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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, University of Phoenix did not return $662 in Title IV funds that it credited to the accounts of or disbursed directly to 2 students without evidence of the student’s attendance in an academically related activity during a payment period.

University of Phoenix disagreed that the students did not begin attendance during the payment period. University of Phoenix stated that the students in question were in attendance during the first week of their respective courses.

We disagree with University of Phoenix’s position. We made our determination based on our review of academically related activities recorded in the online learning management system. If discussion posts were clearly not related to the subject matter of the course (for example, a post in which the student simply introduced himself or herself to classmates), we did not consider the post to be academically related. When conducting our review, we followed University of Phoenix’s policy that a student would be dropped from a course if he or she did not adhere to the school’s attendance requirements. If a student did not meet the attendance requirements for the first week of a 4-week course, the first 2 weeks of a 5- or 6-week course, or the first 3 weeks of a 9-week course, we considered the student to have never attended the course even if the students had an academically related activity later in the course. These two students had activity in their Final Audit Report ED-OIG/A07L0001 Page 77 of 83 courses but they did not have academically related activity on 2 separate days in a week during the course, as required per University of Phoenix’s attendance requirements.

Confirmation of Eligibility at the Time of Disbursement The records for 3 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 an academically related activity before the disbursements.

University of Phoenix disagreed that the students were not eligible at the time of the disbursements. University of Phoenix stated that the students in question were in attendance during the first week of their respective courses and that all disbursements occurred subsequent to the students’ documented postings of attendance.

We disagree with University of Phoenix’s position. University of Phoenix’s online learning management system did not contain evidence that any of the three students attended academically related activities as required by 34 C.F.R. § 668.22(c)(3) before the disbursements.

Final Audit Report ED-OIG/A07L0001 Page 78 of 83 Appendix K: Department’s Comments on the Draft Audit Report

MEMORANDUM

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Thank you for the opportunity to comment on the Office of Inspector General’s (OIG) draft audit report, Title IV of the Higher Education Act Programs: Additional Safeguards Are Needed to Help Mitigate the Risks That Are Unique to the Distance Education Environment, dated September 6, 2013. The objectives of the audit were to determine whether (1) the U.S.

Department of Education adapted the program requirements and guidance for Title IV of the Higher Education Act of 1965, as amended (Title IV), programs to mitigate the unique risks inherent in the distance education environment, and (2) the Department, accrediting agencies, and State agencies adequately monitored schools to provide assurance of their compliance with the Title IV requirements unique to the distance education environment.

This Memorandum provides the Department’s comments and responses to the five (5) findings and recommendations and other matters in OIG’s draft audit report. Federal Student Aid, the Office of Postsecondary Education, and the Office of the Under Secretary collaborated to provide the comments in this Memorandum.

The draft audit report acknowledges that the Department has taken steps to mitigate the risks in the distance learning environment, but recommends further actions to protect the integrity of the Title IV programs. Although the Department agrees in principle that additional safeguards and risk assessment strategies are needed to mitigate the unique risks associated with distance education, the Department does not concur entirely with all of OIG’s recommendations. The Department’s response provides information to support any recommendation(s) for which the Final Audit Report ED-OIG/A07L0001 Page 79 of 83 Department does not concur, as well as clarifying information as may be warranted for recommendations that are being accepted.

In addition, with respect to the issue concerning the calculation of cost of attendance for distance education programs, we believe the draft audit report implies—or may lead a reader to infer— that Congress was unaware of the limitations on the calculation of cost of attendance for correspondence programs when it amended the law to specifically state that no distinction is to be made between on-campus or distance education programs when determining a student’s cost of attendance. A more thorough discussion of the legislative history, however, would show that Congress made this change subsequent to a distance education demonstration program it authorized several years prior. In addition, section 484(l)(1)(A) further demonstrates that Congress sought to distinguish distance education from correspondence courses. We believe such information would better place in context the statement in the draft audit report that “…the HEA recognizes the differences in actual costs incurred based on the mode of instruction.” In particular, we believe it would be more accurate to clarify that the Higher Education Act excludes certain indirect education costs of attendance in the calculation of the cost of attendance for a student enrolled in a course of instruction comprised of correspondence courses that are not excluded with respect a student enrolled in an instruction program comprised of distance education courses.





Regarding Finding No. 5, “More Useful Data on Distance Education Is Needed to Adequately Assess Risk and Direct Monitoring Efforts,” the National Center for Education Statistics (NCES) required institutions to report in the Integrated Postsecondary Education Data System (IPEDS) on programs that are available entirely by distance education beginning in 2012-13. The degree or certificate programs must be identified by the Classification of Instructional Program (CIP) code. In addition, institutions are required to report enrollment data at the institutional level for the fall cohort. The data to be reported include the number of students (undergraduate/graduate) enrolled in none/some/all distance education courses. Furthermore, of the students that are enrolled 100 percent in distance education, the institution is to report where they are located—in the state where the institution is located, in the U.S., or outside of the U.S. This enrollment data is based on the most recent address the institution has on record. For some institutions, particular sections of a course are online, while others are not, and the institution may not have that indicated in its data systems. NCES provided as much notice as possible to institutions that this requirement was forthcoming so the institutions could take whatever steps were necessary to obtain the information, but for some institutions this was definitely a challenge.

Although the level of reporting required for distance education data has increased, NCES has advised the Department that the data from the institutions cannot be tied to Title IV disbursements. Institutions typically keep three different data systems that impact Title IV disbursements (financial aid records, enrollment records, and course records), all of which have different crystallization times that will not support effective data reporting to NCES data systems.

–  –  –

(e) Any agency that has notified the Secretary of a change in its scope in accordance with 602.27(a)(5) must monitor the headcount enrollment of each institution it has accredited that offers distance education or correspondence education. If any such institution has experienced an increase in headcount enrollment of 50 percent or more within one institutional fiscal year, the agency must report that information to the Secretary within 30 days of acquiring such data.

OIG apparently interprets that to mean that all accrediting agencies that have distance education in their scope are required to report information to the Secretary when an institution experiences an increase in headcount of 50 percent or more within one institutional fiscal year. However, that is not the case. This regulation applies only to those institutions that notified the Secretary of an increase in scope to include distance education (see 602.27(a)(5)) rather than apply to the Secretary for an expansion of scope. A handful of agencies expanded their scope by notification to the Department after the statue was amended to allow that. However, the Department conducts a full review of an agency based on its scope when it comes up for renewal of recognition. Once those agencies have had their scope formally reviewed/approved, they are no longer subject to this requirement.

FINDING NO. 1 – Regulations Related to Verifying Student Identify and Disbursing Title IV Funds Should Be Strengthened RECOMMENDATION 1.1 -- Revise the student identity verification regulations to require schools offering distance education to have a process in place to verify the student’s name and educational credentials. Acceptable student identity verification items might include high school diploma, educational transcripts, or college admission test scores. Such verification should occur as part of the enrollment process.

RECOMMENDATION 1.2 -- Revise the regulations to require schools to have their independent public accountants, not accrediting agencies, assess the effectiveness of their processes for verifying a student’s identity.

RECOMMENDATION 1.3 -- Revise the regulations to require more frequent disbursements of Title IV funds. The disbursements should coincide with the timing of institutional charges and other educational expenses, such as monthly child or dependent care and Internet expenses.

We agree with these three recommendations. The Office of Postsecondary Education will develop a decision memo for the Secretary’s Executive Team. The decision memo will address whether or not to include revising the recommendations to modify the appropriate student financial assistance regulations related to confirmation of student identity on the Department’s

negotiated rulemaking schedule. The issues addressed in the decision memo will include:

(1) acceptable student identity verification items and when verification should occur, (2) having independent public accountants, not accrediting agencies, assess the effectiveness of the processes for verifying a student’s identity, and (3) the timing of institutional disbursements and other educational expenses, such as monthly child or dependent care and Internet expenses.

Final Audit Report ED-OIG/A07L0001 Page 81 of 83 FINDING NO. 2 – Attendance at an Academically Related Activity Should Be a Student Eligibility and Disbursement Requirement, Not a Requirement Limited to Return of Title IV Aid Calculations RECOMMENDATION 2.1 -- Amend the regulations to apply the definitions of “academic attendance” and “attendance at an academically related activity” in 34 C.F.R. § 668.22(l)(7) to the regulations for determining student eligibility and disbursing Title IV funds.

We agree with the recommendation. The Office of Postsecondary Education will develop a decision memo for the Secretary’s Executive Team. The decision memo will address whether or not to include revising the recommendations to modify the appropriate student financial assistance regulations related to confirmation of student identity on the Department’s negotiated rulemaking schedule. The issues addressed in the decision memo will include applying the definitions of “academic attendance” and “attendance at an academically related activity” in 34 C.F.R. § 668.22(l)(7) to the regulations for determining student eligibility and disbursing Title IV funds.

RECOMMENDATION 2.2 -- Issue further guidance that clearly explains what is considered acceptable evidence to support a distance education student’s academic attendance and last date of attendance.

We agree with the recommendation. The Office of Postsecondary Education will issue guidance clarifying acceptable evidence supporting academic attendance and last date of attendance for students enrolled in distance education programs through a Dear Colleague letter, the Federal Student Aid Handbook, or other appropriate communication.

FINDING NO. 3 – Cost of Attendance Components for Distance Education Students Should Be Revised RECOMMENDATION 3.1 -- Work with Congress to amend section 472 of the HEA to specify that a school’s cost of attendance budget for a student include only those costs that reflect actual educational expenses.

We agree with the recommendation. The Department is currently assessing needed changes to the Higher Education Act to improve access to, and the quality and affordability of, postsecondary education as well as to improve outcomes for both students and taxpayers and strengthen program integrity. This assessment will include reviewing the statutory framework that governs the determination of financial need among student aid recipients and the direct and indirect educational costs of attendance incurred by students pursuing postsecondary education.

We plan to communicate the results and recommendations of our assessment to Congress prior to the September 30, 2014 expiration of the authorization of the Higher Education Act.

Final Audit Report ED-OIG/A07L0001 Page 82 of 83 RECOMMENDATION 3.2 -- Provide guidance to schools explaining (1) that a distance education student’s cost of attendance budget should not include expenses that they most likely will not incur, and (2) pursuant to section 484(l)(2) of the HEA, a school’s financial aid officer can exercise professional judgment and reduce a student’s Title IV aid amount if the financial aid officer determines that distance education results in a substantially reduced cost of attendance for the student.



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