While there are preliminary indications that local respondents are taking steps to
ensure the appropriate use of proprietary schools, the ACF should continue to be
cautious about the potential for abuse.

The ACF indicated that it will ask States during routine contacts whether they are
experiencing any problems with proprietary schools, and, if so, will consider on-site
monitoring of the use of proprietary schools as part of the JOBS field review process.

We accept this approach as the most practical option available at this time. However,
we also realize that ACF’s oversight will be made somewhat difficult since States and
local JOBS programs report that they do not maintain data on the use of proprietary
schools.

We have added information provided by ACF that clarifies their concerns and
interests regarding proprietary schools, and have incorporated their suggestions and
comments, for the most part.



° However, respondents in ten of the 27 localities (37 percent) report that they
do not refer clients to proprietary schools. The remaining 17 localities report
limited referral. All 27 report limited self-initiated attendance.

° States and localities do not maintain data on use of proprietary schools.

LOCAL RESPONDENTS REPORT HAVING PROCEDURES AND CRITERIA
TO ASSURE THE APPROPRIATE USE OF PROPRIETARY SCHOOLS

fo) Sixteen of the 17 localities that refer clients to proprietary schools have
performance-based contracts.

° All localities say they monitor the attendance and progress of clients.

fe) Twenty of the 27 localities have disapproved self-initiated enrollments when
training is not appropriate.

STATE AND LOCAL RESPONDENTS HAVE VARIED VIEWS ABOUT
PROPRIETARY SCHOOLS

fo) Six of the 11 State respondents report their views of proprietary schools as
mostly unfavorable or mixed. Further, about two-thirds of local respondents
have mostly unfavorable or mixed views of proprietary schools.

° However, most State (10) and about half of local respondents (19) see some
advantages in using proprietary schools. Respondents most frequently mention
greater flexibility, courses starting more times during the year, and quicker and
better job placement.

fo) Sixty-seven percent (29 of 43) of local respondents have concerns about the use
of proprietary schools, most often about how they recruit clients. Sixty-three
percent believe that these schools create either a large or moderate
vulnerability for abuse.

RECOMMENDATION
The Administration For Children And Families should establish a mechanism to

periodically assess utilization and outcomes of JOBS clients attending proprietary
schools.

di


respondents in them as local respondents. There are 541 localities with JOBS
programs operating in the 11 States.

The study team conducted preinspection telephone interviews with five States not in
the study sample to refine data collection guides and visited a locality in one of these
States.

The inspection was conducted in two phases. In the first phase, the team sent letters
to the 11 State JOBS agencies informing them of discussion topics and plans to
schedule telephone interviews. Discussion guides, containing closed and open-ended
questions, were utilized to gather information on State JOBS policies, procedures,
experiences, concerns and relationships with other agencies in planning and
implementing the program. Within each of the 11 States, respondents responsible for
the JOBS program at the State level identified localities they believed to be high users
of proprietary schools.

In the second phase (local-level data collection), the inspection team held telephone
interviews with JOBS program managers in the 27 localities, consisting of cities and
counties of varying size, that were identified by State respondents as high users of
proprietary schools. The team interviewed a total of 43 persons in the 27 localities.
They provided information on local planning, implementation, expenditures, student
outcomes, as well as views and concerns regarding proprietary schools in preparing
students for work. This information was not independently verified by the team. In
12 of the 27 localities both the welfare and JTPA managers gave their views and
concerns.

FINDINGS

STATE AND LOCAL RESPONDENTS REPORT LIMITED USE OF PROPRIETARY
SCHOOLS BUT DO NOT MAINTAIN SPECIFIC DATA ON THEM

States identi few localities using proprietary schools

State respondents’ estimates indicate that approximately one-third of the 541 localities
with JOBS programs in the 11 States use proprietary schools. One State does not use
proprietary schools although the State policy does not restrict their use. The States
identified 27 localities which make high use of proprietary schools by referring clients
for training and/or approving training for clients who had self-initiated enrollment in
proprietary schools. The number of localities identified by States ranged from only
one (in five States) to four (in three States).

However, respondents in ten of the 27 localities (37 percent) report that they do not
refer clients to proprietary schools. The remaining 17 localities report limited referral
of clients to proprietary schools. All 27 localities also report limited incidence of self-
initiated attendance at proprietary schools.


TABLE OF CONTENTS

INTRODUCTION al
Purpose 1
Background 1
Methodology 2

FINDINGS 3

RECOMMENDATION 6
Comments 6

APPENDIX A: COMMENTS ON DRAFT REPORT. ....-cscccoosnsssesseeeee A-1


COMMENTS

Comments received from the ACF indicate that they are reasonably encouraged and
reassured by our findings. A copy of their comments are attached as Appendix A.

We caution against an overly optimistic interpretation of our findings. Our survey of
the 11 States with one year of program experience found that State and local
respondents have varied views about proprietary schools, concerns about the use of
proprietary schools, and believe that there is a vulnerability to abuse by these schools.
While there are preliminary indications that local respondents are taking steps to
ensure the appropriate use of proprietary schools, the ACF should continue to be
cautious about the potential for abuse.

The ACF indicated that it will ask States during routine contacts whether they are
experiencing any problems with proprietary schools, and, if so, will consider on-site
monitoring of the use of proprietary schools as part of the JOBS field review process.

We accept this approach as the most practical option available at this time. However,
we also realize that ACF’s oversight will be made somewhat difficult since States and
local JOBS programs report that they do not maintain data on the use of proprietary
schools.

We have added information provided by ACF that clarifies their concerns and

interests regarding proprietary schools, and have incorporated their suggestions and
comments, for the most part.

iii


Recipients are sometimes already enrolled in training or education programs when
they volunteer or are notified that they are required to participate in the JOBS
program. If the agency approves such self-initiated training as being consistent with an
appropriate employment goal, JOBS funds may be used for supportive services, but
not for tuition. Other clients may conclude their successful or unsuccessful
relationship with proprietary schools without any contact with the JOBS program.

While Federal regulations do not prohibit the use of JOBS funds for tuition and
supportive services for postsecondary education, the Administration For Children And
Families (ACF) is concerned about the potential cost and thus encourages States to
use other resources available to JOBS participants to fund postsecondary education.
Its reasons for this position are 1) that adequate resources are not available for
participants who are educationally disadvantaged through lack of basic and high school
education, and 2) that priority for scarce resources should be given to the large
number of welfare recipients less able to support their families than to those ready to
enter postsecondary education. The ACF supports postsecondary education when it is
consistent both with a client’s abilities and interests and with labor market needs.

Several concerns exist about proprietary schools and their potential for abuse.
Department of Education studies show that students at proprietary schools account for
an inordinate portion of the approximately $2 billion dollars of defaults in 1990 in
student financial aid. Prior to July 1991, proprietary schools often used their own tests
to admit students without a high school or general equivalency diploma, thereby
enabling them to qualify for financial aid. Studies and newspaper accounts also reveal
that many proprietary schools are targeting AFDC recipients as potential
postsecondary students and are aggressively pursuing them through the use of
commission-paid recruiters. These welfare recipients are eligible for maximum
Federal government student financial aid grants and loans. Some schools also have
been using financial aid eligibility as the sole criterion for admission, often enrolling
students who lack the skills to successfully complete their program of study and who
eventually drop out.

SCOPE AND METHODOLOGY

The study focused on the 11 States which had at least one year of JOBS program
experience by the end of FY 1990 and were entitled to $10 million or more in JOBS
funds for that year. Four are State-administered and seven are State-supervised, but
locally-administered. These 11 States accounted for 86% ($453 million) of the FY
1990 JOBS funds allocated to the 25 States with at least one year’s JOBS experience.
They are: California, Florida, Georgia, Maryland, Massachusetts, Michigan,
Minnesota, New Jersey, Ohio, Pennsylvania, and Wisconsin. In nine of the 11 States,
JOBS programs operate at the county level; in one State it operates at a larger than
county level and in the other at both the county and multi-county level. Hereafter,
both types of geographical sub-divisions will be referred to as localities and


Department of Health and Human Services

OFFICE OF
INSPECTOR GENERAL

THE JOBS PROGRAM AND
PROPRIETARY SCHOOLS

a SEs
=
= Richard P. Kusserow
3 INSPECTOR GENERAL
%, S
*erveag

FEBUARY 1992



view, commented, "We try to discourage people from taking out loans...We look to
community colleges as our primary provider."

Twenty-five of the 27 localities say they routinely monitor the attendance and progress
of JOBS clients at proprietary schools; one locality does not consistently monitor and
one has no experience. All but two of the 26 localities with experience conduct face-
to-face assessments with clients on their training progress; the remaining two assess
progress by telephone.

Most localities report disapproving self-initiated enrollments

Twenty of the 27 localities have disapproved some self-initiated enrollments when
training is not appropriate. Of the seven remaining: one has no experience with self-
initiated enrollments; one has approved only four clients since the start of JOBS; one
states, “all self-initiated clients are doing well"; two feel that since the client has taken
initiative and obtained grants or loans the program should support them; and two have
approved all training based on the availability of employment opportunities.

STATE AND LOCAL RESPONDENTS HAVE VARIED VIEWS ABOUT PROPRIETARY
SCHOOLS

Proprietary schools viewed less favorably than not-for-profit schools

Six of the 11 State respondents report their views of proprietary schools as mostly
unfavorable (4 States) or mixed (2 States). Four States’ views are mostly favorable,
and one, which doesn’t use proprietary schools, has no opinion. Further, of the 40
local respondents (three did not respond), 63 percent have mostly unfavorable (33%)
or mixed (30%) views of proprietary schools.

In contrast, respondents had an overwhelmingly positive view of not-for-profit schools.
When asked about their views of not-for-profit schools, ten of 11 State respondents
and 42 of 43 local respondents gave mostly favorable views.

However, most State (10) and just under half of local respondents (19) see some
advantages in using proprietary schools. State respondents most frequently mention
the greater flexibility afforded by proprietary schools. They start courses more times
during the year, have shorter courses and smaller classes, and quicker and better job
placement. Local respondents were most likely to cite training tailored to the client
and/or the market as an advantage of using proprietary schools. They also frequently
mentioned the flexibility noted by State respondents.


States and localities do not maintain data on use of proprietary schools

Aggregate data on the number of clients referred, the number of self-initiated
enrollments, training outcomes and program expenditures for clients attending
proprietary schools are not maintained at the State or local level. Only one locality
was able to provide precise data on the number of clients who attended proprietary
schools.

LOCAL RESPONDENTS REPORT HAVING PROCEDURES AND CRITERIA TO
ASSURE THE APPROPRIATE USE OF PROPRIETARY SCHOOLS.

Almost all localities use performance-based contracts to monitor proprietary schools

Sixteen of the 17 localities that refer clients to proprietary schools have performance-
based contracts. Fifteen of these 16 localities work through experienced JTPA
organizations. The JTPA organizations provide an open competitive process by
requesting proposals from service providers and by reviewing the effectiveness of
providers in delivering services based on demonstrated performance. Consideration is
given to graduation and job placement rates, cost, quality of training, teacher
qualifications, wages at placement and the stability of the provider. The JTPA then
contracts with selected service providers for training. These contracts contain financial
incentives for schools to assist clients in making progress, obtaining employment and
retaining jobs. Typically, these contracts provide partial payment as each of five
phases is completed: enrollment, mid-term, graduation, employment and job
Tetention.

Localities say that basic safeguards are in place

Each of the 27 localities says it conducts client assessments and develops employability
plans as required. Their case managers work with clients to establish a plan to
develop occupational skills. In all 27 localities (whether or not they refer clients to
proprietary schools), the case manager considers the client’s skills and abilities, past
employment history, education and occupational preference. Typically, before
referring a participant to a proprietary school, the program takes into account the
proprietary school’s past history and reputation.

The criteria used in approving self-initiated attendance at proprietary schools appear
to support their appropriate use. Localities frequently report that training has to be
consistent with the demands of the local labor market and that clients must have the
skills and ability necessary to complete the training. All of the localities with
experience say that the criteria to approve self-initiated attendance at proprietary
schools are the same as for not-for-profit vocational schools. When asked about how
they decide the type of school, proprietary or not-for profit, to refer participants to,
local respondents most frequently mentioned considering the accessibility of the school
as well as the appropriateness of the course. One respondent, reflecting a common


INTRODUCTION

PURPOSE

To ascertain the experiences of States in their use of proprietary schools in the Job
Opportunities and Basic Skills (JOBS) Training Program.

BACKGROUND

The Family Support Act of 1988 created the JOBS program which provides recipients
of Aid to Families with Dependent Children (AFDC) the opportunity to become self-
sufficient. The purpose of JOBS is to assure that eligible individuals obtain services
that will help them avoid long-term welfare dependence. These include education, job
training, employment-related activities and support services, such as child care and
transportation costs. The Act required State AFDC agencies to have a JOBS program
in operation no later than October 1, 1990. Twenty-five of the 54 JOBS jurisdictions
had at least one year of operational experience as of that date.

The State AFDC Agency is responsible for administering the JOBS program. States
may contract with or enter into agreements with other organizations to operate parts
of it. Many States use Job Training And Partnership Act (ITPA) organizations to
assist them. These JTPA organizations contract with a variety of vocational and
technical training schools to provide work skills training to economically disadvantaged
individuals, including AFDC recipients.

The JOBS program must inform all AFDC applicants and clients, at the time of
application or recertification, of the availability of educational opportunities and
supportive services for which they are eligible, the grounds for exemption and the
consequences for refusing or failing to participate. Sanctions may include deducting
an individual’s assistance amount from the family allotment for failing to participate in
a required activity.

Prior to actual participation in JOBS program activities, JOBS program staff assess
each recipient’s employability, using methods such as interviews, testing, counselling
and self-assessment. Next, an employability plan is prepared, in consultation with the
AFDC client, which includes an employment goal and services to be provided to the
client.

The JOBS program must provide clients with the opportunity to obtain job skills
training, including vocational training, in areas appropriate to participants’
employment goals. At State option, the program may include referral of participants
to postsecondary education, including proprietary schools. These are postsecondary
institutions, operated for profit, which usually provide short-term job training in a wide
variety of occupational fields.


EXECUTIVE SUMMARY

PURPOSE

To ascertain the experiences of States in their use of proprietary schools in the Job
Opportunities and Basic Skills (JOBS) Training Program.

BACKGROUND

The Family Support Act of 1988 created the JOBS program which provides recipients
of Aid to Families with Dependent Children (AFDC) with services to help them to
become self-sufficient. These services may include training at public and proprietary
postsecondary schools. Proprietary schools are postsecondary institutions, operated for
profit, which usually provide short-term job training in a wide variety of occupational
fields.

While Federal regulations do not prohibit the use of JOBS funds for tuition for
postsecondary education, the Administration For Children And Families (ACF) is
concerned about the cost and that the education is consistent with clients’ abilities and
labor market needs. Studies and newspaper accounts reveal that many proprietary
schools have been using financial aid eligibility as the sole criterion for admission,
often enrolling students who lack the skills to successfully complete their program of
study and who eventually drop out.

SCOPE AND METHODOLOGY

The study focused on the 11 States which had at least one year of JOBS program
experience by the end of FY 1990 and were entitled to $10 million or more in JOBS
funds for that year. The inspection team held structured interviews with officials
responsible for the JOBS program in each of these States. In addition, the team
asked respondents at the State level to identify localities which they believed to be
high users of proprietary schools. The team then held structured interviews with 43
program managers in the 27 localities so identified.

FINDINGS

RESPONDENTS REPORT LIMITED USE OF PROPRIETARY SCHOOLS BUT
DO NOT MAINTAIN SPECIFIC DATA ON THEM

oO State respondents’ estimates indicate that approximately one-third of the 541
localities with JOBS programs in the 11 States use proprietary schools.
Respondents identified 27 localities which they believe make high use of
proprietary schools.


APPENDIX A

COMMENTS ON THE DRAFT REPORT

A-l


Department of Health and Human Services

OFFICE OF
INSPECTOR GENERAL

THE JOBS PROGRAM AND
PROPRIETARY SCHOOLS

SERVICES,
ey
= Richard P. Kusserow
i C INSPECTOR GENERAL
%

OEI-02-91-00210



OFFICE OF INSPECTOR GENERAL

The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, as
amended, is to protect the integrity of the Department of Health and Human Services’ (HHS)
programs as well as the health and welfare of beneficiaries served by those programs. This
statutory mission is carried out through a nationwide network of audits, investigations, and
inspections conducted by three OIG operating components: the Office of Audit Services, the
Office of Investigations, and the Office of Evaluation and Inspections. The OIG also informs
the Secretary of HHS of program, and management problems, and recommends courses to
correct them.

OFFICE OF AUDIT SERVICES

The OIG’s Office of Audit Services (OAS) provides all auditing services for HHS, either by
conducting audits with its own audit resources or by overseeing audit work done by others.
Audits examine the performance of HHS programs and/or its grantees and contractors in
carrying out their respective responsibilities and are intended to provide independent
assessments of HHS programs and operations in order to reduce waste, abuse, and
mismanagement and to promote economy and efficiency throughout the Department.

OFFICE OF INVESTIGATIONS

The OIG’s Office of Investigations (OI) conducts criminal, civil, and administrative
investigations of allegations of wrongdoing in HHS programs or to HHS beneficiaries and of
unjust enrichment by providers. The investigative efforts of OI lead to criminal convictions,
administrative sanctions, or civil money penalties. The OI also oversees State Medicaid fraud
control units which investigate and prosecute fraud and patient abuse in the Medicaid program.

OFFICE OF EVALUATION AND INSPECTIONS

The OIG’s Office of Evaluation and Inspections (OEI) conducts short-term management and
program evaluations (called inspections) that focus on issues of concern to the Department,
the Congress, and the public. The findings and recommendations contained in these inspection
reports generate rapid, accurate, and up-to-date information on the efficiency, vulnerability,
and effectiveness of departmental programs. This report was prepared in the New York
Regional Office under the direction of Regional Inspector General Thomas F. Tully. Project
staff included:

Joseph Benkoski, Project Leader Jodi Nudelman
Joseph Corso, Jr. Alan S. Meyer, Ph.D.
Lucille M. Cop Ann O’Connor, Region 5

William Counihan Ruth Folchman, Headquarters


Concems about proprietary schools persist, especially relating to self-initiated enrollments

Six States say they have had concerns about using proprietary schools, although only
four report current concerns. Most of these concerns were about proprietary school
recruitment practices.

Sixty-seven percent (29 of 43) of local respondents have concerns about the use of
proprietary schools, most often about how they recruit clients, especially before they
receive JOBS orientation. Other concerns mentioned frequently were loose admission
practices, inability to retain students through remediation and other support services,
high costs, and the poor quality of their training and/or placement services. Local
welfare agency respondents were much more likely (73%) to express such concerns
than JTPA respondents (54%).

Sixty-three percent of local respondents also believe that using proprietary schools
creates either a large (33%) or moderate (30%) vulnerability for abuse, most
prominently in the recruitment by proprietary schools of self-initiated clients. Some
cited inadequate monitoring to weed out and keep out inferior schools. A few also
mentioned the difficulty of steering clients away from inappropriate proprietary
schools without lawsuits being brought by the schools.

RECOMMENDATION

States without significant experience should profit from the experienced States. These
States and localities are somewhat wary about using proprietary schools and have
taken action to prevent abuse. We believe continuing caution is warranted. As
indicated, States and localities lack data on proprietary school use and client
outcomes. Six localities have approved all clients who self-initiated enrollment at
proprietary schools.

Therefore, we recommend:

The Administration For Children And Families should establish a mechanism to
periodically assess utilization and outcomes of JOBS clients attending proprietary
schools.

COMMENTS

Comments received from the ACF indicate that they are reasonably encouraged and
reassured by our findings. A copy of their comments are attached as Appendix A.

We caution against an overly optimistic interpretation of our findings. Our survey of
the 11 States with one year of program experience found that State and local
respondents have varied views about proprietary schools, concerns about the use of
proprietary schools, and believe that there is a vulnerability to abuse by these schools.

6