IN THE MATTER OF MBTI BUSINESS . Docket No. 93-147-SA
TRAINING INSTITUTE OF .
PUERTO RICO, . Student Financial Assistance
Appearances: Joan B. Farrell, Esq., of Hinshaw & Culbertson,
Milwaukee, Wisconsin, for the Respondent.
J. Trepacz, II, Esq., of the Office of the
General Counsel, United States Department of
Education, for the Office of Student Financial
This is an action initiated by the United States Department of
Education (ED) to recover $90,112 in Federal funds from MBTI
Business Training Institute of Puerto Rico, Inc. (MBTI). This
action was proposed following a final audit determination which
concluded that MBTI had overstated the total clock hours of
instruction for its programs. ED alleges that the overstatement
rendered one of MBTI's programs ineligible for Pell grants and
resulted in the award of excess Pell Grants to students in
otherwise eligible programs. MBTI argues, in effect, that it
utilized an acceptable method of computing the number of clock
hours in its programs, and, therefore, properly disbursed Federal
funds. Based on the findings of fact and conclusions of law,
infra, the final audit determination is vacated and the Department may not recover any Federal
funds.See footnote 1
I. FINDINGS OF FACT
The pertinent findings of fact are set forth in the opinion. The detailed findings of fact are
set forth in the appendix, infra. To the extent that the proposed findings of fact or conclusions
of law by a party have not been adopted in this decision, they
are rejected as being inaccurate or unnecessary to the
disposition of this case.
Under the Pell Grant program, the Secretary provides grants to
eligible students to assist in making available the benefits of
postsecondary education. 20 U.S.C. § 1070(a). An eligible
student is one who is enrolled or accepted for enrollment in an
eligible program. 34 C.F.R. § 668.7(a)(1)(i) (1991). With
respect to a post-secondary vocational institution, an eligible
program is, inter alia, at least a six month program leading to a degree or other recognized
equivalent and consists of a minimum
of 600 clock hours of supervised training at an institution using
clock hours to measure academic progress. See 34 C.F.R. §§ 668.2 and
ED contends that the duration of MBTI's Conversational English
program was less than the 600 clock hour minimum and, therefore,
it was not an eligible program for Pell grants. ED also asserts
that the clock hours of MBTI's Travel and Tourism program and its
other programs were overstated and resulted in an overaward of
Pell grants. These contentions are based upon ED's view that
MBTI incorrectly computed the number of clock hours in each
program. The nature of the dispute may be illustrated by the
Conversational English program offered to day-time students.
The Conversational English program had 116 days of instruction
and each day included three instruction sessions with a break
before and after the second session. The total time of daily
instruction was 275 minutes and the total time of the two breaks
between the sessions was 25 minutes.See footnote 2
According to MBTI, the Conversational English program was a 638 clock hour program. In its view, a clock hour may constitute 50 minutes of instruction according to the regulations. Hence, its 275 minutes of daily instruction constitute 5.5 clock hours of instruction per day (275 minutes / 50 minutes per clock hour = 5.5 clock hours). The program offered 116 days of instruction
ED argues that the program constituted only 580 clock hours which
is 20 hours short of the minimum of 600 clock hours that is
necessary to constitute an eligible program. In its view, the
daily program had 275 minutes of instruction and 25 minutes of
breaks for a total of 300 minutes. ED interprets a clock hour as
equal to 60 minutes of which at least 50 minutes must be
instruction. Accordingly, ED divides the 300 minutes of
instruction and breaks by 60 minutes which equals 5 clock hours
per day. The program had 116 days of instruction and, therefore,
the program constituted 580 clock hours (5 clock hours per day x
The dispute between the parties is whether a clock hour may
constitute 50 minutes of instruction, as MBTI urges, or whether
it must be, as ED argues, 60 minutes in duration of which 50 to
60 minutes must be instructional and any remaining time in that
hour must be spent by the student at the school.
Since the parties agree that the amount of instruction was
adequate, the practical effect of the disagreement is that ED
seeks the recovery of Pell funds because, under its view, MBTI
did not provide its students with an additional 10 1/2 minutes of
break time each day in the Conversational English program.See footnote 3
A clock hour is defined by 34 C.F.R. § 668.2 (1991) as the
equivalent of "[a] 50 to 60 minute class, lecture or recitation."
This is precisely the definition implemented by MBTI. MBTI used
50 minutes as representing a clock hour and determined the number
of clock hours in its programs based upon the actual amount of
instruction. It did not include any break time as part of a
clock hour of instruction. This construction is fully consistent
with the above definition of a clock hour.
The positions and arguments of the parties in this litigation are identical to the dispute in In re Denver Paralegal Institute, Dkt. Nos. 92-86-SP and 92-87-SA, U.S. Dep't of Education at 15-16 (Mar. 14, 1994). There, ED's argument was rejected and the tribunal held that the clock hour regulation focuses solely on instructional time and that a clock hour of instruction may be
[A] clock hour is defined by 34 C.F.R. § 668.2 . . . as
'[t]he equivalent of [a] 50 to 60 minute class, lecture, or
recitation.' Thus, 50 minutes of instruction is sufficient
to constitute one clock hour. Hence, the regulation is
clear that clock hour measurement does not correspond
precisely with the actual amount of time of instruction.
Clock hour measurement will always be the same or more than
the actual instruction time. Hence, ED's . . . premise
underlying its litigating position -- that clock hour
measurement reflects actual time -- is inconsistent with the
. . . .
The clock hour regulation focuses solely upon the period of instruction. Break periods are not relevant under the regulation. Thus, the determining factor is the quantity of education provided, not whether there is or is not a break provided before or after the period of instruction.
Notwithstanding the unambiguous definition of clock hour in 34 C.F.R. § 668.2, ED relies upon a June 1985 Dear Colleague Letter (Gen-85-12) as authority for the proposition that an institution cannot divide the total number of minutes of instruction in a day by 50 minutes to determine the number of clock hours in that day.See footnote 4 4/ This proposition was also included in the 1992-93 Student
Financial Aid Handbook which ED relied upon as its primary
authority in Denver Paralegal Institute.
The position advanced in the Student Financial Aid Handbook in
Denver Paralegal Institute was disregarded and its basis is equally applicable to the Dear
[It] conflicts with the rationale of the definition of clock
hour in 34 C.F.R. § 668.2, as noted above, and, therefore,
the handbook may be disregarded.
Id., at 17.
Moreover, the legal significance of a Dear Colleague Letter was
also addressed in Denver Paralegal Institute. There, it was held that a Dear Colleague Letter
serve as a basis for substantive rules upon which ED can
rely. This view is consistent with Jackson v. Culinary Sch. of Wash., 788 F. Supp. 1233, 1262
(D.D.C. 1992) which held that a Department policy, not subject to the notice and
comment procedures of the Administrative Procedure Act
(APA), was not binding on third parties--
[since] this policy has not yet been
codified in law or
regulation . . . [t]he case law in this Circuit clearly
suggests that such a pronouncement, which has not been
subjected to the notice and comment procedures required
by the APA, 5 U.S.C. § 553, cannot be binding on third
See also In re Baytown Technical Sch., Inc., Dkt. No. 91-40- SP,
U.S. Dep't of Education (1991) at 26 (the Department's
Dear Colleague Letters may be useful as a "backdrop of
published policy statements . . . but these indicia of
policy cannot stand alone as the basis for regulatory
Id., at 4-5.
For the reasons indicated above, the position set forth in the
Dear Colleague Letter is rejected.
ED also relies on the Preamble to the Federal Register published on July 23, 1993. In the Preamble, the Secretary notes that an
To demonstrate the number of clock hours in an educational
program, certain institutions have aggregated the number of
minutes of instruction provided in that program, and have
divided those minutes by 50. This practice is inconsistent
with the Secretary's long-standing interpretation under the
current definition of the term "clock hour." Under that
interpretation, if an institution seeks to determine the
number of clock hours in an educational program by
aggregating the number of minutes in that program, it has to
divide those minutes by 60 rather than 50.
The revised definition of a clock hour requires that each
clock hour of instruction takes place in a discrete 60-
minute period.[See footnote 5
58 Fed. Reg. 39,619 (July 23, 1993).
Regulations and decisions of the Secretary, issued in response to
appeals of the decisions of Administrative Law Judges or hearing
officials, are binding on this tribunal as accepted means of
expressing policy and interpretation. However, a comment by the
Secretary in a Preamble is not a regulation and has no binding
effect. See Bissette v. Colonial Mortgage Corp. of D.C., 477 F.2d 1245, 1247 (D.C. Cir. 1973);
Gersman v. Group Health Ass'n, Inc., 725 F. Supp. 573, 577 (D.D.C. 1989); Council of Hawaii
Hotels v. Agsalud, 594 F. Supp. 449, 453 (D. Haw. 1984). "[T]he
preamble . . . is merely a general statement of policy which does not mitigate and certainly does not override the specific requirements laid out in the body of the statute." Samuels v. District of Columbia, 650 F. Supp. 482, 484 (D.D.C. 1986).
In addition, the Preamble to a regulation published in 1993 does
not affect the period of July 1, 1990, through June 30, 1991,
which is in issue in this proceeding. Regulations promulgated
subsequent to the year of the program may not govern the program
in a prior year. Bennett v. New Jersey, 470 U.S. 632 (1985); In re Temple University, Dkt. No.
89-26-S, U.S. Dep't of Education (1990). Such a proscription is equally applicable to a Preamble
which came after the period in issue. See Denver Paralegal Institute, at 17.
In summary, ED's position is contrary to the plain language of the definition of clock hour as set forth in 34 C.F.R. § 668.2. Accordingly, ED's proposed recovery, which seeks $90,112 in Pell
funds due solely to MBTI's purported failure to compute properly
the clock hours of its programs, is denied and the final audit
recovery determination is vacated.See footnote 6
On the basis of the foregoing findings of fact and conclusions of
law, and the proceedings herein, it is HEREBY--
ORDERED that the demand by the United States Department of
Education to recover funds from MBTI Business Training Institute
of Puerto Rico is denied and the final audit recovery
determination is vacated.
Allan C. Lewis
Administrative Law Judge
Issued: April 15, 1994
1. MBTI Business Training Institute operated
Wisconsin and Puerto Rico. In 1990, MBTI Business Training
Institute in Wisconsin was sold.
2. MBTI Business Training Institute of Puerto
Rico (MBTI) was
founded in 1969 and has operated in San Juan, Puerto Rico since
that time. MBTI has been licensed by the Puerto Rico Department
of Education since its founding.
3. MBTI is accredited by the Commission for
and Schools of the Career College Association. MBTI has been
accredited since 1974 and its accreditation remains in effect
until December 31, 1996.
4. During the 1991 award year, 662 students were
enrolled in MBTI
programs. These programs included in Secretarial Sciences, Sales
and Marketing, Accounting Clerk, Fashion Merchandising, Travel
and Tourism, Data Entry, and Conversational English.
5. The Conversational English day program was
638 total clock
hours which consisted of 116 days of instruction with each day
accounting for 5.5 clock hours--
Status Period Minutes Clock Hours
Class 8:00 - 9:45 105 2.1
Break 9:45 - 10:00 15
Class 10:00 - 11:50 110 2.2
Break 11:50 - 12:00 10
Class 12:00 - 1:00 60 1.2
6. The Conversational English night day program
was 639 total
clock hours which consisted of 142 days of instruction with each
day accounting for 4.5 clock hours--
Status Period Minutes Clock Hours
Class 6:00 - 8:00 120 2.4
Break 8:00 - 8:15 15
Class 8:15 - 10:00 120 2.1
7. During award year 1991, MBTI participated in the Pell Grant program, the Federal Supplemental Educational Opportunity Grant (FSEOG), and the Federal Family Education Loan programs.
8. The Office of Inspector General, United States
Education conducted an field audit of the Student Financial
Assistance programs at MBTI from November 1991 through February
1992. The audit included the period from July 1, 1990 to June
30, 1991 and the audit report was issued on February 2, 1993.
9. Effective April 6, 1992, MBTI changed its class
comply with the Inspector General's audit report which
interpreted a clock hour to be the equivalent of 60 minutes of
10. On April 9, 1992, MBTI received a letter
from the Department
of Veterans Affairs, Regional Office 355, which responded to
MBTI's inquiries concerning the certification of VA
beneficiaries. The Department of Veterans Affairs indicated
that, with respect to its financial aid awards, a standard class
session is computed by converting the student's hours of
attendance per week to minutes and dividing by 50.
11. On September 14, 1993, the United States
Education issued a final audit determination which asserted that
MBTI overstated the number of clock hours of instruction which
resulted in student financial assistance awards to students
enrolled in ineligible programs and overpayments to students
enrolled in otherwise eligible programs.
12. On November 4, 1993, MBTI, thorough
counsel, appealed the
final audit determination.
Edmund J. Trepacz, II, Esq.
Office of the General Counsel
U.S. Department of Education
Room 4083, FOB-6
400 Maryland Avenue, S.W.
Washington, D.C. 20202
Joan B. Farrell, Esq.
Hinshaw & Culbertson
100 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Status Period Minutes
Class 8:00 - 9:45 105
Break 9:45 - 10:00 15
Class 10:00 - 11:50 110
Break 11:50 - 12:00 10
Class 12:00 - 1:00 60
Clock Hour Definition
Q. The definition of a "clock
hour" (Section 690.2), refers to "the equivalent of a 50 to 60-minute class,
lecture, or recitation." Can an institution divide the
total number of minutes of instruction in a day by 50
minutes to determine the number of clock hours in a day
A. No. For Pell Grant and
Campus-based program award calculations, a clock hour is defined as an hour of
instruction with an allowance for a 10-minute break in
a given 60-minute period. If schools were allowed to
divide the total number of minutes by 50, a student
would earn approximately 1.17 clock hours in an hour.
This is not consistent with the concept of a clock hour
as an hour of instruction. For the purpose of
calculating a financial aid award, a student may not
earn more than one clock hour in a given 60-minute period.