News reports this past fall highlighted two situations of institutions that had been recipients of a Federal Program Review of their Title IV Federal Student Aid (FSA) programs. The schools had been cited by the U.S. Department of Education (ED) for going further than ED believed to be warranted and acceptable in exercising discretion in the use of professional judgment when considering students’ applications for FSA funding. Yes, this can many times be an area of exploration by ED program reviewers when visiting schools. But, the interesting point in these two cases is that ED conducted the on-site program reviews at these institutions in the 1990s. (Did someone ask the question of when ED will complete the determination on their own more recent program review?) Late last year ED contacted the two institutions with a request for payment of funds as a result of the program review in the ‘90s. While surely the schools may have contested the initial findings from ED, it is also likely that after a number of years the schools began to think hell was going to freeze over before they received a Final Program Review Determination (FPRD) letter for their program reviews. Certainly the two schools would have passed the point years ago when they would have thought that they would have any actual findings for which they would have to repay funds. But, alas, hell did not freeze over! It is reported that ED’s response last year came back with a request for payment of $305,561 for one school and several thousand dollars for the other. That is roughly 15 years after the program reviews took place!
The point to be made here is that schools must ensure compliance with applicable laws, regulations, and ED guidance from the start—before a program review comes into view. To do so requires diligence. Even when each day seems to contain more than enough on the plate to get finished, a plan must be in place to ensure your operations are always in a compliant state. Some of the areas, among many, for ongoing action are the routine review and analysis of the frequent changes in regulations and legislation, a frequent (at least annually) review of your policies and procedures, and timely updating of your E-App when necessary.
Within the last couple of years we have seen many changes in laws, regulations, and policy guidance (or change in emphasis on prior guidance). The topics of these changes have been headlined in the industry. Some of the hot items include the focus on students having a high school diploma or recognized equivalent versus the old Ability-to-Benefit (ATB) provisions, the implementation of the laws and guidance related to the lifetime eligibility on Pell Grants, the requirement to resolve Pell Grant Unusual Enrollment History (UEH) issues, the 150% of program limit on Subsidized Direct Loan (DL) eligibility, the addition to the DL entrance counseling requirements in regard to the 150% Subsidized DL limit, DL interest rate structure changes, and the various announcements about the effects of sequestration. And, these are just the most talked about ones before the current round of negotiated rulemaking (Neg Reg) on such topics as Gainful Employment and Violence Against Women Act, to name some.
Affirmation of Current Compliance Knowledge
So, how does an institution deal with all of these changes? One important step is to ensure you have methods developed to alert you when changes take place. It is surprising how frequent it is that financial aid administrators seem unaware of recent critical changes. A method must be in place for affirming you are aware and act. Perhaps that is through a daily reading of trusted news resources applicable to the industry along with actual source documents such as Dear Colleague Letters (DCLs) and Electronic Announcements (EAs). (Keep in mind that use of IFAP.ed.gov to review DCLs and EAs is compulsory to demonstrate the required administrative capability acknowledged when signing the Program Participation Agreement.) Or, possibly you have reliable colleagues with whom you interact regularly to bounce ideas off of as well as to discuss the latest developments in the financial aid arena. Maybe you use third party servicers or contractors as sources of the most recent critical information. Whatever your method, two things are crucial. First, ensure your source is accurate and reliable. A school comes to mind that was using another school as a source and example of how to implement a new program and process. The only problem was that the “model” school was not current in knowledge of the applicable regulations, and therefore was not a reliable and accurate source although well-intentioned. That school was actually modeling non-compliance. Next, when becoming aware of changes or new regulations or legislation, one must then view them with an eye toward how the changes impact your operations. Will you need to create new policies and procedures, or modify current ones, as a result of the new information in order to remain compliant?
Policies and Procedures are Key
Policies and procedures are something that most everyone will agree is important in the successful operation of an entity. And, believe it or not, everyone does have policies and procedures! It may be that they are not formalized and in a “manual”, and it may be that the policies and procedures are not accurate or helpful. But, any organization that is in operation has them. The key is whether or not they are accurate, current, and beneficial. And, of course, ED does require many specific policies and procedures to be in place—in writing. With the numerous changes in regulation, legislation and guidance listed earlier, each will require a re-visit to the school’s policies and procedures to ensure that all are appropriately addressed. For example, one area of focus in recent program reviews is in regard to an institution’s Drug and Alcohol Abuse Prevention Program. Part of the policy related to that program is to address the sanctions and penalties that may arise from related offenses. Additionally, the policy must have a section that addresses its plan to review its Drug and Alcohol Abuse Prevention Program at least once every two years to determine the program’s effectiveness. The results of that biennial review must be available for audits and program reviews. It has been noted that many schools do not have a compliant Drug and Alcohol Abuse Prevention Program and policies related to it. Other critical polices that schools should ensure they have are in relation to determining if a student has a high school diploma or equivalent. A recent conversation with a school highlighted this when they stated that they were seeing a number of students they were admitting that had attended other postsecondary schools where they had received Federal Student Aid although the high school the student listed was a known diploma mill. What procedures are in place to validate a high school diploma in situations where it is perceived that the high school the student lists may be a “diploma mill”? And, what are your procedures for resolving Pell Grant UEH issues? Although ED gave steps to take in resolving UEH issues, have you interpreted them and incorporated them into your own policies, defined your procedures, and put them in writing? Policies and procedures are critically important to have, to use, and be able to demonstrate they are followed when going through a program review. When examining one school’s policies and procedures manual during a campus visit, the school acknowledged that they had not updated their policies and procedures manual since the late 1980s. While, obviously, in day to day practice they had to have updated some things, they had not revised their official policies and procedures. That is an open invitation for issues when visited by ED.
Accurate and Current Data Provided
Another area that sometimes gets overlooked in the frenzy of daily activities is updating information on the Program Participation Agreement (PPA) through use of the electronic version of the Application for Approval to Participate in the Federal Student Aid Programs (E-App). This document contains critical elements that must remain up to date. Schools may have a tendency to forget the action necessary when changes occur at the school. ED focuses on this document when conducting a program review to ascertain how the school has been previously approved and then compares it with what is observed when on site. Schools are reminded of the requirement to submit any modifications to ED via the E-App. The changes must be made within 10 days—a timeframe that many times may be missed absent careful communication and planning within the institution. It is critical that the revisions be made timely. Some of the more common items to update on the E-App include changes in ownership or members of the board of directors; a change in the person filling the roles of financial aid administrator or chief financial officer; an addition or change of locations or addresses; adding new academic programs; a change in academic measurement from clock to credit hours or credit to clock hours; or, a switch in accrediting agencies. Notification of changes such as the ones just listed are critical to ensuring compliance with ED requirements, and are only some of the amendments that are required to be reported. Schools must ensure that they have a method and the means to comply with this aspect of Title IV participation.
In the paragraphs above, three areas have been highlighted that often cause schools to stumble in their compliance, especially when visited for a Federal Program Review. But, there are others. For example consumer information shortfalls can also trip up a school during a program review. Schools must comprehensively be prepared. Although it is always hoped that a program review will not occur, that is like hoping hell will freeze over. To date, ED has not indicated a limit on the timeframe of its compliance reach. It appears that it would take legislative action to change the apparent unlimited time for closing a Federal Program Review. Thus, it is imperative that schools maintain an ever vigilant eye on the small things related to compliance, several of which have been addressed herein. Because, as the schools referenced at the start of this article found out, the time when hell freezes over never comes. The day of reckoning does arrive, sooner—or later.