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Troubles are deepening for ITT Educational Services, with the U.S. Department of Education on Monday announcing stricter financial oversight and reporting requirements on the embattled for-profit chain.
In a letter to the company, the department cited federal fraud allegations against two ITT executives and the company’s “failure of the general standards of financial responsibility” in justifying its decision to tighten the screws.
The department already had placed the company under a tighter form of oversight, dubbed heightened cash monitoring. That form of sanction, and an additional 21-day freeze by the department on financial aid payments, toppled Corinthian Colleges, the for-profit chain that collapsed earlier this year. ITT landed on heightened cash monitoring last year for failing to file annual financial information on time.
ITT said last year it would default on credit agreements with banks if the feds imposed an aid freeze of at least five days on the company. Such a freeze does not appear to have occurred, according to the department’s latest letter.
However, the department said it found several discrepancies during its heightened monitoring of the company. Those issues included a failure by ITT to reconcile its federal aid accounts in a timely manner, a lack of written policy to guide that process and conflicting information about Pell Grant awards over several years.
“Taken together, these facts demonstrate a failure by ITT to meet its fiduciary obligations, to properly and timely reconcile Title IV program funds as per the regulations and Federal Student Aid guidance, and to meet the standards of administrative capability required of institutions participating in Title IV, Higher Education Act programs,” the department wrote.
Nicole Elam, a spokeswoman for ITT, said the company was complying with the department's requirements and in the process of addressing the new reporting and administrative matters.
"While the additional requirements will result in an increased administrative burden, the company does not believe they will have a material negative impact on our financial results, or in any manner affect the timely award of financial aid to eligible students or the operation of our campuses," she said.
ITT must now provide additional documentation to the department about federal aid funds. It may only disburse those funds once an academic term has begun and after confirming students' eligibility to the department and that eligible students have attended courses “sufficient to justify the enrollment status.”
The department also is requiring that ITT submit a monthly enrollment roster to the feds, as well as information about all federal aid funds it disbursed during the previous month.
One reason for the tighter oversight, the department said, is fraud charges the U.S. Securities and Exchange Commission filed earlier this year against ITT and two of its top executives. The SEC alleged that the executives concealed massive losses in two student loan programs the company backed.
ITT is facing several other legal challenges, including lawsuits filed by the Consumer Financial Protection Bureau and attorneys general in several states.
The career-oriented for-profit enrolls roughly 50,000 students at 135 campus locations. Last week ITT confirmed it suspended new student enrollments at a handful of its campuses. The company’s national accreditor said it has closed eight locations during the last two years.
Ted Mitchell, the under secretary of education, said in a written statement that the department placed ITT on heightened cash monitoring for failing to meet several responsibilities.
“At the department, we are committed to rigorous accountability of all institutions that participate our federal student aid program,” he said. “We will continue to closely monitor ITT and take additional action as necessary as we keep students’ futures at the heart of every decision we make.”
