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This resource is being maintained for historical purposes only and is not currently applicable.

Obtaining, Managing, and Returning Title IV Funds

PublicationDate: 7/1/95
ChapterNumber: 4
ChapterTitle: Obtaining, Managing, and Returning Title IV Funds
SectionNumber: 3
SectionTitle: Projecting Cash Needs
PageNumbers: 89-93


4.3 Projecting Cash Needs

((Advance payment schools))
A school on advance payment must determine the amount of funds it
needs before it transmits a request to ED/PMS. The amount
requested must be limited to the minimum amount needed to make
disbursements, so that excess funds do not exist after disbursements
are made. The amount must be enough to meet:

- Federal Pell Grant disbursements to students,

- the federal share of Federal Supplemental Educational
Opportunity Grant (FSEOG) disbursements to students,

- the federal share of Federal Work-Study (FWS) payroll
disbursements,

- the federal share of Federal Perkins Loan disbursements, and

- Federal Direct Loan disbursements.*14*

The following equation may be used to calculate projected cash
needs:

((Formula))
Anticipated Disbursements - Balance of Cash On Hand -
Anticipated Recoveries - ACH/EFT Cash in Transit

= Projected Cash Needs

In general, a school's request for funds should not exceed its
immediate need. (See section 4.8.1.)

4.3.1 Immediate Need

((Immediate need))
Immediate need is defined as the amount of Title IV program funds a
school needs to make disbursements within three business days
following the date that the school receives the funds. This definition
of immediate need applies to all Title IV program funds, regardless
of whether the school draws down funds through Automated
Clearinghouse/Electronic Funds Transfer (ACH/EFT) or through
FEDWIRE. Amounts received beyond immediate need result in
excess cash. (See sections 4.8, 4.8.1.1, and 4.8.1.2.)

Formerly, immediate need for FEDWIRE drawdowns was defined as
one business day. This period was changed to three business days in
the cash management regulations that became effective July 1, 1995.

Immediate need is determined by the amount of cash a school needs
to make disbursements to students within a specified period of time.
As long as the school makes disbursements within that time period,
including disbursements made by issuing checks properly, it has
satisfied the immediate need standard. (See section 4.7.2.2.)

4.3.2 Special Program Considerations

To accurately determine the total amount of Title IV program funds
needed to make disbursements, a school must consider certain
program-specific requirements for each Title IV program.

4.3.2.1 Federal Pell Grant Program

((Valid SAR or ISIR))
A school may pay Federal Pell Grants to students only on the basis
of a valid Institutional Student Information Record (ISIR) or Student
Aid Report (SAR). A school must establish a system for tracking the
status of these documents and determining when a student's Federal
Pell Grant award is ready to be paid. (See section 6.1.1.)

((Federal Pell Grant authorization))
The maximum amount of Federal Pell Grant funds a school may
draw down is based on the school's Federal Pell Grant authorization,
as reported to the school in its Statement of Account (SOA). The
first SOA received by a school for an award year contains ED's
estimate of the amount of funds the school will need to make first
disbursements to students. As the award year progresses, the school
receives adjusted authorizations on the basis of student payment
information reported in the school's Institutional Payment Summary
(IPS) or electronic equivalent. (See section 6.1.1.3.) AT NO TIME
DURING AN AWARD YEAR MAY A SCHOOL'S REQUEST
FOR FEDERAL PELL GRANT FUNDS EXCEED THE AMOUNT
AUTHORIZED IN ITS CURRENT SOA.

4.3.2.2 Campus-Based Programs

Each campus-based program--Federal Supplemental Educational
Opportunity Grant (FSEOG), Federal Work-Study (FWS), and
Federal Perkins Loan--requires that awards made to students be a
combination of both federal and nonfederal funds. (See section 3.2.)

((Federal share of funds))
To accurately determine its immediate cash need for campus-based
programs, a school must calculate the portion of disbursements from
each program that may be attributed to federal funds. THE
AMOUNT OF FUNDS DRAWN DOWN REPRESENTS ONLY
THE FEDERAL SHARE.

((Program allocations))
The maximum amount of federal funds a school may draw down
from each campus-based program is based on the school's allocation
for that program, as reported to the school in its Official Notice of
Funding from ED. (See section 3.1.2.)

((FSEOG Program))
For the FSEOG Program, a school must time its drawdowns to
coincide with the dates it expects to disburse FSEOG funds to
students. Disbursement dates must be determined in accordance with
34 CFR 668.165(c). (See section 4.7.3.) FSEOG disbursements
must be made within a three-day period following the date funds
were drawn down.

((FWS Program))
For the FWS Program, a school must time its drawdowns to coincide
with its payroll dates. A school must estimate the amount of federal
funds needed to meet payroll for a given pay period and draw down
only the appropriate federal share of wages to be paid. Student
wages must be paid within a three-day period following the date
funds were drawn down.

((Federal Perkins Loan Program))
For the Federal Perkins Loan Program, a school must determine
whether the cash available in its Federal Perkins Loan fund is
sufficient to make loan advances to students. A school may draw
down the federal capital contribution (FCC) only if the amount of
Federal Perkins Loan funds on hand is not enough to cover
disbursements. A school must time its drawdown of FCC to coincide
with the dates it expects to advance (disburse) loans to students.
Disbursement dates must be determined in accordance with 34 CFR
668.165(c). (See section 4.7.3.)

4.3.2.3 William D. Ford Federal Direct Loan Program
Direct Loan funding requests are initiated only by schools that
participate in the William D. Ford Federal Direct Loan Program
(Direct Loan Program) under school origination (Level 1). The
Direct Loan Servicing Center initiates funding requests for schools
that participate under school origination (Level 2) and under
alternative origination (Level 3). (See section 4.4.5.)

((No authorization level))
Unlike the Federal Pell Grant Program and the campus-based
programs, there is no school allocation or authorization level for the
Direct Loan Program. Schools participating in the Federal Direct
Loan Program determine drawdown amounts on the basis of the
amount of funds needed to make loans to eligible borrowers. The
school draws down only the net amount of the loan. Loan fees are
deducted prior to drawdown.

((Estimating cash needs))
A Direct Loan school estimates the amount of funds it needs to make
anticipated disbursements on an ongoing basis. A school can use the
Direct Loan software or its own school computer system to calculate
the amount of funds needed. Loan records flagged in the system as
"eligible for payment" will be included in the computer-generated
estimate of funds needed. The school may need to adjust this figure
to account for Direct Loan funds on hand and anticipated recoveries
and cancellations. For each loan eligible for payment, the Direct
Loan software deducts a 4 percent loan fee from the gross
disbursement amount and counts only the net amount of the
disbursement in the estimate of funds needed.

((Promissory notes))
A school is not required to collect a signed, completed promissory
note from a borrower before DRAWING DOWN FUNDS for that
borrower. However, a school may not DISBURSE FUNDS to any
borrower until it has received the borrower's executed, legally
enforceable promissory note.

More information about drawing down Direct Loan funds can be
found in sections 4.4.5.1 and 4.4.5.2 of this book and in Chapter 6 of
the Direct Loan School Guide.


*14* Direct Loan funding requests must be made separately; they
may not be combined with cash requests for other Title IV program
funds. (See section 4.3.2.3.)

Last Modified: 06/30/1995