In a recent matter, an SFAP assessment of liability was upheld by a Department of Education Administrative Judge pertaining to a community college, requiring the College to reimburse $134,797 to the Department of Education.
On October 13, 2009, Snead State Community College, a public institution of higher education located in Boaz, AL, was issued a Final Audit Determination (FAD) by the Office of Federal Student Aid (FSA), US Department of Education (ED). The FAD demanded the return of $134,797 in federal funds due to two adverse findings, initially presented in the school’s annual audit report for the fiscal year, October 1, 2007 through September 30, 2008. The first finding alleged that the school’s failed to properly calculate certain students’ satisfactory academic progress, a violation of 34 CFR 668.16(e). The second finding alleged that the school failed to consistently establish the dates of student withdrawals, resulting in instances of the incorrect calculation of the return of Title IV funds to ED.
According to the Standards of Administrative Capability, 34 CFR 668.16(e), an institution participating in Title IV, HEA programs, is required to establish, publish and apply reasonable standards for measuring whether an otherwise eligible student is maintaining satisfactory academic progress (SAP) in their educational program. These standards must be either the same or stricter than the Department’s and must include the following elements:
(i) A qualitative component which consists of grades (provided that the standards meet or exceed the requirements of §668.34), work projects completed, or comparable factors that are measurable against a norm.
(ii) A quantitative component that consists of a maximum timeframe in which a student must complete his or her educational program. The timeframe must—
(A) For an undergraduate program, be no longer than 150 percent of the published length of the educational program measured in academic years, terms, credit hours attempted, clock hours completed, etc. as appropriate;
(B) Be divided into increments, not to exceed the lesser of one academic year or one-half the published length of the educational program;
(C) Include a schedule established by the institution designating the minimum percentage or amount of work that a student must successfully complete at the end of each increment to complete his or her educational program within the maximum timeframe; and
(D) Include specific policies defining the effect of course incompletes, withdrawals, repetitions, and noncredit remedial courses on SAP.
The school must also apply consistent standards to all students within categories of students, e.g., full-time, part-time, undergraduate, and graduate students, and educational programs established by the institution. The College must then determine at the end of each increment if the student has met their established qualitative and quantitative components of the standards;
In terms of the withdrawal date, as noted in 34 CFR 668.22(c), for colleges which are not required to take attendance, the student’s withdrawal date is:
(i) The date, as determined by the institution, that the student began the withdrawal process prescribed by the institution;
(ii) The date, as determined by the institution, that the student otherwise provided official notification to the institution, in writing or orally, of his or her intent to withdraw;
(iii) The mid-point of the payment period (or period of enrollment, if applicable) if the student ceases attendance without providing official notification to the institution of his or her withdrawal;
(iv) The date that the institution determines is related to the circumstance if the institution determines that a student did not begin the institution’s withdrawal process or otherwise provide official notification (including notice from an individual acting on the student’s behalf) to the institution of his or her intent to withdraw because of illness, accident, grievous personal loss, or other such circumstances beyond the student’s control;
(v) The date that the institution determines the student began his or her approved leave of absence.
The official school policy regarding the withdrawal process and its requirements must be communicated and made available to all students.
Snead State appealed the FAD filed by FSA. After a number of extensions, both the school and FSA submitted their pleadings. The school presented no evidence to dispute the findings detailed in the FAD. In response to the first finding, the school offered only an explanation that the program had been amended to prevent errors in future years. The school did not address the second finding.
Judge Ernest C. Canellos concluded that the school failed to carry its burden of establishing that its expenditures of Title IV funds were correct. The law states that if an institution fails to establish the correctness of its expenditure of FSA funds, then it must return all such funds to ED. The school did not rebut the findings, but rather only submitted evidence that it had corrected the problem that led to the erroneous payments. The Judge concluded that this in itself does not act as a defense to a demand for the return of such funds to ED. The FAD was affirmed and the liability was upheld.
For current Title IV practitioners, this case makes two very crucial points. The first is that once SFA makes aprima facie showing that a college has violated the Title IV regulations, the burden of proof reverts to the college to prove it administered the Title IV programs correctly. The second is that good faith efforts and the correction of a problem are not adequate defenses when confronted with a FAD assessing liability.
If you have any comments or questions, you may contact Milton L. Kerstein, Esq. via email at mkerstein@kcl-law.com or by telephone at 617-965-9698.
This article is provided, with the assistance of Colleen King of the Higher Education Assistance Group, Inc., for general information purposes only and with the understanding that neither the authors or publisher are engaged in rendering legal advice or opinion. If legal advice is required, the services of a competent professional person should be sought.