oversight

Report on the Inspection of Career Training Institute's Federal Financial Aid Programs.

Published by the Department of Education, Office of Inspector General on 1998-12-30.

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

Department of Education, OIG                       CN: N04-70011                                                  Page 1




    HIGHLIGHTS OF INSPECTION RESULTS

Our primary inspection objective was to determine if Career Training Institute (CTI)
administered its Federal student financial aid (SFA) programs in accordance with laws,
regulations and applicable program requirements. Our inspection revealed that CTI and its
programs were eligible to participate. However, we determined that CTI did not always:
(1) properly determine student eligibility, (2) appropriately disburse SFA funds, and
(3) properly calculate and pay refunds for students who withdrew. We also determined that
there were other weaknesses in the school’s capability to administer the SFA programs.

From the sample of student files reviewed, we identified $67,6701 in liabilities owed either to
the Department or to lenders and $306 owed to students for aid received during award years
1996 and 1997. During this period, the school received a total of $2,824,258 in Title IV funds.
Based on the liabilities identified from each of our Determinations (findings), we estimate that
the liabilities owed by CTI may be $513,568 or as much as $932,054 (see our calculations in
Appendix A).

In response to Determinations 1 and 3, CTI advised us that they have instituted new operating
procedures, hired additional financial aid staff and contracted with a new SFA servicer. We
believe these steps will help improve CTI’s administration of the SFA programs. However, we
have made some additional recommendations, which include that CTI determine and refund
any additional liabilities owed. Details about our Determinations and the school’s responses
are presented below. The school’s response in its entirety is included as Appendix B.




           1
             - For reporting purposes, the decimal portion of each dollar figure and number (when referring to hours)
   appearing in the report has been rounded up or down to the nearest dollar or number.
Department of Education, OIG            CN: N04-70011                                     Page 2




                                     DETERMINATIONS -
                                      STUDENT ELIGIBILITY
                               The Institutional Student Information Record (ISIR)
 Determination
                               process date was after some students had withdrawn.
     No. 1
                       Unallowable disbursements of Pell Grant funds totaling $3,442 were
                       paid to 4 students, 7 percent of our sample, who withdrew before CTI
Liabilities Owed       obtained an ISIR. The process date of the ISIRs for these students
                       ranged from 1 to 5 days after the students withdrew. The Pell Grant
                       central processor furnishes the student financial aid (SFA)
                       administrator, as part of the ISIR, the expected family contribution
                       (EFC) for each student. The SFA administrator examines and
                       assesses the data used to calculate the EFC and makes the award to
                       the student.

                       Under 34 CFR Section 690.61(b)(1), for a student to receive a
     Criteria          Federal Pell Grant, the school must obtain a valid ISIR by the last date
                       that the student is still enrolled.

                       CTI officials stated that they would review the files we identified and
     CTI’s             make a refund. School officials also stated that their servicer,
   Response:           Financial Aid Management for Education, Inc. (FAME), has a
                       procedure in place for this situation. The school must confirm to
                       FAME that the student is in attendance. No financial aid will be
                       disbursed to a student who has a last date of attendance prior to the
                       ISIR process date.

                       The school’s new procedures appear adequate to resolve this problem
IG’s Comments
                       in the future.

                       We recommend that the Department require CTI to:
      IG’s
  Recommen-            (A) Refund the $3,442 in Pell Grants disbursed to the
  dations for          students identified in our sample.
 Determination
     No. 1:            (B) Review the files for all students who received aid during
                       award years 1996-1997 for this problem, not just the students
                       in our samples. Where the problem is identified, CTI should
                       be required to make refunds.
Department of Education, OIG            CN: N04-70011                                    Page 3


                               The school did not always maintain or require students
 Determination                 to sign the Free Application for Federal Student Aid
     No. 2                     (FAFSA).

                       Fifteen or 25 percent of our sample students’FAFSAs were either
                       unsigned or not in the students’file. We consider the student’s
Liabilities Owed       signature on the FAFSA and the school’s acquisition and review of
                       FAFSAs a critical control to ensure students are actually eligible to
                       receive aid. These students received $38,509 in aid.

                       CTI used a modem to send financial aid application data to its servicer
                       who then sent it to the Pell Grant central processor. According to 34
     Criteria          CFR Section 690.82(b), a school shall retain any completed
                       applications (FAFSAs) or any other documents submitted by a student
                       to the school if the application information is transmitted to the
                       Secretary under ED Express software. Also, the student is required to
                       sign the statement on the FAFSA certifying that the information
                       provided is correct. If the student applies electronically through his or
                       her school, the school must keep the signed FAFSA in the student’s
                       file. Without a signed statement from the student on the application,
                       the Department has no assurance that the information used to
                       determine the student’s eligibility was accurate and complete.

                       We recommend that the Department require CTI to:
     IG’s
Recommenda-            (A) Refund the $38,509 in aid disbursed to the students in
  tions for            our sample who did not have a signed FAFSA.
Determination
    No. 2:             (B) Identify any students who do not have a signed FAFSA
                       during award years 1996-1997 and make refunds where
                       necessary.

                       (C) Maintain all original, signed FAFSAs for any student who
                       applies for Federal aid.
Department of Education, OIG           CN: N04-70011                                  Page 4



                                    DETERMINATIONS -
                                         DISBURSEMENTS
                               Unallowable and early second disbursements of aid
 Determination                 were made for students who did not complete the
     No. 3                     required clock hours of instruction prior to
                               disbursement.

                       Unallowable second disbursements of aid totaling $14,425 were made
 Unallowable           for 8 students (13 percent of our sample) because CTI incorrectly
   Second              calculated that the students had completed 450 clock hours of
Disbursements          classes. The school included unearned hours of attendance when
    of Aid             calculating the number of hours completed by students to determine
                       their eligibility for second disbursements.

                       Except for cosmetology and barbering students, CTI disbursed second
CTI’s Payment          payments of aid to students after they reviewed summary attendance
   Periods             records and determined that the students had completed 450 clock
                       hours of classes. For cosmetology and barbering students, CTI
                       disbursed second payments of loans after they completed 600 clock
                       hours of classes. For our analysis, we used the Department’s
                       requirement for all students to complete 450 class hours before being
                       eligible for second payments.

                       We performed a detailed analysis of the attendance records for each
IG’s Analysis of       student in our sample. We compared the attendance marks and hours
                       recorded on the student’s “Student Attendance Report” (the summary
  Attendance
                       attendance record) with the attendance marks and hours recorded on
                       instructors’original attendance records.

                       We considered the instructors’original attendance records to be the
                       most accurate, complete and reliable record documenting the actual
                       hours of classes completed by students. Therefore, we relied on the
                       attendance marks recorded on these records to determine whether
                       and when students were eligible for second disbursements of aid.

                       In reviewing our sample students’attendance records, we gave
                       students credit for:
Department of Education, OIG             CN: N04-70011                                     Page 5

                               -- scheduled hours of class attendance when instructors
                               marked the students present with a “P” or the student signed in
                               on attendance records.

                               -- actual hours of class attendance when instructors or the
                               student marked their “sign in” time and “sign out” time on
                               attendance records.

                               -- actual hours of class attendance when students clocked in
                               and clocked out on a time card using the school’s time clock.

                       Also, we gave students credit for the full day of scheduled hours of
                       attendance for days when we could not determine the actual hours
                       completed by students. For example, we gave full credit for days with
                       the following attendance marks recorded:

                               -- “PT”- present, but tardy

                               -- “P/A”- present part of the day, but absent part of the day

                               -- “PLE”- present, but left early.

                       In addition, we gave students full credit for many days when the
                       students did not sign or clock out. For example, a student may have
                       signed or clocked in at 6:00 p.m., but failed to sign or clock out. Even
                       though we could not determine when the student actually finished
                       class that day, we gave the student full credit for their scheduled class
                       time from 6:00 to 10:00 p.m.

                       CTI’s policy was to record excused absences as “AE” or “A/E” (absent,
                       but excused) on attendance records. We gave medical assistant
                       students up to 45 hours credit (10 percent of the payment period) for
                       excused absences. This is CTI’s policy. No absences were excused
                       for cosmetology and barbering students because of State licensing
                       requirements for those students. Also, we did not give medical
                       assistant students credit for absences not designated as excused. We
                       considered unexcused absences as those that were recorded as “A”,
                       “ABS” or when no mark was recorded.

                       Also, we gave students credit when CTI marked the student absent on
                       the summary attendance record, but the student was marked present
                       on originals and CTI marked the student present for fewer hours on
                       the summary than were recorded on the originals.
Department of Education, OIG            CN: N04-70011                                    Page 6

                       From our review of attendance records, we uncovered many instances
  Unearned             where the school recorded unearned hours of class attendance on the
   Hours of            students summary attendance records.
 Attendance
 Recorded on                   — For 51 students, 85 percent of our sample, CTI gave
                               students credit for unexcused absences on their summary
  Summary
                               attendance records for a total of 4,287 hours.
 Attendance
   Records                     — For 29 students, 48 percent of our sample, CTI gave full
                               credit on the summary attendance report for partial attendance
                               recorded on original attendance records for a total of 724
                               hours.

                               — For 27 students, 45 percent of our sample, CTI gave the
                               students a total of 292 hours of class attendance on their
                               summary attendance record for days that were holidays.

                               — For 2 students, CTI gave bonus credit hours on their
                               summary attendance record for a total of 64 hours.

                               — For 2 students, CTI marked the students present on their
                               summary attendance record for a total of 12 hours when
                               classes were not scheduled.

                               — For 1 student, CTI gave the student 30 hours credit on the
                               summary attendance record for class attendance while the
                               student was on a leave of absence.

                       CTI’s use of unearned attendance hours resulted in CTI making
 Unallowable           unallowable second disbursements. The school disbursed $14,425 to
   Second              8 students, 13 percent of our sample, who did not complete 450 hours
Disbursements          of classes.
    of Aid
                       For example, CTI calculated that one student attended 545 hours of
                       classes. However, we calculated that the student only completed 395
                       of the required 450 hours of classes in the payment period. Therefore,
                       the student was not eligible for a second Pell Grant payment of $1,170
                       and a second Stafford loan payment of $1,260.

                       CTI’s use of unearned attendance hours also resulted in CTI making
                       second disbursements early for 12 students, 20 percent of our sample.
 Early Second
                       For example, for one student, CTI disbursed second payments for a
Disbursements          subsidized Direct loan on 10/31/96 and a Pell Grant on 11/8/96.
     of Aid            However, we calculated that the student did not complete 450 hours of
                       classes until 1/22/97.
Department of Education, OIG           CN: N04-70011                                     Page 7

     Criteria          Under 34 CFR Section 668.165(c)(2), the earliest an institution may
                       credit the account of an enrolled student for second disbursements of
 Stafford and          Direct Loans or FFEL program funds is 10 days before the first day of
 Direct Loans          a period of enrollment for which that disbursement is intended.

                       Under 34 CFR Section 690.75(a), for each payment period, an
                       institution may pay a Federal Pell Grant to an eligible student only
  Pell Grants          after it determines that the student has completed required clock
                       hours, if the student is enrolled in a program that is measured in clock
                       hours.

                       Regulations under 34 CFR Section 668.23, require schools to
    General            maintain student, program and fiscal records that are systematically
                       organized and readily available for review. Further, The Federal
   Provisions          Student Financial Aid Handbook 1995-96, page 3-147 emphasizes
                       the importance of maintaining complete and consistent records.
                       Student records for each SFA recipient must clearly show that the
                       student was eligible for the funds received, and that the funds were
                       disbursed in accordance with program regulations.

                       School officials stated they would check the files in the inspection
     CTI’s             period to determine the time completed by the students as of the date
   Response:           of the second disbursements. If the students did not successfully
                       complete the minimum attendance required, the school agreed to
                       repay any unallowable SFA disbursed.

                       CTI officials stated that its servicer, FAME, has a process that requires
                       the school to submit attendance data prior to the preparation of first
                       and second disbursements. FAME does not process any second
                       disbursements unless the student has COMPLETED the required
                       hours.

                       The school’s new procedures appear adequate to resolve this problem
IG’s Comments          if CTI calculates hours completed by students in accordance with ED
                       regulations.

                       We recommend that the Department require CTI to:
     IG’s
Recommenda-            (A) Refund the $14,425 in aid disbursed to the 8 students in
  tions for            our sample who did not complete 450 hours of attendance.
Determination
    No. 3              (B) Review the files for all students who received aid during
                       award years 1996-1997 for this problem, and make refunds
                       where necessary.

                       (C) Strictly enforce its policies for recording and transferring
                       attendance hours from originals to summary records.
Department of Education, OIG           CN: N04-70011                                     Page 8


 Determination                 Loans were disbursed prior to the students’
     No. 4                     completion of 30 days of attendance.

                       CTI disbursed loan payments to 4 first-time borrowers prior to the
                       completion of 30 days of class attendance. The students only
                       completed between 26 and 29 days of classes prior to receiving their
                       first loan disbursements.

                       Under 34 CFR Section 668.165(c)(3), if a student is enrolled in the
     Criteria          first year of an undergraduate program of study and the student has
                       not previously received an FFEL or Direct Loan, the institution may not
                       release to the student the first installment of his or her FFEL or Direct
                       loan until 30 days after the first day of the student’s classes.

      IG’s             We recommend that the Department require CTI to implement
  Recommen-            procedures for disbursing loan proceeds to first-time
   dation for          borrowers only after students complete 30 days of classes.
 Determination
     No. 4:
Department of Education, OIG           CN: N04-70011                                    Page 9



                                     DETERMINATIONS -
                                                 REFUNDS
                               The school underpaid refunds because it included
 Determination                 unearned hours of attendance to calculate refunds due
     No. 5                     for students who withdrew.

                       CTI’s calculation of hours completed by students affected the
Effect of Using        calculation of the school’s pro rata refunds. Based on our
   Unearned            calculations, CTI owes additional refunds of $11,033 for 17 (28
   Hours to            percent) of our sample students. For example, for one student, CTI
   Calculate           calculated that the student completed 212 hours of attendance while
   Refunds             enrolled. However, we calculated that the student only completed 124
                       hours of attendance, including excused absences, of the 900 clock
                       hour training program. Therefore, instead of the school being eligible
                       to retain 30 percent of the student’s charges, CTI was only eligible to
                       keep 20 percent. This resulted in CTI owing an additional refund of
                       $477 for the student.

                       Schools must calculate refunds for students who withdraw in
     Criteria          accordance with 34 CFR Section 668.22. Section 668.22 (b) and (c)
                       requires institutions to perform pro rata refund calculations for
                       withdrawn students. Specifically, schools have to calculate refund
                       amounts based on the number of clock hours completed (including
                       excused absences) by students. By overstating hours completed, CTI
                       was able to reduce the amount of required refunds.

                       We recommend that the Department require CTI to:
      IG’s
  Recommen-            (A) Pay additional refunds of $11,033 identified for the 17
  dations for          students.
 Determination
     No. 5:            (B) Review the files for all students who withdrew during
                       award years 1996-1997, recalculate the number of actual
                       hours completed by those students, and make any additional
                       refunds where necessary.
Department of Education, OIG            CN: N04-70011                                     Page 10


 Determination                 The school had late and unpaid Title IV refunds.
     No. 6
                       In our sample of 60 files reviewed, 10 late refunds occurred and 4
                       refunds were unpaid at the time of our file reviews in June and July
                       1998. The late refunds ranged from 11 to 292 days late. Also, the
   Liabilities         school wrote 4 refund checks totaling $2,918 which remain unpaid. At
   Identified          the time of our file reviews, the 4 checks had been outstanding from
                       129 to 512 days. Two of these unpaid refunds totaling $2,610 are
                       questioned under Determination 3. Therefore, only the remaining 2
                       unpaid refunds totaling $308 are questioned here— checks for $212
                       to the Direct Loan program and $96 to a student.

                       In addition, we identified 2 credit balances which remain unpaid to
                       students totaling $210. Also, another student’s Pell Grant program
                       refund was underpaid by $50.

                       According to 34 CFR Section 682.607 (c)(1), a school shall pay a
     Criteria          refund that is due within 60 days after the student's withdrawal as
                       determined under 34 CFR 668.22(i).

                       According to 34 CFR Section 668.22 (g)(3)(iii)(B), if an institution
                       demonstrates that the total amount of a refund would be $25 or less,
                       the institution is not required to pay the refund, provided that the
                       institution has obtained written authorization from the student in the
                       enrollment agreement to retain any amount of the refund that would be
                       allocated to the Title IV, HEA loan programs.

                       According to 34 CFR Section 668.22 (h)(2)(iv), the amount of the Title
                       IV, HEA program portion of the refund allocated to the Title IV, HEA
                       programs other than the FWS, Federal Stafford Loan, Federal PLUS,
                       and Federal SLS programs must be returned to the appropriate
                       program account or accounts by the institution within 30 days of the
                       date that the student officially withdraws, is expelled, or the institution
                       determines that a student has unofficially withdrawn.

                       We recommend that the Department require CTI to:
      IG’s
  Recommen-            (A) Follow the established policies for making timely refunds.
  dations for          (B) Repay: $308 in outstanding refund checks— $212 to the
 Determination         Direct Loan program and $96 to a student; $210 in credit
     No. 6:            balances owed to students; and $50 owed for an underpaid
                       refund to the Pell Grant program.
                       (C) Identify all students who currently have a credit balance
                       over $25 or who have a refund due and make appropriate
                       refunds where necessary.
Department of Education, OIG            CN: N04-70011                                     Page 11



                                     DETERMINATIONS -
                              OTHER INDICATIONS OF
                           WEAKNESSES IN ADMINISTRATIVE
                                  CAPABILITIES
                               Loan promissory notes were signed by students before
 Determination
                               a valid ISIR was obtained.
     No. 7
                       We identified 32 instances, 53 percent of our sample, where the
                       student’s loan promissory note was signed by the student prior to the
                       process date of the ISIR. The promissory notes were signed from 3 to
                       217 days prior to the process date of the student’s ISIR. Although the
                       ISIRs were eventually obtained and the students were eligible for
                       loans, CTI officials should have obtained the ISIRs first. An ISIR
                       should be obtained and reviewed by a school to: 1) ensure that the
                       student is eligible and 2) resolve any conflicting eligibility information
                       prior to disbursing aid.

                       Under 34 CFR Section 682.201(a)(1), a student is eligible to receive a
                       Stafford loan if the student has received a determination of eligibility or
     Criteria          ineligibility for a Pell Grant. Similarly, under 34 CFR Section
                       685.200(a)(1)(iii), a student is eligible to receive a Direct Subsidized
                       or a Direct Unsubsidized Loan if the student has received a
                       determination of Federal Pell Grant eligibility.

                       We recommend that the Department require the school to
      IG’s
                       change its loan processing procedures to ensure that loan
  Recommen-
                       promissory notes are not signed by students and/or
   dation for
                       processed by the school until the school is in receipt of a
 Determination
                       valid ISIR.
     No. 7:
Department of Education, OIG           CN: N04-70011                                Page 12


 Determination                 Instructors’student grade records and summary
     No. 8                     student grade records did not match.

                       For 22 students, 37 percent of our sample, the instructors’original
                       grade records and the grade summaries maintained for each student
                       did not match. We did not attempt to determine whether students
                       were meeting satisfactory academic progress standards because of
                       conflicting grade records.

                       The regulations (34 CFR Section 668.23) require schools to maintain
     Criteria          student records, and program and fiscal records. The importance of
                       maintaining complete and consistent records cannot be
                       overemphasized. Student records for each SFA recipient must clearly
                       show that the student was making satisfactory progress and was
                       eligible for the funds received.

                       We recommend that the Department require the school to:
     IG’s
Recommenda-            (A) Carefully follow its grade recording procedures to ensure
  tions for            that original grades are correctly transferred from original
Determination          instructors’grade records to the summary grade record.
    No. 8:
                       (B) Review all student grade records and determine the
                       actual grades earned by students and record them on the
                       summary grade record.
Department of Education, OIG             CN: N04-70011                                    Page 13



                                        OTHER MATTERS
                       The school submitted a “Narrative” containing its responses to our
                       initial Determinations. The beginning of the Narrative discusses the
CTI’s Changes          changes CTI has made in student record keeping and financial aid
                       management. We reviewed the school’s changes and have the
                       following comments about them:

                       CTI’s Changes
    Servicer           1) Beginning in calendar year 1998, CTI began using FAME as its
    Change             servicer. FAME uses the following beneficial procedures:

                               — Safety nets are built-in to FAME’s software to prevent errors
                               in student eligibility, conflicting data in an ISIR, and early
                               disbursement. FAME requires CTI to submit an attendance
                               report on a monthly basis. This information is taken from the
                               student’s permanent Attendance Record Sheet (Student
                               Attendance Report or SAR). FAME will not proceed with the
                               disbursement unless the student has completed the required
                               hours.

                               — CTI has contracted with FAME to provide “unannounced”
                               visits to its Financial Aid Department for surprise inspection of
                               records and processes.

                               — FAME sends Title IV regulations, changes and updates to
                               CTI.

                       a) We believe FAME’s procedures for identifying errors in student
IG’s Comments:         eligibility, conflicting data in an ISIR, and early disbursement should
                       help CTI avoid such errors in the future.

                       b) We believe FAME’s procedure to not disburse aid unless the
                       student has completed the required hours should help deter this
                       problem as long as CTI provides FAME with the actual hours
                       completed by students.

                       c) We believe FAME’s “unannounced” visits to CTI’s Financial Aid
                       Department for surprise inspections of records and processes should
                       be an excellent test for seeing results of changes.

                       d) We believe FAME’s distribution of Title IV regulations, changes and
                       updates should help CTI stay abreast of current Title IV management
                       practices.
Department of Education, OIG            CN: N04-70011                                    Page 14


   New Staff           2) CTI hired two additional staff for its Financial Aid Department.

                       We believe CTI’s hiring additional staff for the Financial Aid
     IG’s              Department should improve operations. We recommend that CTI
  Comments /           require its staff to continually obtain training from the
  Recommen-            Department and financial aid associations such as the
    dation:            Florida Association of Student Financial Aid Administrators.


                       3) CTI replaced its mechanical time clock with a new electronic one
   New Time            which computes totals for a designated time period. The clock is used
    Clock              by Barber and Cosmetology students. Students sign the time cards at
                       the end of the month to attest to the accuracy of the calculation.

                       We viewed the time cards used by this clock and believe it will help
     IG’s              alleviate the troubles CTI had in calculating and keeping track of
                       students’completed hours. However, since CTI is a clock hour
  Comments /
  Recommen-            school, we recommend that CTI use the time clock for all
    dation:            students enrolled, not just Barber and Cosmetology
                       students.


                       4) CTI has a new system for make-up hours for Medical
New System for         Assisting/Medical Administrative Specialist students. The Attendance
Make-Up Hours          Record Sheet was reformatted to account for both “scheduled” and
                       “make-up” time. The medical programs director has a “make-up” sign-
                       in sheet on her office door for students to sign when time is made up.
                       In addition, instructors and the program department head are present
                       during non-class hours to provide students with make-up/tutorial
                       assistance.
     IG’s
                       Since all students may be performing “make-up” time, we
  Comments /
                       recommend that CTI use this new Attendance Record Sheet
  Recommen-
                       to record attendance for all students.
    dation:
Department of Education, OIG           CN: N04-70011                                 Page 15


  Attendance           5) CTI streamlined its attendance record keeping system to include
   Record-             one student-generated document and one instructor-generated
keeping System         document that contains all attendance and make-up verifications.

                       We appreciate CTI’s efforts to streamline its attendance record
     IG’s              keeping system. However, we recommend that CTI maintain all
  Comments /           original instructor records that support the Attendance
  Recommen-            Record Sheet. We did not have problems with the number of
    dation:            different records CTI maintained. However, it is a problem when
                       attendance recorded on different records do not match.



  New Grade            6) CTI implemented a computerized grade book system for the
 Book System           Medical programs. Hard copies are printed at the end of the module,
                       signed by faculty, and submitted to the programs director. CTI will
                       continue to post grades to the audit sheet.

                       We appreciate CTI’s efforts to implement a computerized grade book
     IG’s
                       system. However, we recommend that CTI maintain all
  Comments /
                       original instructor records containing student grades.
  Recommen-
    dation:
Department of Education, OIG           CN: N04-70011                                    Page 16


                       In November 1990, Roger and Nancy Bradley purchased the Ohio
BACKGROUND             State College of Barber Styling, Toledo, Ohio and its branches, Career
                       Training Institute (CTI), Orlando, Florida and Career Training Institute,
                       Leesburg, Florida.

                       CTI currently has three campuses. The main campus is located on
Campuses and           Edgewater Drive in Orlando. Two other campuses are located in
  Programs             Orlando and Apopka, Florida. The school offers training in the
   Offered             following areas: Medical Assisting, Medical Administrative Specialist,
                       Phlebotomy Technician, Microcomputer Operations, Barber Styling,
                       Cosmetology and Nail Technology.

                       CTI participates in the following Title IV aid programs: Federal Pell
                       Grant, Federal Family Education Loan Program, Wiiliam D. Ford
   Federal
                       Federal Direct Student Loan Program, Federal Perkins Loan Program
   Program
                       and Federal Supplemental Educational Opportunity Grant. During
 Participation         award years 1996 and 1997, CTI received a total of $2,824,258 in
                       Title IV funds.


                       Our primary inspection objective was to determine if the school has
 INSPECTION            administered its Federal SFA programs in accordance with laws,
 SCOPE AND             regulations and applicable program requirements. Our review covered
   METHOD-             the following program areas:
    OLOGY
                                    -- Institutional Eligibility and Participation
                                    -- Program Eligibility
                                    -- Student Eligibility
                                    -- Disbursements
                                    -- Refunds
                                    -- Administrative Capability

                       To accomplish our objective, we reviewed administrative policies and
                       procedures, accounting records, attendance and grade records, SFA
                       files, bank records, Federal Pell Grant Student Payment Summaries
                       and funding information from the National Student Loan Data System.
                       We interviewed current and former school officials responsible for the
                       administration of the Title IV aid programs. We interviewed current
                       and former students. We also reviewed the school’s Independent
                       Public Accountant’s audit reports. In addition, we verified with State
                       officials whether students obtained the equivalency of a high school
                       diploma.
Department of Education, OIG             CN: N04-70011                                    Page 17

                       We performed 60 file reviews. We randomly selected samples of
  Sampling             students who: (1) withdrew and (2) were funded (received aid) during
 Methodology           award years 1996 and 1997. First, to ensure we tested for compliance
                       with refund requirements, we selected 15 withdrawn students from
                       each award year. Second, we selected 15 funded students from each
                       award year. For all students selected, we reviewed the students’files
                       for compliance with major program area requirements— see the
                       “Inspection Scope and Methodology” section above.

                       A total of 638 students received SFA funding at CTI during our
    Universe           inspection period. Our sample of 60 file reviews represents 9.4
                       percent of the total universe.

                       Our inspection period covered SFA funds received by CTI students
   Inspection          from July 1, 1995 through June 30, 1997. We performed fieldwork at
     Period,           the school during the months of October 1997 through March 1998.
    Fieldwork          We made additional requests for information and performed reviews
Visits, and PCIE       and analysis between and after fieldwork visits up until November 13,
                       1998. Our inspection was performed in accordance with Quality
   Standards
                       Standards for Inspections, adopted by the President’s Council on
    Followed
                       Integrity and Efficiency, appropriate to the scope of review described
                       above.


                       This inspection was supervised by Carol S. Lynch, Regional Inspector
MANAGER AND
                       General for Audit of the Atlanta Office of the Eastern Area. ED-OIG
 INSPECTION            staff members who provided support for this inspection included:
    STAFF
  MEMBERS                 Ž    Fritz Bailey, New York office      Ž Lee Greear, Austin-
                          Ž    JoAnn C. Jones, Atlanta office        Advisory & Assistance
                          Ž    Steve Purdy, Philadelphia office      Services
                          Ž    Celia Ruiz, Puerto Rico office     Ž Ken Dion, Boston office-
                          Ž    James Wiley, Atlanta office           Information Technology
                                                                     Services
                                     REPORT DISTRIBUTION LIST
                                    CONTROL NUMBER: N04-70011



Auditee                                                                         No. Of Copies

Mr. Roger Bradley                                                                     1
President
Career Training Institute


Action Official

Greg Woods                                                                            1
Chief Operating Officer
Office of Student Financial Assistance Programs


Other OSFAP Officials

Director                                                                              1
Institutional Participation and Oversight Service
Office of Student Financial Assistance Programs

Director, Atlanta Area Team, Office of Student Financial Assistance Programs   Hand delivered


Other ED Officials

Office of the General Counsel                                                         3

Supervisor, Post Audit Group
 Office of the Chief Financial Officer                                                1

Office of Public Affairs                                                              1

Accounting and Financial Management Service, OPE                                      1


ED-OIG Officials

Acting Inspector General                                                       Electronic (1)
Acting Deputy Inspector General                                                Electronic (1)
Acting Assistant Inspector General for Audit                                   Electronic (1)
Assistant Inspector General for Investigations                                 Electronic (1)
Assistant Inspector General for Operations - Eastern Area                      Electronic (1)
Director, Advisory and Assistance, Student Financial Assistance                Electronic (1)
Counsel to the Inspector General                                               Electronic (1)
Director, PAMS                                                                 Electronic (1)
Special Agent in Charge, Atlanta Field Office                                  Hand delivered
Other Area Audit Managers                                                      Electronic (1)
                                                                                     Appendix A
                             ATTRIBUTE SAMPLE PROJECTION -
                                 All Determination Liabilities

  SYMBOL       EXPLANATION        AMOUNT
     N        UNIVERSE                638
     n        SAMPLE                  60
     f        SAMPLE %           0.0940438871
     h        SAMPLE HITS             38
     P        HITS %            0.63333333333



STANDARD ERROR FORMULA:                         0.0592147422        THIS IS 1 STANDARD DEVIATION
AT 68% CONFIDENCE LEVEL

STANDARD ERROR FORMULA:                         0.097408251        THIS IS 1.645 STANDARD DEVIATION
AT 90% CONFIDENCE LEVEL

SAMPLE PROJECTION:
MIDPOINT                                            404
LOWER LIMIT                                         342
UPPER LIMIT                                         466

STANDARD ERROR NUMBER                               62
AT 90% CONFIDENCE LEVEL

STANDARD ERROR PERCENT                             15.4%
AT 90% CONFIDENCE LEVEL



CONCLUSION: WE ARE 90% CONFIDENT THAT THE NUMBER OF INELIGIBLE STUDENTS
    WHO RECEIVED SFA IS             404        PLUS/MINUS       62              OR SOMEWHERE
                                                                                   BETWEEN
     342             AND            466                        .




                 VARIABLE (DOLLAR) SAMPLE
                       PROJECTION
  SYMBOL       EXPLANATION                                                   AMOUNT
     N        UNIVERSE                                                          638
     n        SAMPLE                                                             60
      f       SAMPLE %                                                     0.0940438871
     D        SUM OF SAMPLE DIFFERENCES (HITS)                                $67,976
   AVG D      AVERAGE OF SAMPLE DIFFERENCES                                  $1,132.93
     d2       SUM OF SQUARED DIFFERENCE SFA PAID/AUDIT                     $157,951,676
    SD        STANDARD DEVIATION                                             $1,622.51

STANDARD ERROR FORMULA:                           $199.37    THIS IS 1 STANDARD DEVIATION
AT 68% CONFIDENCE LEVEL

STANDARD ERROR FORMULA:                           $327.97    THIS IS 1.645 STANDARD DEVIATION
AT 90% CONFIDENCE LEVEL

SAMPLE PROJECTION:
MIDPOINT                                          $722,811
LOWER LIMIT                                       $513,568
UPPER LIMIT                                       $932,054

STANDARD ERROR DOLLARS                            $209,243
AT 90% CONFIDENCE LEVEL

STANDARD ERROR PERCENT                              29%
AT 90% CONFIDENCE LEVEL



CONCLUSION: WE ARE 90% CONFIDENT THAT THE INELIGIBLE STUDENTS RECEIVED
  $722,811          IN SFA, PLUS OR MINUS         $209,243       OR SOMEWHERE BETWEEN
  $513,568         AND              $932,054               .
                                                                                         Appendix B
                                  CAREER TRAINING INSTITUTE

                                         ORLANDO, FLORIDA



Narrative

The Visiting Team is to be commended for the outstanding level of professionalism and respect shown to the
students, faculty, and staff of Career Training Institute. A cooperative relationship between the Team and
the school was developed early on, creating a conducive working environment. We made every effort to
accommodate all requests and respond in an immediate fashion. The Team has assured us time and again that
we have provided them with all materials requested.

There are several items of importance that we believe should be identified prior to the reading of the
Conditions outlined:

During the last few months prior to and subsequent to the commencement of the Team Visit, Career Training
Institute has made changes in the operation of our student record keeping and financial aid management. We
trust these changes have improved both our own efficiency and service to the students. The most significant
change is with our third party financial aid servicer.

1) Career Training Institute utilized the services of Mitchell Sweet and Associates since the school became
eligible to participate in Title IV programs. This was prior to the current school ownership. When the
current owners purchased the school, it was Mitchell Sweet and Associates (MSA) who assisted with the
painstaking challenge of the change of ownership process. MSA staff have worked with us in all areas of
Title IV management--eligibility, processing, refunds, reporting, etc. This was a long-term relationship. It
took the owners several years of consideration and research to make a change.

We participate extensively in state-wide professional organizations, including the Florida Association of
Student Financial Aid Administrators. Through these professional associations we became acquainted with
FAME--Financial Aid Management for Education, Inc. Headquartered in Ft. Lauderdale, FAME offers a
"local" connection which we had not enjoyed with MSA, which is located in Arizona--very far away and in
a different time zone, making it difficult for telephone consults or questions. After securing references and
even visiting other schools using the services of FAME, we made our decision in the late summer of 1997.

We were in the process of gathering our conversion information and setting a conversion date when the Team
arrived and our plans for conversion came to a halt. Not knowing just what to expect during the Visit, we
felt that severing a relationship with Mitchell Sweet at this time would not be a practical thing to do.
However, as time went on and we established a cordial working relationship with the Visiting Team, we were
able to supply all requested information and did not feel the need to continue our relationship with MSA.
It was time to move on and the new year would be an ideal time to continue with our conversion. We
worked on the conversion package all during the Christmas Holidays and so were able to begin the FAME
processing service with the new year.


                                                     1
We have discovered that the FAME service has certain procedures inherent within its system to prevent
inadvertent mistakes. Safety nets are built-in to FAME’s software to prevent errors in such areas as student
eligibility, conflicting data in an ISIR, and early disbursement. For example, they require the school to submit
an attendance report on a monthly basis which is submitted by the financial aid officer. This information will
be taken from the student's permanent Attendance Record Sheet, which will have been completed by the
education department. FAME will not proceed with the disbursement unless the student has completed the
required hours. This procedure serves as just one example that we feel will assist us in the effective
management of the financial aid department.

We have contracted with FAME to provide "unannounced" visits to our financial aid department for surprise
inspections of records and processes.

We have already had a training session here at our school when the Vice President for Technical Services
came for a full day on January 19, 1998. She covered the FAME financial aid processing system in which
she went through a hands-on simulation on our computer with our staff. In addition, she offered information
and answered our questions regarding many different aspects of financial aid processing and management.
One of our staff members is traveling to the FAME offices in Ft. Lauderdale on February 9, 1998 to attend
a two-day individualized training session. This will enhance the training already received during the Vice
President's visit to our school.

As a standard part of their service, FAME sends information relevant to Title IV regulations, changes, and
updates via the computer linkage often, sometimes daily. By doing so, they ensure that the financial aid
officer as well as other designated staff such as the Director and/or President are informed of breaking news
as it happens. This is daily continuing education. They also send out a regular news bulletin via mail. FAME
has assured us and has already proven their ongoing support of our financial aid department and institutional
well-being. In a short period of time, we have established relationships with FAME personnel which have
enhanced our knowledge of and effectiveness in financial aid management.

In addition to the third-party servicer change, we have already initiated some internal procedures which
should assist with effective management of the school.

2) We have hired additional staff for our financial aid department. They bring with them extensive
knowledge of financial aid regulations, practices, and compliance. In addition, they possess professional
accounting backgrounds. One person has extensive experience working as a financial aid officer at nonpublic
postsecondary schools and was employed by FAME as a compliance specialist for three years. Another staff
member has years of business management and banking/accounting experience.

3) We replaced our existing mechanical time clock with a new electronic one which computes totals for a
designated time period. This clock is used by our Barber and Cosmetology students.




                                                       2
It assists us with both speed and accuracy in the calculation of completed hours. Students are signing their
time cards at the end of the month to attest to the accuracy of the calculation. The instructor continues to
use the Attendance Record Sheet and will ensure this sheet reflects the totals contained on the time card.

4) We have initiated a system for a more straightforward documentation of our make-up hours for our
Medical Assisting/Medical Administrative Specialist students.

A.. We reformatted our existing Attendance Record Sheet to split the space per class day for "scheduled
class time" and "make-up time." This is completed by the education department on a daily basis. This
replaces the blanks on the Attendance Record Sheet which we had previously used to designate time and
work made up for the entire module (six week period). These sheets are maintained in a binder secured in
the program director's office.

B. The medical programs director has a "make-up" sign-in sheet on her office door. Students are required
to sign in and out for all make-up time and identify the subject area for which they are spending this time.

These additions to our present procedure for class/work make-up should enhance the overall management
of the attendance record keeping system. As has been our standard operating procedure, all daytime
instructors are required to remain on campus for a minimum of one hour per day after class in order to make
themselves available for make-up/tutorial assistance. In addition, our program department head as well as
two other instructors are present each day all afternoon so that any student staying late or coming early for
evening class may be served by faculty.

5) We have streamlined our attendance record keeping system to include one student-generated document
and one instructor-generated document. All attendance and make-up verifications will be found on these
items.

6) We have implemented a computerized grade book system. This standardized all grade reporting for
every instructor in the Medical programs. Hard copies are printed at the end of the module, signed by
faculty, and submitted to the programs director. She backs up the system to disk at the end of the module
so that we will have an exact duplicate of the hard copy on disk. The system is secure--accessed by
passwords--can be viewed by School Director and Medical Programs Director. We will continue our practice
of posting grades to the audit sheet, which serves as an 'in-school transcript." Final transcripts for graduates
are prepared from the audit sheets.

We hope that this narrative has provided an overview of the sincere effort made by the staff, of Career
Training Institute on an ongoing basis to comply with established policies, procedures and regulations. As
outlined in the responses to the conditions identified below, we will continue to develop a plan of action to
address the Visiting Team's recommendations.




                                                       3
Condition 1

Several cases occurred where income was not considered or was conflicting when determining students'
eligibility for aid.

Immediate action: We will check files in the sample in which this problem was identified. We will identify
any conflicting information and contact student to resolve. We will also recalculate to see if there would be
any change in the award. If so, we will make an appropriate refund of any Title IV aid that was disbursed
due to an error caused by conflicting information. We will enlist the assistance of the FAME service in order
to complete this item.

Procedure: Student brings in tax return(s) (his own, as well as responsible party if dependent) for appropriate
year. During the initial financial aid interview, information from the tax return(s) is used when completing
the FASFA Our financial aid officer transmits FASFA information electronically to our third-party servicer,
FAME. The ISIR comes into school several days later and the information contained in the ISIR is checked
against the original hard copy application (FASFA) and the tax return information. If conflict exists, the
prospective student is contacted by the financial aid officer and asked to provide information/documentation
to resolve the situation. Through FAME's Student Master Database, the school confirms that the ISIR is
correct prior to the disbursement of any Title IV aid.

Condition 2. Several cases occurred where the ESAR or ISIR process date was after students had
withdrawn.

Immediate Action: We will review the files identified with this problem and compare the LDA with the
ESAR/ISIR process date. Where a conflict exists, we will make an appropriate refund of Title IV Aid which
was disbursed based on an ISIR/ESAR process date which occurs after the student's LDA.

Procedure: Our current financial aid third party servicer, FAME, has a procedure in place for this very
situation. Through their student VIP/Student Master Data input system, a series of steps are required to be
taken by the financial aid officer. The school must confirm to FAME that the student is in attendance prior
to any further action. The disbursement process will be interrupted if attendance reporting information
reveals that a student is no longer in school prior to the final processing of an ISIR/ESAR.

In addition to the FAME method, our institutional system includes a cross check by the financial aid officer
to the student’s attendance record to ensure that a student is in attendance as of the ISIR process date. No
financial aid will be disbursed to a student who has a last date of attendance prior to the ISIR process date.




                                                      4
Condition 3. In many cases, second disbursements were given (a) to students before they completed the
required 450 clock hours of instruction or (b) to students who never completed the required 450 clock hours
of instruction.

Immediate Action: The school will check files in the inspection period to determine the time completed by
the student as of the date of the second disbursement. If the student has not successfully completed the
minimum attendance required, then the school will make the appropriate refund. The school will obtain
direction from the Department as to the format and specific content of this report.

Procedures: Our third party servicer, FAME, has a process whereby the school must submit attendance data
prior to the preparation of first and second disbursements. The school will not receive any checks for
disbursement unless it has attested to the hours of attendance completed by the students on whom second
disbursements are requested. In order to retrieve the correct information for this report, the Financial Aid
officer utilizes information from the permanent attendance record (Attendance Record Sheet and sign in sheet
or time card) that is maintained by the education department. Any questions will be resolved by the
Department Head or the School Director. It is this information which is transmitted on the FAME attendance
reporting form to the FAME office for second disbursement processing. FAME does not process any second
disbursements unless the student has COMPLETED the required hours. By the time the award is ready for
disbursement, the student will be well beyond the 450th hour in his program.

Condition 4. In many cases, numerous differences exist between instructors' weekly attendance sheets, sign
in sheets, and time cards and the Student Attendance Reports--the documents used to determine students'
eligibility for aid.

Immediate action: After Listening to comments made by the Visiting Team, we have determined that our
attendance documentation must be streamlined in order to be more user friendly. The documents currently
utilized by the school for attendance record keeping include: Individual Attendance Record Sheets (student's
permanent record) for all students, time cards for Barber and Cosmetology students, and sign in sheets. In
the past, we have also utilized rosters. SPECIAL NOTE: We more than provided ALL possible information
to the Visiting Team in addition to our official school record keeping documents. These materials included
various supplemental items which we used for the purpose of internal cross checking. We have never
considered these supplements as official school documents. We have already begun the process of evaluating
our current attendance record keeping system and will be implementing changes immediately.

As detailed in the “Student grade and Attendance Record Keeping Procedures" summary that was provided
to the Visiting Team last Friday, January 30. 1998, the documents described are considered a part of the
student's permanent file. The instructor completes the Attendance Record sheet and the student either signs
in or punches a time card. It is the responsibility of the instructor/education department to ensure that
attendance is correctly marked on a daily basis. The student's individual Attendance Record Sheet is kept
in a three ring binder until the sheet is completely filled. Then, it is transferred to the students permanent file.
These sheets clearly identify each "module" of available class time. The education department is responsible
for summarizing the hours completed and made up during the module. As mentioned in our preface, the
school has detailed additional make-up record keeping for attendance documentation. When hours are
calculated at the end of each module, it should be much easier than in our prior system to see just how this
make-up was accomplished.




                                                         5
Our attendance policy has an excused absence allowance for all students other than Barber and Cosmetology.
We allow up to 10% of a 450 hour payment period to be considered an excused absence which does not have
to be made up with attendance. (See catalog, page 6). Any excused absences in excess of 10% of a 450 hour
payment period and all unexcused absences will be made up with attendance. There is no attendance
allowance for excused absences in our Cosmetology and Barber programs. As in the past, all academic work
must be made up as specified by the instructor.

We have expressed to the Visiting Team our willingness to alter our existing attendance record keeping
system to eliminate unnecessary duplication of information. We are enthusiastic about having the opportunity
to improve our effectiveness and thus, better serve our student population.




                                                     6