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Finding No. 2 – Current Regulations Defining Attendance at an Academically Related Activity Should Also Apply to Student Eligibility and Disbursement Requirements Currently, the definition of attendance at an academically related activity (referred to throughout this report as “academic attendance”) appears in the regulation regarding calculation of funds to be returned to the Title IV programs for students who withdraw from school (see 34 C.F.R.
§ 668.22(l)(7)). When a student withdraws, the school must determine the amount of the Title IV funds that the student earned as of the student’s withdrawal date.
The Department clarified the definition of academic attendance in 34 C.F.R. § 668.22(l)(7). 10 That regulation describes a nonexclusive list of activities that may be considered academic
• logging in to an online class without active participation, and
• participating in academic counseling or advising.
However, determination of academic attendance affects eligibility to initially receive or retain Title IV funds not only for students who withdraw from school but also for students who never begin attendance. Although regulations at 34 C.F.R. § 668.21 require schools to return all Title IV funds for students who do not begin attendance in a payment period or period of enrollment, that regulation does not expressly cross-reference the definition of academic attendance in 668.22(l).
Determination of Attendance Affects a Student’s Eligibility to Receive or Retain Initial and Subsequent Disbursements of Title IV Funds Proper determination of attendance affects a student’s initial eligibility for Title IV funds and
subsequent disbursements of Title IV funds. For example:
• If a school disburses Title IV funds to students on or after the first day of classes, the students are eligible to receive the Title IV disbursements only if they have begun attendance (“2011-2012 Federal Student Aid Handbook”, Volume 4, Chapter 1, page 4-29).
• If a school disburses Title IV funds to students who never attend during the payment period, the school must return to the Department or lenders all Title IV funds disbursed to those students (34 C.F.R. § 668.21(a)).
• If the projected enrollment status of a student changes based on the courses in which the student actually began attendance, schools must recalculate the student’s Federal Pell Grant (Pell) award (34 C.F.R. § 690.80(b)(2)(ii)).
Therefore, a proper determination of whether a student attended the courses in which he or she enrolled is necessary to ensure that only proper payments of Title IV funds are made.
Schools Did Not Consistently Apply the Definition of Academic Attendance When Determining Eligibility for Disbursements of Title IV Funds Our review of student records at eight schools showed that schools have not consistently applied the Department’s regulation and guidance regarding academic attendance when determining initial student eligibility and making disbursements of Title IV funds. We found that all eight schools considered activity that was not academic attendance to be evidence that distance education students attended their courses.
We reviewed student records covering award year 2010–2011 using the July 1, 2010, attendance requirement (34 C.F.R. § 668.22(c)(3)) that was applicable to students who withdraw from school. Student records showed that schools used different methods for determining attendance during award year 2010–2011. Three of the eight schools that we reviewed as part of this audit allowed faculty members to define attendance on their own. However, faculty members were not responsible for knowing Title IV regulations. Student records at two of these three schools showed that faculty members accepted activity that was not academic attendance as evidence Final Audit Report ED-OIG/A07L0001 Page 21 of 83 that distance education students started attending the courses. Therefore, these schools did not ensure that they complied with regulatory prohibitions against retaining Title IV funds for students who did not begin attendance.
We found the following for the remaining five schools that we reviewed.
• Two schools considered a student logging in to the online learning management system to be support for academic attendance. One of the two schools revised its attendance policy in August 2011 so that logging in to the online learning management system is no longer considered an academically related activity.
• One school defined attendance as accessing a course through the school’s online learning management system.
• Two schools considered any submission to the online learning management system to be support for academic attendance, even though not all submissions were academically related. Both schools considered nonacademically related submissions, such as a student posting a brief personal introduction or completing a checklist, to the online learning management system to be evidence that distance education students attended during the payment period.
During our review, we looked for events, such as the examples listed in 34 C.F.R.
§ 668.22(c)(3)(ii)(2010), or any other evidence that might reasonably indicate that a student attended an academic activity. We accepted as sufficient evidence a student (1) submitting discussion postings related to the classwork; (2) completing exams, quizzes, or assignments; or (3) initiating contact with a faculty member to ask a question about the academic subject. We did not consider a student’s simply accessing the online learning management system as sufficient evidence of attendance when the record of access did not indicate whether the student attended an academic activity, such as replaying a video lecture, joining an online discussion, or reviewing reading materials.
None of the eight schools that we reviewed retained adequate evidence of a student’s academic attendance, as required in regulation that became effective July 1, 2010 (34 C.F.R.
§ 668.22(c)(3)), to support the student’s withdrawal date. To support the withdrawal date, the July 1, 2010, regulation requires schools to document that the activity is academically related and document that the student attended the activity. Generally, the schools that we reviewed retained evidence of a student’s accessing the online learning management system to support the student’s withdrawal date. However, by itself, evidence that the student accessed the online learning system is not sufficient to support that the student attended an academically related activity as required in 34 C.F.R. § 668.22(c)(3). In the situations described in this report and appendices, the login record did not indicate any activity other than the login itself.
Without Expansion of the Regulations Defining Attendance and Issuance of Additional Guidance, Schools Might Not Comply With All Attendance-Dependent Requirements Because the definition of academic attendance in the return of Title IV aid regulations is not expressly cross-referenced in other regulations, schools might not always (1) return all Title IV funds for distance education students who never attended during a payment period, (2) adjust Final Audit Report ED-OIG/A07L0001 Page 22 of 83 Pell awards for distance education students whose enrollment statuses changed because they did not attend all the courses in which they enrolled, and (3) confirm that distance education students attended in the payment period before disbursing Title IV funds after the start of the payment period.
We reviewed the records for 400 students who received about $1.8 million from the 8 schools that we reviewed as part of this audit. We found that
• seven schools retained about $101,000 of Title IV funds for 39 distance education students who never attended a payment period,
• six schools retained about $37,000 more than they should have received because the schools did not adjust the Pell awards for 49 distance education students who had a change in enrollment status in the payment period, and
• seven schools disbursed Title IV funds after the start of the payment period to 41 distance education students who had not yet attended classes during the payment period.
Appendices C through J provide the details for the numbers reported.
Recommendations We recommend that the Acting Assistant Secretary for Postsecondary Education, in collaboration with the Chief Operating Officer for FSA—
2.1 Amend the regulations for disbursing Title IV funds to cross-reference the definitions of “academic attendance” and “attendance at an academically related activity” in 34 C.F.R.
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.
Department Response The Department agreed in principle with the finding and agreed with both recommendations.
The Department stated that OPE will develop a decision memo for the Secretary’s Executive Team. The decision memo will address whether or not to modify the appropriate regulations to apply the definition of “academic attendance” and “attendance at an academically related activity” to the regulations for determining student eligibility and disbursing Title IV. In addition, OPE will issue guidance clarifying acceptable evidence supporting academic attendance and last date of attendance for students enrolled in distance education programs.
Final Audit Report ED-OIG/A07L0001 Page 23 of 83 Finding No. 3 – Cost of Attendance Components for Distance Education Students Should Be Revised Distance education students and students attending classes on campus often have different costs of attendance. Students enrolled in distance education programs, like students enrolled in correspondence programs, are not physically present in traditional classrooms.
According to the HEA, cost of attendance includes tuition and fees; an allowance for books, supplies, transportation, and other personal expenses; and room and board expenses. Subsequent to the Distance Education Demonstration Program, Congress amended section 472 of the HEA to state that no distinction shall be made with respect to the mode of instruction in determining the student’s cost of attendance. Although section 472 states that no distinction is to be made between on-campus or distance education programs when determining a student’s cost of attendance, it limits cost of attendance for students enrolled in correspondence programs to only tuition and fees and, if required, books, supplies, travel, and room and board costs incurred only for periods of required residential training.
Not All Students Incur the Same Expenses to Attend School On average, tuition, fees, and books at the eight schools that we reviewed as part of this audit accounted for 42.3 percent of each full-time student’s total cost of attendance (see Table 2).
The remaining 57.7 percent of the student’s cost of attendance consisted of allowances for transportation, room and board, and miscellaneous personal expenses.
However, Title IV funds to cover transportation, room and board, and miscellaneous personal expenses might not always be needed by distance education students. For example, distance education students do not need to change residences to attend school. Because of such differences, distance education students are not likely to incur the same expenses to attend school as students attending on-campus programs. Yet, distance education students have been allowed to borrow more than is necessary to cover their educational expenses, creating loan debt on costs that are not necessarily academically related.
Final Audit Report ED-OIG/A07L0001 Page 24 of 83 Cost of attendance is an estimate of a student’s educational expenses for the period of enrollment. Only components that directly relate to a student’s educational expenses should be included in cost of attendance budgets. These estimated costs should be reasonable and necessary, and they most likely will vary depending on the student’s educational needs. Cost of attendance budgets greatly impact the amount of Title IV funds a student is awarded.
Transportation cost is one component in cost of attendance budgets and an example of a cost that might not be incurred by every student enrolled in a distance education program. Three of the eight schools that we reviewed did not include any transportation costs in cost of attendance budgets for distance education students. The other five schools included transportation costs.
We found that two of these five schools limited the transportation costs to the distance education student’s anticipated need. However, the other three schools included the same transportation cost allowance for distance education students as they did for students attending classes on campus.
If students do not incur additional costs during their courses of study, they have no need for the costs to be included as part of their cost of attendance budgets for Title IV purposes. Schools need to apply cost of attendance budgets based on students’ characteristics. Applying cost of attendance budgets based on students’ characteristics would (1) reduce the risk of certain groups of students being awarded Title IV funds that they do not need to cover their costs of education and (2) reduce the opportunities for students to borrow amounts not needed to cover the costs of education.
Title IV Aid in Excess of Educational Need Increases the Risks of Fraud Title IV funds delivered to students attending distance education programs are more vulnerable to fraud and abuse than funds delivered to students in traditional programs. The IPAR that the OIG issued on September 26, 2011, 11 reported on the increasing number of fraud rings obtaining Title IV funds when schools provide credit balances to students. 12 Fraud rings usually target community colleges and other distance education programs that charge lower tuition, because the Title IV funds awarded are sufficient to satisfy institutional charges (for example, tuition and fees) and result in a sizable payment of the balance of the award to the student for other expenses (for example, room and board and miscellaneous personal expenses). The balance typically consists of loan funds because Pell funds are applied to tuition and fees first.