August 24, 2005

> **Control Number**
>
> **ED-OIG/A09E00****15**

Mr. Todd S. Nelson

President and CEO

Apollo Group, Inc.

4615 East Elwood Street

Phoenix, AZ 85040

Dear Mr. Nelson:

This **Final Audit Report**, entitled *University of Phoenix's
Processing of Student Financial Aid Disbursements for the Higher
Education Act, Title IV Programs*, presents the results of our audit.
The purpose of the audit was to determine whether the University of
Phoenix (UOP) has policies and procedures that provide reasonable
assurance that the institution properly makes initial and subsequent
disbursements to students enrolled in Title IV eligible programs. Our
review generally covered disbursements to UOP students who received
Title IV funds during the period September 1, 2002 through March 31,
2004. The Objective, Scope, and Methodology section of this report
further explains the extent of audit coverage for each aspect of our
review.

BACKGROUND

UOP, a wholly-owned subsidiary of the Apollo Group, Inc. (Apollo), is a
private, for-profit institution of higher education offering associate,
bachelor, master, and doctoral degrees and professional certificate
programs. UOP has 55 campuses and 102 learning centers located in
33 states, Puerto Rico, and Vancouver, British Columbia. Its educational
programs are also offered worldwide via the Internet through University
of Phoenix Online, a division of UOP. Apollo contracts with Affiliated
Computer Services, Inc. (ACS), a third-party servicer, for the
processing of financial aid for UOP's students. UOP is accredited by the
Higher Learning Commission of the North Central Association of Colleges
and Schools.

UOP uses a non-term academic calendar and measures the length of its
educational programs in credit hours. Students, including students at
UOP Online, generally enroll in an educational program that encompasses
a series of five to six-week courses. Typically, the courses are taken
one at a time, sequentially, over the length of the program.

UOP is a participant in the U.S. Department of Education's Distance
Education Demonstration Program and participates in the Higher Education
Act (HEA), Title IV Programs listed in the below table.

  ----------------------------- -------------- ---------- --------------- -----------------
  **Title IV Funds Reported in                                            
  Annual Audit Reports**                                                  

  **Title IV Program**          **Students**              **Title IV      
                                (a)                       Funds**         

                                **2003**       **2004**   **2003**        **2004**

  Federal Family Education Loan 107,203        161,781    \$778,026,809   \$1,599,370,890
  Program (FFEL)                                                          

  Federal Pell Grant Program    27,908         50,939     60,920,063      142,434,388
  (Pell Grant)                                                            

  Federal Supplemental          3,393          7,381      1,173,602       2,311,921
  Educational Opportunity Grant                                           
  Program (FSEOG)                                                         

  Federal Perkins Loan Program  225            255        629,439         511,349

  Total Title IV Funds                                    \$840,749,913   \$1,744,628,548

  \(a\) Students may have                                                 
  received funds from more than                                           
  one Title IV program.                                                   
  ----------------------------- -------------- ---------- --------------- -----------------

UOP primarily uses three electronic interactive Apollo systems in
processing student financial aid: the Student Record, Financial Aid, and
Accounting systems.[^1]

AUDIT RESULTS

Except for two areas, we concluded that UOP had policies and procedures
that provide reasonable assurance that the institution properly makes
initial and subsequent disbursements to students enrolled in Title IV
eligible programs. We found that UOP used an automated process for
checking eligibility prior to making Title IV disbursements that placed
a hold on disbursements that failed the eligibility checks. We also
found that the staff who reviewed disbursements that failed the
eligibility checks generally made proper decisions regarding student
eligibility for released disbursements. However, UOP's policies and
procedures did not ensure that 1) Title IV disbursements were credited
to student accounts for only allowable institutional charges and 2)
students who received Title IV disbursements were enrolled in eligible
programs.

Our conclusion on the adequacy of UOP's policies and procedures is based
on 1) our understanding of the system of internal control that existed
during the audit period for making the initial and second Title IV
disbursements in an academic year and 2) our evaluations and limited
tests of selected data elements in Apollo's systems that were related to
determining student eligibility for the second disbursement. The
projection of this evaluation of the system of internal control to
future periods is subject to the risk that procedures may become
inadequate because of changes in conditions, or that the degree of
compliance with the procedures may deteriorate.

UOP did not concur with our finding and recommendations concerning
UOP's policies and procedures for crediting Title IV disbursements to
student accounts for institutional charges. UOP concurred with the other
finding and recommendations presented in the report. The text of UOP's
comments is included as an attachment to the report.

FINDING NO. 1 -- UOP Improperly Used Title IV Funds to Credit Student
Accounts for Prior Learning Assessment Fees

Of the 197,230 students who received Title IV funds during the period
September 1, 2002 through March 31, 2004, we identified 834 students for
whom UOP had improperly used \$319,338 in Title IV funds to credit the
student accounts for prior learning assessment fees.

UOP students may petition for an assessment of prior learning to meet
the completion requirements for their educational program. A student may
earn up to 30 prior learning credits for professional training
(workshops, seminars, licenses, business and professional courses, and
other institutionally-sponsored course work) and undergraduate students
may earn up to 30 additional credits for verified college-level learning
gained through experience (experiential learning).[^2]

To initiate the assessment process, the student takes the following
action---

-   [Professional training]{.underline}. The student submits a completed
    Professional Training Portfolio to UOP's Prior Learning Assessment
    Center (Center).

-   [Experiential learning]{.underline}. The student enrolls in either
    UOP's Experiential Learning course (GEN/110) or UOP's Experiential
    Learning Essay Tutorial. The instruction provided helps students
    prepare the experiential course writing that will be evaluated for
    credit.

Then, the Center evaluates the student's prior learning and awards
academic credit, which is posted in the student's academic transcript.

UOP's school catalog for 2003-2004 states that the tuition for GEN/110
is based on the prevailing tuition rate for the major course work and
that students will earn one credit upon successful completion of the
course. The catalog contains the following information on assessment
fees charged for the Center's services---

> When materials are complete, they are sent to the Prior Learning
> Assessment Center in Phoenix and a \$90 submission fee is collected.
> The following evaluation and posting fees apply to credit awarded
> through Prior Learning Assessment---

-   \$30.00 per credit for standardized evaluations, and items from the
    Apollo Quick List^TM^.

```{=html}
<!-- -->
```
-   \$55.00 per credit for professional course work and training, and
    experiential learning essays.

-   Costs per credit for articulated course work and training may vary.

UOP's fees for the evaluation and posting of credits awarded for prior
learning are separate from tuition and fees related to the student's
educational program. Specifically, the catalog states---

> Charges arising out of \[assessment\] services and the posting of
> credit awarded for prior learning are *not* included as part of the
> major curriculum fees and tuition.

Use of Title IV funds to pay the tuition cost for the GEN/110 course is
appropriate since the course instruction was provided by UOP and the
credit received for completing the course may be used to meet the
minimum credits for completion of the student's educational program.
However, the materials submission fee and the fees for evaluation and
posting of credit for prior learning are not institutional charges that
can be paid with Title IV funds. These charges are not incurred by the
student at the institution for educationally related activities
delivered by the institution during the academic year or loan period.
Thus, UOP should not have applied Title IV funds to student accounts for
the fees.

The regulations at 34 C.F.R. § 668.164(d) state---

> Crediting a student\'s account at the institution. (1) Without
> obtaining the student\'s or parent\'s authorization under Sec.
> 668.165, an institution may use title IV, HEA program funds to credit
> a student\'s account at the institution to satisfy current charges
> for\--
>
> \(i\) Tuition and fees;
>
> \(ii\) Board, if the student contracts with the institution for board;
> and
>
> \(iii\) Room, if the student contracts with the institution for room.
>
> \(2\) After obtaining the appropriate authorization from a student or
> parent under Sec. 668.165, the institution may use title IV, HEA
> program funds to credit a student\'s account at the institution to
> satisfy\--
>
> \(i\) Current charges that are in addition to the charges described in
> paragraph (d)(1) of this section that were incurred by the student at
> the institution for educationally related activities;

\* \* \* \* \*

> \(4\) For purposes of this paragraph, current charges refers to
> charges assessed the student by the institution for\--
>
> \(i\) The current award year; or
>
> \(ii\) The loan period for which an institution certified or
> originated a loan under the FFEL or Direct Loan programs.

The HEA § 472 defines the term "cost of attendance" for Title IV
purposes. The definition includes the following explanation of "tuitions
and fees"---

> \[T\]uition and fees normally assessed a student carrying the same
> academic workload as determined by the institution . . . .

The fees for the evaluation and posting of credits awarded for prior
learning are not included in the tuition and fees portion of the
student's cost of attendance. The fees are not normally assessed to
students as part of their academic workload since the fees are only
incurred if the student submits materials for assessment and the Center
awards credits to the student. Only 834 of the 197,230 students in our
audit universe were assessed prior learning fees, which were paid with
Title IV funds. UOP acknowledged in its school catalog that the fees
were not part of the tuition and fees for the student's educational
program (i.e., *not* included as part of the major curriculum fees and
tuition). In addition, the fees were incurred by the student for the
evaluation of activities that occurred at locations other than UOP and
that may have taken place prior to the student's enrollment. Thus, the
fees were not charges that were incurred by the student at the
institution for educationally related activities.

UOP's written policies included prior learning assessment fees as an
allowable use of Title IV funds when the student has authorized UOP to
apply financial aid funds to all open allowable charges.

> If the student has authorized the University via the UOP FA
> Application (UOPFAA), \[ACS\] will apply funds as follows:
>
> [Other Open Charges]{.underline} -- \[ACS\] will retain funds for
> other fees and charges that are discretionary educationally related
> expenses.
>
> Other open charges include the following:

-   NSF fees

-   Assessment fees

-   Books, and other discretionary charges

## The prior learning assessment fees paid with Title IV funds for the 834 students totaled \$319,338.

+-----------------------------------------------+----------------------+
| ## Tit                                        |                      |
| le IV Funds Credited to Student Accounts for  |                      |
|                                               |                      |
| ## Prior Learning Assessment Fees             |                      |
+-----------------------------------------------+----------------------+
| ## Title IV Program                           | #                    |
|                                               | # Title IV Funds (a) |
+-----------------------------------------------+----------------------+
| ## Unsubsidized FFEL                          | ## \$196,916         |
+-----------------------------------------------+----------------------+
| ## Subsidized FFEL                            | ## 72,019            |
+-----------------------------------------------+----------------------+
| ## Plus FFEL                                  | ## 1,400             |
+-----------------------------------------------+----------------------+
| ## Federal Pell Grant                         | ## 45,653            |
+-----------------------------------------------+----------------------+
| ## Federal Perkins Loan                       | ## 1,833             |
+-----------------------------------------------+----------------------+
| ## Supplemental Education Opportunity Grant   | ## 1,517             |
+-----------------------------------------------+----------------------+
| ## Total                                      | ## \$319,338         |
+-----------------------------------------------+----------------------+
| \(a\) Amounts reflect the portion of any      |                      |
| Title IV disbursements made to students in    |                      |
| our audit universe (i.e., students who        |                      |
| received at least one Title IV disbursement   |                      |
| during the period September 1, 2002 through   |                      |
| March 31, 2004) that was shown in Apollo's    |                      |
| Accounting System (as of May 10, 2004) as     |                      |
| being applied to student accounts for prior   |                      |
| learning assessment fees.                     |                      |
+-----------------------------------------------+----------------------+

##  {#section-7 .RptSubcaption}

**Recommendations**

We recommend that the Chief Operating Officer for Federal Student Aid
require UOP to---

1.  Revise its policy to exclude prior learning materials submission and
    assessment fees from the list of allowable uses for Title IV funds
    and place controls in the Financial Aid System to prevent the
    application of Title IV funds to the fees.

2.  To the extent that UOP can locate the students for whom Title IV
    funds were used for PLAC, require UOP to return the \$319,338 to the
    students. For those students UOP cannot locate, require UOP to
    return the funds to the Department or lenders as appropriate.

3.  Require UOP to determine all students for whom Title IV funds were
    used for PLAC since the end of our audit period and require UOP to
    return the funds to the students it can locate. For those students
    UOP cannot locate, require UOP to return the funds to the Department
    or lenders as appropriate.

##### UOP Comments 

UOP did not concur with the finding and recommendations. In its comments
to the draft report, UOP provided additional details on its policies and
procedures for PLAC and stated that the finding is contrary to Federal
regulations and prior guidance published by the Department. To support
its position, UOP stated---

-   Title 34 C.F.R. § 668.164(d)(2) plainly authorizes the payment of
    PLAC fees with Federal funds.

```{=html}
<!-- -->
```
-   The disbursements were duly authorized because 1) UOP obtained
    required student or parent authorizations and 2) the PLAC fees were
    incurred by the student for educationally related activities.

-   The PLAC fees paid for educationally related activities. UOP stated
    that fees and charges for evaluating evidence of academic
    achievement and credit towards graduation could only be
    characterized as educationally related. UOP stated that the report,
    and the policies and procedures described in its response to the
    draft report, establish that the charges were incurred at UOP for
    activities performed by UOP personnel to advance the educational
    programs and objectives of enrolled students.

> UOP disagreed with the report statement that the PLAC fees do not
> qualify as educationally related because they "were incurred by the
> student for the evaluation of activities that occurred at locations
> other than UOP and may have taken place prior to the student's
> enrollment." UOP stated that the auditors' conclusion is incorrect
> because the PLAC fees paid for the process of assessing the prior
> learning activities and the fees do not cover the prior activities
> themselves.

-   The Department's published guidance demonstrates that the auditors
    are incorrect in asserting that PLAC fees cannot be paid with Title
    IV funds. UOP cited the Secretary's commentary that accompanied the
    issuance of proposed rules and final regulations on Title IV
    disbursements and a FSA Policy Interpretation and Guidance Bulletin
    on determining whether a charge is an institutional charge when
    calculating an institutional refund.

> The cited commentary from the final regulations states that students
> (or parents) should have control over Title IV funds in excess of
> direct institutional charges and that the student has discretion to
> use these funds to pay for other costs of attendance and other
> miscellaneous institutional charges. The cited commentary from the
> proposed regulations was an illustration that used outstanding parking
> fees as a permitted institutional charge applied to Title IV funds
> held in student accounts. UOP stated that if parking fees are
> educationally related charges that qualify for Title IV funding, the
> same is true of PLAC fees, which cover core educational activities.
> The cited Guidance Bulletin section defines non-institutional charges
> for purposes of calculating institutional refunds as including charges
> to a student's account for discretionary educationally related
> expenses (e.g., parking and library fines and the cost of athletic and
> concert tickets, etc.).
>
> UOP asserted that this guidance confirms that the Department considers
> other charges that are further from the educational mission than PLAC
> fees to be considered educationally related and qualified for Title IV
> funding.

-   The PLAC fees would qualify for funding as part of the students'
    cost of attendance. UOP stated that the statement in its school
    catalog that PLAC fees were not part of UOP's major curriculum fees
    and tuition did not negate the fact that the PLAC charges
    constituted a fee and as such, met the statutory definition of "cost
    of attendance." The HEA § 472 defines cost of attendance as "tuition
    and fees normally assessed a student carrying the same academic
    workload as determined by the institution." UOP noted that the
    definition calls for the institution to determine what fees are
    normally assessed and that only billing those students who availed
    themselves of the PLAC option did not signify that the fees were not
    normally assessed. UOP cited a National Association of Student
    Financial Aid Administrators (NASFAA) publication that included
    "fees for credit by examination when students advance toward their
    degree or educational objective" as an example of allowable
    educational expenses that can be included in a student's budget.

UOP also stated that any disallowed PLAC fees would be returnable to the
students, not to the lenders or the FSA programs.

##### OIG Response 

We did not change the finding. The primary point in the finding and each
of UOP's statements is whether PLAC fees were "incurred by the student
at the institution for educationally related activities." UOP
acknowledged that the PLAC fees were not for educational activities in
which the student was involved during the academic year/loan period and
the fees are not a cost related to such activities.

The finding is consistent with the commentary from the cited proposed
rule and final regulations. Typically, parking fees are charged to a
student's account for a permit to park a vehicle on campus while the
student attends classes, which is an educational activity that occurs
during the academic year/loan period. The cited Guidance Bulletin
section, defining non-institutional charges excluded from institutional
refunds, is not applicable since PLAC is an institutional charge and the
Bulletin does not indicate that Title IV funds held in the student's
account were used to cover the charges. Also, UOP did not include PLAC
fees as one of the "other institutional charges" in its procedures for
calculating institutional refunds.

We do not agree that PLAC fees could be included in the student's cost
of attendance, if UOP decided to do so. While the statutory definition
provides for the inclusion of fees in the cost of attendance, the
definition is referring to fees related to the student's academic
workload. Since PLAC fees are incurred for the assessment of prior
learning activities, the fees are not related to the student's academic
workload for the academic year/loan period.

We agree that Title IV funds used for PLAC fees should be returned to
the students. To the extent that students cannot be located, payment
should be made to either the Department or lenders. Thus, we amended our
original recommendations requiring the return of Title IV funds to the
Department or lenders.

FINDING NO. 2 -- UOP Disbursed Title IV Funds to Students Enrolled in an
Ineligible Program

UOP has continued to disburse Title IV funds to students enrolled in its
Associate of Arts in General Studies program, which is not an eligible
program for purposes of Title IV. In our prior audit of UOP, we reported
that, as a result of our work, Federal Student Aid (FSA) notified UOP
that the Associate of Arts -- General Studies was an ineligible
program.[^3]

The regulations at 34 C.F.R. § 668.32(a)(1)(i) state "\[a\] student is
eligible to receive title IV, HEA program assistance if the student\--Is
a regular student enrolled, or accepted for enrollment, in an eligible
program at an eligible institution . . . ." The regulations at
34 C.F.R. § 668.8 (d)(1)(iii) state "\[a\]n eligible program provided by
a proprietary institution of higher education . . . must provide
undergraduate training that prepares a student for gainful employment in
a recognized occupation."

In a letter to UOP, dated February 26, 1999, FSA advised UOP that the
Department had determined that the Associates of Arts -- General Studies
program did not prepare students for gainful employment in a recognized
occupation as defined in 34 C.F.R. 668.8(d)(2)(iii). In the letter, FSA
informed UOP that "\[a\]ny disbursements of Title IV student financial
assistance funds made after February 25, 1999 will be considered
liabilities." We found that, after that date, UOP disbursed \$22,656 in
Title IV funds to students enrolled solely in the program. [^4]

+---------------+--------+-----------+--------------+--------+---------+
| **Title IV    |        |           |              |        |         |
| Funds         |        |           |              |        |         |
| Improperly    |        |           |              |        |         |
| Disbursed to  |        |           |              |        |         |
| Students      |        |           |              |        |         |
| Solely        |        |           |              |        |         |
| Enrolled in   |        |           |              |        |         |
| an Ineligible |        |           |              |        |         |
| Educational   |        |           |              |        |         |
| Program** (a) |        |           |              |        |         |
+---------------+--------+-----------+--------------+--------+---------+
| **Educational | **     | **Sub     | **Un         | **Pell | **      |
| Program**     | Number | sidized** | subsidized** | Gr     | Total** |
|               | of     |           |              | ants** |         |
|               | Stud   | **FFEL**  | **FFEL**     |        |         |
|               | ents** |           |              |        |         |
+---------------+--------+-----------+--------------+--------+---------+
| Associate of  | 6      | \$8,061   | \$11,620     | \      | \       |
| Arts --       |        |           |              | $2,975 | $22,656 |
| General       |        |           |              |        |         |
| Studies       |        |           |              |        |         |
+---------------+--------+-----------+--------------+--------+---------+
| \(a\) Covers  |        |           |              |        |         |
| disbursements |        |           |              |        |         |
| made during   |        |           |              |        |         |
| the period    |        |           |              |        |         |
| from February |        |           |              |        |         |
| 26, 1999      |        |           |              |        |         |
| through May   |        |           |              |        |         |
| 10, 2004.     |        |           |              |        |         |
+---------------+--------+-----------+--------------+--------+---------+

UOP's internal control procedures did not prevent the improper
disbursements. Prior to the release of Title IV disbursements, the
Financial Aid System electronically confirms that a student is enrolled
in an eligible educational program. The Financial Aid System obtains the
most recent educational program that the student had enrolled in from
the Student Record System. The Financial Aid System then confirms that
the system's eligible program table shows the educational program is
eligible for Title IV programs at the UOP location attended by the
student. If the educational program is not an eligible program, the
Financial Aid System places a hold on the Title IV disbursement. Then,
ACS staff, or UOP staff at the specific location, review the additional
student information available in the Student Record System. If the staff
determines that the student is eligible for the disbursement, the staff
releases the disbursement for further processing.

The eligible program table in the Financial Aid System is derived from a
spreadsheet titled "Financial Aid Eligible Programs by Campus," which is
maintained by the Director for Apollo Financial Services Oversight. The
spreadsheet identifies the educational programs at each UOP location
that are eligible programs for Title IV purposes. When a change in
program eligibility occurs, the Director informs ACS and ACS updates the
eligible program table in the Financial Aid System. Apollo's Vice
President for Student Financial Aid informed us that the information in
the "Financial Aid Eligible Programs by Campus" spreadsheet and the
eligible program table in the Financial Aid System is reconciled
semiannually.

UOP's data showed that the six students attended the Associate of Arts
-- General Studies program at UOP's main campus. We found that the
eligible program table in the Financial Aid System incorrectly showed
the program as an eligible program for the main campus when the
"Financial Aid Eligible Programs by Campus" spreadsheet showed that the
program was ineligible for Title IV programs at all UOP locations.
Apollo's Vice President for Student Financial Aid advised us that the
eligible program table in the Financial Aid System has been corrected to
properly reflect that the Associate of Arts -- General Studies is an
ineligible program for the main campus.

We also noted that the Financial Aid System did not maintain the date
that a change in program eligibility status occurred. Thus, UOP may not
have the historical data in its systems necessary to determine, after
the fact, that the educational program was an eligible program for the
UOP location at the time the disbursement was released. Apollo's Vice
President for Student Financial Aid informed us that the Financial Aid
System will be enhanced to include the effective date of changes in
educational program eligibility.

## Recommendations  {#recommendations .RptSubcaption}

We recommend that the Chief Operating Officer for Federal Student Aid
require UOP to---

1.  Return to lenders the \$8,061 of subsidized FFELs and \$11,620 of
    unsubsidized FFELs disbursed to students enrolled in ineligible
    programs and return to the Department the interest costs incurred by
    the Federal government on the subsidized FFELs.

2.2 Return \$2,975 to its Federal Pell Grant Account for disbursements
to students enrolled in ineligible programs.

3.  Identify the subsidized FFEL (plus interest costs incurred by the
    Federal Government on the loans), unsubsidized FFEL, Federal Pell
    Grant, and FSEOG funds disbursed after\
    May 10, 2004 to students in ineligible programs, and return the
    amounts to lenders, the Federal Pell Grant Account, or Department,
    as applicable.*\
    *

4.  Strengthen its internal control procedures by implementing
    independent reviews of the "Financial Aid Eligible Programs by
    Campus" spreadsheet and conducting more frequent reconciliations
    between the "Financial Aid Eligible Programs by Campus" spreadsheet
    and the eligible program table in the Financial Aid System.

##### UOP Comments 

UOP concurred with the finding and recommendations. In its comments to
the draft report, UOP confirmed that the six students inadvertently
received Title IV funds while enrolled in a program deemed ineligible
for Title IV. UOP stated that it would comply with the report's
recommendations after receipt of additional information on the students
and FSA's final determination on the recommendations.

OTHER MATTER

As part of our initial audit work, we reviewed the methodology used by
Apollo to calculate UOP's Title IV revenue percentage for the period
ended August 31, 2003. Section 102(b)(1)(F) of the HEA requires a
proprietary institution to derive at least 10 percent of its revenue
from other than Title IV sources. The regulations at 34 C.F.R. §
600.5(d) provides the formula for calculating the Title IV revenue
percentage.

We found that UOP (1) inappropriately included "Funds Returned to
Student for Non-Tuition Expenses" in the denominator of the formula, (2)
inappropriately included an "Accrual to Cash Basis" adjustment to
revenue for its prepaid account in the denominator, (3) overstated the
amount of Federal Perkins Loan Program funds in the numerator and the
amount of revenue in the denominator, and (4) overstated the amount of
FSEOG Program funds in the numerator.\
We concluded that the methodology errors did not appear to have an
impact on UOP's institutional eligibility to participate in the Title IV
programs for its fiscal year ended\
August 31, 2003.

In SFA Interim Audit Memorandum 05-01, dated November 30, 2004, we
advised FSA of the errors and suggested that FSA require Apollo to
evaluate the impact of using the correct methodology on the Title IV
revenue percentage reported for 2003 for all its institutions
participating in the Title IV programs. We also suggested that Apollo be
required to take immediate action to ensure that procedures to apply the
correct methodology are in place for its 2004 financial statements. In a
letter to FSA, dated December 28, 2004, Apollo stated that it has
attempted to implement the methodology described in the written guidance
and provided FSA with recalculated Title IV revenues percentages for UOP
and its other institution (Western International University). The
recalculated percentages showed that the institutions complied with the
HEA § 102(b)(1)(F).

OBJECTIVE, SCOPE, AND METHODOLOGY

Our audit objective was to determine whether UOP has policies and
procedures that provide reasonable assurance that the institution
properly makes initial and subsequent disbursements to students enrolled
in Title IV eligible programs. Our review generally covered
disbursements to UOP students who received Title IV funds during the
period September 1, 2002 through March 31, 2004.

The initial audit objective was to determine whether UOP was
administering the Title IV programs in compliance with the HEA and
applicable regulations and program guidance. After performing
preliminary fieldwork, we refined the audit objective to focus on two
areas: Title IV disbursements and the return of Title IV funds for
withdrawn students. We plan to issue a separate audit report on our
review of UOP's policies and procedures for the calculation and return
of Title IV funds.

To evaluate internal controls relevant to our objective, we reviewed
written policies and procedures applicable to UOP's student financial
aid processes and interviewed Apollo, UOP, and ACS officials and staff,
who were involved in the administration of the Title IV programs. We
gained an understanding of the electronic processes used by the Student
Record, Financial Aid, and Accounting systems in making eligibility
determinations for Title IV disbursements. We also gained an
understanding of the Campus Tracking System used to track student
attendance for campus-based locations and UOP Online.

We relied on data from Apollo's Student Record, Financial Aid, and
Accounting systems to identify the students who received Title IV funds
during our audit period (audit universe) and evaluate the effectiveness
of UOP's policies and procedures. Apollo provided us with electronic
files containing selected system tables extracted from backup files
created on May 10, 2004 from the Student Record, Financial Aid, and
Accounting systems. To assess the reliability of the data, we compared
selected data in the extracted system tables to data in Apollo's active
system for\
11 students randomly selected from the audit universe. We also compared
selected data for\
11 students randomly selected from Apollo's active system to data in the
extracted system tables. In addition, we compared the total funds for
Title IV programs included in the extracted tables to the total amounts
shown in the Department\'s National Student Loan Data System for the
covered period. We compared attendance data in UOP's Campus Tracking
system to attendance data in the Student Record system. We also compared
hardcopy rosters at the Sacramento Valley Campus and Online attendance
data to UOP's Campus Tracking system.

For the following data elements, our review was limited to gaining an
understanding of the processes for deriving and entering the data in the
Student Record and Financial Aid systems: 1) beginning date and ending
date for the student's academic year, Pell Grant payment period, and the
FFEL period; 2) number of credits required for the student's completion
of an academic year and payment period; and 3) number of weeks in an
academic year.[^5] While we did not perform specific tests of the
processes used to derive and enter these data elements, nothing came to
our attention during our review of individual disbursements to indicate
that the data were not accurate. We also did not confirm that individual
courses, which were used in determining eligibility of the second
disbursement in an academic year, were part of the student's educational
program. Based on our understanding of Apollo's systems and the results
of tests performed on the data, we concluded that the data were
sufficiently reliable to be used in meeting the audit objective.

**[Second Disbursements for an Academic Year]{.underline}**. We used
data analysis software packages and the data tables provided by Apollo
to evaluate the second disbursements of FFEL and Pell Grants made to
students in our audit universe. We designed tests to evaluate the
reasonableness of the data (i.e., relationship of key dates used in
determining eligibility for disbursements) and compliance with the
following Title IV requirements: students were enrolled for classes in
the payment period at the time of the disbursement
(34 C.F.R. § 668.164(b)(1)); students completed the coursework for the
previous payment period (34 C.F.R § 668.164(f)(2)); disbursements were
made after students completed half of the weeks of the student's
academic year (34 C.F.R. § 668.4(b) and 34 C.F.R. § 690.63 (f)), and
FFEL disbursements were made after the later of the calendar midpoint of
the students' loan period or the date the students completed half of the
academic coursework in the period (34 C.F.R. § 682.604(c)(7)(i)). For
our analyses, we reviewed all disbursements shown in the electronic
files provided from the Financial Aid system (as of May 10, 2004) that
had been made to students who received at least one Title IV
disbursement during the period September 1, 2002 through March 31, 2004.

We evaluated the Financial Aid System data for 280,521 FFEL
disbursements, totaling \$686,407,006, and 25,344 Pell Grant
disbursements, totaling \$33,992,862. Our data analyses flagged 47,889
FFEL disbursements and 5,073 Pell Grant disbursements for further
review. We placed the flagged disbursements into five groups (three for
FFEL disbursements and two for Pell Grant disbursements) and, for random
samples of students selected from each group, reviewed other student
data available in Apollo's active systems.

-   [FFEL Disbursements -- Group 1]{.underline}. This group included the
    32,999 FFEL disbursements, totaling \$107,410,243, for which the
    data showed that the weeks actually attended were less than half the
    weeks in the payment period. We reviewed the data for a random
    sample of 10 disbursements[^6] and found the disbursements were
    proper.

-   [FFEL Disbursements -- Group 2]{.underline}. This group included
    4,451 FFEL disbursements, totaling \$6,475,370 for which the data
    showed the disbursements were made after the end of the loan period.
    We reviewed the data for a random sample of 25 disbursements and
    found the disbursements were proper.

-   [FFEL Disbursements -- Group 3]{.underline}. This group included the
    remaining 10,439 FFEL disbursements, totaling \$20,818,608, that
    were flagged for further review. We reviewed the data for a random
    sample of 32 disbursements and found the disbursements were proper.

-   [Pell Grant Disbursements -- Group 1]{.underline}. This group
    included 390 Pell Grant disbursements, totaling \$547,551, for which
    the data showed that the weeks actually attended were less than half
    the weeks in the payment period. We reviewed the data for a random
    sample of 10 disbursements and found the disbursements were proper.

-   [Pell Grants Disbursements -- Group 2]{.underline}. This group
    included 4,683 Pell Grant disbursements, totaling \$6,323,053, that
    were flagged for further review. We reviewed the data for a random
    sample of 15 disbursements and found the disbursements were proper.

[**Prior Learning Materials Submission and Assessment
Fee**s]{.underline}. We used data analysis software packages and the
data tables provided by Apollo to identify students who were charged
prior learning material submission and assessment fees and to identify
the Title IV funds that were applied to the student's account for those
fees. For the students included in our disbursement analyses, we
identified the portion of any Title IV disbursement that was shown in
the tables provided from the Accounting System as being applied to the
student accounts for prior learning assessment fees.

**[Enrolled in an Eligible Program]{.underline}.** We used data analysis
software packages and the data tables provided by Apollo to identify
students who were not enrolled in an eligible program at the time of the
disbursement. Since this was a follow-up to a previously reported
condition, we reviewed all disbursements in the tables provided from the
Financial Aid System. Initially, our analysis identified 58 students in
the Associates of Arts in General Studies and 163 students enrolled in
other programs that, based on the data, appeared to not be an eligible
program. We reviewed a random sample of 20 students (10 enrolled in the
Associate of Arts in General Studies and\
10 enrolled in other educational programs) to confirm our understanding
of the data. Based on the results of the sample review, additional
information provided by UOP, and information contained in the
Department's letter of February 26, 1999, we further refined our
analysis to identify disbursements made after February 26, 1999 to
students who were solely enrolled in either the Associate of Arts in
General Studies or the Associate of Arts in Credit Recognition.

**[Retaking Courses.]{.underline}** We used data analysis software and
the data tables provided by Apollo to identify students retaking courses
for which they previously received a passing grade.

We performed fieldwork at Apollo and UOP administrative offices and UOP
Online in Phoenix, Arizona, and the UOP Sacramento Valley Campus in
Sacramento, California. We held an exit briefing with Apollo officials
on May 25, 2005. We performed the audit in accordance with generally
accepted government auditing standards appropriate to the scope of the
review, as discussed above.

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 actions
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 Education Department officials who will
consider them before taking final Departmental action on this audit.

> Theresa S. Shaw
>
> Chief Operating Officer
>
> Federal Student Aid
>
> U.S. Department of Education
>
> Union Center Plaza, Room 112G1
>
> 830 First Street, NE
>
> Washington, D.C. 20202

It is the policy of the U.S. Department of Education 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 under the Act.

Sincerely,

/s/

Gloria Pilotti

Regional Inspector General for Audit

**ATTACHMENT**

**UOP Comments on the Draft Report**

**APOLLO GROUP, INC.**

UNIVERSITY OF PHOENIX

INSTITUTE FOR PROFESSIONAL DEVELOPMENT

COLLEGE FOR FINANCIAL PLANNING

WESTERN INTERNATIONAL UNIVERSITY

July 27, 2005

Ms. Gloria Pilotti

Regional Inspector General for Audit

United States Department of Education

Office of Inspector General

501 I Street, Suite 9-200

Sacramento, CA 95814

> Re: Draft Audit Report titled, *University of Phoenix's Processing of
> Student Financial Aid Disbursements for the Higher Education Act
> (HEA), Title IV Programs;* Control Number ED-OIG/A09E0015

Dear Ms. Pilotti:

This responds to the above-referenced draft audit report dated June 30,
2005 (the "Draft Report"). Enclosed please find written comments by
which Apollo Group, Inc., and the University of Phoenix ("UOP") respond
to the findings and recommendations in the Draft Report.^1^

> The Audit Results presented in the Draft Report include the following
> statement:
>
> "Except for two areas, **we concluded that UOP had policies and
> procedures that provide reasonable assurance that the institution
> properly makes initial and subsequent disbursements to students
> enrolled in Title IV eligible programs**. **We found that UOP used an
> automated process for checking eligibility prior to making Title IV
> disbursements** that placed a hold on disbursements that failed the
> eligibility checks. **We also found that the staff, who reviewed
> disbursements that failed the eligibility checks, generally made
> proper decisions regarding student eligibility for released
> disbursements.** However, UOP's policies and procedures did not ensure
> that 1) Title IV disbursements were credited to student accounts for
> only allowable institutional charges and 2) students, who received
> Title IV disbursements, were enrolled in eligible programs.
>
> Draft Report at page 2 (emphasis added).

These audit results reflect the confirmation by OIG that UOP's policies
and procedures are generally sound and compliant. As discussed in the
enclosed comments concerning the minor exceptions referenced in the two
findings in the Draft Report, UOP

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

^1^ The Draft Audit Report requested our written comments within 30 days
of the date of the letter. Therefore this response is timely filed.

Ms. Gloria Pilotti

July 27, 2005

Page 2

does not concur with Finding 1 and has initiated responsive action with
respect to the isolated items cited in Finding 2.

On behalf of the Apollo Group, Inc. and the University of Phoenix, we
extend our appreciation to you and the other OIG personnel for the
cooperative efforts towards resolution of this audit, and we look
forward to continued work together towards completion of this matter.

> Sincerely yours,

/s/

Robert T. Collins

Vice President of Student Financial Aid

**FINDING NO. 1**

The University of Phoenix (UOP) does not concur with Finding No. 1 in
the Draft Report. Therefore, UOP also disagrees with the recommendations
that are predicated upon this finding. UOP's reasons for disagreement
with Finding 1 and the accompanying recommendations are explained below.

Finding 1 cites 834 students (from a universe of 197,230 students) for
whom UOP used Title IV funds to credit their accounts for prior learning
assessment fees. The finding asserts that such disbursements were
noncompliant because the prior learning assessment fees are not
institutional charges that could be paid for with Title IV funds. UOP
respectfully disagrees with this assertion and contends that it is at
odds with the governing regulations and with prior guidance published by
the U.S. Department of Education.

[Background]{.underline}

The University of Phoenix Prior Learning Assessment Center (PLAC) adds
an additional level of service to students in providing the ability,
where appropriate, to use professional development training, life
experience, foreign language coursework, professional certification and
licensure, and workshop or seminar courses to fulfill credit
requirements for degree completion. The standards and criteria
established by UOP for assessing prior college-level learning were
developed in conformance with guidelines set forth by the Council for
Adult and Experiential Learning (CAEL) and approved by the American
Council on Education, the American Association of Collegiate Registrars
and Admissions Officer and the Council on Higher Education
Administration. Throughout the audit period at issue in the Draft
Report, the PLAC followed stringent compliance requirements for tracking
and documenting each process associated with credit recognition and
awards, relying upon a staff of approximately 25 professionals in areas
of accounting, compliance, intake, evaluations, corporate review, and
Continuing Education Units. Additionally, UOP engaged faculty evaluators
in areas of content expertise to review and render credit decisions
based upon academic learning and merit in areas of applicability.
Student program files were reviewed for areas of need and compatibility
of subject matter for content requirements and non-duplication of
program and submission content. The PLAC process required -- and
continues to require --substantiation of learning through official
certification, transcript, license, and other forms of documentation.

The Draft Report correctly notes at page 5 that UOP's written policies
included prior learning assessment fees as an allowable Title IV charge
when the student authorized UOP to apply financial aid funds to all open
allowable charges. Elsewhere, the finding corroborates other key facts
that substantiate the disbursements at issue. For example, the Draft
Report details at page 3 that UOP assessed PLAC fees and related credit
posting

fees at uniform rates for all students who availed themselves of the
prior learning assessment option. The Report also reflects, in a manner
consistent with the description of the PLAC set forth in the paragraph
immediately above, that the evaluation and assessment activities paid
for by PLAC fees were comprised of activities performed at and by UOP,
and not at or by any individual student's predecessor institution.
Lastly, the Report confirms at page 3, including footnote 2, that the
PLAC process was comprised of educationally related activities,
including the compilation by the student of a detailed portfolio and
related materials, and the assessment by UOP of the student's
qualification for credit that will be applied to his or her chosen
program of study.

As shown below, each of these facts substantiated in the Draft Report
affirms that the usage of Title IV fees by UOP to pay PLAC fees was
permissible and compliant.

[Statement of Reasons]{.underline}

1\. [The applicable federal disbursement regulation plainly authorizes
the payment of PLAC fees with federal funds]{.underline}. That
regulation states as follows:

> After obtaining the appropriate authorization from a student or parent
> under Section 668.165, the institution may use title IV, HEA program
> funds to credit a student's account at the institution to satisfy---
>
> \(i\) current charges that are in addition to charges described in
> paragraph (d)(1) of this section that were incurred by the student at
> the institution for educationally related activities;

34 C.F.R. §668.164(d)(2).

2\. [The disbursements were duly authorized]{.underline}. The factual
recitations in the Draft Report establish that the use of Title IV funds
to pay PLAC fees was proper under this regulation, because those
disbursements were made pursuant to the required student or parent
authorizations, and because the PLAC fees were incurred by the student
at UOP for educationally related activities. As previously noted, the
Draft Report acknowledges at page 5 that UOP required that students
authorize the application of financial aid funds before these
disbursements were made. Accordingly, the Draft Report does not dispute
that UOP complied with the requirement in the regulation that UOP first
obtain "the appropriate authorization from a student."

3\. [The PLAC fees paid for educationally related
activities]{.underline}. UOP disagrees with the Draft Report's assertion
at page 5 that prior learning assessment activities at UOP "were not
charges that were incurred by the student at the institution for
educationally related activities" pursuant to section 668.164(d)(2).
Fees and charges for evaluating evidence of academic achievement and
credit towards graduation can only be characterized as educationally
related. The Draft Report's description of the standards and procedures
utilized by the PLAC, and the further elaboration presented in this
response, clearly establish that the prior learning assessment
activities were educationally related, and that the charges were
incurred at UOP, for activities performed by UOP personnel, to advance

the educational programs and objectives of enrolled students.^1^ Finding
1 is fundamentally flawed in its reliance upon the premise that prior
learning assessment activities were not educationally related.

4\. [The Department's published guidance demonstrates that Finding 1 is
incorrect in asserting that PLAC fees cannot be paid with Title IV
funds]{.underline}. We also disagree with the Finding's conclusion at
page 4 that the PLAC fees "are not institutional charges that can be
paid with Title IV funds." That conclusion was contradicted by guidance
that the Department published when it promulgated the substantially
similar predecessor version of the current disbursement regulation. That
guidance stated as follows:

> ... the Secretary believes that **a student should have control over
> program funds in excess of direct institutional charges -- the student
> uses these funds at his or her discretion** to pay for
> other-cost-of-attendance and other miscellaneous institutional
> charges."

59 Fed. Reg. 61728 (Dec. 1, 1994)(emphasis added).^2^

The discretion afforded to students to authorize the payment of other
institutional charges with Title IV funds has been expressly reiterated
in subsequent guidance. For example, when the Department issued proposed
rules concerning late disbursements in 1999, it published an
illustration of "the major principles of the proposed late disbursement
procedures" which identified [late parking fines]{.underline} as a
permissible institutional Title IV charge. The published example stated
as follows:

> The institution determines that Michael has \$50 in outstanding
> tuition charges **and \$100 in outstanding parking fines** for the
> payment period. The institution credits Michael's account with \$50 of
> Michael's Federal Pell Grant funds. The institution wants to use
> another \$100 of Michael's late disbursement to cover the outstanding
> parking fines. However, the institution has not received permission
> from Michael prior to his withdrawal **to credit his account for
> educationally-related charges other than tuition and fees and room and
> board**. ...

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

^1^ Finding 1 argues that the PLAC fees do not qualify as educationally
related because they "were incurred by the student for the evaluation of
activities that occurred at locations other than UOP and may have taken
place prior to the student's enrollment." This conclusion is incorrect
because the prior learning assessment activities paid for the process of
assessing the prior learning activities; the fees do not cover the prior
activities themselves. Furthermore, the interpretation in the finding is
contradicted by the governing regulation, which authorizes disbursements
for current charges "incurred by the student at the institution..." The
facts recited in the Draft Report plainly establish that these charges
were incurred at UOP, not elsewhere. Therefore the charges are expressly
authorized by the governing regulation.

^2^ The quoted commentary accompanied the final publication of the
predecessor disbursement rule that appeared at §668.165(b)(3). Moreover,
the Department provided similar guidance with its final regulations of
November 29, 1996, stating "\[a\] student or parent should have control
over the Title IV, HEA program funds he or she receives for educational
costs in excess of tuition and fees..." 61 Fed. Reg. at 60595

64 Fed. Reg. 43028 (August 6, 1999)(emphasis added).

The Department's example concludes that, upon receipt of the requisite
authorization from "Michael," the institution is permitted to "credit
his account with the \$100 of Federal Pell Grant funds to cover his
outstanding parking fines." [Id]{.underline}. Clearly, if parking fines
are "educationally-related" charges that qualify for Title IV funding,
the same is true of PLAC fees, which cover core educational activities.

Other sources of guidance confirm that the Department considers other
charges that are further attenuated from the educational mission than
PLAC fees to be considered educationally related and qualified for Title
IV funding. For example, on January 7, 1999, the Department issued a
Policy Bulletin that endorsed Title IV funding for charges "to a
student's account for discretionary educationally related expenses
(e.g., parking or library fines, the cost of athletic or concert
tickets, etc.)". Although that policy guidance was aimed at clarifying
the return of Title IV calculation requirements as they relate to
non-institutional charges, it was premised upon the proposition that
these items qualify for Title IV funding, another example of published
Departmental guidance contradicting the restrictive, novel, and
incorrect interpretation of "educationally related" set forth in Finding
1.

5\. [The PLAC fees would qualify for funding as part of the students'
cost of attendance]{.underline}. The Draft Report cites UOP's published
materials for the proposition that PLAC fees were not included as part
of the major curriculum fees and tuition. Report at page 5. This point
is not central to the analysis because UOP's funding of PLAC fees with
Title IV dollars was authorized pursuant to 34 C.F.R. §668.164(d)(2),
not 34 C.F.R. §668.164(d)(1). Whereas subsection (d)(1) focuses upon
disbursements for tuition and fees, subsection (d)(2) focuses upon
authorized payments for "current charges that are in addition to the
charges described in paragraph (d)(1)."

In any event, Finding 1's assertions that the PLAC fee disbursements
could not have been included in the cost of attendance and were
therefore subject to disallowance are incorrect. Subsection (d)(1)(i) of
34 C.F.R. §668.164 expressly authorizes institutions to utilize Title IV
funds to pay "tuition and fees." UOP's assertion, for administrative
purposes, that PLAC fees were not part of UOP's major curriculum fees
and tuition did not negate the obvious fact that the charges for prior
learning assessment nonetheless constituted a form of "fee," and the
Draft Report presents no fact or information to refute this self-evident
conclusion.

Moreover, the statutory definition of the term "cost of attendance,"
relied upon in the Draft Report, again demonstrates that UOP's PLAC fee
disbursements were proper. The definition in HEA § 472 refers to
"tuition and fees normally assessed

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

^3^ See, FSA IFAP Library, *Policy Interpretation and Guidance*, at
ifap.ed.gov/pbulletins, page E8-4

a student carrying the same academic workload as determined by the
institution." The Draft Report's description of UOP's PLAC fees at page
3 reflects that the fees were normally assessed, at uniform rates, in
connection with prior learning assessment activity.

The Report asserts that PLAC fees did not meet the "normally assessed"
component of the costs of attendance definition because only 834 of the
197,230 students in the audit universe were assessed the fees. However,
the mere fact that PLAC fees were not assessed to every student does not
signify that these fees were not normally assessed. The statute calls
for a "determination by the institution" as to what fees are normally
assessed; the obvious fact that UOP only billed those students who
actually availed themselves of the prior learning assessment option does
not signify that the fees were not normally assessed.

Longstanding guidance from the National Association of Student Financial
Aid Administrators (NASFAA) confirms that the PLAC fees could properly
have been considered to be within the cost of attendance. The 1993
NASFAA Monograph concerning cost of attendance and student expense
budgets expressly references "Other Educational Expenses" as a component
of the student budget and includes within that category the following:

"\[E\]xamples of allowable other educational expenses include:
additional tuition, fees, equipment and materials not already
accommodated in other budget components: fees for credit by examination
when students advance toward their degree or educational objective,
e.g., CLEP (College-Level examination Program), APP (Advanced Placement
Program); thesis and dissertation costs\..."

NASFAA Monograph Number 9, *Constructing Student Expense Budgets*, at
page 7 (April 1993).

The Monograph was issued by the federal student aid community to provide
guidance to financial aid administrators who construct student expense
budgets and has continued to be relied upon, without pertinent
revisions, twelve years after it was published. The Monograph clearly
includes prior learning assessment functions in the cost of attendance
and student expense budget, thereby demonstrating that the PLAC fees are
an allowable expense.

In any event, UOP's PLAC fee disbursements complied with the stringent
requirements of 34 C.F.R. §668.164(d)(2) concerning authorized charges
beyond tuition and fees. As is stated in the Student Aid Handbook,
"Allowable charges always include current charges for tuition and fees
and room and board ... You may use FSA funds to pay other current
charges that a student has incurred for educationally related activities
if you obtain the student's *written authorization* to pay those charges
..."^4^

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

^4^ 2005-06 Federal Student Aid Handbook at page 4-17.

6\. [Any disallowed PLAC fees would be returnable to the students, not
to the lenders or the FSA programs]{.underline}. Based upon all of the
stated reasons for disagreement with Finding 1, UOP also disagrees with
the resultant accompanying recommendations. With respect to the repeated
recommendations concerning the return of Title IV funds to the various
FSA programs and lenders, UOP notes that these funds were authorized by
the students to be held by UOP (and to be applied to allowable charges).
Any disallowance would therefore result in the disbursement of these
funds back to the students, not to the FSA programs or lenders.

**FINDING NO. 2**

UOP concurs that Finding 2 cites a very limited number of students who
inadvertently received Title IV funds although they were enrolled in a
program deemed ineligible. Notably, these six students reflect a very
small percentage of the students enrolled in the referenced ineligible
program at UOP during the audit period. As is noted in the Draft Report
at page 8, the inadvertent funding of the six cited students resulted
from an isolated circumstance that occurred at only one UOP campus.

UOP notes that the Draft Report indicates that the cited recommendations
are subject to further action by the ED Chief Operating Officer.
Furthermore, UOP will need additional information in order to identify
precisely the six students cited in Finding 2. UOP is ready and willing
to comply with the stated recommendations once they are final and upon
receipt of the requisite information. UOP notes that most of the Title
IV funds at issue in Finding 2 are FFEL funds and respectfully requests,
for fairness and simplicity, that the resolution of those disbursements
be achieved via application of the actual loss formula in lieu of the
recommended return to lenders.

[^1]: UOP uses the software platform names to refer to these systems.
    The respective names used by UOP are OSIRIS (an in-house developed
    platform), PeopleSoft, and Oracle.

[^2]: UOP's policy states that a student may not earn more than 60
    credits from any combination of experiential learning, national
    testing, credit by exam, and professional course work and training.
    State‑imposed limits on credits awarded for prior learning may
    further limit the credits earned.

[^3]: See Other Matters section of OIG Audit Report titled *University
    of Phoenix's Management of Student Financial Assistance Programs*,
    issued March 2000 (Control Number ED-OIG/A09-70022). The audit
    report identified improper disbursements for Title IV loans and
    grants that had loan/grant periods starting between October 1995 and
    September 1997.

[^4]: We considered students who were concurrently enrolled in an
    ineligible educational program and an eligible education program to
    be eligible for Title IV funds. Under UOP's procedures, a student
    enrolled in eligible and ineligible programs are eligible for Title
    IV programs provided that the student's coursework is concentrated
    in the eligible program.

[^5]: We did confirm that the student's academic year met the minimum
    requirement of 30 weeks.

[^6]: We also reviewed 10 Pell Grant disbursements that were flagged for
    this same evaluative criteria.