UNITED STATES DEPARTMENT OF EDUCATION
             WASHINGTON, D.C. 20202


____________________________________

In the Matter of                         Docket No. 96-126-SP

UNIVERSIDAD EUGENIO MARIA
de HOSTOS
,                            Student Financial Assistance Proceeding
            Respondent.            
____________________________________        PRCN: 199430200058

Appearances:



Before:


DECISION


    On August 16, 1995, the Office of Student Financial Assistance Programs (SFAP) of the U.S. Department of Education (Department) issued a final program review determination (FPRD) finding that Universidad Eugenio Maria de Hostos (Universidad) violated several regulations promulgated pursuant to 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. Universidad, located in the Dominican Republic, is an institution that formerly participated in the Title IV, HEA programs.See footnote 11
    
    From May 23 through May 26, 1995, SFAP conducted a program review of Universidad's administration of the Title IV, HEA programs. This review served as the basis for both the FPRD at issue and the termination action taken against Universidad. On January 12, 1995, SFAP issued a program review report covering Universidad's administration of the Title IV, HEA programs during the 1991-1992 and 1992-1993 award years. Due to the deficiencies uncovered during the program review, SFAP requested that Universidad perform a full file review of its records for the 1989-1990 through 1993-1994 award years. According to SFAP, Universidad failed to submit a full file review. As a result, SFAP assessed liability for all Federal Family Education Loan (FFEL) program funds disbursed during the 1989-1990 through the 1993-1994 award years.See footnote 22 Liability was assessed for the FPRD's major finding that the institution failed to satisfy the standards for administrative capability of the Title IV, HEA programs.See footnote 33

    In its brief, Universidad requested oral argument in this matter. I find that oral argument is unnecessary to further illuminate the findings at issue in the instant proceeding. Therefore, Universidad's request for oral argument is hereby denied.

    To begin and continue participation in any Title IV, HEA program, an institution must demonstrate that it is capable of adequately administering that program under the standards specified in 34 C.F.R. § 668.14 (1991).See footnote 44 These standards include the following: the institution is required to designate a capable individual to be responsible for administering all the Title IV, HEA programs in which it participates; the institution must use an adequate number of qualified persons to administer the Title IV, HEA programs as well as have adequate checks and balances in its system of internal controls; the institution must also establish, publish, and apply reasonable standards for measuring satisfactory academic progress; the institution must establish, publish, and apply its refund policy; the institution must develop and apply an adequate system to identify and resolve discrepancies in the student information it receives from different sources; and the institution must provide adequate financial aid counseling to eligible students who apply for financial aid. 34 C.F.R. § 668.14 (1991).

    SFAP argues that Universidad failed to document that it established and maintained records required under the Title IV, HEA programs. In particular, SFAP asserts that Universidad did not maintain FFEL program applications, need analysis documents, Student Status Confirmation Reports (SSCRs), Statements of Educational Purpose, Statements of Registration Status, and statements of non-default. Further, SFAP argues that Universidad failed to establish, publish, and apply both a satisfactory academic progress (SAP) policy and a refund policy. Additionally, SFAP asserts that the institution failed to develop and apply an adequate system to identify and resolve discrepancies in the information contained in its students' applications for financial aid, and that it failed to provided adequate counseling to financial aid applicants.

    Universidad argues that it had a decentralized system for administering the Title IV, HEA programs that collectively assigned tasks to several designated individuals. Universidad further argues that it has and continues to maintain FFEL applications and that even though it is not required to perform needs assessment/analysis, it has performed this task. Universidad next points to the documentation it has submitted to this tribunal evidencing its compliance with maintaining the aforementioned required documentation. According to Universidad, this documentation includes needs assessment/analysis information as well as a wide selection of FFEL loan applications, SSCRs, and Statements of Educational Purpose, Statements of Registration Status, and Statements of Non-default.

    An institution is required to maintain copies of FFEL program applications. 34 C.F.R. § 682.610(b) (1991). SFAP asserts that seven of the ten students identified in the FPRD did not have FFEL applications. Additionally, SFAP asserts that Universidad failed to submit applications to this tribunal for four of the seven students identified in the FPRD as missing FFEL applications.See footnote 55 According to SFAP, of the three applications that were produced by Universidad, only one (Student # 3) is for one of the award years examined during the program review period. The applications for the other two students (#1 and # 6) were for the 1993-1994 and 1994-1995 award years.See footnote 66 SFAP further states that Universidad has failed to conduct a full file review and submit the applications for all FFEL program recipients since the 1989-1990 award year.

    A review of the evidence submitted by Universidad reveals that the institution is not able to substantiate its position that it did maintain copies of FFEL loan applications from the program review period. The majority of the FFEL loan applications submitted by Universidad are for the 1994-1995 and 1995-1996 award years. See Resp. Ex. 9. Although Universidad asserts that it provided SFAP with a “wide selection” of FFEL loan applications, it is also clear from this evidence that it failed to comply with the full file review requested by SFAP. From the sample of students contained in the FPRD, Universidad only produced loan applications for loan periods that occurred during the program review period for two students.See footnote 77 The loan applications for two other students (# 1 and # 6) in the sample were for loan periods that occurred after the program review period.

    To be considered administratively capable, an institution must develop and apply an adequate system to identify and resolve discrepancies in the information it receives regarding a student's application for financial aid. 34 C.F.R. § 668.14(f) (1991). One factor in determining whether that system is adequate is whether that institution obtains and reviews all student aid applications, need analysis documents, Statements of Educational Purpose, and Statements of Registration Status. Id. To be eligible to receive an FFEL loan, a student must be determined to have financial need in accordance with the requirements of the FFEL program. 34 C.F.R. § 668.7(a)(10) (1991). Compliance with this responsibility is documented through the institution's performance of a needs analysis, a process by which the student's cost of attendance at the institution and the student's expected family contribution are evaluated to arrive at the student's financial need. 20 U.S.C. §§ 1087kk, ll; 20 U.S.C. § 1070a-6.

    SFAP argues that Universidad failed to maintain need analysis documents for all ten of the students identified in the program review sample. SFAP asserts that Universidad only produced summary sheets of students' financial need and did not produce any source documentation used to determine the students' expected family contribution. Again, SFAP asserts that Universidad had the opportunity to demonstrate its compliance by conducting a full file review but that it failed to do so. Universidad argues that as an eligible foreign institution, it was not required to perform needs assessment/analysis; rather, the Secretary has assigned this task to the guaranty agencies. Universidad then asserts that even though it was not required to perform needs analysis, it, in fact, did perform this task.

    As proof that it was not required to perform needs analysis/assessment, Universidad points to a December 23, 1992, memorandum drafted by the Department's Eligibility and Administrative Analysis Branch of the Division of Institutional Participation. See Resp. Ex. 19 at 345-347. This memorandum states that for certain institutions on an attached list, it is the guaranty agency, and not the institution, that must perform the needs assessment/analysis. Id. Universidad is identified as one of the institutions for whom the guaranty agency should perform needs analysis.See footnote 88 Universidad argues that the since foreign schools are required to comply with the provisions of 34 C.F.R. Part 682 only to the extent determined by the Secretary, the Department's memorandum alleviates the institution of its responsibility to conduct, and therefore, maintain documentation, of needs analysis/assessment. 34 C.F.R.
§ 682.601(d) (1991).

    An institution is not released from its responsibility to ensure that its students are eligible to receive Title IV funds under 34 C.F.R. Part 668. The December 23, 1992, memorandum states that the guaranty agency(ies) and not the institution, should perform needs analysis for institutions identified by an asterisk on an attached list. Without any other support for its position other than this 1992 memorandum, I am not persuaded by Universidad's argument that it was not required to perform needs analysis, and that consequently, it did not need to maintain documentation of a task that it was not required to perform. Further, an institution is never released from its responsibility to ensure that its students are eligible to receive Title IV funds under 34 C.F.R. Part 668, even if it is a foreign institution. I also find Universidad's assertion that it did perform this task unpersuasive since it produced no evidence that it maintained this documentation.

    An institution that participates in the Title IV, HEA programs must establish, publish, and apply reasonable standards for measuring whether a student is maintaining satisfactory academic progress (SAP). 20 U.S.C. § 1091(a)(2); 34 C.F.R. §§ 668.7(a) and 668.14(e) (1991). SFAP asserts that Universidad failed to establish, publish, and apply a SAP policy during the program review period. Although Universidad submitted its catalog which contained such a policy, SFAP argues that since the catalog was published in February 1995, the policy was not developed and in use during the program review period. Universidad argues that its student manual clearly enumerates its satisfactory academic progress policy.

    Although Universidad produced a student manual that does detail its SAP policy, Universidad did not produce a report detailing the application of its SAP policy during the program review period as directed by SFAP. Universidad did submit some documentation regarding academic evaluations of students; however, the majority of these documents are for a time subsequent to the program review period. See Resp. Ex.14. Further, I recognize that in the termination proceeding, Judge Canellos found that Universidad did establish and publish a SAP policy. In re Universidad Eugenio Maria de Hostos, Docket No. 95-128-ST, U.S. Dep't of Educ. (January 21, 1997). I also find that Universidad did establish and publish its SAP policy although I do have some doubt about whether it existed during the program review period.See footnote 99 It is however, to be noted that in this proceeding, Universidad and not SFAP, bears the burden of proof in also establishing that it applied its policy during the program review period. It is abundantly clear that the institution has failed to demonstrate that it applied its SAP policy during the program review period.

    An institution that participates in the Title IV, HEA programs must provide adequate counseling, including a discussion of the institution's refund policy, to students who apply for Title IV assistance. 34 C.F.R. § 668.14(h) (1991). As part of this duty, an institution is required to establish, publish, and apply a fair and equitable refund policy.See footnote 1010 34 C.F.R. §§ 668.44 and 682.606(a)(2) (1991). SFAP asserts that Universidad failed to demonstrate that it had a written or published refund policy for the FFEL program during the program review period. Further, SFAP argues that Universidad failed to produce a report detailing the application of its refund policy during the program review period. Universidad argues that its student manual lays out its refund policy. Although I am willing to concede that Universidad did establish and publish its refund policy, the institution, by failing to produce the report detailing the application of its refund policy, failed to carry its burden that it applied its refund policy during the program review period.

    An institution must complete and return SSCRs to the Secretary or the appropriate guaranty agency. 34 C.F.R. § 682.610(c) (1991). SFAP argues that Universidad failed to produce any SSCRs for the students identified in the program review sample. SFAP also argues that Universidad's failure to complete and return SSCRs led to the submission of 16 fraudulently certified FFEL loan applications to guaranty agencies by students who were never enrolled at the institution. Additionally, SFAP asserts that Universidad failed to produce SSCRs for nine of the 16 students who submitted false FFEL program applications and that of the seven that were produced, two were not returned to the guaranty agency.

    Universidad responds that SFAP's allegation that its failure to complete and return SSCR led to the submission of fraudulent loan applications is specious. First, Universidad states that it has submitted a wide selection of SSCRs from different guaranty agencies dated from 1990 to the present. Second, Universidad argues that it did indicate on an SSCR as early as May 1991 that one of the students who submitted a fraudulent application was never enrolled at the institution and that it also alerted the Florida guaranty agency in May 1993 of possible forgeries and the individuals involved. Finally, Universidad argues that it cannot be held accountable for the independent acts of fraud and forgery committed by individuals.

    The evidence submitted by Universidad does not support its assertion that it regularly completed and returned SSCRs to guaranty agencies during the program review period in accordance with 34 C.F.R. § 682.610. From the evidence submitted by Universidad, it is apparent that its completion and submission of SSCRs was, at best, piecemeal. Although Universidad states that it submitted a “wide selection” of SSCRs from the program review period, the majority of SSCRs submitted to this tribunal were from 1995. See Resp. Ex. 11 at 130-150.

    It is not, however, clear that Universidad's lackadaisical approach to filing these SSCRs led to the submission of some fraudulent applications to guaranty agencies. This tribunal has long held that fact-finding determinations must be based on factual disputes related to an alleged regulatory violation for which SFAP seeks a relevant remedy. In re Belzer Yeshiva, Docket No. 95-55-SP, U.S. Dep't of Educ. (June 19, 1996) at 6. In Belzer Yeshiva, although SFAP asserted that the institution improperly instructed its students use the institution's mailing address on their financial aid applications, the tribunal did not find this to be actionable as there was no indication that Title IV funds were misspent as a result of this alleged violation. Id.

    The evidence submitted by Universidad demonstrates that it did, in fact, notify guaranty agencies that six of the sixteen students identified by SFAP were never enrolled at the institution.See footnote 1111 Further, SFAP does not appear to contest the fact that Universidad did notify the appropriate guaranty agencies about some of these students, and consequently, that the institution complied with this particular program requirement as to these six students. However, since the SSCR identifying these six students was submitted as late as two years after some of these FFEL loans were disbursed, I am left to wonder what impact the submission of SSCRs for these students would have had on stopping the disbursement of these loans.See footnote 1212 Therefore, I am not convinced that the submission of fraudulent loan applications can be directly traced to Universidad's piecemeal submission of SSCRs to guaranty agencies as SFAP has framed this allegation.See footnote 1313 However, since no separate liability was attached for this finding, my determination that Universidad's conduct did not lead to the submission of fraudulent loan applications does not alter my finding that Universidad failed to demonstrate that it regularly submitted SSCRs nor does it affect the liability assessed against Universidad in the instant proceeding.

    A Statement of Educational Purpose contains a certification by the student that he or she will use any Title IV funds received solely for educational expenses connected with attendance at the institution. 34 C.F.R. § 668.32(a)(2) (1991). An institution may not disburse Title IV funds until a student files a Statement of Educational Purpose with the institution. 34 C.F.R.
§ 668.32 (1991). The certification must be filed for each award year. Id. An institution is also required to collect and maintain copies of Statements of Registration Status. 34 C.F.R.
§§ 668.14(f)(1) and 668.33 (1991). An institution may waive the requirement that a student file a Statement of Registration Status for each award year only if the student has already filed such a statement and the student's status under the registration law has not changed. 34 C.F.R.
§ 668.33(e).

    According to SFAP, Universidad failed to collect Statements of Educational Purpose for seven of the ten students sampled in the program review and it also failed to obtain Statements of Registration status from all ten students sampled in the program review. SFAP asserts that Universidad admits these allegations and that it has not provided any explanation for why it has continued to refuse to comply with the program review requirement that it produce these missing statements for the students identified in the program review sample and for all the student files for the 1989-1990 through the 1993-1994 award years.

    Universidad argues that it has in the past certified its students' Statements of Educational Purpose and Registration status through the borrowers' certification on their loan applications. Further, Universidad asserts that it has now adopted a system to collect and maintain independent statements of educational purpose and registration status. Universidad submitted Statements of Educational Purpose signed in 1995 to demonstrate that it now has a system in place to collect these statements. See Resp. Ex. 15. This evidence is, however, irrelevant to a determination that the institution complied with program requirements during the period at issue. Universidad has failed to demonstrate that it collected and maintained these statements during the program review period either by providing separate statements attesting to the student's certifications or by attaching the FFEL loan applications from the students at issue in the program review sample and by conducting the requested full file review.

    To be eligible to receive an FFEL loan, a student must certify that he or she is not in default on any other Title IV loan. 34 C.F.R. §668.7(a)(7) (1991). An institution is required to maintain such statements of non-default. 34 C.F.R. § 682.610 (1991). SFAP argues that Universidad did not collect and maintain statements of non-default for seven of the ten students included in the program review sample nor has it reviewed the files for all the FFEL borrowers for award years 1989-1990 through 1993-1994 to determine whether these files contain statements of non-default. Universidad argues that it previously captured a student's statement of non-default through the borrower's certification on the FFEL loan application. Further, Universidad argues that it has now adopted a system to collect and maintain independent statements of non-default for its students.

    Universidad's evidence does not demonstrate that it collected and maintained statements of non-default during the program review period at issue. Although certifications made by students on loan applications would satisfy the requirements of 34 C.F.R. § 682.610, no separate statements or copies of FFEL loan applications containing such a certification were submitted for seven of the 10 students contained in the program review sample nor did Universidad conduct a full file review as directed by SFAP. All of the statements submitted by Universidad were signed by students in late 1995. See Resp. Ex. 12. Further, Universidad's assertion that it has now developed a system to collect and maintain such statements is not relevant to my determination that Universidad failed to fulfill this requirement during the program review period.

    An institution that participates in the Title IV, HEA programs must develop and apply an adequate system to identify and resolve discrepancies in the information it receives regarding a student's application for financial aid. 34 C.F.R. § 668.14(f) (1991). In determining whether the institution's system is adequate, the Secretary considers whether the institution obtains and reviews all student aid applications, Statements of Educational Purpose, Statements of Registration Status as well as any other factors relating to a student's Title IV eligibility. Id. It is abundantly clear that Universidad failed to collect much of this data as it was required to do so under the regulations. Therefore, I find that Universidad failed to demonstrate that it had a adequate system in place to identify and resolve discrepancies in students' financial aid information.

    Under 34 C.F.R. § 668.14(h), § 668.43, and § 668.44, an institution is required to provide adequate financial aid counseling to its students, and to publish and make available pertinent financial assistance and institutional information to both current and prospective students. According to SFAP, Universidad failed to provide the adequate information to its students including a description of the FFEL program, procedures and forms for applying for assistance, student eligibility requirements, SAP standards, and Title IV refund policies. SFAP further asserts that Universidad failed to offer any evidence to refute this finding and that the institution's catalog published in February 1995 is not sufficient to demonstrate its compliance during the program review period.

    As proof that it complied with program requirements, Universidad once again points to its student manual. I have found that Universidad's manual was in existence during the program review period; consequently, I find that Universidad did provide adequate financial aid information to its students. However, Universidad merely asserted that it provided financial aid counseling to its students but submitted no evidence to that effect. Therefore, Universidad has failed to carry its burden under 34 C.F.R. § 668.116(d) that it provided adequate financial aid counseling during the program review period.

    As a general defense against SFAP's allegations, Universidad argues that it was not provided with adequate training and materials regarding its responsibilities under the Title IV, HEA programs. SFAP asserts that it has no affirmative obligation to provide training to institutions that participate in the Title IV, HEA program and that Universidad had a contractual obligation, by signing a program participation agreement, to make itself aware of the requirements regarding administration of the Title IV, HEA programs. Further, SFAP asserts that Universidad's duty to act as a fiduciary subject it to the highest standard of care and diligence in administering the Title IV, HEA programs. 34 C.F.R. § 668.82(b)(1) (1991) .

    As addressed in the tribunal's decision terminating Universidad's participation in the Title IV programs, it is the responsibility of the institution to ensure that its staff is adequately trained in administering the Title IV programs. In re Universidad Eugenio Maria de Hostos, Docket No. 95-128-ST, U.S. Dep't of Educ. (January 21, 1997) at 5. The fact that an institution was not provided adequate guidance cannot, and does not, excuse the institution from its duty to comply with Title IV program requirements. Id.

    An institution appealing a FPRD has the burden of proving that Title IV funds were properly disbursed. 34 C.F.R. § 668.116(d). See In re National Training, Inc., Docket No. 93- 98-SA, U.S. Dep't of Educ. (October 18, 1995). An institution that fails to demonstrate how its exhibits establish its burden of proof acts at its own peril, as did Universidad. See In re Clark Atlanta University, Docket No. 93-106-SP (Decision on Remand II) (December 22, 1997). Although Universidad asserts that it did meet the standards of administrative capability, the evidence does not support its assertion. For each of the different types of documentation that Universidad was required to maintain, the institution only provided extremely limited documentation, the majority of which does not correspond to the program review period. Further, Universidad failed to demonstrate that it applied its satisfactory academic progress and refund policies during the program review period. I also note that Universidad failed to conduct the full file review SFAP instructed it to do after the program review. As part of its duty to account for its expenditure of Title IV funds, this tribunal has long held that when an institution has failed to conduct a full file review, the institution is liable for all Title IV funds disbursed during the program review period. In re Pan American School, Inc., Docket No. 96-147-SP, U.S. Dep't of Educ. (January 24, 1997). Therefore, I find that Universidad failed to demonstrate that it was capable of administering the Title IV programs during the period at issue. This constitutes a violation of an institutional eligibility requirement.

    Finally, Universidad argues that the estimated loss liability assessed against it is erroneous, unwarranted and excessive. The estimated loss formula has been adopted as a fair method of calculating an institution's liability for FFEL Program violations. See In re Christian Brothers University, Docket No. 96-4-SP, U.S. Dep't of Educ. (January 8, 1997). Given my finding that Universidad was not capable of administering the Title IV programs and the institution's own failure to adequately document that it complied with program requirements, I do not find the liability assessed against Universidad to be excessive.

    

ORDER

    On the basis of the foregoing, it is hereby ORDERED that Universidad Eugenio Maria de Hostos pay to the U.S. Department of Education the sum of $427,653.00.

                        _________________________________
                             Judge Richard I. Slippen

Dated: February 19, 1998



SERVICE

A copy of the attached initial decision was sent by certified mail, return receipt requested to the following:

Arcadio J. Reyes, Esq.
1150 Connecticut Avenue, N.W.
Ninth Floor
Washington, D.C. 20036

Paul G. Freeborne, Esq.
Office of the General Counsel
U.S. Department of Education
600 Independence Avenue, S.W.
Washington, D.C. 20202-2110


Footnote: 1    1Universidad's eligibility to participate in the Title IV, HEA programs was terminated on January 21, 1997. See In re Universidad Eugenio Maria de Hostos, Docket No. 95-128-ST, U.S. Dep't of Educ. (January 21, 1997), certified by the Secretary (October 22, 1997).
Footnote: 2    2SFAP used the estimated loss formula to calculate Universidad's liability.
Footnote: 3    3The FPRD's other findings incorporate many of the standards included in the regulation governing administrative capability. It is evident that these other findings should have been either encompassed in the FPRD's initial finding or should have had separate liabilities attached. However, since SFAP identified these other findings in the FPRD, it is also clear that the institution had notice that these findings were at issue in the instant proceeding. As an aside, I note that SFAP's FPRD was one of the more poorly crafted documents I can recall seeing.
Footnote: 4    434 C.F.R. § 668.14 (1991-1992) was substantially revised and redesignated as 34 C.F.R. § 668.16, effective April 29, 1994. The revised regulation strengthened the administrative capability standards. 59 Fed. Reg. 9526, 9545 (February 28, 1994). Further technical changes were made effective July 31, 1995. Although the parties cite Section 668.16 throughout their submissions, this section with its stricter administrative capability standards does not govern the dispute in this proceeding.
Footnote: 5    5These four students are Student # 2, # 7, # 9, and # 10.
Footnote: 6    6Although Universidad submitted a Notice of Loan Guarantee Disclosure Statement for Student # 1 for the 1993-1994 award year, this does not constitute a FFEL loan application. See Resp. Ex. 9 at 91-93.
Footnote: 7    7These two students were Student # 3 and Student # 5. See Resp. Ex. 9 at 89 and 96.
Footnote: 8    8I am troubled by SFAP's statement that Universidad produced absolutely no evidence that guaranty agencies were designated by the Secretary to perform needs analysis for the institution, while not even discussing the Departmental memorandum attached as Resp. Ex. 19.
Footnote: 9    9See Resp. Ex. 13 at 278.
Footnote: 10    10As of July 23, 1992, an institution was required to have a refund policy in place that is based on pro rata refund calculations.
Footnote: 11    11 These students are R.F., E.M., F.M., E.R., T.R., and F.R.. See Resp. Ex. 11 at 169. Universidad's evidence for two other students, D.S. and S.S., indicates that the SSCR was not returned to the guaranty agency. I am not, therefore, persuaded that the guaranty agency in question was notified. Further, Universidad's assertion that it notified another guaranty agency about a student, G.R., who submitted a fraudulent loan application is irrelevant as this student was not identified by SFAP as one of the sixteen students at issue although Universidad indicates that G.R. may be the sole person responsible for submitting several and/or all of the fraudulent loan applications.
Footnote: 12    12This SSCR was submitted in April 1993. According to SFAP, FFEL loans for some of these students were disbursed as early as 1991. See SFAP Brief at 11.
Footnote: 13    13However, this is not to say that Universidad cannot be held accountable for the “independent” acts of fraud committed by individuals, if the institution's violation of a Title IV program requirement led to the improper expenditure of Title IV funds.