In the Matter of Docket No. 95-103-ST
Penn-Ohio College, Student Financial Assistance Proceeding
S. Dawn Robinson, Esq., Office of the General Counsel, United States
Department of Education, Washington, D.C., for Student Financial Assistance
Before: Judge Ernest C. Canellos
On June 27, 1995, the Office of Student Financial Assistance Programs (SFAP) of the
U.S. Department of Education (Department) issued a notice of intent to terminate the eligibility
of Penn-Ohio College (Penn-Ohio) from participation in the student financial assistance
programs authorized under Title IV of the Higher Education Act of 1965, as amended (HEA). 20
U.S.C. § 1070 et seq. and 42 U.S.C. § 2751 et seq. The notice also imposed fines against Penn-
Ohio totaling $40,000. By letter dated July 11, 1995, Penn-Ohio filed a timely appeal of the
notice of intent to terminate and fine.
On August 10, 1995, SFAP issued an amended termination notice wherein it provided an additional basis for terminating Penn-Ohio's eligibility for participation in student financial assistance programs. According to SFAP, Penn-Ohio's accrediting agency, the Accrediting Council for Independent Colleges and Schools (ACICS), informed the Department that it had recently withdrawn Penn-Ohio's accreditation.
As a condition of participation in Federal student financial assistance programs (Title IV
programs), institutions must account for the expenditure of Title IV program funds by submitting
periodic compliance audits to the Department. 34 C.F.R. § 668.23(c). According to SFAP,
Penn-Ohio failed to file its compliance audit covering award years 1989-90 and 1990-91 and also
failed to file a compliance audit covering award years 1991-92 and 1992-93.
See footnote 1 In support of its
position, SFAP submitted a written and signed declaration by an auditor for the Department's
Office of Inspector General (OIG), William T. Allen, which stated that although Penn-Ohio's
compliance audit covering award years 1989-90 and 1990-91 was due on June 30, 1992 and the
institution's compliance audit covering award years 1991-92 and 1992-93 was due on June 30,
1994, the institution had not filed either audit report as of September 14, 1995, the date of Mr.
The material facts in this case are not in dispute. In its defense, Penn-Ohio argues that
the current administration, appointed by the institution's Board of Trustees in January 1993, was
unaware of the institution's violation of Title IV audit filing requirements. In that regard, the
institution does not dispute that it has not filed its compliance audits, but urges that I reject the
fine sought by SFAP because the institution is undergoing a good faith attempt to complete the
required audits. In addition, Penn-Ohio concedes that ACICS withdrew its accreditation, and as
a result, the institution became ineligible to participate in Title IV programs. Although SFAP
seeks to terminate the institution's eligibility on the basis of the school's loss of accreditation,
SFAP does not propose to fine the school. Consequently, I find that SFAP has met its burden of
proof establishing that Penn-Ohio failed to maintain the standards of institutional eligibility as a
result of its loss of accredited status.
With regard to the institution's failure to file compliance audits, it is well established that
the nature of enforcement of Title IV programs creates the need for institutions to adhere to
program regulations requiring institutions to timely file compliance audits that account for the
disbursement of program funds. This data assists the Department in determining whether any, if
not all, program funds were disbursed contrary to statutory and regulatory requirements. In this
respect, this tribunal has consistently determined that, under Title IV regulations, a finding that
an institution failed to timely file a compliance audit requires the Hearing Official to terminate
the institution's participation in Title IV programs. See, e.g., In re Putnam County Technical
Center, Dkt. No. 94-155-ST, U.S. Dep't of Educ. (August 28, 1995) (holding that if biennial
audits are not timely filed, even by one day, the Hearing Official must order termination of
eligibility); In re Art of Beauty College, Dkt. No. 95-72-ST, U.S. Dep't of Educ. (August 31,
1995) (holding that under 34 C.F.R. § 668.90(a)(3)(iv), the Hearing Official must find that
termination of eligibility is warranted if the institution fails to timely file its required audits). It
is abundantly clear that Penn-Ohio does not dispute SFAP's contention that the institution has
not filed compliance audits covering award years 1989-90, 1990-91, 1991-92 and 1992-93.
Accordingly, I find that SFAP has met its burden of proof establishing that Penn-Ohio failed to
timely file its compliance audits. On this basis, the institution's eligibility to participate in Title
IV programs is terminated.
When assessing the appropriate penalty for the violation of program regulations, I must
determine whether the total punishment sought by SFAP is appropriate. In this regard, I must
consider whether SFAP's proposed $40,000 fine is warranted in light of the fact that I have
determined that the institution's eligibility must be terminated. See, In re Northeast Center for
Judaic Studies, Dkt. No. 94-155-ST, U.S. Dep't of Educ. (May 2, 1995). In evaluating whether
the imposition of SFAP's proposed fine is warranted, 34 C.F.R. § 668.92 requires that I consider
the gravity of the institution's violation and the size of the institution. Although, as I have noted
supra, the institution's failure to file compliance audits is a serious and significant violation
program regulations, I find that there are mitigating factors present in this case warranting
rejection of SFAP's proposed fine.
It has been consistently recognized that an institution's size should be measured by the
average amount of Title IV funds disbursed by an institution during an applicable award year.
See, e.g., In the Matter of Fischer Technical Institute, Dkt. No. 92-141-ST, U.S. Dep't of Educ.
(March 16, 1995); In the Matter of Bais Fruma, Dkt. No. 93-171-ST, U.S. Dep't of Educ.
(March 9, 1995); Hartford Modern School of Welding, Dkt. No. 90-42-ST, U.S. Dep't of Educ.
(January 31, 1991). By SFAP's own determination, Penn-Ohio is a small institution that
disbursed only $115,000 in Title IV funds in 1993. In addition, there is no evidence in the record
of intentional wrong-doing or fraudulent conduct by Penn-Ohio. Therefore, in view of the fact
that I have upheld the severest sanction available to SFAP, the termination of an institution's
eligibility to participate in Title IV programs, I find that the imposition of a fine in this case is
Ernest C. Canellos
Dated: October 27, 1995
A copy of the attached initial decision was sent by certified mail, return receipt requested to the
James E. Roberts, Esq.
Roth, Stephens, Blair, Roberts & Co.
1100 Bank One Building
Youngstown, Ohio 44503-1576
S. Dawn Robinson, Esq.
Office of the General Counsel
U.S. Department of Education
600 Independence Avenue, S.W.
Washington, D.C. 20202-2110