Washington Post 2013 Annual Report Download - page 26

Whether as a result of changes in the laws and regulations governing Title IV programs, a reduction in Title IV program
funding levels or a failure of schools within KHE to maintain eligibility to participate in Title IV programs, a material
reduction in the amount of Title IV financial assistance available to the students attending those schools could have a
material adverse effect on Kaplan’s business and operations. In addition, any development that has the effect of making
the terms on which Title IV financial assistance is made available materially less attractive could also have a material
adverse effect on Kaplan’s business and operations.
U.S. Senate Committee Review. In the summer of 2010, the Chairman of the HELP Committee commenced an industry-
wide review of for-profit higher education institutions. The institutions owned and operated by KHE were included in the
scope of this industry-wide review. In July 2012, the majority staff of the Committee issued a final report to conclude the
review that included observations and recommendations for federal policy, but did not include or endorse any specific
proposed legislation or regulations. The ultimate outcome of the review and any implications for the operation of KHE’s
institutions remain unknown.
Other committees of Congress have also held hearings into, among other things, the standards and procedures of
accrediting agencies, credit hours and program length and the portion of U.S. Federal student financial aid going to for-
profit institutions, and enrollment of active-duty military personnel and veterans. A number of legislators have variously
requested the U.S. Government Accountability Office to review and make recommendations regarding, among other
things, student recruitment practices; educational quality; student outcomes; the sufficiency of integrity safeguards against
waste, fraud and abuse in Title IV programs; and the percentage of proprietary institutions’ revenue coming from Title IV
and other U.S. Federal funding sources. In addition, concerns generated by congressional or other activity or media
reports may adversely affect enrollment in for-profit educational institutions.
Kaplan cannot predict the extent to which these activities could result in further investigations, legislation or rulemaking
affecting its participation in Title IV programs, other governmental actions and/or actions by state agencies or legislators
or by accreditors. If any laws or regulations are adopted that significantly limit Kaplan’s participation in Title IV programs
or the amount of student financial aid for which Kaplan’s students are eligible, then Kaplan’s results of operations and
cash flows would be adversely and materially impacted.
Program Reviews, Audits and Investigations. Kaplan’s schools are subject to audits or program compliance reviews
by various external agencies, including the ED, its Office of the Inspector General and state and accrediting agencies.
While program reviews may be undertaken for a variety reasons, they are performed routinely as part of regulatory
oversight of institutions that participate in Title IV or state student funding programs. If the ED or another regulatory agency
determines that an institution has improperly disbursed Title IV or state program funds or violated a provision of the Higher
Education Act or state law or regulations, the affected institution may be required to repay such funds to the ED or the
appropriate state agency or lender and may be assessed an administrative fine and be subject to other sanctions.
Although Kaplan endeavors to comply with all U.S. Federal and state laws and regulations, Kaplan cannot guarantee
that its interpretation of the relevant rules will be upheld by the ED or other agencies, or upon judicial review.
In September 2008, the ED began a program review at KHE’s Broomall, PA, campus. The ED has delayed issuing a final
report on this review, pending the completion of a separate inquiry regarding the program from the U.S. Attorney’s Office
for the Eastern District of Pennsylvania. In July 2011, Kaplan resolved the inquiry with the U.S. Attorney’s Office. The ED
has not yet issued a final report on this review. No assurance can be given that the ED’s final report will not have a
significant adverse effect on Kaplan’s ability to continue to operate this school. See further discussion in Item 3. Legal
Proceedings.
The ED also began a program review in October 2007 at KHE’s Pittsburgh, PA, location. Kaplan has responded to all
requests for information and is cooperating fully in this review. The ED has not yet issued a final report on this review. No
assurance can be given that the ED’s final report will not have a significant adverse effect on Kaplan’s ability to continue
to operate this school.
In September 2009, the ED began a program review of Kaplan University at its offices in Fort Lauderdale, FL. In May
2012, the ED issued a preliminary report containing several findings that required Kaplan University to conduct additional
file reviews and submit additional data. In January 2013, Kaplan submitted a response to the ED’s data request. In
December 2013, the ED issued its Final Program Review Report determining that Kaplan University was required to repay
a nominal sum.
In addition, in August 2012, the ED notified Kaplan University that it was conducting an offsite program review focused
solely on Title IV verification processes, and the ED began this review in September 2012. In November 2012, the ED
issued a Program Review Report containing one finding and requesting that Kaplan University update its verification policy
and report on certain students whose verifications were not properly coded. In January 2013, Kaplan submitted a
8GRAHAM HOLDINGS COMPANY