UNITED STATES DEPARTMENT OF EDUCATION
WASHINGTON, D.C. 20202
In the Matter of Docket No. 97-1-SP
STYLING COLLEGE, Student Financial Assistance Proceeding
____________________________________ PRCN: 199530311776
On October 18, 1996, 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 Anthony's Barber Styling College (ABSC) violated several regulations 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. In June 1995, SFAP conducted a program review of ABSC's administration of its Title IV student assistance programs for the 1992-93 and 1993-94 award years. Based on its review, SFAP issued a FPRD containing five findings that carry an aggregate liability of $94,851.
Respondent requested that oral argument be heard on this matter. According to 34 C.F.R.
§ 668.116 (1996), oral argument may be heard if the hearing official determines that oral argument is necessary to clarify the issues and positions of the parties as presented in their written submissions. In Re Chicago State University, Docket No. 94-173-SA, U.S. Dep't of Educ. (April 26, 1996). I find that oral argument is unnecessary as the issues do not require further clarification, and therefore, I hereby deny ABSC's request for oral argument.
Initially, SFAP found that ABSC failed to obtain the necessary documentation to verify
the need for student financial assistance for 11 students chosen from a sample of 20 students.
Due to this ratio of incomplete files, SFAP ordered ABSC to review the files of all students
selected for verification as required by 34 C.F.R. § 668.54 (1992). In reviewing these files,
SFAP uncovered missing documentation to include Electronic Student Aid Reports (ESARs),
signed ESARs, verification worksheets, and income tax returns. In total, 31 of the 48 student
files reviewed were missing some form of documentation.
Although ABSC challenges this finding regarding missing verification documentation,
ABSC did not provide any evidence demonstrating that it complied with Title IV program
requirements as listed under 34 C.F.R. §§ 668.54 - 668.59 (1992). This tribunal has long held
that an institution that fails to demonstrate that it obtained the verification documentation prior to
disbursing Title IV funds remains liable for those funds. In Re American Education Center, Inc.,
Docket No. 94-109-SP, U.S. Dep't of Educ. (February 21, 1996) at 6. See also In Re College of
Beauty Arts & Sciences, Docket No. 96-128-SP, U.S. Dep't of Educ. (January 15, 1997) at 2.
Therefore, I find that ABSC remains liable for $63,539 in Pell Funds and $11,424 in FFEL loans
disbursed to the 31 students for whom it failed to obtain verification documentation.
Without such documentation, the institution would be liable for the unmatched shares not
contributed for these award years. In Re Smith Business School, Docket No. 95-108-SA, U.S.
Dep't of Educ. (November 30, 1995) at 3. In the instant case, ABSC failed to provide
documentation to demonstrate that it made any contributions to match the Federal funds owed by
ABSC for the 1991-92, 1992-93, and 1993-94 award years. ABSC owed the amounts of
$500.00, $1000.00, and $1,850, respectively. ABSC failed to address this finding in its Initial or
Reply Briefs. Therefore, I find that ABSC failed to demonstrate that it complied with the
program requirements contained in 34 C.F.R. § 676.21 (1992), and ABSC remains liable for the
aggregate amount of $3,350 owed for the three award years in FSEOG matching funds.
An institution is also required to hire an independent auditor to perform financial and
compliance audits of its Title IV, HEA programs. 34 C.F.R. § 668.23(c)(1) (1992). Any audit
must be conducted in compliance with the standards set forth in the U.S. General Accounting
Office's Standards for Governmental Organizations, Programs, Activities, and Functions. Id.
Procedures for audits are contained in the audit guides developed by the Department's Office of
the Inspector General. 34 C.F.R. § 668.23(c)(2) (1992).
This tribunal has held that an institution participating in Title IV assistance programs has
a fiduciary responsibility to the Department to accurately account for the receipt and expenditure
of Title IV funds. In Re The Cittone Institute, Docket No. 94-131-SA, U.S. Dep't of Educ. (April 7, 1995) at 2.
An institution is required to maintain a record of each program transaction.
Thus when an institution cannot reconcile its records, it is liable to the Department for the
missing funds uncovered by discrepancies unless it can satisfy its burden of accounting for these
missing funds. Id.
In the instant case, ABSC was instructed to reconcile all of its Title IV transactions for
the 1992-93 and 1993-94 award years. SFAP also instructed ABSC to submit a copy of each
reconciliation explaining any discrepancies which occurred during the program review period.
SFAP further instructed ABSC to retain a certified public accountant (CPA) to review the
reconciliation's accuracy and completeness. The CPA's review was to be attached to the
reconciliation and submitted within 45 days of ABSC's receipt of the FPRD dated October 18,
1996. ABSC failed to submit any documentation to demonstrate that the institution completed a
reconciliation of its institutional ledgers for the 1992-93 and 1993-94 award years or that it
retained a CPA to review its fiscal records.
Due to ABSC's failure to demonstrate that it complied with 34 C.F.R. §§ 690.81 and
690.83 (1992) by not providing SFAP with a comprehensive review of its administration of Title
IV funds during the program review period, I hereby find that ABSC remains liable for the
$15,225 in unaccounted Pell funds. 34 C.F.R. § 668.116(d) (1992).
In order to be considered fair and equitable, an institution's refund policy will provide for
a refund in the amount which is the largest of (1) the requirements of applicable State law; (2) the
specific refund requirements established by the institution's nationally recognized accrediting
agency and approved by the Secretary; or (3) the pro rata refund calculation described in § 1091b
if the student was attending that institution for the first time and withdrew from the institution
before completing at least 60 percent of the period of enrollment. 20 U.S.C. § 1091b(b). In Re
Louise's Beauty College, Docket No. 95-48-SP, U.S. Dep't of Educ. (May 20, 1996) at 5.
According to SFAP, ABSC did not provide refunds for nine students identified in the
FPRD under the pro rata refund policy as set forth in 20 U.S.C. § 1091b. ABSC did not address
this finding in either its Initial or Reply briefs. ABSC also failed to submit a reconstruction of its
records for all students who withdrew on or after July 23, 1992, as requested by SFAP in the
FPRD. Therefore, I find that Respondent failed to meet its burden under 34 C.F.R. § 668.116(d)
to comply with the pro rata refund policy and to demonstrate that it properly disbursed Title IV
refunds to these nine students. Consequently, ABSC remains liable for $8,847 in Pell funds and
$1,000 in FFEL loan funds disbursed to these students.
An ATB exam must be administered in accordance with the regulations set forth by the
Title IV, HEA. 57 Fed.Reg. 62440 (Dept. of Educ. 1992) at 4. Guidelines set forth by
57 Fed.Reg. 62440
require that the proctor of the examination have no current or prior fiscal
interest in the institution. The only relationship that should exist between the proctor and the
institution is a relationship at arm's length. Id. The guidelines also advise that an institution
keep records to ensure the independence of the administered ATB examinations. The recorded
information should include dates and locations of the exams, test scores, and the names of the
individuals who administered the exams. 57 Fed.Reg. 62440 (Dept. of Educ. 1992) at 4.
SFAP argues that ABSC improperly used a school official instead of an independent
proctor to administer the Wonderlic ATB exam to two students. ABSC did not specifically
address this finding in either its Initial or Reply briefs or submit any evidence that someone other
than the school official administered the ATB exam. I find that ABSC failed to demonstrate that
it complied with Title IV program requirements in its administration of the Wonderlic ATB
exams. Therefore, ABSC remains liable for $3,980 in Pell funds disbursed to these two students.
2. ABSC failed to meet its matching requirements for the FSEOG program.
3. ABSC failed to comply with the accounting regulations contained in 34 C.F.R. § 668.23 (1992).
4. ABSC failed to implement a pro-rata refund policy as required by 20 U.S.C.
5. ABSC improperly administered ATB tests to its students violating 20 U.S.C.
§ 1091(d), and 34 C.F.R. §§ 600.11 and 668.7(a)(3)(i) (1992).
Judge Richard I. Slippen
Dated: August 1, 1997
A copy of the attached initial decision was sent by certified mail, return receipt requested to the
Kelly J. Andrews, Esq.
Office of General Counsel
U.S. Department of Education
600 Independence Ave. S.W.
Washington, D.C. 20202-2110
Waverly V. Yates, & Bisco C. Anthony, President
Anthony's Barber Styling College
1307 Jefferson Ave.
Newport News, VA 23607