oversight

University of Phoenix's Processing of Student Financial Aid Disbursements for the Higher Education Act, Title IV Programs.

Published by the Department of Education, Office of Inspector General on 2005-08-24.

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

                              UNITED STATES DEPARTMENT OF EDUCATION

                                      OFFICE OF INSPECTOR GENERAL 

                                               501 I STREET, SUITE 9-200
                                            SACRAMENTO, CALIFORNIA 95814
                                       PHONE (916) 930-2388 • FAX (916) 930-2390




                                                       August 24, 2005
                                                                                                          Control Number
                                                                                                          ED-OIG/A09E0015

Mr. Todd S. Nelson
President and CEO
Apollo Group, Inc.
4615 East Elwood Street
Phoenix, AZ 85040

Dear Mr. Nelson:

This Final Audit Report, entitled University of Phoenix’s Processing of Student Financial Aid
Disbursements for the Higher Education Act, Title IV Programs, presents the results of our audit.
The purpose of the audit was to determine whether the University of Phoenix (UOP) has policies
and procedures that provide reasonable assurance that the institution properly makes initial and
subsequent disbursements to students enrolled in Title IV eligible programs. Our review
generally covered disbursements to UOP students who received Title IV funds during the period
September 1, 2002 through March 31, 2004. The Objective, Scope, and Methodology section of
this report further explains the extent of audit coverage for each aspect of our review.




                                                   BACKGROUND 



UOP, a wholly-owned subsidiary of the Apollo Group, Inc. (Apollo), is a private, for-profit
institution of higher education offering associate, bachelor, master, and doctoral degrees and
professional certificate programs. UOP has 55 campuses and 102 learning centers located in
33 states, Puerto Rico, and Vancouver, British Columbia. Its educational programs are also
offered worldwide via the Internet through University of Phoenix Online, a division of UOP.
Apollo contracts with Affiliated Computer Services, Inc. (ACS), a third-party servicer, for the
processing of financial aid for UOP’s students. UOP is accredited by the Higher Learning
Commission of the North Central Association of Colleges and Schools.

UOP uses a non-term academic calendar and measures the length of its educational programs in
credit hours. Students, including students at UOP Online, generally enroll in an educational
program that encompasses a series of five to six-week courses. Typically, the courses are taken
one at a time, sequentially, over the length of the program.




          Our mission is to promote the efficiency, effectiveness, and integrity of the Department’s programs and operations
Final Report
ED-OIG/A09E0015                                                                                  Page 2 of 23

UOP is a participant in the U.S. Department of Education’s Distance Education Demonstration
Program and participates in the Higher Education Act (HEA), Title IV Programs listed in the
below table.


                              Title IV Funds Reported in Annual Audit Reports
                                                   Students (a)              Title IV Funds
                 Title IV Program
                                                2003        2004         2003             2004
    Federal Family Education Loan Program
                                               107,203    161,781    $778,026,809 $1,599,370,890
    (FFEL) 

    Federal Pell Grant Program (Pell Grant) 
   27,908     50,939      60,920,063      142,434,388
    Federal Supplemental Educational
                                                 3,393       7,381      1,173,602        2,311,921
    Opportunity Grant Program (FSEOG) 

    Federal Perkins Loan Program
                  225         255        629,439          511,349
    Total Title IV Funds                                             $840,749,913 $1,744,628,548
    (a) Students may have received funds from more than one Title IV program.


UOP primarily uses three electronic interactive Apollo systems in processing student financial
aid: the Student Record, Financial Aid, and Accounting systems.1




                                             AUDIT RESULTS 



Except for two areas, we concluded that UOP had policies and procedures that provide
reasonable assurance that the institution properly makes initial and subsequent disbursements to
students enrolled in Title IV eligible programs. We found that UOP used an automated process
for checking eligibility prior to making Title IV disbursements that placed a hold on
disbursements that failed the eligibility checks. We also found that the staff who reviewed
disbursements that failed the eligibility checks generally made proper decisions regarding
student eligibility for released disbursements. However, UOP’s policies and procedures did not
ensure that 1) Title IV disbursements were credited to student accounts for only allowable
institutional charges and 2) students who received Title IV disbursements were enrolled in
eligible programs.

Our conclusion on the adequacy of UOP’s policies and procedures is based on 1) our
understanding of the system of internal control that existed during the audit period for making
the initial and second Title IV disbursements in an academic year and 2) our evaluations and
limited tests of selected data elements in Apollo’s systems that were related to determining
student eligibility for the second disbursement. The projection of this evaluation of the system of
internal control to future periods is subject to the risk that procedures may become inadequate
because of changes in conditions, or that the degree of compliance with the procedures may
deteriorate.

1
  UOP uses the software platform names to refer to these systems. The respective names used by UOP are OSIRIS
(an in-house developed platform), PeopleSoft, and Oracle.
Final Report
ED-OIG/A09E0015                                                                                        Page 3 of 23


UOP did not concur with our finding and recommendations concerning UOP’s policies and
procedures for crediting Title IV disbursements to student accounts for institutional charges.
UOP concurred with the other finding and recommendations presented in the report. The text of
UOP’s comments is included as an attachment to the report.


FINDING NO. 1 – 	 UOP Improperly Used Title IV Funds to Credit Student
                  Accounts for Prior Learning Assessment Fees

Of the 197,230 students who received Title IV funds during the period September 1, 2002
through March 31, 2004, we identified 834 students for whom UOP had improperly used
$319,338 in Title IV funds to credit the student accounts for prior learning assessment fees.

UOP students may petition for an assessment of prior learning to meet the completion
requirements for their educational program. A student may earn up to 30 prior learning credits
for professional training (workshops, seminars, licenses, business and professional courses, and
other institutionally-sponsored course work) and undergraduate students may earn up to 30
additional credits for verified college-level learning gained through experience (experiential
learning).2

To initiate the assessment process, the student takes the following action—

    • 	 Professional training. The student submits a completed Professional Training Portfolio to
        UOP’s Prior Learning Assessment Center (Center).
    • 	 Experiential learning. The student enrolls in either UOP’s Experiential Learning course
        (GEN/110) or UOP’s Experiential Learning Essay Tutorial. The instruction provided
        helps students prepare the experiential course writing that will be evaluated for credit.

Then, the Center evaluates the student’s prior learning and awards academic credit, which is
posted in the student’s academic transcript.

UOP’s school catalog for 2003-2004 states that the tuition for GEN/110 is based on the
prevailing tuition rate for the major course work and that students will earn one credit upon
successful completion of the course. The catalog contains the following information on
assessment fees charged for the Center’s services—

    When materials are complete, they are sent to the Prior Learning Assessment Center
    in Phoenix and a $90 submission fee is collected. The following evaluation and
    posting fees apply to credit awarded through Prior Learning Assessment—

         • 	 $30.00 per credit for standardized evaluations, and items from the Apollo
             Quick ListTM.


2
  UOP’s policy states that a student may not earn more than 60 credits from any combination of experiential
learning, national testing, credit by exam, and professional course work and training. State-imposed limits on
credits awarded for prior learning may further limit the credits earned.
Final Report
ED-OIG/A09E0015                                                                          Page 4 of 23

       • 	 $55.00 per credit for professional course work and training, and experiential
           learning essays.
       • 	 Costs per credit for articulated course work and training may vary.

UOP’s fees for the evaluation and posting of credits awarded for prior learning are separate from
tuition and fees related to the student’s educational program. Specifically, the catalog states—

   Charges arising out of [assessment] services and the posting of credit awarded for 

   prior learning are not included as part of the major curriculum fees and tuition. 


Use of Title IV funds to pay the tuition cost for the GEN/110 course is appropriate since the
course instruction was provided by UOP and the credit received for completing the course may
be used to meet the minimum credits for completion of the student’s educational program.
However, the materials submission fee and the fees for evaluation and posting of credit for prior
learning are not institutional charges that can be paid with Title IV funds. These charges are not
incurred by the student at the institution for educationally related activities delivered by the
institution during the academic year or loan period. Thus, UOP should not have applied Title IV
funds to student accounts for the fees.

The regulations at 34 C.F.R. § 668.164(d) state—

   Crediting a student's account at the institution. (1) Without obtaining the student's or 

   parent's authorization under Sec. 668.165, an institution may use title IV, HEA 

   program funds to credit a student's account at the institution to satisfy current charges 

   for--

      (i) Tuition and fees;
      (ii) Board, if the student contracts with the institution for board; and
      (iii) Room, if the student contracts with the institution for room.
      (2) After obtaining the appropriate authorization from a student or parent under 

   Sec. 668.165, the institution may use title IV, HEA program funds to credit a 

   student's account at the institution to satisfy-- 

      (i) Current charges that are in addition to the charges described in paragraph (d)(1) 

   of this section that were incurred by the student at the institution for educationally 

   related activities; 

                                         *****
      (4) For purposes of this paragraph, current charges refers to charges assessed the 

   student by the institution for-- 

      (i) The current award year; or
      (ii) The loan period for which an institution certified or originated a loan under the 

   FFEL or Direct Loan programs. 


The HEA § 472 defines the term “cost of attendance” for Title IV purposes. The definition
includes the following explanation of “tuitions and fees”—

   [T]uition and fees normally assessed a student carrying the same academic workload 

   as determined by the institution . . . . 

Final Report
ED-OIG/A09E0015                                                                                Page 5 of 23

The fees for the evaluation and posting of credits awarded for prior learning are not included in
the tuition and fees portion of the student’s cost of attendance. The fees are not normally
assessed to students as part of their academic workload since the fees are only incurred if the
student submits materials for assessment and the Center awards credits to the student. Only
834 of the 197,230 students in our audit universe were assessed prior learning fees, which were
paid with Title IV funds. UOP acknowledged in its school catalog that the fees were not part of
the tuition and fees for the student’s educational program (i.e., not included as part of the major
curriculum fees and tuition). In addition, the fees were incurred by the student for the evaluation
of activities that occurred at locations other than UOP and that may have taken place prior to the
student’s enrollment. Thus, the fees were not charges that were incurred by the student at the
institution for educationally related activities.

UOP’s written policies included prior learning assessment fees as an allowable use of Title IV
funds when the student has authorized UOP to apply financial aid funds to all open allowable
charges.

   If the student has authorized the University via the UOP FA Application (UOPFAA),
   [ACS] will apply funds as follows:
       Other Open Charges – [ACS] will retain funds for other fees and charges that are
       discretionary educationally related expenses.
       Other open charges include the following:
       • NSF fees
       • Assessment fees
       • Books, and other discretionary charges

The prior learning assessment fees paid with Title IV funds for the 834 students totaled
$319,338.


                       Title IV Funds Credited to Student Accounts for
                               Prior Learning Assessment Fees
                        Title IV Program                          Title IV Funds (a)
    Unsubsidized FFEL                                                   $196,916
    Subsidized FFEL                                                       72,019
    Plus FFEL                                                              1,400
    Federal Pell Grant                                                    45,653
    Federal Perkins Loan                                                   1,833
    Supplemental Education Opportunity Grant                               1,517
    Total                                                               $319,338
    (a) Amounts reflect the portion of any Title IV disbursements made to students in our audit
    universe (i.e., students who received at least one Title IV disbursement during the period
    September 1, 2002 through March 31, 2004) that was shown in Apollo’s Accounting System (as of
    May 10, 2004) as being applied to student accounts for prior learning assessment fees.
Final Report
ED-OIG/A09E0015                                                                        Page 6 of 23

Recommendations

We recommend that the Chief Operating Officer for Federal Student Aid require UOP to—

1.1 	   Revise its policy to exclude prior learning materials submission and assessment fees from
        the list of allowable uses for Title IV funds and place controls in the Financial Aid
        System to prevent the application of Title IV funds to the fees.

1.2 	   To the extent that UOP can locate the students for whom Title IV funds were used for
        PLAC, require UOP to return the $319,338 to the students. For those students UOP
        cannot locate, require UOP to return the funds to the Department or lenders as
        appropriate.

1.3 	   Require UOP to determine all students for whom Title IV funds were used for PLAC
        since the end of our audit period and require UOP to return the funds to the students it
        can locate. For those students UOP cannot locate, require UOP to return the funds to the
        Department or lenders as appropriate.

UOP Comments

UOP did not concur with the finding and recommendations. In its comments to the draft report,
UOP provided additional details on its policies and procedures for PLAC and stated that the
finding is contrary to Federal regulations and prior guidance published by the Department. To
support its position, UOP stated—

    • 	 Title 34 C.F.R. § 668.164(d)(2) plainly authorizes the payment of PLAC fees with
        Federal funds.

    • 	 The disbursements were duly authorized because 1) UOP obtained required student or
        parent authorizations and 2) the PLAC fees were incurred by the student for
        educationally related activities.

    • 	 The PLAC fees paid for educationally related activities. UOP stated that fees and
        charges for evaluating evidence of academic achievement and credit towards graduation
        could only be characterized as educationally related. UOP stated that the report, and the
        policies and procedures described in its response to the draft report, establish that the
        charges were incurred at UOP for activities performed by UOP personnel to advance the
        educational programs and objectives of enrolled students.

        UOP disagreed with the report statement that the PLAC fees do not qualify as
        educationally related because they “were incurred by the student for the evaluation of
        activities that occurred at locations other than UOP and may have taken place prior to the
        student’s enrollment.” UOP stated that the auditors’ conclusion is incorrect because the
        PLAC fees paid for the process of assessing the prior learning activities and the fees do
        not cover the prior activities themselves.
Final Report
ED-OIG/A09E0015                                                                       Page 7 of 23

   • 	 The Department’s published guidance demonstrates that the auditors are incorrect in
       asserting that PLAC fees cannot be paid with Title IV funds. UOP cited the Secretary’s
       commentary that accompanied the issuance of proposed rules and final regulations on
       Title IV disbursements and a FSA Policy Interpretation and Guidance Bulletin on
       determining whether a charge is an institutional charge when calculating an institutional
       refund.

       The cited commentary from the final regulations states that students (or parents) should
       have control over Title IV funds in excess of direct institutional charges and that the
       student has discretion to use these funds to pay for other costs of attendance and other
       miscellaneous institutional charges. The cited commentary from the proposed regulations
       was an illustration that used outstanding parking fees as a permitted institutional charge
       applied to Title IV funds held in student accounts. UOP stated that if parking fees are
       educationally related charges that qualify for Title IV funding, the same is true of PLAC
       fees, which cover core educational activities. The cited Guidance Bulletin section defines
       non-institutional charges for purposes of calculating institutional refunds as including
       charges to a student’s account for discretionary educationally related expenses (e.g.,
       parking and library fines and the cost of athletic and concert tickets, etc.).

       UOP asserted that this guidance confirms that the Department considers other charges
       that are further from the educational mission than PLAC fees to be considered
       educationally related and qualified for Title IV funding.

   • 	 The PLAC fees would qualify for funding as part of the students’ cost of attendance.
       UOP stated that the statement in its school catalog that PLAC fees were not part of
       UOP’s major curriculum fees and tuition did not negate the fact that the PLAC charges
       constituted a fee and as such, met the statutory definition of “cost of attendance.” The
       HEA § 472 defines cost of attendance as “tuition and fees normally assessed a student
       carrying the same academic workload as determined by the institution.” UOP noted that
       the definition calls for the institution to determine what fees are normally assessed and
       that only billing those students who availed themselves of the PLAC option did not
       signify that the fees were not normally assessed. UOP cited a National Association of
       Student Financial Aid Administrators (NASFAA) publication that included “fees for
       credit by examination when students advance toward their degree or educational
       objective” as an example of allowable educational expenses that can be included in a
       student’s budget.

UOP also stated that any disallowed PLAC fees would be returnable to the students, not to the
lenders or the FSA programs.

OIG Response

We did not change the finding. The primary point in the finding and each of UOP’s statements
is whether PLAC fees were “incurred by the student at the institution for educationally related
activities.” UOP acknowledged that the PLAC fees were not for educational activities in which
the student was involved during the academic year/loan period and the fees are not a cost related
to such activities.
Final Report
ED-OIG/A09E0015                                                                                      Page 8 of 23

The finding is consistent with the commentary from the cited proposed rule and final regulations.
Typically, parking fees are charged to a student’s account for a permit to park a vehicle on
campus while the student attends classes, which is an educational activity that occurs during the
academic year/loan period. The cited Guidance Bulletin section, defining non-institutional
charges excluded from institutional refunds, is not applicable since PLAC is an institutional
charge and the Bulletin does not indicate that Title IV funds held in the student’s account were
used to cover the charges. Also, UOP did not include PLAC fees as one of the “other
institutional charges” in its procedures for calculating institutional refunds.

We do not agree that PLAC fees could be included in the student’s cost of attendance, if UOP
decided to do so. While the statutory definition provides for the inclusion of fees in the cost of
attendance, the definition is referring to fees related to the student’s academic workload. Since
PLAC fees are incurred for the assessment of prior learning activities, the fees are not related to
the student’s academic workload for the academic year/loan period.

We agree that Title IV funds used for PLAC fees should be returned to the students. To the
extent that students cannot be located, payment should be made to either the Department or
lenders. Thus, we amended our original recommendations requiring the return of Title IV funds
to the Department or lenders.


FINDING NO. 2 – UOP Disbursed Title IV Funds to Students Enrolled in an
                Ineligible Program
UOP has continued to disburse Title IV funds to students enrolled in its Associate of Arts in 

General Studies program, which is not an eligible program for purposes of Title IV. In our prior 

audit of UOP, we reported that, as a result of our work, Federal Student Aid (FSA) notified UOP 

that the Associate of Arts – General Studies was an ineligible program.3


The regulations at 34 C.F.R. § 668.32(a)(1)(i) state “[a] student is eligible to receive title IV, 

HEA program assistance if the student--Is a regular student enrolled, or accepted for enrollment, 

in an eligible program at an eligible institution . . . .” The regulations at 

34 C.F.R. § 668.8 (d)(1)(iii) state “[a]n eligible program provided by a proprietary institution of 

higher education . . . must provide undergraduate training that prepares a student for gainful 

employment in a recognized occupation.” 


In a letter to UOP, dated February 26, 1999, FSA advised UOP that the Department had 

determined that the Associates of Arts – General Studies program did not prepare students for 

gainful employment in a recognized occupation as defined in 34 C.F.R. 668.8(d)(2)(iii). In the 

letter, FSA informed UOP that “[a]ny disbursements of Title IV student financial assistance 





3
 See Other Matters section of OIG Audit Report titled University of Phoenix’s Management of Student Financial
Assistance Programs, issued March 2000 (Control Number ED-OIG/A09-70022). The audit report identified
improper disbursements for Title IV loans and grants that had loan/grant periods starting between October 1995 and
September 1997.
Final Report
ED-OIG/A09E0015                                                                                         Page 9 of 23

funds made after February 25, 1999 will be considered liabilities.” We found that, after that
date, UOP disbursed $22,656 in Title IV funds to students enrolled solely in the program. 4


         Title IV Funds Improperly Disbursed to Students Solely Enrolled in an Ineligible
                                   Educational Program (a)
                          Number
        Educational                 Subsidized     Unsubsidized         Pell
                            of                                                       Total
         Program                       FFEL            FFEL            Grants
                         Students
     Associate of Arts
                            6          $8,061         $11,620          $2,975       $22,656
     – General Studies
     (a) Covers disbursements made during the period from February 26, 1999 through May 10, 2004.


UOP’s internal control procedures did not prevent the improper disbursements. Prior to the
release of Title IV disbursements, the Financial Aid System electronically confirms that a student
is enrolled in an eligible educational program. The Financial Aid System obtains the most recent
educational program that the student had enrolled in from the Student Record System. The
Financial Aid System then confirms that the system’s eligible program table shows the
educational program is eligible for Title IV programs at the UOP location attended by the
student. If the educational program is not an eligible program, the Financial Aid System places a
hold on the Title IV disbursement. Then, ACS staff, or UOP staff at the specific location, review
the additional student information available in the Student Record System. If the staff
determines that the student is eligible for the disbursement, the staff releases the disbursement
for further processing.

The eligible program table in the Financial Aid System is derived from a spreadsheet titled
“Financial Aid Eligible Programs by Campus,” which is maintained by the Director for Apollo
Financial Services Oversight. The spreadsheet identifies the educational programs at each UOP
location that are eligible programs for Title IV purposes. When a change in program eligibility
occurs, the Director informs ACS and ACS updates the eligible program table in the Financial
Aid System. Apollo’s Vice President for Student Financial Aid informed us that the information
in the “Financial Aid Eligible Programs by Campus” spreadsheet and the eligible program table
in the Financial Aid System is reconciled semiannually.

UOP’s data showed that the six students attended the Associate of Arts – General Studies
program at UOP’s main campus. We found that the eligible program table in the Financial Aid
System incorrectly showed the program as an eligible program for the main campus when the
“Financial Aid Eligible Programs by Campus” spreadsheet showed that the program was
ineligible for Title IV programs at all UOP locations. Apollo’s Vice President for Student
Financial Aid advised us that the eligible program table in the Financial Aid System has been
corrected to properly reflect that the Associate of Arts – General Studies is an ineligible program
for the main campus.


4
  We considered students who were concurrently enrolled in an ineligible educational program and an eligible
education program to be eligible for Title IV funds. Under UOP’s procedures, a student enrolled in eligible and
ineligible programs are eligible for Title IV programs provided that the student’s coursework is concentrated in the
eligible program.
Final Report
ED-OIG/A09E0015                                                                      Page 10 of 23

We also noted that the Financial Aid System did not maintain the date that a change in program
eligibility status occurred. Thus, UOP may not have the historical data in its systems necessary
to determine, after the fact, that the educational program was an eligible program for the UOP
location at the time the disbursement was released. Apollo’s Vice President for Student
Financial Aid informed us that the Financial Aid System will be enhanced to include the
effective date of changes in educational program eligibility.

Recommendations

We recommend that the Chief Operating Officer for Federal Student Aid require UOP to—

2.1 	   Return to lenders the $8,061 of subsidized FFELs and $11,620 of unsubsidized FFELs
        disbursed to students enrolled in ineligible programs and return to the Department the
        interest costs incurred by the Federal government on the subsidized FFELs.

2.2 	   Return $2,975 to its Federal Pell Grant Account for disbursements to students enrolled in
        ineligible programs.

2.3 	   Identify the subsidized FFEL (plus interest costs incurred by the Federal Government on
        the loans), unsubsidized FFEL, Federal Pell Grant, and FSEOG funds disbursed after
        May 10, 2004 to students in ineligible programs, and return the amounts to lenders, the
        Federal Pell Grant Account, or Department, as applicable.

2.4 	   Strengthen its internal control procedures by implementing independent reviews of the
        “Financial Aid Eligible Programs by Campus” spreadsheet and conducting more frequent
        reconciliations between the “Financial Aid Eligible Programs by Campus” spreadsheet
        and the eligible program table in the Financial Aid System.

UOP Comments

UOP concurred with the finding and recommendations. In its comments to the draft report,
UOP confirmed that the six students inadvertently received Title IV funds while enrolled in a
program deemed ineligible for Title IV. UOP stated that it would comply with the report’s
recommendations after receipt of additional information on the students and FSA’s final
determination on the recommendations.




                                     OTHER MATTER 



As part of our initial audit work, we reviewed the methodology used by Apollo to calculate
UOP’s Title IV revenue percentage for the period ended August 31, 2003. Section 102(b)(1)(F)
of the HEA requires a proprietary institution to derive at least 10 percent of its revenue from
other than Title IV sources. The regulations at 34 C.F.R. § 600.5(d) provides the formula for
calculating the Title IV revenue percentage.
Final Report
ED-OIG/A09E0015                                                                      Page 11 of 23

We found that UOP (1) inappropriately included “Funds Returned to Student for Non-Tuition
Expenses” in the denominator of the formula, (2) inappropriately included an “Accrual to Cash
Basis” adjustment to revenue for its prepaid account in the denominator, (3) overstated the
amount of Federal Perkins Loan Program funds in the numerator and the amount of revenue in
the denominator, and (4) overstated the amount of FSEOG Program funds in the numerator.
We concluded that the methodology errors did not appear to have an impact on UOP’s
institutional eligibility to participate in the Title IV programs for its fiscal year ended
August 31, 2003.

In SFA Interim Audit Memorandum 05-01, dated November 30, 2004, we advised FSA of the
errors and suggested that FSA require Apollo to evaluate the impact of using the correct
methodology on the Title IV revenue percentage reported for 2003 for all its institutions
participating in the Title IV programs. We also suggested that Apollo be required to take
immediate action to ensure that procedures to apply the correct methodology are in place for its
2004 financial statements. In a letter to FSA, dated December 28, 2004, Apollo stated that it has
attempted to implement the methodology described in the written guidance and provided FSA
with recalculated Title IV revenues percentages for UOP and its other institution (Western
International University). The recalculated percentages showed that the institutions complied
with the HEA § 102(b)(1)(F).




                  OBJECTIVE, SCOPE, AND METHODOLOGY 



Our audit objective was to determine whether UOP has policies and procedures that provide
reasonable assurance that the institution properly makes initial and subsequent disbursements to
students enrolled in Title IV eligible programs. Our review generally covered disbursements to
UOP students who received Title IV funds during the period September 1, 2002 through
March 31, 2004.

The initial audit objective was to determine whether UOP was administering the Title IV
programs in compliance with the HEA and applicable regulations and program guidance. After
performing preliminary fieldwork, we refined the audit objective to focus on two areas: Title IV
disbursements and the return of Title IV funds for withdrawn students. We plan to issue a
separate audit report on our review of UOP’s policies and procedures for the calculation and
return of Title IV funds.

To evaluate internal controls relevant to our objective, we reviewed written policies and
procedures applicable to UOP’s student financial aid processes and interviewed Apollo, UOP,
and ACS officials and staff, who were involved in the administration of the Title IV programs.
We gained an understanding of the electronic processes used by the Student Record, Financial
Aid, and Accounting systems in making eligibility determinations for Title IV disbursements.
We also gained an understanding of the Campus Tracking System used to track student
attendance for campus-based locations and UOP Online.
Final Report
ED-OIG/A09E0015                                                                                Page 12 of 23

We relied on data from Apollo’s Student Record, Financial Aid, and Accounting systems to
identify the students who received Title IV funds during our audit period (audit universe) and
evaluate the effectiveness of UOP’s policies and procedures. Apollo provided us with electronic
files containing selected system tables extracted from backup files created on May 10, 2004 from
the Student Record, Financial Aid, and Accounting systems. To assess the reliability of the data,
we compared selected data in the extracted system tables to data in Apollo’s active system for
11 students randomly selected from the audit universe. We also compared selected data for
11 students randomly selected from Apollo’s active system to data in the extracted system tables.
In addition, we compared the total funds for Title IV programs included in the extracted tables to
the total amounts shown in the Department's National Student Loan Data System for the covered
period. We compared attendance data in UOP’s Campus Tracking system to attendance data in
the Student Record system. We also compared hardcopy rosters at the Sacramento Valley
Campus and Online attendance data to UOP’s Campus Tracking system.

For the following data elements, our review was limited to gaining an understanding of the
processes for deriving and entering the data in the Student Record and Financial Aid systems:
1) beginning date and ending date for the student’s academic year, Pell Grant payment period,
and the FFEL period; 2) number of credits required for the student’s completion of an academic
year and payment period; and 3) number of weeks in an academic year.5 While we did not
perform specific tests of the processes used to derive and enter these data elements, nothing came
to our attention during our review of individual disbursements to indicate that the data were not
accurate. We also did not confirm that individual courses, which were used in determining
eligibility of the second disbursement in an academic year, were part of the student’s educational
program. Based on our understanding of Apollo’s systems and the results of tests performed on
the data, we concluded that the data were sufficiently reliable to be used in meeting the audit
objective.

Second Disbursements for an Academic Year. We used data analysis software packages and
the data tables provided by Apollo to evaluate the second disbursements of FFEL and Pell Grants
made to students in our audit universe. We designed tests to evaluate the reasonableness of the
data (i.e., relationship of key dates used in determining eligibility for disbursements) and
compliance with the following Title IV requirements: students were enrolled for classes in the
payment period at the time of the disbursement (34 C.F.R. § 668.164(b)(1)); students completed
the coursework for the previous payment period (34 C.F.R § 668.164(f)(2)); disbursements were
made after students completed half of the weeks of the student’s academic year (34 C.F.R.
§ 668.4(b) and 34 C.F.R. § 690.63 (f)), and FFEL disbursements were made after the later of the
calendar midpoint of the students’ loan period or the date the students completed half of the
academic coursework in the period (34 C.F.R. § 682.604(c)(7)(i)). For our analyses, we
reviewed all disbursements shown in the electronic files provided from the Financial Aid system
(as of May 10, 2004) that had been made to students who received at least one Title IV
disbursement during the period September 1, 2002 through March 31, 2004.

We evaluated the Financial Aid System data for 280,521 FFEL disbursements, totaling
$686,407,006, and 25,344 Pell Grant disbursements, totaling $33,992,862. Our data analyses
flagged 47,889 FFEL disbursements and 5,073 Pell Grant disbursements for further review. We
placed the flagged disbursements into five groups (three for FFEL disbursements and two for

5
    We did confirm that the student’s academic year met the minimum requirement of 30 weeks.
Final Report
ED-OIG/A09E0015                                                                                         Page 13 of 23

Pell Grant disbursements) and, for random samples of students selected from each group,
reviewed other student data available in Apollo’s active systems.

      • 	 FFEL Disbursements – Group 1. This group included the 32,999 FFEL disbursements,
          totaling $107,410,243, for which the data showed that the weeks actually attended were
          less than half the weeks in the payment period. We reviewed the data for a random
          sample of 10 disbursements6 and found the disbursements were proper.

      • 	 FFEL Disbursements – Group 2. This group included 4,451 FFEL disbursements,
          totaling $6,475,370 for which the data showed the disbursements were made after the end
          of the loan period. We reviewed the data for a random sample of 25 disbursements and
          found the disbursements were proper.

      • 	 FFEL Disbursements – Group 3. This group included the remaining 10,439 FFEL
          disbursements, totaling $20,818,608, that were flagged for further review. We reviewed
          the data for a random sample of 32 disbursements and found the disbursements were
          proper.

      • 	 Pell Grant Disbursements – Group 1. This group included 390 Pell Grant disbursements,
          totaling $547,551, for which the data showed that the weeks actually attended were less
          than half the weeks in the payment period. We reviewed the data for a random sample of
          10 disbursements and found the disbursements were proper.

      • 	 Pell Grants Disbursements – Group 2. This group included 4,683 Pell Grant
          disbursements, totaling $6,323,053, that were flagged for further review. We reviewed
          the data for a random sample of 15 disbursements and found the disbursements were
          proper.

Prior Learning Materials Submission and Assessment Fees. We used data analysis software
packages and the data tables provided by Apollo to identify students who were charged prior
learning material submission and assessment fees and to identify the Title IV funds that were
applied to the student’s account for those fees. For the students included in our disbursement
analyses, we identified the portion of any Title IV disbursement that was shown in the tables
provided from the Accounting System as being applied to the student accounts for prior learning
assessment fees.

Enrolled in an Eligible Program. We used data analysis software packages and the data tables
provided by Apollo to identify students who were not enrolled in an eligible program at the time
of the disbursement. Since this was a follow-up to a previously reported condition, we reviewed
all disbursements in the tables provided from the Financial Aid System. Initially, our analysis
identified 58 students in the Associates of Arts in General Studies and 163 students enrolled in
other programs that, based on the data, appeared to not be an eligible program. We reviewed a
random sample of 20 students (10 enrolled in the Associate of Arts in General Studies and
10 enrolled in other educational programs) to confirm our understanding of the data. Based on
the results of the sample review, additional information provided by UOP, and information
contained in the Department’s letter of February 26, 1999, we further refined our analysis to
6
    We also reviewed 10 Pell Grant disbursements that were flagged for this same evaluative criteria.
Final Report
ED-OIG/A09E0015                                                                      Page 14 of 23

identify disbursements made after February 26, 1999 to students who were solely enrolled in
either the Associate of Arts in General Studies or the Associate of Arts in Credit Recognition.

Retaking Courses. We used data analysis software and the data tables provided by Apollo to
identify students retaking courses for which they previously received a passing grade.

We performed fieldwork at Apollo and UOP administrative offices and UOP Online in Phoenix,
Arizona, and the UOP Sacramento Valley Campus in Sacramento, California. We held an exit
briefing with Apollo officials on May 25, 2005. We performed the audit in accordance with
generally accepted government auditing standards appropriate to the scope of the review, as
discussed above.




                             ADMINISTRATIVE MATTERS 



Statements that managerial practices need improvements, as well as other conclusions and
recommendations in this report, represent the opinions of the Office of Inspector General.
Determinations of corrective actions to be taken will be made by the appropriate Department
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 Education Department
officials who will consider them before taking final Departmental action on this audit.

                              Theresa S. Shaw
                              Chief Operating Officer
                              Federal Student Aid
                              U.S. Department of Education
                              Union Center Plaza, Room 112G1
                              830 First Street, NE
                              Washington, D.C. 20202

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

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

                                             Sincerely,

                                             /s/
                                             Gloria Pilotti
                                             Regional Inspector General for Audit
Final Report 

ED-OIG/A09E0015                                          Page 15 of 23



                                                     ATTACHMENT





                  UOP Comments on the Draft Report
                                                •
                                     AFOLLO GROUP, INC.
                                           UNIVERSITY OF PHOENIX
                                   INSTITUTE FOR PROFESSIONAL DEVELOPMENT
                                       CoLLEGE FOR FINANCIAL PLANNING
                                      WESTERN INTERNATIONAL UNIVERSITY


                                              July 27,2005



Ms. Gloria Pilotti
Regional Inspector General for Audit
United States Department of Education
Office of Inspector General
501 I Street, Suite 9-200
Sacramento, CA 95814

                  Re: 	    Draft Audit Report titled, University ofPhoenix's Processing ofStudent
                           Financial Aid Disbursements for the Higher Education Act (HEA), Title IV
                           Programs; Control Number ED-OIG/A09E0015

Dear Ms. Pilotti:

       This responds to the above-referenced draft audit report dated June 30, 2005 (the
"Draft Report"). Enclosed please find written comments by which Apollo Group, Inc.,
and the Universit(' of Phoenix ("UOP") respond to the findings and recommendations in
the Draft Report.

         The Audit Results presented in the Draft Report include the following statement:

         "Except for two areas, we concluded that UOP had policies and procedures that provide
         reasonable assurance that the institution properly makes initial and subsequent
         disbursements to students enrolled in Title IV eligible programs. We found that UOP used
         an automated process for checking eligibility prior to making Title IV disbursements that
         placed a hold on disbursements that failed the eligibility checks. We also found that the staff,
         who reviewed disbursements that failed the eligibility checks, generally made proper
         decisions regarding student eligibility for released disbursements. However, UOP's policies
         and procedures did not ensure that 1) Title IV disbursements were credited to student accounts for
         only allowable institutional charges and 2) students, who received Title IV disbursements, were
         emolled in eligible programs.

         Draft Report at page 2 (emphasis added).

       These audit results reflect the confirmation by OIG that UOP's policies and
procedures are generally sound and compliant. As discussed in the enclosed comments
concerning the minor exceptions referenced in the two findings in the Draft Report, UOP


I The Draft Audit Report requested our written comments within 30 days of the date of the letter.
Therefore this response is timely filed.

                                         4615 East Elwood Street
                                          Phoenix, Arizona 85040
Ms. Gloria Pilotti
July 27, 2005
Page 2


does not concur with Finding 1 and has initiated responsive action with respect to the
isolated items cited in Finding 2.

        On behalf of the Apollo Group, Inc. and the University of Phoenix, we extend our
appreciation to you and the other OIG personnel for the cooperative efforts towards
resolution of this audit, and we look forward to continued work together towards
completion of this matter.


                                     Sincerely yours,

                                     /s/

                                     Robert T. Collins
                                     Vice President of Student Financial Aid
Response to Draft Report
ED-OIG/A09E0015                                                                   Page 1 of 6



FINDING NO. 1

The University of Phoenix (UOP) does not concur with Finding No. 1 in the Draft
Report. Therefore, UOP also disagrees with the recommendations that are predicated
upon this finding. UOP’s reasons for disagreement with Finding 1 and the accompanying
recommendations are explained below.

Finding 1 cites 834 students (from a universe of 197,230 students) for whom UOP used
Title IV funds to credit their accounts for prior learning assessment fees. The finding
asserts that such disbursements were noncompliant because the prior learning assessment
fees are not institutional charges that could be paid for with Title IV funds. UOP
respectfully disagrees with this assertion and contends that it is at odds with the
governing regulations and with prior guidance published by the U.S. Department of
Education.

Background

The University of Phoenix Prior Learning Assessment Center (PLAC) adds an additional
level of service to students in providing the ability, where appropriate, to use professional
development training, life experience, foreign language coursework, professional
certification and licensure, and workshop or seminar courses to fulfill credit requirements
for degree completion. The standards and criteria established by UOP for assessing prior
college-level learning were developed in conformance with guidelines set forth by the
Council for Adult and Experiential Learning (CAEL) and approved by the American
Council on Education, the American Association of Collegiate Registrars and
Admissions Officer and the Council on Higher Education Administration. Throughout
the audit period at issue in the Draft Report, the PLAC followed stringent compliance
requirements for tracking and documenting each process associated with credit
recognition and awards, relying upon a staff of approximately 25 professionals in areas of
accounting, compliance, intake, evaluations, corporate review, and Continuing Education
Units. Additionally, UOP engaged faculty evaluators in areas of content expertise to
review and render credit decisions based upon academic learning and merit in areas of
applicability. Student program files were reviewed for areas of need and compatibility of
subject matter for content requirements and non-duplication of program and submission
content. The PLAC process required – and continues to require –substantiation of
learning through official certification, transcript, license, and other forms of
documentation.

The Draft Report correctly notes at page 5 that UOP’s written policies included prior
learning assessment fees as an allowable Title IV charge when the student authorized
UOP to apply financial aid funds to all open allowable charges. Elsewhere, the finding
corroborates other key facts that substantiate the disbursements at issue. For example,
the Draft Report details at page 3 that UOP assessed PLAC fees and related credit posting
Response to Draft Report
ED-OIG/A09E0015                                                                                  Page 2 of 6


fees at uniform rates for all students who availed themselves of the prior learning
assessment option. The Report also reflects, in a manner consistent with the description
of the PLAC set forth in the paragraph immediately above, that the evaluation and
assessment activities paid for by PLAC fees were comprised of activities performed at
and by UOP, and not at or by any individual student’s predecessor institution. Lastly, the
Report confirms at page 3, including footnote 2, that the PLAC process was comprised of
educationally related activities, including the compilation by the student of a detailed
portfolio and related materials, and the assessment by UOP of the student’s qualification
for credit that will be applied to his or her chosen program of study.

As shown below, each of these facts substantiated in the Draft Report affirms that the
usage of Title IV fees by UOP to pay PLAC fees was permissible and compliant.

Statement of Reasons

1.    The applicable federal disbursement regulation plainly authorizes the payment of
PLAC fees with federal funds. That regulation states as follows:
       After obtaining the appropriate authorization from a student or parent under Section
       668.165, the institution may use title IV, HEA program funds to credit a student’s
       account at the institution to satisfy—
         (i) current charges that are in addition to charges described in paragraph (d)(1) of this
       section that were incurred by the student at the institution for educationally related
       activities;

       34 C.F.R. §668.164(d)(2).

2.      The disbursements were duly authorized. The factual recitations in the Draft
Report establish that the use of Title IV funds to pay PLAC fees was proper under this
regulation, because those disbursements were made pursuant to the required student or
parent authorizations, and because the PLAC fees were incurred by the student at UOP
for educationally related activities. As previously noted, the Draft Report acknowledges
at page 5 that UOP required that students authorize the application of financial aid funds
before these disbursements were made. Accordingly, the Draft Report does not dispute
that UOP complied with the requirement in the regulation that UOP first obtain “the
appropriate authorization from a student.”

3.      The PLAC fees paid for educationally related activities. UOP disagrees with the
Draft Report’s assertion at page 5 that prior learning assessment activities at UOP “were
not charges that were incurred by the student at the institution for educationally related
activities” pursuant to section 668.164(d)(2). Fees and charges for evaluating evidence of
academic achievement and credit towards graduation can only be characterized as
educationally related. The Draft Report’s description of the standards and procedures
utilized by the PLAC, and the further elaboration presented in this response, clearly
establish that the prior learning assessment activities were educationally related, and that
the charges were incurred at UOP, for activities performed by UOP personnel, to advance
Response to Draft Report
ED-OIG/A09E0015                                                                                 Page 3 of 6


the educational programs and objectives of enrolled students.1 Finding 1 is
fundamentally flawed in its reliance upon the premise that prior learning assessment
activities were not educationally related.

4.      The Department’s published guidance demonstrates that Finding 1 is incorrect in
asserting that PLAC fees cannot be paid with Title IV funds. We also disagree with the
Finding’s conclusion at page 4 that the PLAC fees “are not institutional charges that can
be paid with Title IV funds.” That conclusion was contradicted by guidance that the
Department published when it promulgated the substantially similar predecessor version
of the current disbursement regulation. That guidance stated as follows:

         … the Secretary believes that a student should have control over program funds in
         excess of direct institutional charges – the student uses these funds at his or her
         discretion to pay for other-cost-of-attendance and other miscellaneous institutional
         charges.”

         59 Fed. Reg. 61728 (Dec. 1, 1994)(emphasis added).2

The discretion afforded to students to authorize the payment of other institutional charges
with Title IV funds has been expressly reiterated in subsequent guidance. For example,
when the Department issued proposed rules concerning late disbursements in 1999, it
published an illustration of “the major principles of the proposed late disbursement
procedures” which identified late parking fines as a permissible institutional Title IV
charge. The published example stated as follows:

         The institution determines that Michael has $50 in outstanding tuition charges and $100
         in outstanding parking fines for the payment period. The institution credits Michael’s
         account with $50 of Michael’s Federal Pell Grant funds. The institution wants to use
         another $100 of Michael’s late disbursement to cover the outstanding parking fines.
         However, the institution has not received permission from Michael prior to his
         withdrawal to credit his account for educationally-related charges other than tuition
         and fees and room and board. …

____________________________
1
  Finding 1 argues that the PLAC fees do not qualify as educationally related because they “were incurred
by the student for the evaluation of activities that occurred at locations other than UOP and may have taken
place prior to the student’s enrollment.” This conclusion is incorrect because the prior learning assessment
activities paid for the process of assessing the prior learning activities; the fees do not cover the prior
activities themselves. Furthermore, the interpretation in the finding is contradicted by the governing
regulation, which authorizes disbursements for current charges “incurred by the student at the
institution…” The facts recited in the Draft Report plainly establish that these charges were incurred at
UOP, not elsewhere. Therefore the charges are expressly authorized by the governing regulation.
2
  The quoted commentary accompanied the final publication of the predecessor disbursement rule
that appeared at §668.165(b)(3). Moreover, the Department provided similar guidance with its
final regulations of November 29, 1996, stating “[a] student or parent should have control over the
Title IV, HEA program funds he or she receives for educational costs in excess of tuition and
fees…” 61 Fed. Reg. at 60595
Response to Draft Report
ED-OIG/A09E0015                                                                                Page 4 of 6



           64 Fed. Reg. 43028 (August 6, 1999)(emphasis added).

The Department’s example concludes that, upon receipt of the requisite authorization
from “Michael,” the institution is permitted to “credit his account with the $100 of
Federal Pell Grant funds to cover his outstanding parking fines.” Id. Clearly, if parking
fines are “educationally-related” charges that qualify for Title IV funding, the same is
true of PLAC fees, which cover core educational activities.

Other sources of guidance confirm that the Department considers other charges that are
further attenuated from the educational mission than PLAC fees to be considered
educationally related and qualified for Title IV funding. For example, on January 7,
1999, the Department issued a Policy Bulletin that endorsed Title IV funding for charges
“to a student’s account for discretionary educationally related expenses (e.g., parking or
library fines, the cost of athletic or concert tickets, etc.)”. Although that policy guidance
was aimed at clarifying the return of Title IV calculation requirements as they relate to
non-institutional charges, it was premised upon the proposition that these items qualify
for Title IV funding, another example of published Departmental guidance contradicting
the restrictive, novel, and incorrect interpretation of “educationally related” set forth in
Finding 1.

5.     The PLAC fees would qualify for funding as part of the students’ cost of
attendance. The Draft Report cites UOP’s published materials for the proposition
that PLAC fees were not included as part of the major curriculum fees and tuition.
Report at page 5. This point is not central to the analysis because UOP’s funding
of PLAC fees with Title IV dollars was authorized pursuant to 34 C.F.R.
§668.164(d)(2), not 34 C.F.R. §668.164(d)(1). Whereas subsection (d)(1) focuses
upon disbursements for tuition and fees, subsection (d)(2) focuses upon
authorized payments for “current charges that are in addition to the charges
described in paragraph (d)(1).”

In any event, Finding 1’s assertions that the PLAC fee disbursements could not
have been included in the cost of attendance and were therefore subject to
disallowance are incorrect. Subsection (d)(1)(i) of 34 C.F.R. §668.164 expressly
authorizes institutions to utilize Title IV funds to pay “tuition and fees.” UOP’s
assertion, for administrative purposes, that PLAC fees were not part of UOP’s
major curriculum fees and tuition did not negate the obvious fact that the charges
for prior learning assessment nonetheless constituted a form of “fee,” and the
Draft Report presents no fact or information to refute this self-evident conclusion.

Moreover, the statutory definition of the term “cost of attendance,” relied upon in
the Draft Report, again demonstrates that UOP’s PLAC fee disbursements were
proper. The definition in HEA § 472 refers to “tuition and fees normally assessed

________________________
3
    See, FSA IFAP Library, Policy Interpretation and Guidance, at ifap.ed.gov/pbulletins, page E8-4
Response to Draft Report
ED-OIG/A09E0015                                                                          Page 5 of 6


a student carrying the same academic workload as determined by the institution.”
The Draft Report’s description of UOP’s PLAC fees at page 3 reflects that the
fees were normally assessed, at uniform rates, in connection with prior learning
assessment activity.

The Report asserts that PLAC fees did not meet the “normally assessed”
component of the costs of attendance definition because only 834 of the 197,230
students in the audit universe were assessed the fees. However, the mere fact that
PLAC fees were not assessed to every student does not signify that these fees
were not normally assessed. The statute calls for a “determination by the
institution” as to what fees are normally assessed; the obvious fact that UOP only
billed those students who actually availed themselves of the prior learning
assessment option does not signify that the fees were not normally assessed.

Longstanding guidance from the National Association of Student Financial Aid
Administrators (NASFAA) confirms that the PLAC fees could properly have been
considered to be within the cost of attendance. The 1993 NASFAA Monograph
concerning cost of attendance and student expense budgets expressly references
“Other Educational Expenses” as a component of the student budget and includes
within that category the following:

“[E]xamples of allowable other educational expenses include: additional tuition, fees,
equipment and materials not already accommodated in other budget components: fees for
credit by examination when students advance toward their degree or educational
objective, e.g., CLEP (College-Level examination Program), APP (Advanced Placement
Program); thesis and dissertation costs...”

NASFAA Monograph Number 9, Constructing Student Expense Budgets, at page 7
(April 1993).

The Monograph was issued by the federal student aid community to provide guidance to
financial aid administrators who construct student expense budgets and has continued to
be relied upon, without pertinent revisions, twelve years after it was published. The
Monograph clearly includes prior learning assessment functions in the cost of attendance
and student expense budget, thereby demonstrating that the PLAC fees are an allowable
expense.

In any event, UOP’s PLAC fee disbursements complied with the stringent requirements
of 34 C.F.R. §668.164(d)(2) concerning authorized charges beyond tuition and fees. As
is stated in the Student Aid Handbook, “Allowable charges always include current
charges for tuition and fees and room and board … You may use FSA funds to pay
other current charges that a student has incurred for educationally related activities if you
obtain the student’s written authorization to pay those charges …”4

________________________
4
    2005-06 Federal Student Aid Handbook at page 4-17.
Response to Draft Report
ED-OIG/A09E0015                                                                  Page 6 of 6



6.      Any disallowed PLAC fees would be returnable to the students, not to the lenders
or the FSA programs. Based upon all of the stated reasons for disagreement with Finding
1, UOP also disagrees with the resultant accompanying recommendations. With respect
to the repeated recommendations concerning the return of Title IV funds to the various
FSA programs and lenders, UOP notes that these funds were authorized by the students
to be held by UOP (and to be applied to allowable charges). Any disallowance would
therefore result in the disbursement of these funds back to the students, not to the FSA
programs or lenders.


FINDING NO. 2

UOP concurs that Finding 2 cites a very limited number of students who inadvertently
received Title IV funds although they were enrolled in a program deemed ineligible.
Notably, these six students reflect a very small percentage of the students enrolled in the
referenced ineligible program at UOP during the audit period. As is noted in the Draft
Report at page 8, the inadvertent funding of the six cited students resulted from an
isolated circumstance that occurred at only one UOP campus.

UOP notes that the Draft Report indicates that the cited recommendations are subject to
further action by the ED Chief Operating Officer. Furthermore, UOP will need
additional information in order to identify precisely the six students cited in Finding 2.
UOP is ready and willing to comply with the stated recommendations once they are final
and upon receipt of the requisite information. UOP notes that most of the Title IV funds
at issue in Finding 2 are FFEL funds and respectfully requests, for fairness and
simplicity, that the resolution of those disbursements be achieved via application of the
actual loss formula in lieu of the recommended return to lenders.