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Special Report
Who Is Auditing the Auditors?
The GAO joins in the Obama administration’s dirty war against career colleges.
In the past few months this columnist has authored a pair of articles (October 6 and December 1) regarding the assault on career colleges by the U.S. Department of Education. Unlike state-owned public institutions and private, not-for-profit colleges, career colleges operate on a for-profit basis.
It is apparent the current administration has very little use for career colleges. No doubt there is room for improvement among career college practices including improved recruiting policies, increased graduation rates and lower student costs. Of course, the same argument can be made about public institutions and private, not-for-profit colleges.
The Dept of Ed has targeted career colleges by proposing new rules and regulations that would apply only to career colleges and not all college programs. If uniformly applied, the same rules would likely have painful consequences for countless collegiate programs regardless of profit status.
Criticism of career colleges reached a fever pitch during an August 4, 2010 hearing before the Senate Committee on Health, Education, Labor and Pensions. Chaired by Senator Tom Harkin (D-IA), the committee hearing list was stacked with witnesses who were hostile to the mere existence of for-profit colleges.
The tone of the committee hearing was set early by the very critical testimony of the hearing’s first witness, Gregory Kurtz, the managing director of the Office of Forensic Audits and Special Investigations in the U.S. Government Accountability Office. Kurtz buttressed his testimony with a GAO report that alleged deceptive marketing practices at 15 career colleges and accused four of those schools of conducting fraudulent practices.
The GAO conducted undercover tests at “a nonrepresentative selection of” colleges by having four individuals pose as prospective students. These undercover applicants spoke with college admissions representatives about their degree and/or certificate programs (e.g. cosmetology).
The report was damning. It alleged “four colleges encouraged fraudulent practices, such as encouraging students to submit false information about their financial status.” Further, the report claimed “all 15 colleges made some type of deceptive or otherwise questionable statement to undercover applicants.”
However, the GAO report raised serious questions about its methodology and its interpretation of conversations. For example, the report alleged career college representatives encouraged undercover applicants to enter false information in personal financial status disclosures; to not disclose personal funds held by the applicants; or to request subsidized loan amounts larger than necessary to pay college costs.
The problem with these allegations is that there is no discernible incentive for college representatives to engage in these practices. In fact, it would be counter to the best financial interests of the colleges to engage in some of the practices the GAO alleged.
For example, one undercover applicant claimed to have $250,000 in savings. This amount of savings would easily cover the $15,000 tuition of the sought-after college course of instruction. Yet, the GAO alleged the admissions representative encouraged the undercover applicant to not disclose those personal funds and instead apply for subsidized loans.
Here is the problem with that scenario as presented by the GAO. Colleges do not receive any remuneration from a federally subsidized student loan program. There is no finder’s fee, no kick back, no bonus or any other identifiable financial incentive for a college to eschew the certainty of a personal tuition check in favor of the uncertain outcome of a subsidized loan application.
There are also unconfirmed reports that GAO may have conducted undercover investigations at numerous colleges but cherry-picked the results only from schools in which there appeared to be questionable marketing practices.
Armed with these inconsistencies and other questions, this columnist queried the GAO about the agency’s investigation and the report. The GAO is an arm of the Congress and is therefore exempt from the Freedom of Information Act. Nonetheless, questions can still be asked. And they were.
The GAO replied to a series of questions and quietly released a revised version of the original report that answered many but not all questions. A GAO spokesman stated, “Ultimately nothing has changed with the overall message of the report, and nothing has changed with any of our findings.”
In spite of this claim, the changes in the report were significant enough to call into question either the competence or the integrity of the GAO. Consider the following comparisons of original report language versus revised report language (emphasis added).
About the Author
Mark Hyman hosts “Behind the Headlines,” a commentary program for Sinclair Broadcast Group. You can follow him on Twitter at @markhyman.
Letter to the Editor View all comments (11) | Leave a comment
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TennesseeVolunteer| 12.14.10 @ 8:19AM
The real reason these illicit recruiting practices have proliferated is the over generous government aid programs that give these and, even accredited 4 year colleges, too much incentive to get students the federal aid that is out there.
At the four year college level, students are given loans that are way over their amount of part time tuition that basically pay them to go to school. As long as they drag out their education, this "extra compensation" is given to them on top of paying for their tuition. They use this money as income and keep putting off the tax man by never graduating. A good friend of mine is the comptroller for a very good private college and hates allowing these "grifters" to come to the business office and get their checks but it is the law of the land and he can do nothing about it.
These are part time students who have jobs! Some are even Masters degree candidates! This is one reason why the Obama administration wants to forgive student loans if they work in the public sector or in education. This robbery of the treasury and "spreading around the wealth" is just one more way our federal spending goes out the roof.
We have to starve the beast(federal government). when the beast won't audit itself, our tax dollars become wasted under the guise of helping people become educated etc.
Swordsman| 12.14.10 @ 9:44AM
I worked for (and retired from) GAO for 26 years and witnessed that once-respected independent agency slip into politicization and political correctness. Few people know that GAO has a prominent role to play in the new Obamacare law, selecting and vetting the many members that are to serve on the commissions carrying out the various provisions of the law. Few people also know that the new GAO chief actuary Frank Todisco has a master's degree in economics from the New School for Social Research, about as left-wing an educational institution as you can get, and there are many others in responsible positions in GAO with similar backgrounds and inclinations. GAO needs a thorough ideological housecleaning, in my opinion.
EricEssig| 12.14.10 @ 4:49PM
Organizations, like a dead fish, always rot from the head. I'm appalled that the GAO has sunk to this level of performance. I once had the all the respect in the world for the organization. It will be a long time before they earn back that respect.
Tommy K| 12.14.10 @ 9:46AM
Forget the top tier Not-For-Profit schools for a second. Fact: If one compares the vast middle and lower tier Not For Profit, one will find graduation/career placement rates similar to career colleges (with comparable costs to the student). Big difference to the tax payer...Career Colleges pay taxes.
Leroy W| 12.14.10 @ 12:37PM
Mr. Hyman did some great reporting here. Those were absolutely damning changes by the GAO. Every single change shows that the college did not make a false statement or encourage fraud. I wish more people stepped outside of the mainstream media to learn what is really going on in the world. I am saddened that the GAO is proving itself not worthy of trust.
David W| 12.14.10 @ 1:05PM
To what end would the GAO and other government agencies want to spread falsehoods about for-profit and career colleges? Perhaps it is because the teachers are there to teach them skills/vocations and not to teach them a political viewpoint.
Alan W| 12.14.10 @ 3:53PM
Mark, I'm not quite sure why you are fighting Obama on this issue -- it's a sure winner for him. There is so much fraud and abuse in these career colleges that even a Democrat could look good by pointing out their weaknesses!
jrjr| 12.14.10 @ 5:38PM
Just another part of gubbermint. Fraud and Abuse is little more than a budgetary gimmick to show we stooges that it will not cost as much - as if anyone other than the gubbermint's bookkeepers were keeping track. Fraud and Abuse is alive and well in the US and will not be overcome by political police, such a GAO. FBI, EPA, Alphabet Soup, etc.
Nite| 12.14.10 @ 10:05PM
The so called quality colleges like Harvard have become places of liberal indoctrination of the students into Socialism or Marxism. Career colleges meet the needs of students with jobs or who can only go part-time to learn a trade. Sure some may have poor practices, but students are less likely to be indoctrinated to liberal causes. Obama is one controlling freak.
Elle| 12.15.10 @ 10:15AM
This article fails to mention dismal career placement rates and high student loan default rates.
I have a simple solution. Stop government grants and loans to schools which have high default rates. Stop screwing the taxpayers who fund these loans/grants! If you want to attend a for-profit school, then get a private loan and finance it on your own. End of story. Stop wasting my money.
mark| 12.15.10 @ 4:04PM
Excellent comments, particularly the one from the invidividual that retired from the GAO. In my home state, the last game of our Lt Gov was sitting in as auditor, despite no experience. What is not known among the general public is what he failed to audit-certain federal programs distributing large sums of money. He also sits on the board with some Demkrat lawyer deciding who gets money. What's wrong with this? This guy is a Repug, Demkrat lite, and certainly knows how to play the game. The game is played like this: I get myself into a position to decide what gets audited. If you are in a position to advance my career, I turn a blind eye. From there, I use that office for further political gain. An office that should be honorable gets perverted into political opportunism, career politician style.