oversight

Walden University's Compliance with Selected Regulations and U.S. Department of Education Guidance.

Published by the Department of Education, Office of Inspector General on 2009-01-21.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                                   UNITED STATES DEPARTMENT OF EDUCATION
                                                        OFFICE OF INSPECTOR GENERAL

                                                                                                              AUDIT SERVICES
                                                                                          Chicago/Kansas City/Dallas Audit Region

                                                                     January 21, 2009

                                                                                                            Control Number
                                                                                                            ED-OIG/A05H0018

Jonathan A. Kaplan, J.D.
President
Walden University
155 Fifth Avenue South
Suite 100
Minneapolis, Minnesota 55401-2511

Dear Mr. Kaplan:

This Final Audit Report, entitled Walden University’s Compliance with Selected Regulations
and U.S. Department of Education Guidance, presents the results of our audit. The objective of
the audit was to determine if Walden University resolved comment codes in compliance with
regulations and U.S. Department of Education (Department) guidance. The period covered by
the audit was July 1, 2005, through June 30, 2006 (2005-2006 award year).




                                                      BACKGROUND 



Walden University (University) is a private, for-profit, distance learning institution that provides
programs at the undergraduate, graduate, and professional levels. Since 2004, it has been owned
by Laureate Education, Inc. The University is headquartered in Minneapolis, Minnesota. The
records for accounting and administration of student financial assistance programs are located in
Baltimore, Maryland. It provides 100 percent of its courses online to more than 24,000 students
and offers more than 20 degree programs, including doctoral and master’s degrees in education,
management, psychology, health and human services, and public policy and administration. The
University also offers master’s degrees in engineering and applied science, a bachelor
completion program in business, academic certificates for engineering and IT professionals, self-
paced graduate courses for K–12 educators, and a post-doctoral certificate in psychology. It is
accredited by The Higher Learning Commission and is a member of the North Central
Association of Colleges and Schools (NCACS). The University’s M.S. Nursing program is
accredited by the Commission on Collegiate Nursing Education.

The purpose of the programs authorized by Title IV of the Higher Education Act of 1965, as
amended (HEA), is to provide financial assistance to students attending eligible institutions of
higher education. The University participates in three Title IV, HEA programs: Federal Pell
Grant (Pell), Federal Work-Study (FWS), and Federal Family Education Loan (FFEL). Under
 The Department of Education's mission is to promote student achievement and preparation for global competitiveness by fostering educational
                                                   excellence and ensuring equal access.
Final Report
ED-OIG/A05H0018                                                                       Page 2 of 37

the FFEL Program, Stafford loans (subsidized and unsubsidized) are made to students, and
PLUS loans (unsubsidized) are made to graduate students and to parents of dependent
undergraduate students. The federal government pays the interest on a subsidized student loan
during in-school status, the grace period, and during authorized deferment periods. Borrowers
are responsible for the interest that accrues on an unsubsidized loan throughout the life of the
loan.

During the 2005-2006 award year, the University disbursed the following amounts of Title IV,
HEA program funds:

Program                                         Funds
Pell                                     $    530,785
FFEL-Stafford Subsidized                 $ 98,327,756
FFEL-Stafford Unsubsidized               $130,230,147
FFEL-PLUS                                $     51,337
FWS                                      $      9,504
Total                                    $229,149,529

The Department’s Central Processing System (CPS) receives and processes each student’s Free
Application for Federal Student Aid (FAFSA) and correction information. Upon receipt of a
student’s FAFSA, CPS completes a series of quality control checks on the application data to
identify incomplete or inconsistent data. CPS also performs database matches with the
Department’s National Student Loan Data System (NSLDS) and other federal agency records to
screen for applicant eligibility (for example, Department of Homeland Security (DHS) and
Social Security Administration (SSA) records). CPS generates a Student Aid Report
(SAR)/Institutional Student Information Record (ISIR) for each student, with comment codes,
also referred to as C codes, that include warning edits, assumptions, highlights, and reject codes.
The comment codes point out possible questions or identify missing or inconsistent FAFSA data.

In accordance with 34 C.F.R. § 668.16(f), an institution must develop and apply “an adequate
system to identify and resolve discrepancies in the information that the institution receives from
different sources with respect to a student’s application for financial aid under Title IV, HEA
programs.” Institutions must retain documentation of the resolution of SAR/ISIR C codes to
comply with the record retention provisions in 34 C.F.R. § 668.24. Records an institution must
maintain include the SAR/ISIR used to determine eligibility for Title IV, HEA program funds;
application data submitted to the Secretary, lender, or guaranty agency by the institution on
behalf of the student or parent; and documentation of each student’s or parent borrower’s
eligibility for Title IV, HEA program funds. The Department provides information and guidance
on how to resolve SAR/ISIR C codes in The ISIR Guide, SAR/ISIR Comment Codes and Text,
and Application and Verification Guide.
Final Report
ED-OIG/A05H0018                                                                      Page 3 of 37



                                     AUDIT RESULTS 



The University did not always resolve SAR/ISIR comment codes returned to the University
during the processing of student FAFSAs in compliance with regulations and the Department’s
guidance. Specifically, the University (1) did not adequately resolve all comment codes
generated by CPS after unsuccessful database matches with other federal agencies and (2) did
not adequately resolve comment codes generated after a match with NSLDS indicated that
students were approaching or had exceeded aggregate loan limits. As a result, the University
disbursed $1,185,473 in unallowable Title IV, HEA program funds. These funds were
unallowable because the University did not resolve SAR/ISIR comment codes as required to
document students’ eligibility.

A draft of this report was provided to the University for review and comment on June 2, 2008.
We received the University’s comments, along with additional documentation, on July 11, 2008.
In its comments, the University concurred, in part, and disagreed, in part, with the findings and
recommendations. We summarized the University’s comments at the end of each finding. We
also provided our response after the summary of the University’s comments. Based on the
University’s comments and the actions it took based on the findings disclosed in the draft audit
report, we revised parts of our original findings and recommendations.

Except for personally identifiable information (that is, information protected under the Privacy
Act of 1974 (5 U.S.C. § 552a)), the entire narrative of the University’s comments is included as
Attachment 1 to this report. All personally identifiable information mentioned in the
University’s comments was replaced with bracketed text. Because of the voluminous nature of
the attachments to the University’s comments and the personally identifiable information within,
we have not included them in Attachment 1. Copies of the attachments to the University’s
comments, less the personally identifiable information, are available on request.


FINDING NO. 1 – The University Did Not Resolve All Comment Codes Generated
                after Unsuccessful Database Matches with Other Federal
                Agencies

Prior to awarding and disbursing Title IV, HEA program funds, the University did not always
resolve comment codes generated (1) when students claiming to be eligible noncitizens failed the
CPS match with DHS or (2) when students claiming to be citizens failed the match with SSA.
For the 2003-2004 through 2006-2007 award years, the University disbursed $734,212 without
documenting that the students were eligible to receive Title IV, HEA program funds. In late
2007, after we completed our field work, the University documented the students’ eligibility for
$188,604 of these disbursements.
Final Report
ED-OIG/A05H0018                                                                        Page 4 of 37

Secondary Confirmation of Noncitizen Student Immigration Status Not Performed When
CPS Match with DHS Was Unsuccessful

The University did not submit required requests for secondary confirmations to DHS to confirm
noncitizen students’ eligibility when the CPS match was unable to confirm that the student was
an eligible noncitizen. If CPS is unable to confirm a student’s eligibility electronically after two
attempts, a comment code is added to the SAR/ISIR indicating that DHS did not confirm the
student’s statement on the FAFSA that he or she is an eligible noncitizen. The student is
required to submit proof of noncitizen eligibility, and the University is then required to begin a
secondary confirmation process with DHS. We reviewed the files for all 17 students for whom,
for the 2005-2006 award year, the University was required to obtain a secondary confirmation to
resolve comment codes. The University did not obtain secondary confirmations for any of the 17
students.

In accordance with 34 C.F.R. § 668.133(a)

       [A]n institution shall require the student to produce the documentation required
       under § 668.33(a)(2) [for proof of citizenship or noncitizenship status] and
       request the INS [Immigration and Naturalization Service] to perform secondary
       confirmation for a student claiming eligibility under § 668.33(a)(2) . . . .

Pursuant to 34 C.F. R. § 668.135

       Within 10 business days after an institution receives the documentary evidence
       of immigration status submitted by a student required to undergo secondary
       confirmation, the institution shall—
              (a) Complete the request portion of the INS Document Verification 

       Request Form G-845; 

              (b) Copy front and back sides of all immigration-status documents 

       received from the student and attach copies to the Form G-845; and 

              (c) Submit Form G-845 and attachments to the INS District Office.

A University official stated that staff did not understand what was required for the secondary
confirmation. Staff did not follow University policy and ensure that proof of eligible
noncitizenship status was received, maintained, and confirmed prior to awarding and disbursing
Title IV, HEA program funds.

The 17 students received improper payments of $257,770 in Title IV, HEA program loan funds
during the 2005-2006 award year. The University also had disbursed an additional $420,939
during the 2003-2004, 2004-2005, and 2006-2007 award years, for a total of $678,709 of
improper payments. The University submitted secondary confirmation requests to DHS for the
17 students after we completed our fieldwork. The results of the 17 confirmations are provided
below:

   1.	 The University was unable to obtain confirmations for 9 students. The University
       disbursed $346,105 in subsidized and unsubsidized loans for these ineligible students for
       the 2005-2006 through 2007-2008 award years. Using NSLDS, we confirmed that the
       University subsequently canceled or repaid loan holders $320,845 of loan principal for
Final Report
ED-OIG/A05H0018                                                                       Page 5 of 37

       these students, leaving $25,260, of which $5,000 was paid off by the Department under
       the Teacher Loan Forgiveness program.

   2.	 Confirmations were received in late 2007 indicating that 3 students were then eligible
       because they had become citizens. However, the confirmations did not identify the dates
       that the students became citizens, so they do not provide any assurance that the students
       were eligible at the time they received their disbursements. These three students received
       $144,000 in Title IV, HEA program loans during the 2003-2004 through 2006-2007
       award years.

   3.	 The University received confirmations that 5 students were eligible non-citizens. The
       documents submitted with the confirmation appeared to include the period covered by the
       loans received. However, the 5 students had received subsidized, unsubsidized, and
       graduate PLUS loan disbursements totaling $188,604 before the date the University
       received the confirmations and would have been able to confirm the students’ eligibility
       for Title IV, HEA assistance.

Inadequate Documentation of Student Citizenship Status When CPS Match with SSA Was
Unsuccessful

The University did not provide evidence that it obtained proof of citizenship status for all
students. We randomly selected 100 (of 392) students with a citizenship comment code that
required the University to obtain proof of citizenship. The Department’s ISIR Guide provides
examples of documents that may be used to support a student’s citizenship status. Acceptable
documentation includes, but is not limited to, copies of a United States of America Certificate of
Naturalization, certificate of live birth issued by a state or the United States, United States of
America passport, or secondary confirmation from DHS.

We reviewed 99 students’ files (the University could not locate 1 student’s file while we were on
site) and concluded that 96 files contained adequate documentation to support the students’
citizenship status. However, 3 of the students’ files did not contain documentation proving
United States citizenship. One student’s file had no documentation to support citizenship. A
second student’s file contained a copy of a United States of America passport, but the name on
the passport did not match the name on the loan documentation. A third student’s file
contained a copy of a certificate of live birth in the United States, a copy of a marriage record,
and a copy of a Social Security card; however, the name on the marriage record did not match
the name on the live birth certificate, and the name on the Social Security card did not match the
name on the live birth certificate or the name on the loan documentation.

According to 34 C.F.R. § 668.24(a)(3), “An institution shall establish and maintain, on a current
basis, any application for title IV, HEA program funds and program records that document . . .
[i]ts administration of the title IV, HEA programs in accordance with all applicable requirements
. . . .” According to 34 C.F.R § 668.24(c)(1)(iii), “The records that an institution must maintain
in order to comply with the provisions of this section include but are not limited to . . .
[d]ocumentation of each student’s or parent borrower’s eligibility for title IV, HEA program
funds . . . .”
Final Report
ED-OIG/A05H0018                                                                                          Page 6 of 37

The University did not follow its own policy to ensure that proof of citizenship was received,
reviewed, and maintained prior to awarding Title IV, HEA program funds. A University official
stated that the University makes an effort to record student information in its electronic financial
aid system. University quality control procedures state that, on a regular basis, the financial aid
director or designee randomly selects 10 to 20 file folders to review for accuracy and
compliance. A University official informed us that, during the 2005-2006 award year, this
procedure was not followed.

The 4 students for whom the University could not provide adequate documentation of citizenship
status while we were on site received payments of $55,503 in Title IV, HEA program funds
during the 2005-2006 award year.1 The University subsequently located the one missing file and
was able to locate the documentation it used to make the eligibility determinations of citizenship
status for two of the other students. However, it was not able to produce sufficient
documentation for the student with differing names on the birth record, marriage license, and
social security card, and who received $6,168.

Recommendations

We recommend that the Acting Chief Operating Officer (COO) for Federal Student Aid (FSA)
require the University to

1.1	       Return to lenders and the Department the outstanding amounts improperly paid to the 18
           ineligible 2005-2006 award year students:

           a	 Return to lenders $144,000 for the three students confirmed as U.S. citizens after our
              audit but who were not confirmed as eligible prior to the period for which they were
              awarded Title IV, HEA program funds;
           b Return to lenders $20,260 not confirmed by NSLDS as canceled or repaid;
           c Return to the Department the $5,000 Teacher Loan Forgiveness payment paid to the
              lender for a student who was not an eligible non-citizen; and
           d Return $6,168 to the lender for the one student without sufficient evidence of
              citizenship;

1.2	       Review its files for the 2004-2005 and 2006-2007 award years to the present (during the
           audit, we reviewed all 2005-2006 students requiring secondary confirmations) to ensure
           that any and all secondary confirmations have been obtained, and, if not, determine the
           amount of improper payments and return to the lender and/or Department any Title IV,
           HEA program funds (gross amount) that were improperly paid to ineligible students;

1.3	       Continue to strengthen and follow existing policies and procedures to obtain and maintain
           adequate proof of citizenship and support for students’ citizenship status, including
           secondary confirmations of noncitizen eligibility; and

1.4	       Continue to provide training to financial aid staff responsible for the resolution of
           comment codes identified during the student financial assistance application process.


1
    Our sample size was not sufficient to project the results of our sample to the remaining 292 students.
Final Report
ED-OIG/A05H0018                                                                          Page 7 of 37

We also recommend that the Acting COO for FSA

1.5	      Consider fine proceedings under 34 C.F.R. § 668.84 for the University’s failure to
          perform secondary confirmations of noncitizen student immigration status.

University Comments

The University concurred, in part, and disagreed, in part, with our finding and recommendations.

Secondary Confirmation of Non-Citizen Student Immigration Status

The University concurred that secondary confirmation of noncitizen student immigration status
with DHS was not performed prior to disbursement for 17 students during the 2005-2006 award
year. Subsequent to the initiation of the audit, it submitted Document Verification Request
Forms (G-845s) and the required documentation to DHS for each of the 17 students identified
during the audit. From that submission, the University obtained positive confirmation of student
eligibility from DHS for 8 students and did not obtain positive confirmation for 9 students.

       •	 The University provided a list of the 8 students with positive confirmations, the type of
          confirmation response, and the date confirmation was received by the University and
          asserted that a return of funds for those students was unwarranted.

       •	 The University attempted to return all Title IV, HEA program funds disbursed by the
          University for the 2004-2005 through the 2007-2008 award years for the remaining 9
          students. A total of $307,404.98 (net loan proceeds) was returned to the appropriate
          lenders. For 1 of the 9 students, the University was unable to return loan funds because
          the loan had been repaid in full by the borrower.

The University reported corrective action taken, including the implementation of enhanced
policies and procedures, to ensure that the secondary confirmation of citizenship/eligible non-
citizenship (G-845) is completed within 10 days as required by applicable regulations. In
addition, the University hired a Compliance Manager in September 2007 to oversee all database
match processes. University officials also stated that all financial aid staff responsible for the
resolution of CPS comment codes have received a considerable amount of training regarding the
enhanced policies and procedures.

Citizenship Status Documentation When SSA Match Was Unsuccessful

The University stated that it obtained required proof of citizenship before disbursing funds but
misfiled the documents so they were not available for our review. Of the 100 files reviewed,
only 4 instances were noted by the auditors where sufficient documentation of citizenship was
not present. The University submitted documentation of the eligibility of the 4 questioned
students. Also, the Financial Aid Office created and implemented a “Name Confirmation Form”
to resolve possible name and/or date of birth discrepancies in the future.
Final Report
ED-OIG/A05H0018                                                                        Page 8 of 37

Recommendations to Expand the Review and Fine

The University asked us to revise our recommendations to address only its failure to resolve
certain CPS comments codes:

   •	 Only 9 of the students identified in the audit report were ineligible for the funds they
      received, and the University has returned those funds;

   •	 A broader review of files is unwarranted because the error rate “is well below the 

      Department’s standard compliance review threshold,” and 


   •	 Because there were only isolated instances of ineligible disbursements and the University
      has returned those disbursements, fine proceedings are “uncalled for and excessively
      punitive.”

Office of Inspector General (OIG) Response

We did not alter our findings that the University had awarded funds to noncitizens without
obtaining required secondary confirmations and had not maintained (at the time of our on-site
fieldwork) proof of the citizenship status of 4 of 100 sampled students. However, we did reduce
the recommended return of funds for those students for whom the University was able to obtain
evidence of eligibility after our field work and for funds already returned. We modified draft
report Recommendation 1.1 to show the revised amount of loan funds to return to lenders and the
Department and the number of ineligible students as specified in the above sections. We
changed draft report Recommendation 1.4 to stress that the University needs to continue to
strengthen and follow existing policies and procedures and Recommendation 1.5 to acknowledge
that the University provided training to financial aid staff responsible for the resolution of
comment codes identified during the student financial assistance application process.

In addition to reviewing the supplemental documentation provided by the University, we also
queried NSLDS (in October 2008) to determine whether the University canceled or otherwise
paid the entire amount or a portion of the amount awarded for the students the University agreed
were never eligible. The schedule in the University’s response reflected a slightly lower amount
than the amount we calculated, because the schedule provided the net amount returned, not the
total amount awarded/canceled. The University’s lender allowed the University to cancel loans
after the loan period ended and only required a return of the net proceeds received by the school.
The University paid the net amount of the loan proceeds for two loans which could no longer be
canceled because they had been consolidated. This resulted in recovery of less than the original
loan amounts.

Secondary Confirmation of Non-citizen Student Immigration Status

We disagree with the University’s assertion that, because the University returned funds for
certain limited instances of noncompliance, the matter is now fully resolved. Students should not
have received any Title IV, HEA program funds prior to the University’s receiving confirmation
of their status as eligible non-citizens. Such confirmation is the final step to establish the
student’s basic eligibility. To protect federal funds, it is the responsibility of the University to
Final Report
ED-OIG/A05H0018                                                                       Page 9 of 37

ensure that students are eligible before Title IV, HEA program funds are disbursed.
Furthermore, we do not agree that the supplemental documentation the University provided was
acceptable in all cases. Finally, for those students the University concurred were ineligible, the
amounts returned did not always refund the entire amount of the loans disbursed.

We reviewed the supplemental information provided for the 17 students in our sample:

   •   For 8 of the 17 students

       -   Five students were confirmed by DHS, after the fact, as eligible non-citizens,
           consistent with the documentation provided, and there was evidence that the
           documentation covered the loan periods. Without the confirmations, the University
           awarded and disbursed $188,604 of loans during the 2005-2006 and 2006-2007 for
           these individuals (one Graduate PLUS loan disbursement was dated during the period
           between submitting the confirmation form and receiving the reply) before their
           eligibility was established. Because the students were confirmed by DHS, we
           removed the recommended recoveries for these five students.

       -   Three students’ G-845s were obtained by the University but did not provide evidence
           that the students’ were eligible non-citizens during the period for which they received
           loans. DHS did not confirm the validity of the non-citizen documentation the
           University had submitted. The checkbox on the form returned by DHS indicated that
           the students were eligible on the date the form was processed (that is, they had
           become U.S. citizens), but the form did not include any certification sufficient to
           establish their eligibility during the period for which they received their loans. The
           form did not provide information about the students’ eligibility before naturalization
           or even the dates they became citizens. According to NSLDS, as of October 2008,
           these three students had received $144,000 in FFEL loans prior to the University’s
           receiving confirmations that they were eligible citizens. Without additional
           documentation, we were unable to determine whether the students were eligible for
           the following loans:

Table 1. Not Documented as Eligible Non-Citizen During Loan Periods.
Student Confirmation Date         Loan Period          Disbursed                     Total
2        11/20/2007        9/6/05 - 5/28/06         $ 18,500
                           6/5/06 - 2/25/07         $ 18,500
                           3/5/07 - 11/25/07        $ 18,500                              $ 55,500
3        11/20/2007        9/1/03 – 5/31/04         $ 17,500
                           9/7/04 – 5/29/05         $ 14,000
                           6/6/05 – 8/28/05         $ 2,000                               $ 33,500
6        11/19/2007        9/6/05 – 5/28/06         $ 18,500
                           6/5/06 – 2/25/07         $ 18,500
                           3/5/07 – 11/25/07        $ 18,000                              $ 55,000
Total                                                                                     $144,000
Final Report
ED-OIG/A05H0018                                                                                     Page 10 of 37

    •     For 9 of the 17 students

          -    Five students’ loans, totaling $216,000, were completely refunded or canceled by the
               University.
          -    Four students still had an outstanding balance totaling $25,260. (See notes 1, 2, and 3
               in Table 2 for further explanation.)

Table 2. Verification of Cancellations and Payments Using NSLDS
              Prior Amount    2005-2006        2006-2007         2007-2008              Total           Total Still
Student
               Outstanding   Paid/Canceled    Paid/Canceled     Paid/Canceled       Paid/Canceled      Outstanding
1             $ 8,500        $   8,500                                            $ 8,500             $      0
2             $ 18,437 (1)                    $   13,437                          $ 13,437            $ 5,000 (1)
3             $ 76,000       $ 37,000         $   18,500       $20,500            $ 76,000            $      0
4             $ 37,000       $ 18,500         $   18,500                          $ 37,000            $      0
5             $ 57,500       $ 18,500         $   18,500       $20,500            $ 57,500            $      0
6             $ 37,000                        $   18,500                          $ 18,500            $ 18,500 (2)
7             $ 56,168       $ 30,169         $   18,500       $ 6,834            $ 55,503            $    665 (3)
8             $ 18,500       $ 17,405                                             $ 17,405            $ 1,095 (3)
9             $ 37,000                        $ 18,500         $18,500            $ 37,000            $      0
Total         $346,105       $130,074         $124,437         $66,334            $320,845            $ 25,260
(1) The student’s 2006-2007 loan already had been reduced by a $5,000 Teacher Loan Forgiveness payment from the
Department of Education in November 2007, prior to the University’s refund as a result of the audit. We have added
the amount to the outstanding principal amount. The Department should be reimbursed the $5,000.
(2) The 2005-2006 loans had not been canceled as indicated in the response. Both loans, totaling $18,500, were still
outstanding according to NSLDS.
(3) For both students 7 and 8, two 2005-2006 loans totaling $18,500 were consolidated. However, the University
remitted only the amount received by the school (less fees). After paying down the loan and interest, there were $665
and $1,095 of principal from the original loans (excluding capitalized interest) remaining, respectively.

Citizen Status Documentation When SSA Match Was Unsuccessful

Although not provided during the course of our audit, we accepted the supplemental
documentation provided for three of the four students in the original sample. However, the
documentation provided for one of the two students with questions about marital status and name
change still was insufficient to establish eligibility. The University provided a narrative to
explain the name change, but the document was not signed or dated. Furthermore, additional
documents submitted did not support the student’s name as it appears on the birth certificate.
The total amount that remains unsupported is $6,168.

Recommendations for Enhanced Policies and Procedures

We neither reviewed nor confirmed the University’s assertions that corrective action, including
the implementation of enhanced policies and procedures, the hiring of a Compliance Manager in
September 2007, and the training provided to all financial aid staff responsible for the resolution
of CPS comment codes, has been taken. However, we have modified our report to recommend
“continued” implementation of those actions.
Final Report
ED-OIG/A05H0018                                                                                   Page 11 of 37

Recommendations to Expand the Review and Fine

Because the University was able to resolve the majority of the cases (99 of 100) involving
citizenship documentation, we removed draft report Recommendation 1.3, in which we
recommended that the University review its files for citizens failing the SSA match for the 2004-
2005 and 2006-2007 award years. This resulted in a renumbering of the remaining
recommendations.

The University’s comments did not demonstrate that its practices in other years were any
different than they were during our audit period. The University failed to conduct required
secondary confirmations for 100 percent (17 of 17) of the students to whom it awarded Title IV,
HEA program funds during 2005-2006 award year, and we have no evidence showing that it
performed secondary confirmations for students in other years. Therefore, we continue to
recommend that FSA require the University to review its files for the 2004-2005 and 2006-2007
award years to the present to ensure that all required secondary confirmations have been
obtained. We also continue to recommend that FSA consider fine proceedings. The University’s
non-compliance with the requirements resulted in the University concurring that more than half
the students (9 of 17) received Title IV, HEA program funds to which they were not entitled.
We were not able to accept after-the-fact confirmations for another 3 students (a total of 12
ineligible students).


FINDING NO. 2 – The University Did Not Adequately Resolve Comment Codes
                after a Match with NSLDS Indicated That Students Were
                Approaching or Had Exceeded Aggregate Loan Limits

The University did not adequately resolve all comment codes related to aggregate loan limits,
and, as a result, awarded or disbursed $448,759 of FFEL and $2,502 of FWS program funds to
students who had exceeded their aggregate subsidized loan limit and/or aggregate total
(subsidized and unsubsidized) loan limit.2

The University did not properly consider loan balances included on students’ ISIRs or resolve
ISIR comment codes that indicated the students were approaching or had exceeded aggregate
loan limits. CPS performs a database match with NSLDS to obtain an estimate of the student’s
outstanding principle balances of subsidized and total (subsidized and unsubsidized) loans for
each application. That information is provided on a financial aid history report with the ISIR to
assist the institution in determining a student’s remaining eligibility under the loan limits.
NSLDS also monitors loan limits and generates a new ISIR and financial aid history report,
including new or repeated comment codes about whether loan limits are close or have been
exceeded, if subsequent loans are posted with scheduled disbursements which will cause the
student to approach or exceed the aggregate loan limits.

2
  Aggregate loan limits are established in 34 C.F.R. § 682.204. During the audit period, the maximum aggregate
unpaid principal amount of all Federal Stafford Loan Program loans and Federal Direct Stafford/Ford Loan Program
loans was $23,000 for a student who had not successfully completed a program of study at the undergraduate level,
and $65,500, including loans for undergraduate study, for a graduate or professional student. The combined Federal
Stafford, SLS, and Federal Unsubsidized Stafford Loan Program aggregate limits were $46,000 for an
undergraduate student and $138,500 for a graduate or professional student.
Final Report
ED-OIG/A05H0018                                                                        Page 12 of 37

Using NSLDS loan histories, we identified 200 students (of the 531 students at the University
with comment codes on at least one 2005-2006 ISIR that indicated they were close to and/or had
exceeded their loan limits) whose loan histories indicated they may have received loans in excess
of the limits. Next, we judgmentally selected the 75 students with the largest amounts in excess
of loan limits. We then determined (1) whether any of the 75 students’ loans had been paid off
or discharged and (2) whether the University should have been able to determine that a student’s
loan limits were exceeded before disbursing additional loan funds to the student.

Our analysis determined that the University disbursed loans for 40 of the 75 students when it
should have been able to determine that the students had already exceeded their aggregate loan
limits. We did not include overawards if the NSLDS Financial Aid History provided with the
latest ISIR the school had received before disbursement (1) did not include loans awarded by
another institution, (2) indicated remaining eligibility if the unallocated balance of consolidated
loans was excluded, or (3) the NSLDS had made an error and understated the total loan balance
even though a review of the underlying loans would have yielded a larger outstanding loan
balance.

An institution must identify and resolve discrepancies in the information it receives with respect
to a student’s application for Title IV, HEA program funds (34 C.F.R. § 668.16(f)). Also, in
accordance with 34 C.F.R. § 682.603(d)(1), “A school may not certify a Stafford or PLUS loan
application, or combination of loan applications, for a loan amount that . . . [t]he school has
reason to know would result in the borrower exceeding the annual or maximum loan amounts in
§ 682.204 . . . .”

Pursuant to 34 C.F.R. § 668.32(g)(2), “A student is eligible to receive title IV, HEA program
assistance if the student . . . [h]as not obtained loan amounts that exceed annual or aggregate loan
limits made under any title IV, HEA loan program . . . .”

Pursuant to 34 C.F.R. § 668.35(d)—

       A student who is not in default on a loan made under a title IV, HEA loan
       program, but has inadvertently obtained loan funds under a title IV, HEA loan
       program in an amount that exceeds the annual or aggregate loan limits under
       that program, may nevertheless be eligible to receive title IV, HEA program
       assistance if the student—
               (1) Repays in full the excess loan amount; or
               (2) Makes arrangements, satisfactory to the holder of the loan, to repay
       that excess loan amount.

The 2005-2006 Federal Student Aid Handbook states that the institution is “responsible for
knowing the student’s prior Title IV loans before disbursing additional loan funds to the
student.” (2005-2006 Federal Student Aid Handbook, pages 5-7)

The University’s financial aid staff made notes in electronic comment files for 17 (of the 40)
students, indicating that those students were approaching or had exceeded aggregate loan limits.
Despite these notes, the University disbursed additional FFEL funds to the students, resulting in
overawards. In some cases, the outstanding loan balances reported on the ISIR clearly showed
that students were at or over the loan limits, but the University certified additional loans. For at
Final Report
ED-OIG/A05H0018                                                                       Page 13 of 37

least 2 of those students, comments in the file indicated that balances for the students’
consolidation loans should be subtracted from the ISIR totals; however, when we reviewed the
consolidation loans’ underlying loan balances, we determined that the amount on the ISIR was
correct. For other students, files did not identify the reason that the University did not use the
outstanding balances on the ISIR.

The University’s staff did not update the total subsidized and unsubsidized loan balances
reported on the ISIR with all loans disbursed by the University after the ISIR was generated.
The circumstances at the University make this kind of update essential. Students often complete
the academic requirements for one loan year in approximately nine months and are then awarded
a second loan from the same ISIR. The student’s third loan, awarded from the next year’s ISIR,
may be disbursed as late as December or January, in the following award year. If the University
obtained the student’s second ISIR before the second loan was disbursed, the University’s
electronic financial aid system would only use the outdated information from that ISIR to
determine loan limit eligibility. It would not consider any subsequent awards and disbursements
made by the University.

For some students, the University acknowledged the comment code indicating that the student
had exceeded Stafford subsidized loan limits by canceling subsequent disbursements of the
subsidized loan. However, 34 C.F.R. § 668.35(d) provides that a student who has borrowed
more than the annual or aggregate Stafford loan limits cannot be awarded any additional Title
IV, HEA program funds until arrangements are made to repay the overaward. Even though there
was no indication the student had made arrangements to repay the overaward, the University
reclassified scheduled subsidized disbursements to unsubsidized loans, continued to make new
unsubsidized loan awards, and, in some cases, awarded other Title IV, HEA program funds to
the student.

As a result of not adequately resolving comment codes related to loan limits, the University
awarded or disbursed Title IV, HEA program funds for students who had exceeded their
aggregate subsidized loan limit and/or aggregate total (subsidized and unsubsidized) loan limit.

The University improperly disbursed $448,759 in FFEL Program funds to the 40 students who
were identified by 2005-2006 CPS comment codes as approaching or exceeding aggregate loan
limits. One student was improperly disbursed FWS funds in the amount of $2,502. The chart
below shows the amount of FFEL and FWS program funds improperly disbursed during the
2005-2006, 2006-2007, and 2007-2008 award years.

    Table 3. Improper FFEL and FWS Program Funds Disbursed
                                 2005-2006   2006-2007 2007-2008                         Total
    Stafford Subsidized Loans       $ 77,728 $ 47,005      $ 4,236                    $128,969
    Stafford Unsubsidized Loans     $175,656 $ 97,275      $16,342                    $289,273
    Stafford Graduate PLUS                $0 $ 30, 517          $0                    $ 30,517
    Total FFEL                      $253,384 $174,797      $20,578                    $448,759
    Federal Work Study Funds        $ 2,502         $0          $0                    $ 2,502

Improperly disbursed subsidized loans might have caused the Department to make improper
special allowance payments or payments for other benefits and increased the Department’s
Final Report
ED-OIG/A05H0018                                                                      Page 14 of 37

potential liability for default claims. One student already has defaulted on the loans and another
student’s loans were discharged through bankruptcy.

After we informed University officials of the overawards but before we issued this final report,
the University canceled, refunded, or made payments on loans totaling $173,245 included above.
In addition, the University reclassified $73,514 of subsidized loan disbursements as unsubsidized
loan disbursements. The reclassification effectively restored students’ eligibility for $104,385 of
previously improper unsubsidized loan disbursements and the $2,502 FWS award. The removal
of the subsidized overaward retroactively restored the students’ eligibility because the students’
loans no longer exceeded the total aggregate loan limit. If the lender allowed retroactive
reclassification or cancellation of the disbursements that exceeded the subsidized loan limits
(with an effective date the same as the original disbursement), the student’s loan history no
longer showed any period of overaward or ineligibility. Therefore, the previously improper
disbursements of subsidized loans and other Title IV, HEA assistance between the date of
original overaward and the retroactive reclassification or cancellation were now proper. The
remaining improper disbursements total $97,615, as detailed in Table 4.

       Table 4. FFEL and FWS Program Funds Outstanding After Recoveries
                                   2005-2006 2006-2007 2007-2008        Total
       Stafford Subsidized Loans     $ 9,494   $ 4,961    $ 1,402     $15,857
       Stafford Unsubsidized Loans   $50,326  $ 29,569     $1,863     $81,758
       Stafford Graduate PLUS             $0        $0         $0         $ 0
       Total FFEL                    $59,820   $34,530     $3,265     $97,615
       Federal Work Study Funds         $ 0         $0         $0        $ 0

Recommendations

We recommend that the Acting COO for FSA require the University to

2.1	   Return to lenders $97,615 of FFEL program funds improperly paid to 15 students in
       excess of loan limits;

2.2	   Continue to strengthen and follow existing policies and procedures to resolve comment
       codes related to a student’s aggregate loan limits;

2.3	   Continue to provide training to financial aid staff responsible for the resolution of
       comment codes identified during the student financial assistance application process, to
       ensure that the resolution of comment codes, including comment codes on aggregate
       loan limits, is accurate, adequate, and documented; and

2.4	   Review its files for the 2004-2005 award year to the present (excluding the 75 students
       we reviewed) to identify other borrowers who received loan amounts in excess of their
       aggregate limits and return to lenders any FFEL Program funds delivered to ineligible
       borrowers or paid in excess of loan limits.
Final Report
ED-OIG/A05H0018                                                                        Page 15 of 37

We also recommend the Acting COO for FSA

2.5	      Consider fine proceedings under 34 C.F.R. § 668.84 for the University’s delivery of loan
          funds to borrowers in excess of aggregate limits.

University Comments

The University agreed, in part, with our finding and recommendations but disagreed with most of
the questioned disbursements. Additional documentation and a detailed discussion were
provided on a student-by-student basis. The University also listed circumstances pertaining to
ISIR and NSLDS processing during the 2005-2006 award year that it felt should have been
considered when reviewing comment code resolution related to aggregate loan limits. The
University enumerated that (1) prior to March 2005, historical Outstanding Principal Balance
and Outstanding Interest Balance amounts were not available through NSLDS; (2) NSLDS
Newsletter No. 11 (February 2006) instructed financial aid administrators to change the
methodology for calculating aggregate loan totals to eliminate “unallocated amounts when
calculating aggregate subsidized, unsubsidized, and combined outstanding principal balances;”
(3) it “relied heavily on ISIRs in reconstructing loan histories for students at issue in this audit”
due to the dynamic nature of the NSLDS website; and (4) the Department identified, on October
20, 2006, an NSLDS post-screening system error that affected aid overpayment and ISIRs during
the summer of 2006.

The University divided the 40 students that we determined to have exceeded aggregate loan
limits into three groups.

       •	 Group 1 – For 15 students, the University disputed the draft audit report’s conclusions in
          their entirety. It asserted that the students were eligible at the time of their 2005-2006
          disbursement and/or that a post-screened ISIR arrived after the 2005-2006 awards had
          been fully or partially disbursed.

       •	 Group 2 – For 16 students, the University concurred that it did not adequately resolve
          2005-2006 aggregate loan limits. It determined that each of the students had exceeded
          their loan limits. However, it disputed the specific amount of Title IV, HEA program
          funds needing to be returned to lenders. The disputed amounts were primarily
          disbursements for 2006-2007 and 2007-2008.

       •	 Group 3 – For 9 students, the University concurred and returned the pertinent 2005-2006
          award year Title IV, HEA program loan funds to the appropriate lenders.

The University disagreed that it improperly disbursed $2,502 in FWS program funds to one
student, stating that its recent return of the loan funds made the student eligible for the FWS
disbursement.

Comments on Recommendations

The University also provided comments regarding draft audit report Recommendations 2.2
through 2.5. The University disagreed that any other 2005-2006 awards were inappropriate
Final Report
ED-OIG/A05H0018                                                                                 Page 16 of 37

based on information that was available at the time of the 2005-2006 disbursements. Therefore,
the University asserted that no further returns of funds are required with respect to the 2005-2006
award year. The University further stated that additional supporting documentation was
provided, and it has returned all Title IV, HEA program funds that it determined were
overpayments for the 2005-2006 award year.

The University asserted that, in the years following the period covered by the audit, it has revised
and strengthened its policies and procedures for reviewing and resolving CPS comment codes.
In August 2007, the University provided training to all staff on its revised procedure for
documenting NSLDS values when reviewing aggregate totals directly from the NSLDS website.
In January 2008, its financial aid awarding team was restructured to include a new manager and
additional staff. At the same time, the University strengthened its NSLDS review and coding for
students who receive “renewal loans” (two loan years from one ISIR), and financial aid staff
received special training to review NSLDS for renewal students. Most recently, in March 2008,
the University adopted significant changes to the coding and quality control features of the
PowerFAIDS software and trained all staff responsible for resolving comment codes. The
software was designed to prevent manual errors pertaining to NSLDS and to correct errors before
funds are disbursed.

The University disagreed with the draft audit report’s recommendation that FSA require a
broader review of files from the 2004-2005 award year to the present. The University asserted
that, because the OIG reached incorrect conclusions regarding students’ eligibility for loan
disbursements during the 2005-2006 award year, and because the Department has acknowledged
weaknesses and problems with NSLDS during that award year, a broader file review is excessive
and unwarranted. The University claimed to have (1) examined all of the students questioned by
the audit, (2) returned appropriate funds to lenders, and (3) previously implemented enhanced
policies and procedures to prevent future similar occurrences. Therefore, the University
considered fine proceedings regarding this matter both uncalled for and excessively punitive.

OIG Response

We did not change the finding other than by adjusting the report to reflect actions taken by the
University subsequent to our audit and by making a net adjustment of $3,4113 to the amount
originally questioned. Though the University’s subsequent actions restored some students’
eligibility for certain disbursements, its failure to properly determine students’ eligibility at the
time disbursements were made put Title IV, HEA program funds at risk and delivered Title IV,
HEA program funds to students who were, and remain, ineligible.

During our audit, we only used information that was available to the University at the time it
made the disbursements. We fully considered the circumstances pertaining to ISIRs and NSLDS
processing regarding loan limits during 2005-2006 and the discontinuation of the requirement to
review unallocated loan amounts in January 2006. The methodology we used, described in the
bullets below, was simplified to provide a conservative method to identify loans made to
ineligible students. Some of the loans that our audit did not identify as being made to ineligible
students might be improper if additional information were obtained.

3
  We discovered that we originally overlooked improper disbursements made for one student, overstated aggregate
balances for two students, and allowed for minor reductions for subsequent loan payments for four others.
Final Report
ED-OIG/A05H0018                                                                      Page 17 of 37

   •	 Our original analysis did not include any unallocated amounts reported on an ISIR, even
      before January 2006, in calculating and determining if a student exceeded his/her loan
      limit.

   •	 In addition to reviewing NSLDS loan histories, we reviewed data, including ISIRs, notes,
      and comments to electronic student files made by University staff, provided by the
      University to determine what was known in determining the amount of program funds
      improperly paid to ineligible students in excess of loan limits. We used only the
      aggregate balances of subsidized and unsubsidized loans calculated on the ISIR in the
      University’s files and subsequent disbursements the University made.

   •	 We did not calculate an overaward if an ISIR were incomplete or in error. For four
      sampled students, we did not question the overaward that occurred because the NSLDS
      balances were understated, even though an examination of all the loans on NSLDS
      showed that they should have been included. For another sampled student, we reduced
      the amount for which we held the University responsible by the amount of loans omitted
      from the NSLDS total.

   •	 If overawards were caused by the University’s unknowingly relying on an understated
      ISIR aggregate loan balance, we did not question disbursements made prior to receiving
      the corrected ISIR. We held the University responsible only for disbursements after the
      later ISIR date.

   •	 We reduced any overaward calculation based on any corrections made on the NSLDS
      loan history subsequent to the awards that reduced the amount of aggregate loan balances
      at the time of disbursement. Any uncertainties were resolved in favor of the University.

None of the documentation provided with the University’s comments caused us to change our
determination. We also do not agree that only disbursements in excess of the aggregate loan
limits during the 2005-2006 award year were improper. The requirement to monitor the
students’ aggregate loan limits continued during the 2006-2007 and 2007-2008 award years. If a
student exceeded the aggregate loan limits during 2005-2006, the student remained ineligible for
disbursements of Title IV, HEA program funds in subsequent years. In addition, when
determining whether a student exceeded loan limits, the University was responsible for including
the amounts of the subsequent disbursements that it made itself, even if the student’s ISIR did
not yet include those loans. The notes made by its financial aid staff for the students should have
resulted in extra care being taken by the University when aid for those students was packaged
and disbursed. At the time the University made the loan disbursements, all 40 students were
ineligible to receive Title IV, HEA program disbursements due to exceeding aggregate loan
limits.

Attachment 2 to this report includes a table that shows the remaining questioned costs for each of
the three groups. We determined that the University’s refunds, cancellations, and
reclassifications, made after our audit, cleared all questioned costs for 25 of the 40 students who
had received improper disbursements. The University’s actions also reduced the questioned
Final Report
ED-OIG/A05H0018                                                                     Page 18 of 37

costs for some of the remaining 15 students. We calculated the remaining questioned costs for
the 15 students to be $97,615.4

In its response, the University divided the 40 students into three groups:

      •	 Group 1 - The University Did Not Concur. We reviewed the University’s response,
         along with the additional documentation, and disagree with the University for all 15
         students. The University made disbursements totaling $117,510 to these students when
         their borrowing exceeded their aggregate loan limits. We agree that, in many instances,
         the disbursements were proper during the 2005-2006 award year. However, improper
         disbursements were made during the 2006-2007 and 2007-2008 award years. Regardless
         of its non-concurrence, NSLDS records reflect that the University has refunded or
         cancelled $55,777 of the loans for Group 1. The amount that remains in question is
         $44,109. (See Attachment 2, Group 1)

      •	 Group 2 - The University Concurred but Disputed the Amount Calculated. We analyzed
         the University’s response, along with the additional documentation submitted by the
         University. We disagreed with the University’s exclusion of disbursements made during
         the 2006-2007 and 2007-2008 award years, because the 16 students were ineligible
         during those years and their excess borrowing was not resolved before we performed our
         audit work. The University refunded, canceled, or reallocated loans for these students,
         including amounts with which the University did not agree, totaling $102,227. An
         additional, $99,407 in improper disbursements was resolved when eligibility was
         retroactively restored by cancellations or reclassifications. The amount that remains in
         question is $43,724. (See Attachment 2, Group 2)

      •	 Group 3 - The University Concurred. We reviewed the University’s response and
         documentation it provided for its subsequent actions. We accepted the support for 7 of
         the 9 students. For the remaining 2 students, the University stated that it had made a
         check request for the net amount, but it did not provide support that the funds were
         returned to the lender. As of October 2008, NSLDS records for the 2 students did not
         reflect that Title IV, HEA program funds had been returned. Therefore, we do not agree
         with the amount of Title IV, HEA program loan funds that were returned. The amount
         that remains in question is $9,782. (See Attachment 2, Group 3)

FWS

We agree that the $2,502 of FWS disbursed to one student is no longer in question. At the time
FWS funds were disbursed, the student was ineligible. However, the University has since
returned and canceled subsidized and unsubsidized loan funds, thereby eliminating the
overaward of loan funds and making the FWS disbursement proper.

Comments on Recommendations

We modified Recommendation 2.1 to show the revised amount of loan funds to return to lenders
and the number of students who received an improper payment. We revised Recommendation
4
    $44,109 for Group 1 plus $43,724 for Group 2 plus $9,782 for Group 3
Final Report
ED-OIG/A05H0018                                                                     Page 19 of 37

2.2 to stress that the University needs to continue to strengthen and follow existing policies and
procedures. We revised Recommendation 2.3 to acknowledge the University’s assertion that it
provided training to staff to ensure that the resolution of comment codes is accurate, adequate,
and documented. However, we do not agree with the University’s assertion that further return of
funds are not required or that additional file reviews are unwarranted and excessive.

We did not remove our recommendation that the Department consider fine proceedings under 34
C.F.R. § 668.84 for the University’s delivery of loan funds to borrowers in excess of aggregate
limits. The additional documentation provided by the University did not cause us to revise our
analysis of the initial overawards. Fifty-three percent (40 of 75) of the students we reviewed
received a loan that exceeded their aggregate loan limit.




                  OBJECTIVE, SCOPE, AND METHODOLOGY 



The objective of our audit was to determine if the University resolved comment codes in
compliance with regulations and Department guidance. Our audit covered the 2005-2006 award
year.

To accomplish our objective, we

   1.	 Reviewed selected provisions of the HEA, regulations, and FSA guidance applicable to
       the audit objective.
   2.	 Reviewed (a) Walden University’s Compliance Attestation Examination of the Title IV
       Student Financial Assistance Programs For The Year Ending December 31, 2004;
       (b) Walden E-Learning, Inc. (A Subsidiary of Laureate Education, Inc.) Consolidated
       Financial Statements for the year ended December 31, 2004 with Report of Independent
       Auditors; (c) Compliance Attestation Examination of the Title IV Student Financial
       Assistance Programs For The Year Ending December 31, 2005; (d) Walden E-Learning,
       Inc. (A Wholly Owned Subsidiary of Laureate Education, Inc.) Consolidated Financial
       Statements and Supplementary Information for the year ended December 31, 2005
       with Report of Independent Auditors; (e) Compliance Attestation Examination of the Title
       IV Student Financial Assistance Programs For The Year Ending December 31, 2006; and
       (f) Walden E-Learning, Inc. (A Wholly Owned Subsidiary of Laureate Education, Inc.)
       Consolidated Financial Statements and Supplementary Information for the year ended
       December 31, 2006 with Report of Independent Auditors.
   3.	 Reviewed reports prepared by FSA and the Higher Learning Commission.
   4.	 Reviewed the University’s program participation agreement.
   5.	 Reviewed written policies and procedures and interviewed University officials to gain an
       understanding of the University’s internal control structure, policies, procedures, and
       practices applicable to resolving comment codes returned during student financial
       assistance application processing.
   6.	 Reviewed the University’s web site, organizational chart, and financial aid staff directory
       to gain an understanding of the University’s history and organization.
Final Report
ED-OIG/A05H0018                                                                                     Page 20 of 37

    7.	 Reviewed the records of 30 students randomly selected from a universe of 2,712 students
        who received Title IV, HEA program funds and whose 2005-2006 SAR/ISIR contained a
        comment code returned during the student financial assistance application process.5
    8.	 Queried the universe of 2,708 students6 to identify students who received Title IV, HEA
        program funds and whose final 2005-2006 CPS record contained a citizenship status
        comment code returned during the student financial assistance application process. The
        query identified 412 students with a comment code specific to citizenship status. We
        stratified the 412 students into three populations. The first population contained 18
        students for whom the University was required to confirm citizenship status.7 We
        reviewed all 18 students’ records. The second population contained 2 students who
        had multiple citizenship comment codes, requiring the University to obtain proof of
        citizenship. We reviewed the records for both students. The third population consisted
        of 392 students who had a single citizenship comment code, requiring the University to
        obtain proof of citizenship. We randomly selected 100 of the 392 students and reviewed
        99 student files (the University was unable to locate 1 student file).
    9.	 Queried the universe of 2,708 students to identify students who received Title IV, HEA
        program funds and whose SAR/ISIR contained an aggregate loan limits comment code.
        The query identified 531 students with a comment code specific to aggregate loan limit.
        We judgmentally selected and reviewed the records for 75 (of 531) students who were
        awarded the largest amounts in excess of loan limits.
    10. Reviewed additional documentation provided by the University in response to the
        findings presented in the draft report to determine whether the additional documentation
        was sufficient to reduce the instances of noncompliance for each of the findings.

We relied, in part, on data provided to us by University officials. We compared the University’s
data to data we obtained from CPS and NSLDS to ensure we had a complete universe from
which to select our samples for reviewing student records and determining the University’s
compliance with regulations and Department guidance. University officials provided us a listing
that identified 2,708 students who received Title IV, HEA program funds during the 2005-2006
award year and whose 2005-2006 SAR/ISIR contained a comment code. To ensure
completeness and accuracy of the University data, we reviewed the query the University used to
extract the names of students who received Title IV, HEA program funds during the 2005-2006
award year and whose 2005-2006 SAR/ISIR contained comment codes. We also confirmed the
reasonableness and completeness of disbursement and ISIR data in the University’s electronic
system during our review of sample items. Based on our comparisons and reviews, we
concluded the data the University provided to us were sufficiently reliable for our purposes.
We conducted our audit from July through December 2007 at the University’s office in
Baltimore, Maryland, and at our offices. We discussed the results of our audit with University
officials on December 12, 2007 and on May 21, 2008. We performed our work in accordance


5
  A secondary confirmation for citizenship was not obtained for one student, and one student was disbursed Title IV, 

HEA program funds over the student’s aggregate loan limit. Based on our initial tests of 30 students, we narrowed

the universe to include only comment codes related to the two issues found.

6
  We used the information contained in CPS to perform our queries and narrow our student listing to include only

comment codes specific to citizenship status (8 comment codes) and aggregate loan limits (4 comment codes).

7
  The University was required to begin a secondary confirmation with DHS to confirm eligibility of citizenship

status for 17 (of 18) students. The remaining student had a missing or invalid Alien Registration Number requiring 

the student to submit proof of noncitizen eligibility to the University.

Final Report
ED-OIG/A05H0018                                                                      Page 21 of 37

with generally accepted government auditing standards (2003 Revision) appropriate to the scope
of our audit.




                            ADMINISTRATIVE MATTERS



Statements that managerial practices need improvements, as well as other conclusions and
recommendations in this report, represent the opinions of the Office of Inspector General.
Determinations of corrective action to be taken, including the recovery of funds, will be made by
the appropriate Department of Education officials.

If you have any additional comments or information that you believe may have a bearing on the
resolution of this audit, you should send them directly to the following Department of Education
official, who will consider them before taking final Departmental action on this audit:

                              James Manning
                              Acting Chief Operating Officer
                              Federal Student Aid
                              U. S. Department of Education
                              Union Center Plaza, Room 112E1
                              830 First Street, N. E.
                              Washington, D.C. 20202

It is the policy of the U. S. Department of Education to expedite the resolution of audits by
initiating timely action on the findings and recommendations contained therein. Therefore,
receipt of your comments within 30 days would be appreciated.

In accordance with the Freedom of Information Act (5 U.S.C. § 552), reports issued by the
Office of Inspector General are available to members of the press and general public to the extent
information contained therein is not subject to exemptions in the Act.


                                             Sincerely,

                                             /s/

                                             Gary D. Whitman
                                             Regional Inspector General
                                             for Audit

Attachments
Draft Report
ED-OIG/A05H0018                                                               Page 22 of 37
                                                                              Attachment 1




     ATTACHMENT 1: University Comments on the Draft Audit 

                         Report


(The University provided several attachments with its letter. All personally identifiable
information mentioned in the University’s comments was replaced with bracketed text. Because
of the voluminous nature of the attachments to the University’s comments and the personally
identifiable information within, we have not included them in Attachment 1. Copies of the
attachments to the University’s comments, less the personally identifiable information, are
available on request.)
Final Report
ED-OIG/A05H0018                                                                  Page 23 of 37
Auditee Response                                                                 Attachment 1

Via E-Mail (PDF) and Overnight Delivery


July 11, 2008

Mr. Gary D. Whitman
Regional Inspector General for Audit
Office of the Inspector General
U.S. Department of Education
500 West Madison Street, Suite 1414
Chicago, IL 60661

Re: 	 Response and Comments to Draft Audit Report
      (Control Number ED-OIG/A05H0018)


Dear Mr. Whitman:

The materials accompanying this letter comprise Walden University’s response and comments to
the June 2, 2008 Draft Audit Report entitled Walden University’s Compliance with Selected
Regulations and U.S. Department of Education Guidance. In order to meet the accessibility
requirements of Section 508 of the Rehabilitation Act of 1973, as amended, we have also
enclosed a CD-ROM containing the narrative portion of this response in electronic (Microsoft
Word) format.

As described in the attached comments, Walden University concurs in part and disagrees in part
with the Findings and Recommendations set forth in the Draft Audit Report. We appreciate the
opportunity to comment on the Draft Audit Report, and we reserve the right and opportunity to
respond further to any final report as may be issued.

Respectfully submitted,

/s/

Jonathan A. Kaplan, J.D.
President
Final Report
ED-OIG/A05H0018                                                                                    Page 24 of 37
Auditee Response                                                                                   Attachment 1

FINDING NO. 1 –	 The University Did Not Resolve All Comment Codes Generated after
                 Unsuccessful Database Matches with Other Federal Agencies

The Draft Audit Report alleges that Walden University (“Walden” or “the University”) did not
always resolve comment codes generated (1) when students claiming to be eligible noncitizens
failed the CPS match with the Department of Homeland Security (“DHS”) or (2) when students
claiming to be citizens failed the match with the Social Security Administration (“SSA”). As a
result of these findings, with which Walden concurs in part and disagrees in part, the Draft Audit
Report claims that the University improperly disbursed $313,273 in Title IV, HEA funds to
ineligible students. As described in more detail below, however, and supported by enclosed
documentation, the University is able to demonstrate that a significant majority of the questioned
students were in fact eligible to receive Title IV, HEA funds. As a result, Walden respectfully
asserts that its return of funds for certain limited instances of noncompliance should fully resolve
this matter, that no further file review is necessary, and that a fine proceeding would be
excessively punitive.

Secondary Confirmation of Non-citizen Student Immigration Status When CPS Match
with DHS Was Unsuccessful

The University concurs with the Draft Audit Report’s finding that secondary confirmation of
non-citizen student immigration status with DHS was not performed in a timely fashion for 17
students during the 2005-06 award year. Subsequent to the initiation of the audit, Walden
submitted Document Verification Request Forms G-845s and the required proof of citizenship
documentation to DHS for each of the 17 students identified during the audit. The following
eight students were consequently determined to be eligible for Title IV, HEA funds (see
Appendix A for supporting documentation):




*Last   *First    Gross Amount   G-845      G-845
Name    Name      Disbursed      Sent       Received   Comments                                     G-845 Result



                                                       Received G-845 from DHS 12.12.07. USCIS      Eligible for federal
                  $ 16,252.82    10.26.07   12.12.07   response is #4 Asylee.                       financial aid



                                                       Received G-845 from DHS 11.20.07. USCIS      Eligible for federal
                  $ 48,779.00    10.26.07   11.20.07   response is #10 U.S. Citizen.                financial aid



                                                       Received G-845 from DHS 11.20.07. USCIS      Eligible for federal
                  $ 15,449.00    10.26.07   11.20.07   response is #10 U.S. Citizen.                financial aid



                                                       Received G-845 from DHS 11.16.07. USCIS      Eligible for federal
                  $ 15,975.38    10.26.07   11.16.07   response is #1 Lawful Permanent Resident.    financial aid



                                                       Received G-845 from DHS 11.20.07. USCIS      Eligible for federal
                  $ 33,920.38    10.26.07   11.20.07   response is #1 Lawful Permanent Resident.    financial aid
Final Report
ED-OIG/A05H0018                                                                                                       Page 25 of 37
Auditee Response                                                                                                      Attachment 1



                                                                         Received G-845 from DHS 11.20.07. USCIS         Eligible for federal
                      $ 53,905.00         10.26.07       11.19.07        response is #10 U.S. Citizen.                   financial aid



                                                                         Received G-845 from DHS 11.20.07. USCIS         Eligible for federal
                      $ 17,945.00         10.26.07       11.20.07        response is #2 Conditional Resident.            financial aid



                                                                         Received G-845 from DHS 11.20.07. USCIS         Eligible for federal
                      $ 16,497.76         10.26.07       11.20.07        response is #1 Lawful Permanent Resident.       financial aid
* [Student Name Deleted]

As each of the above students was in fact eligible to receive Title IV, HEA funds, a return of
funds is not warranted notwithstanding the fact that secondary confirmation did not occur prior
to disbursement. Requiring a return of funds to lenders for these students, based solely on a
documentation error rather than the student’s actual eligibility to receive such funds, would be an
unjustified and unsupportable result. Walden therefore disagrees with the Draft Audit Report’s
recommendation that funds be returned with respect to the above eight students.

With respect to the remaining nine students, the University has reviewed the files and determined
that secondary confirmation of citizenship was not obtained from DHS during the 2004-05,
2005-06, 2006-07 or 2007-08 award years. We thus concur with the Draft Audit Report’s
recommendation that loan proceeds for these students be returned to appropriate lenders, and we
have processed such returns in a total amount of $307,404.98 as set forth below (see supporting
documentation in Appendix B):


                              Net loan               Net loan               Net loan            Net loan             Net loan
                              amount                 amount                 amount              amount               amount
                              returned:              returned:              returned:           returned:            returned:
*Last Name     *First Name    2004-05                2005-06                2006-07             2007-08              all years
                               $           -         $    8,245.00           $          -                            $       8,245.00
                                                              8
                               $           -         $    0                  $    18,300.00                          $      18,300.00

                               $           -         $    35,890.00          $    18,500.00     $ 6,834.00           $      61,224.00
                               $           -         $    17,945.00          $    18,500.00                          $      36,445.00

                               $           -         $    17,945.00          $    18,500.00     $ 6,834.00           $      43,279.00
                               $           -         $    17,945.00          $    18,500.00                          $      36,445.00


                               $           -         $    29,908.98          $    18,500.00     $ 6,834.00           $     55,242.98

                               $           -         $    17,945.00          $          -                            $      17,945.00
                               $           -         $    17,945.00          $    12,334.00                          $      30,279.00

TOTALS                         $           -         $    163, 768. 98       $   123,134.00     $ 20,502.00          $    307,404.98
* [Student Name Deleted]


8
 The University is unable to return loan funds to the lender in this instance, as the loan has been repaid in full by the
borrower.
Final Report
ED-OIG/A05H0018                                                                      Page 26 of 37
Auditee Response                                                                     Attachment 1

Walden University has taken corrective action, including the implementation of enhanced
policies and procedures, to ensure that the secondary confirmation of citizenship/eligible non-
citizenship (G-845) is completed within 10 days as required by applicable regulations (see
Appendix C). In September 2007, Walden University created and filled a Compliance Manager
position to oversee all database match processes. We have further provided considerable training
regarding these enhanced policies and procedures to all financial aid staff members responsible
for the resolution of CPS comment codes.

Documentation of Student Citizenship Status When CPS with SSA Was Unsuccessful

Walden disputes this portion of the Draft Audit Report finding, in its entirety, as we have been
and remain in material compliance with the requirements of 34 C.F.R. § 668.24(a)(3) pertaining
to U.S. citizenship documentation prior to the awarding of Title IV, HEA funds. As noted in the
Draft Audit Report, the OIG field auditors noted only four instances – out of one-hundred files
reviewed – where sufficient documentation of citizenship was not present. The University has
since adequately documented the eligibility of the four questioned students (see supporting
documentation at Appendix D):

       [Student Name Deleted] – Although the student’s file could not be located at the time of
       the audit, both the file and citizenship documentation have since been located. According
       to PowerFAIDS system records, the information for this student was received on
       7/23/2004.

       [Student Name Deleted] – The citizenship documentation had been originally misfiled
       and was not in the correct student folder at the time of the audit. It has since been
       located. According to PowerFAIDs system records the information for this student was
       received on 10/20/05.

       [Student Name Deleted] – The University had previously obtained documentation of
       citizenship, but the student’s records were unclear due to a change in marital status and
       name. Such name discrepancies and records have subsequently been clarified.

       [Student Name Deleted] – The University had previously obtained documentation of
       citizenship, but the student’s records were unclear due to a change in marital status and
       name. Such name discrepancies and records have subsequently been clarified.

The University has thus demonstrated that 100 percent of the student files contained in the audit
sample contain adequate documentation of citizenship. Consequently, the Draft Audit Report’s
statement that $55,503 in Title IV, HEA funds were improperly disbursed to the above students
is incorrect. Additionally, based on some of the issues identified in the audit, the Financial Aid
Office has created and implemented a “Name Confirmation Form” to resolve possible name
and/or date of birth discrepancies in the future (see sample at Appendix C).

Comments Regarding Recommendations under Finding No. 1

As set forth above, the University concurs with Finding No. 1 only to the limited extent that it
did not resolve certain CPS comment codes generated after unsuccessful database matches.
Final Report
ED-OIG/A05H0018                                                                                     Page 27 of 37
Auditee Response                                                                                    Attachment 1

However, as demonstrated by the enclosed supporting materials, in the vast majority of instances
identified by the audit the failure to resolve CPS comment codes did not cause disbursements of
Title IV, HEA funds to ineligible students. Specifically, from among the 117 students noted in
this finding, the University has demonstrated that 108 were in fact eligible to receive such funds.
Funds that were disbursed to the nine remaining students have already been returned. We
therefore request that the Draft Audit Report’s recommendations regarding this matter be revised
accordingly.

The Draft Audit Report’s recommendation that Federal Student Aid (“FSA”) require a broader
review of files from the 2004-05 award year to the present – based on what are isolated instances
of noncompliance within the audit sample – is simply unwarranted. The above discussion
regarding Walden’s compliance, supported by accompanying documentation, reveals an error
rate that is well below the Department’s standard compliance review threshold for requiring a
full file review, let alone a full file review spanning multiple award years.

Additionally, the Draft Audit Report’s recommendation that FSA consider fine proceedings
regarding this matter is both uncalled for and excessively punitive. As noted previously, as a
percentage of total files reviewed, the audit revealed only isolated instances of ineligible
disbursements, and such disbursements have since been returned by Walden to the appropriate
lenders. Such return of funds is the appropriate remedial action, and the University has further
implemented corrective action to better ensure that CPS comment codes are appropriately
resolved in the future.


FINDING NO. 2 – The University Did Not Adequately Resolve Comment Codes after a
                Match with NSLDS Indicated That Students Were Approaching or
                Had Exceeded Aggregate Loan Limits

The Draft Audit Report alleges that Walden did not properly consider students’ loan balances or
adequately resolve comment codes regarding aggregate loan limits and, as a result, awarded or
disbursed $445,184 of Federal Family Education Loan (“FFEL”) and $2,502 of Federal Work
Study (“FWS”) program funds to students who had exceeded their aggregate subsidized loan
limit and/or aggregate total loan limit as established by 34 C.F.R. § 682.204. As set forth in
detail below, on a student-by-student basis, the University disagrees with the OIG regarding a
majority of the questioned disbursements underlying this finding.9

Walden follows the Department’s guidance regarding FFEL program limits as set forth in Dear
Colleague Letter GEN-97-3 (May 1997), which includes the following relevant instructions:




9
  During the performance of the audit and in conjunction with the Draft Audit Report, the auditors provided Walden
with various work papers and spreadsheets purporting to support Finding No. 2. These comments and the
accompanying supporting documents therefore respond to the student-specific information provided by the OIG in
its disclosed work papers. If Finding No. 2 is based, in any part, on data or work papers not previously shared with
the University, we respectfully request that it be promptly provided for our review and comment prior to the
issuance of any Final Audit Report.
Final Report
ED-OIG/A05H0018                                                                           Page 28 of 37
Auditee Response                                                                          Attachment 1

        Example 5b: Determining a Graduate Borrower's Remaining Aggregate
                        Unsubsidized Loan Eligibility

        Aggregate graduate loan limit for Unsubsidized Loans                          $138,500
        minus amount of Subsidized Loans received                                      - 65,500
        minus amount of Unsubsidized Loan received                                           -0
        remaining aggregate Unsubsidized Loan eligibility                                73,000


       A graduate borrower who has received a combined amount of Subsidized and
       Unsubsidized Loans that equals or exceeds the $65,500 aggregate Subsidized limit
       continues to be eligible for Subsidized Loans until the borrower reaches the $65,500
       Subsidized limit. In addition, the borrower continues to qualify for Unsubsidized Loans
       until the borrower reaches the combined $138,500 Subsidized/Unsubsidized
       aggregate limit.

Additionally, any audit focused on ISIR and NSLDS processing during the 2005-06 award year
must fairly consider the following circumstances:

   •	 Prior to March 2005, historical data on Outstanding Principal Balance (“OPB”) and
      Outstanding Interest Balance (“OIB”) amounts were not stored or displayed in NSLDS.
      Only in late March 2005 did NSLDS begin the process of storing and displaying such
      information. Thus, historical OPB and OIB data was simply not available through
      NSDLS to Walden at the time we awarded and disbursed many of the loans questioned
      by this audit.

   •	 In February 2006, NSLDS Newsletter No. 11 instructed financial aid administrators to
      change the methodology for calculating aggregate loan totals, specifically stating the
      following: “For all of the reasons discussed here, as of January 2006, NSLDS, while
      continuing to report (on web pages and on ISIRs) unallocated amounts, does not use
      unallocated amounts when calculating aggregate subsidized, unsubsidized, and combined
      outstanding principal balances. Nor are FAAs required to investigate whether an
      unallocated amount might impact a student’s eligibility for additional aid. This change
      to the FAA requirement is effective immediately. For system reasons, NSLDS did not
      make this change to 2005-2006 ISIRs.”

   •	 Because data provided on the NSLDS website is dynamic rather than static, it is
      impossible at any given point in time to determine what data was provided for a
      particular student on the site at any prior point in time. It is for this reason that Walden
      has relied heavily on ISIRs in reconstructing loan histories for students at issue in this
      audit. The NSLDS website may have information now available regarding those students
      that simply was not available at the time their loans were awarded and disbursed.

   •	 On October 20, 2006, the Department of Education identified an NSLDS post-screening
      system error that affected Aid Overpayment and ISIRs during the summer of 2006. The
      affected records contained incorrect overpayment information until corrected ISIRs were
      reprocessed by CPS. For nearly everyone involved in the administration of the Title IV
      programs, the 2005-06 award year was unusually confusing insofar as the accuracy and
      consistency of NSLDS historical loan data was concerned.
Final Report
ED-OIG/A05H0018                                                                   Page 29 of 37
Auditee Response                                                                  Attachment 1

With the above as background, the University disputes the Draft Audit Report’s conclusions, in
their entirely, with respect to the following students (supporting documentation provided at
Appendix E):

       [Student Name Deleted] – At the time of her 2005-06 loan disbursements, this student did
       not exceed either the graduate-level Subsidized aggregate limit of $65,500 or the
       combined aggregate limit of $138,500. The underlying loans for this student at the time
       her loans were disbursed totaled $104,315, of which $55,375 were Subsidized loans. She
       was therefore eligible for the $8,500 Subsidized and $10,000 Unsubsidized loans
       disbursed.

       [Student Name Deleted] – At the time of her 2005-06 loan disbursements, this student did
       not exceed either the graduate-level Subsidized aggregate limit of $65,500 or the
       combined aggregate limit of $138,500. An ISIR processed on 10/18/05 showed
       combined loans of $137,058, of which $20,000 were Subsidized loans. The student was
       thus eligible for the $1,442 Subsidized loan disbursed ($138,500 - $137,058 = $1,442).
       A subsequent ISIR processed on 01/05/06 confirms this eligibility.

       [Student Name Deleted] – At the time of her 2005-2006 loan disbursements, this student
       did not exceed either the graduate-level Subsidized aggregate limit of $65,500 or the
       combined aggregate limit of $138,500. An ISIR processed on 2/09/05 showed combined
       loans of $103,505, of which $36,199 were Subsidized loans. The student was thus
       eligible for the $8,500 Subsidized loan disbursed and the $10,000 Unsubsidized loan
       disbursed by 6/16/06 ($138,500 - $103,505 = $34,995). When the post-screened ISIR
       dated 7/11/06 arrived after the 2005-06 loans had fully disbursed.

       [Student Name Deleted] – This student was awarded and disbursed an $11,334
       Unsubsidized loan for the 2005-06 award year. Based upon an ISIR processed on
       10/18/05, the student’s Subsidized loans totaled $5,108 with combined loans of $37,000.
       The student was thus eligible for her $11,334 Unsubsidized award.

       [Student Name Deleted] – At the time of his 2005-06 loan disbursements, this student did
       not exceed either the graduate-level Subsidized aggregate limit of $65,500 or the
       combined aggregate limit of $138,500. At the time of awarding, his underlying
       Subsidized loans totaled $35,999 and aggregate combined $107,595. Upon receipt of the
       post-screened ISIR dated 11/01/05 a determination was made that the student was not
       exceeding the aggregate limit, and the student is not presently exceeding aggregate loan
       limits. Therefore, he was eligible for his 2005-06 loan disbursements of $8,500
       Subsidized and $10,000 Unsubsidized.

       [Student Name Deleted] – At the time of her 2005-06 loan disbursements, this student did
       not exceed either the graduate-level Subsidized aggregate limit of $65,500 or the
       combined aggregate limit of $138,500. As of 10/27/05 her underlying loan totals were
       $53,459 Subsidized and $113,364 combined. She was eligible for her $12,334 in 2005-
       06 loan disbursements ($2,296 Subsidized loan and $9,338 Unsubsidized loan).
Final Report
ED-OIG/A05H0018                                                                 Page 30 of 37
Auditee Response                                                                Attachment 1

     [Student Name Deleted] – At the time of 2005-06 loan disbursements, this student did not
     exceed either the graduate-level Subsidized aggregate limits of $65,500 or the combined
     aggregate loan limit of $138,500. An ISIR processed on 3/24/05 shows $59,946 in total
     Subsidized and $114,697 combined FFELP loans. The student was eligible for her
     $5,554 Subsidized ($65,500 - $59,946 = $5,554) and her $12,946 Unsubsidized loan.
     She was also eligible for the renewal Unsubsidized Stafford Loan of $5,303. This is
     confirmed by the ISIR processed 2/1/06.

     [Student Name Deleted] – At the time of 2005-06 loan disbursements, this student did not
     exceed either the graduate-level Subsidized aggregate limits of $65,500 or the combined
     aggregate loan limit of $138,500. The calculated underlying loans for this student
     following her 2005-06 loan disbursements totaled $114,906. She was eligible for both
     the $8,500 subsidized and $10,000 Unsubsidized loans awarded and disbursed.

     [Student Name Deleted] –At the time of loan disbursements, this student did not exceed
     either the graduate-level Subsidized aggregate limit of $65,500 or the combined
     aggregate limit of $138,500. Her Subsidized and Unsubsidized loans had disbursements
     on 11/1//05 and 12/16/05. When her post-screen ISIR subsequently arrived on 1/10/06,
     her remaining 2005-06 loan disbursements were canceled.

     [Student Name Deleted] – At the time of her 2005-06 loan disbursements, this student did
     not exceed either the graduate-level Subsidized limit of $65,500 or the combined limit of
     $138,500 based on a calculation of her underlying loans.

     [Student Name Deleted] – At the time of 2005-06 loan disbursements, this student did not
     exceed the graduate-level Subsidized aggregate limit of $65,500. An ISIR processed on
     3/28/05 shows total Subsidized loans of $40,511 and a combined aggregate total of
     $72,008. Her $5,067 Subsidized Stafford loans had disbursements on 12/16/05 and
     3/17/06. It was not until 4/11/06, following two 2005-06 disbursements, that a post-
     screen ISIR provided any indication that the student was nearing her aggregate
     Subsidized limits. At that point, the student’s two remaining 2005-06 Subsidized loan
     disbursements were canceled in order to prevent overpayment.

     [Student Name Deleted] – At the time of her 2005-06 loan disbursements, this student did
     not exceed either the graduate-level subsidized aggregate limit of $65,500 or the
     combined aggregated limit of $138,500. An ISIR received on 1/3/05 showed total
     subsidized loans of $42,500 and a combined aggregate total of $92,500. When her ISIR
     contained a post-screen message that she was about to exceed her combined loan levels,
     her Unsubsidized Stafford was reduced to $6,200. When a subsequent ISIR transaction
     arrived on 3/21/06, it reconfirmed that (including pending disbursements) she was no
     longer in danger of exceeding her combined loan limits.

     [Student Name Deleted] – At the time of her 2005-06 loan disbursements, this student did
     not exceed either the graduate-level Subsidized aggregate limit of $65,500 or the
     combined aggregate limit of $138,500. An ISIR received on 2/14/05 showed total
     Subsidized loans of $59,328 and a combined aggregate total of $133,931. Her $4,569
     Unsubsidized Stafford loans had disbursements on 6/17/05 and 7/22/05. It was not until
Final Report
ED-OIG/A05H0018                                                                     Page 31 of 37
Auditee Response                                                                    Attachment 1

       1/31/06, following all 2005-06 disbursements, that an ISIR post-screen transaction
       provided any indication that the student was nearing her aggregate loan limits.

       [Student Name Deleted] – At the time of her 2005-06 loan disbursements, this student did
       not exceed either the graduate-level subsidized aggregate limit of $65,500 or the
       combined aggregate limit of $138,500. An ISIR processed on 3/22/05 showed total
       Subsidized loans of $20,162 and a combined total of $96,806 ($138,500 – $96,806 =
       $41,694 remaining Unsubsidized eligibility). The post-screen ISIR was not received
       until July 12, 2006, nearly four months following the student’s final 2005-06 loan
       disbursement (and that post-screen ISIR further contained suspect information, counting
       $91,503 of the student’s consolidation loans toward the student’s aggregate loan totals).
       The questionable information was later corrected. As of 2/13/07, this student’s total
       unallocated consolidation loans totaled $107,129 per the student’s ISIR for 2006-07. The
       latter ISIR is further evidence that the student had not exceeded her FFEL program
       aggregate loan limits as of March 15, 2006.

       [Student Name Deleted] – At the time of 2005-06 loan disbursements, this student did not
       exceed either the graduate-level subsidized aggregate limit of $65,500 or the combined
       aggregate limit of $138,500. The underlying loans for this student at the time his loans
       were disbursed totaled $72,068, of which $48,100 were Subsidized Stafford loans.

With respect to the following students, the University concurs that it did not adequately resolve
2005-06 aggregate loan limits, but disputes the specific amount of Title IV, HEA program funds
claimed by the OIG as needing to be returned to lenders (supporting documentation provided at
Appendix F):

       [Student Name Deleted] – The University has determined that a loan overpayment of
       $9,763, rather than $22,202 as indicated on the OIG work papers, had occurred during
       2005-06. The net loan amount of $9,470.11 has been returned to the lender.

       [Student Name Deleted] – We have calculated a $6,335 overpayment of Subsidized loans
       in 2005-06, and requested reallocation of $2,462 of this student’s 2005-06 Subsidized
       Stafford loan to her Unsubsidized Stafford loan. Therefore, the net amount returned to
       the lender was $3,756.81.

       [Student Name Deleted] – An overpayment of $6,125 occurred, and we have
       subsequently reallocated all $6,125 of this student’s Subsidized Stafford loan to an
       Unsubsidized Stafford loan. The amount to be returned to the lender is therefore $0.

       [Student Name Deleted] – The University’s calculations indicate that there was an
       overpayment of $13,756 in 2005-06 rather than $15,935 as indicated on the OIG work
       papers. A net loan amount of $13,328.55 has been returned to the lender.

       [Student Name Deleted] – An overpayment of $1,276 occurred, and we have
       subsequently reallocated $1,276 of the student’s Subsidized loan to her Unsubsidized
       loan. Therefore, the amount to be returned to the lender is $0.
Final Report
ED-OIG/A05H0018                                                                 Page 32 of 37
Auditee Response                                                                Attachment 1

     [Student Name Deleted] – We have determined there was an $8,500 overpayment of
     Subsidized loans, and have subsequently reallocated the entire amount to his
     Unsubsidized loan. Therefore, the amount to be returned to the lender is $0.

     [Student Name Deleted] – We have calculated a $1,734 overpayment of Subsidized
     loans, which have been subsequently reallocated to the student’s Unsubsidized loan.
     Therefore, the amount to be returned to the lender is $0.

     [Student Name Deleted] – At the time of loan disbursements, this student did exceed the
     graduate-level Subsidized aggregate limit of $65,500. The funds cannot be reallocated
     because the underlying loan has been consolidated, and the holder of the consolidated
     loan has denied our request to reallocate the funds. Therefore, we consider the
     consolidation to be reaffirmation of the debt and correction of the overpayment.

     [Student Name Deleted] – At the time of loan disbursements, this student did exceed the
     graduate-level Subsidized aggregate limit of $65,500. The underlying loans for this
     student at the time her loans were disbursed totaled $116,345, which is below the
     combined aggregate limit of $138,500. We have subsequently reallocated $7,519 of the
     2005-06 subsidized loan overpayments to her 2005-06 unsubsidized loans. Therefore, the
     amount to be returned to the lender is $0.

     [Student Name Deleted] – At the time of loan disbursements, this student did exceed the
     graduate-level Subsidized aggregate limit of $65,500. The underlying loans for this
     student at the time of her loan disbursements totaled $101,726, which is below the
     combined aggregate limit of $138,500. We have subsequently reallocated $6,646 of the
     2005-06 Subsidized loan overpayments to her 2005-06 Unsubsidized loans. Therefore,
     the amount to be returned to the lender is $0.

     [Student Name Deleted] – At the time of loan disbursements, this student did exceed the
     graduate-level subsidized aggregate limit of $65,500. The underlying subsidized loans
     for this student at the time her loans were disbursed totaled $58,416 and her combined
     aggregate total was $112,322, which is below the combined aggregate limit of $138,500.
     We have subsequently reallocated $1,416 of 2005-06 Subsidized loan overpayments to
     her 2005-06 Unsubsidized loans. Therefore, the amount to be returned to the lender is
     $0.

     [Student Name Deleted] – We have determined there was a $12,886 overpayment of
     Subsidized loans and reallocated the entire amount to the student’s Unsubsidized loan.
     Therefore, the amount to be returned to the lender is $0.

     [Student Name Deleted] – We have reallocated $8,500 from Subsidized to Unsubsidized
     and returned an overpayment of Unsubsidized loan funds in the net amount of $3,993.49.

     [Student Name Deleted] – Based on a calculation of underlying loans, we have
     determined there was a $2,008 overpayment of Subsidized loan and $5,696 Unsubsidized
     loan. We have returned a net loan amount of $7,472.88.
Final Report
ED-OIG/A05H0018                                                                     Page 33 of 37
Auditee Response                                                                    Attachment 1

       [Student Name Deleted] – The University has calculated an overpayment of $6,146 rather
       than $18,500, and returned such amount to the lender.

       [Student Name Deleted] – We have determined an overpayment of $1,636 of Subsidized
       loans and reallocated the entire amount to an Unsubsidized loan. Therefore, the amount
       to be returned to the lender is $0.

The University concurs with the OIG concerning the following students and has returned
pertinent Title IV loan funds to the appropriate lenders for the 2005-06 aid year (supporting
documentation provided at Appendix G):

       [Student Name Deleted] – We have returned a net loan amount of $8,302.23.

       [Student Name Deleted] – We have returned a net loan amount of $9,879.45.

       [Student Name Deleted] – We have returned $4,448 to the lender ($2,596 Subsidized and
       $1,852 Unsubsidized).

       [Student Name Deleted] – We have returned a net loan amount of $17,945.00.

       [Student Name Deleted] – We have requested a check to return a net loan amount of
       $5,981.99.

       [Student Name Deleted] – We have returned $3,880 as the net amount of the loan
       overpayment.

       [Student Name Deleted] – We have requested a check to return a net loan amount of
       $3,233.98.

       [Student Name Deleted] – We have returned a net loan amount of $5,577.50.

       [Student Name Deleted] – We have requested a check to return a net loan amount of
       $6,254.56.

The Draft Audit Report further alleges that because of its failure to resolve FFEL loan limits,
Walden also improperly disbursed $2,502 of FWS program funds to one student. We disagree.
Assuming that the student received an overpayment of loan funds, the return of which has been
documented herein, the student was then eligible for the FWS disbursement (see supporting
documentation provided at Appendix G).

Comments Regarding Recommendations under Finding No. 2

As described above and evidenced by the supporting documents, the University has returned all
Title IV, HEA funds that it has determined were overpayments for the 2005-06 award year. We
disagree with the OIG that any other 2005-06 awards were inappropriate, based on information
that was available at the time of 2005-06 disbursements. Walden therefore asserts that no further
returns of funds are required with respect to the 2005-06 award year.
Final Report
ED-OIG/A05H0018                                                                    Page 34 of 37
Auditee Response                                                                   Attachment 1

With respect to the University’s policies and procedures for reviewing and resolving CPS
comment codes, we have already revised and strengthened such policies and procedures in the
years following the period covered by the audit. Specifically, in August 2007, the University
revised its procedure for documenting NSLDS values when reviewing aggregate totals directly
from the NSLDS website, and provided training to all staff on the revised procedures and
NSLDS review. In January 2008, we restructured the financial aid awarding team, including the
hiring of a new manager and additional staff. At the same time, the University strengthened its
NSLDS review and coding for students who receive “renewal loans” (two loan years from one
ISIR), and financial aid staff received special training to review NSLDS for renewal students.
Also, our internal reporting system was modified to separate renewal students who were close to
aggregate loan limits from those who were not. Most recently, in March 2008, we adopted
significant changes to the coding and quality control features of the PowerFAIDS software,
which are designed to prevent manual errors pertaining to NSLDS and to correct errors before
funds are disbursed. All staff responsible for resolving comment codes have been trained or
retrained, as appropriate, as have staff responsible for packaging and disbursing FFELP loans
(see supporting documentation at Appendix H).

Walden further disagrees with the Draft Audit Report’s recommendation that FSA require a
broader review of files from the 2004-05 award year to the present. As set forth above and
supported by the accompanying materials, Finding No. 2 is significantly based on what the
University asserts are incorrect conclusions by the OIG regarding students’ eligibility for loan
disbursements during the 2005-06 award year. This, combined with the NSLDS weaknesses and
problems acknowledged by the Department during that same award year, render a broader file
review as excessive and unwarranted.

Additionally, as with the previous finding, the Draft Audit Report’s recommendation that FSA
consider fine proceedings regarding this matter is both uncalled for and excessively punitive.
The University has examined all of the students questioned by the audit, returned appropriate
funds to lenders, and previously implemented enhanced policies and procedures to prevent future
similar occurrences. To initiate any fine proceeding regarding this matter would also be
inequitable, as the Department itself acknowledged various problems in NSLDS during the
2005-06 award year that affected not only Walden, but all institutions participating in the Title
IV loan programs.
Draft Report
ED-OIG/A05H0018                                                                  Page 35 of 37
                                                                                 Attachment 2

   Attachment 2: Detailed Tables Documenting Finding No. 2
Questioned Costs and OIG Comments on the University’s Response
Group 1: The University Did Not Concur (15 of the 40 Students Questioned)

The University disagreed entirely with the OIG’s conclusion that 15 (of 40) students had
exceeded their aggregate loan limits and received improper disbursements totaling $117,510.
We reviewed the University’s response, along with the additional documentation, and disagree
with the University for all 15 students.

The University’s primary argument was that the students did not exceed the aggregate limits
during the 2005-2006 award year. We agree that, in many instances, there were not improper
disbursements during that year. However, improper disbursements were made during the 2006-
2007 and 2007-2008 award years.

As part of our analysis, we reviewed the student loan activity using NSLDS as of October 2008.
Even though the University disagreed with this finding, it has refunded or canceled $55,777 and
reclassified $12,646 of subsidized loan disbursements, which restored students’ eligibility for
$4,978 of the previously improper unsubsidized loan disbursements. Disbursements for 6 of the
originally disputed 15 students have not been fully resolved, and $44,109 remains in question.

   Table 5. The University Did Not Concur
                                Amount University Actually
   Student Questioned In          Refunded/                    Restored      Remaining
               Draft Report       Canceled       Reallocated Eligibility Questioned Costs
   1.                  $7,105           $7,105             $0                            $0
   2.                  $6,167           $6,167             $0                            $0
   3.                 $13,415          $13,415             $0                            $0
   4.              * $13,987                 $0            $0                       $13,987
   5.               * $1,243                 $0        $1,243                            $0
   6.               * $3,265                 $0            $0                        $3,265
   7.                  $5,303           $5,303             $0                            $0
   8.                 $11,442                $0            $0                       $11,442
   9.                  $1,395                $0            $0                        $1,395
   10.               *$17,593          $17,593             $0                            $0
   11.                 $8,500                $0        $8,500                            $0
   12.                 $6,194           $6,194             $0                            $0
            Not included in the questioned costs. Probably confused her with the student
   13.      below. The student was not on any list and had same first name.
   13x.            ** $8,711                                                         $8,711
   14.              * $5,309                 $0            $0                        $5,309
   15.                 $7,881                $0        $2,903    $ 4,978                 $0
   Total             $117,510          $55,777        $12,646    $ 4,978            $44,109
   * Questioned amount had been adjusted up or down from draft report amount.
   ** Student not addressed (has the same first name as Student No. 13x).
Final Report
ED-OIG/A05H0018                                                                    Page 36 of 37
Detailed Finding 2 - OIG Tables and Analysis                                       Attachment 2

Group 2: The University Concurred that An Overaward Existed but Disputed the Amount
(16 of the 40 Students Questioned)

The University concurred that it did not adequately resolve 2005-2006 aggregate loan limits for
the second group of students. However, the University disputed the amount of Title IV, HEA
program funds that should be returned to lenders.

We analyzed the University’s response, the additional documentation submitted by the
University, and recent NSLDS data (as of October 2008). We noted that the amounts disputed
by the University were, generally, for improper disbursements made during the 2006-2007 and
2007-2008 award years. We questioned the loan amounts for these subsequent years because the
University had been put on notice in 2005-2006 that these students were in danger of exceeding
aggregate loan limits. Also, as we noted for Group 1, regardless of its stated non-concurrence,
the University made refunds and cancellations and reclassified subsidized amounts as
unsubsidized for these students, fully clearing all improper loan disbursements for 9 of the 16
loans. These actions also restored students’ eligibility for $99,407 in loan funds. However,
$43,724 remains in question.

   Table 6. University Concurred Partially (There Was An Overaward but Disputed
   Amount)
             Questioned     Amount University Actually                      Remaining
                                                              Eligibility
   Student    In Draft      Refunded/                                       Questioned
                                           Reallocated         Restored
               Report       Canceled                                          Costs
   1             $22,202          $9,763            $3,756          $8,683          $0
   2              $6,335          $3,757                $0               $0     $2,578
   3             $23,208              $0            $6,125        $17,083           $0
   4           *$13,756         $13,329                 $0               $0       $427
   5             $12,019            $471            $1,276        $10,272           $0
   6              $8,500              $0            $8,500               $0         $0
   7              $1,734              $0            $1,734               $0         $0
   8              $9,516              $0                $0               $0     $9,516
   9             $48,785            $428            $7,519        $40,838           $0
   10            $12,332              $0            $7,520          $4,812          $0
   11             $3,583              $0            $1,416          $2,167          $0
   12            $22,555              $0          $12,886           $9,669          $0
   13            $18,500              $0            $8,500          $5,883      $4,117
   14            $14,340          $7,473                $0               $0     $6,867
   15            $18,500          $6,138                $0               $0    $12,362
   16             $9,493              $0            $1,636               $0     $7,857
   Total       $245,358         $41,359           $60,868         $99,407      $43,724
   * Questioned amount had been adjusted down from draft report amount
Final Report
ED-OIG/A05H0018                                                                     Page 37 of 37
Detailed Finding 2 - OIG Tables and Analysis                                        Attachment 2

Group 3 - The University Concurred and Returned the Pertinent 2005-2006 Award Year
Title IV, HEA Program Loan Funds (9 of the 40 Students Questioned)

The University concurred with the OIG concerning the third group of students and indicated it
returned Title IV, HEA program funds to the appropriate lenders for the 2005-2006 award year.
We reviewed the University’s response and the supporting documentation. We accepted the
support for 7 of the 9 students. For the remaining 2 students, the University stated that a check
request was made for the net amount but did not provide support that the funds were returned to
the lender. As of October 2008, NSLDS records for the 2 students did not reflect that Title IV,
HEA program funds had been returned. Therefore, the OIG does not agree with the amount of
Title IV, HEA program funds that were returned, and $9,782 remains in question.

   Table 7. Improper Disbursements with Which the University Concurred and
   Claimed to Have Refunded
              Questioned       Amount University Actually                        Remaining
               in Draft        Refunded/                          Eligibility    Questioned
   Student      Report          Canceled       Reallocated        Restored         Costs
   1             $27,059            $27,059               $0                $0            $0
   2             $10,185            $10,185               $0                $0            $0
   3              $4,448             $4,448               $0                $0            $0
   4             $18,500            $18,500               $0                $0            $0
   5              $6,167             $6,167               $0                $0            $0
   6              $4,000             $4,000               $0                $0            $0
   7              $3,334                 $0               $0                $0        $3,334
   8              $5,750             $5,750               $0                $0            $0
   9              $6,448                 $0               $0                $0        $6,448
   Total         $85,891            $76,109               $0                $0        $9,782