oversight

Platt College - San Francisco Administration of Title IV Programs.

Published by the Department of Education, Office of Inspector General on 2000-03-30.

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

                   Platt College - San Francisco
                Administration of Title IV Programs




                                FINAL AUDIT REPORT




                     Audit Control Number ED-OIG/A09-90011
                                  February 2000




Our mission is to promote the efficient          U.S. Department of Education
and effective use of taxpayer dollars            Office of Inspector General
in support of American education.                Sacramento, California
                                   NOTICE
Statements that management practices need improvement, as well as other
conclusions and recommendations in this report, represent the opinions of the
Office of Inspector General. Determination of corrective action to be taken will
be made by the appropriate Department of Education officials.

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


                                                                                          Page

Executive Summary …………………………………..….......….…. 1

Audit Results ……………………...………………………….....…... 3

       Finding No. 1 -- Students Enrolled in the Computer Graphic Design
                        Program Received Title IV Funds That Exceeded
                        the Annual Limit for Subsidized Loans ...…............. 3

       Finding No. 2 -- Students Enrolled in Ineligible Programs Received
                        Title IV Funds …….…………………….…….…...... 6

       Finding No. 3 -- Platt College Did Not Meet the Standards of
                        Administrative Capability ...….......................…...…            9

Other Matters …………………………………….….....…...…..... 13

Subsequent Events .......................................................................... 14

Background …………………………………….……...……..….... 15

Purpose, Scope and Methodology ………………………….......… 16

Statement on Management Controls ……………….…..….….… 17

Attachment – Platt College’s Comments on the Report …...…… 18
                                Executive Summary

Platt College - San Francisco (Platt College) did not properly administer the Title IV Student
Financial Assistance programs. We found that:

   • Platt College disbursed Federally subsidized loans that exceeded the maximum annual
       limit. Federal regulations specify that an undergraduate student in the first year of an
       educational program may borrow up to $2,625 in subsidized loans. We found that Platt
       College had improperly concluded that students enrolled in its Computer Graphic Design
       (CGD) program could borrow up to $3,500, the limit for students who are enrolled in the
       second year of an undergraduate program. The CGD program had a course length of one
       academic year. Therefore, CGD students were never in the second year of a program.
       We identified 101 CGD students who received $82,163 of Federal Family Education
       Loan (FFEL) funds in excess of the subsidized annual loan limit. In addition, we
       identified 17 CGD students who received $14,875 of William D. Ford Federal Direct
       Loan (Direct Loan) Program funds in excess of the limit.

   • Platt College disbursed FFEL and Federal Pell Grant funds to students enrolled in
       ineligible educational programs. Platt College created customized programs for students
       by combining selected course modules from its other educational programs. Students
       enrolled in customized programs were not eligible to receive Title IV funds because the
       programs had not been approved by the State or the school’s accrediting agency. We
       identified eight students who were enrolled in the ineligible customized programs who
       received $34,822 in FFEL and $11,215 in Pell Grant funds.

   • Platt College did not meet the standards of administrative capability. Platt College had
       students endorse loan checks for parent borrowers receiving FFEL PLUS loans. Platt
       College made refunds late and did not properly calculate refund amounts. In addition, we
       found that Platt College gave students approved leaves of absence for more than the
       maximum days allowed. We also found that Platt College did not submit a signed
       promissory note for one student who received funds in July and August 1996 under the
       Direct Loan Program.

We recommend that the Chief Operating Officer for Student Financial Assistance (SFA) require
that Platt College cease disbursing Title IV funds that exceed the annual loan limit and
disbursing Title IV funds to students enrolled in educational programs that are not state licensed
or accredited. Also, we recommend that Platt College improve its management controls to
ensure proper endorsement of PLUS loans, payment of refunds and approval of leaves of
absence. In addition, we recommend that Platt College be required to return lenders and the U.S.
Department of Education (Department) the Title IV funds that were improperly disbursed or not
refunded to students.




ED-OIG                   Audit Control No. ED-OIG/A09-90011                               Page 1
In its comments to the draft report, Platt College stated that it discontinued the practice of
awarding Title IV funds in excess of the annual limit applicable to CGD program, and had taken
corrective action to improve its management controls. However, Platt College did not agree with
some of our conclusions or other recommendations contained in our report. Platt College’s
comments are summarized in the report and included as an attachment.

Termination of Platt College’s Title IV Program Participation. In a letter dated
December 6, 1999, SFA notified Platt College that the institution failed to meet the quantitative
and qualitative requirements of financial responsibility specified in Title 34, Code of Federal
Regulations (CFR) 668.171 and 668.174. The SFA determination was based on a review of the
institution’s financial statements for fiscal year 1999. The letter stated that Platt College’s
continued participation in Title IV programs was dependent on the institution complying with
specific requirements outlined in the letter, including posting of an irrevocable letter of credit
(LOC). Rather than comply with the LOC requirement, Platt College proposed a phased
withdrawal of its participation in Title IV programs.

On December 30, 1999, Platt College signed an agreement with SFA that terminated the
institution’s participation in Title IV programs, effective February 1, 2000. Under the
agreement, eligible students enrolled at Platt College, prior to February 1, 2000, may continue to
receive Title IV assistance until completion of their educational programs or, if earlier, the date
students become ineligible for Title IV assistance or June 15, 2000.

The agreement did not discharge liabilities that Platt College may incur as a result of the
Department’s determination on the corrective action recommended in this report. Also, the
agreement did not eliminate the need for our recommended changes in Platt College’s
procedures since the institution may continue to disburse Title IV funds to eligible students up to
June 15, 2000.




ED-OIG                   Audit Control No. ED-OIG/A09-90011                                Page 2
                                      Audit Results


The purpose of our audit was to determine if Platt College (1) met selected institutional and
program eligibility requirements for participation in the Title IV programs, and (2) awarded
Title IV amounts to students within annual loan limits. We found that students enrolled in Platt
College’s Computer Graphic Design program received subsidized loans that exceeded the annual
maximum limit and that Title IV funds were disbursed for students enrolled in ineligible
programs. Also, we found that Platt College used improper or inadequate procedures for loan
disbursements, refunds and leaves of absence. In addition, Platt College had not submitted a
signed promissory note for a student who received funds in July and August 1996 under the
Direct Loan Program. We concluded that Platt College met the minimum non-Title IV revenue
percentage required for a proprietary institution’s continued participation in Title IV Programs.


Finding No. 1 -- Students Enrolled in the Computer Graphic Design Program
                 Received Title IV Funds That Exceeded the Annual Limit for
                 Subsidized Loans


Platt College offers a CGD Program that has a length of 720 clock hours consisting of 36 weeks
of instruction and 36 quarter credit hours. Platt College defines its academic year as equal to
36 quarter credit hours. Therefore, the CGD Program is a one-year program.

Title 34 CFR Section 682.204 and 685.203 limit the combined amount of FFEL and Direct Loan
funds that an undergraduate student may borrow for an academic year. For Federally subsidized
loans, an undergraduate student in the first year of a program of undergraduate education may
borrow up to $2,625. Students who have successfully completed the first year of an
undergraduate program and are in the second year of an undergraduate program may borrow up
to $3,500 in subsidized loans.

Although the CGD Program is a one-year program, we found that Platt College provided
students enrolled in that program with up to $3,500, the limit for students in the second year of a
program. As a result, students enrolled in the CGD Program received subsidized loans that
exceeded the $2,625 annual limit. The school president stated that her understanding was that
the $3,500 limit applied to “second year level” programs rather than the second year of a
program. The president considered the CGD program to be a “second year level” program
because of its enrollment prerequisite. The school catalog specified that students must have
completed Platt College’s Graphic Design Program or demonstrated ability through a placement
exam prior to enrolling in the CGD Program.




ED-OIG                   Audit Control No. ED-OIG/A09-90011                                Page 3
Students enrolled in the CGD Program cannot be considered students in the second year of a
program because the CGD Program is a one-year program. The school catalog stated that the
program had a length of 36 quarter credit hours, or one academic year. The State of California,
Bureau for Private Postsecondary and Vocational Education approved the CGD Program as a
720 hour program, which is equivalent to 36 credit hours. In reports submitted to its accrediting
agency, Platt College stated that the CGD Program was 36 credit hours. Also, in its application
for program approval submitted to the Department, Platt College reported that the CGD Program
was 36 credit hours. In addition, the enrollment agreements signed by students for the CGD
Program clearly stated that they were enrolling in a 36 credit hour program. None of the above
documents contained a reference to the CGD program being a two-year program or the second
year of another Platt College program. Also, we identified CGD students for whom school
records contained no evidence that the student met the required prerequisite of the Graphic
Design Program or a placement exam.

Recommendations

We recommend that the Chief Operating Officer for SFA require that Platt College:

1. Cease disbursing Title IV funds that exceed the FFEL and Direct Loan annual limit for
   students in the first year of an educational program.

2. Return to lenders and the Department the portion of Federally subsidized loans that exceeded
   the limit for an academic year. We identified 101 CGD students who received $82,163 of
   FFEL funds in excess of the subsidized annual loan limit during the period July 1995 through
   February 1999. In addition, we identified 17 CGD students who received $14,875 of Direct
   Loan funds in excess of the annual limit during that period.

Platt College’s Comments

In its response to our draft report, Platt College stated that it discontinued using the second year
loan limit for determining the subsidized loan amount for students enrolled in the CGD Program.
However, Platt College maintained that the OIG’s recommendation to return Title IV funds was
unreasonable and inappropriate.

Platt College stated that the CGD Program was for all intents and purposes the second year of a
two-year program with each of the two years separately approved. Platt College claimed that the
State of California and the accrediting agency would have approved the program and the OIG
would not have questioned the Title IV funds if the institution had simply “packaged” the two
one-year programs as a single program with one certificate and made no other changes.

In its response, Platt College referred to Section 428(b)(1)(A)(ii) of the Higher Education Act of
1965 (HEA) as amended, which is the basis for the regulatory citations presented in our finding.
Platt College stated that the concept presented in the HEA provision was no different than HEA
Section 428(b)(1)(A)(iv). The latter section states that, for determining the applicable loan limit
when the student is enrolled in an eligible program for which the institution requires an associate




ED-OIG                   Audit Control No. ED-OIG/A09-90011                                Page 4
or baccalaureate degree for admissions, the institution shall include, in the number of years, any
prior enrollment for which the student was awarded such a degree. Platt College claimed that, as
structured by the institution, the CGD Program was clearly a second year or advanced level
program since completion of the Graphic Design Program allowed the student to advance to the
next more difficult level (the CGD Program). The institution provided statistics showing that
most students who completed the Graphic Design Program enrolled in the CGD Program.

OIG Response

We did not change our recommendation. The State of California approved the Graphic Design
Program and CGD Program as separate one-year programs. In addition, accreditation documents
that the school sent to its accrediting agency show the programs as separate one-year programs.
Platt College’s claim that the State and accrediting agency would have approved the two
programs packaged as a single program, without change, is simply speculation. To our
knowledge, the institution has not submitted a “packaged” program to either the State or
accrediting agency for their approval.

HEA Section 428(b)(1)(A)(iv) is not applicable to students enrolled in programs offered by Platt
College. This HEA section applies to programs requiring an associate or baccalaureate degree as
an enrollment requirement. Platt College had no such requirement for its programs. Also,
students did not receive an associate or baccalaureate degree upon completion of the Graphic
Design Program. Platt College’s claim that most students completed the Graphic Design
Program prior to enrolling in the CGD Program did not negate the fact that Platt College
represented the programs as separate one-year programs to its students, the State, accrediting
agency and the Department. Students enrolled in a one-year program were subject to the $2,625
limit on subsidized FFEL and Direct Loans.




ED-OIG                   Audit Control No. ED-OIG/A09-90011                               Page 5
Finding No. 2 -- Students Enrolled in Ineligible Programs Received
                 Title IV Funds


Platt College created customized programs for students by combining selected course modules
from its other educational programs. According to the school president, the customized
programs were tailored to meet the needs of individual students. Typically, the programs
consisted of three modules from the Graphic Design Program and three modules from the
Computer Graphic Design Program.

Students enrolled in customized programs were not eligible to receive Title IV funds because the
programs had not been approved by the State or the school’s accrediting agency. The president
of Platt College stated that the customized programs did not require approval because the
programs consisted of parts of two approved educational programs.

Title 34 CFR Section 600.5 defines a proprietary institution of higher education. Subsection
(a)(4) and (6) of that regulation requires that the institution is legally authorized to provide an
educational program beyond secondary education in the State in which the institution is
physically located and that the institution is accredited. The Department considers an
institution’s eligibility for Title IV programs to extend only to those programs that are authorized
or recognized by the applicable state and accrediting agency.

The requirement for state and accrediting agency approval of educational programs is explained
in The Federal Student Financial Aid Handbook 1997-98 (Handbook). On page 3-223 of the
Handbook, the Department informed schools of requirements for determining the eligibility of an
educational program that is not listed on its Eligibility and Certification Approval Report
(ECAR) issued by the Department. The ECAR for Platt College showed the following approved
educational programs: Graphic Design, Computer Graphics and Computer Graphic Design. The
Handbook states that “Before the school may determine these programs to be eligible and
disburse funds to enrolled students, the school must have received both the required state and
accrediting agency approvals.” The requirement is reiterated on page 3-11 of the Handbook:

       “Because a school’s eligibility does not necessarily extend to all its programs, the
       school must ensure that a program is eligible before awarding SFA funds to
       students in that program. The school is ultimately responsible for determining
       that a program is eligible. In addition to determining that the program meets the
       eligible program definition, the school should make certain that the program is
       included under the notice of accreditation from a nationally recognized
       accrediting agency (unless the agency does not require that particular programs be
       accredited). The school should also make certain that it is authorized by the
       appropriate state agency to offer the program (if the state licenses individual
       programs at postsecondary institutions).”




ED-OIG                   Audit Control No. ED-OIG/A09-90011                                Page 6
The State of California requires that individual programs offered at an institution be approved by
the State. The State documents show that Platt College had been approved for three programs:
Graphic Design, Computer Graphic Design and Computer Graphics. California State Private
Postsecondary and Vocational Education Reform Act requires State approval before additional
programs can be offered at a school location. Specifically, Article 9, Section 94915(h) states that
“No institution shall offer a course or program of instruction, training, or study at a campus that
had not offered the course or program at the time the institution applied for approval to operate
that campus unless the council first approves the offering of the course or program after
determining that it satisfies the minimum standards . . . .” Platt College did not have any
documents from the State granting approval for the customized educational programs. A
representative of the California State Bureau for Private Postsecondary and Vocational
Education informed us that the Bureau would consider a customized program (such as a program
comprised of courses from other approved programs) to be different from those programs
already approved by the State. The customized program would require its own State review and
approval.

Platt College is accredited by the Accrediting Commission of Career Schools and Colleges of
Technology (ACCSCT). ACCSCT’s policies and practices state that “Accreditation by
ACCSCT is institutional in nature. In order for a program to be included in the institution's
accreditation, it must be within the Commission's scope of accreditation and properly reported to
and approved by the Commission.” ACCSCT had approved the Graphic Design, Computer
Graphic Design and Computer Graphics programs. A representative of ACCSCT informed us
that a customized program would be considered a new program different from the
ACCSCT-approved programs. The representative stated that Platt College would be required to
submit a letter requesting separate approval for the customized program and documentation of
the State’s approval.

Recommendations

We recommend that the Chief Operating Officer for SFA require that Platt College:

1. Cease disbursing Title IV funds to students enrolled in the ineligible customized programs.

2. Return to lenders the FFEL funds and return to the Department the Pell Grant funds
   disbursed for students enrolled in the ineligible programs. We identified eight students who
   were enrolled in the customized programs that received $34,822 in FFEL and $11,215 in Pell
   Grant funds during the period July 1996 through February 1999.

Platt College’s Comments

Platt College did not agree with our finding and recommendations. In its response to the draft
report, the institution claimed the Handbook section cited in the report conflicted with 34 CFR
Section 600.10(c)(2)(ii). Platt College stated that the regulation cited in the report did not
require that an additional or subsequent program be approved by the State of California and
ACCSCT in order for the program to be considered an eligible program for Title IV funds. The




ED-OIG                   Audit Control No. ED-OIG/A09-90011                                Page 7
institution stated that about five years ago a State official advised the institution that customized
programs were not a problem as long as this practice was done on an individual basis and
infrequently. According to Platt College, a State official confirmed this advice in a May 15, 1999
phone conversation with the institution’s president. Platt College stated that it told ACCSCT
that the institution offered customized programs and believed that action met the accrediting
agency’s needs.

OIG Response

The regulation cited by Platt College allows an institution, under certain circumstances, to add an
educational program without applying to the Department. This regulation does not relieve an
institution from obtaining required state and accrediting agency approvals for the program. As
mentioned in our report, both the State of California and ACCSCT required the institution to
submit requests for approval of new programs.

Platt College’s claim that a state official informed the institution that the State of California
would not require approval of the customized programs that are offered infrequently is contrary
to information obtained during our review and the State law cited in our report. Platt College
provided no documentation to support its claim.




ED-OIG                   Audit Control No. ED-OIG/A09-90011                                 Page 8
Finding No. 3 -- Platt College Did Not Meet the Standards of
                 Administrative Capability


Title 34 CFR Section 668.16 states that “…to continue to participate in any Title IV HEA
program, an institution shall demonstrate to the Secretary that the institution is capable of
adequately administering that program….” The regulation lists the standards used by the
Department to assess administrative capability. In our opinion, the following deficiencies, taken
in conjunction with the previous two findings, show that Platt College lacked administrative
capability.

   • Platt College permitted students to endorse loan checks for PLUS loans made payable to
       the student’s parent. Under the FFEL program, parents may obtain Federally guaranteed
       loans (called PLUS loans) for use in meeting their child’s cost of education. The
       disbursement checks are made payable to the parent. Title 34 CFR Section 682.207,
       specifically states that a check made payable to the borrower “… requires the personal
       endorsement or other written certification of the borrower….” The school president
       confirmed that students routinely endorsed PLUS checks by signing the parent’s name.
       We identified nine PLUS loans with disbursements totaling $39,492 that were guaranteed
       during the period July 1996 through June 1998.

   • Platt College made refunds late and did not properly calculate refund amounts. Platt
       College’s Certified Public Accountant (CPA) disclosed in an SFA audit report issued
       August 28, 1998, that the institution had not made timely refunds. Our review found that,
       after receipt of the CPA’s audit report, Platt College continued to make refunds late.
       During the period July 1998 through February 1999, 16 students had withdrawn from the
       school for whom refunds were payable to the lender. For seven of the 16 students, the
       refunds were paid late. The refunds were made from 12 to 98 days late. Title 34 CFR
       Section 668.22(j) specifies the time frames for timely payment of refunds. For those
       refunds where we could determine a reason for the late payment, we found that
       withdrawal dates noted in Platt College records were incorrect or the students did not
       return from leaves of absence that exceeded the 60-day maximum. We also found that,
       for four of the 16 students, $1,954 in refunds were underpaid to lenders because Platt
       College did not use the correct last day of attendance when calculating the refund
       amount.

       In its report, the CPA stated that a cause for late refunds was that one person prepared the
       weekly change of status reports that identified students who had withdrawn from their
       education program. That same individual issued the corresponding refund checks. These
       procedures were not reviewed by another person. The CPA recommended that
       “Management should establish a cross-checking system by delegating duties to an
       additional employee who will monitor the refund policy and the timely issuance of refund
       checks.” The school president is the sole person referred to in the CPA’s report. The
       president has not taken action to implement the CPA’s recommendation.



ED-OIG                   Audit Control No. ED-OIG/A09-90011                               Page 9
   • Platt College gave students approved leaves of absence (LOAs) for more than the
       maximum days allowed. Title 34 CFR Section 668.22(j)(2)(i) provides that an approved
       LOA cannot exceed 60 days in any 12-month period. For the 16 students, we identified
       four who were given approved LOAs. We found that three of the four LOAs exceeded
       the 60 day maximum. The three LOAs ranged from 67 to 123 days. Also, Platt College
       did not require students to submit a written request for the LOA, which is contrary to
       Title 34 CFR Section 668.22(j)(2)(ii).

   • Platt College has not submitted a signed promissory note for a student who received
       funds under the Direct Loan Program in July and August 1996. Title 34 CFR Section
       685.301(c)(2) specifies that “A school that originates a loan shall provide to the Secretary
       [Department] an executed, legally enforceable promissory note as proof of the borrower's
       indebtedness.” Section 685.301(d) (1) states “A school that originates a loan must submit
       the promissory note…to the Secretary no later than 30 days following the date of
       disbursement.” The school files did not have a signed promissory note for the loan. The
       school president was aware of the lack of a promissory note, but had taken no action to
       resolve the matter with the Department. Since Platt College is unable to provide the note,
       it must return the $7,200 disbursed for this loan to the Direct Loan Program.

Platt College needs to improve its management controls to ensure that the Title IV programs are
administered in accordance with the HEA and Federal regulations.

Recommendations

We recommend that the Chief Operating Officer for SFA require that Platt College:

1. Implement procedures requiring parent borrowers to personally endorse PLUS loan checks.

2. Implement procedures to ensure that refunds are calculated in accordance with Federal
   regulations and that refunds are paid within the specified time frame.

3. Ensure that LOAs are limited to the maximum period allowed by Federal regulations and that
   students submit written requests for LOAs.

4. Recalculate the refund amounts for students who withdrew or dropped from the institution
   since July 1998 and refund any additional amounts due to the appropriate lender. We
   identified $1,954 of underpaid refunds for four students who withdrew/dropped during the
   period July 1998 through February 1999.

5. Identify and repay to lenders the PLUS disbursements for which parent borrowers did not
   personally endorse the checks. We identified nine PLUS loans with disbursements totaling
   $39,492 that were guaranteed during the period July 1996 through June 1998.

6. Repay to the Department the $7,200 of Direct Loan funds that was disbursed without a
   signed promissory note.




ED-OIG                   Audit Control No. ED-OIG/A09-90011                              Page 10
Platt College’s Comments

Platt College partially agreed with our findings and recommendations, but took exception to
statements in the report regarding the extent of the identified problems.

PLUS Check Endorsements. The school president stated that students might have endorsed
checks for their parents a couple of times, but at no time, did she state or confirm that students
routinely endorsed PLUS checks. The school president stated that to assume students endorsed
all PLUS loan disbursements and to require Platt College to repay the disbursements was neither
fair nor reasonable.

Refunds. The school president agreed that refunds were paid late for the seven students
mentioned in the report, but did not agree with the number of days that the payment was late for
two of the students. The school president confirmed that refunds were underpaid for the four
students mentioned in the report.

According to the school president, Platt College implemented a corrective action plan in late
August 1998, in response to the CPA’s report. The school president stated that action taken
would ensure that refunds were paid on time. In addition, Platt College stated that it began
recording attendance on individual student sheets in June 1999. The school president believes
that this change will better enable the school to track student attendance and determine the total
hours the students attended.

Leaves of Absence. The school president believed that a leave of absence could be allowed for
more than 60 days if the next available class start date was after the 60-day period. The school
president stated that, in the future, Platt College would comply with the Federal regulations.

Promissory Note. The school president agreed that the Platt College made a mistake in
disbursing the Federal Direct Loan proceeds to a student that had not yet signed a promissory
note. She stated that the Platt College returned the loan funds to the Federal Direct Loan
Program.

OIG Response

PLUS Check Endorsements. The school president’s statements in the response to our draft
report were not consistent with information obtained during our review or disclosed by an
EdFund1 review. During our February 8, 1999 walk-through of Platt College procedures, the
school president stated that in nine of ten cases, the students signed the check for their parents.
The EdFund review, conducted in June 1999, also found that the school president permitted
students to endorse PLUS loan checks. The EdFund review compared check endorsement
signatures with parent signatures on promissory notes. EdFund concluded that differences
appeared to exist in the signatures for several of the documents. In one instance, the student
signed his own name instead of the parent’s name.




1
    EdFund is a contractor for the California Student Aid Commission (a state guaranty agency).


ED-OIG                     Audit Control No. ED-OIG/A09-90011                            Page 11
Refunds. Our review identified refunds that were paid late after July 31, 1998, which indicates
that the corrective action taken was not adequate. In addition, the EdFund report concluded that
Platt College had not implemented the corrective action described in its response to the CPA
report and, as a result, Platt College continued to make refunds late. EdFund also reported that
Platt College had not properly calculated refund amounts. The EdFund report stated that the
system in place for identifying students who withdraw was not adequate and that no
cross-checking system existed. While Platt College’s decision to use individual student
attendance sheets may improve its procedures, the institution needs to take additional steps to
ensure that refunds are correctly calculated and paid timely.




ED-OIG                  Audit Control No. ED-OIG/A09-90011                             Page 12
                                     Other Matters


Supply Charges Used in Refund Calculations. While reviewing refund recalculations, we noted
that Platt College did not use a consistent method to determine the amount of supply expense to
charge to students. In the recalculations, the amount charged was determined by multiplying the
budgeted supply costs by the student’s percentage of attendance. For the 20 refunds reviewed,
we found that the supply charges did not correspond to the student’s percentage of attendance in
nine refund calculations. In eight of the nine calculations, the student was charged more than the
corresponding amount. For the other calculation, the student was charged less than the
corresponding amount.




ED-OIG                   Audit Control No. ED-OIG/A09-90011                             Page 13
                                 Subsequent Events

Termination of Platt College’s Title IV Program Participation. In a letter dated
December 6, 1999, SFA notified Platt College that the institution failed to meet the quantitative
and qualitative requirements of financial responsibility specified in Title 34 CFR Section
668.171 and 668.174. The SFA determination was based on a review of the institution’s
financial statements for fiscal year 1999. The letter stated that Platt College’s continued
participation in Title IV programs was dependent on the institution complying with specific
requirements outlined in the letter, including posting of an irrevocable LOC. Rather than comply
with the LOC requirement, Platt College proposed a phased withdrawal of its participation in
Title IV programs.

On January 7, 2000, Platt College signed an agreement with SFA that terminated the institution’s
participation in Title IV programs, effective February 1, 2000. Under the agreement, eligible
students enrolled at Platt College, prior to February 1, 2000, may continue to receive Title IV
assistance until completion of their educational programs or, if earlier, the date students become
ineligible for Title IV assistance or June 15, 2000.

EdFund Review. On October 20, 1999, EdFund issued a report on the results of a program
review performed at Platt College in June 1999. The objective of the program review was to
determine the institution’s compliance with the Federal and state laws, regulations, policies and
procedures pertaining to the administration of the FFEL Stafford and PLUS loan programs. The
period covered by the review included the 1997-98 and 1998-99 award years. The report
identified several problems with Platt College’s administration of the loan programs, including
the findings disclosed in our report.




ED-OIG                   Audit Control No. ED-OIG/A09-90011                             Page 14
                                       Background


Platt College is a proprietary institution located in San Francisco, California. Platt College
opened in 1988 as a part of the Platt College based in San Diego, California. Platt College –
San Francisco became a separately owned institution in 1991. The institution has a single
campus that offers diplomas in Graphic Design, Computer Graphics and Computer Graphic
Design. The school offers Title IV Student Financial Assistance to students enrolled in the
Graphic Design and Computer Graphic Design Programs. Platt College is accredited by the
Accrediting Commission of Career Schools and Colleges of Technology.

Currently, Platt College participates in the FFEL and Pell Grant Programs. The institution is also
authorized to participate in the Direct Loan Program but has not received funds under that
program since March 1997. The following table summarizes the Title IV funds that Platt
College received during the fiscal years ended June 30, 1996, 1997 and 1998.

                         Title IV Funds Received by Platt College
                                                  Fiscal Year Ended
           Title IV Program          June 30, 1996 June 30, 1997 June 30, 1998
           FFELs                         $332,200         $387,400   $661,800
           Direct Loans                  $175,600          $68,400          $0
           Pell Grants                     $32,400         $46,100     $69,000
             Total                       $540,200         $501,900   $730,800




ED-OIG                   Audit Control No. ED-OIG/A09-90011                              Page 15
                      Purpose, Scope and Methodology


The purpose of our audit was to determine if Platt College (1) met selected institutional and
program eligibility requirements for participation in Title IV programs and (2) awarded Title IV
amounts to students within annual loan limits. Our survey work included determining whether
the institution met the minimum non-Title IV revenue percentage required for proprietary
institutions and adhered to annual loan limits on FFEL and Direct Loans. After completion of
our survey, we expanded our review to include state and accrediting agencies’ approval of
educational programs and Platt College’s processing of Title IV loan disbursements and Title IV
refunds.

To accomplish our objectives, we obtained information about the institution from Platt College’s
corporate financial statements and most recent Student Financial Assistance audit reports
prepared by its CPA firms. We obtained background information from the California State
Bureau for Private Postsecondary and Vocational Education and the Accrediting Commission of
Career Schools and Colleges of Technology. We also obtained background information from the
Department of Education’s Direct Loan Account Management Office and Institution
Participation and Oversight Service.

We analyzed data extracted from Platt College’s computerized financial records. We assessed
the reliability of extracted data that was used as a basis for our audit conclusions by confirming
the data with other sources, such as bank statements and documents in student files. We used
data extracted from the Department’s National Student Loan Data System (NSLDS) and reports
generated from the Department’s Postsecondary Education Participants System. We reviewed
school policies and procedures and student records. We also conducted interviews of Platt
College officials.

Our audit covered the institution’s fiscal years ended June 30, 1997 and 1998 and the eight-
month period July 1, 1998 through February 1999. We extended the period used to quantify the
excess subsidized loan amounts to include the period July 1995 through June 1996 since
information needed to determine the excess amounts was readily available from NSLDS.

We performed fieldwork at Platt College’s office and conducted analysis at our offices in
San Francisco and Long Beach from February 1999 through May 1999. Our audit was
performed in accordance with generally accepted government auditing standards appropriate to
the scope of the review described above.




ED-OIG                   Audit Control No. ED-OIG/A09-90011                             Page 16
                    Statement on Management Controls


As part of the review, we gained an understanding of Platt College's management control
structure, and its policies, procedures, and practices applicable to our objectives. We assessed
the level of control risk to determine the nature, extent, and timing of our substantive tests. For
this report, we assessed management controls related to:

   •   Calculation of percentage of revenues from non-Title IV sources
   •   Processing of loan applications and disbursements
   •   Licensing and accreditation of educational programs
   •   Refund calculation and payment
   •   Leaves of absence

Because of inherent limitations, a study and evaluation made for the limited purposes described
above would not necessarily disclose all material weaknesses in the control structure. However,
our assessment disclosed material weaknesses in the procedures used to process loan
disbursements, licensing and accreditation of educational programs, calculation and timely
payment of refunds, and approval of leaves of absence. These weaknesses are discussed in the
Audit Results section of this report.




ED-OIG                   Audit Control No. ED-OIG/A09-90011                              Page 17
                                    Attachment


                               Platt College’s
                            Comments to the Report




                                       OIG Note

 This attachment contains only those portions of Platt College comments applicable to
 statements, conclusions and recommendations presented in the final report. Upon request,
 our office will provide a full copy of Platt College’s comments with its attachments.




ED-OIG                Audit Control No. ED-OIG/A09-90011                          Page 18
August 30, 1999



Mss. Gloria Pilotti
Regional Inspector General For Audit
Region IX
U.S. Department of Education
801 1 Street, Room 219
Sacramento, CA 95814

               RE: ED Audit Control No. A0990011 - Draft Report

Dear Ms. Pilotti:

Platt College is pleased to submit the following response to the above referenced draft
audit report. The draft audit reports takes the position that students enrolled in the
Computer Graphic Design Program received Title IV funds in excess of the annual loan
limit to students (Finding No. 1) and that a few students were enrolled in ineligible
programs and inappropriately received Title IV funds (Finding No. 2) and Administrative
Procedures for processing loan disbursements, refunds and leaves of absence were
improper or inadequate (Finding No. 3). Platt College's response to the above men-
tioned Findings are as follows:

Finding No. 1: Students enrolled in the Computer Graphic Design Program re-
ceived Title IV funds that exceeded the annual limit for subsidized loans.

Platt College believes that students enrolled in the Computer Graphic Design Program
who had completed the Graphic Design Program, or met the required prerequisite,
were properly treated as second year students who could receive higher annual loan
amounts.

The draft audit report takes the position that students enrolled in the Computer Graphic
Design Program ("CGD") could not receive Federal Family Education Loans or Direct
Loans in excess of the $2,625 annual limit. Draft Audit Report at page 2. The Office of
Inspector General ("OIG") asserts that Platt College inappropriately permitted students
enrolled in the CGD Program to receive loans up to $3,500, the limit for students in the
second year of a program. The OIG's interpretation relies on the fact that the
Ms. Gloria Pilotti
Page 2
August 30, 1999



Computer Graphic Design and the Graphic Design Programs (both of which have a
length of 720 clock hours consisting of 36 weeks of instruction and 36 quarter credit
hours) are each separately approved programs (by the State of California and the
School's Accrediting Agency) that lead to certificates of completion.

The fallacy with the OIG interpretation is that the CGD Program is for all intents and
purposes the second year of a two year program with each of the two years separately
approved. This is clearly illustrated by the fact that the College's second year program,
CGD, requires completion of the Graphic Design ("GD") Program as a prerequisite to
enrollment unless the student can demonstrate ability through a placement exam. See
1999 Platt College Catalog at page 9 (Exhibit A) and Draft Audit Report at 2-3. Had
Platt College simply "packaged" the two one year programs as a single program with
one certificate and made no other changes, there would not be any question but that
this "program" would have been approved by the State and the accrediting agency and
that the OIG would not be questioning loans in excess of $2,625 for the second year of
the program. The hyper-technical argument being made by the OIG is unreasonable
and an elevation of form over substance.

The Higher Education Act of 1965, as amended ("HEA”), provides that students who
have successfully completed the first academic year of a progam but have not com-
pleted the remainer of a program are eligible to receive up to $3,500 for the second
academic year. Section 428(b)(I)(A)(ii) of the HEA; 1998199 SFAH at page 10-19.
Similarly, students who have received an associate degree or baccalaureate degree
and are enrolled in an eligible program for which the institution requires such degree
for admissions are eligible to receive loans at the higher annual loan limit levels. Sec-
tion 428(b)(1)(A)(iv) of the HEA; 1998199 SFAH at page 10-19. Platt's approach is no
different but for the fact that there is no requirement that the student possess a degree.

The concept in both statutory provisions cited above is really no different. That is, to
permit students to receive higher annual loan limits for participation in programs that
are either longer that one academic year or that require a certain mastery level
before enrollment such as the degree prerequisite.

The CGD Program is clearly a second year or advanced level program as structured by
the College. Completion of the first year (the GD Program level) allows the student to
advance to the next more difficult level. The separate approvals were obtained to
simply permit students the opportunity to obtain a certificate after only one year if they
choose not to pursue the more advanced program. Notwithstanding, the majority of the
students approach the two programs as one with most students who complete the GD
Ms. Gloria Pilotti
Page 3
August 30, 1999

level going on to immediately enroll in the CGD Program.

Of the students who enrolled in GD in 1988, about 53% have enrolled in the CGD
Program and this percentage is expected to increase as some of the 1998 starts finish.
Of those who started in 1999, about 70% have indicated that they intend to enroll or
have enrolled in the CGD Program. For the period from 1990 to present, about 60% of
the students who completed the first year level subsequently enrolled in the second
year program.

Platt's practice as identified by the OIG was the result of a legitimate and honest inter-
pretation of the law that was made in good faith. The amounts at issue were not
awarded as a result of fraud or any misconduct and Platt has discontinued the practice.
Platt submits that it is unreasonable and inappropriate for the OIG to recommend that
the Institution return the approximate $97,000 at issue, especially in light of the hyper-
technical nature of the finding and the ambiguity in the rules as identified and inter-
preted by the College.

Finding No. 2: Students Enrolled in Ineligible Programs Received Title IV Funds

Platt College believes the students enrolled in the customized programs were eligible to
receive Title IV funds.

The draft audit report states that the students enrolled in the customized programs were
eligible to receive Title IV funds because the programs were not approved by the State
of the College's accrediting agency. Draft Audit Report at page 4. The OIG states that
the Department "considers an institution's eligibility for Title IV programs to extend only
to those programs that are authorized or recognized by the applicable state and ac-
crediting agency." Id.

The OIG cites the Student Financial Aid Handbook for support on this point. The
Hand-book is a sub-regulatory document that provides guidance, however, it is not
law. In any conflict between the Handbook and a regulation, the regulation will govern
since the regulation is law.

According to the Department's regulations, an eligible insitution that adds an educa-
tional program after it has been designated as an eligible insitution does not have to
apply to the Secretary to have that additional program designated as an eligible pro-
gram if the additional program prepares students for gainful employment in the same
Ms. Gloria Pilotti
Page 4
August 30, 1999

or related recognized occupation and is at least 8 semester, 12 quarter or 600 clock
hours in length. 34 CRF 600. 10(c)(2)(ii)(1998).

Clearly, the regulation does not require that the additional or subsequent program be
approved by the state and accrediting agency in order for the program to be considered
an eligible Title IV program. All three of Platt's approved programs prepare students for
employment in the same occupational code of 50.0402, graphic design, commercial art
and illustration. See ECAR attached as Exhibit B. The customized programs met the
minimum length requirement cited above and pulled modules from these approved
programs. The programs were designed to prepare students for gainful employment in
the same occupational code as the three approved programs.

For example, the customized program, typically, pulled the first three modules from the
Graphic Design Program (Typography, Production Art and Image Construction) and the
three modules in the Computer Graphics Program (Photoshop, Illustrator and
QuarkXpress). This program consisted of 36 weeks and 36 quarter credit hours, an
academic year. Completion of this program led students to similar occupations as our
other approved programs.

Based on regulatory criteria and the facts as applied to the criteria, Platt College's
customized programs are not only eligible programs but are exactly the type of sitution
that the regulation is intended to cover. The students who received Title IV funds who
enrolled in the customized programs were entitled to receive Title IV funds.

Finally, I would also note that I proceeded with the creation and offering of these pro-
grams, of which there were very few, only after receiving assurances from State officials
that they did not require any separate state approval. Approximately five years ago, I
spoke to Mr. Ken Miller, the then Executive Director of the Council for Private
Postsecondary and Vocational Education requesting permission to customize programs
for a few students with special needs and desires, creating these few programs from
already approved programs. Mr. Miller assured me that this was not a problem as long
as this practice is done on an individual basis and infrequently. On May 15, 1999, 1
called Patty Wohl at the Bureau for Private Postsecondary and Vocational Education
inquiring as to whether there was a change in this policy. Ms. Wohl assured me that
customizing programs, as long is it is done infrequently and from already approved
curriculum, is not a problem. She did say that if I planned to customize "a lot", I should
submit a new program approval application. I told Ms. Wohl that I had no intention of
customizing a lot of programs at this time and that if I changed my mind, I would submit
the appropriate paperwork.
Ms. Gloria Pilotti
Page 5
August 30, 1999

In addition, and with respect to the accrediting agency, Platt College told the agency
that it offered customized programs. Platt believed that this satisfied the agency's
needs and further believed that if the agency had additional questions, it would have
made inquiries.

For all these reasons, Platt College respectfully submits that it acted in accordance
with the law and is not liable for repayment of the Title IV funds.

Finding No. 3: Administrative Procedures for Processing Loan Disbursements,
Refunds and Leaves of Absence Were Improper or Inadequate.

Platt College permitted students to endorse checks for PLUS loans.

The Audit Report (page 6) states, "The school owner confirmed that students routinely
endorse PLUS checks by signing the parents name." At no time did 1, the school
owner, state or confirm that students routinely endorse PLUS checks by signing the
parents name. I said that knew it had happened maybe a couple of times. It has not
been a practice of this institution to have students sign the PLUS loan disbursement
checks. By no means is it reasonable or fair to assume that all nine identified PLUS
loans guaranteed during the July 1996 through June 1998 were endorsed by students,
nor is it fair or reasonable for the College to repay all PLUS loan disbursements for the
period July 1996 to June 1998. Platt College is ensuring that all PLUS loan disburse-
ments are taken to the parents for signatures, is as our practice.

Platt College made refunds late and did not properly calculate refund amounts. The
draft audit report states, "Our review found that, after receipt of the CPA's audit report,
Platt College continued to make refunds late. During the period July 1998 through
February 1999, 16 students had withdrawn from the school and for whom refunds were
payable to the lender. For seven of the 16 students, the refunds were paid from 12 to
103 days late." [See OIG Note 1]

The following is a response on the seven students OIG states that refunds were paid
late. Please be aware that the 96-97 SFA CPA's Audit was completed in late Au-
gust, 1998. It was following this audit that the corrective action plan was put into
place.

OIG Note 1: The range for the days late was revised in the final report. The actual
range was from 12 to 98 days late.
Ms. Gloria Pilotti
Page 6
August 30, 1999

Student # 1:            student was given a leave of absence beginning 6/26/
98 to return on 9/21/98. On 9/18/98, student contacted me and told me she would not
be returning to school. Student was withdrawn on 9/18/98. Refund was made on 10/
15/98. 1 was of the understanding that students could take a 60 day leave of absence,
with the exception of the availability of the next start date of classes. Shannon wanted
to return to the next available evening classes, which were to start on 9/21/98. (I recall
a few years back getting some guidance on this subject matter.)

Because OIG states that no leave of absence can be greater than 60 days, the with-
drawal date should've been 8/26/98, and the refund due on 9/25/98. Technically, this
made the refund late by 20 days, not the 52 OIG stated. However, because of my
understanding, I did not believe the refund was late. Also, this entire situation began
prior to the end of the 96-97 SFA CPA's audit and OIG telling me no leave of absence
could exceed 60 calendar days. [See OIG Note 2]

Student # 2:      I agree that this student's refund was paid late, but only
by 78 days, not the 103 OIG states. I simply forgot to do it. The refund was made
6/16/98 and this student's late refund was found during the 96-97 SFA CPA audit.
[See OIG Note 2]

Student # 3:         this student took a leave of absence to begin 5/4/98, to return
7/13/98 (again, a new class start date). I withdrew her on 7/31/98 (which should've
been 7/13/98 - I think I just accidently transposed the 31 and 13), the refund was made
on 8/13/98. The correct withdrawal date should've been 7/13/98, making the refund
due 8/12/98. Technically, the refund was late by 1 day, not the 12 days OIG states.
Based on the mistake in the withdrawal date, the refund was 1 day late, however, I
didn't catch that mistake earlier. Also, this situation happened prior to the 96-97 SFA
CPA audit being completed and the corrective action plan implemented.

Student # 4:             student took a leave of absence to begin 8/22/98 and to
return on 10/11/98 (new class start date). She didn't return from the leave of absence.
However, for some reason, I didn't withdraw her until 10/16/98. 1 should've had her
withdraw date as 10/1/98 (15 days incorrect) with a refund due date of 10/31/98. Her
refund was paid on 11/12/98, which made her refund late 12 days, not the 18 days OIG
states. I cannot think of the reason why I had her withdraw date incorrect, but thinking
at the time that the withdraw date was correct, I thought I had made the refund on time.

OIG Note 2: The refunds for Student #1 and #2 were actually paid 55 and 98 days
late, respectively.
Ms. Gloria Pilotti
Page 7
August 30, 1999

Student # 5:        Student took a leave of absence from 3/6/98 to return 7/13/98.
Student had extensive medical problems, so I thought I was doing the best thing for the
student. Student was unable to return from his leave of absence and I withdrew him on
7/15/98. Refund was paid on 8/13/98. This made the refund 1 day late because I
should've had his withdrawal date as 7/13/98.

Because OIG states that the leave of absence should've been no more than 60 days
and the student should've been withdrawn on 5/6/98, it made the refund very late. This
situation happend prior to OIG telling me no leave of absence could exceed 60 days.

Student # 6:      student withdrew 4/15/98. 1 had the student's withdraw date as
4/15/98. However, I just plain forgot to do the refund until 8/13/98 and admit the refund
was late and this student's late refund was found during the 96-97 SFA CPA audit.
Once discovered, the refund was immediately made.

Student # 7:     student was granted a leave of absence on 8/20/98 to return to
classes on 10/9/98. Student contacted me on 10/9/98 and told me his medical condi-
tion was no better and would not be able to return to classes. Student was withdrawn
on 10/9/98. Refund was paid on 11/4/98. The refund was not late.

In summary, based on my understanding of the leave of absence policy, I didn't think I
was violating any regulation by allowing students extra leave of absence time for re-
turning on a new class start date. I understand now, that no leave of absence can
exceed 60 calendar days and have not allowed anything other than that since the OIG
audit. 3 of the 7 students OIG reports as having late refunds were due to my apparent
misunderstanding of the leave of absence regulation. One student's refund was late
due to my error in calculating the correct withdrawal date. One student's refund was
not late at all. And finally, 2 students late refunds were discovered in the 96-97 SFA
CPA audit. [See OIG Note 3]

Since the end of August, 1998 when the 96-97 SFA CPA audit was completed and a
new corrective action plan was implemented, I do not believe that any student with-
drawing after that time has resulted in a late refund. In addition, attendance, now on
easily followed individual sheets, is being cross-checked daily by the receptionist
and myself.

OIG Note 3: On October 25, 1999, we met with the president of Platt College to
review the institution’s calculation of the number of days that refunds were paid late.
For Student #2, #3, #5, #6, and #7, the president agreed with our determination of
the number of days that refunds were paid late. The president did not agree with our
determinations for Student #1 and #4.
Ms. Gloria Pilotti
Page 8
August 30, 1999

OIG states (page 6 audit report), "Platt College followed the California State law that
requires refunds to be calculated on a pro rata basis using student attendance. A total
of $2,591 was underpaid to lenders for five students". [See OIG Note 4]

My response on these 5 students is a follows:

Student # 8:            refund paid on 11/12/98 was $3450.14. In counting the
days he attended (in the attendance book) again, I calculate the student
attended 102 days (orientation days not included) @ 4 hours per day to equal
408 completed clock hours. The original refund calculation form reflects that the
student only com-pleted 376 hours of a 720 clock hour course. This resulted in a
refund overpayment of $293.60.

Student # 9:               original withdrawal calculation reflects completed course
hours of 492. In recounting attendance days, I realized I mistakenly counted some
orientation days that I should not have, resulting in a total of 480 course hours
com-pleted. The original refund made was $2538.53. The correct refund amount is
$2697.87, resulting in an additional $159.34 due. This additional refund was paid
on 8/30/99.

Student # 10:          in recounting attended hours, I see that I counted incorrectly.
The original withdrawal calculation form indicated that the student completed 95 hours
of the program. The correct hours completed is 65. (1 must have mistakenly counted a
whole attendance page twice.) The original refund paid was $212.40, the correct
amount is $579.40, resulting in an additional refund due of $367.00. This additional
refund was paid on 8/30/99.

Student # 6:               in recounting attended hours, I see that I counted incor-
rectly. The student actually attended 348 hours of the 720 hour course. In the original
withdraw calculation, I calculated only 316 hours completed. However, during the
course of the calculation, I multiplied incorrectly. The correct amount of the total refund
due is $952.60, not the $837.88 paid. The results in an additional refund due of
$114.72, which was paid on 8/30/99.

OIG Note 4: This sentence was revised in the final report as follows: “A total of $1,954
was underpaid to lenders for the four students”.
Ms. Gloria Pilotti
Page 9
August 30, 1999

Student # 7:       in recounting the students attendance, I accidently counted
one orientation day, resulting in the correct course completed hours at 595, not 600. In
recalculating his withdrawl calculation, the correct total refund due is $721.39, not the
$648.44 already paid. This resulted in an additional $72.95 refund due. This additional
refund was paid 8/30/99.

In summary, I can see that I need to take more care and caution in counting attendance
days that results in the total hours a student attended. To assist in this, we have gone
to an individual attendance sheet for each student, rather than a master attendance
book showing pages and pages of all students, which easily results in miscounting.
We actually implemented this in June, 1999.

Concerning the 5 students OIG states that a total of $2,591 was underpaid, I have
found the following:
Student                         refund         refund       underpaid
                                due            paid         (overpaid)
Student #8                      3156.14        3450.14      (293.60)
Student #9                      2697.87        2538.53      159.34
Student #10                     579.40         212.40       367.00
Student #6                      952.60         837.88       114.72
Student #7                      721.39         648.44       72.95

Totals                            8107.40       7687.39       420.41
Exhibit C are the revised refund calculation forms, with proof of additional refunds
made. [See OIG Note 5]

OIG States (page 7 audit report), "Platt College gave student approved leaves of
absence (LOAs) for more than the maximum days allowed."

As previously stated in my response, I believed that allowing a leave of absence for
more than 60 days was proper if the next available class start date was later. In one
case, I allowed the student a lengthy leave of absence due to mitigating circumstances
and thought I was doing what was best for the student. As a result of the OIG audit, I
fully understand that no leave of absence can exceed 60 calendar days and the school
will ensure that this regulation is adhered to.

OIG Note 5: During the October 25, 1999 meeting, we also reviewed the institution’s
recalculations of refund amounts. We agreed with the institution’s determination of
the additional refund amounts due for Student #9, #10, and #6 and that the institution
had overpaid the refund for Student #8. For Student #7, the refund should have
been $1,961.54 and the additional amount due was $1,313.10.
Ms. Gloria Pilotti
Page 10
August 30, 1999

OIG states (audit report page 7), "Platt College has not submitted a signed
promissory note for a student who received funds under the Direct Loan Program in
July and Au-gust 1996."

The student in question is Student #11, and absolutely, the school made a mistake
in disbursing the Federal Direct Loan proceeds to this student when we overlooked
his not signing the promissory note. The funds have now been returned to the
Department of Education, Federal Direct Loan Program. I do not believe this type of
mistake has ever been made before, and the school will make sure this does not
happen again. Exhibit D is proof of return of funds.


The response from this point through the first paragraph of page 13 related to
a matter that was not included in the final report.
Ms. Gloria Pilotti
Page 13
August 30, 1999

Regarding the overall draft audit report and its findings, I want to stress that, we at Platt
College, believe we generally do a good job in administering the Title IV funds to
students. We understand that mistakes are made and we do correct those mistakes
when found. We also understand that internal and external assessment of our policies
and procedures for the administration of Title IV funds is necessary and we attempt to
improve and implement improvements to those policies and procedures when appli-
cable.

Thank you for your time and consideration of our response to the Draft Audit Report.

Please contact me should you have any further questions.
                              Report Distribution List
                       Audit Control No. ED-OIG/A09-90011


                                                                                   No. of
Auditee                                                                            Copies
   Carel R. Thomas, President
   Platt College
   362 22nd Street
   Oakland, CA 94612                                                                1

Primary Action Official
    Mr. Greg Woods                                                                  4
    Chief Operating Officer
    Student Financial Assistance
    U.S. Department of Education
    400 Maryland Ave., SW
    Regional Office Building 3, Room 4004
    Washington, DC 20202

Other ED Offices
   General Manager for Schools Channel, Student Financial Assistance                1
   Director, Default Management, Student Financial Assistance                       1
   Chief Financial Officer, Student Financial Assistance                            1
   General Counsel, Office of General Counsel                                       1
   Area Case Director, San Francisco Team                                           1

Other
   Director, California State Bureau for
      Private Postsecondary and Vocational Education                                1
   Director, Accrediting Commission of Career Schools and Colleges of Technology    1

Office of Inspector General                                                (Electronic Copy)
    Inspector General                                                               1
    Deputy Inspector General                                                        1
    Counsel to Inspector General                                                    1
    Acting Assistant Inspector General for Investigation                            1
    Assistant Inspector General for Audit                                          1
    Deputy Assistant Inspector General for Audit                                   1
    Director, Student Financial Assistance Advisory and Assistance Team             1
    Regional Offices                                                                1 each