United States Government Accountability Office

Washington, DC 20548 

On March 12, 2010, GAO 

revised this product to correct 

information published on 

pages 2, 4-6, and 10-13 related 

to the dates in which 

Education substantiated an 

incentive compensation 

violation at certain schools, 

and the number of schools 

with violations confirmed 

before and after the 

publication of safe harbor 

regulations.

February 23, 2010 

The Honorable Tom Harkin 

Chairman 

The Honorable Michael B. Enzi 

Ranking Member 

Committee on Health, Education, Labor, and Pensions 

United States Senate 

The Honorable George Miller 

Chairman 

The Honorable John P. Kline 

Ranking Member 

Committee on Education and Labor 

House of Representatives 

Subject: Higher Education: Information on Incentive Compensation Violations 

Substantiated by the U.S. Department of Education 

In 1992, Congress banned schools participating in federal student aid programs from 

paying commissions, bonuses, or other incentive payments to individuals based on their 

success in enrolling students or securing financial aid for them.1

 Congress instituted this 

incentive compensation ban to eliminate abusive recruiting practices in which schools 

enrolled unqualified students who then received federal student aid funds. In 2002, the 

U.S. Department of Education (Education) issued regulations—commonly referred to as 

“safe harbors”—that allowed for 12 activities or payment arrangements that schools 

could use without violating the ban against incentive compensation. As of January 2010, 

Education was reviewing these safe harbor regulations as part of a negotiated rule 

making process to maintain or improve federal student aid programs. 

The Higher Education Opportunity Act (HEOA) mandated that GAO conduct a study on 

Education’s enforcement of the incentive compensation ban in light of the safe harbors 

and report on the number of violations substantiated by the Secretary of Education since 

1998, the nature of these violations, and the names of the institutions involved.2

 As 

agreed with your offices, this report provides information on violations of the incentive 

compensation ban substantiated by the Secretary since 1998. We will provide additional 

information on Education’s enforcement of the incentive compensation ban in a 

subsequent report. 

 

1

Schools participate in federal student aid programs under Title IV of the Higher Education Act of 

1965 (HEA), as amended. The ban on incentive payments was added to the HEA by the Higher 

Education Amendments of 1992, Pub. L. No. 102-325, § 490. 

2

Section 1124 of the Higher Education Opportunity Act, Pub. L. No. 110-315, Aug. 14, 2008. 

 GAO-10-370R Higher Education 
Page 2 GAO-10-370R Higher Education 

nd (3) 

 

This report is based on our analysis of Education data, program reviews, and audit reports 

related to the incentive compensation ban from January 1998 through December 2009. As 

required by the mandate, our analysis examines incentive compensation cases initiated and 

substantiated by the Secretary of Education since 1998. For the purposes of our report, we 

defined cases initiated during this time period as program reviews begun by Education’s 

staff or any outside audit report received by Education for eventual resolution on or after 

January 1, 1998.3

 We defined substantiated violations during this period as those cases in 

which a violation of the incentive compensation ban was noted in an Education final 

determination letter by December 10, 2009, the most recent information available at the 

time of our review.4

 We also limited our analysis to violations found at schools located in 

the United States.5

 Education maintains a database of incentive compensation findings 

and gave us data on schools within the above time period. We assessed the reliability of 

those data elements needed for our study by (1) examining the data; (2) comparing the 

data to available program reviews, audit reports, and final determination letters; a

interviewing Education officials. Based on this assessment, we determined the number of 

schools as reported in Education’s database that had violations identified and 

substantiated since 1998. We determined that the data on violations at these schools are 

sufficiently reliable for the purposes of this report. In addition to our data analysis, we 

reviewed relevant laws and regulations, and conducted interviews with officials from 

Education, Education’s Office of the Inspector General, and various higher education 

associations. While this report provides data on violations substantiated by Education, it 

does not examine the penalties associated with these violations or assess the overall 

impact of the safe harbor regulations on Education’s efforts to enforce the incentive 

compensation ban. 

We conducted our work from December 2009 through February 2010, in accordance with 

generally accepted government auditing standards. Those standards require that we plan 

and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable 

basis for our findings based on our audit objectives. We believe that the evidence obtained 

provides a reasonable basis for our findings. 

In summary, we found that between 1998 and 2009 Education reported substantiating 

incentive compensation violations at 32 schools. Of the 32 schools with substantiated 

violations, 18 schools were found to have violated the ban in the 5 years before final safe 

harbor regulations were published on November 1, 2002, and 14 schools were found to 

have violated the ban in the 7 years afterward. Many of the violations involved payments 

by schools to their staff in the form of bonuses or commissions for successfully enrolling 

students in the school, while a smaller number involved payments to third party 

contractors or noncash rewards to staff for successfully enrolling students. In addition to 

finding violations at 32 schools, Education entered into settlement agreements with 22 

3

Throughout this report, we use the terms initiated and identified interchangeably. 

4

For the purposes of this report, we refer to violations substantiated by the Secretary as violations 

found or substantiated by Education, using the words found and substantiated interchangeably. 

5

In addition to violations by U.S. schools of the incentive compensation ban, Education data also 

noted two separate incentive compensation violations at one foreign school. Foreign schools 

approved by Education can administer and disburse funds for federal student aid programs to U.S. 

citizens and certain noncitizens, such as permanent residents, eligible for Federal Family Education 

Loans and enrolled in a certificate or degree program at that school. Both of the violations identified 

at the foreign school were substantiated by Education. 
other schools. Education does not have data on the total number of school reviews and 

audits initiated by the Secretary and outside auditors for potential violations of the 

incentive compensation ban during the time period we reviewed.6

 For this reason, it is 

unknown whether the total number of reviews and audits conducted each year has 

changed over the course of this time period and what percentage of these cases have 

resulted in substantiated violations. 

Background 

U.S. Department of Education and the Incentive Compensation Ban

Education is responsible for overseeing federal student aid programs authorized under 

Title IV of the Higher Education Act of 1965, as amended.7

 In this role, it is responsible for 

enforcing the statutory ban against incentive compensation which prohibits schools that 

receive Title IV student aid funds from providing “...any commission, bonus, or other 

incentive payment based directly or indirectly on success in securing enrollments or 

financial aid to any persons or entities engaged in any student recruiting or admission 

activities or in making decisions regarding the award of student financial assistance...”8

The ban applies to all schools, including proprietary (also known as private for-profit), 

public, and private nonprofit schools. 

Safe Harbor Regulations

On November 1, 2002, Education published regulations–commonly referred to as the safe 

harbor regulations–that allowed for 12 activities or payment arrangements that schools 

could use without violating the statutory prohibition against incentive compensation.9

 

These arrangements include: (1) adjustments to employee compensation that are not based 

"solely" on the number of students recruited, admitted, enrolled, or awarded financial aid; 

(2) compensation to recruiters who enroll students in nontitle IV eligible programs; (3) 

compensation for contracts with employers to provide training; (4) profit-sharing bonus 

plans; (5) compensation based upon program completion by students; (6) compensation 

for pre-enrollment activities; (7) compensation for managerial and supervisory employees; 

(8) token gifts; (9) profit distributions; (10) compensation for Internet-based activities; (11) 

compensation to third parties for nonrecruitment activities; and (12) compensation to third 

 

6

For the purposes of our report, we focused on the total efforts to monitor compliance with the 

incentive compensation ban. While Education notes that approximately 5,000 audits have been 

conducted at schools each year and these audits have checked for incentive compensation 

violations, Education does not have data on how many program reviews examining incentive 

compensation issues have been conducted each year. As a result, data on the combined number of 

program reviews and audits initiated for potential incentive compensation violations since 1998 are 

not available. 

7

20 U.S.C. § 1001 et seq. 

8

20 U.S.C. § 1094(a)(20). The ban does not apply to the recruitment of foreign students residing in 

foreign countries who are not eligible to receive federal student aid from the U.S. government. 

9

67 Fed. Reg. 67048. 

Page 3 GAO-10-370R Higher Education 
parties for recruitment activities. For more detailed information on the 12 safe harbors, see 

enclosure I. When Education published the regulations in November 2002, the agency 

applied the safe harbors to both ongoing and new reviews and audits.10 

Program Reviews and Audits

Education department employees conduct program reviews of schools to monitor 

compliance with federal laws and regulations. The reviewers examine school records, 

interview institution staff and students, and review relevant student information, among 

other things. Program reviews can be conducted on-site at the institution or off-site, in 

which case institutions are asked to submit copies of selected records to officials at 

Education. In addition to program reviews conducted by Education employees, 

independent auditors conduct annual compliance audits of schools, and Education’s Office 

of the Inspector General staff conduct their own audits and provide information and 

referrals to Education.11 Education is required to resolve program deficiencies identified in 

both program reviews and audit reports and may impose penalties on schools found in 

violation.12 As part of the resolution process, Education generally sends a program review 

or audit determination letter to the school describing the violations found and any 

corrective actions the school must take to address the finding. In addition, at any point 

during this process, Education may also choose to resolve a case through a settlement 

agreement, which often finalizes the case without an acknowledgment of wrongdoing. 

Between 1998 and 2009, Education Substantiated 32 Incentive Compensation 

Violations, but the Total Number of Schools Examined for Potential Violations Is 

Unknown 

Between 1998 and 2009, Education found that 32 schools had violated the incentive 

compensation ban, but the total number of incentive compensation reviews and audits 

conducted over this time period is unknown.13 Prior to the implementation of safe harbor 

regulations in 2002, 18 schools were found to have incentive compensation violations over 

a period of 5 years. After the implementation of safe harbor regulations, 14 schools were 

found to have violations over a period of 7 years. Although our data analysis presents 

information on incentive compensation violations substantiated by Education, it does not 

reflect the total number of schools for which reviews and audits were initiated by 

 

10Although these regulations were published with an effective date of July 1, 2003, as required by 

section 482(c) of the HEA (20 U.S.C. § 1089(c)), the Secretary of Education used her authority under 

section 482(c)(2)(A) of the HEA (20 U.S.C. § 1089(c)(2)(A)) to allow institutions to implement the 

regulations as of Nov. 1, 2002. In a memo dated Nov. 19, 2002, Education officials stated that the 

safe harbor regulations should be applied to ongoing cases. Education did not apply the safe harbor 

regulations retroactively to closed audits and reviews that had final determinations prior to Nov. 1, 

2002. 

11Institutions that receive Title IV funds must submit an annual audit to Education. A certified 

independent auditor must prepare the audit. 

12In certain circumstances, Education may fine a school or suspend, limit, or terminate a school's 

participation in Title IV programs. 

13One of the 32 schools had three separate incentive compensation violations. All of the other 

schools had one substantiated incentive compensation violation. In addition, 4 of the 32 schools 

had multiple campus locations where incentive compensation violations were also substantiated by 

Education. 

Page 4 GAO-10-370R Higher Education 
Education and outside auditors for potential violations of the incentive compensation ban 

because this data is not collected by Education. Consequently, it is unknown whether the 

number of incentive compensation cases changed over the course of the time period 

reviewed and what percentage of these cases resulted in substantiated violations. 

Figure 1 shows the number of schools with incentive compensation violations 

substantiated by Education from 1998 through 2009. Many of the violations involved 

payments by schools to their staff in the form of bonuses or commissions for successfully 

enrolling students in the school, while a smaller number involved payments to third party 

contractors or noncash rewards to staff for successfully enrolling students. For more 

detailed information on the nature of the violations, as well as the names of the schools, 

see enclosure II. 

Figure 1: Number of Schools with Incentive Compensation Violations Substantiated and Reported by 

Education from 1998 through 2009 

0

1

2

3

4

5

6

7

8

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Number of schools found in violation

Year

Audit

Program review

Source: GAO analysis of Education data, program reviews, audit reports, and final determination letters.

Safe Harbor 

Regulations

Published

Notes: 

a

As required by the mandate, our analysis focuses on schools where violations of the incentive compensation ban were 

identified and substantiated by Education since 1998. 

b

Final safe harbor regulations were published on Nov. 1, 2002, and were applied to both ongoing and new reviews and 

audits at that time. The safe harbors were not applied retroactively to closed reviews and audits that had final 

determinations prior to Nov. 1, 2002. 

c

Education did not find any schools in violation of the incentive compensation ban in November or December of 2002, or in 

2006. 

d

The one school that had three separate violations is listed once under 1998 because all three violations were substantiated 

in that year. 

Page 5 GAO-10-370R Higher Education 
Education data also provide information on the type of schools that have violated the 

incentive compensation ban. From 1998 through 2009, proprietary schools had more 

substantiated violations than other types of schools. In total, 19 proprietary schools, 12 

private nonprofit schools, and 1 public school had substantiated incentive compensation 

violations.14

 

In addition to the 32 schools with substantiated violations between 1998 and 2009, 27 

schools were identified by Education data, program reviews, Office of Inspector General 

audits, or independent audits as having potential violations of the incentive compensation 

ban during this time period. While Education is currently reviewing a few of these cases, in 

the others Education either found no incentive compensation violations or reached 

settlement agreements with the schools. 

• As of December 2009, three schools under review had not yet received a final decision 

or a determination letter from Education.15 

• Two other schools identified as having potential violations were found by Education to 

have not violated the ban.16 At the first school, Education found that it was not a 

violation of the incentive compensation ban for teachers to receive commissions for 

students completing certain parts of the program. At the second school, Education 

found that commissions paid to a third-party representative based on the number of 

students submitting information cards following an informational presentation was not 

a violation of the incentive compensation ban. 

• Additionally, Education entered into settlement agreements with 22 schools.17 Many of 

the settlement cases involved incentive payments made to school employees based on 

the number of students enrolled. Generally, these settlements state that the 

agreements do not constitute an admission or acknowledgment of noncompliance or 

wrongdoing by either the institution or Education. 

Agency Comments 

We provided a draft of this report to the Department of Education for review and 

comment. Education did not provide formal comments on this report, but did provide some 

technical comments that we incorporated, as appropriate. 

 

14Education data show that prior to the publication of safe harbors, 13 proprietary schools and 5 

private nonprofit schools had substantiated incentive compensation violations. After the publication 

of safe harbors, 6 proprietary schools, 7 private nonprofit schools, and 1 public school had 

substantiated violations. 

15These cases without a final decision involve two private nonprofit schools and one public school. 

16Education did not find incentive compensation violations at two proprietary schools. Education 

made these determinations in 2000 and 2007. 

17While there were 22 schools that entered into settlement agreements, 1 school had 2 separate 

settlements, bringing the total number of settlements to 23. Of the 23 settlements, 1 took place prior 

to the publication of safe harbors, and 22 took place afterward. The settlements involved 3 

proprietary schools and 19 private nonprofit schools. 

Page 6 GAO-10-370R Higher Education 
- - - - - 

We are sending copies of this report to appropriate congressional committees and the 

Secretary of Education. In addition, the report will be available at no charge on GAO’s Web 

site at http://www.gao.gov. If you or your staff have any questions about this report, please 

contact me at (206) 287-4820 or iritanik@gao.gov. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page of this report. 

GAO staff who made major contributions to this report are listed in enclosure III. 

Sincerely yours, 

Katherine M. Iritani, Acting Director 

Education, Workforce, and Income Security Issues 

Enclosures - 3

Page 7 GAO-10-370R Higher Education 
Enclosure I 

Page 8 GAO-10-370R Higher Education 

Department of Education (Education) Safe Harbor Regulations 

The Safe Harbor regulations, found at 34 C.F.R. § 668.14(b)(22)(ii) provide that the 

activities and arrangements schools may carry out without violating the incentive 

compensation ban include, but are not limited to, the following activities and 

arrangements: 

(1) The payment of fixed compensation, such as a fixed annual salary or a fixed hourly 

wage, as long as that compensation is not adjusted up or down more than twice during any 

12-month period, and any adjustment is not based solely on the number of students 

recruited, admitted, enrolled, or awarded financial aid. For this purpose, an increase in 

fixed compensation resulting from a cost of living increase that is paid to all or 

substantially all full-time employees is not considered an adjustment. 

(2) Compensation to recruiters based upon their recruitment of students who enroll only in 

programs that are not eligible for Title IV, HEA program funds. 

(3) Compensation to recruiters who arrange contracts between the institution and an 

employer under which the employer's employees enroll in the institution, and the employer 

pays, directly or by reimbursement, 50 percent or more of the tuition and fees charged to 

its employees; provided that the compensation is not based upon the number of employees 

who enroll in the institution, or the revenue they generate, and the recruiters have no 

contact with the employees. 

(4) Compensation paid as part of a profit-sharing or bonus plan, as long as those payments 

are substantially the same amount or the same percentage of salary or wages, and made to 

all or substantially all of the institution's full-time professional and administrative staff. 

Such payments can be limited to all, or substantially all, of the full-time employees at one 

or more organizational level at the institution, except that an organizational level may not 

consist predominantly of recruiters, admissions staff, or financial aid staff. 

(5) Compensation that is based upon students successfully completing their educational 

programs, or one academic year of their educational programs, whichever is shorter. For 

this purpose, successful completion of an academic year means that the student has earned 

at least 24 semester or trimester credit hours or 36 quarter credit hours, or has successfully 

completed at least 900 clock hours of instruction at the institution. 

(6) Compensation paid to employees who perform clerical “pre-enrollment” activities, such 

as answering telephone calls, referring inquiries, or distributing institutional materials. 

(7) Compensation to managerial or supervisory employees who do not directly manage or 

supervise employees who are directly involved in recruiting or admissions activities, or the 

awarding of Title IV, HEA program funds. 

(8) The awarding of token gifts to the institution's students or alumni, provided that the 

gifts are not in the form of money, no more than one gift is provided annually to an 

individual, and the cost of the gift is not more than $100. 

(9) Profit distributions are proportionately based upon an individual's ownership interest 

in the institution. 
Enclosure I 

(10) Compensation paid for Internet-based recruitment and admission activities that 

provide information about the institution to prospective students, refer prospective 

students to the institution, or permit prospective students to apply for admission online. 

(11) Payments to third parties, including tuition-sharing arrangements, that deliver various 

services to the institution, provided that none of the services involve recruiting or 

admission activities, or the awarding of Title IV, HEA program funds. 

(12) Payments to third parties, including tuition-sharing arrangements, that deliver various 

services to the institution, even if one of the services involves recruiting or admission 

activities or the awarding of Title IV, HEA program funds, provided that the individuals 

performing the recruitment or admission activities, or the awarding of Title IV, HEA 

program funds, are not compensated in a manner that would be impermissible under 

paragraph (b)(22) of this section. [Section (b)(22) prohibits the payment of any 

commission, bonus, or other incentive payment based directly or indirectly upon success 

in securing enrollments or financial aid to any person or entity engaged in any student 

recruiting or admission activities or in making decisions regarding the awarding of Title IV, 

HEA program funds].

Page 9 GAO-10-370R Higher Education 
Enclosure II 

Page 10 GAO-10-370R Higher Education 

List of Violations Substantiated and Reported by the Department of Education 

(Education) 

Table 1: Violations Substantiated and Reported by Education

Date 

substantiated School name Location 

Review 

method Description of violation 

10/28/1998 Euro Hair School Corpus Christi, Tex. Audit The school paid its director incentive 

payments. 

11/18/1998 Professional Hair Design 

Academya

Greenville, S.C. Audit Documentation describing the specific 

nature of the incentive compensation 

violation was not available. 

1/7/1999 Huntington Institute Norwich, Conn. Audit The school paid the Director of 

Admissions bonuses totaling $5,799, 

based on potential student leads. 

2/17/1999 The Hair Design School Jacksonville, Fla. Audit Documentation describing the specific 

nature of the incentive compensation 

violation was not available. 

4/2/1999 Graceland College Lamoni, Iowa Program 

review 

The school paid a third party contractor 

commission payments equivalent to a

percentage of the students’ tuition (60 

percent at initial enrollment and 40 

percent at re-enrollment). The 

payments totaled nearly $6 million. 

4/19/1999 Johnson & Wales

University 

Providence, R.I. Program 

review 

The school was paying its admissions

personnel commissions or bonuses

based on their success in securing 

enrollments. 

9/9/1999 Culver-Stockton College Canton, Mo. Audit The school awarded bonus payments

totaling $2,575 to two admissions

counselors for achieving a targeted 

number of enrollments. 

11/8/1999 Liceo de Arte, Disenos y 

Comercio 

Caguas, P.R. Audit The school paid its enrollment officers

car allowances based on their success

in securing enrollments. The car 

allowance amount was directly related 

to the number of enrollments secured 

by the enrollment officer. 

11/12/1999 Sunstate Academy of 

Hair Designb

Sarasota, Fla. Audit The school paid nearly $2,000 in 

commission payments related to 

student recruitment. 

5/24/2000 Rochester College Rochester Hills, 

Mich. 

Audit The school gave incentive payments to 

its admissions representatives based 

on recruiting performance. 

10/4/2000 Nielsen Electronics

Institute 

Charleston, S.C. Audit The school paid a bonus to one 

recruiter. 

12/8/2000 Computer Learning 

Centersc

Alexandria, Va. Program 

review 

The school assigned annual salary 

ranges based on the average number 

of students a recruiter enrolled per 

month and increased employees’ 

salaries if they achieved a target 

number of enrollments during an 

evaluation period. 
Enclosure II 

Date 

substantiated School name Location 

Review 

method Description of violation 

3/23/2001 Cheryl Fell’s School of 

Business

Niagara Falls, N.Y. Audit The school paid a total of $200 in 

referral fees to three students for 

enrolling other students. 

7/30/2001 Precision Technical 

Institute 

Sacramento, Calif. Audit The school paid an employee $2,975, 

based directly on success in securing 

enrollments. 

8/3/2001 CC’s Cosmetology 

College 

Tulsa, Okla. Audit The school paid commissions to staff 

based on the number of students

enrolled. 

1/28/2002 National Aviation 

Academy of Mississippi 

Clearwater, Fla. Audit The school paid referral fees to third 

parties, totaling $3,000. 

9/13/2002 Averett University Danville, Va. Audit The school had an arrangement to 

share revenue with a third party, based 

on the number of students who 

enrolled in a study group program. 

10/22/2002 Texas Careers San Antonio, Tex. Audit The Laredo campus of this school 

provided payments to 128 students for 

the referral of other students to the 

campus. The campus paid a total of 

$3,225 in referral bonuses over a 2-

year period. 

2/13/2003 High-Tech Instituted,e Phoenix, Ariz. Program 

review 

The compensation program of HighTech Holdings’ (the school’s parent 

company) telemarketing department 

provided bonuses to those engaged in 

student recruiting activities based on 

success in securing enrollments. 

2/13/2003 The Bryman School of 

Arizonad,f

Phoenix, Ariz. Program 

review 

The compensation program of HighTech Holdings’ (the school’s parent 

company) telemarketing department 

provided bonuses to those engaged in 

student recruiting activities based on 

success in securing enrollments. 

7/2/2003 Newbury College Brookline, Mass. Program 

review 

Documentation describing the specific 

nature of the incentive compensation 

violation was not available. 

8/14/2003 Pittsburgh Beauty 

Academy 

Pittsburgh, Pa. Program 

review 

The school awarded commission 

payments to employees based on 

success in securing the enrollment of 

students who were eligible for Title IV 

program funds. 

8/21/2003 Ohio Valley Collegeg Vienna, W.Va. Program 

review 

The school paid a total of $3,000 in 

bonuses to admissions staff over a 2-

year period for meeting or exceeding 

recruitment goals. 

3/19/2004 Hays Academy of Hair 

Design 

Hays, Kans. Program 

review 

The school paid a total of $100 to an 

employee for the recruitment of one 

student. 

3/22/2004 California Recording 

Institute 

San Francisco, Calif. Program 

review 

The school paid a total of $2,445 in 

bonuses to an individual for 

successfully securing enrollments. 

Page 11 GAO-10-370R Higher Education 
Enclosure II 

Date 

substantiated School name Location 

Review 

method Description of violation 

10/19/2004 Erie Institute of 

Technologyh

Erie, Pa. Program 

review 

The school had an incentive program 

which provided $300 cash payments to 

admissions representatives if the 

school reached its enrollment goal. 

The program also provided $100 gift 

certificates to individual admissions

representatives for reaching individual 

recruitment targets, and $25 gift 

certificates to individual admissions

representatives for each application 

they secured above their individual 

recruitment target. In addition, the 

school rewarded staff with social 

outings for achieving recruitment 

goals. 

3/18/2005 Concordia College Selma, Ala. Audit The school paid a total of $25,263 in 

incentive payments to 4 counselors for 

the recruitment of 95 students. 

6/2/2005 Lipscomb University Nashville, Tenn. Audit The school paid bonuses totaling 

$62,500 to admissions staff based on 

team and territorial goals. 

5/4/2007 Mount Olive College Mount Olive, N.C. Audit The school had an employee incentive 

plan worth approximately $5,000 for 

securing enrollments. 

11/20/2008 New York Institute of 

Technology 

Old Westbury, N.Y. Audit Admissions advisors at the school’s

online division received compensation 

above and beyond their normal 

compensation based on the number of 

students enrolled. 

4/17/2009 Colegio Biblico 

Pentecostal de Puerto 

Ricoi

St. Just, Trujillo Alto, 

P.R. 

Audit Documentation describing the specific 

nature of the incentive compensation 

violation was not available. 

10/2/2009 Denmark Technical 

College 

Denmark, S.C. Audit The school paid bonuses totaling 

$52,500 to 17 employees based on 

their recruitment of approximately 137 

students. In addition, the school paid 

$22,750 to 10 executive council 

members and other faculty and staff 

who facilitated a recruitment program 

that exceeded recruitment goals. 

Source: GAO analysis of Education data, program reviews, audit reports, and final determination letters 

Note: The data on incentive compensation violations come from an Education database on schools with incentive compensation 

violations. For most of the schools, Education provided additional documentation, such as program reviews, audit reports, or final 

determination letters describing both the violations and the dates they were substantiated. For four of the schools (Colegio Biblico 

Pentecostal de Puerto Rico, Euro Hair School, Lipscomb University, and Newbury College) Education had more limited 

documentation and was able to provide supplemental information describing either the violations or the substantiation dates. In the 

case of two schools (Professional Hair Design Academy and The Hair Design School), Education was not able to provide additional

documents to supplement the database information. 

a

Professional Hair Design Academy had three incentive compensation violations found during 3 separate audit years. However, all 

three violations were substantiated on Nov. 18, 1998. 

b

Sunstate Academy of Hair Design is currently Meridian Career Institute. 

Page 12 GAO-10-370R Higher Education 
Enclosure II 

c

The following Computer Learning Center locations were cited in the Final Program Review decision: Alexandria, Va.; Anaheim, 

Calif.; Cherry Hill, N.J.; Chicago, Ill.; Garland, Tex.; Houston, Tex.; Hurst, Tex.; Laurel, Md.; Los Angeles, Calif.; Lowell, Mass.; 

Madison Heights, Mich.; Manassas, Va.; Marietta, Ga.; Paramus, N.J.; Philadelphia, Pa. (branch campus); Philadelphia, Pa. (main

campus); Pittsburgh, Pa.; Plymouth Meeting, Pa.; San Francisco, Calif.; San Jose, Calif.; Schaumberg, Ill.; Somerville, Mass.; and 

South Plainfield, N.J. 

d

High-Tech Holdings, Inc. owns and operates two schools: High-Tech Institute (currently Anthem College) and the Bryman School. 

Incentive compensation violations were identified at each of these schools through a corporate-wide program review. However, 

Education issued separate final program review determination letters and catalogued the violations separately in their database. 

e

The following High-Tech Institute (currently Anthem College) locations were cited in the Final Program Review decision: Phoenix, 

Ariz.; Sacramento, Calif.; Brooklyn Center, Minn.; Nashville, Tenn.; and Marietta, Ga. 

f

The following Bryman School locations were cited in the Final Program Review decision: Phoenix, Ariz.; Aurora, Colo.; Orlando, 

Fla.; Irving, Tex.; and Las Vegas, Nev. 

g

Ohio Valley College is currently Ohio Valley University. 

h

The incentive compensation program at Erie Institute of Technology was also implemented at Toni and Guy Cosmetology and 

Great Lakes Institute of Technology, both located in Erie, Pa. 

i

Colegio Biblico Pentecostal de Puerto Rico is currently Theological University of the Caribbean. 

Page 13 GAO-10-370R Higher Education 
Enclosure III 

Page 14 GAO-10-370R Higher Education 

GAO Contact and Staff Acknowledgments 

GAO Contact 

Katherine M. Iritani, (206) 287-4820 or iritanik@gao.gov. 

Staff Acknowledgments 

In addition to the contact named above, the following staff members made important 

contributions to this report: Melissa Emrey-Arras, Assistant Director; Claudine Pauselli, 

Analyst–in-Charge; Colleen Moffatt; and Kris Nguyen. Also, Jean McSween provided 

guidance on the study’s data analysis; Jessica Botsford provided legal advice; Mae Liles 

assisted with report graphics; Susan Aschoff provided writing assistance; and Ronni 

Schwartz and Kim Siegal verified our findings.

(130991)
This is a work of the U.S. government and is not subject to copyright protection in the 

United States. The published product may be reproduced and distributed in its entirety 

without further permission from GAO. However, because this work may contain 

copyrighted images or other material, permission from the copyright holder may be 

necessary if you wish to reproduce this material separately. 
The Government Accountability Office, the audit, evaluation, and GAO’s Mission investigative arm of Congress, exists to support Congress in meeting its 

constitutional responsibilities and to help improve the performance and 

accountability of the federal government for the American people. GAO 

examines the use of public funds; evaluates federal programs and policies; 

and provides analyses, recommendations, and other assistance to help 

Congress make informed oversight, policy, and funding decisions. GAO’s 

commitment to good government is reflected in its core values of 

accountability, integrity, and reliability. 

The fastest and easiest way to obtain copies of GAO documents at no cost Obtaining Copies of is through GAO’s Web site (www.gao.gov). Each weekday afternoon, GAO 

GAO Reports and posts on its Web site newly released reports, testimony, and 

correspondence. To have GAO e-mail you a list of newly posted products, Testimony go to www.gao.gov and select “E-mail Updates.” 

Order by Phone 	 The price of each GAO publication reflects GAO’s actual cost of 

production and distribution and depends on the number of pages in the 

publication and whether the publication is printed in color or black and 

white. Pricing and ordering information is posted on GAO’s Web site, 

http://www.gao.gov/ordering.htm. 

Place orders by calling (202) 512-6000, toll free (866) 801-7077, or 

TDD (202) 512-2537. 

Orders may be paid for using American Express, Discover Card, 

MasterCard, Visa, check, or money order. Call for additional information. 

Contact: To Report Fraud, 

Waste, and Abuse in Web site: www.gao.gov/fraudnet/fraudnet.htm 

E-mail: fraudnet@gao.gov

Federal Programs Automated answering system: (800) 424-5454 or (202) 512-7470 

Ralph Dawn, Managing Director, dawnr@gao.gov, (202) 512-4400 Congressional U.S. Government Accountability Office, 441 G Street NW, Room 7125 

Relations Washington, DC 20548 

Chuck Young, Managing Director, youngc1@gao.gov, (202) 512-4800 Public Affairs U.S. Government Accountability Office, 441 G Street NW, Room 7149 

Washington, DC 20548