The Importance of Title IV Reconciliation
Reconciliation and fiduciary responsibility
Except for funds received by a school for administrative expenses and for funds used for the Job Location and Development (JLD) Program, funds received by a school under the Federal Student Aid (FSA) programs are held in trust for the intended student beneficiaries. As a trustee of those funds, a school must have procedures in place that ensure FSA funds are used as intended.
Cash management regulations
- Cash management regulations
- 34 CFR Part 668 Subpart K
- 668.162 Requesting funds
The cash management regulations establish rules and procedures that a school must follow in requesting, managing, and returning FSA program funds. Under the cash management regulations, a school has a fiduciary responsibility to have a system in place to:
safeguard FSA funds,
ensure FSA funds are used only for the purposes intended,
act on the student’s behalf to repay a student’s FSA education loan debt when the school is unable to pay a credit balance directly to the student, and
return to the Department any FSA funds that cannot be used as intended.
Financial responsibility regulations
34 CFR Part 668 Subpart L
Failure to have such a system in place calls into question a school’s administrative capability, its fiscal responsibility, and its system of internal controls. In short, it calls into question a school’s qualifications to participate in the FSA programs.
A key component of the system described is the process of reconciliation. Reconciliation is a process in which financial records are compared and discrepancies resolved. Conducting reconciliation frequently can help ensure that your school is properly exercising its fiduciary responsibilities to safeguard federal funds and ensure that they are used as intended.
Your school is required to have documented reconciliation procedures that describe who, how, and when your school performs Title IV reconciliation. You should review these procedures regularly to identify issues and make any necessary improvements. Your school must meet all cash management and disbursement reporting requirements. Regular reconciliation can help identify and resolve discrepancies so your school can stay in compliance.
Title IV reconciliation is the process by which a school reviews and compares Title IV aid (grants, loans, and Campus-Based aid) recorded on the Department’s systems (COD, G5, NSLDS) with the information in the school’s internal records. Through reconciliation, disbursement and cash discrepancies are identified and resolved in a timely manner to ensure the school meets all regulatory requirements. Schools must document their reconciliation process and retain any reconciliation documentation for audit and review purposes.
34 CFR 668.166
If completed on a regular basis, reconciliation can assist schools in determining whether disbursement reporting and excess cash deadlines are being met, and whether any additional data needs to be submitted in the various Department systems to ensure all school data is reflected correctly.
A school performs internal reconciliation when it compares business office records of funds requested, received, disbursed, and returned to financial aid office records of funds awarded to students. When the school compares its reconciled internal records to the Department’s records of funds received and returned, and of grants or loans originated and disbursed to students at the school, it is performing external reconciliation. A school ensures that the Department’s records reconcile with the school’s records, both at the cumulative and individual student levels, when it performs external reconciliation.
At a minimum, your school should reconcile its FSA financial records monthly. However, the more often you perform reconciliation, the more likely you will be able to identify and resolve issues before they become a bigger problem. Frequent reconciliation is an important internal control that can increase the overall integrity of the FSA programs at your school. In addition, schools that have a system to identify discrepancies between school internal records and data contained in Department records will find that monthly reconciliation is easier and the year-end closeout less time consuming.
Schools should work with their administrative software systems specialists to create a program that compares COD student level data to:
student Title IV award information maintained separately by the financial aid office;
Title IV funds posted to each student’s account; and
report exceptions found during the comparison process.
Common discrepancies you may be able to identify using COD reports in your school’s reconciliation process include:
recipient’s disbursement data appears on the school’s records for an award amount less than the amount shown in the COD System;
recipient’s data appears on the school’s records for an award amount greater than the amount shown in the COD System;
recipient’s disbursement data appears on the school’s records but does not appear in the COD System.
See the electronic announcement of November 19, 2019, for a summary and reminder of the general requirements regarding disbursement reporting, excess cash, and reconciliation.
The Department has reviewed the operation of schools where the schools’ administrative systems generate reports whenever data in the schools’ business and financial aid offices do not agree (sometimes as often as daily). The schools’ directors of financial aid and business officers meet whenever the reports are generated to resolve discrepancies. We found that at these schools the annual internal closeout takes hours rather than days and that time required for reconciliation with the Department’s data is equally reduced.
Internal controls in automated systems
Since no one person or office may have the ability to both authorize and disburse Title IV funding (see Volume 2, System of checks and balances), if award entries made by the financial aid office automatically roll over and populate award fields in the business office, then the separation of functions must take place elsewhere.
For example, if your system automatically awards funds based on a student’s budget, then your system must ensure that only employees with a special security standing can change those budgets or otherwise modify a student’s award. In addition, your system must be able to identify any employee who makes a change to a data element that can affect the level of a student’s award (anyone who initiates a budget or award override).
Who is responsible for reconciliation?
More than one office has access to and expertise with data needed to facilitate the Title IV reconciliation process. For instance, cooperation between the business and financial aid offices is essential if reconciliation of FSA funds is to be successful. For example, the financial aid office will likely be the source of COD System information, while the business office is generally responsible for G5 data and student account information.
Though it is possible and even advisable for financial aid and business office staff to be able to view information in each other’s systems (e.g. G5, COD, etc.), there is no substitute for the direct involvement of professionals in each office in the reconciliation process. Reconciliation is a shared responsibility: the business office and the financial aid office are equally responsible for reconciliation. This responsibility involves much more than the mere sharing of reports; it requires joint action by the financial aid and business office to identify and correct discrepancies in a timely way.
Reconciliation and a school’s coordinating official
Department regulations require that every participating school designate a capable individual to coordinate aid from the FSA programs with all other aid received by students attending the school. The coordinating official is responsible for ensuring that the school has a system for identifying and resolving discrepancies with FSA-related information no matter where it occurs at the school. Note that resolution includes not only determining what information is incorrect, but actually correcting the inaccurate data. Since the resolution of discrepancies with data is the essence of reconciliation, your school’s coordinating official should be part of the reconciliation process. (See Volume 2 for more information about the requirement for schools to have coordinating officials.)
34 CFR 668.16(b)(1)
The Department does not specify the office in which your school’s coordinating official must work, nor do we specify the type of system your school must have to reconcile its data internally and externally. However, the Department does require your school have a coordinating official and perform regular reconciliation. (See Volume 2 for more information on the requirement to have a coordinating official and other key requirements of administrative capability.)
Recommended general reconciliation practices
A key factor in facilitating reconciliation is staying on top of the process. The Department encourages schools to:
define responsibilities of key individuals and offices;
document your reconciliation procedures;
build in regular communication between your business office, financial aid office, and school’s technical staff;
compare internal student accounts and business office/bursar records with financial aid office records and resolve any discrepancies;
balance all subsidiary accounts to the general ledger;
ensure that all drawdowns and refunds of cash are accounted for and applied to the correct FSA program and award year;
ensure that all batches have been sent to and accepted by the COD System, all disbursements and adjustments are accurately reflected in the COD System, and all responses are imported into the school’s system;
ensure that all unbooked loans are booked or inactivated (reduced to $0) for Direct Loans and TEACH;
resolve all outstanding rejected records;
return all refunds of cash via G5; and
request any remaining funds owed to the school based on actual disbursements accepted by the COD System (Pell, DL, TEACH) or reported as expenditures on your FISAP (Campus- Based Programs).
Your school is ultimately responsible—including when it uses a thirdparty servicer—for meeting all regulatory requirements and reconciling on a regular basis. Reconciliation should include ensuring that your school’s internal records match what is at the servicer as well as what is in the Department’ systems.
Each school is assigned a COD reconciliation coordinator who can help answer reconciliation questions. If reconciliation issues arise that require your school’s immediate attention, your COD reconciliation coordinator may contact your school directly.
For disbursement reporting, excess cash, or reconciliation questions, or to speak with your COD reconciliation coordinator, please contact the COD School Relations Center at 1-800-848-0978, or CODSupport@ed.gov.
Discrepancies that occur between financial aid and business office data are usually caused by a lapse in communication. Note that these discrepancies often do not show up in a comparison of the financial aid office’s records to COD records, or in the comparison of drawdowns/ returns between the business office and the G5 payment system. For instance:
the financial aid office notifies the business office that the student is eligible for payment on a certain date, but the disbursement record is rejected by the COD System. If the financial aid office doesn’t tell the business office to cancel the disbursement, the business office draws down funds and makes a disbursement to the student that is not supported in the COD System or in the financial aid office’s records.
the business office cancels a disbursement and/or makes a refund of cash to the G5 system without informing the financial aid office. Thus, the original amount will still be included as a disbursement but will not be reflected in the net Cash Receipts.
The first step in the reconciliation process should be to confirm that business office records of actual disbursements posted to student accounts are consistent with financial aid office records of student award and scheduled disbursement amounts. Both offices should also agree on the amount of funds that should have been drawn down from G5 to cover the funds disbursed to students.
Discrepancies can be avoided by establishing daily or weekly communication touchpoints between the two offices or by scheduling a data comparison between the two office systems. Resolving differences in internal reconciliation will lead to a smoother external reconciliation with the Department’s official data.
Internal reconciliation should also include steps to reconcile cash transactions such as drawdowns and refunds of cash. Your school should ensure that bank statements correctly reflect all funds drawn or returned and that this information matches the school’s ledgers and other internal records. Your school should confirm that any returns of Title IV aid calculated by the financial aid office are reflected correctly in the business office student account records and that any funds not necessary to cover immediate need (excess cash) have been returned to the Department.
So, you could begin the internal reconciliation process by comparing a monthly financial aid office roster of scheduled Title IV disbursements to a monthly business office cash detail report that reflects Title IV funds drawn down and Title IV funds disbursed for the month. If you discover discrepancies, you must resolve them.
In addition, you should also compare business office and financial aid office records of adjustments (refunds of cash) made during the month. At times, returns of cash due to withdrawals performed by the financial aid office aren’t applied by the business office. In addition, sometimes adjustments made by the business office aren’t noted in the financial aid office. Either of these omissions can cause an internal discrepancy that will affect a school’s ending cash balance and should be resolved before a school begins its external reconciliation process.
During internal reconciliation, the school will have resolved any differences between records in the financial aid office and those in the business office. In external reconciliation, a school will reconcile its records to the Department’s records.
Schools may perform internal and external reconciliation in any order. However, if internal reconciliation is completed first, there will be fewer discrepancies to resolve during external reconciliation. The Department offers various tools to assist schools with external reconciliation (explained later in this chapter and Chapter 6).
Reconciliation In The Pell Grant Program
Although there is no regulatory requirement for reconciling your school’s Pell Grant Program operations on a monthly basis, it is almost impossible to satisfy other program requirements without performing monthly reconciliation of your school’s Pell Grant Program participation.
For example, a school must submit Federal Pell Grant or Iraq and Afghanistan Service Grant disbursement records no later than the deadline dates published in the Department’s annual Federal Register notice (most recent example can be found in the July 14, 2020 Federal Register for 2020-2021 award year deadline dates) after making a Pell Grant or Iraq and Afghanistan Service Grant disbursement or becoming aware of the need to adjust a student’s previously reported disbursement for those programs. A school’s failure to submit disbursement records within the required time frame may result in an audit or program review finding.
To be proactive, on a monthly basis, your school should compare:
the records of Pell Grant awards and scheduled disbursements to students made in the financial aid office to awards on individual student accounts in the business office;
the record of disbursements in the school’s Pell Grant Program ledger to the record of Pell Grants disbursed to students in the business office;
the individual and program records of all adjustments (positive and negative) made during the period; and
on an individual and program basis, the record of Pell Grants disbursed to students in COD to the records of Pell Grant disbursements in the business office.
Monthly reconciliation for the Pell Grant Program should include verifying that individually and cumulatively:
records of student awards and pending disbursements calculated and maintained by the financial aid office match the records of pending disbursement data received or maintained by the business office;
business office records of actual disbursements posted to student accounts are consistent with financial aid office records of student eligibility and applicable award and disbursement amounts;
records of disbursements in the general ledger match those in subsidiary ledgers (e.g. student ledgers and accounts);
the actual disbursements posted to students’ accounts internally match the actual disbursements accepted in the COD System (including any adjustments to actual disbursements);
cumulative school and COD records of Pell Grant disbursements match net draws (drawdowns minus refunds of cash) in G5 for the award year in the Pell Grant Program;
any remaining excess cash balances have been returned to the Department per cash management regulations; and
all reconciliation efforts have been documented for future reference, and all identified balance issues have been resolved in a timely manner.
Pell Grant reconciliation defined
Pell Grant reconciliation is when a school reviews and compares Pell Grant data in its internal records with information in the Department’s systems. This should occur regularly and is recommended at least monthly. See the annual Pell Grant reconciliation reminder, for a summary of Pell reconciliation, including an attachment of Q’s and A’s.
This is the reconciliation of disbursement transactions (actual disbursements and adjustments) and related cash transactions (drawdowns, drawdown adjustments, refunds of cash, and returns) between business office records and the financial aid system. The school should document any discrepancies and resolve them in a timely manner.
This is the reconciliation of internal disbursement and cash balances from the business office and financial aid office with disbursement and cash balances from the COD system. At a minimum this reconciliation should be completed monthly to ensure that data is correct in all systems and that cash management and disbursement reporting timelines are being met.
Reconciling school-level data
Whether you maintain your records electronically or on paper, comparing the records of Pell Grant awards made to students by the financial aid office to the records of Pell Grant disbursements recorded in individual student accounts should be a routine process that is not complex. If awards recorded by the financial aid office automatically populate the business office records, the data should always agree.
If your school’s processes are automated, your systems staff can create a program that compares the relevant data elements and generates an exception report that identifies discrepancies between business office and financial aid office data. Reconciliation of school level data is an internal control check mechanism. By reviewing the exception report on a daily basis, the bursar ensures that the school’s internal records agree and he or she also confirms that the school’s system for communicating data between offices is functioning correctly.
Reconciling school-level data with COD Pell Grant data
Your school should reconcile all internal cash (drawdowns and refunds of cash) and disbursement records (actual disbursements and adjustments) with information in the COD System on an ongoing basis (external reconciliation). This will greatly minimize the number of post deadline adjustments and help identify and resolve issues as they arise.
In reconciling school-level Pell Grant records of individual student awards with individual student records in the COD System, you can use the following tools:
Pell Grant school account statement (SAS) and SAS disbursement detail on demand
The COD System produces the Pell Grant SAS monthly. This is similar to a bank statement and summarizes processing activity (both cash and disbursement data) for that month and/or year-to-date (YTD). It can be used as a reconciliation tool to compare to financial aid and business office records.
Schools may also request Pell Grant SAS disbursement detail on demand files through the report requests page on the COD website. This report contains disbursement level detail for schools to use for interim reconciliation as needed.
Pell Grant reconciliation report
The Pell Grant reconciliation report is a one-record student summary of processed records and can be helpful to your school as it completes both the year-end and ongoing reconciliation processes. This report can be downloaded, printed, or imported into a spreadsheet for comparison with your school’s data. This report provides the total YTD disbursement amount per student as it is in the COD System.
Pell Grant electronic statement of account (ESOA)
The ESOA summarizes the status of a school’s current funding level (CFL) versus the net drawdown for that award year. In addition, the ESOA provides (for the current processing day only) the YTD unduplicated recipient count, the YTD total accepted and posted disbursements, the YTD total administrative cost allowance (ACA) paid to schools, and the net drawdown payments in G5 up to the current processing day. That is, it provides the sum of school initiated drawdowns, direct payments for obligate/ pay accounts, adjustments (+/–) less refunds, and returns.
For a sample ESOA, go to the 2020–2021 COD Technical Reference and click on Volume VI, Section 7, and go to pages 24 and 25.
Pending disbursement list report
The pending disbursement list report contains disbursements not yet funded in the COD System. This “list by student” reports anticipated disbursements received and accepted, but not yet made, in a school’s Pell Grant Program.
Pell Grant YTD record
A Pell Grant YTD record can be requested for an individual student or for all Pell Grant recipients at your school. A YTD record contains more detailed award and disbursement data than the Pell Grant Reconciliation Report. It contains information at the individual transaction level and can be used to replace a corrupt database or to reconcile records with accepted data on the COD System.
The YTD record shows the award information that the COD System is using for each student. You can view each disbursement as well as the total disbursed to a student for the year. The YTD summary shows the total number of recipients at your school, the number of awards, and the disbursements accepted, rejected, or corrected. The details in a YTD record can help you resolve discrepancies between school and COD data.
You can also use the following COD website screens:
Funding Information screen and school funding history report
The Funding Information screen shows totals such as current funding level, available balance, net drawdowns, net accepted and posted disbursements, and cash > net accepted and posted disbursements. These totals can be used to compare against your internal totals from both your business office and financial aid office. If discrepancies are found, the detail should be compared and any discrepancies resolved.
Schools can access the school funding history report through a link at the bottom of the funding information screen. This report displays YTD funding authorization (current funding level or CFL) information for the selected school, program type, and award year. This report also contains a history of cash activity transactions for the school.
Cash Activity screen
The cash activity screen shows all individual drawdown, refund of cash, and drawdown adjustment transactions received in the COD System from G5. This information can be used to reconcile to internal bank statements and cash transactions.
Anticipated Disbursement Queue
This page allows schools to search—by award year, program, disbursement date range, and SSN—and view anticipated disbursements currently on file in the COD System. They can select up to 100 records at a time and submit them as actual disbursements and can also export the anticipated disbursement list. While schools no longer use the action queue to release pending disbursements, it continues to be available on the COD website.
The COD Technical Reference, Volume VI, Section 8—COD Reports can be found at https://fsapartners.ed.gov/publications. Click on System Technical Reference under Resource Type.
Final reconciliation of a Pell Grant award year
In addition to regular monthly reconciliation of Pell Grant data, a final reconciliation should be performed as soon as possible after final scheduled disbursements have been made for the award year. If a school is meeting all disbursement/adjustment reporting, excess cash, and reconciliation requirements, final reconciliation should begin no later than the last award or payment period end date for a given program and year. A school should be able to reconcile to a zero ending cash balance soon after its final disbursements and should not carry an ending cash balance (positive or negative) for an extended period. Schools can close out via the COD School Balance Confirmation page when they have a zero ending cash balance or are within the established tolerance and have $0 in total net unbooked disbursements.
This final reconciliation should ensure that all data are correct and that total net drawdowns equal net accepted and posted disbursements (NAPD) in the COD System (cash > NAPD balances should equal $0). This process must be done by the applicable data submission deadline defined below, as well as immediately following processing of any additional data by the school (for example, returns of unclaimed credit balance checks, eligible late disbursements, or disbursement adjustments made within regulatory time frames but which occur after the data submission deadlines).
There are two deadlines which affect this process -
Data submission deadline
Schools must finalize reconciliation of cash and reporting of Pell Grant and Iraq and Afghanistan Service Grant disbursements and disbursement adjustments by the data submission deadline, which is published annually in the Federal Register and is the last business day of September following the official end of the award year (e.g., for 2020–2021, the deadline will be September 30, 2021). After this date the COD system will not accept upward awards or disbursement adjustments without approval for extended processing (downward adjustments will continue to be accepted). Your school can request an extension to the data submission deadline via the COD website on the Request Reopen/ Extended Processing page.
Funding cancellation deadline
Pell Grants and Iraq and Afghanistan Service Grants are completely closed and funding is cancelled (no longer available) five years after the award year on the last business day of September (e.g., for 2020–2021, funding will be cancelled on September 30, 2026). After that time, schools will be unable to draw down or adjust funds via G5 (although refunds of cash will still be accepted), and the COD System will be completely closed to any further award or disbursement processing for that award year. Schools must complete all final reconciliation activities well before this final deadline, in accord with disbursement reporting timelines and the data submission deadline. After the five-year period, funds must be returned directly to the Treasury. If you need help returning funds after the five-year closing date, please contact G5 customer service at 1-888- 336-8930.
The data submission and funding [no-lexicon]cancellation[/no-lexicon] deadline dates appear in the same Federal Register notice mentioned earlier in the chapter. For 2020–2021 deadlines, please see the Federal Register Volume 85, Number 135, July 14, 2020.
Reconciliation, Records, and Internal Controls in the Campus-based Programs
A school is required to reconcile its Campus-Based program and financial records at least monthly. A school may be required to provide records of its monthly reconciliations during the required annual audit or during a program review. In addition, the school performs annual reconciliation of its annual participation in the Campus-Based programs when it completes the Fiscal Operations Report (FISOP). The FISOP is parts III, IV, V, and VI of the Fiscal Operations Report and Application to Participate (FISAP).
If you participated in any Campus-Based programs in an award year, you must report on your activities for those programs by completing the appropriate portions of the FISAP by the following October.
- Monthly Reconciliation Required
- Perkins 34 CFR 674.19(d)(1)
- FWS 34 CFR 675.19(b)(2)(iv)
- FSEOG 34 CFR 676.19(b)(2)
Your school must reconcile, at least monthly, your Campus-Based funds drawn down through G5 to your designated bank accounts accounting for any discrepancies.
In addition, your school must have a system that reconciles your drawdowns for the award year at least monthly in the individual Campus- Based Programs plus any funds provided by your school or received from other sources to the amounts expended in the Campus-Based programs.
Reconciliation and the Federal Perkins Loan Program
Though the Perkins Loan Program has officially ended and no new Perkins Loans can be made to students, schools that have not liquidated their Perkins portfolio must have a system that, on at least a monthly basis, reconciles and accounts for any discrepancies in:
cash on hand in your Perkins fund at the start of the period;
payments of principal, interest, late charges, and collection charges received during the period;
expenses paid from the fund during the period (permissible collection costs not paid by the borrower);
repayments of fund capital to the federal government paid from the fund;
repayments of fund capital to the institution paid from the fund;
accounts on which incorrect information is recorded in NSLDS; and
cash on hand in the fund at the end of the period.
Reconciliation and the Federal Supplemental Educational Opportunity Grant (FSEOG) Program
Your school must have a system that at least monthly reconciles and accounts for any discrepancies between FSEOG awards made to students during an award year plus the administrative cost allowance (ACA) and any:
federal funds drawn down during the award year for FSEOG awards; plus
funds carried forward from the prior year, carried back from the upcoming year, or transferred from FWS during the award year; plus
any nonfederal funds (both institutional and noninstitutional) made available for grants to students during the award year; plus
any other resources designated as FSEOG awards to students.
Reconciliation and the Federal Work-Study (FWS) Program
Your school must have a system that reconciles at least monthly the amount of funds drawn down and received to the amounts disbursed to students or returned to the Department. Specifically, these are the federal funds drawn down during the award year for FWS awards, plus funds carried forward or back, or transferred from FSEOG for that award year, plus any nonfederal (both institutional and noninstitutional) funds made available for FWS payments to students during the award year versus FWS funds paid to students during the award year, plus ACA, plus job location and development expenditures. Your school must account for any discrepancies.
In addition, you should examine your FWS program and fiscal records at the start of the award year and monthly thereafter. The following questions might help you develop procedures that will enhance the effectiveness of reconciliation within your FWS program:
Do you have a method for verifying that a student’s rate of pay in your payroll system matches the rate of pay on which the award was calculated, and if the rate assigned to the position and the experience level of the student matches the levels required by the school’s policies and procedures?
Do you have a system that records the maximum a student may earn in FWS wages and alerts you if a student approaches that amount?
Do you periodically evaluate your rate of expenditures to determine if you are spending funds at the same rate, if you are spending less, or if you are spending more than the amount you budgeted for FWS expenditures?
Are your matching funds consistently deposited at the same time you received your federal share?
In the FWS Program, your requests for funds should always be for a payroll for which data has been entered. The only time your need for funds should be greater or less than your draw is when anticipated payments from an off-campus employer are early or late. Excepting those occasions, do you often find yourself requesting additional funds or returning unused funds?
Do you have a process in place to ensure that students are actually working the hours reported—that timesheets are accurate?
Do you frequently audit payrolls to test whether hours recorded in the payroll system match the hours reported on student timesheets?
Do you reconcile the expenditure of funds in the community service part of your FWS program to the reports submitted by employers?
Closeout information for the Campus-Based Programs
See the February 21, 2020 electronic announcement for more information about closeout procedures for the Campus-Based Programs. This announcement outlines the closeout procedures for the 2018-2019 Campus-Based programs. Information provided includes where to find closeout amounts in the G5 system, the closeout amount determination process and the notification method if an award decreases.
Contact Information For Reconciliation
For disbursement reporting, excess cash, or reconciliation questions about the Pell Grant, TEACH Grant, FWS, FSEOG, Perkins Loan, or Direct Loan programs, call the COD School Relations Center at 1-800-848-0978 or e-mail CODSupport@ed.gov.