Participation, Fiscal CHAPTER

1
Procedures & Records
This chapter addresses fiscal procedures and recordkeeping requirements
that are specific to the campus-based programs. For information on general
fiscal procedures and records requirements for all Federal Student Aid pro-
grams, refer to Volume 2 - School Eligibility and Operations, and the current
edition of the Blue Book.

A school applies for and receives program funds directly from the
U.S. Department of Education by submitting an application, the Fiscal R Chapter Highlights R
Operations Report and Application to Participate (FISAP), each award
FISAP........................................6-2
year. The school’s financial aid administrator is responsible for
Allocation of Funds.................6-3
ensuring that eligible students at the school receive program funds
according to the provisions of the law, the regulations, the Program Transfer of Funds ...................6-6
Participation Agreement (PPA) signed by both the Secretary of Federal/Nonfederal Share.....6-9
Education and the school’s chief administrative officer, and other Recordkeeping.......................6-17
criteria the Department may establish.

PROGRAM PARTICIPATION AGREEMENT

A school that wants to participate in any Federal Student Aid
(FSA) program must sign a PPA with the Department. The school
Program Participation
official legally authorized to assume the agreement’s obligations on
Agreement
the school’s behalf must sign the agreement. (For more information 34 CFR 675.8
on this agreement, see Volume 2 - School Eligibility and Operations.)

Under the PPA, the school agrees to use the funds it receives
solely for the purposes specified in the regulations for that program
and to administer each program in accordance with the Higher FISAP Application
Education Act of 1965, as amended (HEA), and the General 34 CFR 673.3
Provisions regulations. See volume 2 for General Provisions
requirements that apply to all of the FSA programs. The Federal
Perkins Loan and FWS programs have additional requirements that
are part of the PPA and that are specific to the individual program.

Perkins PPA Requirements

The agreement requires the school to submit annually to the
Perkins PPA
Department a report containing information that determines the 34 CFR 674.8
school’s cohort default rate.

The agreement for the Federal Perkins Loan Program also

requires the school to establish and maintain a Fund and to deposit
into the Fund:

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• the Federal Capital Contribution (FCC) the school receives

as its federal allocation for the program for each award year
(explained later in this chapter);
• the school’s matching share—the institution’s capital
contribution (ICC), discussed on the next page;
• payments the school receives for repayment of loan
principal, interest, collection charges, and penalty or late
charges on loans from the fund;
• payments the school receives from the federal government
for cancellations (such as teacher cancellations) of Perkins
Loans and National Direct Student Loans (see chapter 4 of
this volume);
• any other earnings on fund assets, including net interest
earnings on funds deposited in an interest-bearing account
(total interest minus bank charges incurred on the account);
and
• proceeds of any short-term no-interest loans the school
makes to the fund in anticipation of receipt of its FCC or of
loan collections.

Federal Work-Study PPA Federal Work-Study PPA Requirements

34 CFR 675.8 Under the Program Participation Agreement, schools participating
in the Federal Work-Study (FWS) Program must:

• make FWS employment reasonably available, to the extent of

available funds, to all eligible students;
• award FWS employment, to the maximum extent
practicable, that will complement and reinforce each
recipient’s educational program or career goals;
• assure that FWS employment may be used to support
programs for supportive services to students with disabilities;
and
• inform all eligible students of the opportunity to perform
community services and consult with local nonprofit,
governmental, and community-based organizations to
identify those opportunities.

FISAP
APPLICATION FOR FUNDS
To apply for and receive funds from the Department for one or
more of the campus-based programs, a school must submit a FISAP for
each award year. By the 1st of August each year, the Department
makes available the next FISAP, which is due no later than the 1st of

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 Chapter 1 — Participation, Fiscal Procedures, and Records

October of the same year. If October 1st falls on a weekend, the

deadline is moved back to the previous business day. The
Department posts instructions for submitting the FISAP in a Dear
Partner Letter at [http://www.ifap.ed.gov]. (See box “FISAP on the
Web.”) The information reported on the FISAP must be accurate and
verifiable.

A school that has applied to participate in the campus-based

programs for the first time should submit a FISAP by the deadline
even if the school has not been certified to participate in the
programs. The Department will calculate a funding level for the school
and put the funding on “hold” status until the school has been
approved to participate. See “Allocation of Funds” for more
information.

FISAP ON THE WEB

Schools must submit the FISAP through the FISAP on the Web, available at
[http://www.cbfisap.ed.gov]. A list of all camps-based submission deadlines
can also be found there.

Schools may also make corrections to the 2004-2005 Fiscal Operations Report
and 2006-2007 Application to Participate via the FISAP on the Web site.

For assistance submitting corrections for years prior to the 2001-2002 Fiscal
Operations Report and 2003-2004 Application to Participate or for questions
concerning the preparation of the FISAP, schools should contact the Campus-
Based Call Center at (877) 801-7168 or [email protected]. Questions about prior-
year data listed on a FISAP should be referred to a FISAP administrator at the
Campus-Based Call Center.

ALLOCATION OF FUNDS
Allocation of funds
The Department allocates funds for the campus-based programs HEA 462(a)
directly to schools each award year. The allocation (or authorization) 34 CFR 673.4
for each program is the amount of funding the school is authorized to
receive from the Department for an award year. The Department
bases the allocation amount on statutory formulas and on the
amount of funds appropriated by Congress for the program. A school Campus-Based Programs
allocation formula
will not, however, receive an allocation that is in excess of its request.
Dear Partner Letters CB-99-16 and CB-03-
Your school’s initial Perkins allocation (FCC) is based on the 02
amount allocated for the base award year, 1999-2000. HEA Sections 413D, 442, and 462

Allocation schedule
If your school submits the FISAP by the 1st of October, the 2005-2006 Perkins FCC
Department provides your school with tentative allocation information There will be no new FCC for 05-06, but
in January of the following year and with final allocation information there may be allocations from unused
04-05 funds.
by the 1st of April. The Department posts notification of the

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availability and calculation methodology used for final award figures in

a Dear Partner Letter at [http://www.ifap.ed.gov]. Schools obtain
their specific award amounts by visiting the Self Service section of the
FISAP on the Web site.

Sometimes, the Department calculates a school’s final

allocations, but does not issue the final allocation by April 1st. We
may withhold a school’s final allocation if:

• the school lost its eligibility to participate in FSA programs;

• the school is a new applicant for the FSA programs and/or
for campus-based programs and hasn’t been approved yet;
or
• we have not received the FISAP signature/certification form
with the required original signature of the school’s CEO.
When the reason (s) for holding the school’s final allocation is/
are resolved, we will release the school’s final allocation.

If a school does not use its total allocation of funds for the campus-
based programs, the school must release unexpended amounts to the
Department. In June/July, the Department posts a Dear Partner
Letter at [http://www.ifap.ed.gov] that requests schools to release any
previous award year funds that they have not expended and offers
Reallocation DCL schools the opportunity to request supplemental FWS funds for
http://ifap.ed.gov/dpcletters/
community service. The Reallocation Form for schools wishing to
CB0408.html (CB-04-08)
return funds or request supplemental FWS funds can be found in the
Setup section of the FISAP on the Web site.

Releasing unused funds

If a school returns more than 10% of its allocated funds for a given
award year under any one of the campus-based programs, the
Department will reduce the school’s allocation for the second
succeeding award year by the dollar amount returned unless the
Department waives this provision. For example, if the school returns
Reduction of Allocation more than 10% of its 2004-2005 allocation, its 2006-2007 allocation will
34 CFR 673.4(d)(3) be reduced by the dollar amount returned for 2004-2005.

The Department may waive this provision for a specific school if it

finds that enforcement would be contrary to the interests of the
program. The Department considers enforcement to be contrary to
the interest of the program only if the school returned more than 10%
of its allocation due to circumstances that are beyond the school’s
control and are not expected to recur.

After schools release their unexpended allocations, the

Department reallocates the funds to schools that have met the criteria
for receiving a supplemental allocation. Criteria for distributing these
funds for each program are established in accordance with the HEA
and the campus-based program regulations.

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 Chapter 1 — Participation, Fiscal Procedures, and Records

For Perkins, if you return unexpended funds, the Department

reallocates 80% of the returned funds in accordance with 462(i) of
the HEA and reallocates 20% in a manner that best carries out the
purposes of the Federal Perkins Loan Program. Unexpended
FSEOG funds returned to the Department will be reallocated to an
eligible school in a manner that best carries out the purposes of the
FSEOG program.
Requesting Waiver of Allocation
Reduction
Unexpended FWS funds returned to the Department will be
To request a waiver, a school must submit
reallocated to an eligible school that used at least 5% of its total FWS an explanation of the circumstances with
allocation to pay students employed as reading tutors of children or its FISAP. The Department explains the pro-
performing family literacy activities in family literacy projects in the cess a school must use to request a waiver
preceding award year. A school must request the reallocated FWS for the 2006-2007 award year in the FISAP
funds, and the school must have a fair-share shortfall to receive these Instruction Booklet.
funds. A school must use all the reallocated funds only to pay students
employed in community service jobs.

Fiscal Operations Report

The school uses the Fiscal Operations Report portion of the FISAP Cash Management
A school must disburse campus-based
to report its expenditures under the campus-based programs in the
program funds on a payment period basis,
previous award year. (See box “FISAP on the Web.”) with the exception of FWS payments to stu-
dents. Cash management requirements
The Department provides materials essential for the preparation that apply to all FSA programs are dis-
and submission of the FISAP in a Dear Partner Letter posted in July cussed in detail in Volume 4.
each year at [http://www.ifap.ed.gov].

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Transfer of Perkins funds TRANSFER OF CAMPUS-BASED FUNDS

34 CFR 674.18(b) Perkins Transfer
Your school may transfer up to a total of 25% of its total Federal
Perkins Loan allocation (initial plus supplemental) for an award year
Work-Colleges funds
A work-college may transfer up to 100 per-
to either or both the Federal Supplemental Educational Opportunity
cent of its initial and supplemental Perkins Grant (FSEOG) and Federal Work-Study (FWS) programs. The
Loan allocations to the Work-Colleges Pro- Department’s permission is not required.
gram. Any unexpended funds must be
transferred back to the Federal Perkins If your school is a work-college, your school may transfer up to the
Loan Program at the end of the award total Federal Perkins Loan allocation (initial plus supplemental) for an
year. award year to the Work-Colleges Program (see Chapter 2 of this
volume for details on the Work-Colleges Program).

Your school must match any Perkins funds transferred to FSEOG

GAPS: Transferred or FWS at the matching rate of that program, but the match doesn’t
Perkins Funds have to be made until the transfer has occurred.

Any Perkins funds You must award transferred Perkins funds according to the
transferred to FSEOG or requirements of the program to which they are transferred.
FWS must be entered in
You must report any transfer of Perkins funds on the Fiscal
GAPS as an expenditure
Operations Report portion of the FISAP.
against the Perkins
program, not the program
A school that transfers funds to the FWS, FSEOG, and/or Work-
into which the funds were
Colleges Programs must transfer any unexpended funds back to the
transferred and used.
Federal Perkins Loan Program at the end of the award year.

Federal Work-Study Transfer

Your school may transfer up to 25% of its total FWS allocation
Future Allocations Not Affected
By Transfer (initial and supplemental) to the FSEOG Program. The Department’s
A school’s future allocations for all pro- permission is not required. (Your school’s total FWS allocation does
grams are not affected by past transferring not include funds carried forward or carried back from other award
of funds between programs. years. See chart on next page.)

Your school must match any FWS funds transferred to FSEOG at

the matching rate of the FSEOG Program, but the match doesn’t have
to be made until the transfer has occurred.

You must award transferred FWS funds according to the

requirements of the FSEOG Program.

You must report any transfer of FWS funds on the Fiscal

Operations Report portion of the FISAP.

A school that transfers FWS funds to the FSEOG Program must

transfer any unexpended funds back to the FWS Program at the end
of the award year.

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FSEOG Transfer Prohibited Transfer of FWS funds to FSEOG

The HEA prohibits the transfer of FSEOG funds to any other cite
program. However, a school may transfer FWS and Perkins funds to 34 CFR 675.18(e)
the FSEOG program as covered under the headings Perkins
Transfer and Federal Work-Study Transfer above.

Transfer from FWS to FSEOG

FWS allocation
(before carry 25% FSEOG
forward/back)

Example
2004-2005 FWS 2005-2006 FWS 2005-2006 FSEOG
initial & initial & initial &
supplemental: $24,000 supplemental: $20,000 supplemental: $18,000
X .10 $2,400 X .25 $5,000

GAPS: Transferred FWS

Funds

Any FWS funds transferred

to FSEOG must be entered
in GAPS as an expenditure
against the FWS Program,
not the FSEOG Program.

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FSEOG AND FWS CARRY FORWARD/CARRY

GAPS: Funds Carried BACK
Forward/Back
Your school may spend up to 10% of its current year’s FWS or
Any FWS funds carried FSEOG allocation (initial and supplemental) in the following award year
forward or carried back (carry forward). Before a school may spend its current year’s allocation,
between award years it must spend any funds carried forward from the previous year.
must be entered in GAPS
as an expenditure against Your school is also permitted to spend up to 10% of its current year’s
the FWS authorization for FWS or FSEOG allocation (initial and supplemental) for expenses
the award year from which incurred in the previous award year (carry back).
the funds were taken, not
the authorization for the Your school must match FWS or FSEOG funds carried forward or
award year in which the carried back in the award year that they are spent. A school’s future FWS
funds were used. The or FSEOG program allocation is not affected by carrying forward or
same requirement holds carrying back funds between award years.
for FSEOG funds.
You may “carry back” FWS funds for summer employment; that is,
you may use any portion of your school’s initial and supplemental FWS
allocations for the current award year to pay student wages earned on or
FWS carry forward/carry back
34 CFR 675.18(b)
after May 1 of the previous award year but prior to the beginning of the
34 CFR 675.18(c) current award year (July 1). This summer carry back authority is in
addition to the authority to carry back 10% of the current year’s FWS
allocation for use during the previous award year.

Also, your school may spend any portion of its current award
year’s initial and supplemental FSEOG allocations to make FSEOG
awards to students for payment periods that begin on or after May 1st
of the prior award year but end prior to the start of the current award
year (“carry back” for summer). This carry back authority for summer
FSEOG awards is in addition to the authority to carry back 10% of the
current award year’s FSEOG allocation for use during the previous
award year.

On the FISAP, you must report FWS or FSEOG funds that your
school carries back and carries forward. For example, if a school carried
forward 10% of its FWS 2004-2005 allocation to be spent in 2005-2006,
the school must report this amount on the FISAP that is due no later
than September 30th, 2005, in Part V of the Fiscal Operations Report
for 2004-2005.

The official allocation letter for a specific award period is the

school’s authority to exercise these options. A school may not carry
forward or back FWS funds to any award year in which there is no
specific FWS allocation and the same requirement holds for FSEOG
funds.

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10 % Carry Back/Carry Forward for FWS and FSEOG

2004-2005 10%
2005-2006 10%
2006-2007
FWS Allocation FWS Allocation FWS Allocation

The same flexibility is available for FSEOG Funds

FWS Limitations on Use of Funds Carried Forward or

Back
Schools are not permitted to add funds that are carried forward or
back to the total FWS allocation for an award year when determining
the maximum percentage of available funds that may be used in that
award year for any of the following purposes (see next page): Part 606
• the transferring of FWS funds to FSEOG; Developing Hispanic-Serving
Institutions Program
• providing the federal share of wages in private for-profit
sector jobs; or Part 607
• the Job Location and Development (JLD) Program. Strengthening Institutions Program

For example, for the 2005-2006 award year, a school may not add American Indian Tribally Controlled
to the 2005-2006 total FWS allocation any FWS funds carried forward Colleges and Universities Program
from 2004-2005 or carried back from 2006-2007 when determining the Alaska Native and Native Hawaiian-
maximum percentage of available funds that may be used in 2005-2006 Serving Institutions Program
for the purposes listed above. The maximum amount usable for each
of the three purposes listed in the previous paragraph is the Part 608
appropriate percentage of a school’s total 2005-2006 original FWS Strengthening Historically Black
allocation plus any supplemental 2005-2006 FWS allocation. Colleges and Universities Program

Part 609
FEDERAL SHARE LIMITATION Strengthening Historically Black
Graduate Institutions Program
Federal Work-Study Federal Share
The federal share of FWS wages paid to a student may not exceed
75%, with the following exceptions:

• The federal share of FWS wages paid to a student employed Wages from Federal Agency
by a private for-profit organization may not exceed 50%. The portion of the FWS wages contributed
as the institutional share by a federal off-
• The FWS regulations authorize a 100% federal share of FWS campus agency is not considered part of
wages paid to a student who is-- the “federal share.” Thus, a federal
• employed as a reading tutor for preschool-age agency may provide the required share of
student compensation normally paid by
children or elementary school children
off-campus agencies plus any other em-
ployer costs that they agree to pay.

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• employed as a mathematics tutor for children in

Federal shares cites
elementary school through ninth grade, or
Federal share limitation • performing family literacy activities in a family
34 CFR 675.26(a)(1) literacy project that provides services to families with
preschool age children or elementary school children.
Private for-profit organizations The work performed by the student must be for the school itself,
34 CFR 675.26(a)(3) for a federal, state, or local public agency, or for a private nonprofit
organization. A school is not required to ask the Department for a
Reading tutor and family literacy waiver of the FWS nonfederal share requirement to receive the 100%
projects federal share authorization for an FWS student employed in one of
34 CFR 675.26(d) these jobs. Instead, the school should use 100% federal dollars to pay
such a student and then show on its FISAP that it did so. A discussion
Strengthening institutions of employing FWS students as tutors and in family literacy projects is in
34 CFR 675.26(d) chapter 2 of this volume.

90% federal share • The Department may authorize a federal share of 100% of
34 CFR 675.26(a)(2) FWS wages at schools designated as eligible schools under 34
CFR parts 606, 607, 608, or 609 (see chart). The work
Restrictions cite performed by the student must be for the school itself, for a
34 CFR 675.26(b) federal, state, or local public agency, or for a private
nonprofit organization. Your school is considered to have
JLD cite applied for a waiver of the nonfederal share requirement if
34 CFR 675.33(b) your school is designated as an eligible school and your
school submits a complete FISAP by the established
deadline. Such schools will receive a letter from the
Department indicating that they have been granted a waiver
of the FWS nonfederal share requirement. (For more
information, see pages 3-10 to 3-11 of The Blue Book,
published February 2001.)
If your school files a FISAP on behalf of two or more
separately eligible school locations, but not all of these
locations are eligible for a waiver of the nonfederal share
requirement, you must file a separate FISAP for any
locations that are not eligible for a waiver of the nonfederal
share requirement. Only those locations that are eligible will
receive a waiver of the nonfederal share requirement.
• The FWS regulations authorize a school to pay a federal
share of FWS wages to a student in excess of the current
75% limit but not exceeding 90% under the following
specific conditions:
• The student is employed at a private nonprofit
organization or a federal, state, or local public
agency. (Employment at the school itself is not
eligible.)
• The school does not own, operate, or control the
organization or agency. To satisfy this requirement,
your school must keep a statement in the school’s
file, signed by both the agency and the school,
stating that they have no such relationship.

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 Chapter 1 — Participation, Fiscal Procedures, and Records

• The school selects the organization or agency on

an individual, case-by-case basis. This requirement
is satisfied when the school selects the agency
through its normal process of selecting potential
employers.
• The organization or agency must be unable to pay
the regular nonfederal share. To satisfy this
requirement, the school must keep in its file a
signed letter from an official of the agency stating
that the agency cannot afford to pay the regular
nonfederal share.
• The 90% federal share is limited to no more than
10% of the students paid under the FWS Program.
For purposes of this calculation, the school must
use the total number of FWS students paid during
the current award year. The 10% limit on the
number of students paid with the 90% federal
share does not include students whose FWS wages
have been exempted from the full nonfederal
share requirement due to being employed as a
reading tutor, mathematics tutor, or performing
family literacy activities.
The federal share of FWS wages paid to a student may be lower
than 75% if the employer chooses to contribute more than the
minimum required nonfederal share. For example, if a school has a
large demand for FWS jobs from its various departments, it may
contribute more than the usual 25% to allow for additional
employment.

The federal share may not be used to provide fringe benefits such
as sick leave, vacation pay, or holiday pay, or employer’s contributions
to Social Security, workers’ compensation, retirement, or any other
welfare or insurance program. These restrictions on the federal share
apply even when the Department authorizes a federal share of 100%
of FWS wages.

The federal share of allowable costs in carrying out the JLD

Program may not exceed 80% of such costs. (See chapter 2 of this
volume.)

Perkins Federal Share

The federal funds allocated to a school in an award year under
the Federal Perkins Loan Program are called the Federal Capital
Contribution (FCC). The FCC funds to be used for the Federal
Perkins Loan Program must be deposited into the school’s Perkins
revolving fund. The FCC deposited into the school’s Perkins
revolving fund must not exceed 75% of the combined FCC and
required nonfederal share. Unlike the FWS and FSEOG programs,
the Department is not able to authorize a federal share of 100% for
the FCC deposited into the school’s Perkins revolving fund. It
should be noted that when a school transfers new FCC to either the

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FWS or FSEOG programs, the FCC is not deposited into its Perkins
revolving fund.

FSEOG Federal Share

The federal share of FSEOGs made by a school may not exceed
75% of the total FSEOGs. The school must contribute a nonfederal
share (also called “institutional share”) of 25%. However, the
Department may waive the nonfederal share requirement and may
authorize for an award year a federal share of 100% to a school that is
designated as an eligible school under 34 CFR parts 606, 607, or 608
(see chart). Your school is considered to have applied for a waiver of
the nonfederal share requirement if your school is designated as an
eligible school and your school submits a complete FISAP by the
established deadline. Such schools will receive a letter from the
Department indicating that they have been granted a waiver of the
nonfederal share requirement. (For more information, see pages 3-10
to 3-11 of The Blue Book: Accounting, Recordkeeping, and Reporting
by Postsecondary Education Institutions for Federally Funded Student
Financial Aid Programs, published June 2001.)

NONFEDERAL SHARE
Nonfederal share Federal Work-Study Nonfederal Share
34 CFR 675.27
The nonfederal share of a student’s FWS wages must be at least
25% each award year, except in the cases listed above. (See previous
section.)

Your school may use any resource available to pay its share of FWS
compensation except federal funds allocated under the FWS Program.
The school’s share may come from its own funds, from outside funds
(such as from an off-campus agency), or from both. However, if a
student is employed by a private, for-profit organization, that
organization must provide the nonfederal share.

Your school may also pay the institutional share with noncash
contributions. If the school’s noncash contribution is less than the
remaining 25%, the school must make up the difference in cash.

If the Department grants an institutional share waiver to a school

that is designated as an eligible school under 34 CFR parts 606, 607,
608, or 609 (see chart on previous page), that school has the option of
providing an institutional share and determining the amount of the
share. However, the institutional share requirements for employment
provided by a private for-profit organization (50% federal-share
limitation) or for the administration of the JLD Program (80% federal-
share limitation) are never waived.

If a school receives more money under an employment agreement

with an off-campus agency than the sum of (1) required employer
costs, (2) the school’s nonfederal share, and (3) any share of

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administrative costs the employer agreed to pay, the school must

handle the excess in one of three ways:

• use it to reduce the federal share on a dollar-for-dollar basis;

• hold it in trust for off-campus employment during the next
award year; or
• refund it to the off-campus employer.
Funds from programs sponsored by federal agencies (such as the
National Science Foundation or the National Institutes of Health) may
be used to pay the nonfederal share, as long as the programs have the
authority to pay student wages. A school should contact the
appropriate federal agency to see if the program in question does have
this authority.

Perkins Nonfederal Share

The nonfederal share required from the school’s own funds for
the Federal Perkins Loan Program is called the Institutional Capital
Contribution (ICC). A school must deposit its ICC into the school’s
Perkins revolving fund either prior to or at the same time it deposits
any FCC. Unlike the FWS and FSEOG programs, the Department is
not able to grant a waiver of the ICC.

The required ICC must equal or exceed:

• One-third (33 1/3% of the FCC, or

• One-quarter (25%) of the combined FCC and ICC.
For example, if a school receives and deposits into its Perkins
revolving fund an FCC of $3,000, it would be required to provide an
ICC of at least $1,000, for a combined amount of $4,000. The FCC
($3,000) times .3333 equals $1,000. The combined FCC and ICC
($4,000) times .25 equals $1,000.

It should be noted that when a school transfers new FCC funds

to either the FWS or FSEOG programs, the FCC is not deposited
into its Perkins revolving fund and the school does not have to
provide an ICC share. Instead, the school must provide a
nonfederal share for those FCC funds at the level required by the
program that it was transferred to and spent in by the school.

FSEOG Nonfederal Share

The nonfederal share of FSEOGs must be made from the
school’s own resources. These resources may include:

• institutional scholarships and grants;

• waivers of tuition or fees;
• state scholarships and grants; and
• funds from foundations or other charitable organizations.
The Department has determined that all state scholarships and

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grants, except for the Leveraging Educational Assistance Partnership

(LEAP) (formerly the State Student Incentive Grant [SSIG] Pro-
gram) and the Special Leveraging Educational Assistance Partner-
ship (SLEAP) programs are eligible funds that may be used to meet
the nonfederal share requirement of FSEOGs. LEAP and SLEAP
grants, for this purpose, are defined as the federal LEAP and SLEAP
allocation plus the minimum required state matching amount. The
remaining state grants are not considered LEAP or SLEAP grants.

Dear Partner Letter CB-05-03, issued February 2005, provided a

State Scholarship as Nonfederal chart showing what percentage of each state’s scholarships could be
Share Component example used to provide the nonfederal share of FSEOGs for the 2004-2005
Dominic receives a grant of $675 from a award year. The Department computed the percentages in the chart
state with a percentage of 96.26. Jacob on the basis of information furnished by the respective states regarding
Broadcasting School multiplies 96.26% by expected expenditures for state scholarships and grants for the 2004-
$675, resulting in $650, which is the por- 2005 award year, and by using the 2004-2005 LEAP and SLEAP
tion of the grant that may be used to allocation data and required matching information. Each school can
meet the nonfederal share requirement
apply the appropriate state percentage to the state scholarships and
for a $2,600 FSEOG award ($1,950 is the
grants its students receive to determine the total amount of state
federal share of the FSEOG award).
scholarships and grants that may be used to meet the FSEOG
nonfederal share requirement.

As a variance from use of the percentages indicated in the chart,

if a school has specific knowledge that a state scholarship or grant—
irrespective of its name—is considered to be the required state
matching portion of a LEAP or SLEAP grant, that scholarship or
grant may not be used to meet the FSEOG nonfederal share. Also, if
a school has documented knowledge that a state scholarship or grant
is not comprised of LEAP or SLEAP monies (federal or state), 100%
of the scholarship or grant may be used as the FSEOG nonfederal
share.

The nonfederal share requirement of 25% (unless the school

qualifies for a waiver) may be met by one of three methods. In the
following discussion of these methods, you should note that for a
student to meet the definition of an FSEOG recipient, some portion of
the grant awarded the student must have come from the FSEOG
federal dollars. Also, by the time the FSEOGs are disbursed (regardless
of when in the award period the disbursements are made), the
required match must have been accomplished; that is, the school’s
own resources must have been disbursed before or at the time the
federal dollars are disbursed. However, it is important to note that
outside resources (such as state grants, and foundation or other
charitable organization funds) can be used to match FSEOGs even if
the funds are received at a later date, provided that the school has
written information about funds that the noninstitutional agency or
organization is awarding to the student involved. The written
information must be kept on file at the school.

The three methods a school may use to meet its nonfederal

share follow:

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1. Individual FSEOG recipient basis—the school provides its

share to an individual FSEOG recipient together with the
federal share; that is, each student’s total FSEOG would
consist of 25% nonfederal resources and 75% federal dollars
for the 2005-2006 award year.
2. Aggregate basis—the school ensures that the sum of all
funds awarded to FSEOG recipients in the 2005-2006 award
year comprises 75% FSEOG federal funds and 25%
nonfederal resources. For example, if a school awards a total
of $60,000 to FSEOG recipients in 2005-2006, it has to
ensure that $45,000 comes from FSEOG federal funds and
$15,000 comes from nonfederal resources; if there are 100
FSEOG recipients, the entire $15,000 nonfederal resource
requirement can be met by awarding a total of $15,000 in
nonfederal resources to four FSEOG recipients. However,
each FSEOG recipient must receive some FSEOG federal
funds.
3. Fund-specific basis—the school establishes an “FSEOG fund”
into which it deposits FSEOG federal funds and the required
25% nonfederal share. Awards to FSEOG recipients then are
made from the fund.

USE OF FWS ALLOCATED FUNDS

An approved school may use part of its FWS allocation for the
purpose of meeting the costs of the Work-Colleges Program discussed Allocation
in chapter 2.
The term allocation
Your school may use up to 25% of its FWS allocation and always refers to the
reallocation for an award year to pay the wages of FWS students original initial and
employed by private for-profit organizations. supplemental allocation
your school receives and
Community service jobs never refers to an amount
remaining after your
There are two community service expenditure requirements that a school carries forward or
school must meet. First, a school must use at least 7% of its FWS carries back funds.
federal allocation for an award year to pay the federal share of wages
to students employed in community service jobs for that year. Second,
in meeting this 7% community service requirement, one or more of
the school's FWS students must be employed as a reading tutor for
children in a reading tutoring project or performing family literacy
7% Citation
activities in a family literacy project. 34 CFR 675.18(g)

A school may request a waiver of either or both of these

requirements by providing in writing detailed information to support
its waiver request. The waiver request must be received by the deadline Waiver request statement
that is published annually in the Federal Register. The Department will Dear Partner Letter CB-05-05, dated April
approve a waiver only if it determines that the school has 2005
demonstrated that enforcing the requirements would cause a hardship
for students at the school. The fact that it may be difficult for the
school to comply with these requirements is not, in and of itself, a basis
for granting a waiver.

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The Department issues a letter annually on the FWS community

service waiver process and deadline. To request a waiver for the 2005-
2006 award year, a school must submit its waiver request and any
supporting information to the Department by April 30, 2005. The
waiver request must be signed by an appropriate school official, and
above the signature the official must include this statement: “I certify
that the information I provided in this waiver request is true and
accurate to the best of my knowledge. I understand that the
information is subject to audit and program review by the U.S.
Department of Education.” If a school official has any questions
regarding the FWS community service expenditure requirements or
waiver procedures, he or she may contact FSA’s Campus-Based Call
Center at 1 (877) 801-7168.

COMMUNITY SERVICE APPROVED WAIVER EXAMPLES

Case Study #1 - Small FWS allocation

The school had a very small FWS allocation. The supporting information
submitted by the school noted that 7% of the school’s allocation only
provided enough funds for a student to work for a short period of time.
Therefore, the school was unable to find placement for a student in
community service.

Case Study #2 - Rural area

The school was in a rural area that was located far away from the types of
organizations that would normally provide community service jobs. The
school provided information that showed that its students lacked the means
of transportation to get to the town where the community service jobs were
located. In a similar waiver request in which transportation did exist, a school
provided documentation that showed that the transportation costs were
extremely high for the students.

Case Study #3 - Specialized program

The school offered only a single program of specialized study that required
its students to participate in extensive curriculum and classroom workloads.
The school provided information that demonstrated that this specialized
educational program prevented the students from performing community
service jobs at the time those work opportunities were available.

These examples are not the only circumstances that may result in approval of a
waiver request, however, you must always submit a justification of your request.

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The Department has not specified the circumstances that would

allow a school to receive a waiver of the community service
requirements in order to allow flexibility for consideration of all
factors that may be valid reasons for a waiver. The Department in the
past has approved a limited number of waivers of the community
service expenditure requirements for schools that have demonstrated
that enforcing these requirements would have caused a hardship for
their students. (See examples of waiver requests approved by the
Department in the above box.) These examples are not the only
circumstances that may result in approval of a waiver request.

FWS community service expenditures for the 2004-2005 award year

are reported on the FISAP that is due no later than September 30,
2005. When a school receives reallocated FWS funds, the minimum
amount of FWS federal funds the school must expend on community
service jobs is the greater of: 7% of its total FWS federal allocation for
an award year; or 100% of the amount of its reallocated FWS federal
funds.

CAMPUS-BASED RECORDKEEPING
A school must follow the recordkeeping requirements in the
General Provisions (discussed in Volume 2), and those specific to the
campus-based programs.

A school must keep financial records that reflect all campus-based

program transactions and must keep all records supporting the
school’s application for campus-based funds. This documentation
includes the applications and records of all students who applied for
campus-based assistance for a specific award year and were included
on the school’s FISAP for that award year. The school must also retain
applications and records of students who applied for but did not
receive aid either because the school had no more funds to award or
because the school determined that the student did not need funds.
The school must keep general ledger control accounts and related
accounts that identify each program transaction and must separate
those transactions from all other institutional financial activity. Fiscal
records must be reconciled at least monthly.

The campus-based records a school must maintain include but

are not limited to:

• the Student Aid Report (SAR) or Institutional Student

Information Record (ISIR) used to determine a student’s
eligibility for campus-based program funds;
• application data submitted to the Department or the school
on behalf of the student;
• documentation of the payment of any return of Title IV
funds or overpayment to the FSA program fund or the
Department;

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• documentation of the amount of a Perkins Loan, FSEOG or

FWS award, its payment period, and the calculations used to
determine the amount of the loan, grant, or FWS award;
• documentation of each FSEOG or Perkins Loan
disbursement and the date and amount of each payment of
FWS wages;
• documentation of the school’s calculation of any refunds or
overpayments due to or on behalf of the student and the
amount, date, and basis of the school’s calculation;
• information collected at initial and exit loan counseling
required by Perkins Loan regulations; and
• reports and forms used by the school in its participation in a
campus-based program, and any records needed to verify
data that appear in those reports and forms.

Perkins Recordkeeping
Record retention cites Perkins Loan records a school must maintain include, but are not
limited to:
FISAP
34 CFR 668.24(e)(1)(i) • documentation of each student’s eligibility for a Perkins
Loan;
Perkins loans • documentation of the amount of a Perkins Loan, its
34 CFR 674.19(e) payment period, and the calculations used to determine the
amount of the loan;
Records under question
34 CFR 668.24(e)(3) • documentation of the date and amount of each
disbursement of Perkins Loan funds;
• information collected at initial and exit loan counseling
required by Perkins Loan regulations.
For each Perkins Loan borrower, a school must also maintain a
repayment history that shows:

• the date and amount of each repayment during the life of

the loan;
• the amount of each repayment credited to principal,
interest, collection costs, and either penalty or late charges;
• the date, nature, and result of each contact with the
borrower (or endorser for loans made prior to July 23, 1992)
in the collection of an overdue loan; and
• copies of all correspondence to or from the borrower (and
endorser for loans made prior to July 23, 1992), except for
bills, routine overdue notices, and routine form letters
(demand letters, notices of intent to accelerate, and the like
are not considered to be routine form letters).
When the borrower has fully repaid the Perkins Loan, your school
is required to either mark the original note “paid in full,” have it

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certified by an official of the school, and return it to the borrower; or

to notify the borrower in writing that the loan is paid in full. The
school must keep a copy of the note for at least three years after the
date the loan was paid in full.

The school must keep the original signed promissory note and
repayment schedule in a locked, fireproof container until the loan is
repaid in full or until the original note and schedule are needed to
enforce loan collection. Only authorized personnel may have access to
these records. If a promissory note was signed electronically, you must
store it electronically and ensure that it can be retrieved in a coherent
format.

If the original promissory note is released for the purpose of

enforcing repayment, the school must keep a certified true copy. To
qualify as a certified true copy, a photocopy (front and back) of the
original promissory note must bear the following certification
statement signed by the appropriate school official.

The following is a sample certification statement that you may

adopt:

Certification Statement
“CERTIFIED TRUE COPY: I declare under penalty of perjury that the foregoing is a true
and correct copy of the original Promissory Note.
Signature: _____________________________________________
Title: _________________________________________________
Date: _________________________________________________”

The Department recommends that the school maintain a certified

copy of the signed promissory note as well as a record of the full
amount owed in its records beyond the three-year record retention
requirement.

FWS Recordkeeping
For schools administering FWS, you must also follow the FWS Recordkeeping
procedures established in 34 CFR 675.19 for documenting a student’s 34 CFR 675.19(b)
FWS work, earnings, and payroll transactions. You must establish and
maintain an internal control system of checks and balances that
ensures that no office can both authorize FWS payments and disburse
FWS funds to students. If you use a fiscal agent for FWS funds, that
agent may perform only ministerial acts.

Payroll records Fiscal Procedures and Records

34 CFR 676.19(b)
In school records, schools must distinguish expenditures for FWS
compensation from other institutional expenditures. You should enter

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FWS compensation on a separate voucher or, if listed on the general

payroll voucher, you should group FWS compensation separately from
other compensation. If payrolls are handled on automatic data
processing equipment, you should identify FWS with a special code.

You must establish and maintain program and fiscal records that
are reconciled at least monthly. The records must include:

• a payroll voucher containing sufficient information to

support all payroll disbursements;
• a noncash contribution record to document any payment of
the school’s share of the student’s earnings in the form of
services and equipment; and
• a certification by the student’s supervisor, an official of the
school (or off-campus agency) that each student has worked
and earned the amount being paid. Your school may use an
electronic certification process described below. The school
may still continue to have the FWS student’s supervisor sign
a paper certification. If the students are paid on an hourly
basis, the certification must include or be supported by a
time record showing the hours each student worked in clock
time sequence, or the total hours worked per day.
Electronic certification
As noted above, a school may use an electronic certification by
an FWS student’s supervisor that the student has worked and earned
the amount being paid. This electronic certification enables a
school to implement an electronic payroll system for its FWS
students.

A school that uses an electronic certification must adopt

reasonable safeguards against possible fraud and abuse. The school
should provide a secure electronic certification through an electronic
payroll system that includes:

• password protection;
• password changes at set intervals;
• access revocation for unsuccessful log-ins;
• user identification and entry-point tracking;
• random audit surveys with supervisors; and
• security tests of the code access.
Payroll vouchers
Payroll vouchers must support all payroll disbursements and
should provide space for the following information:

• the school’s name and address;

• the starting and ending dates of the payroll period;
• the student’s name;

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• an identification of the student’s job;

• the number of hours worked during the pay period;
• the hourly rate of pay for an undergraduate student;
• the hourly rate of pay or salary for a graduate student;
• the student’s gross earnings;
• any compensation withheld for federal, state, county, or city
taxes, and other deductions;
• any noncash payments;
• the student’s net earnings;
• a check number, duplicate receipt, or other payment
identification; and
• any overtime earnings (a student may be paid overtime with
FWS funds).
Job descriptions
Each FWS position should have a job description that includes the
following:

• the name and address of the student’s employer

(department, public agency, nonprofit organization);
• the purpose of the student’s job;
• the student’s duties and responsibilities;
• the job qualifications;
• the job’s wage rate or range;
• the length of the student’s employment (beginning and
ending dates); and
• the name of the student’s supervisor.
The job description has several purposes:
• It clearly defines whether the job qualifies under the FWS
Program.
• It provides the information needed to explain the position
to a student and to help him or her select the type of
employment most closely related to his or her educational or
career objectives.
• It helps the financial aid administrator, the student, and the
supervisor determine the number of hours of work required
at the specified wage rate to meet a student’s financial need.
• It establishes a written record, for both student and
employer, of the job’s duties and responsibilities so that
there will be no misunderstanding.

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If a student is employed with an agency or organization that

provides community services, the school should, as with any other FWS
position, have a job description that includes the duties and the
responsibilities. Schools should use the job description to verify that
the job meets the definition of community services in the FWS
regulations (see Chapter 2). In addition, for students performing
reading tutoring or family literacy activities, the job description
should support those jobs.

FSEOG Recordkeeping
In addition to following the fiscal procedures and records re-
quirements mentioned above and in Volume 2, a school must meet
the following requirements, which are included in the FSEOG
regulations:

• A school must establish and maintain an internal control

system of checks and balances that ensures that no office can
both authorize FSEOG payments and disburse FSEOG funds
to students.
• A school must establish and maintain program and fiscal
records that are reconciled at least monthly.
• Each year a school must submit a FISAP and other
information the Department requires. The information must
be accurate and must be provided on the form and at the
time specified by the Department.

Record Retention
Your school must make its records readily available for review by
the Department or its authorized representative at an institutional
Records readily available for location the Department or its representative designates. Generally, a
review school must keep records relating to the school’s administration of a
34 CFR 668.24(d) campus-based program for three years after the end of an award year
for which the aid was awarded and disbursed under that program.
There are some exceptions to this requirement:

• The school must retain the FISAP containing reported

expenditures and any records necessary to support the data
contained in the FISAP, including “income grid
information,” for three years after the end of the award year
in which the FISAP is submitted.
• The school must keep repayment records for Perkins Loans,
including records relating to cancellation and deferment
requests for at least three years from the date a loan is
repaid, cancelled, or assigned to the Department. If a loan is
assigned to the Department due to total and permanent
disability, the school must retain any loan related

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documentation that it does not submit until the Department

approves a final discharge or the loan has been paid in full
(Dear Colleague Letter CB-02-08).
• Records questioned in an audit or program review must be
kept until the questions are resolved or until the end of the
retention period applicable to the records, whichever is
later.
Record formats
A school must keep its campus-based program records in one of Format of records
34 CFR 674.19(e)(4)
the following formats:
34 CFR 668.24(d)

• Original signed promissory notes and signed repayment

schedules for Perkins Loans, National Direct Student Loans,
or National Defense Student Loans must be kept in a locked
fireproof container until the loan is repaid or until the
school needs the originals to enforce collection of the loan.
If a loan is assigned to the Department, the school must
send the original promissory note or a certified copy of the
note, as well as a copy of the original deferment or
cancellation form(s). The school may not send computer-
generated form(s) or microform(s).
• A school may keep other required records in hard copy or in
microform, computer file, optical disk, CD-ROM, or other
media formats, but all record information must be
retrievable in a coherent hard copy format or in other
media formats acceptable to the Department except that (1)
a student’s SAR or ISIR used to determine eligibility for FSA
program funds must be kept in the format in which the
school received it, unless the school keeps the SAR in an
“imaged media format;” and (2) any document that contains
a signature, seal, certification, or any other image or mark
required to validate the authenticity of its information must
be kept in its original hard copy or in an “imaged media
format.”
• Any “imaged media format” used to keep required records
must be capable of reproducing an accurate, legible, and
complete copy of the original document, and, when printed,
this copy must be approximately the same size as the
original. Perkins Assignment
34 CFR 674.50
Dear Colleague Letter CB-03-12
PERKINS REIMBURSEMENT & ASSIGNMENT
The Department may require your school to reimburse its Perkins
Loan Fund for any outstanding balance on an overpayment or a Assignment address
defaulted loan for which your school failed to record or retain the A school should mail assignments to:
promissory note, record disbursements, or exercise due diligence.
U.S. Department of Education
Perkins Loan Assignment
Your school must also reimburse the Perkins Loan Fund for the
Processing Center
amount of the administrative cost allowance claimed on any P.O. Box 4136
reimbursed portion of a loan. Greenville, TX 75403-4316

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You do not have to reimburse the Perkins Loan Fund if your

school can recover the defaulted loan or show the Department that
the borrower would not have paid the loan even if your school
properly exercised due diligence.

Also, you should not reimburse the Perkins Loan Fund for loans
on which your school obtains a judgment.

Your school must assign to FSA Collections all its Perkins and
NDSL loans if:

• your school is closing

• your school is withdrawing from the Federal Perkins
Loan Program; or
• the Department is terminating your school’s
participation in the program.

Perkins Liquidation
Perkins loan liquidation There are seven basic steps to liquidating a school’s Perkins
procedures Loan portfolio:
Dear Partner Letter CB-00-05
1) Notifying the Department of Education of your school’s
intent to liquidate its Perkins Loan portfolio;

2) Assigning all of your outstanding Perkins Loans to the

Department;

3) Continuing National Student Loan Data System reporting

until all your outstanding Perkins Loans have been either fully
retired, accepted for assignment, or purchased by your school;

4) Returning the federal share of your school’s Perkins Loan

revolving fund to the Department;

5) Filing the final Fiscal Operation Report;

6) Having an independent compliance audit conducted of all

Perkins Loan funds your school has received; and

7) Reconciling the FISAP information reported by your school

with Department data.

After the Department completes the reconciliation process and

determines that your school has satisfied the liquidation
requirements, we will send a letter of approval to your school.

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ADMINISTRATIVE COST ALLOWANCE (ACA) Administrative cost allowance

A school participating in the campus-based programs is entitled to 34 CFR 673.7
an ACA for an award year if it advances funds under the Perkins
Loan Program, provides employment under the FWS Program, or
awards grants under the FSEOG Program to students in an award
year. The ACA may be used to help offset administrative costs, such FSA Assessment: Administrative
as salaries, furniture, travel, supplies, and equipment. The ACA can Cost Allowance
also be used for service fees that banks charge for maintaining http://ifap.ed.gov/qadocs/
accounts. Computer costs associated with Perkins Loan billing may also FiscalManagement/Activity8FM.doc
be paid from this allowance. Schools may use the allowance to help
pay the costs of administering not only the campus-based programs
but the Federal Pell Grant Program as well. Administrative costs also
cover expenses for carrying out the student consumer information
services requirements.

The amount of the ACA is calculated as a percentage of the

school’s expenditures for students for an award year under the
campus-based programs (see table below).

Administrative Cost Allowance (ACA) Calculation

5% of the first $2,750,000 of a school’s expenditures to students under the Campus-Based programs
+
4% of expenditures to students greater than $2,750,000 but less than $5,500,000 under the campus-based
programs +
3% of expenditures to students greater than $5,500,000 under the campus-based programs

When a school calculates its ACA for the 2005-2006 award year, the
school is to include in its calculation the full amount of its FSEOG
awards—both the 75% federal share and the required 25% nonfederal
share. However, a school that chooses to provide more than a 25% Using ACA to Train FWS Tutor
institutional share to FSEOG recipients may not include an FSEOG A school may use a portion of its adminis-
institutional share in excess of 25% in its FISAP or in the calculation of trative cost allowance (ACA) to cover the
its ACA. costs of training an FWS tutor. A school
may also use a portion of its ACA to cover
If the Department has granted a school a waiver of its required expenses that are related to employing a
student as a tutor with a local school dis-
institutional share for the FSEOG Program or the FWS Program, that
trict and that the school may not incur with
school’s ACA may be calculated only on the full federal portion of its
another organization. If, for example, a
awards for those programs. school district requires all employees to un-
dergo a background check and be finger-
The school takes the ACA out of the annual authorizations the printed at a cost of $40 per employee, the
school receives for the FSEOG and FWS programs and from the postsecondary school may use a portion of
available cash on hand in its Perkins Loan fund. It is not a separate its ACA to cover this cost. The FWS Program
allowance sent to the school. A school may draw its allowance from any does not provide for any additional funds
combination of campus-based programs, or it may take the total beyond the ACA for technical assistance
allowance from only one program provided there are sufficient funds and training of tutors.
in that program. However, a school may not draw any part of its
allowance from a campus-based program unless the school has

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disbursed funds to students from that program during the award year.
If a school charges any ACA against its Perkins Loan fund, it must
charge these costs during the same award year in which the
expenditures for these costs were made.

Your school may use up to 10% of the ACA, as calculated above, as

attributable to its expenditures under the FWS Program to pay the
administrative costs of conducting its program of community service.
These costs may include:

• developing mechanisms to assure the academic quality of a

student’s experience;
• assuring student access to educational resources, expertise,
and supervision necessary to achieve community service
objectives; and
• collaborating with public and private nonprofit agencies and
programs assisted under the National and Community
Service Act of 1990 in the planning, development, and
administration of these programs
Some schools do not claim an ACA so that all the funds can be
used for student awards. This option is the school’s decision.

CERTIFICATIONS A SCHOOL MUST SUBMIT TO

THE DEPARTMENT
The Department has incorporated the following form into Part I
of the FISAP: Form 80-0013, Certifications Regarding Lobbying;
Debarment, Suspension, and Other Responsibility Matters; and Drug-
Free Workplace Requirements. The Standard Form LLL, Disclosure
of Lobbying Activities, should only be completed if a school expends
funds for lobbying activities. The form can be printed from FISAP
on the Web. To participate in the campus-based programs each award
year, a school’s chief executive officer must complete, sign, date, and
submit to the Department the above certification forms with the
school’s completed FISAP by the established deadline. A detailed
discussion of the certification requirements is in Volume 2.

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