Nonprofit institutions that manage Federal Student Aid funds often focus solely on navigating the annual Single Audit. However, a more significant threat looms: the U.S. Department of Education’s (ED) Program Review. This in-depth examination delves into your institution’s administration of Title IV federal financial aid programs, uncovering compliance issues that a Single Audit might miss.
These issues can lead to hefty fines, program suspensions, and even loss of Title IV funding. The heightened scrutiny is particularly challenging for nonprofit institutions, which account for approximately 40% of institutions facing increased oversight for financial responsibility and compliance issues.
The Problem: Single Audits vs. Program Reviews
Single Audits are required to focus on your institution’s financial statements and internal controls. However, auditors are required to determine which federal programs, including student financial aid, are considered to be significant programs to be tested under the Single Audit. This determination is based on the amount of aid awarded and the auditors’ assessment of risk associated with each federal program. This means student financial aid may not be tested during the annual Single Audit. In addition, Single Audit guidance requires auditors to consider materiality when reporting findings. While Single Audits cover some essential ground, they lack the depth and breadth of an ED Program Review.
In contrast, Program Reviews provide a comprehensive examination of Title IV compliance.They scrutinize student eligibility, recordkeeping, disbursement procedures, and more. Program Reviews can uncover a wide range of issues, from minor administrative errors to major systemic problems that can lead to fines or returning aid received for a large number of students.
The 10 Most Common Program Review Findings
ED annually publishes a list of the most common Program Review findings. Here’s a glimpse into the top 10 issues:
- Student Status Reporting: Inaccurate or untimely reporting of student enrollment status can lead to significant discrepancies.
- Return of Title IV (R2T4) Calculation Errors: Recent regulatory changes have increased the complexity of R2T4 calculations, making errors more likely.
- Student Credit Balance Deficiencies: Failing to promptly return excess financial aid to students or Title IV programs.
- Inaccurate Recordkeeping: Discrepancies between disbursement records and COD submissions, and poor reconciliation of Title IV accounts can all lead to findings.
- Entrance/Exit Counseling Deficiencies: Ensuring all students receive the required loan counseling is critical and can impact loan eligibility for students.
- Lack of Administrative Capability: This broad category encompasses issues like inadequate staffing, poor internal controls, and untimely submission of audits.
- Satisfactory Academic Progress (SAP) Policy Issues: Ensuring your SAP policy is well-defined, effectively monitored, and applied consistently is crucial.
- Pell Grant Overpayment/Underpayment: Inaccurate enrollment status updates and incorrect grant calculations can lead to significant overpayments or underpayments.
- Consumer Information Requirements Not Met: Compliance with the Clery Act, timely graduation rates, and other consumer information requirements are essential. Violations have led to some of the largest fines levied by ED
- Improper Credit/Clock Hour Conversion: Accurately converting clock hours to credit hours for eligible programs is a complex and often-misunderstood area that can lead to being required to refund financial aid for all students who enrolled in a program.
Proactive Steps to Program Review Preparedness
Don’t wait for ED to come knocking. Take proactive steps to enhance your institution’s compliance posture:
- Conduct Compliance Audits: Go beyond the scope of your Single Audit. Conduct in-depth internal reviews or engage specialists to identify potential vulnerabilities.
- Align with ED Requirements: Ensure all your financial aid processes align with the latest ED regulations.
- Robust Recordkeeping: Maintain meticulous and easily accessible records for all financial aid transactions.
- Policy Review and Updates: Regularly review and update your institutional financial aid policies to reflect current federal requirements.
- Comprehensive Staff Training: Equip your financial aid staff with the knowledge and skills to navigate complex regulations and best practices.
- Regular Compliance Reporting: Monitor key compliance reports, such as the Annual Security Report and enrollment reporting, to identify and address potential issues early on.
Introducing McClintock’s Program Review Protector
At McClintock & Associates, we know how challenging it is to navigate Title IV compliance that’s why we created our Program Review Protector —an end-to-end solution to help institutions excel in compliance and operational performance through a proven process: Assess, Improve, and Maintain.
Mock Program Review
This proactive and thorough audit mirrors federal program review procedures, identifying potential risks and enhancing operational compliance.
After Action Report
This comprehensive, actionable analysis highlights institutional strengths, identifies areas for improvement, and provides tailored recommendations for achieving compliance and operational excellence.
Implementation Guidance & Support
Our experts collaborate closely with your team to implement recommended changes, offering hands-on support and follow-up testing to ensure effectiveness.
Ready to take action?
Don’t let an unexpected ED Program Review derail your institution’s financial aid operations. By taking proactive steps, conducting thorough internal assessments, and leveraging the expertise of McClintock’s Program Review Protector, you can enhance your compliance posture, minimize risk, and ensure the long-term sustainability of your financial aid programs.
Contact McClintock & Associates today to learn more about how our expertise can help you prepare for your next ED Program Review.
Disclaimer: This information is for general guidance only and does not constitute legal or professional advice.
