Financial aid professionals looking for a little more guidance on reconciling federal financial aid programs have now received some from the Department of Education.
On January 27, the Department released an Electronic Announcement that provides more specific information to assist schools in reconciling the Direct Loan, Pell Grant, and TEACH Grant programs.
Reconciliation is when schools review and compare data in the Department of Education systems with their own internal records, resolve any discrepancies, and document reasons for any remaining cash balances. Reconciling the financial aid program accounts is a shared responsibility between the financial aid office and business office and critical in identifying issues and ensuring compliance.
Under 34 CFR 685.300(b)(5), Direct Loan reconciliation is mandatory on a monthly basis. The Department encourages monthly reconciliation for the Pell Grant and TEACH Grant programs.
The two types of reconciliation include:
Internal Reconciliation – This is when the business office and financial aid office compare the financial aid office roster of monthly disbursements with the related cash transactions. Any discrepancies must be documented and resolved in a timely manner.
External Reconciliation – This occurs when the school compares its reconciled internal records to the Department’s records of funds received and returned. The Department offers various tools to assist with external reconciliation.
More detailed information on both is provided in the announcement.
A final reconciliation to a zero ($0) ending cash balance is also required at the end of the processing year, usually within a month or two of the school’s final disbursements but no later than the annual closeout deadline. More information on the final reconciliation process for the Direct Loan, Pell Grant, and TEACH Grant programs is included in the announcement.
