UNITED STATES DEPARTMENT OF EDUCATION
WASHINGTON, D.C. 20202
In the Matter of Docket No. 94-214-SP
CC'S COSMETOLOGY COLLEGE, Student Financial Assistance Proceeding
____________________________________ PRCN: 94206025
Denise Morelli, Esq., Office of the General Counsel, U.S. Department of Education, Washington, D.C., for the Office of Student Financial Assistance Programs
CC's Cosmetology College (CC's), Tulsa, Oklahoma, is a proprietary school offering vocational programs in cosmetology at locations in Tulsa and Durant, Oklahoma, and Paris, Texas. It is accredited by the National Accrediting Commission of Cosmetology Arts and Sciences and is eligible to participate in the Federal Pell Grant and Federal Family Education Loan Programs, authorized under Title IV of the Higher Education Act of 1965, as amended (Title IV), 20 U.S.C. § 1070 et seq. and 42 U.S.C. § 2751 et seq.
Between February 14-18, 1994, program specialists from the office of Student Financial
Assistance Programs (SFAP) of the U. S. Department of Education (Department), conducted an
on-site review of CC's administration of the Title IV Programs for award years 1991-92 and
1992-93. The program review report dated March 9, 1994, contained ten adverse findings. On
October 14, 1994, SFAP issued a final program review determination (FPRD) which found that
CC's had taken corrective action as to nine of these findings leaving unresolved only one
violation, i.e. that CC's violated Title IV and its implementing regulations, by improperly
awarding Federal Pell Grants to students at its Durant branch campus. Specifically, CC's was
alleged to have made Pell Grant disbursements to students attending the Durant campus before
that campus had become eligible to participate in Title IV programs.
As a result of this finding, SFAP alleged that CC's improperly expended $26,767 in Pell
Grant payments for the 1991-92 and 1992-93 award years. CC's disputed this liability and filed
an appeal. In this appellate proceeding, CC's has the burden of proof and is obligated to show
that: the questioned expenditures were proper, and the institution complied with program
requirements. 34 C.F.R. § 668.116(d).See footnote 11
To participate in the federal student financial assistance programs promulgated under
Title IV, an institution must apply to the Secretary for a determination that it qualifies as an
eligible institution. 34 C.F.R. § 600.20. Once a decision has been made relative to eligibility,
the institution is notified. 34 C.F.R. § 600.21. The eligibility determination is made by the
Department based on the information provided in the eligibility application. Eligibility applies
only to the educational programs and locations specifically identified by the institution and the
Secretary; eligibility does not extend to a location that is established after the Department's
determination is made. 34 C.F.R. § 600.10(b)(3). Therefore, institutions which establish
additional locations must apply separately for an individual eligibility determination on each new
location. 34 C.F.R. § 600.30(a)(3). Until the time any additional locations are approved by the
Department, the students attending at those locations are not eligible to receive Title IV funds.
See 34 C.F.R. § 668.7(a)(1)(I).
CC's is an eligible institution which has participated in the Title IV programs through a
Program Participation Agreement entered into on December 9, 1988.See footnote 22 After a number of years
in operation, CC's submitted an Application of Institutional Eligibility and Certification for
approval of an additional location in Durant, Oklahoma. Based upon that application, on June
23, 1992, SFAP designated CC's Durant location as eligible to participate in Title IV programs.
Consequently, on and after June 23, 1992, CC's could lawfully disburse Pell Grant funds to
eligible students enrolled in programs at the Durant location -- not before.
I am persuaded that CC's did not satisfy its burden of proof in this case. CC's asserts that
no Pell Grant funds were disbursed to students prior to June 23, 1992, and it provides copies of
checks as documentation. A review of each check reveals that it is dated after the June 23, 1992,
eligibility date. However, the date of disbursement of the Pell Grant is not the controlling factor,
but rather it is the period for which the payment was made that is significant. In this case,
students were paid after the June 23, 1992, eligibility date, but payment improperly included
clock hours which were earned during prior payment periods. I find that the evidence reveals
that CC's improperly disbursed Pell Grant funds during the 1991-92 and 1992-93 award years
because the disbursements included payment for the entire award year rather than just for the
appropriate or current payment period.
Regulations promulgated pursuant to Title IV provide that [i]f an institution begins
participation in the Pell Grant Program during an award year, a student enrolled and attending
that institution is eligible to receive a Pell Grant for the payment period during which the
institution enters into a program participation agreement with the Secretary and any subsequent
payment period. 34 C.F.R. § 690.7(a)(2) (emphasis added). See In the Matter of Puerto Rico
Barber & Technical College, Docket No. 91-36-SP (February 10, 1993). In the present case,
CC's disbursed Pell Grant funds to students for the entire award year rather than just for the
appropriate or current payment period. Clearly, disbursements to students attending a newly
eligible institution or branch of an institution cannot include payment for hours earned in a
previous payment period, even if that payment period occurs in the same award year.
CC's does not dispute that it needed to gain eligibility for the Durant campus location
before it could disburse Pell Grant payments to the students at Durant. Instead, it claims that it
made an honest attempt to follow regulations set forth by the Department and was unaware of
any wrongdoing. This tribunal recognizes that the school's mistakes were probably unintentional
and, furthermore, that the interpretation of the school was not completely off-base; however, that
does not constitute an excuse for the unauthorized expenditure of federal funds.
Judge Ernest C. Canellos
Dated: December 11, 1996
A copy of the attached initial decision was sent by certified mail, return receipt requested to the
Chiquita Carter, Owner
CC's Cosmetology College
11630 E. 21 St.
Tulsa, Oklahoma 74129
Denise Morelli, Esq.
Office of the General Counsel
Counsel, Student Financial Assistance Programs
U.S. Department of Education
600 Independence Avenue, S.W.
Washington, D.C. 20202-2110