Our audit of the Bureau for Private Postsecondary Education (bureau) revealed the following:
One of 40 regulatory entities within the California Department of Consumer Affairs (Consumer Affairs), the Bureau for Private Postsecondary Education (bureau) has been responsible for regulating private postsecondary educational institutions (institutions) in California since 2010. The long and troubled past of the entities that previously performed the same functions as the bureau have been well documented in reports by the California State Auditor and others. In fact, the problems these reports identified were so severe that a former governor vetoed a bill that would have extended the sunset date of the immediate predecessor to the bureau—the Bureau for Private and Postsecondary and Vocational Education—in 2007. Unfortunately, during our current audit of the bureau, we found that many of the problems of the past persist today, four years after the Legislature reestablished the bureau to fill the regulatory void left by the sunset of its predecessor.
The bureau is currently undergoing a sunset review and will cease to exist on January 1, 2015, unless the Legislature determines that it should continue its operations. We believe the Legislature has several options when deciding how best to regulate private postsecondary education in the future. For example, the Legislature could allow the bureau to continue in its current form but require Consumer Affairs to provide it with significantly more assistance and oversight. Alternatively, the Legislature could reduce the bureau's responsibilities by reassigning some of them to other entities that Consumer Affairs oversees. Finally, the Legislature could transfer the powers and duties set forth in the California Private Postsecondary Education Act of 2009 from the director of Consumer Affairs to another state entity or entities. What follows is a summary of our audit of the bureau and our recommendations for either the bureau or the entities that inherit any of its responsibilities.
As of July 2013, the bureau regulated 1,047 institutions. Although its statutory responsibilities include licensing institutions, conducting inspections, and investigating complaints, it has struggled to meet these and other responsibilities designed to protect the public and students. For example, the bureau had more than 1,100 license applications outstanding as of June 30, 2013. Some of these applications had been outstanding for more than three years, significantly delaying the institutions' ability to operate. Further, the bureau took an average of 185 days to process the roughly 3,200 applications it received and closed during fiscal years 2009-10 through 2012-13—three times as long as its goal of 60 days.
The bureau has also struggled to identify proactively and sanction effectively unlicensed institutions, thereby exposing the public to potential risk from institutions that operate illegally. State law requires the bureau to establish a program to identify unlicensed institutions proactively; however, as of January 2014, the bureau had not done so. Moreover, as of October 2013, it had not yet resolved roughly 160 of the 438 complaints against unlicensed institutions that it had received, 13 of which were about three years old. Further, it had issued 14 citations to unlicensed institutions with administrative fines totaling $700,000, yet at the time of this audit, it had only collected $5,000 from one of the institutions. We believe that state law grants the bureau broad enforcement authority and that the bureau could be more aggressive in its efforts to reduce the number of unlicensed institutions operating in the State. Until the bureau takes full advantage of the enforcement alternatives available to it, institutions are likely to continue to operate without its approval.
The bureau has further placed the public at risk because it has performed compliance inspections for far fewer institutions than state law requires and it failed to identify violations during the inspections that it did perform. For example, state law requires the bureau to perform announced inspections of each of the 1,047 institutions it currently regulates at least once every two years. This number would suggest that the bureau would perform an average of about 500 announced inspections per year. However, between January 1, 2010, and August 6, 2013, the bureau performed only 456 announced inspections. Several factors contributed to the bureau's failure to perform compliance inspections, including its delay in implementing regulations and hiring staff. Further, the bureau took an average of almost 300 days to complete the 10 inspections we selected for review, even though its goal is to complete them within 135 days. In addition, our review of the bureau's inspections found that at times it failed to identify violations of state regulations and that it did not ensure that institutions promptly resolved those violations that it did identify.
The bureau also failed to respond appropriately to complaints against institutions, even when students' safety was allegedly at risk. The bureau's data indicate that it had almost 780 complaints outstanding as of October 2013, and that 546 of these had been outstanding more than 180 days. Our analysis of 11 of the roughly 1,300 closed complaints found that the bureau took an average of 254 days to close them. The public may have suffered harm as a result of the bureau's delays in resolving some of these complaints, in part because it did not consistently prioritize complaints involving potential risk to students as its procedures require. For example, the bureau took 502 days to resolve a complaint alleging that an institution was operating as an unapproved flight school and was charging students $30,000 for flight training that they did not receive—a complaint that it should have identified as high priority but did not. We also found that it had closed two of the 20 complaints we reviewed without collecting sufficient evidence that the institutions had resolved the problems in question.
Further, the bureau did not ensure that institutions provide students with accurate information that they can use for making enrollment decisions. State law and regulations require institutions to compile and publish fact sheets that contain brief summaries of statistical information such as completion rates, license examination passage rates, and job placement rates for their students. Each of the five institutions we visited either had errors or could not substantiate the data they reported in their fact sheets. The bureau had conducted on-site inspections for three of these five institutions but did not identify any of the discrepancies we found.
We also noted weaknesses in the bureau's management of the Student Tuition Recovery Fund (recovery fund), which the Legislature established to provide a means of mitigating economic losses students suffer, such as when institutions close or when they fail to provide the services for which students paid. As of July 2013, the bureau had processed 442 recovery fund claims and had 473 claims outstanding. Our review of 29 claims found the bureau took an average of 290 days to process them, despite the bureau chief's stated goal of processing claims in 90 days. In addition, the bureau does not track the information necessary to allow it to identify which stages of the process have contributed to its delays. We also noticed that the bureau made errors in processing seven of these claims. Until the bureau improves its management of the recovery fund, it cannot ensure that it is adequately protecting those students who suffer losses because of institutions' actions.
To protect the public, the Legislature should consider other options for regulating private postsecondary education, including reducing the bureau's responsibilities or transferring them to another state entity.
To improve its licensing process, the bureau should take steps to eliminate its backlog of applications, such as reviewing and streamlining the application process and specifying a time frame for staff to complete their review.
To comply with state law, the bureau should identify proactively and sanction effectively unlicensed institutions. It also should use the enforcement mechanisms that state law provides for sanctioning unlicensed institutions.
To comply with state law and to ensure that it effectively manages its inspections of institutions, the bureau should do the following:
To reduce its backlog of unresolved complaints involving institutions, the bureau needs to establish benchmarks and monitor them to ensure that staff resolve the backlog as expeditiously as possible.
To ensure that it addresses issues that pose potential risk to students, the bureau should ensure that staff follow its procedures for prioritizing complaints.
To ensure that it identifies and obtains sufficient evidence before closing complaints, the bureau should work with Consumer Affairs to establish an investigative training program.
To ensure that institutions provide prospective students with accurate data in their fact sheets, the bureau should direct its staff to review and retain the documentation supporting the fact sheets during its on-site inspections.
To process recovery fund claims in a more timely manner, the bureau should track the information it needs to identify where the delays in its process occur.
Consumer Affairs stated that, in general, it and the bureau concur with our recommendations in chapters 1 and 2. Consumer Affairs also stated it would continue to support the efforts of the bureau to implement the recommendations. However, Consumer Affairs did not believe the title of the report reflected the conditions found at the bureau.