Dont Be a Sap, Know Your SAP! And Other Recent Audit Topics - - PowerPoint PPT Presentation

Don’t Be a Sap, Know Your SAP!

And Other Recent Audit Topics

Presented by Robert Helgeson

Audit Manager for the Office of Higher Education

Agenda

Don’t Be a Sap, Know Your SAP! | www.ohe.state.mn.us

• SAP Policy Issues and Best Practices
• Tax Filing Discrepancies
• Timely and Accurate Reporting to OHE
• Summary
• Resources & References

SAP Policy

• OHE has adopted the U.S. Department of Education’s (ED’s) requirements which became effective July 1,

2011.

• When we refer to Title IV aid this also refers to MN State Aid Programs with the exception of SELF.
• Electronic Code of Federal Regulations: §668.34 Satisfactory Academic Progress
• (a) Satisfactory academic progress policy. An institution must establish a reasonable satisfactory academic progress policy for

determining whether an otherwise eligible student is making satisfactory academic progress in his or her education program and may receive assistance under Title IV, HEA programs.

• In July 2019, the ED’s Office of the Inspector General (OIG) released a report detailing issues with the

Office of Federal Student Aid's (FSA) oversight of institutions' compliance with SAP regulations. (Referenced later in the presentation).

• FSA included SAP-related issues in its list of the top 10 program review findings from 2013 through 2018.

Don’t Be a Sap, Know Your SAP! | www.ohe.state.mn.us

SAP Policy

• 1. At least as strict as the policy applied to a student not receiving financial aid

under the Title IV, HEA programs.

• 2. Must be consistently applied to all students within categories of students.
• e.g. FT, PT, undergraduate, graduate, and educational programs.
• 3. Measurement of student’s progress at each evaluation:
• Policy must require evaluation at the end of each payment period for students in

programs lasting one year or less.

• For all other programs, a policy must require, at a minimum, annual reviews and must
• ccur at the end of a payment period.

Don’t Be a Sap, Know Your SAP! | www.ohe.state.mn.us

SAP Policy

• 4. Qualitative – Must specify the grade point average (GPA), or comparable equivalent,

that a student must achieve at each evaluation.

• For student’s enrolled in a program of more than two years, the policy specifies that at the end of

the second academic year, the student must have a GPA of at least a “C” or its equivalent, or have academic standing consistent with the institution's requirements for graduation.

• For example, if the school uses a 4.0 scale, a 2.0 would be required.
• In addition, the HEA requires a specific qualitative review at the end of the student’s second

academic year.

• Second year is interpreted as the student being in school for four semesters or six quarters, regardless of a

student’s enrollment status.

• At that point, the student must have a GPA of at least a 2.0 or it’s equivalent or have academic standing consistent

with the institution’s graduation requirements.

Don’t Be a Sap, Know Your SAP! | www.ohe.state.mn.us

SAP Policy

• 5. Quantitative - Must specify the pace at which a student must progress

through their educational program to ensure that the student will complete the program within the maximum timeframe.

• A student is ineligible via the max timeframe element when it becomes mathematically

impossible for them to complete their program within 150% of its length.

• Max Timeframe: For undergraduate programs, a period of no more that 150% of the

published length of the program. For graduate programs, a period the school defines that is based on the length of the program.

• Policy must clarify how a school will treat a student who changes majors or programs for

SAP and max timeframe purposes.

Don’t Be a Sap, Know Your SAP! | www.ohe.state.mn.us

SAP Policy

• 6. Policy describes how student’s GPA and pace are affected by incompletes, withdrawals, repetitions,
• r transfer of credits.
• Transfer credits that are accepted toward the student's educational program must count as both attempted and

completed hours.

• Must include number of allowed repeats on passed and failed classes.
• School’s policy must have some means of assessing a student’s academic progress in remedial coursework. Policy may

include ESL requirements and affect on SAP.

• 7. At the time of each evaluation, a student who is not meeting SAP, is no longer eligible to receive

assistance under the Title IV, HEA programs.

• Schools SAP policy must distinguish between its academic progress policies and financial aid progress requirements.

Don’t Be a Sap, Know Your SAP! | www.ohe.state.mn.us

SAP Policy

• 8. Definitions of Warning, Probation, and Academic Plan
• Warning: Status assigned to a student who fails to make SAP at an institution that evaluates SAP at the end
• f each payment period.
• Student may continue to receive Title IV aid for one payment period without a student appeal.
• Probation: Status assigned to a student failing to make SAP, who successfully appealed, and has had

eligibility for Title IV aid reinstated for one payment period only.

• Students are not allowed more than one probation period consecutively (one convoluted exception).
• “Continued Probation” status no longer allowed in policy or in practice but is allowed in discussion with students.
• Academic Plan: Regulations do not specify what needs to be included. The school and student must

develop a plan that ensures that the student is able to meet the school’s SAP standards by a specific time (which may be graduation).

Don’t be a sap, know your SAP! | www.ohe.state.mn.us

SAP Policy

• 9. Institution’s policy must specify the conditions under which a student may appeal and the

process for doing so, including:

• How the student may reestablish eligibility for financial aid.
• The circumstances for which a student may submit an appeal.
• Information the student must submit related to why the student failed to make SAP, and what has

changed that will allow the student to make SAP at the next evaluation.

• 10. If the institution doesn’t allow appeals, the policy must describe how the student may

reestablish his or her eligibility to receive assistance under the Title IV, HEA programs.

• taking time off or paying your own way cannot reestablish eligibility

Don’t be a sap, know your SAP! | www.ohe.state.mn.us

Tax Discrepancies

Disclaimer – The staff at OHE are not qualified to provide legal or tax advice

• The federal 2019-20 Application and Verification Guide states that FAAs are

required to know:

(1) whether a person was required to file a tax return, (2) what the correct filing status for a person should be, and (3) that an individual cannot be claimed as an exemption by more than one person.

• The Guide goes on to suggest FAAs use IRS Pub. 17 “Your Federal Income Tax

For Individuals” as a resource and provides the page numbers to refer to.

Don’t Be a Sap, Know Your SAP! | www.ohe.state.mn.us

Tax Discrepancies

When conflicting information is not correctly resolved, the result is an invalid ISIR. Without a valid ISIR, OHE may require the return of any Minnesota aid disbursed to a student.

• Schools may choose to act when:
• There is a presence of one or more ISIR Comment Codes 361-368 but ISIR is not selected for verification, or

there are no other documents with conflicting information.

• Schools must act:
• If the ISIR is selected for verification with or without ISIR Codes 361-368. While tax filing status and marital

status are not verifiable items, once a school has additional tax and other information, then it must resolve conflicting data.

• When performing a professional judgment (PJ) on an ISIR selected for verification a school must complete

verification, resolve conflicting information, submit changes to CPS, and obtain a new ISIR before performing the PJ.

• Regardless of verification status, a school that has additional information provided to it by a student/family

must resolve any conflicting information, even if the school did not request the additional information.

Don’t Be a Sap, Know Your SAP! | www.ohe.state.mn.us

Tax Discrepancies

Discrepant Tax Data

The following is an excerpt from the Federal Application and Verification Guide for 2019-20:

• “Financial aid administrators do not need to be tax experts, yet there are some

issues that even a layperson with basic tax law information can evaluate. Because conflicting data often involve such information, FAAs must have a fundamental understanding of relevant tax issues that can considerably affect the need analysis. You are obligated to know: (1) whether a person was required to file a tax return, (2) what the correct filing status for a person should be, and (3) that an individual cannot be claimed as an exemption by more than one person.” (emphasis added by OHE)

Don’t Be a Sap, Know Your SAP! | www.ohe.state.mn.us

Tax Discrepancies

Example 1 – Required to File?

Student A submitted a FAFSA, which was selected for verification. Student A indicated they were married on the FAFSA, and did not use the IRS data retrieval tool to import their tax information. Student A submitted a verification worksheet, and their 2015 federal tax return. On the verification worksheet, Student A included themself, a spouse, and their three children in the household size. Student A filed a 1040A with a filing status of ‘married filing separately’, and included a note that the spouse did not file taxes. There was also a statement in the file from Student A’s spouse that indicated they earned a total of $21,876 in wages and tips during the year. Does the school have a valid ISIR?

• No. Since Student A’s spouse did, in fact, make more than the IRS filing threshold amount of $4,050 for individuals who are

married filing separately, Student A’s spouse should have filed taxes.

• Student A’s spouse will need to file taxes and be added correctly to the FAFSA in order to have a valid ISIR.

Don’t Be a Sap, Know Your SAP! | www.ohe.state.mn.us

Tax Discrepancies

Tax Filing and Undocumented Citizens

• An individual's undocumented status does not exempt the individual from the requirement to file taxes if they

earn enough to be required to file. Immigrants are not exempt from tax filing. The IRS is more concerned whether a person is a resident or nonresident—rather than a documented or undocumented—alien. An alien is anyone who is not a U.S. citizen or national. A resident alien is one who either is a permanent resident or has resided in the U.S. for a specific minimum amount of time (has met the substantial presence test). All others are nonresident aliens. Resident aliens’ income is generally subject to tax in the same manner as U.S. citizens’, and they file Forms 1040, 1040A, or 1040EZ. Nonresident aliens who are required to file a return submit Form 1040NR or 1040NR-EZ; both forms are acceptable documentation for verification.

• Per IRS Publication 519, immigrants who do not have an SSN and are unable to get one can apply with the IRS for

an individual taxpayer identification number (ITIN). The ITIN is only for tax purposes. It does not authorize a person to work, endorse his legal status, or entitle him to the earned income credit or Social Security benefits. It is not to be used as an identifier in place of the SSN on the FAFSA.

Don’t Be a Sap, Know Your SAP! | www.ohe.state.mn.us

Tax Discrepancies

Head of Household

You may be able to file as head of household if you meet all the following requirements (IRS Pub. 17):

• 1. You are unmarried or “considered unmarried” on the last day of the year.
• Considered Unmarried:

1) You filed a separate return 2) You paid more than half of the cost of keeping up a home for the tax year 3) Your spouse did not live in your home during the last 6 months of the tax year 4) Your home was the main home of your child, stepchild, or foster child for more than half the year 5) You must be able to claim the child as a dependent

• 2. You paid more than half of the cost of keeping up a home for the year.
• 3. A qualifying person lived with you in the home for more than half the year (except for temporary absences, such as school).

However, if the qualifying person is your dependent parent, they do not have to live with you.

Don’t Be a Sap, Know Your SAP! | www.ohe.state.mn.us

Tax Discrepancies

Example 2 - Correct Filing Status?

Student X submitted a FAFSA, which was selected for verification. Student X answered “yes” as being married under the dependency section; Student X also indicated they were “separated”, and filed a tax return as Head of Household. Student X provided the school with a copy of their federal tax return. Was Student X eligible to file as Head of Household? What documents should the school have asked for?

• Per the IRS Publication 17, a married person (in almost all cases) cannot file as Head of Household. The definition of an unmarried

person is “(1) unmarried, or (2) legally separated from your spouse under a divorce or separate maintenance decree. State law governs whether you are married or legally separated under a divorce or separate maintenance decree.”

• Minnesota Statutes 2018 518.06 subdivision 1. A decree of legal separation does not terminate the marital status of the parties.

Student X did not provide the school with a copy of a divorce decree; therefore, Student X is considered “married” per Minnesota statutes, making them ineligible to file taxes as Head of Household for that particular academic year.

Don’t Be a Sap, Know Your SAP! | www.ohe.state.mn.us

Tax Discrepancies

Example 3 - Correct Filing Status?

Student Y submitted a FAFSA, which was selected for verification. Student Y was dependent and their parents’ marital status was “divorced/separated”. The FAFSA only included Parent 1’s tax information. Student Y provided the school with a copy of Parent 1’s federal tax return, and a verification worksheet which listed both parents in the household. The school collected Parent 2’s federal tax return. Each of the two parents (living at the same address) filed as Head of Household.

Were Student Y’s parents both eligible to file as Head of Household?

• No, they BOTH were not eligible to file HOH. Student Y’s parents must meet all of the requirements,

including: You paid more than half of the cost of keeping up a home for the year. This tax filing error resulted in an invalid ISIR. To resolve, the parent(s) must amend their taxes, before correcting their FAFSA.

Don’t Be a Sap, Know Your SAP! | www.ohe.state.mn.us

Tax Discrepancies

Example 4 – Personal Exemptions

Student Z submitted a FAFSA, which was selected for verification. Student Z was a dependent student. Student Z claimed themself as an exemption on their own federal tax return and the student’s parents also claimed the student as an exemption on their 2015 federal tax return.

• Per IRS regulations, a person who could be claimed as a dependent by someone else cannot claim an exemption for themself

during the same tax year.

• This is a change for 2018! No more personal exemptions beginning in tax year 2018. Effective through 2026 (we think… but

we’re not tax experts).

Don’t Be a Sap, Know Your SAP! | www.ohe.state.mn.us

Reporting to OHE Annual Close-Out Requirements

• OHE has been tracking late program close-outs since the 2012-13 aid year (FY 13) with the exception of

State Grant in FY 16. OHE also adds a “grace” period of about a week before considering a program to be closed late. Due to a number of federal issues in FY 17 related to the change-over from using prior- year tax data to using prior-prior-year tax data, OHE extended the State Grant date to be considered late to September 29, 2017.

• Late closeouts of prior year’s programs impact OHE’s ability to administer the next year’s programs and

in many cases cause the next year’s funds from being timely distributed to not only the institutions that were late, but also to all the other schools participating in a given program.

• OHE also uses the close-out data to project spending, monitor cash flows for both the current

year/biennium and future years/bienniums.

Don’t Be a Sap, Know Your SAP! | www.ohe.state.mn.us

Reporting to OHE

Minnesota State Grant

• Balance of unused funds must be returned to the OHE at the close of the aid year.
• The deadline for returning funds to the OHE is August 31.
• Schools must also honor any requests for return of excess cash balances sent by OHE throughout the aid year and return the

requested amount within 10 days of receiving the request.

• Schools must report award and payment activity to OHE on at least a monthly basis throughout the aid year.

Minnesota Child Care Grant & State Work Study

• Excess funds shall be returned to the OHE within 30 days of the refund/reallocation request. Returned funds are used to

reallocate to other eligible institutions.

• At the end of the fiscal year, excess funds must be returned to OHE no later than July 31.
• End of Year reports are due no later than the first working day after August 9.
• MN State schools are allowed an extra two weeks to finalize reports.

Don’t Be a Sap, Know Your SAP! | www.ohe.state.mn.us

Summary

• Familiarize yourself with the latest federal SAP policy requirements and then review

your school’s financial aid SAP policy for compliance.

• Understand which staff member(s) is responsible for OHE-reporting requirements,

create a control system including cross-training where possible, and mark calendars for program deadlines.

• Call the appropriate area of OHE with questions in advance of acting if you are unsure

about something.

• RELAX—you either just confirmed you’re doing everything correctly or else you just

fixed some issues before OHE even audits your school!

Don’t Be a Sap, Know Your SAP! | www.ohe.state.mn.us

Resources & References

• Program Integrity Q & A, which links off of IFAP homepage:

https://www2.ed.gov/policy/highered/reg/hearulemaking/2009/sap.html

Don’t Be a Sap, Know Your SAP! | www.ohe.state.mn.us

Resources & References

• FSA Handbook 2019-20, Satisfactory Academic Progress, Volume 1,

pages 12-18

• OIG Report SAP Audit Finding
• Electronic Code of Federal Regulations 668.34
• IRS Publication 17
• Publication 519
• Office of the Revisor of Statutes

Don’t Be a Sap, Know Your SAP! | www.ohe.state.mn.us

Questions?

Contact the Audit Team

Robert Helgeson, Audit Manager robert.helgeson@state.mn.us Annie Lee, Program Reviewer annie.lee@state.mn.us Erin Poster, Program Reviewer erin.poster@state.mn.us Erin Wayne, Program Reviewer erin.wayne@state.mn.us

Don’t Be a Sap, Know Your SAP! | www.ohe.state.mn.us