • - Continuing education and training related to Title IV overall, and specific to the R2T4 process;
  • - Monitoring procedures that include periodic and/or specific sampling and testing of R2T4 calculations;
  • - Reference to and/or use of FSA Assessment tools specific to the R2T4 process;
  • - Application of Department of Education R2T4 worksheets (Electronic Web Application (; and,
  • - Frequent reference to rules and regulations in the FSA Handbook, Volume 5, Chapter 1 as well as Regulations: 34 C.F.R. §§ 668.22(e) and (f); 22(j) and 668.173(b).

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 or call 714.990.1040.

Topics: Institutions of Higher Learning, Title IV Funds, R2T4

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