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«FINAL AUDIT REPORT ED-OIG/A07L0001 February 2014 Our mission is to promote the U.S. Department of Education efficiency, effectiveness, and Office of ...»

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Treatment of Title IV Funds When a Student Does Not Begin Attending Classes Of the 50 students in our sample, ITT Tech did not return $8,165 in Title IV funds that it credited to the accounts of or disbursed directly to 6 students without evidence of the students’ attendance in academically related activities during the payment period.

Final Audit Report ED-OIG/A07L0001 Page 72 of 83 ITT Tech disagreed that it did not return the Title IV funds for students who did not begin attendance during a payment period. ITT Tech’s position and our disagreement are the same as noted in the “Treatment of Title IV Funds When a Student Withdraws” issue.

Confirmation of Eligibility at Time of Disbursement The records for 4 of the 50 students in our sample indicated that the students received Title IV disbursements after the start of the payment period without evidence of the students’ attendance in academically related activities before the disbursements.

ITT Tech disagreed that it did not confirm eligibility before making disbursements after the start of the payment period. ITT Tech’s position and our disagreement are the same as noted in the “Treatment of Title IV Funds When a Student Withdraws” issue.

Recalculation of Pell Award Of the 50 students in our sample, ITT Tech’s online learning management system records for 8 students indicated a change in enrollment status based on the students’ lack of academically related activity in 1 or more of their classes. The enrollment status changes for seven of the eight students had an effect on their Pell eligibility. However, ITT Tech did not properly recalculate the Pell awards for those seven students. As a result, ITT Tech awarded $5,549 more than it should have awarded to the seven students.

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University of Phoenix was founded in 1976 and is headquartered in Phoenix, Arizona. It is a subsidiary of Apollo Group, Inc. The school is accredited by The Higher Learning Commission.19 University of Phoenix offers 160 programs that can be completed entirely through distance education. During award year 2010–2011, University of Phoenix disbursed more than $3.6 billion in Title IV funds to about 326,000, including about 253,000 students who were enrolled solely in distance education courses.

Cost of Attendance University of Phoenix’s cost of attendance budget included tuition and fees and allowances for room and board, transportation, books and supplies, miscellaneous, and loan expenses.

University of Phoenix created a separate cost of attendance budget that did not include an allowance for transportation costs for distance education students.

Billings and Disbursements University of Phoenix is a non-term-based school. It defined the payment period for each student as 12 successfully completed credit hours. Associate degree courses were 9 weeks, bachelor degree courses were 5 weeks, and graduate degree courses were 6 weeks, with new courses beginning each week. Bachelor and graduate degree-seeking distance education students attended one course at a time, and associate degree-seeking distance education students attended two courses concurrently. University of Phoenix charged tuition and fees by course, not by payment period. Distance education students usually earned 3 credit hours per course and would have to receive passing grades on 12 credit hours’ worth of courses to complete a payment period.

If a distance education student failed or withdrew from courses during a payment period, he or she would take longer to receive passing grades worth 12 credit hours and complete the payment period. Also, University of Phoenix allowed distance education students to take breaks between courses. Before July 1, 2011, distance education students could take a break for a maximum of 29 days between courses without being withdrawn from the school. Starting July 1, 2011, distance education students could take a break for a maximum of 14 days between courses without being withdrawn from the school. If a distance education student chose to take a break between courses instead of taking one course immediately after another, he or she would take longer to complete the payment periods. A distance education student would not receive a second Title IV disbursement until after he or she had successfully completed the credit hours for the first payment period.

University of Phoenix usually disbursed Title IV funds to distance education students 10 days after the start of the payment period. Although tuition and fees were charged one course at a time, Title IV funds were disbursed for the entire payment period. Three days before a Title IV University of Phoenix informed us that, effective June 27, 2013, it was placed on notice by The Higher Learning Commission. The notice was a sanction indicating that the school was pursuing a course of action that, if continued, could lead it to be out of compliance with one or more criteria for accreditation. A school placed on notice by the accrediting agency retains its accreditation.

Final Audit Report ED-OIG/A07L0001 Page 74 of 83 disbursement, University of Phoenix’s automated financial aid system ran eligibility checks to determine whether students were eligible for their disbursements. These checks included determining whether the student had attendance in the payment period. If a distance education student was not eligible at the time the system ran the checks, the automated financial aid system would put a hold on the disbursement until the student met all applicable requirements. Once the student cleared all eligibility checks, the automated financial aid system released the student’s disbursement.





Attendance and Withdrawal Policies University of Phoenix required distance education students to establish attendance on 2 separate days during a week (a predefined 7-day period established for each course) to be considered in attendance for the entire week. University of Phoenix considered any submission to the interactive classroom section of its online learning management system as evidence that the student met the attendance requirement. For example, a student could post a message to a course forum on 2 separate days during the week and be considered in attendance for the week.

Students who failed to meet the attendance requirements for a certain number of weeks (depending on the length of the course) would be dropped from the course. If the student failed the attendance requirement for the first week of a 4-week course, the first 2 consecutive weeks for a 5- or 6-week course, or the first 3 consecutive weeks for a 9-week course, University of Phoenix would drop the student from the distance education course and treat the student as if he or she had never attended the course.

University of Phoenix was not required to take attendance but chose to do so. For a distance education student who unofficially withdrew from the school, the University of Phoenix used the last date of attendance as recorded in its online learning management system as the student’s withdrawal date for the return of Title IV aid calculation. University of Phoenix calculated the percentage of the payment period the student completed by calculating the student’s rate of progress in successfully completing the credit hours for the payment period before withdrawing.

For example, if a student received passing grades on 3 of the 12 credit hours in the payment period before withdrawing, the student would have completed 25 percent of the payment period.

Determination of Attendance Affects a School’s Compliance With the Title IV Requirements We identified attendance issues that affected University of Phoenix’s compliance with the Title IV requirements in three areas: (1) treatment of Title IV funds when a student withdraws, (2) treatment of Title IV funds when a student does not begin attendance, and (3) confirmation of eligibility at the time of disbursement.

Treatment of Title IV Funds When a Student Withdraws Of the 50 students in our sample, 45 did not successfully complete their credit hours for the payment period. University of Phoenix used an unsupported last date of attendance or incorrectly calculated the number of days in the payment period, resulting in University of Phoenix returning $11,031 less than it should have for 26 students and disbursing $976 more than it should have for 2 students.

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withdrawal. However, for the other eight students, University of Phoenix did not correctly calculate the number of days in the payment period based on the students’ rates of progress or properly account for breaks between courses.

University of Phoenix disagreed that it improperly calculated the return of Title IV aid, stating that we misapplied its attendance policy. According to University of Phoenix, we used last dates of attendance that were not based on the school’s established attendance policies. Specifically, University of Phoenix stated that we failed to use the last day of the week in which the student had submissions on at least 2 days as the student’s last date of attendance. In addition, University of Phoenix believed that we arbitrarily credited some instances of student attendance while ignoring others and incorrectly discounting 1 or more weeks of attendance. University of Phoenix also believed that our misapplication of its attendance policy was an attempt by us to control the school’s curriculum, which is in violation of the prohibition against Federal control of education.

University of Phoenix stated that, during the audit period, the applicable regulation indicated that schools that were not required to take attendance could establish the withdrawal date as the midpoint of the payment period. However, a school also could use the last date of attendance at an academically related activity as the student’s withdrawal date. University of Phoenix believed that the regulation clearly indicated that the school had the option of performing the return of Title IV aid calculation based on the midpoint of the student’s payment period. Therefore, it stated that the questioned dollars overstated the much lesser amounts that University of Phoenix could have chosen to return under the midpoint methodology. According to University of Phoenix, a new regulation stating that a school having its own requirement to take attendance could not use the midpoint of the payment period as the withdrawal date was not effective until July 1, 2011. University of Phoenix stated that we sought to apply this new regulation retroactively by denying the school the option to calculate the return of Title IV aid using the midpoint of the payment period as the withdrawal date.

University of Phoenix also disagreed that it did not correctly calculate the number of days in the payment period. University of Phoenix believed that the information that the OIG provided it related to this issue was not sufficient for the school to provide specific comments related to its calculations of the number of days in the payment period.

We disagree with University of Phoenix’s position. University of Phoenix’s policy of using the last day of the week as the last date of attendance for return of Title IV aid purposes is contrary to 34 C.F.R. § 668.22. The student’s last date of attendance must be the last date of an academically related activity, not the last day of the week in which the student had academically related activity. When conducting our review of student records, we considered an academically related activity to include things such as a discussion posting related to the coursework, a completed quiz, and homework submissions. We did not consider a student logging in to a course to be sufficient evidence of academic attendance because the login record did not indicate attendance at an academically related activity. We also did not consider every discussion post to be an academically related post. For example, we did not consider a student’s post stating that he or she was “Ready to go” or “Checking in” as evidence of an academically related activity.

–  –  –

school’s curriculum. We limited our work to applying the regulations in effect during the audit period and concluding whether the school maintained sufficient evidence of academic attendance.

In addition, we disagree that we overstated the amount of Title IV funds that University of Phoenix should have returned for students who did not successfully complete their credit hours for the payment period. During the audit period, University of Phoenix could have chosen to use the midpoint of the payment period or the last date of academic attendance as the student’s withdrawal date. University of Phoenix chose to use the last date of academic attendance.

Therefore, it was appropriate to use the last date of academic attendance, not the midpoint of the payment period, to determine whether University of Phoenix properly calculated the amount of Title IV aid it should have returned.

We consider University of Phoenix’s practice of not deducting the days in which a student is on a break to be contrary to guidance in the Department’s FSA Handbook. According to the FSA Handbook, when a student in a nonterm, credit hour program takes an unscheduled break in attendance, deviating from the student’s original attendance plan, the school must either (1) treat the student as a withdrawal or (2) place the student on an approved leave of absence. The gap in attendance may not be treated as part of the student's attendance in the payment period and should be excluded from the return of Title IV aid calculation (“2010–2011 Federal Student Aid Handbook,” Volume 5, page 5-85). When we asked for University of Phoenix to comment, we provided it with a list of students for whom we concluded that University of Phoenix did not properly determine the number of days in the payment period when calculating the amount of Title IV aid to return. For those students, we also provided an explanation of how we concluded that the payment period was not properly determined. Finally, we indicated whether University of Phoenix deducted breaks in attendance from the number of days the students attended during the payment period. The information demonstrated precisely how we concluded that University of Phoenix improperly calculated the number of days in the payment period.



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