oversight

Dallas Nursing Institute's Compliance with Selected Provisions of the Higher Education Act of 1965 and Corresponding Regulations.

Published by the Department of Education, Office of Inspector General on 2009-04-08.

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


                                                                     April 8, 2009
                                                                                                               Control Number
                                                                                                               ED-OIG/A06I0012

Mr. Gregory Davault
President
Dallas Nursing Institute
12170 N. Abrams Rd., Suite 200
Dallas, TX 75243


Dear Mr. Davault:

This Final Audit Report, entitled Dallas Nursing Institute’s Compliance with Selected
Provisions of the Higher Education Act of 1965 and Corresponding Regulations, presents the
results of our audit. The objectives of the audit were to determine if Dallas Nursing Institute
(DNI) complied with selected provisions of the Higher Education Act of 1965, as amended
(HEA), and regulations governing (1) the percentage of revenue that can be derived from
Title IV, HEA program funds (90/10 Rule); (2) student eligibility; (3) award calculations and
disbursements; and (4) the return of Title IV aid. Our audit covered the period July 1, 2006,
through June 30, 2007 (2006-2007 award year).




                                                      BACKGROUND 



DNI, formerly North Texas Professional Career Institute, is a private, for-profit institution
located in Dallas, Texas. DNI’s primary accrediting organization is the Accrediting Bureau of
Health Education Schools; it also is accredited by the Texas Workforce Commission. DNI offers
a program in licensed practical/vocational nursing. The licensed practical/vocational nursing
program is a 48-week certificate program approved by the U.S. Department of Education
(Department) as a 52 credit hour program. DNI students may choose from monthly class starts.

The purpose of the programs authorized by Title IV of the HEA is to provide financial assistance
to students attending eligible institutions of higher education. DNI participates in the Federal
Pell Grant (Pell) and Federal Family Education Loan (FFEL) programs. The Pell program helps
financially needy students meet the cost of their postsecondary education. The FFEL program
enables students or their parents to receive low-cost loans to pay for the costs of attendance at
institutions of higher education.




 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/A06I0012                                                                                      Page 2 of 15

During the 2006-2007 award year, DNI records indicate receipt of Title IV, HEA program funds
on behalf of 426 students as follows:

Program                                     Funds
FFEL                                        $2,488,886
Pell                                        $ 658,171
Total                                       $3,147,057




                                            AUDIT RESULTS



DNI complied with the student eligibility requirements for all 25 randomly selected Title IV,
HEA program fund recipients whose records we reviewed.1 However, DNI did not comply with
the requirements governing the 90/10 Rule, award calculations and disbursements, and return of
Title IV aid.

In its comments to the draft report, DNI did not disagree with the findings and described its
proposed corrective actions to prevent future occurrences. DNI’s comments are summarized at
the end of each finding, and the full text of the comments is included as an Attachment to this
report.

FINDING NO. 1 – 90/10 Rule Calculation Not Prepared in Accordance with Federal
                Regulations

DNI did not calculate the percentage of revenue derived from the Title IV, HEA programs for
the 2007 fiscal year2 in accordance with the HEA and regulation. In calculating the percentage,
DNI did not presume that Title IV, HEA program funds were used to pay students’ tuition, fees,
and other institutional charges, regardless of whether those funds were credited or paid directly
to the students. DNI used Title IV, HEA program funds and non-Title IV, HEA program funds
(from private loans and student payments) to pay the students’ tuition, fees, and other
institutional charges. Once all charges were covered, DNI paid the subsequent disbursements,
including Title IV, HEA program funds, directly to the students. However, when DNI calculated
the percentage of revenue it derived from the Title IV, HEA programs, it did not presume the
Title IV, HEA program funds paid directly to students were used to pay students’ tuition, fees,
and other institutional charges.

Section 102(b)(1)(F) of the HEA provides that a proprietary institution must have “at least 10
percent of the school’s revenues from sources that are not derived from funds provided under
title IV, as determined in accordance with regulations prescribed by the Secretary.” Pursuant to
34 C.F.R. § 600.5(a)(8), to be eligible to participate in the Title IV, HEA programs, a proprietary



1
  Our sample size was not sufficient to project the results of our sample to the remaining 401 Title IV, HEA program

fund recipients.

2
  DNI’s 2007 fiscal year was the 12-month period ended June 30, 2007.

Final Report
ED-OIG/A06I0012                                                                                      Page 3 of 15

institution must have “no more than 90 percent of its revenues derived from title IV, HEA
program funds.”3

The following formula for calculating the percentage for an institution’s latest complete fiscal
year is found at 34 C.F.R. § 600.5(d)(1):

        Title IV, HEA program funds the institution used to satisfy its students’ tuition,
             fees, and other institutional charges to students
        ———————————————————————————————
        The sum of revenues including title IV, HEA program funds generated by the
             institution from: tuition, fees, and other institutional charges for students
             enrolled in eligible programs as defined in 34 CFR 668.8; and activities
             conducted by the institution, to the extent not included in tuition, fees, and
             other institutional charges, that are necessary for the education or training of
             its students who are enrolled in those eligible programs.

The regulations at 34 C.F.R. § 600.5(d)(2) provide that “[a]n institution must use the cash basis
of accounting when calculating the amount of title IV, HEA program funds in the numerator and
the total amount of revenue generated by the institution in the denominator of the fraction . . . .”
According to 34 C.F.R. § 600.5(e)(2)

        In determining the amount of title IV, HEA program funds received by the
        institution under the cash basis of accounting . . . the institution must presume that
        any title IV, HEA program funds disbursed or delivered to or on behalf of a
        student will be used to pay the student's tuition, fees, or other institutional
        charges, regardless of whether the institution credits those funds to the student's
        account or pays those funds directly to the student, and therefore must include
        those funds in the numerator and denominator.

By not presuming that Title IV, HEA program funds paid directly to students were used to pay
each student’s tuition, fees, and other institutional charges, DNI reported an incorrect percentage
of revenue it derived from the Title IV, HEA programs. The numerator amount was smaller
when this presumption was not applied, which resulted in a lower percentage. DNI does not
have written policies and procedures for completing the 90/10 Rule calculation.

For the 2007 fiscal year, DNI calculated a percentage of 85.3, ($3,010,681/$3,529,441), and its
audited financial statements reported the same percentage. This percentage is incorrect. We
identified $145,195 in Title IV, HEA program funds paid directly to students and not included in
DNI’s calculation. We reviewed approximately $33,000 judgmentally selected from this
universe. Approximately $23,000 of the $33,000 should have been included in the numerator of
the 90/10 Rule calculation.4 We did not determine the total amount of the required adjustment
because our calculation of the maximum 90/10 Rule percentage, based on adding to the
numerator all $145,195 in Title IV, HEA program funds paid to students and not included in the
calculation, indicates a percentage of 89.4 ($3,155,876/$3,529,441), still under the 90 percent
threshold.
3
 All references are to the HEA as amended through October 2002 and the July 1, 2006, version of the C.F.R.
4
 Because the judgmental selection is based on sorting the universe and selecting the highest dollar amounts, the
sample is not representative of the entire universe and should not be projected.
Final Report
ED-OIG/A06I0012                                                                        Page 4 of 15


However, without performing additional testing, we cannot definitively conclude that DNI’s
90/10 Rule calculation would be under the 90 percent threshold.

Recommendations

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

1.1	     Recalculate the 90/10 Rule percentage for the 2007 and 2008 fiscal years in accordance
         with the HEA and regulation, report the percentages to FSA, and provide FSA with the
         revised calculations and all the detail supporting the revised calculations; and
1.2	     Develop and implement written policies and procedures for calculating the 90/10 Rule
         percentage to ensure that Title IV, HEA program funds are presumed to first pay for
         tuition, fees, and other institutional charges.

DNI’s Comments

DNI stated that it now understands that all Title IV funds paid to a student must be presumed to
have been applied to any institutional charges not satisfied by certain exempt categories of aid
(e.g., Federal Workforce Investment Act funds, state grants or loans, Section 529 savings
account payments, and institutional scholarships awarded with from qualified funds (from
outside source) from special scholarship accounts).

To avoid further 90-10 calculation errors, DNI described its proposed policies and procedures to
ensure that Title IV, HEA program funds are presumed to first pay for tuition, fees, and other
institutional charges. The proposed policies and procedures include a student by student file
review to first apply all disbursed Title IV, HEA program funds towards institutional charges not
satisfied by exempt aid before determining if there are any remaining unsatisfied institutional
charges to which cash payments can be applied.

OIG Response

We have not reviewed the final version of the proposed policies and procedures. However, the
proposed policies and procedures as described are not in compliance with 34 C.F.R.
§ 600.5(e)(3) because this citation does not include state loans as an exempt category of aid.

DNI’s comments do not address recommendation 1.1.

FINDING NO. 2 – Administration of Title IV Programs Needs Improvement

During the 2006-2007 award year, DNI did not always administer the Title IV, HEA programs in
compliance with the law and regulations. Specifically, DNI

   1.	      Used inaccurate cost of attendance amounts,
   2.	      Did not notify students when FFEL funds were credited to their accounts,
   3.	      Improperly disbursed FFEL and Pell Grant funds, and
   4.	      Incorrectly calculated the amount to return to Title IV, HEA programs.
Final Report
ED-OIG/A06I0012                                                                         Page 5 of 15


Pursuant to 34 C.F.R. § 668.14(b)(1)

       By entering into a program participation agreement, an institution agrees that . . .
       [i]t will comply with all statutory provisions of or applicable to Title IV of the
       HEA, all applicable regulatory provisions prescribed under that statutory
       authority, and all applicable special arrangements, agreements, and limitations
       entered into under the authority of statutes applicable to Title IV of the HEA . . . .

Use of Inaccurate Cost of Attendance Amounts

DNI used incorrect cost of attendance (COA) amounts when calculating and awarding Pell and
FFEL program funds for the 2006-2007 award year. We reviewed the records for 25 randomly
selected students from the universe of 426 students who received Title IV, HEA program funds
during the 2006-2007 award year. Of the 25 students in our sample, 23 received FFEL funds and
16 received Pell funds. For 21 of the 23 students who received FFEL funds, DNI should have
used a COA for the 2006-2007 award year but instead used a COA for the 2005-2006 award
year.

Under Section 472 of the HEA, a student’s COA includes tuition, room and board,
transportation, and other costs related to the student’s education. The COA is used to determine
a student’s need for Title IV funds and to determine maximum loan amounts. For example,
pursuant to 34 C.F.R. § 682.204(k)

       In no case may a Stafford, PLUS, or SLS loan amount exceed the student’s
       estimated cost of attendance for the period of enrollment for which the loan is
       intended, less—
               (1) The student’s estimated financial assistance for that period; and
               (2) The borrower’s expected family contribution for that period, in the
       case of a Stafford loan that is eligible for interest benefits.

DNI used the wrong COA amounts because it did not update its software with its COA budgets
for the 2006-2007 award year. Without the update, the software program used the 2005-2006
COA budget to calculate awards for the 2006-2007 award year. The 2005-2006 COA budget
amount was less than the 2006-2007 COA budget amount.

By using COA amounts that were less than they should have been, DNI awarded subsidized
loans in amounts less than students could have received for the 2006-2007 award year. DNI
recalculated the COA and total need for all FFEL recipients for the 2006-2007 award year and
identified 12 students who were awarded subsidized loans in amounts less than they could have
received. DNI’s recalculation indicated the 12 students were awarded from $359 to $2,220 less
than they could have received had DNI used the current COA amounts.
Final Report
ED-OIG/A06I0012                                                                            Page 6 of 15

Students Not Notified When FFEL Funds Were Credited to Their Accounts

DNI did not provide required notifications of disbursements. Of the 25 students in our sample,
23 received FFEL funds. DNI could not provide evidence that it notified any of these 23
students when it credited FFEL disbursements to their accounts.

Pursuant to 34 C.F.R. § 668.165(a)

                (2) . . . if an institution credits a student’s account at the institution with
       Direct Loan, FFEL, or Federal Perkins Loan Program funds, the institution must
       notify the student, or parent . . . .
                (3) The institution must send the notice . . . in writing no earlier than 30
       days before, and no later than 30 days after, crediting the student’s account at the
       institution.

The President of DNI stated that DNI relied on notices sent by the FFEL lenders, the Texas
Guaranty Student Loan Corporation, and DNI’s award letter.

Without the notification required by 34 C.F.R. § 668.165(a), students or parents do not have the
opportunity to cancel all or a portion of that loan or loan disbursement and have the loan
proceeds returned to the holder of that loan.

Disbursement of Pell or FFEL Funds Before Completion of the Prior Payment Period or
the Calendar Midpoint

For 4 of the 25 students in our sample, DNI disbursed Pell and FFEL funds prior to the date
allowed by regulations. First, for 2 of the 16 students who received Pell funds, DNI made
disbursements 2 days prior to the date the students completed the previous payment period.

Pursuant to 34 C.F.R. § 668.164(f)(2)

       If a student is enrolled in a credit hour educational program that is not offered in
       semester, trimester, or quarter academic terms . . . the earliest an institution may
       disburse title IV, HEA program funds to a student or parent for any payment
       period is the later of—
               (i) Ten days before the first day of classes of the payment period; or
               (ii) The date the student completed the previous payment period for which
       he or she received title IV, HEA program funds, except that this provision does
       not apply to the payment of . . . FFEL program funds under the conditions
       described in . . . 34 CFR 682.604 (c)(6)(ii), (c)(7), and (c)(8) . . . .

Second, for 2 of the 23 students who received FFEL funds, DNI made disbursements 5 to 12
days prior to the calendar midpoint of the loan period. Pursuant to 34 C.F.R. § 682.604(c)(7)(i)

       If a school measures academic progress in an educational program in credit hours
       and either does not use terms or does not use terms that are substantially equal in
       length for a loan period, the school may not deliver a second disbursement until
       the later of—
Final Report
ED-OIG/A06I0012                                                                          Page 7 of 15

               (A) The calendar midpoint between the first and last scheduled days of
       class of the loan period; or
               (B) The date, as determined by the school, that the student has completed
       half of the academic coursework in the loan period.

DNI made the two Pell disbursements because it used Wednesday instead of Friday of the last
week of the payment period as the completion date (the payment periods end on Friday). DNI
made the two FFEL disbursements because it used the date the students completed half of the
academic coursework in the loan period, which was earlier than the calendar midpoint of the loan
period. Even though DNI made four improper disbursements, the students remained in school
long enough to be eligible to receive the funds.

DNI Incorrectly Calculated the Return of Title IV Aid

DNI inaccurately calculated the amount of funds it was to return to Title IV, HEA programs.
First, DNI used a payment period basis for calculating the amount of Title IV, HEA program
funds earned by the student but used a period of enrollment basis when calculating the amount of
unearned Title IV aid due from the school. The two calculations must be performed using the
same time period to determine the amount of Title IV, HEA program funds to return.

Pursuant to 34 C.F.R. § 668.22(e)(5)(ii)

               (A) The treatment of title IV grant or loan funds if a student withdraws
       may be determined on either a payment period basis or a period of enrollment
       basis for a student who attended a non-term based educational program or a
       nonstandard term-based educational program.
               (B) An institution must consistently use either a payment period or period
       of enrollment for all purposes of this section . . . .

Second, in calculating the amount of unearned Title IV aid due from the school, DNI
included non-institutional charges. DNI included all program costs from the enrollment
contract. However, program costs such as those for books, supplies, and the state
certification fee are not institutional charges. DNI included these non-institutional
charges when it calculated the amount it was responsible for returning.

Pursuant to 34 C.F.R. § 668.22(g), non-institutional charges are not part of this
calculation:

                (1) The institution must return . . . [a]n amount equal to the total
       institutional charges incurred by the student for the payment period or period of
       enrollment multiplied by the percentage of title IV grant or loan assistance that
       has not been earned by the student . . . .
                (2) For purposes of this section, “institutional charges” are tuition, fees,
       room and board (if the student contracts with the institution for the room and
       board) and other educationally-related expenses assessed by the institution.

Third, DNI calculated the incorrect percentage of Title IV, HEA program funds earned. DNI
used the incorrect payment period start and/or end dates in calculating the percentage. The
Final Report
ED-OIG/A06I0012                                                                                     Page 8 of 15

payment period dates are used in calculating the percentage of the payment period the student
completed, which is equal to the percentage of Title IV, HEA program funds earned. We
reviewed return of Title IV aid calculations for 10 students from the universe of 107 Title IV,
HEA program funds recipients who withdrew from DNI from July 1, 2006, through June 30,
2007. DNI calculated the incorrect percentage of Title IV aid earned for 6.5 DNI is required to
take attendance by the State of Texas’s Texas Workforce Commission.

Pursuant to 34 C.F.R. § 668.22(e)(2)(i), the percentage of Title IV, HEA program funds that
have been earned by the student is “[e]qual to the percentage of the payment period or period of
enrollment that the student completed (as determined in accordance with paragraph (f) of this
section) as of the student's withdrawal date . . . .”

Of the six inaccurate calculations, two resulted in a total overpayment to lenders of $2,101, three
resulted in a total underpayment to the lenders of $142, and one resulted in no difference.

The President stated that DNI staff calculated the incorrect percentage of Title IV funds earned
because of human error. DNI staff used the incorrect beginning and/or ending pay-period dates.

Recommendations

We recommend that the Acting Chief Operating Officer for Federal Student Aid require DNI to

2.1	    Recalculate the amount of funds to return to Title IV program accounts for all students
        who withdrew, dropped, or terminated from July 1, 2006, through June 30, 2007, and
        return any Title IV, HEA program funds owed to the Department or FFEL program
        lenders, as appropriate;
2.2	    Develop and implement policies and procedures that include checks and balances to
        ensure the COA budgets are updated, disbursements are not made early, and the correct
        payment period dates are used in the return of Title IV aid calculation;
2.3	    Provide training for DNI officials to ensure notifications are provided to students when
        FFEL funds are credited to their accounts and the amount of funds to return to Title IV,
        HEA program accounts is properly calculated; and
2.4	    Return $142 of Title IV, HEA program funds owed to the FFEL Program lenders.

DNI’s Comments

DNI described the policies and procedures it has implemented or proposes to correct the
deficiencies. Those procedures include:

    1.	 Requiring the director of financial aid to certify that COA budgets have been updated;
    2.	 Instituting a practice to mail notices to students 30 days before or after the application of
        a FFEL loan disbursement to their account;
    3.	 Issuing a memorandum to the bursar reminding the bursar of the prior payment period
        and calendar midpoint disbursement requirements; and


5
 Our sample size was not sufficient to project the results of our sample to the remaining 97 Title IV, HEA program
fund recipients who withdrew from DNI from July 1, 2006, through June 30, 2007.
Final Report
ED-OIG/A06I0012                                                                                          Page 9 of 15

    4.	 Having DNI’s financial aid servicer perform return of Title IV aid calculations, having
        DNI officials verify the calculation, and issuing a memorandum to financial aid staff
        explaining the correct approach to the calculation.

OIG Response

We have not reviewed the final versions of the proposed policies and procedures.

DNI’s comments do not address recommendations 2.1, 2.3, and 2.4.




                     OBJECTIVES, SCOPE, AND METHODOLOGY 



The objectives of the audit were to determine if DNI complied with selected provisions of the
HEA and regulations governing (1) the percentage of revenue that can be derived from Title IV,
HEA program funds (90/10 Rule); (2) student eligibility; (3) award calculations and
disbursements; and (4) the return of Title IV aid. Our audit covered the 2006-2007 award year.

To achieve our objectives, we performed the following procedures:

    1.	 Reviewed selected provisions of the HEA, regulations, and Department guidance 

        applicable to the audit objectives.

    2.	 Identified the amount of Title IV, HEA program funds DNI recorded as received on
        behalf of its students during the 2006-2007 award year.
    3.	 Reviewed DNI’s web site, catalog, and organizational charts to gain an understanding of
        DNI’s history and organization.
    4.	 Reviewed DNI’s audited financial statements and Compliance Attestation Examination of
        the Title IV Student Financial Assistance Programs for the fiscal year ended June 30,
        2007.
    5.	 Reviewed written policies and procedures and interviewed DNI officials to gain an
        understanding of DNI’s internal control structure, policies, procedures, and practices
        applicable to its administration of the Title IV, HEA programs.
    6.	 Reviewed the records6 for 25 Title IV, HEA program funds recipients randomly selected
        from 426 Title IV, HEA, program funds recipients identified in DNI’s internal database
        to determine if the 25 students met the general student eligibility requirements for the
        2006-2007 award year.
    7.	 Reviewed the records (academic and financial aid) for the 25 randomly selected Title IV,
        HEA program funds recipients to determine if DNI properly calculated and disbursed
        Title IV, HEA program funds only to students enrolled in eligible programs during the
        2006-2007 award year.



6
  The records included transcripts, application forms, internal student applications for financial assistance, personal
information records, student loan budgets, award letters, verification forms, National Student Loan Data System
printouts, and Institutional Student Information Reports.
Final Report
ED-OIG/A06I0012                                                                                         Page 10 of 15

    8.	 Reviewed the records7 for 10 Title IV, HEA program funds recipients randomly selected
        from a DNI-provided list of 107 students who withdrew from July 1, 2006, through
        June 30, 2007, to determine whether DNI (a) correctly calculated the amount of funds
        that should have been returned to the Title IV, HEA programs; and (b) returned the
        correct amount of Title IV, HEA program funds in a timely manner.
    9.	 Analyzed the composition of the numerator and denominator for DNI’s 90/10 Rule
        calculation. We verified

              	 That the numerator and denominator amounts were supported by a detailed list of
                 transactions;
              	 For a random sample of 10 (totaling $2,749) from a universe of 2,265 (totaling
                 $518,760) non-Title IV, HEA program transactions, that DNI had documentation
                 to support the transaction;
               That private loans were properly categorized as non-Title IV, HEA program
                 funds;
               That the amount of FFEL and Pell funds agreed with the amounts reported in the
                 Postsecondary Education Participants System (PEPS); and
              	 For a judgmental sample of 10 students, who had the largest dollar amount of
                 Title IV, HEA program funds paid to them, from the 198 students in the universe,
                 that DNI did not presume these funds were used to pay the student's tuition, fees,
                 or other institutional charges.

We also relied, in part, on data provided to us by DNI from its computer system. We used the
data to draw our samples to test DNI’s compliance with the percentage of revenue that can be
derived from Title IV, HEA program funds (90/10 Rule), student eligibility, award calculations
and disbursements, and the return of Title IV aid. DNI uses its internal computer system to
record student account transactions, attendance, and grades. DNI also uses an electronic
spreadsheet to track students who withdrew, dropped, or terminated. To assess the reliability of
DNI’s data, we compared the total amount of FFEL and Pell DNI received to the total amount
reported in PEPS. We also compared DNI data to other sources, such as the Free Application for
Federal Student Aid, enrollment forms, and withdrawal forms, that DNI maintained in the
students’ files. Based on these comparisons, we concluded that the data provided by DNI were
sufficiently reliable for the purposes of our audit.

We conducted our fieldwork at DNI’s office in Dallas, Texas, from July through September
2008. We discussed the results of our audit with DNI officials on November 13, 2008.

We conducted this performance audit in accordance with generally accepted government
auditing standards. Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions
based on our audit objectives. We believe that the evidence obtained provides a reasonable basis
for our findings and conclusions based on our audit objectives.




7
 The records included return of Title IV aid calculations, billing histories, attendance records, transcripts, student
class schedules, Change in Student Status forms, and bank records.
Final Report
ED-OIG/A06I0012                                                                      Page 11 of 15




                            ADMINISTRATIVE MATTERS



Statements that managerial practices need improvement, 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 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
                              830 First Street, NE, Room 112E1
                              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

Attachment
Final Report 

ED-OIG/A06I0012                                         Page 12 of 15 





                      ATTACHMENT

                  Dallas Nursing Institute’s Comments
Final Report
ED-OIG/A06I0012                                                                   Page 13 of 15




March 10, 2009

Mr. Gary D. Whitman, Regional Inspector General for Audit
Office of Inspector General
United States Department of Education
500 W. Madison Street
Suite 1414
Chicago, IL 60661

RE: Control Number ED-OIG/A06I0012

Dear Mr. Whitman

I am pleased to present our comments on the following pages to the draft audit report entitled
Dallas Nursing Institute’s Compliance with Selected Provisions of the Higher Education Act of
1965 and Corresponding Regulations. Our response addresses both findings in the audit report
as well as describing our proposed corrective actions.

The report is being delivered electronically to Gary.Whitman@ed.gov using a PDF file. Also, a
Microsoft Word file will be included to meet accessibility requirements of Section 508 of the
Rehabilitation Act of 1973, as amended.

Should you or your staff have any questions, please feel free to contact me.

Sincerely,

Greg Davault, President

Attachment
Final Report
ED-OIG/A06I0012                                                                       Page 14 of 15


                                Dallas Nursing Institute 

             Comments to Draft Audit Report from Office of Inspector General 

                For the Audit Period July 1, 2006 through June 30, 2007 


FINDING NO. 1 – 90/10 Rule Calculation Not Prepared in Accordance with Federal
Regulations

DNI requires students to pay off their institutional charges established in their enrollment
agreement through a combination of student cash payments and their financial aid package,
which includes awarded Title IV aid and any other grant aid and private loans. Title IV aid is not
disbursed to students until their school account is paid off, but then students receive any
remaining Title IV disbursements available on their awards. Since student account balances then
are at zero, the school incorrectly assumed that these Title IV disbursements would not be
considered as institutional payments and instead would be characterized as disbursements of aid
funds to students for their living expenses. The school now understands that all Title IV funds
paid to a student must be presumed to have been applied to any institutional charges not satisfied
by certain exempt categories of aid (e.g., Federal Workforce Investment Act funds, state grants
or loans, Section 529 savings account payments and institutional scholarships awarded with from
qualified funds (from outside source) from special scholarship accounts. To avoid any further
errors in the 90-10 calculation, the institution, in calculating its 90-10 score, will perform a
student by student file review and will first apply all disbursed Title IV aid toward any
institutional charges not satisfied by exempt aid and then determine if there are any remaining
unsatisfied institutional charges to which part or all of cash payments (e.g., payments by students
or family members, civic organization scholarships, etc.) can be applied, before including any
part of cash payments made by students in the denominator of the 90-10 fraction. A
memorandum outlining these 90-10 calculation procedures will be issued by the institution’s
president to the institution’s controller, and we believe this will prevent any further 90-10
calculation errors.


FINDING NO. 2 – Administration of Title IV Programs Needs Improvement

Use of Inaccurate Cost of Attendance Amounts

DNI utilizes a software application to aid in the calculation of the COA budget. Each year, the
updated, annual standardized budgets are inputted into the program for use in financial aid
calculations. For the 2006-07 award year, however, the institution’s financial aid staff
apparently inadvertently failed to make the appropriate update. DNI will be issuing a
memorandum to financial aid staff to remind them that it is very important to make the annual
update of the COA prior to the start of each new award year and the director of financial aid will
be instructed to send a written confirmation to the institution’s president, no later than July 1 of
each year, confirming that the annual COA budget has been updated. We believe these
procedures will ensure that the appropriate COA budget update is implemented each year.
Final Report
ED-OIG/A06I0012                                                                         Page 15 of 15

Students Not Notified When FFEL Funds Were Credited to Their Accounts

It had been DNI’s understanding that notices sent by FFEL lenders and the Texas Guaranty
Student Loan Corp, as well as the student’s award letter, satisfied the requirement for written
notification to students of their FFEL loan disbursements. Now that DNI understands that it
must directly give written notice to its students concerning the application of FFEL loan
proceeds to their accounts, DNI has instituted the practice of mailing notices to students, within
30 days before or after the application of a FFEL loan disbursement to their accounts, to alert
them that they have received or are about to receive a loan disbursement, to inform them of the
amount of the disbursement and the amount they owe in institutional charges, and to apprise
them of their rights concerning cancellation of the loan or acceptance of the disbursement, all as
required by 34 CFR 668.165.

Disbursement of Pell or FFEL Funds Before Completion of the Prior Payment Period or
the Calendar Midpoint

DNI understands the requirement to not make a second Pell or FFEL disbursement prior to the
student’s completion of either the prior payment period of the calendar midpoint of the program,
and DNI has followed this rule with the exception of some errors that were made concerning the
students at issue in this finding. Two of students, whose FFEL disbursements are at issue in this
Finding, completed their first academic year on 04/13/2006 with 24 credits and 30 weeks and
began their second academic year on 04/17/06. Both students completed 38 credits and 39
weeks on 06/16/06. Both received their second loan disbursement in their second academic year,
upon completing 39 weeks and 38 credits. These second disbursements were received on
06/16/06. A review of their attendance records reflects that these students received their second
disbursement on the day they completed 39 weeks and 38 credits in their programs. Both
students were erroneously disbursed based on academic year midpoint instead of calendar
midpoint. DNI also made four early Pell disbursements for three students. DNI made
the disbursements between 2 to 10 days prior to the student completing the previous payment
period. Three of the four Pell Grants disbursements were made early as a result of utilizing a
midweek date instead of an end of the week completion date. DNI has issued a reminder
memorandum to its bursar to remind them of the prior payment period and calendar midpoint
disbursement requirements, and DNI believes that this will prevent further errors.

DNI Incorrectly Calculated the Return of Title IV Aid

DNI miscalculated beginning and ending payment period dates because a manual system was
used resulting in human error. Return of Title IV calculations are now being performed by
DNI’s financial aid servicer. DNI staff now doubles checks calculations and clears up any
discrepancies prior to finalizing the refund calculation. For the students at issue in this Finding,
DNI incorrectly used the entire amount of tuition in calculating the amount of title IV earned by
student, rather than the institutional charges for the payment period in which the student
withdrew. DNI will use a pro-rated amount of institutional charges. DNI has issued a reminder
memorandum to its financial aid staff concerning the correct approach to calculation of the
amount of Title IV aid to be returned for students who dropped, and DNI believes that this
action, along with the assistance of its third part servicer, will prevent further refund calculation
errors.