It is the intent to limit the use of cash to the specific program activity for which funds were established with Federal Capital Contributions (FCC). To accomplish this, funds for the loan and scholarship programs must be accounted for separately from other funds of the school, (and from each other), providing a clear audit trail for all transactions.
The school must at all times maintain all monies relating to each individual fund in one or more interest-bearing accounts or investment instruments which meet the Office of Management and Budget requirements established for Federal monies held by third parties. Should the school desire to integrate the funds with other school resources for investment purposes, the school must:
The school must place all earnings into the funds, but may first deduct from total earnings any reasonable and customary charges incurred through the use of an interest-bearing account.
For the Nursing FCC Loan Program, if the school documents that the costs associated with the use of an interest-bearing account would exceed expected earnings, the school is not required to maintain these monies in an interest-bearing account. However, the school in exercising its fiduciary responsibility should keep in mind that investment income can be an important source of additional funds for awards to students.
[42 CFR Part 57.205 and 57.305]
If the Secretary determines funds were used for other purposes (i.e., comingled with other programs' funds, with the school's general operating funds, or held by the State Treasurer), the school will be required to reimburse the program for investment income that would have been earned had the funds not been diverted for other purposes. The amount to be reimbursed will be compounded from the time the comingling began until the fund is reimbursed.
The Department of Health and Human Services makes payments of Federal funds to institutions through the Division of Payment Management. Institutions receive funds through electronic funds transfer either by cash line (electronic funds transfer) or Smart Link II (electronic funds transfer).
Treasury Department Circular No. 1075 specifies the requirements for drawing down funds.
It should be noted that the Department of Health and Human Services will not allocate funds to schools that have not used prior year allocations or have excess cash. Therefore, it is very important for the financial aid office and fiscal office to work together in identifying eligible students and funding requests. Further, the Division of Student Assistance will carefully review each institution's estimated need in conjunction with the projections given on the Annual Operating Report. If a school's available funds meet or exceed its needs for an academic year, a new award will not be issued.
The Public Health Service Act has authorized the Secretary to enter into agreements for the establishment and operation of student loan funds and scholarships with schools engaged in offering courses leading to degrees in the health professions and in nursing. As part of the agreement, schools are required to return any unrequested funds remaining in the accounts at each June 30.
A school must review the balance in each Health Professions and Nursing FCC fund on at least a semi-annual basis to determine whether the fund balance, compared with projected levels of expenditures and collections, exceeds its needs. A school in closing status must review the balance in each fund on a quarterly basis. The school's determination of excess cash is subject to review and approval by the Secretary.
Monies identified as in excess of the school's needs must be reported, and the Federal share returned to the Federal Government by the due date of the required report which identifies excess monies.
[42 CFR Part 57.205 and 42 CFR Part 57.305]
See Chapter 5, Remittance of Collections for additional information on computing excess cash and remittance to the Federal Government.
The regulations require institutions to develop and implement procedures related to cash management for the Health Education Assistance Loan (HEAL) Program. In addition to the procedures discussed below, see Fiscal Management, Program Monitoring, Chapter 2, Section 3B4, Risk-Based Insurance Premiums for remittance of premiums.
Procedures related to HEAL proceeds receipt and release for HEAL loans must be documented and maintained by the school. They must assure that the receipt and release functions are separately maintained from the application preparation and approval process. Schools must designate and maintain a restricted account for receipt of electronically disbursed student loan proceeds. Further, a school must keep a record of the dates on which the following events occur for each HEAL loan disbursement:
In addition, institutions must maintain either a photocopy of each HEAL check, draft or a copy of a disbursement roster. If the school chooses to use disbursement rosters in lieu of photocopies, the rosters must include the information that appears on the check (i.e., name of the lender, date of the disbursement, name of the borrower, amount of the check, parties to whom the check was made co-payable, check number, etc.). After receiving a HEAL check for a borrower, the school must assure that the amount of the check does not exceed the approved total amount of the loan or the statutory maximums; and that the borrower personally endorses the HEAL check; power-of-attorney is not acceptable. The school must maintain proof of disbursement (in an automated or manual format) for a period of 5 years from the last day of a HEAL borrower's attendance.
The school and the borrower are expected to endorse a HEAL check within 30 days of receipt of the check or draft, with the school retaining its portion and disbursing the remainder to the borrower no later than 45 days after the disbursement date of the HEAL funds. Disbursements should not occur prior to enrollment unless the borrower has pre-enrollment educational expenses that must be met. However, good practice suggests that it is best to avoid pre-enrollment disbursement whenever possible in case the borrower ultimately does not enroll. In addition, HEAL regulations stipulate that cancelled disbursements must be returned to the lender within 30 days of the determination that the borrower does not plan to enroll.
[Section 705; 42 CFR Parts 60.16, 60.52, 60.56, and 60.61]
In the event borrowers withdraw, are dismissed or take leaves of absence during an academic period for which they have obtained HEAL funds, institutions must:
The Department of Health and Human Services expects that refunds will be made within 120 days of the date of disbursement. Even though the regulations do not specifically set forth a time limit, 120 days coincides with requirements governing programs under Title IV of the Higher Education Act.
Schools must establish a written policy for calculating refunds. This policy must clearly establish the portion of any refund that will be attributed to the borrower's HEAL loans and the portion that will be attributed to other sources from which the borrower received aid, including the amounts borrowed from other loan programs.
Regulations require lenders to apply refunds directly to the principal, not to interest, thus reducing the amount of HEAL principal that remains outstanding. Cancellation of HEAL disbursements in total, with the school returning the check to the lender within 120 days, will be applied as a refund to the principal amount of the HEAL loans. The lender will notify the Department and the Department will refund the insurance premium, which will also be deducted from the principal amount of the loan.
[42 CFR Parts 60.21, 60.52, and 60.54]
