Making the List: Managing Under Heightened Cash Monitoring

Melissa Maichle .

On a quarterly basis Federal Student Aid (FSA) publishes a list of institutions that are required to use a payment method known as Heightened Cash Monitoring (HCM). This designation can be the result of things under the control of the Financial Aid Administrator such as too many compliance findings or missing statements in annual audits/program reviews or a determination that administrative capability standards aren’t being met by the current organization. Sometimes, it’s things outside of the control of the Financial Aid Office such as the institution being deemed financially unstable or losing certification. There are also two levels of HCM, 1 and 2, and a third status, Reimbursement. Each is assigned based on how much oversight FSA feels your process requires.

If your institution has already been placed on the HCM list, you have likely received detailed instructions about how your disbursement processes will change. You can get more information on the specifics in the Federal Student Aid Handbook under Maintaining and Accounting for Funds. However, there are some things that aren’t directly addressed in the documentation that we think you should consider because they potentially impact your entire campus.

First, regardless of designation, ordinarily you must credit Title IV aid to student accounts and process Title IV refunds before you are able to draw down funds. However, under the current COVID-19 waiver you may wait until disbursements have been received to process your Title IV refunds as long as you do so within three days of receipt of funds. Institutions using these payment methods cannot accept student or parent authorizations to hold Title IV credit balances. Despite the waiver, many institutions are used to drawing down the amount available under the current funding level ahead of the award period.This change may have major implications for the overall budget of your institution. So, make sure whoever pays the bills on your campus is informed.

HCM1 institutions can still transmit disbursement records up to seven days ahead of the assigned disbursement date and once the disbursement records are accepted by COD, can draw down funds from G5 to match the dollar amount of the accepted records.

HCM2 and Reimbursement institutions, however, have even more work to do before funds can be recovered. Once students have been credited with Title IV funds, in addition to origination and disbursement records, the institution must complete a payment request via COD in order to be reimbursed. No more than one payment request can be submitted within a 30-day period. COD will generate documents for FSA to review in order to approve the individual disbursement records submitted. Under HCM2, FSA will review a sample of disbursement records, but under Reimbursement, they will review every disbursement record and withhold funds for any they believe to be in error. In both cases you will be asked to provide documentation of eligibility for each disbursement being reviewed. Once disbursements are approved, FSA will transfer the funds to the institution’s bank account for federal funds.

To add to the significant delays in collecting federal aid proceeds, there is an increased administrative burden due to the need to submit documentation of eligibility for disbursements. Also, under the HCM2 and Reimbursement processes, the accounting procedures may be quite different that the norm for your institution. Finally, institutions using these payment methods have additional audit requirements and the auditor must include an opinion on the institution’s compliance in its annual report.

Last but not least, you should, to the extent possible, be addressing the reason your institution was placed on HCM. Like we said, it may not be within the control of the Financial Aid Office, but if it is, engage your senior management to find the solution — whether it be additional compliance training opportunities, integrating some or more automation into your processes or expanding the staff to be better able to manage the workload.

At the Higher Education Assistance Group, we have many resources to help institutions with their compliance efforts from customized training to on-site expert consultants. Email us at if we can help your school.