Many Proprietary Schools Do Not Comply With Department of Education's Pell Grant Program Requirements

HRD-84-17: Published: Aug 20, 1984. Publicly Released: Sep 11, 1984.

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In response to a congressional request, GAO assessed the administration of the Pell Grant Program by proprietary schools.

Proprietary schools are usually private, for-profit vocational schools, and the objective of the Pell Grant program at postsecondary proprietary schools is to help financially needy students get training to prepare them for employment. Since the program began in 1973, the number of recipients has grown over twelvefold and, during the 1980 through 1981 school year, proprietary schools received and administered $278 million in federal Pell Grant funds. GAO estimated that school practices, which are not in the best interests of the students and do not comply with program requirements, are costing the government millions of dollars. These practices include: (1) the admission of unqualified students who have a greater tendency to drop out of school before completing their training than do qualified students; (2) the failure to establish or enforce academic program standards; (3) schools' misrepresenting themselves to prospective students; and (4) errors in computing and disbursing Pell Grant awards and refunds. In its efforts to assess whether schools comply with Pell Grant Program requirements, the Department of Education conducts on-site program reviews at some schools each year; however, GAO believes that these reviews are not adequate and are hampered by the agency's limited staff resources.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: Proposed legislation for fiscal year 1988 would require students to have, at a minimum, a General Education Development Certificate.

    Recommendation: In view of the significantly higher dropout rate for students admitted on the basis of the ability-to-benefit criterion, the Secretary of Education should explore the feasibility of developing criteria that would provide schools with a better indication that such students have a reasonable likelihood to complete training. In developing criteria, the Secretary might consider, among other things, the characteristics of successful students enrolled on the basis of ability to benefit, where determinable. If suitable criteria cannot be developed, the Secretary should seek a legislative change to limit admission to students with a high school diploma or General Education Development Certificate and provide that exceptions to this requirement be justified in writing and approved by Education.

    Agency Affected: Department of Education

  2. Status: Closed - Implemented

    Comments: Education's IG revised its manual to improve the reporting system for audits by independent public accountants (IPA). In addition, IG developed codes to analyze the quality of these audits at its headquarters and regional offices.

    Recommendation: The Secretary of Education should request that the Inspector General (IG): (1) gather information on why regional offices reject the audit work and reports of independent public accountants; and (2) use the analysis of this information as a basis for assessing and, when necessary, increasing the quality and reliability of public accountant audit work. The overall result of this effort would be the development of better information for Education to use in monitoring compliance. Such information, together with Education's program reviews and IG audits, should allow Education to better ensure that problems, such as those noted regarding recruiting practices, adherence to academic progress standards, and administering federal funds, are identified and remedial or other enforcement action is taken where appropriate.

    Agency Affected: Department of Education


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