Notice of Proposed Rulemaking for Cash Management

By McClintock & Associates | December 20, 2016

By Joseph A. Repko, CPA

There are a few changes being proposed to the Cash Management regulations and the requesting and disbursement of funds we want to highlight.

The first proposed change we are highlighting will impact institutions on the Reimbursement Payment method and Heightened Cash Monitoring (HCM). If an institution uses the reimbursement payment method, prior to an institution reimbursing itself with funds from ED, that institution must post all Title IV aid to be drawn down to the students account and also pay any amount of credit balance due to a student. In addition if an institution is under HCM they must also post all aid and pay all credit balances to students or parents prior to submitting a request for the funds. This change would eliminate the distinction between HCM1 and HCM2. This proposed change would require institutions on reimbursement or HCM to use their own funds to pay all credit balances, even credit balances as a result of Title IV funds being posted to the students account. For institutions whose students receive a large amount of stipends this may result in a potential cash flow timing issue due to the requirement to “front” all funds prior to receiving the Title IV drawdowns.

The second change is in regard to maintaining and accounting for Title IV funds. An institution would be required to maintain all Title IV HEA program funds in a depository account that is federally insured by the FDIC or NCUA. The limit of interest earned on Title IV funds in the depository account that a school is permitted to retain has been increased from $250 during the award year to $500. All excess interest earned must be remitted to the Department of Health and Human Services prior to June 30 of the award year.

The third change we want to highlight is in regard to the disbursement of Title IV funds. Except for paying a student under the FWS program an institution must disburse all aid for a payment period during the period in which the Title IV disbursement was earned. In addition, at the time a Title IV disbursement is being made an institution, along with a third-party servicer if applicable, must confirm that the student is enrolled at the institution and is eligible for the Title IV disbursement. This additional step will likely cause some delays in processing and added workload to verify all students’ eligibility at the time of disbursement.

While we have highlighted a few select changes being proposed, we strongly suggest reading all proposed changes in the NPRM dated May 18, 2015 to ensure preparedness in the event of the changes going into effect. These regulations are tentatively expected to take effect July 1, 2016, but we also advise you to keep track of the situation to be sure the regulations are accepted and do go into effect. If you have any questions about the regulations or their implementation please do not hesitate to contact us.

Volume 2, Issue 4
Fall 2015

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