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.) |