UNITED STATES DEPARTMENT OF EDUCATION
WASHINGTON, D.C. 20202
In the Matter of Docket No. 96-128-SP
COLLEGE OF BEAUTY ARTS & Student Financial SCIENCE, Assistance Proceeding
Respondent. PCRN: 199-540912011
Appearances: Mr. Larry Bulechek, owner, Cottonwood, Arizona, for the College of Beauty Arts and Science.
Denise Morelli, Esq., Office of the General Counsel, United States Department of Education, Washington, D.C., for Student Financial Assistance
Before: Judge Ernest C. Canellos
On August 30, 1996, the office of Student Financial Assistance Programs (SFAP) of the U.S. Department of Education (ED) issued a final program review determination (FPRD) which found that the College violated several regulations promulgated pursuant to Title IV. The FPRD resulted from a September 11-15, 1995, on-site program review of the College's Title IV compliance for the award years 1992-93, 1993-94, and 1994-95, conducted by SFAP's San Francisco Regional Office. During the program review, samples of twenty student files from each award year were selected for review. The program review report, dated January 19, 1996, contained fourteen adverse findings. The FPRD concluded that the College had taken corrective
action as to all but four of these findings, leaving unresolved and in issue only SFAP's
conclusions that the College failed to resolve conflicting information, failed to verify information
of students selected for verification, disbursed federal aid to students without a valid Student Aid
Report (SAR) or Electronic Student Aid Report (ESAR), and erroneously disbursed federal
student aid to a student who was in default on a prior Title IV student loan.
The parties submitted their respective briefs and, therein, they agreed that the College
owed $15 for the finding relative to the inconsistent information in the student files, there was no
liability for the failure to verify, and the College owed $1,150 for the finding relative to the
distribution of federal student aid to a student who was already in default on a Title IV loan. The
College, on the other hand, disputes liability as to the finding relative to the failure to maintain a
valid SAR or ESAR in the student files. In its Summary of Unpaid Liabilities, the College agrees
to pay the undisputed claims and it also inexplicably agrees to pay $2,950 towards the finding
which it disputes.
In an appeal of a finding in an FPRD, the institution has the burden of proving that the
Title IV funds were lawfully disbursed. 34 C.F.R. § 668.116(d). SFAP claims that the matter is
quite straightforward -- as a condition of disbursing Title IV aid, the institution must obtain a
valid SAR or ESAR. 34 C.F.R. § 690.61. To be valid, both a SAR and ESAR must be signed.
34 C.F.R. § 690.2. The evidence of record is quite clear -- the College disbursed Title IV aid to
eight studentsSee footnote 1
without securing a signed ESAR. The College's various defenses, i.e. that the program reviewers exceeded their authority and that there is no authority requiring the actions
demanded by the review, are clearly without merit. The College's argument that other
documentation, such as the student loan application, could substitute for the signed ESAR is,
likewise, not meritorious. The lack of signatures on the ESARs clearly raises the specter of
impropriety, and the College does not rebut this by coming forward with evidence demonstrating
that the Title IV aid was lawfully disbursed. See In the Matter of Knoxville College, Docket No. 94-175-SP, U.S. Dep't of Educ., (Decision of the Secretary), February 8, 1996. As a
consequence, I find that the College has failed to meet its burden of demonstrating that the
students at issue had a valid ESAR and, therefore, the College is liable for the return of the Title
IV aid disbursed to those students. Further, I find the total liability for this finding is $8,753.See footnote 2
2. The College of Beauty Arts and Science failed to resolve conflicting information as to
one student. The liability for that one student is $15.00.
3. The College of Beauty Arts and Science erroneously disbursed Title IV student aid to
one student despite the fact that the student was already in default of a previous Title IV loan.
The liability for that student is $1,150.00.
Ernest C. Canellos
Dated: January 15, 1997
A copy of the attached initial decision was sent by certified mail, return receipt requested to the
Mr. Larry Bulechek
College of Beauty Arts and Science
1229 East Cherry Street
Cottonwood, Arizona 86326
Denise Morelli, Esq.
Office of the General Counsel
U.S. Department of Education
600 Independence Avenue, S.W.
Washington, D.C. 20202-2110