Institutional Eligibility Issues Every Aid Administrator

Should Know About

Blain B. ButnerAaron D. Lacey

Eastern Association of Student Financial Aid Administrators

43rd Annual Conference

Washington, DCMay 18, 2009

Presented by:

2

Overview of Presentation

• The Program Participation Agreement

› Five institutional responsibilities worth a closer look

• Updating Application Information

› Locations› Personnel› Programs

3

Program Participation Agreement

• Program Participation Agreement (PPA) is fundamental agreement between ED and institution

• Content and function of PPA discussed at HEA §487 and 34 C.F.R. §668.14

• PPA contains information concerning various matters, including: › Institutional responsibilities› Special restrictions› Type of approval (provisional or regular)› Timing of recertification

4

Program Participation Agreement

• Five institutional responsibilities from the PPA that are worth a closer look:

1. Administrative Capability

2. Hiring and Contracting

3. Incentive Compensation

4. Campus Crime and Security, and other disclosure requirements

5. Code of Conduct

5

Administrative Capability

• To begin and continue participating in Title IV programs, an institution must demonstrate that it is capable of adequately administering such programs› Authority: 34 C.F.R. §668.14(b)(6)

• Institutions satisfy this “administrative capability” standard by demonstrating compliance with requirements set out at 34 C.F.R. §668.16

6

Administrative Capability

1. Administer Title IV programs in accordance with all applicable federal statutes, regulations and agreements

2. Designate capable individual responsible for administering Title IV programs

3. Communicate effectively between financial aid (“FA”) and other relevant institutional offices

4. Establish written procedures for each FA function (approval, disbursement, reporting)

5. Establish adequate checks and balances in its system of internal controls

7

Administrative Capability

6. Divide functions of authorizing payments and disbursing funds

7. Maintain all required records

8. Establish compliant Satisfactory Academic Progress policy

9. Establish adequate system to identify and resolve information discrepancies in student financial aid applications

8

Administrative Capability

10. Report to OIG any credible information that a Title IV aid applicant may have engaged in fraud or other criminal misconduct in connection with his or her application

11. Report to OIG any credible information that any employee, third-party servicer, or other agent of institution may have engaged in fraud, misrepresentation, conversion or breach of fiduciary responsibility, or other illegal conduct involving Title IV programs

12. Provide adequate financial aid counseling to Title IV applicants

9

Administrative Capability

13. Timely submit all program and fiscal reports and financial statements

14. Show no evidence of significant problems that affect school’s ability to administer Title IV programs

15. Have no principal or affiliate that is debarred or suspended or engaged in any activity that is cause for debarment or suspension

16. Satisfy cohort default rate minimum thresholds

17. Participate in all requisite ED electronic processes

18. Do not otherwise appear to lack administrative capability

10

Hiring and Contracting

• PPA also requires institutions to comply with certain hiring and contracting restrictions › Authority: 34 C.F.R. §668.14(b)(18)

11

Hiring and Contracting

• Must not knowingly employ in financial aid office – or in other positions involving Title IV funds administration – any individual previously convicted of fraud involving federal or other public funds

• Must not knowingly contract with institution or third-party servicer that has been convicted of fraud or terminated from Title IV programs

• Must not knowingly contract with or employ any individual, agency or organization that has been (or that has an officer or employee who has been) convicted of fraud or any crime involving acquisition, use or expenditure of federal funds

12

Hiring and Contracting

• In complying with these requirements, institutions should:

› Conduct adequate diligence prior to entering into any contract or making any hiring decision

› Ensure adequate coordination between Financial Aid and Human Resources offices

› Emphasize to Human Resources that these restrictions are not limited to financial aid hiring

13

Incentive Compensation

• Institutions are prohibited from providing (or contracting with any entity that provides) any commission, bonus or other incentive payment based directly or indirectly on success in securing enrollments or financial aid to any person engaged in any student recruitment, admissions, or financial aid awarding activities› Authority: 34 C.F.R. §668.14(b)(22)

14

Incentive Compensation

• This prohibition applies to all institutions, not just proprietary institutions

• “Incentive payments” include monetary and non-monetary incentives

• Also places restrictions on payment of salary to covered employees

• Is a “hot button” issue for ED

15

Campus Crime and Security

• Institutions must comply with requirements of Jeanne Clery Disclosure of Campus Security Policy and Campus Crime Statistics Act (“Clery Act”)› Authority: 34 C.F.R. §668.14(c)(2)

16

Campus Crime and Security

• Institutions must:

› Have campus security policy in place› Publish Annual Security Report› Submit crime statistics to ED annually› Notify campus community of certain

crime-related events› Retain certain crime-related records

17

Campus Crime and Security

• ED is paying increased attention to non-compliance in this area:

› Up to $27,500 fine per violation

› Eastern Michigan University was cited by ED in November 2007 for thirteen violations of the Clery Act, and fined a record $357,000

18

Campus Crime and Security

• 2008 HEOA modified institutional responsibilities relating to:

› Emergency response and immediate warning

› Hate crime reporting

› Campus law enforcement policy statements

› Whistleblower protection and anti-retaliation

19

Other Disclosure Requirements

• Student financial aid information• Information about institution• Information on completion or graduation

rates› Degree- or certificate-seeking, full-

time undergraduate students› Some schools must now calculate

and disclose “transfer-out” rates• Athletic program participation rates, and

completion rates for student athletes

20

Code of Conduct

• All institutions must adopt a Code of Conduct› Authority: HEA §487(a)(25)

21

Code of Conduct

• Code of Conduct must include specific provisions relating to:

› Conflicts of interest› Revenue-sharing arrangements› Gifts (inducements)› Certain contracting arrangements› Borrower choice› Opportunity pool funds› Certain staff assistance› Certain forms of advisory board

compensation

22

Code of Conduct

• Code of Conduct requirement is presently in effect

• ED has not lost interest in this area

• Must put into place procedures for ensuring compliance with your code of conduct

• Must also comply with state laws and state codes of conduct

23

Updating Application Information

• Each institution’s Eligibility and Certification Approval Report (ECAR) provides details of institution’s participation in Title IV programs as of specific date, including:

› Eligible locations› Degree levels and programs › Management, board members and

owners› State and accreditor approvals › Third-party servicers

24

Updating Application Information

• Institutions must report certain changes within 10 days of their occurrence:

• Changes to Locations› Adding new locations› Updating information relating to

existing locations› Closing locations

25

Updating Application Information

• Changes to Management› CEO/president/chancellor› CFO/financial officer› Financial aid director

• Changes of Ownership› Ownership tree

26

Updating Application Information

• Institutions also must report certain changes to programs› Authority: 34 C.F.R. §600.10

• Examples of program changes

› Increasing level of program offering

› Adding new non-degree programs» The graduate certificate trap

› Modifying existing program information

27

Updating Application Information

• Consequences of failure to report:

› Adverse action (e.g., termination, limitations, fines)

› Pay-it-all-back liability

28

Program Participation Agreement(Complete List of Institutional Responsibilities)

1. Comply with all applicable federal statutes, regulations and agreements

2. Properly manage advance payment fund requests

3. Do not charge fees relating to Title IV eligibility or assistance

4. Comply with provisions relating to financial responsibility

5. Comply with provisions relating to standards of administrative capability

6. Comply with mandatory reporting requirements

29

Program Participation Agreement(Complete List of Institutional Responsibilities)

7. Do not certify students for loan amounts exceeding their eligibility

8. Disclose required institutional and financial assistance information

9. Comply with provisions relating to advertisement of job placement rates

10. Disclose information concerning availability of State grant assistance

11. Provide all required certifications

12. If applicable, implement program to assist students in obtaining recognized equivalent of high school diploma

30

Program Participation Agreement(Complete List of Institutional Responsibilities)

13. Do not deny aid based solely on student’s participation in study abroad program approved by institution

14. Comply with default management plan requirements for new participants and institutions undergoing change of ownership

15. Do not knowingly employ in financial aid office individuals previously convicted of financial aid fraud

16. Do not knowingly contract with institution or third-party servicer that has been convicted of fraud or terminated from Title IV programs

31

Program Participation Agreement(Complete List of Institutional Responsibilities)

17. Do not knowingly contract with or employ any individual, agency or organization that has been convicted of fraud or any crime involving acquisition, use or expenditure of federal funds

18. Complete and timely submit IPEDS data

19. If applicable, comply with provisions regarding athletically related aid

20. Do not penalize students for delayed disbursements attributable to institution

21. Comply with incentive compensation restrictions

32

Program Participation Agreement(Complete List of Institutional Responsibilities)

22. Satisfy state licensing requirements and accreditor standards

23. Comply with refund provisions

24. Satisfy requirements for programs preparing students for gainful employment in recognized occupation

25. Certify that institution has drug abuse prevention program

26. Comply with campus security policy and crime disclosure requirements

33

27. If applicable, comply with 90/10 requirement concerning institutional revenue

28. Develop Code of Conduct and Conflict of Interest Policy (NEW)

29. If applicable, create compliant preferred lender list and make related FFEL loan disclosures (NEW)

30. Provide required disclosures relating to private loans (NEW)

31. Develop plan to combat copyright infringement (NEW)

Program Participation Agreement(Complete List of Institutional Responsibilities)

34

Contact Information

• Blain B. Butner› Dow Lohnes PLLC

1200 New Hampshire Ave, NWWashington, DC 20036

› (202) 776-2579› bbutner@dowlohnes.com

• Aaron D. Lacey› Dow Lohnes PLLC

1200 New Hampshire Ave, NWWashington, DC 20036

› (202) 776-2613› alacey@dowlohnes.com

www.dowlohnes.com