**Control Number ED-OIG****/A05E0013**

Gerald I. Lamkin, President

Ivy Tech State College

One West 26^th^ Street

Indianapolis, IN 46208

Dear Mr. Lamkin:

This **Final Audit Report** presents the results of our audit of the
administration of the student financial assistance programs at the Ivy
Tech State College (Ivy Tech) campus in Gary, Indiana (Ivy Tech - Gary),
during the period July 1, 2002, through June 30, 2003. Our objective was
to determine whether Ivy Tech - Gary administered these programs in
accordance with Title IV of the Higher Education Act of 1965, as amended
(HEA), and applicable program regulations. Specifically, we evaluated
Ivy Tech -- Gary's compliance with requirements in the HEA and
applicable program regulations governing student eligibility, award
calculations, disbursements, and return of Title IV funds.

We provided Ivy Tech with the draft of this report. In its response
dated January 18, 2005, Ivy Tech disagreed with our finding and
recommendations. We made minor changes to our draft report based on Ivy
Tech's response. However, we did not delete the finding or change our
recommendations. We summarized Ivy Tech's response after the finding and
have included it in its entirety as an attachment to this report.[^1]

**AUDIT RESULTS**

Our audit disclosed that Ivy Tech - Gary generally complied with the
requirements governing award calculations, disbursements, and return of
Title IV funds. However, Ivy Tech - Gary did not comply with all
requirements governing student eligibility. Students enrolled in Ivy
Tech - Gary's General Technical Studies (GTS) program received Title IV
funds, even though the GTS program was not an eligible Title IV program.
Our audit identified no other instances of non-compliance with the
requirements governing student eligibility.

**FINDING****: Ivy Tech's GTS Program Is Not an Eligible Title IV
Program**

The GTS program does not meet requirements in the HEA and program
regulations for an eligible program. The GTS program is one year in
length and does not provide undergraduate training that prepares a
student for gainful employment in a recognized occupation.

Ivy Tech's 2001-2003 College Catalog and the U.S. Department of
Education's (Department) Eligibility and Certification Approval Report
indicate that the GTS program is a one-year, 30-semester credit hour
program that leads to a technical certificate. The catalog also
indicates that the GTS program does not prepare students for employment
in a recognized occupation. It describes the GTS program as a general
studies program that aids students who are not yet ready to enter an
academic or occupational program:

The GTS certificate program provides opportunities for students who may
not be ready to enter a degree program due to lack of preparation or
other reasons. GTS helps these students define and meet their
educational objectives. GTS serves students who may be in need of
correcting deficient academic skills before enrolling in a technical
degree program, have yet to decide upon pursuing a specific course of
study, are seeking admission into one of the college's selective
programs, wish to examine an occupational program, are in need of a
career-oriented educational exploration, or are in need of an
educational foundation for a related one- or two-year program and wish
to pursue a one-year program of general technical studies.

Ivy Tech participates in the Title IV programs as both an institution of
higher education and a postsecondary vocational institution. Pursuant to
Sections 101(b)(1), 102(a), 102(c)(1)(A), and 481(b) of the HEA and
implementing regulations found at 34 C.F.R. §§ 600.4(a)(4)(iii),
600.6(a)(4), 668.8(c)(3), and 668.8(d)(1)(iii), [^2] an eligible
one-year program at an institution of higher education or an eligible
program at a postsecondary vocational institution must "prepare students
for gainful employment in a recognized occupation." In addition, 34
C.F.R. § 600.2 provides a definition of a "recognized occupation" as
"\[a\]n occupation that is. . . \[l\]isted in an 'occupational division'
of the latest edition of the *Dictionary of Occupational Titles*,
published by the U.S. Department of Labor\...."[^3]

Because the GTS program does not prepare students for employment in a
recognized occupation, the GTS program is not an eligible Title IV
program. Therefore, students may not receive Title IV funds on that
basis.[^4] During the Summer 2002, Fall 2002, Spring 2003, and Summer
2003 semesters, Ivy Tech - Gary disbursed approximately \$1.6 million of
Title IV funds to students enrolled in the GTS program.

Ivy Tech submitted more than one *Application for Approval to
Participate in Federal Student Financial Aid Programs* (Application) to
the Department that indicated the GTS program was an undergraduate
program that prepared students for gainful employment. Ivy Tech's most
recent Application for continued participation under the Program
Participation Agreement was approved by the Department in February 2004.
On this Application, Ivy Tech indicated that the GTS program was an
undergraduate program that prepares students for gainful employment in a
recognized occupation.

######### Recommendations

We recommend that the Chief Operating Officer for Federal Student Aid
instruct Ivy Tech to

1.  Stop disbursing Title IV funds to ineligible students enrolled in
    the GTS program;

2.  Return to the Department \$1,459,953 and to lenders \$185,207, the
    amount of Title IV funds improperly disbursed for ineligible
    students during its Summer 2002, Fall 2002, Spring 2003, and Summer
    2003 semesters; and

3.  Determine the amount of all other funds disbursed after June 30,
    2001, for students enrolled in the GTS program and return those
    funds to the appropriate lender (for Federal Family Education Loan
    funds) or to the Department (for all other Title IV funds).

**Ivy Tech's Comments**

Ivy Tech maintains that the GTS program is a Title IV eligible program,
because the GTS program

-   Is a certificate program, and certificate programs that meet the
    criteria in 34 C.F.R. § 668.8 are Title IV eligible programs. Some
    of Ivy Tech's students may be ready to enter into a certificate
    program but are not ready or eligible to enter a degree program. The
    GTS certificate program allows these students an opportunity to
    explore the various occupational training opportunities that are
    available at Ivy Tech.

-   Prepares students for numerous occupations listed in the DOT. The
    regulations cited in the report (34 C.F.R. § 668.8) do not stipulate
    that a program must lead to gainful employment in a specific or
    particular occupation. Ivy Tech explains that it established the GTS
    program around its four degree-granting divisions: Business, Visual
    Communications, Technology, and Health and Human Services. All of
    these divisions clearly prepare individuals for occupations listed
    in the DOT. Ivy Tech asks for clarification that the employment must
    be in a specific or particular occupation.

-   Has been approved as an eligible program by the Department. Ivy Tech
    also notes that the GTS program was approved by the Indiana
    Commission for Higher Education and by the U.S. Department of
    Veterans Affairs.

**Office of Inspector General's Response**

We have considered Ivy Tech's comments, and we have made some minor
changes to this audit report. However, we have not made substantive
changes to the audit report for the following reasons:

-   The GTS program does not meet eligibility criteria in the HEA or in
    applicable regulations. For a one-year, certificate program to be an
    eligible program, it must prepare a student for gainful employment
    in a recognized occupation. A student's readiness to enter a degree
    program, or desire to explore various occupational training
    opportunities, does not affect the eligibility of a one-year
    program.

-   Under 34 C.F.R. § 668.8(c)(3), in order for a one-academic-year
    training program to be an eligible program, it must lead to a
    recognized educational credential and must prepare students for
    gainful employment in a recognized occupation. As we cite in our
    report, similar guidance for one-year programs is found elsewhere in
    the HEA and in supporting regulations. Enrollment in a general
    technical studies program does not prepare students for gainful
    employment in a recognized occupation. For example, when students
    receive GTS program certificates in Health and Human Services, or
    any of the other three divisions Ivy Tech identifies in its
    comments, the students are not prepared for gainful employment in a
    specific recognized occupation. Though the students may have
    increased their general knowledge, additional study or training will
    be needed before the students are prepared for gainful employment in
    a recognized occupation.

-   According to the Federal Student Aid Handbook, 2002-2003, Volume 2,
    Chapter 1, Institutional and Program Eligibility, p. 2-14, \"Because
    a school\'s eligibility does not necessarily extend to all its
    programs, the school must ensure that a program is eligible before
    awarding FSA program funds to students in that program. The school
    is ultimately responsible for determining that a program is
    eligible.\" As we noted earlier in our report, the Department's
    approval of the GTS program was based on an Application submitted by
    Ivy Tech, in which Ivy Tech described the GTS program as an
    undergraduate program that prepares students for gainful employment
    in a recognized occupation. Since Ivy Tech's description of the
    program in its Application is incorrect, the Department's
    determination of the program's eligibility may be void. As to the
    GTS program's approval by the U.S. Department of Veterans Affairs
    and by the Indiana Commission for Higher Education, those approvals
    have no bearing on a determination of program eligibility under the
    HEA and the Department's regulations.

**BACKGROUND**

Ivy Tech's website describes Ivy Tech as an open-door college offering
two-year degrees and technical certificates, as well as customized
education for Indiana's businesses and industries. Ivy Tech is Indiana's
second largest post-secondary institution and consists of 14
administrative regions, with 23 campuses and five instruction centers
across Indiana. The Higher Learning Commission of the North Central
Association of Colleges and Schools accredits Ivy Tech.

Ivy Tech - Gary is located in Gary, Indiana, and is part of the
Northwest Region (also known as Region 01). It houses both classes and
the Region 01 administrative offices. Region 01 includes four campuses:
Gary, East Chicago, Valparaiso, and Michigan City.

The Northwest Region's campuses participate in the Federal Pell, Federal
Supplemental Educational Opportunity Grant (FSEOG), Federal Work Study
(FWS), and Federal Family Education Loan (FFEL) programs. According to
Ivy Tech records, for the Summer 2002, Fall 2002, Spring 2003, and
Summer 2003 semesters, the Northwest Region disbursed \$8,774,677 of
Title IV funds.

**OBJECTIVE, SCOPE, AND METHODOLOGY**

The objective of our audit was to determine whether Ivy Tech - Gary
administered the Title IV programs in accordance with the HEA and
applicable program regulations during the period July 1, 2002, through
June 30, 2003. Specifically, we evaluated Ivy Tech -- Gary's compliance
with requirements in the HEA and applicable program regulations
governing student eligibility, award calculations, disbursements, and
return of Title IV funds.

To accomplish our objective, we assessed Ivy Tech -- Gary's system of
internal controls, policies, procedures, and practices applicable to its
administration of the Title IV programs. For the purpose of our audit,
we classified the significant controls into three categories---student
eligibility, awards and disbursements, and return of Title IV funds. We
also assessed the risk that Ivy Tech - Gary would fail to comply with
the law and selected regulations governing the Title IV programs.
Because of inherent limitations, a study and evaluation made for the
limited purpose described would not necessarily disclose all material
weaknesses in Ivy Tech -- Gary's system of internal controls. However,
our limited assessment did not disclose any material weaknesses in Ivy
Tech -- Gary's system of internal controls over student eligibility,
awards and disbursements, and return of Title IV funds.

To accomplish our objective, we also

1.  Reviewed Region 01's Title IV funding information;

2.  Reviewed Ivy Tech - Gary's history and organization;

3.  Reviewed A-133 audit reports prepared by the Indiana State Board of
    Accounts, a program review report prepared by FSA, and internal
    audit reports prepared by Ivy Tech's Internal Audit Department;

4.  Reviewed the laws and regulations applicable to the audit objective;

5.  Reviewed records (financial aid, academic, and accounting) for 40
    Title IV recipients,[^5] 6 apprenticeship students,[^6] and 4
    distance education students;[^7]

6.  Reviewed and tested Ivy Tech's process for returning funds and
    reviewed 17 return of Title IV fund calculations for 14
    students;[^8]

7.  Reviewed the payment of one credit balance for 39 of the 40 Title IV
    recipients;

8.  Reviewed information about the GTS program, including the Ivy Tech
    catalog description, eligibility and certification approval report,
    program participation agreement, and Ivy Tech's Applications for
    participation; and

9.  Identified the amount of Title IV funds disbursed to students
    enrolled in the GTS program during the Summer 2002, Fall 2002,
    Spring 2003, and Summer 2003 semesters.

In addition, we relied, in part, on Ivy Tech data of the population of
Title IV recipients. Ivy Tech uses a system called Student Information
System for administering the Title IV programs. To assess the
reliability of Ivy Tech's data, we performed logic tests and compared
Ivy Tech's data to the Department's data. We also relied, in part, on
Ivy Tech's data of Title IV funds disbursed to Ivy Tech - Gary students
enrolled in the GTS program. To assess the reliability of this data, we
tested the data provided to ensure that it agreed to Ivy Tech's Student
Information System. Based on our assessment and tests, we concluded that
the computer-processed data Ivy Tech provided was sufficiently reliable
for the purposes of our audit.

Our audit was performed in accordance with generally accepted government
auditing standards appropriate to the scope of the audit work described
above. We conducted our field work at Ivy Tech - Gary in Gary, Indiana,
from February 2004 through May 2004, and we visited Ivy Tech's Central
Office in Indianapolis, Indiana, in July 2004. We discussed the results
of our audit with Ivy Tech's Executive Assistant to the President on
September 22, 2004.

**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 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 Department official who will consider them
before taking final Departmental action on the audit.

Theresa S. Shaw, Chief Operating Officer

Federal Student Aid

U.S. Department of Education

> Union Center Plaza, 830 First Street, NE

Room 112G1, Mail Stop 5132

Washington, DC 20202

It is the policy of the Department 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 to
members of the press and general public to the extent information
contained therein is not subject to exemptions in the Act.

If you have any questions, please call Gary Whitman, Assistant Regional
Inspector General for Audit, or me at 312-886-6503.

> Sincerely,

/s/

##  Richard J. Dowd

##  Regional Inspector General

##  for Audit

Attachment

One West 26^th^ Street

P.O. Box 1763

Indianapolis, Indiana 46206-1763

317-921-4882

January 18, 2005

U.S. Department of Education

Office of Inspector General

111 North Canal Street, Suite 940

Chicago, Illinois 60606-7204

### RE: Control Number ED-OIG/A05-E0013, Ivy Tech State College

In response to your draft audit report concerning the Ivy Tech State
College campus in

Gary, Indiana, enclosed please find our response. If you have questions,
please call me at

317-921-4713 or Ben Burton at 317-921-4712.

Sincerely,

/s/

Janet Bozzelli

Executive Assistant to the President

dd

Enclosures

Ivy Tech is an accredited,

Equal opportunity,

Affirmative action state college

Note: Ivy Tech logo here

Ivy Tech State College

Control Number ED-OIG/A05-E0013

Page 1

Ivy Tech State College maintains that the General Technical Studies
(GTS) Technical

Certificate is a Title IV eligible program as defined by the code of
Federal Regulations

(CFR). Additionally, we contend that since the program was approved by
the

Department of Education (DOE)eligible program the students enrolled in
this Certificate program are eligible to receive Title IV financial aid
funds.

In the Findings section of the draft audit report you quote the College
state-wide catalog

as stating; "The General Technical Studies Program provides an option
for students who

may not be ready to enter a degree program due to lack of preparation or
other reasons."

We concur this statement is used in the College state-wide catalog,
however, we do not

agree that such verbiage makes this program ineligible for Title IV
funding. The GTS

program is a certificate program; not a degree program. Certificate
programs that meet

the criteria set forth in CFR 668.8 are Title IV eligible programs. Some
students may be

ready to enter intoa certificate program but not ready or eligible to
enter into a degree

program. The GTS Certificate program allows these students an
opportunity to explore

the various occupational training opportunities that are available at
the College.

As outlined in your report, 34 CFR 668.8(d)(1)(iii) states that "an
eligible program

provided by a proprietary institution of higher education or
postsecondary vocational

institution-(iii) Must provide undergraduate training that prepares a
student for gainful employment in a recognized occupation..." CFR 600.2
defines "recognized occupation"

as: "an occupation that is- (1) Listed in an "occupational division" of
the latest edition of

the *Dictionary of Occupational Titles* published by the U.S. Department
of Labor". Ivy

Tech contends that the GTS program prepares students for numerous
occupations listed

within the above noted publication. The audit finding states that the
GTS program is

being deemed ineligible because it "does not prepare students for a
particular

occupation." The CFR reference quoted in the audit finding and
reiterated above does

not stipulate that a program must lead to gainful employment in a
specific or particular occupation. We have asked for further
clarification form the OIG's office supporting this

stance; however to date, none has been provided. Additionally we are
unable to locate

any published clarifying guidance from the U.S. Department of Education.

The "Abstract Proposal for General Technical Studies Technical
Certificate" program

that was submitted to and subsequently approved by the Indiana
Commission for Higher Education describes the curriculum as follows:

*The General Technical Studies Technical Certificate will be composed of
one-*

*year programs of study, centering around the College's degree-granting
divisions---*

*Business, Visual Communications, Technology, Health and Human Services.
Each of the Technical Certificates will contain a total of 30 redit
hours, with typically 6-15 credit*

*hours of general education appropriate to divisional technical
certificate or associate*

Ivy Tech State college

Control Number ED-OIG/A05-E0013

Page 2

*Degree requirements. General education courses may be selected from:*

*Communications, Social Sciences, Humanities, Mathematics, or Life and
Physical*

*Sciences. Each certificate will contain core technical courses
appropriate to divisional*

*technical certificate or associate degree requirements. Three credit
hours will be*

*determined by the student elective.*

Attached is a program sheet from the Gary Ivy Tech campus. This program
sheet would

be used to counsel students as they progress towards the completion of
their certificate,

and to inform them of certificate requirements. As you will note, as
stated in the

Proposal submitted to the Indiana Commission on higher Education, the
College

established the GTS program around the College's degree-granting
divisions. As

outlined above, these divisions include: Business, Visual
Communications, Technology,

Health and Human Services, all of which clearly prepare individuals for
occupations

listed in the *Dictionary of Occupational Titles*, including but not
limited to, occupations

identified under the two digit occupational division code of 00/01, 02,
03, 04, 07, 09, 20,

21, 24, 30, 31, 32, 33, 35 and 38.

As pointed out in the audit finding, the U.S. Department of Education
did approve the

GTS program as an eligible program. We would additionally note that the
U.S.

Department of Veterans Affairs also approved the GTS program as an
eligible program.

In conclusion, it is our position that the GTS program is a Title IV
eligible program that

does prepare a student for gainful employment in a recognized occupation
as defined by

the CFR 600.2; therefore we do not agree with this audit finding.

RECOMMENDATION:

As was explained to the auditor when he was on site at the College, the
GTS program is scheduled to be phased out. On November 8, 2002, the
College received approval from

the Indiana Commission for Higher Education to offer a two-year AS
general studies

degree (GNS). The College started offering this program in the Fall of
2003. As a part of

this approval process, the College agreed to phase out the GTS program.
For Title IV

purposes, as of the end of the current semester, the phase out will have
ended. Students

have been informed that they may remain in the program untl the end of
the Summer

term, however, they would not be considered Title IV eligible for that
term.

Although the College is adamant that this program is an eligible
program, if the OIG's

Office and DOE's Federal Student Aid Office deem the GTS program as
ineligible, it

would seem unreasonably harsh to require repayment by the institution.
As outlined

above, there is no written guidance that echoes the stance being taken
by the OIG's

Ivy Tech State College

Control Number ED-OIG/A05-E0013

Page 3

Office on this issue. If the interpretation of the outlined regulation
is to be narrowed, as suggested by the audit report, it would seem
reasonable that written guidance be provided

to all institutions with similar programs, and that all disbursements
made from that time

forward be deemed ineligible.

To require institutions to repay funds when no interpretative written
guidance has been issued would cause an undue burden not only on Ivy
Tech, but also all institutions with similar programs. Upon official
notification from the DOE, Ivy Tech will cease issuing aid for the GTS
program; however it is our stance that any and all action should be
prospective in nature.

[^1]: With its response, Ivy Tech submitted several supporting documents
    that are too voluminous to include with this report. However, the
    supporting documents are available upon request.

[^2]: All regulatory citations are to the version dated July 1, 2002.

[^3]: The *Dictionary of Occupational Titles* (DOT) provides an updated
    picture of the recognized occupations in which America\'s workforce
    is employed. It details the tasks to be performed and the levels of
    education that must be achieved.

[^4]: Under 34 C.F.R. § 668.32(a)(1)(i), only "a regular student,
    enrolled or accepted for enrollment, in an eligible program at an
    eligible institution" is eligible to receive Title IV assistance.

[^5]: We selected 25 randomly from a population of 1,570 Pell
    recipients. We selected an additional 15 judgmentally, from Ivy
    Tech's Student Information System, to ensure that our sample
    included at least 5 recipients from each of the non-Pell programs in
    which Ivy Tech participated (FSEOG, FWS, and FFEL).

[^6]: We selected 3 randomly from a population of 1,458 (Fall 2002
    semester) and 3 randomly from a population of 1,548 (Spring 2003
    semester).

[^7]: We selected 2 randomly from a population of 856 (Fall 2002
    semester) and 2 randomly from a population of 958 (Spring 2003
    semester).

[^8]: We selected all 8 of the students in our sample of 40 (described
    in item 5) for whom returns of Title IV funds were calculated, and
    we selected the remaining 6 students randomly, from a population of
    388 students who had withdrawn.