October 30, 2008

> **Control Number**
>
> **ED-OIG/A02H0008**

Dr. Bernard Lander

President

Touro College

President's Office

27-33 West 23rd Street

New York, NY 10010-4202

Dear Dr. Lander:

This **Final Audit Report**, entitled *Touro College's Title IV, Higher
Education Act Programs, Institutional and Program Eligibility*, presents
the results of our audit. The purpose of the audit was to determine if
Touro College (Touro) complied with Title IV, Higher Education Act of
1965, as amended (HEA), programs (Title IV) institutional and program
eligibility requirements. Our original review covered the period July 1,
2005, through June 30, 2006. Because our work indicated that
deficiencies existed outside of the original audit period, we extended
our review to include the period July 1, 2002, through June 30, 2005.

BACKGROUND

Touro was established in 1970 as a private, not-for-profit institution
of higher and professional education located in New York, New York.
Touro offers undergraduate programs leading to associate and bachelor
degrees, and graduate programs leading to master degrees. It operates
professional schools, including a Law School, a College of Health
Sciences, a College of Osteopathic Medicine, a College of Pharmacy, and
a College of Education. Touro is licensed to operate in the states of
New York, California, Nevada, and Florida.[^1] Touro operates 31
additional locations in New York, four additional locations in
California and Nevada, one additional location in Florida, and four
additional locations in Israel, Germany, and Russia.

The Middle States Commission on Higher Education (Middle States)
accredited Touro and all of its instructional locations located in New
York, California, Nevada, Germany, Israel, and Russia. On June 25, 2004,
Middle States informed Touro that Touro University International (TUI),
Touro's online distance education program, established in 1998, and
located in Cypress, CA,[^2] and Touro University California (TUC),
established in 1997, and located in Vallejo, CA, along with its Nevada
branch located in Henderson, NV,[^3] were considered separately
accreditable institutions, and directed Touro to seek accreditation for
these locations from the Accrediting Commission for Senior Colleges and
Universities of the Western Association of Schools and Colleges (WASC).
On February 28, 2005, WASC became the accrediting agency for TUI and
TUC, along with TUC's Nevada branch.[^4]

On March 3, 1999, the U.S. Department of Education's (ED) Federal
Student Aid (FSA) granted a provisional Program Participation Agreement
(PPA) to Touro after an FSA program review found several deficiencies,
including late refunds. When the provisional PPA expired on December 31,
2001, FSA placed Touro in a "month-to-month" extension of its
provisional certification status, which was in effect until April 20,
2008. The total amount of Touro's Title IV awards increased from
\$64,100,041 in the 2002-2003 award year to \$103,075,246 in the
2005-2006 award year (a 61 percent increase). During our audit period,
while under a month-to-month extension of its provisional certification
status, Touro was approved to award \$335,734,960 in Title IV funds to
students as shown below.

  ------------------------- ---------------------------------------------
  ***Award Year***          ***Title IV Amounts***

  2002-2003                 \$ 64,100,041

  2003-2004                 78,968,330

  2004-2005                 89,591,343

  2005-2006                 103,075,246

  Total                     **\$ 335,734,960**
  ------------------------- ---------------------------------------------

On September 28, 2007, FSA approved six of the nine ineligible
additional locations cited in Finding 1 below, (Office of Postsecondary
Education ID (OPE ID) Numbers 01014234, 01014239, 01014240, 01014241,
01014242, and 01014248)[^5] as additional locations eligible to
participate in Title IV. In addition, on March 6, 2008, FSA approved one
of the nine ineligible additional locations cited in Finding 1 (OPE ID
Number 01014233) as an additional location eligible to participate in
Title IV. Lastly, on July 11, 2008, FSA approved the last two of the
nine ineligible additional locations cited in Finding 1 (OPE ID Numbers
01014243 and 01014245) as branch campuses eligible to participate in
Title IV.

AUDIT RESULTS

Touro did not fully comply with Title IV institutional and program
eligibility requirements. Specifically, Touro disbursed approximately
\$36,026,364 in Title IV funds to 4,310 students who attended nine
ineligible additional locations that FSA had not approved as eligible to
participate in the Title IV programs. Touro also disbursed \$17,825,406
to 1,927 students who attended TUI,[^6] which Touro reported to FSA as
an additional location. However, Touro provided documentation dated
March 29, 2000, that FSA did not consider TUI an additional location
because its students did not physically attend classes at the address
listed for TUI. Therefore, Touro did not need prior approval before
disbursing Title IV funds to students attending TUI. Touro never applied
to FSA for approval and participation of TUI as a separate institution
or as a branch campus, even though Middle States informed Touro that it
considered TUI to be a separate accreditable institution on June 25,
2004. FSA should have considered TUI as a branch campus or separate
institution. Furthermore, for the award years 2002-2003 through
2004-2005, Touro did not keep adequate records to account for Title IV
funds disbursements to only eligible additional locations.

We provided a draft of this report to Touro for review and comment on
February 26, 2008. In Touro's comments to the draft report, dated May
20, 2008, Touro did not concur with the findings and recommendation 1.1.
Based on Touro's comments, we modified Finding 1 and recommendation 1.1.
Although Touro did not comment on the issue regarding TUI, we further
clarified our position and modified recommendation 1.3. For the other
recommendations, Touro did not specifically indicate concurrence or
disagreement, but we updated recommendation 2.2 for clarification.
Touro's comments are summarized at the end of each finding.

Except for personally identifiable information (that is, information
protected under the Privacy Act of 1974 (5 U.S.C. § 552a)), the entire
narrative of Touro's comments is included as Attachment C to this
report. All personally identifiable information mentioned in Touro's
comments was replaced with bracketed text. Because of the voluminous
nature of the exhibits attached to Touro's comments and the personally
identifiable information within, we have not included them in Attachment
C. Copies of the exhibits to Touro's comments, less the personally
identifiable information, are available on request.

FINDING NO. 1 -- Touro Disbursed Approximately \$36,026,364 in Title IV
Funds to Students Who Attended Ineligible Additional Locations

**Touro Disbursed Title IV Funds to Students in Nine Ineligible
Additional Locations**

Touro disbursed approximately \$36,026,364 in Title IV funds to 4,310
students who attended nine ineligible locations.[^7] Based on review of
data from FSA's Postsecondary Education Participants System (PEPS) and
the Electronic Application for Approval to Participate in Federal
Student Financial Aid Programs (EAPP), and interviews with FSA
officials, we found that while on a month-to-month extension of its
provisional certification status since 2002, Touro added 17 additional
locations through the EAPP. Although Touro reported these locations on
the EAPP, it did not provide any documentation to demonstrate the
additional locations were approved by FSA as eligible additional
locations to receive Title IV funds. Since Touro was under a
month-to-month extension of its provisional certification status, Touro
was not authorized to disburse any Title IV funds to students attending
any new additional locations without express approval of the additional
locations from FSA.

According to 34 C.F.R. § 600.20(c)[^8]---

> A currently designated eligible institution that wishes to expand the
> scope of its eligibility and certification and disburse title IV, HEA
> Program funds to students enrolled in that expanded scope must apply
> to the Secretary and wait for approval to---
>
> \(1\) Add a location at which the institution offers or will offer 50
> percent or more of an educational program if . . .[^9]
>
> \(i\) The institution participates in the title IV, HEA programs under
> a provisional certification . . . .

Pursuant to 34 C.F.R. § 600.21(a), an eligible institution must report
to the Secretary of Education (Secretary) no later than 10 days after
changing its establishment of an accredited and licensed additional
location at which it offers, or will offer, 50 percent or more of an
educational program if the institution wants to disburse Title IV funds
to students enrolled at that location. In addition, 34 C.F.R. §
600.20(f)(3) provides that if an institution participates in the Title
IV programs under a provisional certification and is required to apply
for approval of a new location, that institution may not disburse Title
IV funds to students at the new location before receiving approval from
the Secretary.

Of the 17 additional locations Touro reported through the EAPP, nine
were ineligible because they offered, or intended to offer, 50 percent
of an educational program, and received Title IV funds.[^10] Based on
our analysis of student data, we identified 4,310 students who attended
the nine ineligible additional locations. Touro disbursed a total of
\$40,728,507 in Title IV funds to these 4,310 students. Of the
\$40,728,507 disbursed to students at the nine ineligible locations, we
conservatively estimated that \$4,702,143 could have been disbursed to
950 students who exclusively attended only eligible locations for at
least one of three semesters that we assumed each student attended in
each of the award years.[^11] As a result, we conservatively estimated
the improper disbursement amount to students attending the nine
ineligible locations to be approximately \$36,026,364. See Attachment A
for the results of our analysis of ineligible Title IV amounts by award
year.

Of the nine ineligible additional locations, the location where students
were disbursed the most Title IV funds was Touro University College of
Osteopathic Medicine which opened in 2004 in Henderson, Nevada. We found
381 students who attended this location for whom Touro disbursed a total
of \$13,501,642 in Title IV funds (over 37 percent of our estimated
total disbursement of \$36,026,364). See Attachment B for a list of all
nine ineligible locations.

Touro officials made a management decision to continue disbursing Title
IV funds to students at these nine ineligible additional locations, even
though they were not approved by FSA as eligible additional locations.
As a result, Touro improperly disbursed an estimated \$36,026,364 in
Title IV funds for students attending nine ineligible additional
locations that were neither approved nor authorized by FSA to receive
Title IV funds.

**Touro Never Applied to FSA for Approval and Participation of TUI as a
Separate Institution or as a Branch Campus**

TUI was 1 of the 17 additional locations that Touro reported through the
EAPP. Even though Touro reported TUI as an additional location through
the EAPP, Touro provided documentation from FSA, dated March 29, 2000,
that FSA did not consider TUI an additional location since TUI offered
only online distance education programs and students did not physically
attend classes at TUI\'s address. As a result, FSA did not require TUI
to obtain prior approval from FSA before disbursing Title IV funds to
students.

ED's definition of a "branch campus" is similar to Middle States'.
According to 34 C.F.R. § 600.2, a branch campus is---

> A location of an institution that is geographically apart and
> independent of the main campus of the institution. The Secretary
> considers a location of an institution to be independent of the main
> campus if the location---
>
> \(1\) Is permanent in nature;
>
> \(2\) Offers courses in educational programs leading to a degree,
> certificate, or other recognized educational credential;
>
> \(3\) Has its own faculty and administrative or supervisory
> organization; and
>
> \(4\) Has its own budgetary and hiring authority.

TUI was an independent location of Touro College which administered the
Title IV funds for its students, used its own accounting system for
tracking its Title IV disbursements, had its own administrative and
faculty staff, and its degrees were approved by the State of California.
In 2005, Middle States determined TUI to be a separate accreditable
institution and a branch campus of Touro that should be accredited by
WASC, not an additional location.[^12] Middle States defines a branch
campus as a location of an institution that is geographically apart and
independent of the main campus of the institution. The location is
independent if the location is permanent in nature; offers courses in
educational programs leading to a degree, certificate, or other
recognized educational credential; has its own faculty and
administrative or supervisory organization; and has its own budgetary
and hiring authority. Under ED's definition, TUI should have been
considered a branch campus or separate institution because TUI was
independent. However, Touro never applied to FSA for approval and
participation of TUI as a separate institution or branch campus. Touro
disbursed a total of \$17,825,406 in Title IV funds to 1,927 students
enrolled at TUI.

## Recommendations  {#recommendations .RptSubcaption}

We recommend the Acting Chief Operating Officer (COO) for FSA require
Touro to

1.  Determine the exact amount of Title IV funds disbursed to students
    attending ineligible locations, and return the amount improperly
    awarded (which we estimated to be \$36,026,364) to ED and the
    lenders, as appropriate. For Federal Family Education Loans Program
    loans, pay to the appropriate lenders the amount of interest that
    accrued on the borrowers' loans and pay to ED the amount of interest
    benefits and special allowance payments. FSA should verify Touro's
    calculations.

2.  Develop written procedures to ensure additional locations are
    approved by FSA to receive Title IV funds before drawing down and
    disbursing Title IV funds to students.

We also recommend the Acting COO for FSA

3.  Determine if Touro should have applied for approval and
    participation of TUI as a separate institution as a result of Middle
    States' decision to consider TUI a separately accreditable
    institution, and take actions as appropriate.

##  {#section .RptSubcaption}

## Touro Comments {#touro-comments .RptSubcaption}

Touro did not concur with our finding and recommendation 1.1. It did not
comment on our other recommendations. Touro did not agree that any of
the nine additional locations were ineligible and provided specific
information intended to support the eligibility of six of the nine
locations (OPE ID Numbers 01014233, 01014234, 01014239, 01014240,
01014241, and 01014242). In its comments, Touro stated that---

1.  Four of the locations the report identifies as ineligible (OPE ID
    Numbers 01014234, 01014240, 01014241, and 01014242) were each "part
    of a campus constituting a duly approved eligible location." NYSED
    and Middle States recognized each of these four locations as
    components of a geographic grouping of classroom facilities
    functioning as single operational units. This treatment is
    consistent with ED's handling of other urban universities. Touro
    over-reported by including one of these locations on its EAPP, and
    "the OIG has taken a prospective, precautionary prediction and
    converted it into a current statement of fact . . . ."

2.  "The Department's regulation concerning approval of sites turns on
    whether the location offers 50% or more of an educational program."
    Two of the locations the report identifies as ineligible (OPE ID
    Numbers 01014233, and 01014239) did not offer more than 50 percent
    of a program. For location OPE ID Number 01014233, the EAPP stated
    that Touro's intention was to offer more than 50 percent of a
    program at this location in the future. For location OPE ID Number
    01014239, additional information was provided indicating this
    location did not offer 50 percent of a program for the 2003-2004
    through 2005-2006 years.

3.  It reasonably believed that the additional locations were approved
    by ED. Touro's ability to utilize the ordinary processes of
    reporting changes was entirely disrupted by its extended
    month-to-month provisional certification status and issues with ED's
    electronic application system. Based on its contact with ED's New
    York Case Team, it very reasonably understood that the reported
    changes, including new locations, were in fact approved. Further,
    Touro was never advised that any new locations were considered to be
    ineligible, nor was it ever advised to stop disbursing Title IV
    funds to these new locations. ED's "continuing pattern of conduct
    over the course of nearly seven years appeared to clearly confirm .
    . . \[that\] the Department's own conduct could be relied upon as de
    facto approval of Touro's new locations."

4.  Even if the locations were ineligible, the asserted liability "is
    incorrectly calculated and grossly overstates the amount of Title IV
    assistance disbursed for coursework at the Challenged Locations." To
    calculate the liability, the OIG identified all students who took
    any courses at any one of the nine challenged locations and then
    totaled all the Title IV assistance awarded to those students for
    the entire award year. The OIG "fails to distinguish between
    students who took one course during a single semester, one course
    during multiple semesters, or multiple courses during multiple
    semesters at any of the Challenged Locations . . . . \[T\]here is no
    basis whatsoever to take the position that the Asserted Liability
    can include Title IV assistance earned as a result of instruction at
    *other indisputably [eligible]{.underline} locations*." (emphasis in
    original.) The asserted liability included disbursements to students
    for attendance at eligible, undergraduate locations who then, later
    in an award year, attended graduate programs at locations questioned
    by OIG; some of these students received no Title IV assistance for
    attendance at the questioned locations.

## OIG Response {#oig-response .RptSubcaption}

We considered Touro's response to our finding and recommendation 1.1,
and modified Finding 1 and recommendation 1.1. Our responses to each of
Touro's comments are provided below:

1.  Federal requirements differ from NYSED and Middle States
    requirements. According to 34 C.F.R. § 600.10(b)(3), when ED
    determines eligibility, "\[e\]ligibility does not extend to *any*
    location that an institution establishes after it receives its
    eligibility designation if the institution provides at least 50
    percent of an educational program at that location . . . " (emphasis
    added). The regulations do not provide an exception for locations
    that are close to other locations; they are based on the percentage
    of an educational program provided at the location. Similarly, 34
    C.F.R. § 600.20(c) provides requirements for an "institution that
    wishes to expand the scope of its eligibility and certification and
    disburse title IV, HEA Program funds to students enrolled in that
    expanded scope . . . ." Though Touro claims that its inclusion of
    the location on its EAPP was over-reporting, that inclusion did
    indicate that, at the time the EAPP was completed, Touro considered
    it to be a "new location." Filing the application also triggered a
    clear obligation to not disburse funds until approval had been
    received.

2.  As stated in our finding, 34 C.F.R. § 600.20(c)(1) requires an
    institution to apply for approval to "\[a\]dd a location at which
    the institution offers *or will offer* 50 percent or more of an
    educational program . . . ." (emphasis added.) For one location (OPE
    ID Number: 01014233), Touro stated on the EAPP that its intention
    was to offer more than 50 percent of a program at this location in
    the future. The regulations do not include any provision for a
    location's gaining eligibility if, in subsequent years, the
    percentage of a program offered at the location decreases to less
    than 50 percent, or if an institution does not follow through with
    the originally stated intention to offer more than 50 percent of a
    program. Therefore, in light of Touro's stated intent, we could not
    conclude that the first location (OPE ID Number: 01014233) was
    eligible, or that Touro was authorized to disburse funds in the
    absence of written authorization from FSA. We questioned the second
    location (OPE ID Number: 01014239) because Middle States data
    indicated that Touro provided at least 50 percent of a program
    there; Touro's EAPP for this location did not include a statement
    that more than 50 percent was offered or that Touro intended to
    offer more than 50 percent. Touro provided additional information
    indicating this location did not offer 50 percent of a program for
    the 2003-2004 through 2005-2006 years (Middle States had attributed
    off-site clinical education to this location). However, Touro did
    not provide documentation for the 2002-2003 year. Therefore, we
    could not conclude that this location was eligible or if
    disbursements were authorized.

3.  Under 34 C.F.R. § 600.20(f)(3), an "institution may not disburse
    title IV, HEA program funds to students attending the subject
    location, program, or branch until the institution receives the
    Secretary's notification that the location, program, or branch is
    eligible to participate in the title IV, HEA programs." Touro did
    not receive approval for its new locations. ED's awareness of the
    locations, or Touro's difficulties with its provisional
    certification status or ED's electronic application system cannot
    authorize the disbursement of Title IV funds contrary to the
    regulatory requirements. See *In the Matter of Cannella Schools of
    Hair Design*, Dkt. Nos. 98-72-SA & 98-73-SA, ED (Decision of the
    Secretary, December 12, 2000) ("Estoppel cannot prevent the
    application of the correct meaning of governing regulations . . .");
    and *In the Matter of Academia La Danza Artes Del Hogar*, Dkt. No.
    90-31-SP, ED (May 19, 1992) (erroneous or negligent designation of
    eligibility by ED does not prevent recovery of funds disbursed
    contrary to law).

4.  We modified our calculation in Finding 1 of the Title IV funds
    disbursed to students attending the nine ineligible locations. We
    also revised recommendation 1.1 for Touro to calculate the exact
    amount of Title IV funds disbursed to students attending the nine
    ineligible locations.

> In the draft report we questioned the entire annual Title IV award and
> disbursement for any student who attended any of the nine ineligible
> locations during an award year. We have modified our methodology to
> identify and exclude any student who attended only eligible locations
> during any single semester of an award year. Of the 4,310 students who
> attended ineligible locations, we determined that 950 students
> attended only eligible locations during at least one semester of an
> award year. However, we could not determine the exact amount of funds
> disbursed to these students for each semester because Touro provided
> Title IV amounts for students only for the whole award year, not
> individual semesters. Using the National Student Loan Data System
> (NSLDS) data, we made a conservative estimation that \$4,702,143 could
> have been disbursed to the 950 students who attended only eligible
> locations for two of three semesters in each of the award years. As a
> result, we estimated the Title IV disbursement to students attending
> the nine ineligible locations to be approximately \$36,026,364.
>
> The modified recommendation that Touro review and determine, subject
> to ED's verification, the actual amount improperly disbursed to each
> student also addresses Touro's comment that our calculation overstated
> the liability for students that did not attend an ineligible location
> for an entire award year. This recommendation is consistent with
> Touro's obligation under 34 C.F.R. § 668.82(b)(1) to account for Title
> IV funds received.
>
> Touro provided no basis to conclude that liability should be reduced
> if a student simultaneously attends eligible and ineligible locations.
> The regulation at 34 C.F.R. § 600.20(f)(3) categorically states that
> an institution may not disburse Title IV funds to a student at a new
> location prior to receiving notice of eligibility from the ED. In
> addition, Title IV awards are based on a student's entire cost of
> attendance and are not awarded or apportioned on a course-by-course
> basis.

Although Touro did not comment on the issue regarding TUI, we further
clarified our position and modified recommendation 1.4.

FINDING NO. 2 -- Touro Did Not Have Adequate Records to Ensure That
Title IV

> Funds Disbursements Were Made Only to Students Attending Eligible
> Additional Locations for the Award Years 2002-2003 through 2004-2005

Touro did not keep adequate records to account for Title IV funds
disbursements to students who attended only eligible additional
locations for the 2002-2003 through 2004-2005 award years. According to
the Dean of Enrollment Management and Institutional Research and Review
(Dean), Touro did not maintain a database of Title IV funds disbursed to
students by location attended.[^13] The student database from Jenzabar
did not contain the location where students attended classes.[^14]
Instead, the database tracked students by instructor. The Touro location
data resided on the faculty database, which was separate from the
student database. The Dean informed us that in order to add the
locations to each student file, the Information Technology staff needed
to compare the student database and faculty database, and then go into
the student database and manually add the locations for each student.

Since Touro did not track students by location attended, Touro did not
have adequate records to ensure that Title IV disbursements were made
only to students attending eligible locations.

According to 34 C.F.R. § 668.16(a), for an institution to meet the
standards of administrative capability, the institution must
administer---

> . . . the Title IV, HEA programs in accordance with all statutory
> provisions of or applicable to Title IV, of the HEA, all applicable
> regulatory provisions prescribed under that statutory authority, and
> all applicable special arrangements, agreements, and limitations
> entered into under the authority of statutes applicable to Title IV of
> the HEA.

In addition, 34 C.F.R. § 668.16(d) states that, to be administratively
capable, an institution must establish and maintain "records required
under this part and the individual Title IV, HEA program regulations."

According to 34 C.F.R. § 668.24---

> \(a\) An institution shall establish and maintain, on a current basis,
> any application for title IV, HEA program funds and program records
> that document---
>
> \(3\) Its administration of the title IV, HEA programs in accordance
> with all applicable requirements; . . .
>
> \(6\) Its disbursement and delivery of title IV, HEA program funds . .
> .
>
> \(d\) *General*. (1) An institution shall maintain required records in
> a systematically organized manner.

Touro did not fully utilize the features in its database system for the
2002-2003 through 2004-2005 award years to track students who received
Title IV funds by location.

**Recommendations**

We recommend the Acting COO for FSA require Touro to

1.  Review its databases to determine if Touro disbursed Title IV funds
    to students attending other ineligible additional locations during
    the 2002-2003 award year through present.

2.  Maintain adequate records on a current basis to ensure that Title IV
    disbursements are made only to students attending eligible
    locations.

##  {#section-1 .RptSubcaption}

## Touro Comments {#touro-comments-1 .RptSubcaption}

Touro did not concur with the finding and stated that it complied with
the record retention requirements of 34 C.F.R. § 668.24 and the
administrative capability requirements of 34 C.F.R. § 668.16. According
to 34 C.F.R. § 668.24, "an institution shall maintain required records
in a systematically organized manner and an institution shall make its
records readily available for review." The regulations do not require an
institution to maintain its records in any particular format, and the
OIG's report does not argue that Touro failed to provide the student
data that was requested.

The Dean, as cited in Touro's comments, "never advised auditors that
'Touro did not maintain a database of Title IV funds disbursed to
students by location attended.' Rather, the Dean advised the OIG that
Touro did not maintain a database of Title IV disbursements *in the
specific format requested by the auditors*." Touro's internal processes
"limit the amount of coursework students could earn at the locations for
which Touro did not understand ED to have provided the required
approvals." Touro is not required to maintain its records in the format
requested by the auditors, and there is no evidence in the report that
Touro failed to provide all of the relevant information requested by the
OIG.

## OIG Response {#oig-response-1 .RptSubcaption}

We considered Touro's response to Finding 2; however, our position
remains unchanged. Touro's records were not "systematically organized"
because they were not maintained in a manner consistent with its
obligations to administer the Title IV programs in compliance with all
requirements. As explained in FSA's *The Blue Book*---

> \[A\] school's operations must be administered in a way that ensures
> all the information the school receives that might affect a student's
> FSA eligibility is communicated to the coordinating official and to
> the financial aid office.

While it is true that records were sufficient after the fact, and after
much analysis, to conclude that most Title IV funds were disbursed at
eligible locations, Touro could not provide the required eligibility
information on a current basis to the financial aid office to use in
combination with other student eligibility data prior to award year
2005-2006. Contrary to Touro's assertion, we are not disagreeing with
the format of its data, rather we have concluded Touro did not make
necessary data currently available to its financial aid office.

Since Touro did not provide any explanation or supporting documentation
for its statement that it had internal processes for limiting the amount
of coursework students could earn at the ineligible locations, we cannot
respond to its comment. We modified recommendation 2.2 to emphasize the
requirement to maintain records on a current basis.

OBJECTIVE, SCOPE, AND METHODOLOGY

Our audit objective was to determine if Touro complied with the Title IV
institutional and program eligibility requirements. Our original review
covered the period July 1, 2005, through June 30, 2006. Because our work
indicated deficiencies existed outside the original audit period, we
extended our review to include the period July 1, 2002, through June 30,
2005.

To accomplish our audit objective, we---

-   Reviewed Touro's 2003, 2004, 2005, and 2006 audit reports conducted
    under U.S. Office of Management and Budget Circular A-133 and the
    workpapers of Touro's independent public accountant (IPA);

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-   Gained an understanding of the pertinent Title IV regulations;

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-   Interviewed management officials from Touro, FSA, and Touro's IPA;

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-   Reviewed Touro's written policies and procedures applicable to its
    Title IV administration for institutional and program eligibility;

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-   Examined approvals and correspondence from Touro's accrediting
    agencies, Middle States and WASC, and respective state licensing
    agencies;

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```
-   Gained an understanding of Touro's use of automated systems to
    manage Title IV funds;

```{=html}
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```
-   Obtained and reviewed Touro's data from its Jenzabar system and from
    ED's NSLDS, PEPS, EAPP,[^15] Eligibility and Certification Approval
    Report, and Grant Administration and Payment System;

```{=html}
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```
-   Extracted data from the PEPS and the EAPP to identify the
    eligibility of Touro's additional locations; and

```{=html}
<!-- -->
```
-   Identified an ineligible student population for each year of our
    audit period by extracting students from our universes who attended
    the ineligible locations identified.

We assessed the system of internal controls, policies, procedures, and
practices applicable to Touro's institutional and program eligibility
for the Title IV programs. Because of inherent limitations, a study and
evaluation made for this limited purpose would not disclose all material
weaknesses in the internal controls. However, our assessment disclosed
significant internal control weaknesses in the institutional and program
eligibility area. These weaknesses and their effects are fully discussed
in the AUDIT RESULTS section of this report.

We relied, in part, on a computer generated universe of students from
the NSLDS database and on Touro's Jenzabar system. For the 2005-2006
award year, we constructed a universe of 11,127 Title IV students by
comparing NSLDS and Touro's Jenzabar data and reconciling discrepancies
of 250 students between the two systems. For the 2002-2003 through
2004-2005 award years, we compared NSLDS and Touro's Jenzabar data. We
randomly sampled 30 students from discrepancies of 1,697 students
between the two systems. Based on the results of our sample, we
constructed universes for each year of our expanded audit period
totaling 27,667 Title IV students. Based on the assessments we conclude
that the data are sufficiently reliable to be used in meeting the audit
objectives.

We performed our fieldwork at Touro's main location located in New York,
New York, between March 13, 2007, and August 22, 2007.

On August 10, 2007, we issued an Interim Audit Memorandum (IAM) to FSA
regarding the significant amount of Title IV funds disbursed to Touro
students attending ineligible additional locations and Touro's not
maintaining a database of Title IV disbursements to students by
location. The IAM recommended FSA to take immediate steps to ensure no
further Title IV funds were disbursed to students who attended
ineligible additional locations, require Touro to return the Title IV
funds disbursed to students attending ineligible additional locations,
notify Touro that it was not in compliance with Title IV requirements,
take action regarding Touro's not maintaining a database of Title IV
disbursements to students by location, and take immediate action to make
a determination regarding Touro's 17 unapproved additional locations. In
its September 5, 2007, response to the IAM, FSA stated that it will
complete the recertification review of Touro by September 30, 2007, and
make a final determination concerning the funds disbursed to students at
the ineligible locations during the completion of the recertification
process. As of July 11, 2008, FSA had subsequently approved the nine
cited additional locations. See the BACKGROUND section for specific
details. As of October 29, 2008, FSA had not made a final determination
concerning the funds disbursed to students at Touro's ineligible
locations.

We conducted the audit in accordance with generally accepted government
auditing standards appropriate to the limited scope of the audit
described 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 action
to be taken, including the recovery of funds, will be made by the
appropriate Department of Education officials in accordance with the
General Education Provisions Act.

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 of Education official, who will
consider them before taking final Departmental action on this audit:

> James Manning

Acting Chief Operating Officer

Federal Student Aid

U.S. Department of Education

Union Center Plaza

830 First Street, NE, Room 112E1

> Washington, DC 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 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.

> Sincerely,
>
> /s/
>
> Daniel P. Schultz
>
> Regional Inspector General
>
> for Audit

Attachments

![](media/image1.png){width="8.0in" height="9.614583333333334in"}

##### Touro College {#touro-college .Enclosure-Number}

**Ineligible Additional Location****s**

**July 1, 2002 through June 30, 2006**

+---+-----------------+----------+-------------------------------------+
|   | **OPE ID Number | **New    | **School Location**                 |
|   | During Audit    | OPE ID   |                                     |
|   | Period**        | Number** |                                     |
+---+-----------------+----------+-------------------------------------+
| 1 | 01014233        | 01014242 | Touro College - Brownsville         |
|   |                 |          |                                     |
|   |                 |          | 250 Blake Avenue                    |
|   |                 |          |                                     |
|   |                 |          | Brooklyn, NY 11212                  |
+---+-----------------+----------+-------------------------------------+
| 2 | 01014234        | 01014233 | Touro College - Boro Park Center    |
|   |                 |          |                                     |
|   |                 |          | 5323 18th Avenue                    |
|   |                 |          |                                     |
|   |                 |          | Brooklyn, NY 11204                  |
+---+-----------------+----------+-------------------------------------+
| 3 | 01014239        | 01014235 | Touro College - Winthrop University |
|   |                 |          | Hospital                            |
|   |                 |          |                                     |
|   |                 |          | 286 Old Country Road                |
|   |                 |          |                                     |
|   |                 |          | Mineola, NY 11501                   |
+---+-----------------+----------+-------------------------------------+
| 4 | 01014240        | 01014236 | Touro College - Starrett Classroom  |
|   |                 |          | and Admin Site                      |
|   |                 |          |                                     |
|   |                 |          | 1390 Pennsylvania Avenue            |
|   |                 |          |                                     |
|   |                 |          | Brooklyn, NY 11239-2103             |
+---+-----------------+----------+-------------------------------------+
| 5 | 01014241        | 01014237 | Touro College - Speech and Hearing  |
|   |                 |          | Center                              |
|   |                 |          |                                     |
|   |                 |          | 1610-20 East 19th Street            |
|   |                 |          |                                     |
|   |                 |          | Brooklyn, NY 11229-1302             |
+---+-----------------+----------+-------------------------------------+
| 6 | 01014242        | 01014238 | Touro College - Graduate Center     |
|   |                 |          |                                     |
|   |                 |          | 950 Kings Highway                   |
|   |                 |          |                                     |
|   |                 |          | Brooklyn, NY 11223-2338             |
+---+-----------------+----------+-------------------------------------+
| 7 | 01014243        | 01014239 | Touro College - Touro University    |
|   |                 |          | College of Osteopathic Medicine     |
|   |                 |          |                                     |
|   |                 |          | 874 American Pacific Drive          |
|   |                 |          |                                     |
|   |                 |          | Henderson, NV 89014-8800            |
+---+-----------------+----------+-------------------------------------+
| 8 | 01014245        | 01014241 | Touro College - Los Angeles         |
|   |                 |          |                                     |
|   |                 |          | 1317 North Crescent Heights         |
|   |                 |          |                                     |
|   |                 |          | West Hollywood, CA 90046            |
+---+-----------------+----------+-------------------------------------+
| 9 | 01014248        | 01014244 | Touro College - Touro College South |
|   |                 |          |                                     |
|   |                 |          | 1703 Washington Avenue              |
|   |                 |          |                                     |
|   |                 |          | Miami Beach, FL 33139-7541          |
+---+-----------------+----------+-------------------------------------+

##### ![](media/image2.png){width="7.452083333333333in" height="9.25in"}Touro's Comments on the Draft Report {#touros-comments-on-the-draft-report .Enclosure-Number}

We are in receipt of the Draft Audit Report, dated February 26, 2008,
entitled *"Touro College's Title IV, Higher Education Act Program
Institutional and Program Eligibility"* ("Draft Report") which presents
the initial comments of the Office of Inspector General ("OIG")
concerning the compliance of Touro College ("Touro" or the "College")
with the institutional and program eligibility requirements of Title IV
of the Higher Education Act of 1965, as amended, and its implementing
regulations ("Title IV"). The College offers the following response.

**Finding No. 1 -- Touro Disbursed \$40,728,507 in Title IV Funds to
Students Who [Attended Ineligible Additional Locations ]{.underline}**

The Draft Report identifies nine Touro addresses as "ineligible
additional locations" and asserts that Touro should repay \$40,728,507
in Title IV funds (the "Asserted Liability") as improperly disbursed at
these locations. For several reasons, Touro does not agree that any of
the nine addresses at issue (the "Challenged Locations") fail to qualify
as eligible additional locations pursuant to 34 C.F.R. § 600.21.[^16]

**I. [Touro operates locations on a campus basis]{.underline}**

As is the case with most larger universities, the physical address of
each of Touro's classrooms is not a standalone location. Rather, with
the approval of both state licensing agencies and accreditors,
geographic groupings of classroom facilities function as single
operational units. The Draft Report includes four such classroom
facilities among its Challenged Locations. For the reasons discussed
below, each such facility is part of a campus constituting a duly
approved eligible location (hereafter identified as "Campus
Facilities").

The College's main campus, headquartered at 27-33 West 23^rd^ Street,
includes multiple instructional locations in the surrounding
neighborhood. The College also operates multiple locations in Brooklyn
in the neighborhoods of Boro Park, Starrett City and Flatbush, each as a
campus. While the specific classroom addresses of the four Challenged
Locations were not listed on the College's Eligibility and Certification
Approval Report ("ECAR"), each of these was operated as an integral part
of a campus in connection with instructional addresses that were listed
on the College's ECAR. It should be noted that the concept of a "campus"
subsuming a material geographic area is nothing new. Based on our
understanding of the U.S. Department of Education's ("Department")
practice, Touro's treatment of these locations as part of a larger
campus that does not require separate reporting on the ECAR is
consistent with the Department's handling of other urban universities
such as New York University.

The College's treatment of certain location groups as Campus Facilities
is consistent not only with Title IV requirements and Department
practices, the treatment is also consistent with the requirements of the
College's other regulators. It has long been the practice of the New
York State Education Department ("NYSED") to recognize separate
facilities that function together as single operating units. For
example, NYSED identifies the facilities at 1301 45^th^ Street and 1273
53^rd^ Street, located several blocks apart, as constituting a single
Boro Park Extension Center. (Exhibit A). NYSED looks to operational
status rather than relying on any specific distance limitations on the
recognition of campuses. Indeed, as early as 1993, NYSED recognized that
a location in Nassau County was properly part of the branch campus with
the main address across the county line in Suffolk County because of the
operational configuration of the locations. (See Exhibit B).

Similarly, the Middle States Commission on Higher Education ("MSCHE")
recognizes single operating units which are a combination of individual
classroom locations. Notably, MSCHE has done so after originally
identifying individual addresses on Touro's Statement of Accreditation
Status ("SAS"). Compare the SAS dated November 1998 (attached as Exhibit
C), which identifies three separate Kings Highway facilities, to the
current SAS (attached as Exhibit D) which recognizes a single Kings
Highway operating unit which subsumes the individual facilities under
one location. Following are specific analyses of the Campus Facilities
identified in the Draft Report as Challenged Locations.

**A. [Boro Park]{.underline}**

Touro currently operates three Campus Facilities in the New York City
Borough of Brooklyn as the Boro Park Extension Center: 1301 45^th^
Street (identified as K1301 and K1305, OPEID 01014230), 1273 53^rd^
Street (identified as K1273, OPEID 01014221) and 5323 18^th^ Avenue
(identified as K5323, one of the Challenged Locations). From the time
the K5323 facility opened, NYSED recognized the K5323 facility as being
included within the scope of the approval of the Extension Center
campus. (See Exhibit E) The MSCHE "Institutional Profile 2004-2005,"
which is part of the OIG's work papers as Exhibit HC: I-100, identifies
at page 13 a single Boro Park location that includes headcount
information for a single, combined unit, ***[inclusive of
K5323]{.underline}***. (See Exhibit F) Since the Boro Park Extension
Center is unquestionably an eligible additional location on Touro's
ECAR, it is improper to consider any of the related Campus Facilities
included in such Center as ineligible locations.

It appears that the OIG included K5323 as a Challenged Location on the
basis of an erroneous reading of Touro's own disclosure in Question 69
of the Department's electronic application as submitted in 2001 and
included in the OIG work papers as Exhibit HC: F-5-b. The application
states:

> Touro College is requesting approval of three new locations ... 5323
> 18^th^ Avenue, Brooklyn, New York, 11204. At the present time, we will
> be offering ***[less than]{.underline}*** 50% of an educational
> programat \[sic\] these locations. We have included the locations in
> this application based on our intention to offer more than 50% of a
> program at these locations ***[in the future]{.underline}*** and would
> like the locations certified on that basis. (Emphasis supplied)

As a result of the very significant delay in the Department's
recertification process, as discussed more fully below, Touro generally
considered it appropriate to ***[over-report]{.underline}*** information
to the Department. In this instance the OIG has taken a prospective,
precautionary prediction and converted it into a current statement of
fact, and in doing so declared a facility to be ineligible. The fact
that in an excess of caution Touro reported the K5323 facility to the
Department, despite its status as part of the Boro Park Extension
Center, is an improper basis for the Draft Report's conclusion that this
Campus Facility is an ineligible additional location. (See Exhibit G)
This is a classic Catch-22 situation. While it is correct that two of
the Boro Park facilities, both integral parts of the Boro Park Extension
Center unit, were previously separately reported to the Department, the
OIG appears to take the curious position that Touro should be penalized
for reporting ***[more]{.underline}*** information than is necessary
under the Department's regulations. Indeed, it is important to recognize
that the College's electronic application was in a locked status ***[for
nearly seven years]{.underline}*** pending recertification, as will be
discussed further in Section III below. As a result, the College was not
allowed ready access to the typical routine self-update functions
available to other institutions.

**B. [Starrett City]{.underline}**

Starrett City is a single very large apartment complex located in the
Canarsie neighborhood of the Borough of Brooklyn, constituting 20,000
people living in 46 apartment buildings spread over 153 acres reclaimed
from marshland in the 1960s. Starrett City is universally recognized as
a single neighborhood, and consistent with this fact MSCHE recognizes
all of the College's Starrett City Campus Facilities at 1461 Geneva Loop
(KS146, OPEID 01014223), 1540 Van Sicklen Avenue (KS154), 1430 Freeport
Loop (KS143), 1426 Freeport Loop (KS142), and 1390 Pennsylvania Avenue
(Challenged Location KS139) as constituting a single Starrett City
campus. See the Starrett City approved MSCHE additional location on the
current SAS at Exhibit D. NYSED has also consistently recognized the
Starrett City campus as a single unit. In 2001, Touro submitted an
application for expansion of the Starrett City Extension Center to
include the new space at 1390 Pennsylvania Avenue (Challenged Location
KS139). See the application attached as Exhibit H.

Since Starrett City is an eligible additional location on Touro's ECAR
(the primary location at KS146 was listed on the ECAR during the audit
period), and since each Campus Facility located within Starrett City is
integral to that campus unit, all separate Campus Facilities, including
KSD139, are appropriately recognized components of an eligible location.

**C. [Flatbush Neighborhood]{.underline}**

Touro operates seven separate Campus Facilities as part of the single
campus located in the Flatbush neighborhood of Brooklyn. The main campus
address is 1602 Avenue J (K16AJ, OPEID 01014206). All of the facilities
making up this campus are within walking distance of each other, with
only 200 feet separating some. Consistent with this, NYSED recognizes
the Challenged Locations K1901 and K946 as part of the Flatbush campus,
along with 1103 Kings Highway (K1103, OPEID 01014208) and 1726 Kings
Highway (K1726, OPEID 01014207). See NYSED correspondence at Exhibit I.

Like NYSED, MSCHE also considers the Flatbush facilities a single
operational unit. See MSCHE correspondence at Exhibit J from 1996,
before the establishment of K1901 and K946, clearly identifying the
facilities as a campus unit.

Since the Flatbush branch campus is an eligible additional location on
Touro's ECAR (indeed in this instance three separate facility addresses
were on Touro's ECAR during the audit period), all of the related Campus
Facilities, including K1901 (located around the corner from 1726 Kings
Highway) and K946 (located diagonally across the street from 1103 Kings
Highway), are similarly eligible as recognized components of that
eligible location.

**II. [NOT ALL CHALLENGED LOCATIONS PROVIDED 50 PERCENT OR MORE OF AN
EDUCATIONAL PROGRAM ]{.underline}**

Touro did not offer 50% of a program at two of the Challenged Locations
identified in the Draft Report: 250 Blake Avenue (K250) or 286 Old
Country Road (LMINE). Accordingly, these Challenged Locations are not
ineligible locations pursuant to the Department's regulations.

**A. [250 Blake Avenue]{.underline}**

The College did not offer 50% of a program at 250 Blake Avenue in
Brooklyn, NY. Yet, the Draft Report cites the K250 classroom site as an
"ineligible location." Exhibit E.3.2 of the OIG work papers clearly
demonstrates that the OIG's determination as to the eligibility of the
K520 classroom site is based on its application of the 50% rule. In
support of the applicability of the 50% rule for the K250 location, the
OIG work papers reference Question 69 of a 2001 update to the
Department's electronic application (Work paper Exhibit HC: F-5-b), the
MSCHE 2004-2005 Institutional Profile (Work paper Exhibit HC: I-100),
the MSCHE 2003-2004 Institutional Profile (Work paper Exhibit HC: I-99),
and the MSCHE 2002-2003 Institutional Profile (Work paper Exhibit HC:
I-98). As demonstrated below, none of the these Exhibits to the OIG's
work papers contradict Touro's statement that it did
***[not]{.underline}*** offer 50% of a program at the K250 classroom
site.

When Touro submitted an application update to the Department in 2001, it
advised that it was ***[not]{.underline}*** currently offering 50% of an
educational program at 250 Blake Avenue:

> Touro College is requesting approval of three new locations... 250
> Blake Avenue, Brooklyn, New York 11212... At the present time, we will
> be offering ***[less than]{.underline}*** 50% of an educational
> programat \[sic\] these locations. We have included the locations in
> this application based on our intention to offer more than 50% of a
> program at these locations ***[in the future]{.underline}*** and would
> like the locations certified on that basis. (Emphasis supplied).

See Work paper Exhibit HC: F-5-b, relevant page included here as Exhibit
G.

The MSCHE Institutional Profile requires institutions to report extended
learning sites under three classifications: Branch Campus, Additional
Location or Other Instructional Site. By MSCHE definition, the terms
"Branch Campus" or "Additional Location" are applied to sites that may
offer 50% or more of a program. An "Other Instructional Site" is defined
as "a location, other than a Branch Campus or Additional Location, at
which the institution offers one or more courses for credit." See the
definitions listed on the MSCHE SAS at Exhibit D. Touro properly
reported the 250 Blake location on the MSCHE Institutional Profiles for
2002-2003, 2003-2004, and 2004-2005 under the "Other Instructional
Sites" category of facilities since it has not offered 50% or more of a
program at that location.

Consistent with this, Touro's disclosure of 250 Blake Avenue to the
Department on the electronic application in 2001 clearly stated that
less than 50% of an educational program was provided at the time of the
disclosure, and this was in fact the case. As demonstrated in the
attached report, which lists each student who earned credits for
coursework at the K250 site during the audit period, as well as the
total number of credits each student earned from July 1, 2002 to the
current semester, Touro's records document that no student was enrolled
for 50% or more of an academic program at 250 Blake Avenue. See Exhibit
K. As it is clear that Touro offers less than 50% of any educational
program at the K250 site, this location is incorrectly identified as an
ineligible location in the Draft Report.

**B. [286 Old Country Road]{.underline}**

Touro never offered 50% of a program at the Winthrop Extension Center at
286 Old Country Road site in Mineola, NY (Challenged Location LMINE). As
part of the physician assistant curriculum offered at the LMINE
location, students at the Mineola site earn significant credit for work
at clinical locations as well as for coursework taught at the Bay Shore
location (LLBAYS).

The Touro School of Health Sciences offers a bachelors of science in
physician assistant studies through its Bay Shore (LLBAYS) and Winthrop
Extension Center (LMINE) locations. As demonstrated at Exhibit L, which
describes the entrance requirements, program curriculum, and list of
clinical education centers affiliated with the Physician Assistant
Studies Program, students entering the Physician Assistant Studies
Program must have previously completed 60 transferable semester credits
in general liberal arts and sciences at an accredited college or
university, and must then complete an additional 52 credits of classroom
instruction[^17] and 45 credits of clinical instruction, for a total of
no less than 157 credits for the award of the degree. Less than a third
of the total number of credits required for the Physician Assistant
Studies Program are taught at the Winthrop Extension Center and
significantly less than half of the 97 non-transfer credits are
obtainable at that site. The facts clearly demonstrate that a student
cannot enroll in courses leading to more than 50% of his or her degree
program at the Winthrop Extension Center.

Exhibit E.3.2 of the OIG work papers documents the OIG's application of
the 50% rule for the Challenged Locations. The OIG references the MSCHE
2005-2006 Institutional Profile (Work paper Exhibit HC: F-25a), the
MSCHE 2004-2005 Institutional Profile (Work paper Exhibit HC: I-100),
and the MSCHE 2002-2003 Institutional Profile (Work paper Exhibit HC:
I-98) in support of its assertion that the Winthrop Extension Center
violates the 50% rule. Yet, MSCHE's reporting structure does not alter
the reality of what percentage of a program is actually offered at the
Winthrop Extension Center. Consistent with MSCHE's practices, Touro
completes the annual Institutional Profiles to report that students can
earn a bachelor's degree at the Winthrop University Hospital & Medical
Center. For MSCHE's own classification purposes, clinical coursework is
attributed to the Winthrop Extension Center, which is designated an
MSCHE "Additional Location" so that each individual clinical education
affiliation center is not required to be separately listed on the
Institutional Profile. The Department's regulation concerning approval
of sites turns on whether the location offers 50% or more of an
educational program. Accordingly, since the record is clear that Touro
offers less than 50% of the Physician Assistant Studies Program at the
LMINE site, this location is incorrectly identified as an ineligible
location in the Draft Report.

**III. [TOURO REASONABLY UNDERSTOOD THE DEPARTMENT TO HAVE APPROVED ITS
ADDITIONAL LOCATIONS AND OTHER CHANGES]{.underline}**

Touro College was first approved to participate in the Title IV programs
in 1971, and has been a continuous participant since that time. On
December 31, 2001, Touro's then current Program Participation Agreement
expired. Despite having properly filed its application for continued
participation, Touro was not issued a new Program Participation
Agreement until 2008, so that for nearly seven years the Department
continued the College's participation under a month-to-month
certification. During this extraordinarily long (and to the knowledge of
Touro, unprecedented) period, Touro's ability to utilize the ordinary
processes of reporting changes was entirely disrupted. Instead, Touro
maintained regular contact with the Department's New York Case Team for
the purpose of apprising the Case Team of changes in the institution,
notably its growth in the medicine and health related fields, as well as
other developments necessary to maintain curricula, meet new state
licensing requirements and serve Touro's dynamic and diverse student
population. Based upon its regular contact with the Case Team, Touro
very reasonably understood that the reported changes, including new
locations, were in fact approved. Indeed, over the course of nearly
seven years, there was never even a suggestion that there was a concern
on the part of the Department about allegedly ineligible locations; the
first inkling that there was such a question came during the OIG's
review.

To the extent possible given the limitations of the system, Touro
entered new information into the Department's electronic application
("E-App"), which is intended to provide the data base from which the
Department generates an ECAR, which is in turn intended to describe in
detail all of the elements of an institution's Title IV eligibility.
However, the E-App is well known to be an imperfect instrument. Most
significantly, it can only handle one open institutional application at
a time. When Touro submitted its recertification application in 2001,
the system erected a barrier to any other applications related to
additional changes. Thus, during the nearly seven years that the
Department maintained the recertification application in a pending
status, the Department itself was unable to issue typical eligibility
updates such as approval letters and an ECAR for new Touro locations,
because all of that information is tied up on the E-App.

As a matter of technological impossibility, Touro could not report new
facilities through the use of the standard electronic process. Every
time a Touro official wanted to revise application information, he or
she had to directly bring the matter to the attention of a member of the
Case Team staff, a contact which in turn was dependent on the
availability of Case Team personnel at any given moment in time. Even
after this communication did take place, the College still had to wait
for the Case Team to manually enable access to the electronic
application. Only after this process was complete could the College
access the application for a narrow window of time to enter a routine
update, after which the virtual window would slam shut until the next
request. As a result, the College was not allowed to engage in the
typical self-update functions available to other institutions.

Touro was never provided with any reason for maintaining the pending
status of the recertification application for such an unconscionable
period, and Touro never had any reason to understand that this was
intended as an unprecedented de facto growth limitation. Furthermore,
during this time, and while it was regularly apprising the Case Team of
institutional changes including new locations, Touro was never advised
that any new locations were considered to be ineligible, nor was Touro
ever advised to stop disbursing Title IV funding for new locations. At
various points in this lengthy span, the College was advised by members
of the Case Team that it was "days away" from issuing a recertification
and a new ECAR. Case Team representatives even initiated contact with
Touro to request that any additional updates be provided so that the
recertification could be finalized.

Touro reasonably believed, and the Department's continuing pattern of
conduct over the course of nearly seven years appeared to clearly
confirm, that in light of the technical limitations of the E-App that
prevented issuance of standard new approval letters and an updated ECAR,
the Department's own conduct could be relied upon as de facto approval
of Touro's new locations. Over so long a period of time, Touro had no
reason ***[not]{.underline}*** to so rely and every reason to do so.

**IV. [ASSUMING ARGUENDO THAT ANY OF THE CHALLENGED LOCATONS ARE
ACTUALLY INELIGIBLE, THE LIABILITY CALCULATION IS FATALLY
FLAWED]{.underline}**

Specifically, the Draft Report, as noted above, identifies a grand total
of \$40,728,507 in Title IV funds disbursed to 4,310 students who
attended classes at the Challenged Locations. During its review of the
auditor work papers, the College was provided with hard copy print-outs
of spreadsheets numbered E.3.3, E.3.5, E.3.7 and E.3.9 (the "Work Paper
Spreadsheets"). These Work Paper Spreadsheets provided the basis for the
Asserted Liability, as identified on Attachments A through D of the
Draft Report. The College has reconstructed the process used to
calculate the Asserted Liability, and, in doing so, has identified
several categories of error. Based on the College's analysis, the
College has determined that the Asserted Liability is incorrectly
calculated and grossly overstates the amount of Title IV assistance
disbursed for coursework at the Challenged Locations. As such, the
Asserted Liability cannot be relied upon in issuing the final audit
report.

Because the College was only supplied work paper information in hard
copy, non-electronic, format and has had the Work Paper Spreadsheets in
its possession for a limited time, it has not been able to analyze every
student record identified in the Draft Report as a liability. However,
as the errors the College has identified at this point are generic in
character, the College can provide examples of several categories of
error, as described more fully below, which conclusively establish that
the Asserted Liability is not reliable and cannot be used even as an
estimate of potential liability.

The OIG used the student data provided by Touro to identify *all*
students who took *any* courses at any one of the nine Challenged
Locations. The OIG then associated this list of student names with the
*total Title IV assistance awarded to those students for the relevant
award year,* resulting in the Asserted Liability. However, this process
is based on several fundamentally flawed assumptions, and therefore
grossly and improperly overstates the amount of Title IV assistance
disbursed at the Challenged Locations.

The most basic error arises from the fact that the amounts listed on the
Work Paper Spreadsheets as representing an Asserted Liability include
*[all]{.underline}* Title IV assistance disbursed to a student in an
award year during which the student took *any* credits at any Challenged
Location. The Report therefore fails to distinguish between students who
took one course during a single semester, one course during multiple
semesters, or multiple courses during multiple semesters at any of the
Challenged Locations. Thus, based on the methodology used by the OIG, if
a full-time student took *one course* during an award year at a
Challenged Location, the *entire amount* of Title IV assistance
disbursed to that student during the award year was considered
assistance disbursed at that Challenged Location. This is simply
factually unsupportable: it is inappropriate to assume that *all* Title
IV assistance disbursed to a student during a given award year was
related to course work at the Challenged Location.

Touro understands that the OIG has taken the position that a repayment
liability may be asserted with respect to Title IV assistance that was
earned by a student on the basis of instruction at the Challenged
Locations (assuming for the sake of argument that any such Challenged
Locations are appropriately determined to be ineligible locations).
However, there is no basis whatsoever to take the position that the
Asserted Liability can include Title IV assistance earned as a result of
instruction at *other indisputably [eligible]{.underline} locations*.
Put another way, the process utilized by the OIG to arrive at the
Asserted Liability includes Title IV funds properly disbursed to
students with respect to attendance at indisputably eligible locations.
As such, the calculation of the Asserted Liability is grossly
inadequate, significantly overestimating the amount of questioned costs
related to the finding, and cannot provide the basis for any assertion
of repayment liability against the College.

The following examples explain categories of error in which students
attended both eligible locations and Challenged Locations during the
same award year. However, as noted above, based upon the limited amount
of time afforded the College to analyze the applicable work papers,
especially given the format of those work papers, these examples may not
be exhaustive of all of the categories which have given rise to the
OIG's overstatement of the Asserted Liability. Further, the College is
only providing an example student for each category explained below. Due
to the limited time available for the review, the College is not able to
present an exhaustive list of all of the students associated with each
category cited. The College's review does establish without any doubt
whatsoever that these errors in the methodology used in the calculation
of the Asserted Liability appear with respect to most if not all of the
Challenged Locations and, if corrected, would significantly reduce the
estimate of potential liability related to this finding.[^18]

**Category 1: Touro Undergraduates Who Subsequently Enrolled as Graduate
[Students at Challenged Locations ]{.underline}**

It is the nature of Touro that a significant number of its undergraduate
students continue at Touro in pursuit of a graduate degree. Two of the
Challenged Locations, K946 and K1901, are graduate locations and do not
serve undergraduate students. While the types of aid and eligibility
requirements may vary, both undergraduate and graduate students are
eligible for Title IV assistance. However, it is also clearly true that
certain students who qualified for and accepted Title IV aid while
pursuing undergraduate work did not seek Title IV assistance for
graduate work. Each of these circumstances needs to be considered in
calculating the assessment of liability with respect to the audit of
Touro.

**A. [Aid During Both Undergraduate and Graduate
Education]{.underline}**

To illustrate this category of error, we have attached and analyzed the
applicable documentation related to \[STUDENT A\], who graduated from
Touro with a bachelor of science degree in the Fall of the 2005-2006
academic year. See Exhibit N***.*** The entirety of \[STUDENT A's\]
undergraduate instruction was at an indisputably eligible location.
\[STUDENT A\] continued his studies as a graduate student in the Spring
of the 2005-2006 academic year, with some of his graduate studies at a
Challenged Location, K946. The Work Paper Spreadsheets identify a
liability associated with the K946 Challenged Location of \$1914 in Pell
Grant and \$8500 in Stafford Subsidized Loans.

First, it is obvious that the asserted Pell Grant liability is factually
impossible: a graduate student is ineligible for a Pell Grant, and there
is no assertion whatsoever that \[STUDENT A\] received Pell Grant funds
other than as an undergraduate. Indeed, \[STUDENT A\] properly received
the entire \$1914 of Pell Grant funds during the Summer and Fall
semesters while he was an undergraduate student attending an
indisputably eligible undergraduate location. Therefore, only the \$8500
in Stafford Loan funds could in any way be associated with the K946
Challenged Location. Further, as discussed below, asserting the
ineligibility of the totality of \[STUDENT A's\] Stafford Loan is in
error.

The Course Listing for \[STUDENT A\] clearly demonstrates that \[STUDENT
A\] attended classes in buildings K1726 and M2733 during Summer 2005
(Term AA), K532 and K1726 during Fall 2005 (Term CC) and K946 and M2733
during Spring 2006 (Term EE). All of the buildings at which \[STUDENT
A\] took classes, other than K946, are indisputably eligible locations.
The Stafford Loan is shown to have been disbursed in the Spring 2006
semester, during which time one of the three classes in which \[STUDENT
A\] was enrolled was offered at an indisputably eligible location.
Therefore, even if the Challenged Location is ultimately determined to
be ineligible, only a portion of the \$8500 Stafford Loan can be
included in any asserted repayment liability.

**B. [Aid Only During Undergraduate Education]{.underline}**

As an example of this situation, we offer the case of \[STUDENT B\],
attached as Exhibit O, who graduated from Touro with a bachelor of arts
degree in the Summer of the 2004-2005 academic year. \[STUDENT B\]
continued her studies as a graduate student in the Fall of the 2004-2005
academic year. The OIG identifies a liability of \$380 in Pell Grant
funds which it associates with \[STUDENT B's\] attendance at the K946
Challenged Location. However, \[STUDENT B\] actually received such Pell
funds for *undergraduate* coursework during Summer 2004 (Term AA) while
attending the M2733 and K16AJ eligible locations. \[STUDENT B\] did not
receive *any* Title IV funds while enrolled at the K946 Challenged
Location and obviously could not have received Pell Grant funds for her
graduate studies. As such, the \$380 in Pell Grant funds disbursed to
this student cannot be included in any computation of liability.

**Category 2:** **Students who Completed only Non-Credit Coursework\
[at a Challenged Location ]{.underline}**

Touro provides non-credit seminars at various college locations. As
described in Exhibit P which reproduces a relevant page from the
2005-2007 catalog of the Lander College of Arts and Sciences, these
seminars are required for teacher licensing in New York state and
elsewhere. One such seminar is EDU-513, a school violence seminar
offered at the K946 Challenged Location. A significant number of
students who attend non-credit seminars do not take any other courses at
Challenged Locations. Since non-credit courses alone do not qualify
students for Title IV eligibility and since these students took
full-time course loads at eligible locations, all of their Title IV
assistance arose from their enrollment at the eligible locations.
Therefore, it is improper to include any Title IV assistance disbursed
to students in this category in any calculation of repayment
liabilities.

Another example is that of \[STUDENT C\], who attended Touro for the
Fall and Spring semester during the 2004-2005 academic year. As
demonstrated by the Course Listing attached as Exhibit Q, during Spring
2005 (Term EE), \[STUDENT C\] enrolled in 11 total courses. One such
course was the *non-credit* seminar EDU-513 taught at the K946
Challenged Location, which was the *only* course in which \[STUDENT C\]
was enrolled at that location. \[STUDENT C's\] eligibility for Title IV
assistance was based entirely on enrollment in his credit-bearing
courses, *all of which* he took at indisputably eligible locations.
Accordingly, *none* of the \$3100 in Pell, \$3500 in Stafford Subsidized
Loan or \$4000 in Stafford Unsubsidized Loan funds identified as
liabilities on the Work Paper Spreadsheets can be included in any
computation of repayment liability.

**Category 3: Students Who Completed Courses At Challenged Locations
Only [During Some Semesters Of An Award Year ]{.underline}**

As is not unusual for large, multipurpose universities, Touro allows
students the opportunity to enroll in courses offered at various
locations. Students who attended courses offered solely at eligible
locations in one semester may have attended courses offered at a
Challenged Location during a later semester. It is improper to include
in any computation of repayment liability any Title IV assistance
disbursed in semesters where a student completed coursework only at
indisputably eligible locations.

As demonstrated in the Course Listing attached as Exhibit R, \[STUDENT
D\] attended Touro during the Fall and Spring semesters of the 2005-2006
academic year. During the Fall (Term CC), \[STUDENT D\] attended the
K250 Challenged location. During the Spring (Term EE), \[STUDENT D\]
attended the main campus, location M2733. Accordingly, of the \$5200 in
total Title IV assistance listed as a repayment liability on the Work
Paper Spreadsheets with respect to this student, \$1200 in Federal Pell
Grant, and \$2800 in Federal Work Study assistance cannot be included in
any computation of repayment liability since the student earned these
Title IV funds solely while attending an eligible location.

Similarly, as the Course Listing attached as Exhibit S clearly
demonstrates, during the Fall (Term CC) of the 2005-2006 academic year,
\[STUDENT E\] attended Touro at the LBAYS eligible location. During
Spring (Term EE), \[STUDENT E\] attended the LMINE Challenged Location.
Accordingly, of the \$9550 in Title IV funds identified as a repayment
liability on the Work Paper Spreadsheets for this student, \$2025 in
Pell, \$500 in SEOG, and \$1750 in Stafford Subsidized Loan funds arose
from \[STUDENT E's\] enrollment at the indisputably eligible LBAYS
location and therefore cannot be included in any computation of
repayment liability arising from enrollment at an allegedly ineligible
location.

**Category 4:** **Students who took credit-bearing courses at eligible
locations and [Challenged locations during the same semester
]{.underline}**

As noted above, it is common for Touro students to take courses at more
than one location during a single semester. Title IV amounts
representing credits earned at indisputably eligible locations cannot be
attributed to liabilities asserted for enrollment in allegedly
*in*eligible locations.

For example, as shown in the Course Listing attached as Exhibit T,
during the 2005-2006 academic year, \[STUDENT F\] completed
credit-bearing courses at both the K1726 eligible location and the KS139
Challenged Location. Accordingly, of the \$3880 in Title IV assistance
listed as a repayment liability on the Work Paper Spreadsheets with
respect to this student, only that part attributed to the allegedly
ineligible locations can be included in any computation of a purported
repayment liability.

As such, the calculations underlying the proposed liability arising from
the alleged ineligible locations are so completely flawed in methodology
that they cannot provide the basis for any assertion of liability
whatsoever.

**Finding No. 2 - Touro Did Not Keep Adequate Records to Account for
Title IV Funds Disbursements to Only Eligible Additional Locations for
the School Years [2002-2003 through 2004-2005 ]{.underline}**

Touro does not believe anything in the Draft Report, and particularly
anything relative to the OIG's use of the data supplied from Touro's
computer system, demonstrates a lack of administrative capability. As
noted previously, Touro has had no reason to consider any of the nine
Challenged Locations to be "ineligible additional locations" for
purposes of Title IV disbursements. Touro had internal processes to
limit the amount of coursework students could earn at the locations for
which Touro did not understand ED to have provided the required
approvals. Touro strenuously argues that it is in compliance with the
record maintenance requirements of 34 C.F.R. § 668.24 and accordingly
the administrative capability requirements of 34 C.F.R. § 668.16.

The Department's regulation relative to record maintenance, set forth at
34 C.F.R. § 668.24, states that: "an institution shall maintain required
records in a systematically organized matter" and "an institution shall
make its records readily available for review." The regulation does not
require institutions to maintain those records in any particular form or
format provided that the form and format of choice is "readily available
for review" and "systematically organized."

Touro maintains its student records in a manner that provides the
necessary access to school officials to ensure the proper administration
of the Title IV programs. Touro financial aid staff use the student data
to ensure student eligibility for financial aid awards. Title IV
disbursements are appropriately documented by student and term. Academic
advisors access course location information to advise students
respecting the availability of appropriate courses, including where
limitations exist on the work that may be completed at a particular
site, taking into account state, accreditor, and federal approvals.
Indeed the Draft Report acknowledges that Touro's admissions, registrar,
bursar, financial aid, advisement and development data is managed
through a well-known administrative computer system commonly used among
colleges and universities. During the five months of the audit
fieldwork, Touro fully cooperated in making all student data available
for review, including making Touro officials available to assist the
reviewers in accessing and using Touro's record management system.

There is no argument that Touro provided the OIG the requested student
data reports with significant assistance from the College's Office of
Information Technology. However, it is incomprehensible that the Draft
Report would allege that providing such expert assistance, from within
its own resources, reflected Touro's failure to maintain adequate
records respecting student eligibility for Title IV disbursements.
Rather, the need for such involvement reflected the nature of the
auditor's requests, which were materially different from the operational
uses for which the system was very properly designed.

The Draft Report misconstrues communication from the Dean of Enrollment
Management and Institutional Research and Review's communication to the
auditors. The Dean never advised auditors that "Touro did not maintain a
database of Title IV funds disbursed to students by location attended."
Rather, the Dean advised the OIG that Touro did not maintain a database
of Title IV disbursements *in the specific format requested by the
auditors*. The auditors requested student data in a report format that
differed from any of Touro's standard reports. Therefore, Information
Technology staff created a process to retrieve the underlying data and
College staff manually added certain information to format a new report
in accordance with the auditors' requests. The data requested by the
auditors was in the College's database and was provided in the specific
format requested by the auditors. Stated another way, the College put
significant resources and time into preparing the information in the
format requested by the auditors, despite the fact that its systems were
not required to maintain the information in the format requested by the
auditors.

Touro appreciates the OIG's observations regarding potentially enhanced
capabilities of its data system, and notes that professional advice is
always welcome. However, there is not a scintilla of evidence of any
inadequacy of the data management system or the ability of the College
to make available for review all of the relevant information requested
by the OIG. There is neither a factual nor a legal basis for this
finding, which should be eliminated from the final audit report.

[^1]: The names of the respective state licensing agencies are the New
    York State Education Department and the University of the State of
    New York, the State of California Department of Consumer Affairs and
    the Bureau for Private Postsecondary and Vocational Education, the
    Nevada Commission on Postsecondary Education, and the Florida
    Department of Education Commission for Independent Education.

[^2]: On October 31, 2007, Touro sold TUI for \$190 million to Summit
    Partners, a private-equity firm located in Palo Alto, CA, and
    Boston, MA.

[^3]: Touro and the Accrediting Commission for Senior Colleges and
    Universities of the Western Association of Schools considered the
    Henderson, NV, location to be a branch campus of TUC.

[^4]: Touro College Los Angeles (TCLA) is Touro's other California
    location. TCLA opened in 2005 after the transfer of accreditation of
    TUI and TUC, and has always been accredited by WASC.

[^5]: The OPE ID Numbers for the ineligible additional locations in this
    report reflect the numbers assigned on the Electronic Application
    for Approval to Participate in Federal Student Financial Aid
    Programs during the time of our audit. These numbers have changed
    since then; please see Attachment B for the new numbers.

[^6]: Certain students were counted more than once in the total because
    they were enrolled in multiple school years. All student totals in
    this report may include students who are counted more than once.

[^7]: Of the 4,310 students, 3,320 students also attended classes at
    approved additional locations. We identified 950 of these students
    who exclusively attended approved, eligible locations for at least
    one of the three semesters in the award years we reviewed.

[^8]: Unless otherwise specified, all C.F.R. citations are to the July
    1, 2002 volume.

[^9]: "Will offer 50 percent or more of an educational program" refers
    to the intention to offer, in the future, 50 percent of a legally
    authorized postsecondary program of organized instruction or study
    that leads to an academic, professional, or vocational degree,
    certificate, or other recognized educational credential.

[^10]: Of the eight remaining additional locations added through the
    EAPP, seven did not offer, or intend to offer, 50 percent of an
    education program, and one was TUI, an online distance education
    program.

[^11]: We assumed that these 950 students attended two of the three
    semesters in the award years we reviewed and were eligible for
    two-thirds of the annual award.

[^12]: Despite the determination that TUI should not be accredited by
    Middle States, Middle States also stated that TUI was "within the
    scope" of Middle States accreditation of Touro College prior to
    TUI\'s receipt of accreditation from WASC.

[^13]: Touro did not begin maintaining a database of Title IV funds
    disbursed to students by location until the 2005-2006 award year. At
    our request, Touro compiled the student and location information for
    award years 2002-2003 through 2004-2005.

[^14]: Jenzabar is a higher education administrative system which Touro
    used to manage its admissions, registrar, bursar, financial aid,
    advisement, and development data.

[^15]: EAPP data as of April 24, 2007, was used for our review.

[^16]: Further, as the College has established in its submission of May
    19, 2008, even if any of the Challenged Locations are ultimately
    deemed to be "ineligible additional locations," the calculation
    methodology used to calculate a repayment amount for these locations
    grossly overstates the amount of Title IV assistance actually
    associated with coursework at these locations. For the convenience
    of the OIG, we have repeated in full in this document the response
    submitted on May 19, 2008 as Section IV of this document.

[^17]: Several of the 52 classroom credits are earned at the Bay Shore
    site. (See the 2006 classroom course schedule attached at Exhibit M
    illustrating that Human Anatomy, Clinical Procedures and Diagnostic
    Modalities, Pharmacology and Medicine II, a total of 13 credits,
    were taught at the LLBAYS location.)

[^18]: Please note that the course listings provided as exhibits to this
    section are print-outs of filtered results from the excel
    spreadsheet of student information originally provided to the OIG
    during the audit process ("Course Listing"). The OIG has this
    identical information in its work papers and used this information
    to compile the flawed Work Paper Spreadsheets and, consequently, to
    arrive at the grossly overstated Asserted Liability.