Georgia for-profit schools enjoy lax policing

For-profit colleges are big business, but state watchdog gives them small-time treatment

Amid numerous investigations, Corinthian Colleges, a giant in the for-profit college industry, is likely headed for bankruptcy and closing or selling off its more than 100 campuses, including several in the Metro Atlanta area under its Everest brand.

More than a dozen states and three federal agencies have been looking into whether the company lied about its educational programs, job-placement rates and finances.

Separate federal and multi-state investigations have targeted other companies that operate ITT Tech, Argosy and Brown Mackie, American InterContinental University, Sanford-Brown and Le Cordon Bleu campuses in Georgia.

Throughout it all, the Georgia state agency responsible for regulating for-profit schools has sat on the sidelines.

Rather than join an investigation or open one itself, the Georgia Nonpublic Postsecondary Education Commission gave each of these colleges and several others under investigation its stamp of approval, certifying they met state standards for educational and fiscal soundness.

An Atlanta Journal-Constitution investigation into the state commission revealed a toothless agency that for years has let about 300 private and for-profit schools it regulates operate in Georgia with almost impunity. The AJC found a supposed watchdog agency with shoddy record-keeping, antiquated processes and slapdash oversight.

The commission has ignored red flags about shaky finances at some schools even though a dozen or so close every year, often as a result of a financial collapse. It also has authorized schools without scrutinizing the quality of education, including colleges with meager graduation rates and some labeled by other authorities as diploma mills.

Even a member of the appointed commission — which meets four times a year, for a few hours at a time — recently characterized many of the for-profit schools as “shams” that dupe consumers.

Yet in the past five years, the commission has not referred a single case to the state attorney general, the AJC learned.

The commission’s deficiencies have left some students with little recourse if employers won’t accept their degree, credits won’t transfer or teachers don’t provide adequate training. Critics say that happens all too often, saddling students with poor job prospects and heavy debt. It also picks the pockets of taxpayers who underwrite the schools through federal tuition grants and low-cost loans for programs that can cost two or three times as much as those at traditional public or private nonprofit colleges.

The commission says it receives only a handful of complaints a year from among the thousands of Georgians who attend the investor-owned schools. But few students know about the commission, much less how to file a complaint. Only one student who spoke to the AJC had ever heard of the NPEC.

Bill Crews, the commission’s long-serving executive director, admits the agency could be more effective — but not, he says, without additional resources. He and another commission board member point a finger at the U.S. Department of Education for not being more aggressive in regulating the schools.

But a recent report published by the National Consumer Law Center pinned abuses on lenient standards and lax oversight by states, even as the number of students attending for-profit institutions has more than tripled in the past two decades.

While all states could improve, Tennessee has been one of the most aggressive in regulating for-profit schools, said NCLC attorney Robyn Smith. It sets minimum placement and completion rates for some programs, among other things.

And dozens of other states have launched investigations.

Georgia is more hands-off than most.

The report lists government investigations and lawsuits involving for-profit schools over the past 10 years. A number of the targeted schools operate campuses in Georgia.

Haphazard records

Perhaps one reason the commission does not find problems is because it doesn’t look.

State law gives its executive director broad investigative powers, including the power to subpoena records and compel school officials to answer questions under oath. But Crews said he has never done that.

In fact, Crews, who has led the agency for about 15 years, at first said he could not issue a subpoena, but he backtracked after he spoke with the Attorney General’s Office. Instead, Crews said he has no need to issue a subpoena.

“Much of what we do, schools will just give us the information we need,” he said. “If there are issues, then they are going to give it to us because we are the regulatory agency.”

But an AJC review of hundreds of pages of annual renewal forms that schools submit to the commission found broad inconsistencies and gaps in how they report tuition, enrollment and finances.

Two competing bartending schools, for example, reported gross tuition and enrollment in entirely different ways. In one case, the gross tuition was handwritten by the commission staffer assigned to the schools.

Deputy Director Carl Camann said the bartending schools filled out the forms incorrectly, but you can’t blame the commission for that.

“These are bartenders. These are not master’s degree people,” he said.

When the AJC attempted to ask additional questions about how the commission accounted for schools’ sloppy reporting, Camann walked out. Crews, Camann’s boss, said schools may fill out some forms incorrectly, but he said the correct information is contained in the more complicated and voluminous “exhibits” that accompany them.

So the AJC looked at the exhibits submitted by 10 regulated schools and found broad inconsistencies in how those records were completed as well.

Some schools declined to report their federal student loan default rate, even though the form requires it.

Ashworth College, an online school based in Gwinnett County, submitted a financial report that didn’t show its total spending for faculty and administration. The company doesn’t reveal salary information, Ashworth’s chief financial officer Joseph Piazza told the AJC.

The report did show $17 million in unexplained operating expenses and nearly $3 million in losses despite taking in $28 million from tuition.

In addition, the school reported millions in negative retained earnings year after year, a sign the school’s investors could be taking more out of the company than it makes. At the end of 2012, the school reported a $16 million deficit in retained earnings.

Despite Ashworth being one of the state’s largest for-profit colleges, Crews said he was unaware of its reported financial condition.

“It sounds like something we should look at,” he said.

Piazza said Ashworth did undergo a difficult period financially. But, he said, “that is now behind us.” Retained earnings reflect in part investments over the past four years in revising the school’s curriculum and updating its website and other technology, he said.

Resources an issue

Some of the commission’s problems, Crews said, are in direct relation to its resources.

It has an annual budget of $787,683. By comparison, the Georgia Board of Regents, which oversees the state’s network of 31 public universities, has a $9 million operating budget for its central office alone.

Since he became executive director, Crews said the number of regulated schools has tripled but his staff has not grown alongside.

“If we were a perfect regulatory agency we would have at least one investigator and probably an in-house attorney,” Crews said.

As it is, the commission has four full-time standards administrators, each responsible for about 84 schools. (Help from a few part-time administrators slightly lowers that number.)

Among their responsibilities, the administrators are to visit each school at least once a year to verify compliance with state standards.

Crews said that happens – most of the time.

But the visits, which are announced in advance, typically last only about two hours. The administrator captures the visits on a single-page, green form, and the hand-written notes often consist of nothing more than a list of student and faculty files that were checked.

The form has a blank for the school’s job-placement rate — one of the standards administrators are to consider in their evaluation — but in the sample of records inspected by the newspaper, no administrator verified the rates.

In one case the administrator simply wrote “overall most already have jobs” while in another the administrator wrote “not available” on the blank.

Administrators also are to consider whether schools provide the programs they’ve described and have a fair and equitable refund policy and can revisit campuses when students file complaints.

But Kelly Norton-Howard said that when she contacted the commission for help, she was told there was not much it could do. So rather than pursue a written complaint, she and classmates Delores Craighead and Carla Satterfield turned to the courts.

The women say they didn’t get the training they expected when they enrolled in January at Premier Medical Careers inaugural 15-week pharmacy technician program in Conyers.

They were attracted by the short program and flexible scheduling.

But after a few class sessions, they said, their instructor — who owns the school with her husband — began showing up later and later for classes, if at all, and then would dismiss class early. When their discussions with the owners over the missed class time were unsuccessful, the students dropped out.

The women filed a lawsuit in small claims court seeking a full refund of their tuition and fees, plus lost wages and travel expenses.

“We just wanted what we paid for,” Norton-Howard said. “We adjusted our lives for this. We made sacrifices, and it just became more and more apparent that that meant nothing.”

The school has offered to refund some of the students’ tuition, but those offers were refused, said David Wood, Premier Medical Careers’ attorney. He also said that a second college employee was available to the pharmacy tech students when the primary teacher was absent.

Wood didn’t provide information about the qualifications of the second employee.

A court hearing in the case is scheduled later this month.

During the AJC’s investigation, the school disappeared from the commission’s listing of authorized schools.

Lax regulation

The problems with the commission’s oversight of these schools are no secret. Last year the state auditor issued a stinging report broadly criticizing the commission’s performance.

Auditors wrote the commission’s process for “assessing the financial viability of institutions … is vague and confusing” to its own employees “and, most likely, the institutions themselves.” Even when the financial forms are submitted, auditors noted that the commission’s “decisions about institutions’ financial viability are not usually based on audited information” and instead rely on “self-reported information.”

Auditors also found that wide discretion given to standards administrators resulted in confusion over how many minimum standards a school must meet in order to receive authorization.

More damning, the auditors found the commission does not place much emphasis on student outcomes when reviewing schools’ applications.

“NPEC has no way of knowing the extent to which students are benefiting from the educational services they receive from authorized schools, and prospective students cannot make fully informed decisions about the institutions they are considering,” the auditors wrote.

Nor are many of these problems recent developments. A 1995 audit cited “inconsistent review and approval of license applications,” unverified financial records and a lax process for investigating student complaints.

“Of 25 complaints reviewed, only five had been thoroughly investigated,” auditors found nearly 20 years ago.

Those auditors also found little documentation of on-site inspections.

Rep. Carl Rogers, R-Gainesville, has chaired the House Higher Education Committee for a little more than two years, but he said he has had little contact with the commission and only a passing familiarity with the for-profit system. He said he had no idea there were more than 300 campuses in Georgia.

“I don’t know how you keep up with that,” he said of the commission’s standards administrators. “No doubt they are understaffed.”

After the AJC forwarded a copy of the state audit to him, Rogers said he touched base with fellow Gainesville politician Gov. Nathan Deal.

“He’s very concerned about it. I am very concerned about it just reading through all of it,” he said.

Rogers said he may call a meeting to get his fellow committee members up to speed.

Committee member Rep. Pat Gardner, D-Atlanta, said she was aware of the problems turned up in the audit, but hopes new policies and a new website would solve some.

“We know there are those (schools) out there that take advantage of students,” she said. “Some of the schools are very much fly-by-night operations.”

Others, she said, likely are doing a good job. She said she believes the commission’s staff can tell the difference, but the state has a culture of taking a light hand to big business.

“Education has become a big business,” she said. “To what extent does the state have the responsibility to regulate business? I tend to think the state does have a role. All of my colleagues don’t.”

Meanwhile, students like Norton-Howard feel failed by a weak regulatory system.

“It’s easy to say the public should look into things before they jump, but if you walk into a place that holds themselves out as a school, you think it’s a school,” Norton-Howard said. “If you don’t know what you don’t know you have no way to check something.”

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