| AwardYear: 1998-1999 EnterChapterNo: 6 EnterChapterTitle: Federal Perkins Loan Program SectionNumber: 11 SectionTitle: Program Funds PageNumbers: 105-109 As discussed in Chapters 3 and 5, a school that wants to participate in any Student Financial Assistance (SFA) Program must sign a Program Participation Agreement with the Secretary. The agreement must be signed by the school official legally authorized to assume, on the school's behalf, the agreement's obligations. For all of the SFA Programs, the agreement provides that the school must use the funds it receives solely for the purposes specified in the regulations for each program and requires the school to administer each program in accordance with the Higher Education Act of 1965 (HEA), as amended, and the Student Assistance General Provisions regulations. The agreement also requires the school to submit annually to the U.S. Department of Education a report containing information that will enable the Department to determine the school's cohort default rate (discussed in Section 8 of this chapter). As discussed in the introduction to this chapter, the agreement for the Federal Perkins Loan Program also requires the school to establish and maintain a Perkins Loan fund (the fund) and to deposit into the fund-- - the federal capital contribution (FCC) the school receives as its federal allocation for the program for each award year (see the next page); - the school's matching share--the institution's capital contribution (ICC), discussed on the next page; - payments the school receives for repayment of loan principal, interest, collection charges, and penalty or late charges on loans from the fund; - payments the school receives from the federal government for cancellations (such as teacher cancellations) of Perkins Loans and National Direct Student Loans (NDSLs) (see Section 5 of this chapter); - any other earnings on fund assets, including net interest earnings on funds deposited in an interest-bearing account (total interest minus bank charges incurred on the account); and - proceeds of any short-term no-interest loans the school makes to the fund in anticipation of receipt of its FCC or of loan collections. As discussed in the introduction to this chapter, a school applies for program funds annually through the electronic Fiscal Operations Report and Application to Participate (FISAP). The Department allocates funds directly to schools. The allocation (FCC) for the Perkins Loan Program is the amount of funding the school is authorized to receive from the Department for an award year. This amount is based on the funds appropriated by Congress for the program, as well as the allocation formulas, which were established by law and which do not provide for appeals. The provisions of the HEA and the Perkins Loan Program regulations that affect the amount of a school's allocation are also discussed in the introduction to this chapter. FISCAL PROCEDURES -------------------- [[Cash management--34 CFR 668.163]] Requirements for maintaining and accounting for SFA program funds are included in 34 CFR 668.163. The cash management requirements that apply in general to SFA programs (those in the General Provisions) are discussed in Chapter 3, Section 3. The cash management requirements specific to the campus-based programs (those in the Federal Work-Study [FWS], Federal Supplemental Educational Opportunity Grant [FSEOG], and Perkins Loan regulations) are discussed in Chapter 5, Section 3. The cash management provisions that apply specifically to the Perkins Loan Program follow. (Section 11 of this chapter provides additional information on fiscal procedures and records.) [[Maintaining funds]] - Under the provisions of 34 CFR 668.163(c), a school must maintain the Perkins Loan Program Fund in an interest-bearing bank account or investment account consisting predominately of low-risk, income-producing securities, such as obligations issued or guaranteed by the United States; interest or income earned on fund proceeds are retained by the school as part of the Perkins Loan Fund. [[Notification of disbursement]] - If a school credits a student's account at the school with Perkins Loan funds, the school must notify the student of the date and amount of the disbursement, the student's right to cancel all or a portion of that loan and his or her right to have the funds returned to the school's Perkins fund; a detailed discussion of these provisions is in Chapter 5, Section 3. [[Cash management requirements specific to the Perkins Loan Program--34 CFR 674.19]] - A school must establish and maintain an internal control system of checks and balances that ensures that no office can both authorize payments and disburse Perkins Loan funds to students. - A separate bank account for federal funds is not required, unless the school fails to comply with the requirements in the cash management regulations and program participation standards discussed in Chapter 3, Section 3. - A school must notify any bank that federal funds are deposited in an account by ensuring that the name of the account clearly shows that federal funds are deposited in the account or notify the bank in writing of the name of the account and keep a copy of this notice in its files. - The school must maintain sufficient liquidity in the Perkins Loan Fund to make required disbursements to students. - A school must deposit its ICC into its fund prior to or at the same time it deposits any FCC - A school must establish and maintain program and fiscal records that are reconciled at least monthly. - Each year a school must submit a Fiscal Operations Report plus other information required by the Department; the school must ensure that the information reported is accurate and must submit it on the form and at the time the Department specifies. RECORDKEEPING REQUIREMENTS ------------------------------ A school must follow the recordkeeping requirements in the General Provisions (discussed in Chapter 3, Section 7), those specific to the campus-based programs, and those specific to the Perkins Loan Program. Perkins Loan records a school must maintain include but are not limited to - the Student Aid Report (SAR) or Institutional Student Information Record (ISIR) used to determine a student's eligibility for a Perkins Loan; - the student's application data and data submitted to the Department or the school on behalf of the student; - documentation of each student's eligibility for a Perkins Loan; - documentation of the amount of a Perkins Loan, its payment period, and the calculations used to determine the amount of the loan; - documentation of the date and amount of each disbursement of Perkins Loan funds; - documentation of the school's calculation of any refunds or overpayments due to or on behalf of the student and the amount, date, and basis of the school's calculation; - documentation of the payment of any refund or overpayment to the SFA program fund or the Department; - information collected at initial and exit loan counseling required by Perkins Loan regulations; and - reports and forms used by the school in its participation in a campus-based program, and any records needed to verify data that appear in those reports and forms. In addition to following the recordkeeping requirements mentioned in Chapters 3 and 5, a school must to follow the procedures in 34 CFR 674.19 for documentation of a student's Perkins Loan repayment history. The school must maintain a repayment history for each borrower that shows - the date and amount of each repayment during the life of the loan; - the amount of each repayment credited to principal, interest, collection costs, and either penalty or late charges; - the date, nature, and result of each contact with the borrower (or endorser for loans made prior to July 23, 1992) in the collection of an overdue loan; and - copies of all correspondence to or from the borrower (and endorser for loans made prior to July 23, 1992), except for bills, routine overdue notices, and routine form letters (demand letters, notices of intent to accelerate, and the like are not considered to be routine form letters). [[Records readily available for review--34 CFR 668.24(d)]] A school must make its records readily available for review by the Department or its authorized representative at an institutional location designated by the Department or its representative. Generally, a school must keep records relating to the school's administration of a campus-based program or the Federal Pell Grant Program for three years after the end of an award year for which the aid was awarded and disbursed under those programs. There are some exceptions to this requirement: [[34 CFR 668.24(e)(1)(i)]] - The school must keep the Fiscal Operations Report and Application to Participate (FISAP) in the Perkins Loan, FSEOG, and FWS Programs, and any records necessary to support the data contained in the FISAP, including "income grid information," for three years after the end of the award year in which the FISAP is submitted. [[34 CFR 674.19(e)(1)(ii)]] - The school must keep repayment records for Perkins Loans, including records relating to cancellation and deferment requests for at least three years from the date a loan is assigned to the Department, canceled, or repaid. [[34 CFR 668.24(e)(3)]] - Records questioned in an audit or program review must be kept until the questions are resolved or until the end of the retention period applicable to the records, whichever is later. For information on the formats in which a school must keep its campus-based program records, see Chapter 5, Section 3. |