Washington Post 2015 Annual Report Download - page 23

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payment to a heightened cash-monitoring or reimbursement system of payment, and may require the institution
to submit to the ED a letter of credit in an amount equal to at least 10% of the institution’s annual Title IV
program funds received by the institution during its most recently completed fiscal year, although the ED could
require a letter of credit based on a higher percentage than 50% of the total Title IV program funds. The ED
historically has evaluated the financial responsibility of the KHE institutions based on the financial results of
KHE. For the 2015 fiscal year, Kaplan expects KHE to have a composite score of 2.97, based on its own
assessment using ED methodology. However, the ED will make its determination once it receives and reviews
KHE’s audited financial statements for the 2015 fiscal year.
Administrative Capability. The Higher Education Act, as reauthorized, directs the ED to assess the
administrative capability of each institution to participate in Title IV programs. The failure of an institution to
satisfy any of the criteria used to assess administrative capability may cause the ED to determine that the
institution lacks administrative capability and subject the institution to additional scrutiny, deny eligibility for
Title IV programs or impose other sanctions. To meet the administrative capability standards, an institution must,
among other things:
• Comply with all applicable Title IV program requirements;
• Have an adequate number of qualified personnel to administer Title IV programs;
• Have acceptable standards for measuring the satisfactory academic progress of its students;
• Have procedures in place for awarding, disbursing and safeguarding Title IV funds and for maintaining
required records;
• Administer Title IV programs with adequate checks and balances in its system of internal control over
financial reporting;
• Not be, and not have any principal or affiliate who is, debarred or suspended from U.S. Federal
contracting or engaging in activity that is cause for debarment or suspension;
• Provide adequate financial aid counseling to its students;
• Refer to the ED’s Office of the Inspector General any credible information indicating that any
applicant, student, parent, employee, third-party servicer or other agent of the institution has engaged in
any fraud or other illegal conduct involving Title IV programs;
• Submit in a timely way all required reports and financial statements; and
• Not otherwise appear to lack administrative capability.
Although Kaplan endeavors to comply with the administrative capability requirements, Kaplan cannot guarantee
that it will continue to comply with the administrative capability requirements or that its interpretation or
application of the relevant rules will be upheld by the ED or other agencies or upon judicial review.
State Authorization. Kaplan’s institutions and programs are subject to state-level regulation and oversight by
state licensing agencies, whose approval is necessary to allow an institution to operate and grant degrees or
diplomas in the state. State laws may establish standards for instruction, qualifications of faculty, location and
nature of facilities, financial policies and responsibility and other operational matters. Institutions that participate
in Title IV programs must be legally authorized to operate in the state in which the institution is physically
located or is otherwise subject to state authorization requirements.
Some states have sought to assert jurisdiction over online educational institutions that offer education services to
residents in the state or to institutions that advertise or recruit in the state, notwithstanding the lack of a physical
location in the state. State regulatory requirements for online education vary among the states, are not well
developed in many states, are imprecise or unclear in some states and are subject to change. If KHE is found not
to be in compliance with an applicable state regulation and a state seeks to restrict one or more of KHE’s
2015 FORM 10-K 8