U.S.Department of Education Staff Report

to the

Senior Department Official on Recognition Compliance Issues

Recommendation Page

  1. Agency: Accrediting Council for Independent Colleges and Schools ( 1956 / 2013)
    (The dates provided are the date of initial listing as a recognized agency and the date of the agency’s last grant of recognition.)
  2. Action Item: Other Report
  3. Current Scope of Recognition: The accreditation of private postsecondary institutions offering certificates or diplomas, and postsecondary institutions offering associate, bachelor’s, or master's degrees in programs designed to educate students for professional, technical, or occupational careers, including those that offer those programs via distance education.
  4. Requested Scope of Recognition: No change in scope of recognition is requested.
  5. Date of Advisory Committee Meeting: 02/24/2021
  6. Staff Recommendation: Terminate recognition.

    When Secretary Betsy DeVos issued her decision to reinstate the agency's recognition on November 21, 2018, she directed the agency to submit a monitoring report on Sections 602.15(a)(1), 602.16(a)(1)(i), 602.16(a)(1)(vii), and 602.19(b) of the Secretary's Criteria for Recognition (Criteria). ACICS submitted the monitoring report on December 20, 2019. After review of the monitoring report, Department staff determined that one or more deficiencies potentially existed in the agency's compliance with the Criteria or the agency's effective application of those Criteria. Therefore, Department staff processed the monitoring report in accordance with the review procedures set forth in Section 602.33.

    The monitoring report submitted by the agency fails to demonstrate compliance with Sections 602.15(a)(1) and 602.19(b).

    NOTE: The agency’s noncompliance with Sections 602.15(a)(1) and 602.19(b) provides a stand-alone basis for termination even if the agency were found to be in compliance (or substantial compliance) with the other criteria under review at this time (i.e., the criteria under review in the RNU Inquiry, the Capacity Inquiry and the Compliance Report). However, the cumulative effect of the noncompliance in those other inquiries and report provides additional support for the sanction of termination and for the Department staff’s conclusion that any further extension to demonstrate compliance is not warranted.
  7. Issues or Problems: Additional information is requested for the following questions. These issues are summarized below and discussed in detail under the Staff Analysis section.

    [602.15(a)(1)]--The agency failed to demonstrate that the agency has the administrative and fiscal capability to carry out its accreditation activities in light of its requested scope of recognition.
    [602.16(a)(1)(i)]--The agency has standards in place regarding student achievement but did not demonstrate that it adheres with fidelity to those standards.
    [602.19(b)]--The agency failed to demonstrate that it has a set of effective monitoring and evaluation approaches that enables the agency to identify problems with an institution's continued compliance with agency standards and that takes into account institutional or program strengths and stability.

Executive Summary

PART I: GENERAL INFORMATION ABOUT THE AGENCY

The Accrediting Council for Independent Colleges and Schools (ACICS) is an institutional accrediting agency that was founded in 1912. The agency currently accredits approximately 73 main and branch campuses across the United States and in Puerto Rico. The agency’s recognition enables its institutions to establish eligibility to receive Federal student assistance funding under Title IV of the Higher Education Act of 1965, as amended. Consequently, the agency must meet the Secretary’s separate and independent requirements as part of the recognition review process.


Recognition History

The Secretary of Education first recognized ACICS in 1956 under the agency’s former name, the Accrediting Commission for Business Schools. Since that time, the Secretary periodically reviewed the agency and granted it continued recognition until Secretary John B. King Jr. denied recognition effective December 12, 2016. After a court decision remanded the recognition decision back to the Department for review of additional information and documentation, Secretary Betsy DeVos reinstated the agency's recognition on November 21, 2018, to include the submission of a compliance report and monitoring report in a year.

ACICS submitted the compliance report on December 19, 2019 (“Compliance Report”) and the monitoring report on December 20, 2019 (“Monitoring Report”). In its review of the Monitoring Report, Department staff determined that one or more deficiencies potentially existed in the agency's compliance with the Secretary's Criteria for Recognition or the agency's effective application of those Criteria, and therefore processed the monitoring report in accordance with the review procedures set forth in Section 602.33.

In addition to the reviews of the Compliance Report and Monitoring Report, there are two inquiries under Section 602.33 occurring at the same time: the inquiry initiated June 19, 2019 related to the review of the financial capacity of ACICS and of two institutions (“Capacity Inquiry”) and the inquiry initiated February 24, 2020 related to the review of Reagan National University (“RNU Inquiry”). Although separate, these reviews have occurred at the same time and there is overlap in the areas of non-compliance.

That monitoring report is the subject of this review. The Department received four public comments in response to a Federal Register Notice invitation for comment.


PART II: SUMMARY OF FINDINGS

602.15 Administrative and fiscal responsibilities

The agency must have the administrative and fiscal capability to carry out its accreditation activities in light of its requested scope of recognition. The agency meets this requirement if the agency demonstrates that--

(a) The agency has--

(1) Adequate administrative staff and financial resources to carry out its accrediting responsibilities;

On November 21, 2018, Secretary Betsy DeVos issued her decision on the recognition status of ACICS, which included the additional monitoring of agency compliance with four of the Secretary's Criteria for Recognition. This section is one of the four sections in which the agency was required to provide information and documentation for monitoring purposes. Specifically, the Secretary adopted the recommendation of the senior Department official (SDO) to require the agency to submit its audited financial records and a report demonstrating the adequacy of its staffing in the context of its institutional membership.

In response to the Secretary's decision, the agency provided information and documentation related to its administrative and fiscal capability to carry out its accreditation activities in light of its requested scope of recognition. With regard to administrative capability, the agency provided a narrative response and its organizational chart (Exhibit 8), staff resumes and job descriptions (Exhibit 9), and staff training (Exhibit 10). In its narrative response, ACICS states that the 10 full-time and one part-time employees are sufficient to carry out the accreditation activities for the agency's membership, which includes 70 institutions (100 main and branch campuses).

Regarding fiscal capability, the agency provided a narrative response and its audited financial statements for fiscal years 2017 and 2018 (Exhibit 3), the draft financial statements and governance letter for 2019 (Exhibits 4 and 5), its current budget and projections through 2023 (Exhibits 1 and 6), and its reserve account statement (Exhibit 7). Although the documentation indicates that the agency is currently operating at a deficit and is projected to do so until 2023, ACICS reported sufficient reserves to cover the expected operating deficits, and the level of those reserves are in line with other similarly sized accrediting agencies. The documentation submitted includes the November 2019 reserve account statement for its investment portfolio. Because ACICS is dependent on its investment portfolio to cover operating deficits, the performance of that portfolio is a significant element in the agency's financial stability. Please provide the following with your response to this draft staff analysis:
1. Investment statements covering the period from December 1, 2019 through the date your response is submitted (or the most recent available date); and
2. Plans to address operating deficits in the event of current and/or long-term negative impact from COVID-19 on your investment portfolio.

The financial projections included within the agency's budget reflect a measured growth at a realistic level, which projects that the operating deficits will be eliminated by 2024. When it submitted its documentation to the Department, ACICS submitted budget estimates for fiscal year July 1, 2019 - June 30, 2020, and draft financial statements for fiscal year ended June 30, 2019. Based on the financial documentation that has been reviewed by Department staff, it appears that ACICS currently has sufficient financial resources to carry out its accrediting responsibilities; however, the Department requires updated information to complete its review. Accordingly, please provide the following additional documents in your response to this draft staff analysis:
1. Actual operating results for the period July 1, 2019 through March 31, 2020;
2. Updated budgets through December 31, 2023; and
3. Final audited financial statements for fiscal year end June 30, 2019.

Analyst Remarks to Response:

In response to the draft staff analysis, the agency provided additional information and documentation concerning its administrative and fiscal capacity. Regarding fiscal capability, the agency provided a narrative response and its audited financial statements for fiscal year 2019 (Exhibit 21), its current budget and projections through 2024 (Exhibits 19 and 20), and its reserve account statement for the period December 1, 2019 to July 31, 2020 (Exhibit 18). ACICS submitted its investment account statement for the period August 1, 2020 to November 30, 2020 (Exhibit 3) and its audited financial statements for fiscal year 2020 (Exhibit 2) in the monitoring report submitted December 21, 2020. ACICS submitted its allocation from the reserve account to fund operating expenses on a year-to-year basis from January 2015 to June 2019 (Exhibit 15) in its response to the Capacity Inquiry submitted October 15, 2019, and its audited financial statements for fiscal year 2016 (Exhibit 55) in the petition for recognition submitted October 3, 2017. ACICS’ financial statements show a consistent downward trend in net assets and change in net assets for operations during the last five years. Revenues were $11,723,247 and $1,362,251, respectively for June 30, 2016 and June 30, 2020, and expenses were $12,812,255 and $3,569,627, respectively for June 30, 2016 and June 30, 2020. Thus, revenues have dropped by more than 88% from June 30, 2016 to June 30, 2020, while expenses have only dropped by 72% for the same period. ACICS has had losses each of the five years over a million dollars, with a decrease in net assets for June 30, 2020 of $2,207,376. ACICS’ net assets were $15,712,691 and $8,724,442, respectively for June 30, 2016 and June 30, 2020, which is a decrease of 44%. ACICS has been able to maintain its operations by drawing funds from its investment portfolio, which have decreased by almost 33% during this same time period. The trend demonstrated by this analysis is consistent with the statements made by Michelle Edwards, President and CEO of ACICS, to the Council for Higher Education Accreditation (CHEA) in June 2019, as reported by Inside Higher Ed and The Chronical of Higher Education (provided by Department staff as exhibits). The Department staff has no basis to believe that ACICS will be able to turn around its precarious financial situation. The Department staff does not believe that this situation can be resolved simply by controlling expenses because at some point restricting spending will (if it has not already) compromise administrative capability. Also see concerns raised by three third-party comments, Written Comment #1 Coalition, Written Comment #2 New America, and Written Comment #3 23 Attorneys General, concerning fiscal and administrative capability, as required by this section. In addition to this Monitoring Report, ACICS has not demonstrated via the Capacity Inquiry and RNU Inquiry that the agency’s review and monitoring processes and procedures adequately identify compliance issues, which therefore calls into question the agency’s administrative and fiscal capabilities.

602.16 Accreditation and preaccreditation standards

(a) The agency must demonstrate that it has standards for accreditation, and preaccreditation, if offered, that are sufficiently rigorous to ensure that the agency is a reliable authority regarding the quality of the education or training provided by the institutions or programs it accredits. The agency meets this requirement if -

(1) The agency's accreditation standards effectively address the quality of the institution or program in the following areas:
(i) Success with respect to student achievement in relation to the institution's mission, which may include different standards for different institutions or programs, as established by the institution, including, as appropriate, consideration of course completion, State licensing examination, and job placement rates.

On November 21, 2018, Secretary Betsy DeVos issued her decision on the recognition status of ACICS, which included the additional monitoring of agency compliance with four of the Secretary's Criteria for Recognition. This section is one of the four sections in which the agency was required to provide information and documentation for monitoring purposes. Specifically, the Secretary adopted the recommendation of the senior Department official (SDO) to require the agency to submit a report detailing the function and effectiveness of the Placement Verification Program (PVP) and the agency's actions taken based on the report.

In response to the Secretary's decision, the agency provided information and documentation related to its success with respect to student achievement in relation to the institution's mission, which may include different standards for different institutions, as established by the institution, including, as appropriate, consideration of job placement rates, in the form of a report on the PVP. The agency provided its narrative response, report on the function and effectiveness of the PVP (Exhibit 11), and its actions taken based on the PVP (Exhibit 12). The PVP report includes all the elements noted for inclusion in the Secretary's decision. ACICS noted in the PVP report that it has validated over 88% of the placements submitted and that the remainder reflects submissions that were invalid, non-responders, or unable to verify. The agency also stated that it has made upgrades to the PVP, to include the establishment of an independent review of contested placement data, addition of a Mandarin Chinese language option, upgrades to the Administrative Dashboard, tracking of total non-responders, submission of third-party verification, and extractable reports.

The two examples provided demonstrate that the agency took action when it found potential fraud in the PVP submissions (Exhibit 12). The actions were both from decisions at the July 2018 council meeting, and the Department requests all accreditation action letters since that date that included actions responsive to PVP submissions, if applicable.

The resolution letter submitted for one of the examples includes an action to place the institution, which is a branch campus of a main campus, on compliance warning (Exhibit 12, pages 9-42). That decision to place the main campus and its seven branch campuses on a compliance warning was based on the institution's ability to resolve only 33 of the 107 findings from the site visits to the campuses. Many of the outstanding issues appear significant, to include "lack of clarity on the distance education activity administration and delivery at the campus, to include the facilitation of online courses for students at its branch campus;" the inability to verify the information and data included in the 2018 Campus Activity Report (CAR); insufficient personnel; failure of required notification to ACICS of all non-substantive changes; failure to follow published admissions policies and procedures; and failure to follow published refund policies. In addition to those outstanding issues, there were findings at multiple campuses of the inability to verify placement waivers, which would affect any review of student achievement. Even though the branch campus was able to resolve the specific PVP misrepresentation issues noted in the original July 2018 action, it is unclear how the agency's removal of the show cause order, but the action to place the main campus and branch campuses on a compliance warning for issues that include the inability to verify placement waivers demonstrates that the agency's student achievement standards are sufficiently rigorous to ensure that the agency is a reliable authority regarding the quality of the education or training provided by the institutions it accredits.

Analyst Remarks to Response:

In response to the draft staff analysis, the agency provided additional information and documentation concerning how its standards address student achievement. ACICS provided a detailed narrative of the overall effectiveness of the Placement Verification Program (PVP). The agency stated that there has been no systemic placement misrepresentation noted since 2018, therefore no other accreditation actions responsive to PVP submissions have been necessary. The agency provided examples of communication to institutions over discrepancies with submissions to the PVP (Exhibit 22) as documentation of the agency’s monitoring activities in this area. ACICS also provided a detailed narrative of the review of the institutional example previously provided as documentation to demonstrate that the agency acted when it found potential fraud in PVP submissions. ACICS explained that the institution (a branch of a main campus that has six other branches) corrected the data integrity issues after two reviews by the council over nine months. During the course of the institution’s data integrity review, the main campus and branch campuses underwent the renewal of accreditation process, which uncovered a large number of areas of noncompliance, which was specifically noted by the agency in its accreditation action letter (Exhibit 12, page 10). ACICS stated that the large number of concerns was the result of findings noted across the system and repeated under individual campuses. There were some repeat findings across the system, but as noted in the draft staff analysis, the areas of noncompliance appeared to be significant, not just high in volume, which ACICS did not address. In the RNU Inquiry, ACICS stated in its narrative response to Section 602.19(b) that it directed RNU to show cause why its accreditation should not be revoked for “given the sheer number of findings of noncompliance” that were not resolved from the site visit report. RNU was found noncompliant with 18 out of an original 28 areas of concern and the institution in Exhibit 12 was found noncompliant with 74 out of the original 107 areas across the seven campuses. Instead, ACICS asserted that it used its “professional judgment” that the institution needed more time to demonstrate compliance with the agency’s standards, to include areas related to student achievement, and therefore, vacated the show cause order and placed the institution on compliance warning. As noted in the draft staff analysis, it is unclear how removing a more severe action (show cause) and replacing it with a lesser one (compliance warning) – when the main and branch campuses had multiple, distinct findings of noncompliance related to student achievement – demonstrates that the agency’s standards are sufficiently rigorous to ensure that the agency is a reliable authority regarding the quality of the education or training provided by the institutions is accredits. Department staff has found the agency in substantial compliance with this section because although the agency has standards in place regarding student achievement, it did not demonstrate that it adheres with fidelity to those standards.

(a)(1)(vii) Recruiting and admissions practices, academic calendars, catalogs, publications, grading, and advertising.

On November 21, 2018, Secretary Betsy DeVos issued her decision on the recognition status of ACICS, which included the additional monitoring of agency compliance with four of the Secretary's Criteria for Recognition. This section is one of the four sections in which the agency was required to provide information and documentation for monitoring purposes. Specifically, the Secretary adopted the recommendation of the senior Department official (SDO) to require the agency to submit a report that includes a table outlining the problems or concerns identified by the At-Risk Institutions Group (ARIG) and the agency's actions taken based on the report, to specifically include actions regarding noncompliance with the agency's standards in the areas of advertising, recruiting, publication of student achievement data, or overall administrative or fiscal capacity of an institution.

In response to the Secretary's decision, the agency provided information and documentation related to the agency's standards regarding recruiting and admissions practices, academic calendars, catalogs, publications, grading, and advertising, in the form of the ARIG report. The agency provided its narrative response and its ARIG annual report for 2019 (Exhibit 13). The report includes the ARIG recommendations and agency's actions for seven institutions from May 2018 to December 2019, which mostly involved financial concerns or concerns from other accrediting or approval agencies.

602.19 Monitoring and reevaluation of accredited institutions and programs.

(b) The agency must demonstrate it has, and effectively applies, a set of monitoring and evaluation approaches that enables the agency to identify problems with an institution's or program's continued compliance with agency standards and that takes into account institutional or program strengths and stability. These approaches must include periodic reports, and collection and analysis of key data and indicators, identified by the agency, including, but not limited to, fiscal information and measures of student achievement, consistent with the provisions of §602.16(f). This provision does not require institutions or programs to provide annual reports on each specific accreditation criterion.

On November 21, 2018, Secretary Betsy DeVos issued her decision on the recognition status of ACICS, which included the additional monitoring of agency compliance with four of the Secretary's Criteria for Recognition. This section is one of the four sections in which the agency was required to provide information and documentation for monitoring purposes. Specifically, the Secretary adopted the recommendation of the senior Department official (SDO) to require the agency to submit an annual report of the actions and activities of the At-Risk Institutions Group (ARIG) and the agency's actions taken based on the work of the ARIG.

In response to the Secretary's decision, the agency provided information and documentation related to the agency's monitoring and evaluation approaches that enables it to identify problems with an institution's continued compliance with agency standards and that takes into account institutional or program strengths and stability, in the form of a report on the work of the ARIG. The agency provided its narrative response and its ARIG annual report for 2019 (Exhibit 13). The report includes the ARIG recommendations and agency's actions for seven institutions from May 2018 to December 2019.

The actions of the ARIG appear to be primarily in response to information provided or actions taken by other accrediting or approval entities and not as a result of compliance issues identified by the agency's monitoring and evaluation approaches, which has been a prior concern of the Department. As an example, Department staff noted in the draft staff analysis for a separate inquiry of the agency under the process at Section 602.33 (Department Exhibit 1 - ACICS Inquiry Resolution Letter Revised 1-29-2020) that the evaluation and monitoring approaches used by ACICS for Virginia International University (VIU, now known as Fairfax University of America) appeared to be deficient in identifying problems with the institution's compliance with agency standards. Based on the ARIG report and the institutional example, it is not clear that ACICS itself has a set of effective monitoring and evaluation approaches that enables the agency to identify problems with an institution's continued compliance with agency standards and that takes into account institutional or program strengths and stability.

Analyst Remarks to Response:

In its response to the draft staff analysis, ACICS provided information on its monitoring efforts and specifically addressed the Department’s concerns about Virginia International University (VIU, now known as Fairfax University of America). In its response regarding VIU, ACICS asserted that its review demonstrated that the “Triad collaborated exactly as the system is intended to function.” Specifically, ACICS stated that the reviews conducted at two different times by two different educational quality entities under two different sets of standards does not indicate oversight failure. But, the review by the State Council for Higher Education in Virginia (SCHEV) found significant areas of concern regarding faculty-student interaction, peer-to-peer interaction, academic rigor at the graduate level and the comparability of the distance education to residential offerings, which are areas where at least some overlap would be expected. Most of these distance education review areas would not be affected by a difference in the enrollment observed or the six-month difference in when the visit was conducted, as all other parts of the distance education infrastructure (e.g. online platform, faculty, curricula, etc.) would be the same. Therefore, the agency’s review of VIU does not demonstrate that its evaluation approaches are effective at revealing compliance concerns. ACICS also referred to a list of 14 oversight efforts outside of the regular renewal of accreditation activities, including the Campus Accountability Report (CAR) (providing enrollment and student achievement data); the Annual Financial Report (AFR) and audited financial statements; and the review of Cohort Default Rate data, program reviews by the Department, complaints, and substantive changes. However, even with these oversight efforts, ACICS still did not uncover the serious areas of noncompliance with financial capability or educational quality standards identified by other accrediting or approval agencies. To the extent these areas are noted in the ARIG report (Exhibit 13), the ARIG investigation resulted from the findings of other accrediting or approval agencies. Although ACICS described as “perplexing” the Department’s conclusion that the agency has not been successful at identifying compliance concerns, it nevertheless acknowledged that ARIG “is in place to review and address matters of concern that may not have been captured elsewhere in the multitude of ACICS oversight activities.” Yet, not even ARIG review identified the areas of noncompliance identified by the other accrediting or approval agencies. Besides the list of oversight activities, ACICS did not provide any examples of its effective application of those monitoring and evaluation approaches to identify noncompliance by an institution with the agency’s standards. Also see concerns raised by three third-party comments, Written Comment #1 Coalition, Written Comment #2 New America, and Written Comment #3 23 Attorneys General, concerning effective monitoring, as required by this section. In addition to this Monitoring Report, ACICS has not demonstrated via the RNU Inquiry that the agency’s review and monitoring processes and procedures adequately identify compliance issues.

PART III: THIRD PARTY COMMENTS

Staff Analysis of 3rd Party Written Comments

Four written third-party comments were received regarding this agency, with three of the comments reflecting negative views regarding ACICS and one requesting to conduct a forensic audit of ACICS. The commenters include the Attorneys General from 23 States ("23 Attorneys General"), a coalition of 16 non-profit organizations ("Coalition"), a public policy think tank ("New America"), and a Nevada-based non-profit organization.

The comment submitted from the Nevada-based non-profit organization requesting to conduct a forensic audit of ACICS is not related to the Department’s accrediting agency recognition process and is therefore outside the scope of this review by Department staff.

The three other comments referenced the decision of the prior administration to deny recognition to ACICS in December 2016 and make the request for the recognition of ACICS to be terminated in this review. These three comments all state that ACICS has failed to demonstrate compliance since the prior decision to deny recognition, and also discuss actions or examples of noncompliance noted in prior and other reviews by the Department, such as financial and administrative capability, monitoring, etc.

All three of the comments tied their areas of alleged noncompliance to Section 602.15(a)(1) of the Secretary's Criteria for Recognition (Criteria), and one tied their concerns to Section 602.16(c). Those comments are referenced in the relevant sections of the Department staff's analysis.

With regard to the issues raised by the comments, the Department has noted non-compliance related to the administrative and fiscal capacity in Section 602.15(a)(1) and review of distance education in Section 602.16(c) in those sections of its analysis.


ACICS provided a response to the comments on December 8, 2020 (attached as ACICS Response to Third-Party Comments). This response did not provide any information beyond what ACICS has already provided within this report and other current reviews to demonstrate compliance with the Criteria.

Two of the commenters complained about the Department’s third-party comment procedure, arguing that the Department should have publicly released ACICS' compliance and monitoring reports, along with the Department staff's analysis. The Department's solicitation of written third-party comments sought comment on ACICS' compliance with the criteria in question pursuant to Section 602.33(c)(4)(iii)(B), not on the agency's compliance or monitoring reports or the Department staff's analysis. The Department followed the regulatory requirements of Section 602.33, which do not provide for the public dissemination of these materials as part of the process of soliciting written third-party comments.