Higher education professionals in Rochester recently gathered at The Bonadio Group’s semiannual College & University Breakfast Series for an interactive discussion on emerging topics and compliance requirements facing colleges and universities related to the administration of their Federal Student Financial Aid programs.
Attendees heard from a legal expert about the related laws and legal compliance requirements surrounding the False Claims Act related to recruitment fraud, the Program Participation Agreement (PPA) and the Eligibility and Certification Approval Report (ECAR), and from Bonadio experts on topics related to Borrower Defense regulations, changes to financial responsibility standards and the Perkins Loan program wind-down.
For those who may have missed the event, the following highlights three of the top issues that are currently impacting colleges and universities throughout the country.
- Borrower Defense Regulations
New Borrower Defense Regulations will take effect in July 2020. These new rules are in response to an increase in defense to repayment claims and clarify the process for borrowers, and place additional reporting responsibilities on institutions. Institutions will now need to provide the Department of Education (DOE) qualitative information, in addition to previously required quantitative information if newly defined triggering events occur. In addition, a new supplemental schedule will be required to be attached to the audited financial statements.
- Perkins Loan Program
A plan to officially wind down the Perkins loan program is in place. The low-interest federal student loan program ended in September 2017, meaning schools are no longer authorized to grant this aid. The Department is using a proportional share formula based on excess cash reported, to calculate the amount to return to the Department, and the Institutional funds to be refunded. However, institutions are now required to assign all Perkins loans that have been in default for two or more years, if they do not have acceptable collection records or if the loan is not in a regular payment status. Although many of these loans are years old with the borrowers lacking the proper documentation for assignment, those without documents can work with the federal government to collect the proper necessary paperwork.
- False Claims Act
The False Claims Act was put in place to protect taxpayer dollars and penalize those who are deemed to have defrauded governmental programs. Institutions that violate the False Claims Act through misuse of the Federal financial aid program are at risk for severe penalties and fines.
There are several ways that institutions can run afoul of the False Claims Act, the most obvious of which is falsifying financial aid information to assist unqualified students in receiving financial aid. However, one element of the False Claims Act that has seen an increased focus in recent years deals with recruiting. Over the past several years, a number of institutions throughout the country have allegedly engaged in illegal actions to compensate recruiters for the number of students that are enrolled, defrauding the False Claims Act and the Incentive Compensation Ban of the Higher Education Act, which bans schools from offering rewards for recruiter success. The most high-profile example happened in 2019 with the college admissions scandal, which saw coaches and recruiters receiving bribes to enroll unqualified students under false pretenses. However, all institutions need to be aware that providing any incentive compensation, including raises based on performance results, to recruiters is illegal under the False Claims Act. With the increased public scrutiny due to the headlines generated from the college admissions scandal, expect the Department of Justice to continue to vigorously pursue violations of the False Claims Act and seek heavy penalties against offenders.
As educational compliance requirements and regulations continue to change, it’s important for professionals in higher education to stay in the know about how to protect yourself and your school. The Bonadio Group is your trusted advisor for navigating the ever-evolving educational landscape. For more information about our Higher Education practice and upcoming events, click below to learn more.
This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. Should you require any such advice, please contact us directly. The information contained herein does not create, and your review or use of the information does not constitute, an accountant-client relationship.
