UNITED STATES DEPARTMENT OF EDUCATION
WASHINGTON, D.C. 20202
In the Matter of Docket No. 97-158-SF
COMMUNITY COLLEGE, Student Financial
Neosho County Community College (Neosho) is an institution which participates in the federal 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. On October 20, 1997, the Office of Student Financial Assistance Programs (SFAP) of the U.S. Department of Education (Department) issued a notice of intent to fine Neosho $75,600 for three violations of HEA program regulations. This fine action arises out of a program review conducted on July 29 - August 2, 1996, which resulted in the issuance of a July 22, 1997, final program review determination (FPRD). Neosho appealed the FPRD finding that student verification was not documented and/or incomplete (Finding #2). SFAP and Neosho settled the institution's appeal of the FPRD's liabilities, and a dismissal was issued by Judge Canellos on March 12, 1998.See footnote 11
The October 27, 1997, notice identifies three alleged bases for this fine action. The first
violation charged was that Neosho failed to verify students' eligibility and need for Title IV
financial aid prior to disbursement for which SFAP requested a fine of $36,000. The second
violation charged was Neosho's failure to apply a fair and equitable refund policy for which
SFAP seeks a fine of $28,000. For Neosho's alleged third violation, the institution's improper
certification of Federal Family Education Loan Program (FFEL) applications, SFAP seeks a fine
In its program review, SFAP uncovered several instances where Neosho failed to
complete verification of students' financial aid information. As a result, SFAP required Neosho
to review the files of all the students Neosho had selected for verification for the 1993-94 award
year.See footnote 22 The result of this file review identified 64 students for whom adjustments were required.
According to Neosho, it appeared as if only 13 of these students resulted in a liability owed to the
Department.See footnote 33 However, in its own review of the institution's files, SFAP uncovered an
additional 27 students for whom verification was not completed, along with $89,717 in
associated liabilities. For each of these 40 violations, SFAP seeks a fine amount of $400,
totaling $16,000. Additionally SFAP seeks a fine of $20,000 for Neosho's failure to submit an
accurate and complete file review. SFAP argues that Neosho's submission of an inaccurate file
review reflects the institution's lack of cooperation and disregard for the program review process.
Neosho argues that SFAP may not impose a fine of $20,000 for the institution's failure to
submit an accurate file review because this violation occurred as a result of the failure to perform
accurate verification. Thus, because one act gave rise to the other, the two violations actually
constitute only one regulatory violation and only one fine is appropriate. SFAP argues that
Neosho's submission of an inaccurate file review reflects the institution's lack of cooperation
and disregard for the program review process. SFAP states that it does not seek to fine Neosho
twice for the same conduct but that the institution's failure to comply with verification
requirements and its submission of an inaccurate file review are two separate acts of misconduct.
Based on the evidence submitted by both parties, I have concluded that a fine for the
institution's failure to comply with verification requirements is appropriate but for a lesser
amount that SFAP seeks. In its fine notice, SFAP asks that a fine of $400 each for 40 violations
be imposed. I find that the appropriate fine for this violation is $200 for each of Neosho's 40
violations for a total of $8000. Further, I am persuaded by Neosho's arguments and evidence
that the institution attempted to submit a complete response to SFAP's request for a file review
and that the institution's conduct does not warrant the imposition of an additional $20,000 fine
for its failure to submit a complete and accurate file review. Therefore, I hereby deny SFAP's
proposed fine of $20,000 contained in its October 20, 1997, fine notice
In its program review, SFAP determined that Neosho did not have a fair and equitable
refund policy for various reasons. Specifically, Neosho's policy only covered the first two weeks
of the semester; it did not disclose the pro rata refund requirement for first-time students who
withdrew or otherwise stopped attending classes prior to completion of 60 percent of the
academic term; and it did not reveal that a refund may be due whether or not the student had
followed the published refund guidelines. As a result of this finding, Neosho was required to
revise its refund policy and retroactively apply the amended policy to the 1993-94 through the
1995-96 award years. Neosho's review revealed 48 students for whom refunds were improperly
calculated. The liability for these improperly calculated refunds totaled $7,913. For this
violation, SFAP now seeks to fine the institution $600 for each of these 48 instances or $28,800.
Neosho does not dispute that it improperly calculated refunds. Rather, the institution argues that its regulatory violations were inadvertent and that SFAP has not offered any evidence of fraud or abuse. Neosho agrees with SFAP that the nonpayment of tuition refunds is a serious violation. It states however, that since its failure to make proper refunds was not intentional, it would not be subject to criminal sanctions as SFAP suggests in its brief.
SFAP argues that Neosho has improperly characterized this violation. SFAP states that
the violation also consists of the institution's failure to adopt a fair and equitable refund policy.
SFAP states that the mitigating factors advanced by Neosho do not warrant reducing the fine. Specifically, SFAP states that Neosho's failure to pay refunds cannot be portrayed as inadvertent since the violation at issue is Neosho's failure to adopt a fair and equitable refund policy. According to SFAP, the institution's failure to adopt such a policy is graver than the failure to pay refunds to specific students because absent a refund policy, an institution may not make any refunds properly. SFAP also argues that Neosho's assertion that it has taken future-oriented corrective action is misleading since the only new procedure initiated by Neosho was the adoption of a new refund policy. SFAP argues that the imposition of a fine is aimed at an institution's improper conduct and that since its twin goals are punishment and deterrence, the severity of a violation should be evaluated at the time of commission. Therefore, corrective measures are not mitigating factors that justify dismissal or reduction of the fine.
SFAP is correct in its argument that the twin purpose of a Subpart G fine action is
punishment and deterrence. However, SFAP is incorrect in asserting that an institution's motive
in committing the violation(s) or its good faith efforts to take corrective action are not relevant to
my determination of what fine amount, if any, is appropriate for the identified violations. See 34
C.F.R. § 668.92(a); In re Dean's Westside Beauty College, Docket No. 95-73-ST, U.S. Dep't of
Educ. (November 8, 1995); In re Wichita Area Vocational Technical School, Docket No. 97-41-
SF, U.S. Dep't of Educ. (September 10, 1997); In re Universidad Eugenio Maria de Hostos,
Docket No. 97-61-SF, U.S. Dep't of Educ. (February 6, 1998). Further, the amount of loss
suffered by the Department due to any statutory or regulatory violations has also been used to
guide this tribunal's assessment of a fine. See In re Hollywood School of Beauty Culture &
Advanced Hair Design, Docket No. 98-37-SF, U.S. Dep't of Educ. (June 10, 1998).
Neosho's failure to adopt a fair and equitable refund policy is a serious violation and
warrants the imposition of a fine, although in an amount lesser than which SFAP seeks. I find
that Neosho's failure to make appropriate refunds to the students identified in the fine action was
inadvertent, and that it did not result in the misuse of a significant amount of Title IV funds.
Further, Neosho took suitable corrective action to cure its violations. Therefore, I find the
appropriate fine to be in the amount of $300 for each of Neosho's 48 violations, or $14,400.
Neosho admits that it failed to properly verify student information, but states that these
violations were unintentional. Neosho argues that it took timely action to correct its
administration of Title IV program requirements and has offered assurances to the Department
that these violations will not reoccur. Neosho asserts that its violations were isolated incidents
rather than part of an overall pattern of misconduct. Neosho further argues that this tribunal has
previously considered both the lack of an ill-motive and an institution's corrective action to be
mitigating factors in a fine action. Neosho disputes SFAP's assertion that it routinely
disregarded verification requirements and that this amounted to a systemic and widespread
problem at the institution. Neosho also proposes that given the relatively small liabilities
assessed in the FPRD and the fact that many verification errors did not result in a program
liability should be considered in lowering the fine sought by SFAP.
As Neosho admits, the institution clearly violated the requirement that it verify its students' financial aid documentation. However, I note that Neosho's errors were not intentional, and resulted in only small liabilities owed to the Department. I also am not persuaded by SFAP's argument that it is appropriate in this case to analogize the projection of liabilities from a statistical sample as SFAP does in assessing program review liabilities in Subpart H proceedings, to set a fine amount in this Subpart G fine action.See footnote 44 Neosho's improper certification of FFEL loan applications for students contained in the program review sample has not demonstrated to me that this violation was pervasive. In fact, if, in response to a program review report, an institution, such as Neosho, opted for a full file review in determining any liabilities owed to the Department as opposed to extrapolating from a program review sample, no more errors may have been uncovered. Therefore, I find that a lesser fine of $100 for each of the 18 violations, or $1800, is appropriate.
On the basis of the foregoing, it is hereby ORDERED that Neosho County Community
College be fined $24,200.
Judge Richard I. Slippen
Dated: January 12, 1999
A copy of the attached document was sent to the following:
Leigh M. Manasevit, Esq.
Karen S. Lovitch, Esq.
Brustein & Manasevit
3105 South Street, N.W.
Washington, D.C. 20007
Alexandra Gil-Montero, Esq.
Office of the General Counsel
U.S. Department of Education
600 Independence Avenue, S.W.
Washington, D.C. 20202-2110