Washington Post 2014 Annual Report Download - page 24

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.
Other committees of Congress have also held hearings addressing, 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. 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, 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.
On July 16, 2013, the ED notified KHE that it would conduct a remote program review known as a “desk audit” with
respect to the KHE’s Houston campus. The Department’s staff did not visit the campus, but instead reviewed information
and data from its offices. The ED indicated that the period under review was 2008 through 2013 and focused on the
admission and qualification of Ability to Benefit (ATB) students, who are students without proof of graduation from high
school or its equivalent. Consistent with broader KHE policy, the Houston campus has not accepted ATB students since
2009. In May 2014, the ED issued a Final Program Review Determination with no finding of any violations.
From July 21, 2014, through July 25, 2014, the ED conducted a program review of KHE’s Mount Washington College.
The review resulted in an expedited Final Program Review letter that made certain findings of non-compliance. Mount
Washington College corrected and resolved all findings prior to the Final Program Review letter, and there was no
material liability or impact to the campus operations. This program review is now closed.
On January 22, 2015, the ED announced that it will conduct a program review of Kaplan University, beginning
on February 23, 2015. On February 19, 2015 the ED notified KHE that it will conduct a program review at KHE’s San
Antonio, TX location, beginning in March 2015. The reviews will assess Kaplan’s administration of its Title IV, HEA
programs and will initially focus on the 2013 to 2014 and 2014 to 2015 award years. Kaplan cannot at this time
predict the outcome of this review, when it will be completed or any liability or limitations that the ED may place on
Kaplan University or KHE San Antonio as a result of these reviews.
Institutional and Programmatic Accreditation. Accreditation is a process through which an institution submits itself to
qualitative review by an organization of peer institutions. Pursuant to the Higher Education Act, the ED relies on
accrediting agencies to determine whether the academic quality of an institution’s educational programs is sufficient to
8GRAHAM HOLDINGS COMPANY