**CONTROL NUMBER**

**ED-OIG/A05-B00****19**

Dr. Anthony Diekema, President

Trinity Christian College

6601 West College Drive

Palos Heights, Illinois 60463

Dear Dr. Diekema:

This **Final Audit Report** presents the results of our Audit of Course
Length at Trinity Christian College (Trinity). Our objective was to
determine whether Trinity complied with the Higher Education Act (HEA)
and applicable regulations pertaining to course length for its *Trinity
Adult Degree Completion Studies* (TRACS) program.

We provided a draft of this report to Trinity. In its response, Trinity
disagreed with the finding and recommendations. Based on the response,
we did not make any revisions to the report. We summarized Trinity's
response after the finding, and a copy of Trinity's response is provided
as an attachment.

**[AUDIT RESULTS]{.smallcaps}**

We found that the actual number of instructional hours Trinity scheduled
for the students who enrolled in its TRACS business program from January
1999 through August 2000 did not provide the number of instructional
hours required to meet the statutory definition of an academic year. The
statutory definition of an academic year is incorporated in the
regulations at Title 34 C.F.R. § 668.2(b). The regulations in this
section that apply to institutions not using semester, trimester, or
quarter systems are commonly known as the 12-Hour Rule.

The 12-Hour Rule requires the equivalent of at least 360 instructional
hours per academic year. An institution's academic year and the credit
hours that a student enrolls in are used, in part, to determine the
amount of funds a student is eligible to receive from the Title IV
programs. We estimated that Trinity overawarded and disbursed \$111,061
in Title IV funds to the TRACS business program students who enrolled
from January 1999 through August 2000. For students who enrolled in the
TRACS program after August 2000, Trinity changed to a semester-based
calendar for awarding and disbursing Title IV funds. As a result, the
12-Hour Rule no longer applies.

**Nonterm Institutions Must Provide a Minimum of 360 Hours of
Instructional Time in an Academic Year**

HEA Section 481(a)(2) states that the term academic year shall:

> \[R\]equire a minimum of 30 weeks of instructional time, and, with
> respect to an undergraduate course of study, shall require that during
> such minimum period of instructional time a full-time student is
> expected to complete at least 24 semester or trimester hours or 36
> quarter hours at an institution that measures program length in credit
> hours....

The regulations at 34 C.F.R. § 668.2(b) clarify what constitutes a week
of instructional time:

> \[T\]he Secretary considers a week of instructional time to be any
> week in which at least one day of regularly scheduled instruction,
> examinations, or preparation for examinations occurs...For an
> educational program using credit hours but not using a semester,
> trimester, or quarter system, the Secretary considers a week of
> instructional time to be any week in which at least 12 hours of
> regularly scheduled instruction, examinations, or preparation for
> examinations occurs....

These regulations, commonly known as the 12-Hour Rule require the
equivalent of 360 instructional hours per academic year (12 hours per
week for 30 weeks). Institutions were required to comply with the
12-Hour Rule as of July 1, 1995.

In the preamble to the 12-Hour Rule regulations published on November
29, 1994, the Secretary explained that an institution with a program
that meets less frequently than 12 hours per week would have to meet for
a sufficient number of weeks to result in the required instructional
hours. For example, if an institution decided to establish an academic
year for a program with classes that met for 10 hours per week, the
classes would need to be held for 36 weeks to result in 360 hours.

During the period January 1999 through August 2000, Trinity did not have
a written defined academic year for the TRACS business program. It
measured the TRACS business program in credit hours, using a
non-traditional academic calendar. Trinity offered the program in three
non-standard terms that were 23, 25, and 29 weeks in length, for a total
of 49 credit hours. It scheduled four-hour classes, one day a week, for
a total of 308 hours[^1] (23+25+29 = 77 weeks x 4 hours). Trinity
considered the students to be full time. Based on four scheduled hours
per week, to comply with the 12-Hour Rule, the TRACS business program
would have needed to be 90 weeks long and provided 58 credit hours to
equal a full 360-hour academic year.

Trinity disbursed amounts to TRACS business students that exceeded the
prorated maximum amounts for an academic year allowed under the Federal
Family Education Loan (FFEL) and Pell Grant programs. We estimated that
Trinity overawarded \$111,061 of Title IV funds to TRACS business
students because it did not comply with the 12-Hour Rule from January
1999 through August 2000.

-   **[FFEL Limits]{.underline}.** Title 34 C.F.R. § 682.603(d)
    stipulates that an institution may not certify a loan application
    that would result in a borrower exceeding the maximum annual loan
    limits specified in 34 C.F.R. § 682.204. We estimated that \$103,266
    in FFEL disbursements exceeded the prorated annual loan limits.

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-   **[Pell Grant Maximum]{.underline}.** Title 34 C.F.R. § 690.62(a)
    specifies that the amount of a student's Pell Grant for an academic
    year is based upon schedules published by the Secretary for each
    award year. The payment schedule lists the maximum amount a student
    could receive during a full academic year. We estimated that \$7,795
    in Pell Grant disbursements exceeded the prorated maximum amount
    allowed.

Because the TRACS business program did not meet the requirements of the
12-Hour Rule from January 1999 through August 2000, Trinity improperly
disbursed FFEL and Pell Grant funds awarded to students who enrolled
during that period. For students who enrolled in the TRACS program after
August 2000, Trinity changed to a semester based calendar for awarding
and disbursing Title IV funds. As a result, the 12-Hour Rule no longer
applies.

**Recommendations**

We recommend that the Chief Operating Officer for FSA require Trinity
to:

1.1 Return to lenders FFEL funds of \$103,266 that exceeded the prorated
annual loan limits for an academic year.

1.2 Return to the Department of Education the Pell Grant funds of
\$7,795 that exceeded the prorated allowable awards.

1.3 Remit to the Department of Education the interest and special
allowance costs incurred on federally subsidized loans.

**Auditee Comments**

Trinity did not agree with our finding or recommendations. It stated
that we should have calculated aid eligibility for the period in
question using standard terms instead of 12-Hour Rule methodology. By
using standard terms, students would be eligible for their entire loan
amounts, and they would also be eligible for a larger percentage of
their Pell Grants. Trinity also stated that the TRACS curriculum has not
changed since the beginning of the program, and the students enrolled
between January 1999 and August 2000 completed the same coursework in
the same amount of time as currently enrolled students. The only
difference between the methodology employed during the period in
question and its current methodology is how the weeks in the term were
represented on the calendar. The finding should focus on using current
methodology to the period in question. Trinity submitted a copy of a
letter from an Institutional Improvement Specialist from the Office of
Federal Student Aid, which it believes verifies that its procedures for
awarding financial aid are correct. It stated that the Institutional
Improvement Specialist paid specific attention to the TRACS program.

**OIG Comments**

We reviewed Trinity\'s response and found no basis for changing the
report. Whether an institution uses standard or non-standard terms, not
the nature of the curriculum, is a factor in determining whether the
12-Hour Rule applies. During the period January 1999 through August
2000, Trinity did not measure the TRACS program using standard semester,
trimester, or quarter terms. Instead, Trinity used non-standard terms
that were between 23 and 29 weeks in length, and it disbursed aid as if
the TRACS students were full-time. Therefore, during the period in
question, Trinity had to comply with the 12-Hour Rule. During our
on-site fieldwork, Trinity\'s Director of Financial Aid stated that,
when he took over the position in October 2000, he realized that
Trinity\'s methodology for calculating and disbursing aid to TRACS
program students did not comply with the regulations. He then changed to
the current methodology. The Director placed the TRACS program on a
semester-based calendar, and changed each student's enrollment status to
part time. This statement and those actions support our conclusion.

The letter from the Institutional Improvement Specialist is not
relevant. He performed a technical assistance review on December 17,
2001, more than 15 months after the period when the 12-Hour Rule was
applicable to the TRACS program. The letter does not indicate that his
review covered the period January 1999 through August 2000, or that he
reviewed the financial aid disbursement methodology that Trinity used
during that period.

**BACKGROUND**

Trinity is a four-year, degree-granting institution operating under a
charter granted by the State of Illinois in 1959. Under the charter,
Trinity has approval to award both the Bachelor of Arts and the Bachelor
of Science degrees. The Commission on Institutions of Higher Education
of the North Central Association of Colleges and Schools accredits
Trinity.

Trinity started the TRACS program in January 1999 when the first
business cohort began attending class. The TRACS business program is
open to adults, age 25 or older, who have completed a minimum of 45
semester hours with a cumulative grade point average of 2.0 or better.
Trinity expanded the TRACS program in September 2000 when the first
TRACS education cohort began attending class. Trinity also added a
nursing program, but it had not yet enrolled any cohorts at the time of
our on-site work.

Students enrolled in the TRACS business program participated in the FFEL
and Pell Grant programs. The Department\'s records (National Student
Loan Data System for FFEL and Student Payment Summary for Pell Grants)
indicated that, from January 1999 through August 2000, Trinity or
lenders disbursed \$328,001 on behalf of students in the TRACS business
program, consisting of \$309,534 in FFEL and \$18,467 in Pell Grant
funds.

Title IV of the HEA of 1965, as amended, authorizes these programs, and
they are governed by regulations contained in 34 C.F.R. Parts 682 and
690, respectively. In addition, these programs are subject to the
provisions contained in the Student Assistance General Provisions
regulations (34 C.F.R. Part 668), and Trinity must comply with the
Institutional Eligibility regulations (34 C.F.R. Part 600) to
participate in these programs. Regulatory citations in the report are to
the codifications revised as of July 1, 1998, and 1999.

**AUDIT SCOPE AND METHODOLOGY**

The objective of the audit was to determine whether the TRACS program
complied with the HEA and Title IV regulations pertaining to course
length. We specifically focused our review on the number of hours of
instruction required under the 12-Hour Rule.

To accomplish our objective, we reviewed Trinity's written policies and
procedures, program participation agreement with the Department, student
financial assistance records, and single audit reports prepared by
Trinity's independent public accountant.

We relied on computer-processed data Trinity extracted from its
financial assistance database. We used award and disbursement data from
the Department's NSLDS and Student Payment Summary to corroborate
information obtained from Trinity. We did this by comparing Trinity\'s
data with FFEL and Pell Grant disbursements for students in the
Department's records. We held discussions with Trinity officials to gain
an understanding of the processes for administering Title IV funds.
Based on these tests and assessments, we concluded that the data Trinity
provided were sufficiently reliable to use in meeting the audit's
objective.

The audit covered the period when the 12-Hour Rule applied to the TRACS
program, that is, January 1999 through August 2000. We performed the
on-site fieldwork in Palos Heights, Illinois, during the period June 11,
2001, through June 22, 2001. We had our exit conference on October 3,
2001. On April 19, 2002, an auditor from OIG\'s Advisory and Assistance
held a meeting with a Department of Education Senior Policy Analyst to
discuss 12-Hour Rule issues that affect this report. Our audit was
performed in accordance with government auditing standards appropriate
to the scope of the audit described above.

**[Methodology Used to Determine the Title IV Funds Improperly
Disbursed]{.underline}.** From January 1999 through August 2000,
Trinity's academic year would have needed to be 90 weeks in length and
provided 58 credit hours for it to meet the 360-hour requirement for an
academic year. Therefore, Trinity could not disburse Title IV funds to
students during a 77-week long program (78-week program for business
cohort 6) that exceeded the prorated maximum annual amounts for an
academic year allowed under the FFEL and Pell Grant programs.

We compared the FFEL disbursements to the applicable prorated annual
loan limits for subsidized and unsubsidized Stafford loans. Students
were not eligible to receive the amounts that exceeded the limits.

For Pell Grants, we considered each award year separately. Trinity
disbursed Pell Grant funds in each of the three non-standard terms. Each
payment equaled one-half the award calculated for a full award year. To
determine the allowable Pell Grant disbursements, we (1) divided the
instructional hours scheduled during a payment period (if there was only
one payment period in the award year) by 180 or the instructional hours
scheduled during the award year (if there were two payment periods) by
360, and (2) multiplied the resulting percentage times the calculated
award.

STATEMENT ON MANAGEMENT CONTROLS

Our review disclosed that Trinity did not have controls in place to
ensure that it complied with the 12-Hour Rule for its TRACS program
during the period January 1999 through August 2000. As a result, we did
a 100 percent review of students in the TRACS program. The AUDIT RESULTS
section of this report discusses the lack of controls and its effects.

**ADMINISTRATIVE MATTERS**

Statements that managerial practices need improvements, as well as other
conclusions and recommendations in this report represent the opinions of
the Office of Inspector General. Determinations of corrective action to
be taken will be made by the appropriate Department of Education
officials.

If you have any additional comments or information that you believe may
have a bearing on the resolution of this audit, you should send them
directly to the following Education Department official, who will
consider them before taking final Departmental action on the audit:

Ms. Theresa Shaw, Chief Operating Officer

Federal Student Aid

U.S. Department of Education

Union Center Plaza Building, Room 112G1

830 First Street, N.E.

Washington, D.C. 20202

Office of Management and Budget Circular A-50 directs Federal agencies
to expedite the resolution of audits by initiating timely action on the
findings and recommendations contained therein. Therefore, receipt of
your comments within 30 days would be greatly appreciated.

In accordance with the Freedom of Information Act (5 U.S.C. § 552),
reports issued by the Office of Inspector General are available, if
requested, to members of the press and general public to the extent
information therein is not subject to exemptions in the Act.

Sincerely,

Richard J. Dowd

Regional Inspector General

for Audit

Attachment

[^1]: For business cohort 6, Trinity added one week to the 23-week
    quarter. Therefore, students in this cohort were scheduled for 312
    hours of classroom instruction.