Objectives

To determine whether the State Education Department’s (Department) Bureau of Proprietary School Supervision (Bureau) is verifying that schools have sufficient resources prior to initial licensing; and whether the Bureau is adequately monitoring schools and utilizing its database to look for warning flags of future closings. The audit covers the period January 1, 2016 through July 21, 2020.

About the Program

Non-degree-granting proprietary schools provide training in a broad range of disciplines, such as business, computer/information technology, and English as a second language. The New York State Education Law (Law) requires all non-degree-granting proprietary schools to be licensed by the State, unless they meet certain exemption criteria. Within the Department, the Bureau is responsible for overseeing these proprietary schools, including licensing and monitoring to ensure that their overall educational quality will provide students with the necessary skills to secure meaningful employment and that students’ financial interests – that is, tuition investments – are protected. As of January 15, 2020, there were 391 licensed proprietary schools – 357 private career schools (PCSs) and 34 English as a Second Language schools  – operating in New York State.

For both initial (two-year) and renewal (four-year) license applications, and annually once licensed, schools are required to submit various financial documentation, which the Bureau reviews to ascertain schools’ financial viability. In addition, PCSs are required to submit statistical reports (e.g., student enrollment, completion, and placement) annually, which the Bureau has deemed to be sufficiently constituted by the Occupational Educational Data Survey (OEDS). The OEDS is included in each school’s catalog, which is provided to prospective students to guide them in their program enrollment decisions. The Law also requires the Bureau to conduct an inspection of each school, including records they are required to maintain on site, at least once every licensure period. If the Bureau finds a school is not financially viable or is operating in violation of the Law or the Regulations of the Commissioner of Education (Regulations), it has the authority to impose sanctions, such as probation, and penalties.

Key Findings

While the Bureau makes determinations of schools’ financial viability based on the documentation schools submit, we found that staff are conducting very little to no analysis of the financial documents schools are required to submit. The Bureau, therefore, failed to notice otherwise readily discernible evidence of schools’ weak financial position. For example:

• 47 of the 103 (46 percent) initial license applications that the Bureau approved between January 1, 2016 and December 31, 2019 had at least one deficiency pertaining to the financial documents submitted that should have precluded their approval.
• Our analyses of 330 schools that submitted 2018 fiscal year financial statements identified an average of 70 schools as having financial viability concerns. Despite the risk such schools pose to students’ education goals and tuition investment, the Bureau has not imposed probation or other actions during our scope period from January 1, 2016 through July 21, 2020 to address issues and mitigate risk of unexpected closure.
• Our review of 127 schools that submitted OEDSs with student counts found that, for 92 schools (72 percent), the OEDSs contained apparent math errors and were not rejected despite Bureau officials stating that they look for math errors. Because students rely on this information to make decisions, OEDSs that contain misinformation could result in vulnerable students selecting substandard schools. This could jeopardize future employment prospects and the ability to repay loans, which would affect taxpayer funds if the loans are government backed. In addition, inaccurate OEDSs compromise the Bureau’s ability to evaluate schools’ programs and stability.
• For 38 of the 41 inspection reports we reviewed, the Bureau failed to report on at least one document type that required its review – which makes it unclear if they’re ensuring the schools are fully complying with the Law and Regulations.

Key Recommendations

• Develop policies and procedures to ensure that pre-licensed schools’ financial information and licensed schools’ financial statements are in compliance with requirements and that schools’ financial viability is determined using more objective measures in accordance with the Law and Regulations.
• Utilize the mechanisms identified in the Law, such as placing a school on probation or requiring the school to secure a performance bond, when financial viability issues are identified.
• Develop policies and procedures to ensure that inspections are fully completed and documented and that determinations rendered are consistent.