FSA Enforcement Bulletin, December 2023 – Institutions Must Maintain Appropriate Compliance Management Systems and Policies
POSTED DATE December 13, 2023
AUTHOR Federal Student Aid
ELECTRONIC ANNOUNCEMENT ID GENERAL-23-113
SUBJECT FSA Enforcement Bulletin, December 2023 – Institutions Must Maintain Appropriate Compliance Management Systems and Policies
The U.S. Department of Education’s Office of Federal Student Aid (FSA) is committed to effectively and fairly carrying out its statutory responsibilities to manage the oversight and enforcement functions related to federal student aid programs authorized under Title IV of the Higher Education Act of 1965 (Title IV). In addition, FSA places a high priority on preventing noncompliance or violations wherever possible, especially those that would create harm to students and taxpayers. Effective institutional compliance with Title IV regulations is the first line of defense in protecting students and the integrity of federal student aid programs. Today, FSA issues the following Bulletin reminding institutions of their obligation to establish and maintain appropriate compliance management systems and policies as part of the responsibilities required under their Program Participation Agreement (PPA) and to foster an overall culture of compliance to prevent violations and minimize harm to students and taxpayers. FSA recognizes that appropriate compliance management systems and policies will not prevent all violations, but they will reduce the risk of violations and will often facilitate early detection of likely violations, which can limit the size and scope of student and taxpayer harm.
When an institution signs a PPA, it agrees to comply with the regulations governing the Title IV program. Institutions that fail to comply could face administrative action. The applicable regulations require an institution to demonstrate that it is capable of adequately administering the program pursuant to the standards established in the regulations. 34 C.F.R. § 668.16. Appropriate Title IV compliance management systems and policies are key components of a school’s internal controls that contribute to its meeting the administrative capability requirement.
Relatedly, under 34 C.F.R. § 668.82(a), an institution must act with the competency and integrity required of a fiduciary. Institutions are “subject to the highest standard of care and diligence in administering the programs[.]” 34 C.F.R. § 668.82(b). An institution with an appropriate compliance management system will have greater ability to effectively perform regular self-checks to ensure that it is complying with Title IV requirements.
At the same time, FSA understands that resources among institutions participating in federal student aid programs vary widely and that an appropriate compliance management system will vary based on numerous factors, including the size, Title IV volume, and complexity of an institution. With those considerations in mind, hallmarks of effective compliance management systems may include:
- An adequate number of capable staff responsible for administering and overseeing the administration of Title IV and the provision of educational services, including marketing and recruiting activities;
- Adequate checks and balances in the system of internal controls;
- A well-known and easy-to-use mechanism for students, faculty, or staff to file complaints or report suspected violations;
- Appropriate records retention;
- Due diligence and monitoring for compliance, including through independent testing and audits;
- Monitoring and oversight of third party servicers acting on an institution’s behalf to ensure compliance with applicable laws and regulations; and,
- A process to address any identified shortcomings.
FSA has heard reports of ongoing challenges with employee retention and staffing in financial aid offices, and that some financial aid offices are struggling to remain administratively capable. Senior level administrators at these institutions are encouraged to address hiring and retention efforts and ensure that they have an appropriate compliance management system and staff relative to the size, Title IV volume, and complexity of the institution.
To be clear, this Bulletin does not represent a change in policy or an announcement of a new requirement. Instead, this Bulletin is intended to reinforce the importance of robust compliance management systems for institutions participating in the Title IV programs.
Reporting Misconduct or Fraud by Individuals or Institutions
FSA’s Office of Enforcement welcomes and encourages information from current and former employees, vendors, and contractors of postsecondary institutions, third-party servicers, third party lead generators, students, or any other relevant individual about potential violations of Title IV programs. Knowledgeable sources with information about potential violations may submit relevant tips and information by visiting Ed.gov/FSATips or emailing FSATips@ed.gov.