UNITED STATES DEPARTMENT OF EDUCATION OFFICE OF INSPECTOR GENERAL 501 I Street, Room 9-200 Sacramento, California 95814 Central Office Number: (916) 930-2388 FAX Number: (916) 930-2390 March 18, 2002 ED-OIG/A09-B0017 Mr. Tim O’Neil Campus Director Glendale Career College 1015 Grandview Avenue Glendale, California 91201 Dear Mr. O’Neil: This is the Office of Inspector General’s Final Audit Report, entitled Glendale Career College’s Administration of the Higher Education Act, Title IV Programs. The purpose of the audit was to determine whether Glendale Career College (GCC) met eligibility requirements and administered the Title IV programs in compliance with the Higher Education Act of 1965, as amended (HEA). Our review covered the institution’s fiscal year ended December 31, 2000. We found that GCC lacked adequate procedures for ensuring compliance with the HEA’s ability-to-benefit provision. GCC has revised its procedures to address the identified weaknesses, but did not agree with our recommendations on the return of Title IV funds. AUDIT RESULTS GCC lacked adequate procedures for ensuring compliance with the ability-to-benefit provision of the HEA. Also, as discussed in the OTHER MATTERS section of the report, GCC did not pay Title IV refunds timely during our audit period, but had subsequently implemented effective corrective action. We concluded that GCC had adequate management controls over other aspects of its administration of the Title IV programs. We also concluded that GCC met institutional eligibility and program eligibility requirements. Our mission is to promote the efficiency, effectiveness, and integrity of the Department’s programs and operations ED-OIG/A09-B0017 Page 2 of 11 FINDING – GCC Lacked Adequate Procedures for Ensuring Compliance with the HEA’s Ability-to-Benefit Provision Section 484(d) of the HEA states— In order for a student who does not have a certificate of graduation from a school providing secondary education, or the recognized equivalent of such certificate, to be eligible for any [Title IV program] assistance . . . [t]he student shall take an independently administered examination and shall achieve a score, specified by the Secretary, demonstrating that such student can benefit from the education or training being offered. Such examination shall be approved by the Secretary on the basis of compliance with such standards for development, administration, and scoring as the Secretary may prescribe in regulations. GCC uses the Wonderlic Basic Skills Test (WBST) to meet this requirement. Prior to July 31, 2000, GCC required all applicants to pass the WBST. After that date, GCC required only applicants without high school diplomas/GEDs and applicants planning to enroll in the institution’s licensed vocational nurse program to pass the WBST. To accomplish our objective, we compared WBST publisher’s records with data in the National Student Loan Data System (NSLDS) for the period July 1, 1997, through November 12, 2000. We also compared the institution’s WBST data to NSLDS for the period January 1 through July 18, 2001. To evaluate GCC’s procedures for ensuring compliance with the ability-to- benefit provision, we reviewed the institution’s records for three groups of students who received Title IV funds. A sample of 50 students of the 871 students who were identified from the WBST publisher’s records as taking the WBST once between July 1997 and November 2000 and failing the test. (Group A) The 31 students for whom the WBST publisher’s records showed that the students retook the same version of the test between July 1997 and November 2000. (Group B) The 16 students identified from the institution’s records who failed the WBST at least once during the period January 1 through July 18, 2001. (Group C) Our review found that GCC did not have procedures in place to ensure that (1) students who previously took the ability-to-benefit test were given an alternative version of the test, and (2) conflicting information on a student’s high school diploma/GED status was resolved. The following table shows the results of our review for each group. ED-OIG/A09-B0017 Page 3 of 11 Summary of Exception Identified From Review of School Records School Records Show School Records Show Student Did Not Have Conflicting Information on School Records High School Whether Student Had Show Total Diploma/GED High School Diploma/GED Student Had Reviewed Retook Retook High School Did Not Same Same Did Not Pass Diploma/GED Pass WBST WBST WBST WBST Version Version Group A 50 43 N/A — N/A 7 Group B 31 21 5 — 5 — Group C 16 12 4 — — — Total 9 — 5 7 Exceptions 9 Exceptions 12 Exceptions Students Retook Same Version of Test. The test publisher has two versions of the WBST test. Our review of school records identified 14 students who improperly retook the same version of the test.1 Federal regulations state— An institution may use the results of an approved test to determine a student’s eligibility to receive Title IV, HEA programs funds if the test was independently administered and properly administered. 34 C.F.R. § 668.151(a)(2) The Secretary considers that a test is properly administered if the test administrator . . . [a]dministers the test in accordance with instructions provided by the test publisher, and in a manner that ensures the integrity and security of the test . . . . 34 C.F.R. § 668.151(d)(2) An institution shall maintain a record for each student who took a test under this subpart of . . .[t]he test taken by the student . . . . 34 C.F.R. § 668.151(g)(1) 1 As noted in the table, school records showed that 9 of the 14 students did not have a high school diploma/GED. For the other 5 students, school records contained conflicting information on whether the student had a high school diploma/GED. ED-OIG/A09-B0017 Page 4 of 11 An institution shall be liable for the Title IV, HEA program funds disbursed to a student whose eligibility is determined under this subpart only if the institution— (a) Used a test administrator who was not independent of the institution at the time the test was given; (b) Compromises the testing process in any way; or (c) Is unable to document that the student received a passing score on an approved test. 34 C.F.R. § 668.154 The WBST User Manual states the rules for retesting on the same form: [Y]ou may retest the applicant again on either form in accordance with the following rules: 1. The applicant must have already taken both forms of the WBST once. 2. The applicant may be retested on the same test form once, and only once. 3. The applicant must NOT have been told in advance that there would be an opportunity to take the same test form again. 4. The applicant may be retested on the same form only if at least 60 days have passed since he or she was initially tested on that form. The Manual also states that the administrator must maintain a record of the test versions administered to an applicant and the dates administered. During our review period, GCC relied on the independent test administrator to determine whether the applicant had previously taken the WBST and the appropriate test version to be administered. After we advised GCC officials that students had been improperly given the same version of the WBST, GCC revised its own ability-to-benefit procedures. Effective September 25, 2001, GCC required staff to ascertain whether the applicant had previously taken the WBST test and to provide the independent test administrator with the prior test documentation. Conflicting Information on High School Diploma/GED. Our review of the school records identified 12 students whose school application and Free Application for Federal Student Aid (FAFSA) contained conflicting information on whether the student had a high school diploma/GED. The 12 students either did not pass the WBST or improperly retook the same version of the test. Due to the conflicting information, we are uncertain as to whether the students needed to pass the WBST to be eligible for Title IV funds. Federal regulations state that institutions must develop and apply— . . . an adequate system to identify and resolve discrepancies in the information that the institution receives from different sources with respect to a student’s application for financial aid under Title IV, HEA programs. 34 C.F.R. § 668.16(f) ED-OIG/A09-B0017 Page 5 of 11 After we advised GCC officials of the discrepancies, the institution’s Financial Services Director issued a memorandum instructing financial aid counselors to review the admissions application and financial aid documents for conflicting information during the intake process. The memorandum provided an example of conflicting information regarding a high school diploma and advised the financial aid counselors that such information must be resolved before the intake process can continue. Recommendations We recommend that the Chief Operating Officer for Federal Student Aid require Glendale Career College to— 1.1 Instruct its independent public accountant (IPA) to assess, as part of the institution’s next annual audit, the effectiveness of the institution’s newly implemented procedures for ensuring that conflicting information is resolved and students retaking the WBST are given an alternative version of the test. 1.2 Return the $44,049 of Title IV funds disbursed to the nine students without high school diplomas/GEDs who improperly retook the same version of the WBST. 1.3 Resolve conflicting information regarding the high school diploma/GED for the 12 students identified in our review who received Title IV funds but either failed the WBST or retook the same version of the test. If the institution finds that the students did not have a high school diploma/GED or the institution is unable to resolve the conflicting information, GCC must return the Title IV funds disbursed to the students. The 12 students received a total of $65,200 in Title IV funds. GCC’s Comments In its response to the draft report, GCC stated that its IPA had tested the procedures implemented during our audit and found no instances of non-compliance. GCC stated that the IPA’s conclusions would be included in the institution’s financial aid audit for calendar year 2001. In a footnote to its comments, GCC stated that the requirement on use of an alternative test form is not as absolute as presented in the draft report. GCC cited the WBST User Manual statement, “Ideally, retests should be conducted on an alternative test form.” From this statement, GCC concluded “failure to use an alternative test form should not necessarily invalidate the test results.” GCC did not agree with our recommendations on the return of Title IV funds. GCC stated that it should not be held liable for errors in the administration of the WBST. GCC stated that the principal responsibility for preparing, administering, scoring, and reviewing the quality of an ability-to-benefit examination rests squarely with the publisher and the independent test ED-OIG/A09-B0017 Page 6 of 11 administrator. GCC cited the Secretary’s statement in the preamble to the regulations published in the Federal Register (FR) on December 1, 1995: [T]he Secretary will not hold institutions financially responsible if they award Title IV, HEA Program funds to an [sic] ability-to-benefit students who present evidence that they passed approved tests as long as the institutions did not interfere with the independence of the testing process and were not involved in the testing process. 60 FR 61836 GCC also cited 34 C.F.R. § 668.154, which lists the instances where an institution would be held liable for Title IV funds disbursed to a student whose eligibility is determined using an ability-to-benefit test. GCC questioned the appropriateness of assessing a liability for students who graduated, since these students have demonstrated their ability to benefit from the education and training being offered. GCC stated that it has been the consistent policy of the Department not to assess liability for ability-to-benefit issues when the student, in fact, graduated. In addition, in a footnote to its comments, GCC stated that if the Department assessed any liability with respect to the issues raised in the report, the liability for Federal Family Education Loan funds cannot exceed the amount calculated based on the Department’s Actual Loss Formula. GCC provided information on two students who we cited as having conflicting information on their school applications and FAFSA. GCC’s comments on the draft report are provided as an attachment to the report. OIG Response The statement quoted by GCC from the “Retesting” section of the WBST User Manual does not negate the requirement to administer tests in accordance with the test publisher’s instructions. The “Retesting” section contains the specific rules to be followed when retesting an applicant on the same form. Of the 14 students cited in the report, 13 students had not taken the alternative version of the WBST. The remaining student took both versions of the WBST, but took the same version four separate times until she eventually passed on that version. We revised the presentation of the Manual requirement in the report to provide more detail on the retesting rules. We have not changed our position regarding the recommended liability. In accordance with 34 C.F.R. § 668.151(a)(2), an ATB test may only be used to determine a student’s eligibility for Title IV, HEA funds if the test was independently administered and properly administered. ED-OIG/A09-B0017 Page 7 of 11 In addition, 34 C.F.R. § 668.151 (g) states— An institution shall maintain a record for each student who took a test under this subpart of— (1) The test taken by the student; (2) The date of the test; and (3) The student’s scores as reported by the test publisher, assessment center, or State. GCC had, or should have had, adequate information in its student files to determine that the students’ tests had not been properly administered. Therefore, GCC was required to determine that the students in question were ineligible to receive Title IV funds based on those tests. Under its program participation agreement, GCC, not the test publisher or the independent test administrator, is responsible for identifying eligible students. Under 34 C.F.R. § 668.154, an institution is liable for funds disbursed to a student if the institution is “unable to document that the student received a passing score on an approved test.” The WBST was approved for use in re-testing in accordance with the publisher’s instructions. Unless the proper re-test form was used, or the required 60-day time period had passed, a student did not receive a passing score on a test approved by the Department. Since GCC is required by 34 C.F.R. § 668.151(g) to maintain records documenting each student test, both pass and fail, GCC’s records should have shown that the students did not take the approved version of the test that was applicable to their circumstances. Hence, our position does not conflict with the Secretary’s statement in the Federal Register cited by GCC, since the Secretary’s statement concerning financial responsibility is limited to students who “present evidence that they passed approved tests.” We made no changes in the recommendations in regards to GCC’s comments on students who have graduated and on the application of the Department’s Actual Loss Formula. During the audit resolution process, the appropriate Department officials will determine any monetary liability owed by GCC with respect to this finding. The information provided by GCC resolved the two students’ conflicting information on high school diploma/GED status. We revised the report and the amount of returned funds in Recommendation 1.3, accordingly. OTHER MATTERS The IPA reported in the institution’s Title IV compliance audit report for fiscal year ending December 31, 2000, that GCC did not pay refunds timely for Title IV programs. As part of the resolution of the refund finding, GCC provided ED with a letter of credit in the amount of $80,421. In June 2001, GCC implemented its corrective action plan, which had in-house staff calculate the refunds using ED-provided software rather than having this function performed by its school servicer. GCC also began using electronic fund transfers to make the payments. Our review of the 32 refunds paid by GCC from July 16, 2001, through September 15, 2001, found that the refunds were paid within the 30-day required timeframe. ED-OIG/A09-B0017 Page 8 of 11 BACKGROUND GCC is a proprietary institution under the ownership of Landmark Education Services, Inc. GCC has a main campus in Glendale, California, and an auxiliary/satellite campus located at Tri- City Medical Center, Oceanside, California. GCC also has a branch campus called Nevada Career Institute in Las Vegas, Nevada. GCC offers educational programs leading to a diploma certificate in Central Service Technology, Computerized Office Assisting, Licensed Vocational Nursing, Massage Therapy, Medical Assisting, Medical/Dental Office Management and Surgical Technology. GCC is accredited by the Accrediting Council for Continuing Education and Training. Global Financial Aid Services, a third-party servicer, processes Title IV transactions for the institution, except for refunds which GCC began performing in-house in June 2001. During the fiscal year ended December 31, 2000, GCC received about $2 million in Pell Grants and $312,000 in Federal Supplemental Educational Opportunity Grants, and GCC students were approved for about $5.5 million in Federal Family Education Loan funds. The most recent ED- published (1999) Cohort Default Rate for GCC was 14.7 percent. PURPOSE, SCOPE AND METHODOLOGY The objective of the audit was to determine if GCC met eligibility requirements and administered the Title IV, HEA programs in compliance with the HEA. Our review covered the institution’s fiscal year ended December 31, 2000. As described later in this section, our tests of compliance with ability-to-benefit and return of funds (refund) provisions include periods prior and subsequent to fiscal year 2000. To accomplish our objective, we reviewed applicable Title IV regulations, the WBST user guide and GCC’s written guidance. We interviewed GCC managers and staff responsible for admissions, registration, student financial aid, business transactions, and placement to gain an understanding of GCC’s policies and procedures. We also interviewed the independent test administrator under contract with GCC who administered the ability-to-benefit test during our site visits. We reviewed GCC’s audited financial statements and Title IV compliance audit reports for fiscal years ended December 31, 1999 and 2000. We relied on computer-processed data extracted by GCC staff from the institution’s CLASS database to review the institution’s compliance with the 90/10 revenue percentage, student eligibility, Title IV disbursement, and return of funds requirements. We reviewed records selected from the following three groups of extracted files: ED-OIG/A09-B0017 Page 9 of 11 Universes and Records Reviewed From GCC’s Class Database No. of Records Requirement Tested Categorya Records Reviewed Title IV funds received 7,149 15 Cash payments received during period 574 10 1/1/00 through 3/31/00 b 90/10 Revenue Percentage Cash payments received during period 2,026 20 4/1/00 through 12/21/00 Job Training Partnership Act payments 166 15 received Student Eligibility and Students enrolled 729 15 Title IV Disbursements Students with refunds paid during the 484 50 period 1/1/00 through 7/15/01 Timely Return of Funds Students with refunds paid during the 32 32 period 7/16/01 through 9/15/01 a The period covered was January 1, 2000, through December 31, 2000, unless otherwise specified. The reviewed records were randomly selected from the universe, except for where we reviewed all records in the universe. b Due to a system change in April 2000, GCC provided two separate files for cash payments received. To evaluate the reliability of GCC’s computer-processed data used to review the 90/10 revenue percentage, we traced the summary amounts by transaction codes to the worksheet used by GCC in its monthly tracking of the 90/10 revenue percentage. For reviewed records, we confirmed information contained in selected data fields with other school records. During our limited testing, nothing we reviewed caused us to doubt the reliability of the data. We also reviewed student records for three universes of students who took the WBST and received Title IV funds. Page two of this report contains information on each universe and the number reviewed. We conducted fieldwork at GCC’s main campus during the months of June through September 2001. We held our exit conference with GCC on November 2, 2001. Our audit was performed in accordance with generally accepted government auditing standards appropriate to the scope of the review described above. STATEMENT ON MANAGEMENT CONTROLS As part of our review, we assessed the system of management controls, policies, procedures, and practices applicable to GCC’s administration and compliance requirements of the Title IV programs. Our assessment was used to determine whether GCC’s policies and procedures provided a reasonable level of assurance that the institution and its students met selected Title IV requirements. ED-OIG/A09-B0017 Page 10 of 11 For the purpose of this report, we categorized the significant controls related to the Title IV programs as follows: Oversight of program eligibility Monitoring of institutional eligibility and financial responsibility requirements Student eligibility determinations Ability-to-benefit testing procedures Award and disbursement of Title IV funds Refunds/return of Title IV funds Because of inherent limitations, a study and evaluation made for the limited purpose described above would not necessarily disclose all material weaknesses in the management controls. However, our assessment disclosed management control weaknesses in the procedures for determining eligibility of students who provided conflicting information on high school diploma/GED and the testing procedures used in administering the ED-approved ability-to- benefit test. These weaknesses are fully discussed in the AUDIT RESULTS section of this report. ADMINISTRATIVE MATTERS Statements that managerial practices need improvements, as well as other conclusions and recommendations in this report represent the opinions of the Office of Inspector General. Determination 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 ED official, who will consider them before taking final action on the audit: Mr. Greg Woods Chief Operating Officer Federal Student Aid Union Center Plaza Building, Room 112G1 830 1st Street, NE Washington, D.C. 20202-5402 Office of Management and Budget Circular A-50 directs Federal agencies 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 greatly appreciated. ATTACHMENT GCC’s Comments on the Draft Report REPORT DISTRIBUTION LIST CONTROL NO. ED-OIG/A09-B0017 Auditee ED Action Official Mr. Tim O’Neil Mr. Greg Woods Campus Director Chief Operating Officer Glendale Career College Federal Student Aid 1015 Grandview Avenue Glendale, California 91201 Other ED Officials/Staff (electronic copy) Audit Liaison Officer Press Secretary Case Management Division Office of Public Affairs Federal Student Aid Correspondence Control Assistant General Counsel Office of General Counsel Office of the General Counsel Assistant Secretary Deputy Secretary Office of Legislation and Office of the Deputy Secretary Congressional Affairs Assistant Secretary Chief of Staff Office of Intergovernmental Office of the Secretary and Interagency Affairs Director Under Secretary Financial Improvement and Office of the Under Secretary Post Audit Operations Office of the Chief Financial Officer Post Audit Group Supervisor Director Financial Improvement and Office of Public Affairs Post Audit Operations Office of the Chief Financial Officer Indirect Cost Group Supervisor Financial Improvement and Post Audit Operations Office of the Chief Financial Officer
Audit of Glendale Career College's Administration of the Higher Education Act, Title IV Programs.
Published by the Department of Education, Office of Inspector General on 2002-03-18.
Below is a raw (and likely hideous) rendition of the original report. (PDF)