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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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Change in the Population of Postsecondary Education Students Requires Increased Analysis As described in the Background section of this report, the increase in the number of students taking at least one distance education course is outpacing the growth for total enrollment in higher education. Because distance education is growing, the Department should take steps now to design a plan to collect the data necessary to identify trends in the distance education environment. Doing so would help policy makers and program managers better understand distance education and proactively identify needed statutory and regulatory changes to protect students and taxpayers.

To better understand distance education, the Department could collect data that it could then

analyze and answer questions such as:

• To what extent is distance education offered at schools (for example, how many degree programs and courses are offered through distance education)?

• What is the level of a student’s participation in distance education (for example, is the student enrolled 100 percent in distance education courses, 100 percent in traditional education courses, or some combination of the two)?

• What amount of Title IV funds did students receive to attend distance education programs (for example, how much in Title IV funds did schools disburse to the students in each category in the preceding bullet)?

–  –  –

distance education student and is it the same as the amount charged to a traditional student for the same program of study)?

Such information would help Department policy makers and program managers identify trends and make informed policy and operational decisions with respect to overseeing and monitoring distance education programs receiving Title IV funds. Plus, this type of information could help FSA

• identify additional risks that have the potential to negatively affect the Title IV programs,

• formulate strategies to mitigate the risks identified, and

• focus its program review resources on high-risk areas.

A properly designed plan that outlines how data will be collected, the type of data to collect, and the purpose of the data collected could provide Department decision makers and program managers a much deeper insight into the distance education environment. Plus, establishing a baseline that can be used for comparative purposes will give the Department the ability to identify shifts in the distance education environment and proactively develop policies and regulations to address future concerns. The issuance of new regulations or guidance, or modifications to existing requirements, would likely be timelier, lessening the impact on the Title IV programs.

Recommendations We recommend that the Acting Assistant Secretary for Postsecondary Education, in collaboration with the Chief Operating Officer for FSA—

5.1 Collect data that helps Department policy makers and program managers better understand the characteristics of the distance education environment; monitor growth in distance education as it relates to Title IV funds, programs, and student population; assess risks specific to the distance education environment; and formulate strategies to address the risks identified.

5.2 Incorporate the data into FSA’s risk assessment process.

Department Response The Department agreed in principle with the finding and agreed with both recommendations.

The Department stated that FSA will review Integrated Postsecondary Education Data System (IPEDS) data elements related to distance education and send comments and recommendations to NCES for updating data elements in IPEDS, as needed. In addition, the Department stated that FSA will use available IPEDS data on distance education to determine how to strengthen Program Compliance’s school risk assessment process. However, the Department stated that the distance education data collected from the schools cannot be tied to Title IV disbursements.

Final Audit Report ED-OIG/A07L0001 Page 36 of 83 OIG Response Distance education disbursement data could be collected through the National Student Loan Data System, which collects student-level data. However, the National Student Loan Data System would need to be modified to include fields for distance education-related data.

Final Audit Report ED-OIG/A07L0001 Page 37 of 83


During our audit, we identified an additional issue that was not specific to the distance education environment. Of the eight schools that we reviewed, four used a form to obtain the student’s or parent’s authorization to hold Title IV credit balances. Two of the four forms were not in compliance with Title IV requirements. In addition, of the eight schools, four did not return Title IV credit balances in a timely manner.

Credit Balance Authorization Forms Were Not in Compliance With Federal Regulations ITT Tech and Liberty University were using authorization forms that did not comply with the Title IV regulations.

• ITT Tech’s authorization form was not in compliance with the regulations because it (1) stated that the school could retain a Title IV credit balance for future charges and for prior academic years and (2) did not specify to whom the Title IV credit balance must be paid when it is liquidated. However, according to 34 C.F.R.

§ 668.165(b)(5)(iii), a school may not hold a credit balance to pay for future charges beyond the end of the award year or loan period, in the case of loans. In addition, a school may not use Title IV funds to satisfy more than $200 of prior award year charges (34 C.F.R. § 668.164(d)(2)).

• Liberty University’s authorization form stated that students who wanted to change their current authorization had to submit a written request before the end of the second week of the semester. However, according to 34 C.F.R. § 668.165(b)(2)(ii), the student or parent must be allowed to cancel or modify the authorization at any time.

Credit Balances Not Returned in a Timely Manner ITT Tech, Ivy Tech, Penn State, and Western Governors University were holding Title IV credit balances longer than 14 days without a student’s or parent’s authorization. Unless a school has authorization from students or their parents to hold Title IV credit balances, it must pay a Title IV credit balance no later than 14 days after the balance occurred, unless the credit balance occurred on or before the start of the first class of the payment period. In that case, schools must pay the credit balance no later than 14 days after the first day of class of the payment period (34 C.F.R. § 668.164(e) and § 668.165(b)(1)(ii)).

Penn State, Western Governors University, and Ivy Tech did not have authorization forms because their practices were to not hold Title IV credit balances. However, our testing showed that Ivy Tech and Western Governors University did not always pay Title IV credit balances to students within 14 days. Penn State paid Title IV credit balances to students unless the students verbally requested that their credit balances be held on their accounts. This verbal request would be noted in the student’s records. However, such a process does not comply with Federal regulations, which require that the authorization be in writing (34 C.F.R. § 668.165(b)(1)).

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The objectives of this audit were to determine whether (1) the Department adapted the program requirements and guidance for the 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.

To achieve our objectives, we gained an understanding of selected provisions of the Higher Education Act of 1965, as amended; the Higher Education Reconciliation Act of 2005;

and the Higher Education Opportunity Act of 2008. We also gained an understanding of the Title IV regulations; June 2012 version of Office of Management and Budget Circular A-133 Compliance Supplement, Part 5, Section 3, “Clusters of Programs, Student Financial Assistance Programs;” January 2000 version of the OIG audit guide, “Audits of Federal Student Financial Assistance programs at participating Institutions and Institution Servicers;” and Departmental guidance applicable to the audit objectives. We also obtained an understanding of the policies, procedures, and practices relevant to distance education at four levels: the Department, accrediting agencies, States, and schools. We reviewed records relevant to July 1, 2009, through June 30, 2011.

Department We interviewed officials and reviewed policies and procedures to obtain an understanding of OPE’s processes for overseeing accrediting agencies and State authorizations of schools. We also gained an understanding of the data that OPE and NCES collected on schools offering distance education programs and OPE’s interaction with FSA to monitor schools that offer distance education programs. In addition, we gained an understanding of OPE’s regulatory and policy changes and guidance related to distance education programs and OPE’s process for recognizing accrediting agencies to accredit schools offering distance education.

We also interviewed officials and reviewed policies and procedures to obtain an understanding of FSA’s processes for monitoring schools that offer distance education programs. We gained an understanding of the role that independent auditors, accrediting agencies, and States had in FSA’s monitoring of schools. We also gained an understanding of the data that FSA collected on schools offering distance education programs and FSA’s interaction with OPE as it related to monitoring schools that offered distance education programs.

Finally, we interviewed personnel, reviewed written policies and procedures, and reviewed five program review reports and the documentation supporting the program review to gain an understanding of FSA’s process for conducting program reviews at schools that offer distance education programs. We judgmentally selected five FSA program reviews: four reviews that FSA conducted at three of the eight schools included in our audit and one additional FSA program review of a school that we previously audited. We compared FSA’s findings with our findings at the same schools.

Final Audit Report ED-OIG/A07L0001 Page 40 of 83 Accrediting Agencies The Department has approved 6 national, 8 regional, and 16 specialized accrediting agencies to accredit distance education programs. We judgmentally selected two national, two regional, and five specialized accrediting agencies for review. We selected the national and regional accrediting agencies that accredited the most schools. We selected the specialized accrediting agencies based on the number of schools and the types of programs that they accredited, as well as whether the agencies shared a location, employees, and other resources (see Table 4). At each of the nine accrediting agencies we

• interviewed officials and reviewed documentation to obtain an understanding of the accrediting agency and its processes for accrediting schools offering distance education;

• reviewed the process for applying for recognition with the Department and the steps the accrediting agency has taken to address new regulations that came into effect July 1, 2010, and July 1, 2011;

• reviewed policies and procedures for accrediting schools, including processes for (1) conducting site visits at traditional schools and schools offering distance education programs and (2) distinguishing between distance education and correspondence programs; and

• obtained an understanding of the accrediting agency’s interaction with the Department, States, independent public accountants, and other accrediting agencies.

The accrediting agency’s documentation that we reviewed included the files for judgmentally selected samples of schools offering distance education. We selected the schools by considering four, nonexclusive factors: (1) amount of Title IV funding the school received, (2) the type of school, (3) geographic location, and (4) whether the school had previously been reviewed by FSA or audited by the OIG.

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States We judgmentally selected nine States and asked for information about their oversight of distance education programs. For this audit, we reviewed eight schools that offered distance education programs. We judgmentally selected the seven States (Arizona, Florida, Indiana, Ohio, Pennsylvania, Utah, and Virginia) in which the eight schools were located. In addition, using the Council for Higher Education Accreditation’s descriptions of the various levels of State oversight of schools, 15 as well as information that we solicited from the schools we reviewed as part of this audit, we judgmentally selected one State (Arkansas) that had a strong level of oversight over schools and one State (South Dakota) that had a minimal level of oversight over schools. We concluded that Arkansas had a strong level of oversight because it required out-of-state and proprietary schools to be certified by the Arkansas Higher Education Coordinating Board in order to offer degrees and college-credit courses. We concluded that South Dakota had a minimal level of oversight because no State agency or commission has approval and licensing authority over proprietary schools. These schools are required only to file articles of incorporation with the Secretary of State.

From each of the nine States, we requested information related to the

• role that the State played in monitoring schools, the type of monitoring performed, and whether that role and type of monitoring were different for schools offering distance education;

–  –  –

• changes imposed that affected the State authorization requirements;

• current State laws, regulations, and requirements for schools and schools offering distance education;

• measures taken, if any, to ensure that schools and schools offering distance education programs complied with State authorization; and

• process for authorizing schools to provide postsecondary education.

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