Washington Post 2011 Annual Report Download - page 43

educational programs, financial strength, facilities, recruiting practices and various other matters. Failure to comply with
these requirements could result in the loss or limitation of the eligibility of one or more of the KHE schools to participate in
Title IV programs, a requirement to pay fines or to repay Title IV program funds, a denial or refusal by the DOE to
consider a school’s application for renewal of its certification to participate in the Title IV programs or for approval to add
a new campus or education program, civil or criminal penalties or other sanctions. No assurance can be given that the
Kaplan schools and programs currently participating in Title IV programs will maintain their Title IV eligibility, accreditation
and state authorization in the future or that the DOE might not successfully assert that one or more of such schools or
programs have previously failed to comply with Title IV requirements. The loss of Title IV eligibility by either (1) the single
OPEID unit that includes Kaplan University or (2) a combination of other OPEID units would have a material adverse effect
on Kaplan’s operating results.
• Program Reviews, Audits, Investigations and Other Reviews of KHE Schools Could Result in Findings of Failure to
Comply With Statutory and Regulatory Requirements
KHE schools are subject to program reviews, audits, investigations and other compliance reviews conducted by various
regulatory agencies and auditors, including, among others, the DOE, the DOE’s Office of the Inspector General, accrediting
bodies and state and various other agencies, as well as annual audits by an independent certified public accountant of
each OPEID unit’s compliance with Title IV statutory and regulatory requirements. These compliance reviews can result in
findings of noncompliance with statutory and regulatory requirements that can, in turn, result in proceedings to impose fines,
liabilities, civil or criminal penalties or other sanctions against the school, including loss or limitation of its eligibility to
participate in Title IV programs. Certain KHE schools are the subject of ongoing compliance reviews and lawsuits related to
their compliance with statutory and regulatory requirements and may be subject to future compliance reviews.
KHE schools also may be subject to complaints and lawsuits by present or former students or employees or other persons
related to compliance with statutory, common law and regulatory requirements that, if successful, could result in monetary
liabilities or fines or other sanctions.
• Reductions in the Amount of Funds Available to Students, Including under Title IV Programs, in KHE Schools,
Changes in the Terms on Which Such Funds Are Made Available or Loss or Limitation of Eligibility to Receive
Such Funds
During the Company’s 2011 fiscal year, funds provided under the student financial aid programs created under Title IV
accounted for approximately $1,110 million of the revenues of the schools in KHE. Any legislative, regulatory or other
development that has the effect of materially reducing the amount of Title IV financial assistance or other funds available to
the students of those schools would 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 or other funds are available to
students of those schools materially less attractive could have a material adverse effect on Kaplan’s business and operations.
• Recent Regulatory Changes Could Have a Material Adverse Effect on Kaplan’s Business and Operations
New regulations went into effect on July 1, 2011, relating to various “program integrity” topics. The topics covered in the
new regulations include, but are not limited to, the following:
• Revisions to the incentive compensation rule (see separate risk factor discussed below);
• Expansion of the notice and approval requirements for adding new academic programs and new reporting and
disclosure requirements for academic programs;
• Revision and expansion of the types of activities that are deemed a “substantial misrepresentation” and the ability
of the DOE to enforce the provisions;
• Requirement that states authorize institutions and set forth certain minimum requirements to obtain such
authorizations;
• Limiting agreements between related institutions;
• Defining a “credit hour”;
• Administration of ability-to-benefit examinations;
• Student attendance requirements;
• Proof of high school graduation;
• Verification of information included on student aid applications;
• Satisfactory academic progress;
• Retaking coursework;
• Return of Title IV funds; and
• Disbursements of Title IV funds.
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