Loss of Program or Institutional Accreditation: A Compliance Guide

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1 Risk Research Bulletin Loss of Program or Institutional Accreditation: A Compliance Guide Student lawsuits over accreditation of colleges or academic programs are on the rise. Consider the following: Graduate students alleged that the Chicago School of Professional Psychology misled them into believing that the Los Angeles campus had the same accreditation as the main campus in Chicago Students alleged that John Tyler Community College did not fulfill its promise to obtain accreditation for its surgical technology program Current and former students alleged that Doña Ana Community College never told them that its nursing program was on accreditation warning status Although relatively infrequent, these lawsuits are expensive and difficult to defend and resolve. Students typically seek return of tuition, lost earnings, and the costs of moving and transferring to another program. And damages add up quickly when multiplied by the number of students in a program. For example, in 2013, Virginia Western Community College settled claims brought by 73 former nursing students for $2.3 million. Colleges may bear significant losses because insurance doesn t cover many common exposures in accreditation claims, such as negative publicity, loss of reputation (unless this is included in the losses suffered by the claimants), fraud (because it involves intentional wrongdoing), and return of tuition. Approximately half of U.S. states do not allow insurance coverage for punitive damages, which are intended to punish wrongdoers for intentional and severe misconduct. In some states, consumer protection laws allow students to recover multiples of their damages plus attorney fees. Types of Accreditation Many types of accreditation exist. Six regional accreditors govern the process, each using separate standards to accredit institutions. Professional associations also accredit specific academic programs such as law, education, and physical therapy. In addition, many states accredit both institutions and programs. 1/8 EduRiskSolutions.org

2 Increased Focus on Accreditation A number of factors have increased scrutiny of the accreditation process and make loss of accreditation more likely: Developing a Risk Management Strategy Institutions need to engage their boards of trustees and senior administrators in identifying and monitoring significant risks. The formal process known as enterprise risk management is designed for boards and campus leaders to take a broad view of risks and opportunities related to hazards, operations, finances, and strategic decisions. Institutions err by limiting the review of programmatic accreditation issues to academic administrators and failing to consult with other senior campus administrators-including legal counsel, business officers, and communications-until the problems become critical. Dialogue among administrators is essential to mitigating these risks in the early stages. The potential loss of programmatic-and certainly institutional-accreditation needs to be closely monitored because of its severe consequences. The checklist that follows can help institutions prevent accreditation problems and manage them if they occur. Pressure for accrediting agencies to get tougher. Both the U.S. Senate and House of Representatives held hearings on accreditation of higher education institutions in Sen. Harkin of Iowa questioned the rigor of the accrediting process, pointing out that in , only four of 4,000 U.S. educational institutions lost accreditation. Critics allege accreditors are lax since site visits are conducted by volunteers from peer institutions or programs. In addition, critics contend that the process contains an inherent conflict of interest because colleges pay accreditors to obtain accreditation. Financial pressures at colleges. As the number of high school graduates declines, colleges-both for-profit and non-profit-compete for fewer students. The federal government is pushing colleges to curb tuition increases and focus on whether graduates obtain jobs. These pressures are forcing many colleges to change at a faster rate than ever, rapidly adding programs to increase revenues while eliminating programs with low enrollment to cut costs. In 2013, Moody s downgraded the credit ratings of 36 colleges and upgraded only nine. Although closures of institutions are rare, more colleges are cutting spending on programs, which can jeopardize program accreditation. Students acting as consumers. Students and their families increasingly view college as an investment to obtain an edge in a tight job market. Approximately 70 percent of students graduate with debt averaging almost $30,000. As a result, students are willing to resort to litigation if they believe accreditation problems prevented them from obtaining a job or diminished the value of their degree. Pressure from U.S. Department of Education (ED). ED is pushing for greater influence in the accreditation process because federal financial aid dollars are contingent on accreditation. ED believes that accreditors focus too much on inputs, such as faculty mix and qualifications, rather than outcomes, such as what students learned and whether they obtained jobs in the field. Media coverage. High profile articles in major national publications have influenced the national discussion by highlighting severely troubled institutions that took accreditors years to shut down. Greater demands for transparency. The accrediting process is usually opaque to outsiders. Some accreditors do not publicly disclose institutions or programs that have been placed on warning or probation status. Many institutions do not reveal accreditation difficulties until a program is in serious trouble, catching students by surprise. 2/8 EduRiskSolutions.org

3 Accreditation Risk Management Checklist This checklist is intended for academic administrators, legal counsel, chief financial officers, and risk managers. All have a role in preventing and mitigating accreditation claims. Fill in the appropriate box and note any that are answered no for further discussion and action. Actions Needed A. STATEMENTS ABOUT ACCREDITATION Review disclosure requirements 1. Do academic administrators and legal counsel review the accuracy of written statements to students regarding program accreditation? These statements may appear in admissions materials, course catalogs, websites, or letters to prospective and current students. 2. Have academic administrators and legal counsel investigated whether any outside recruiters, vendors, or student ambassadors are making statements regarding accreditation of the institution or a program? 3. Does the institution disclose to current and prospective students a decision not to pursue program accreditation, even if accreditation is optional? 4. Does the institution disclose to current and prospective students any withdrawals from a program accreditation process? 5. Has the institution investigated whether state laws or accreditor standards require it to disclose adverse accreditation developments to current and prospective students? B. PREVENTING ACCREDITATION PROBLEMS Monitoring early warning signs 1. Do the board of trustees and top administrators regularly ask about any risks that could jeopardize current or future accreditation? 2. Have legal counsel, risk managers, and business officers opened lines of communication with academic administrators to learn about programs with potential accreditation troubles? 3. Have academic administrators looked for early warning signs that could create accreditation problems for the institution or a particular program? 4. Have academic administrators investigated whether there have been significant changes in accreditation standards for institutions or particular programs? 5. If the institution has experienced financial difficulties, has it identified changes in funding or resources that could be a red flag to accreditors? 3/8 EduRiskSolutions.org

4 B. PREVENTING ACCREDITATION PROBLEMS (continued) Common issues that lead to accreditation problems Further Action Actions Needed 1. If the institution has branch or satellite campuses, do programs on those campuses meet the same accreditation standards as the main campus? 2. If the institution has grown rapidly, has it maintained the same level of academic standards across all programs? 3. Is the institution selective enough in admitting students that they will achieve a pass rate on licensing exams that is acceptable to accreditors? 4. If a program requires clinical or field experience, do program leaders have strong relationships with external clinical or field sites so they can place all students? C. MANAGING A POTENTIAL LOSS OF ACCREDITATION Has the institution: 1. Created a cross-departmental team that includes academic administrators, a communications specialist, an attorney, and a business officer or risk manager, or other appropriate individuals to review accreditation concerns or problems? 2. Prepared a communications plan so that the institution provides a unified message? 3. Identified a point person to be the primary spokesperson with students, faculty, and the media? 4. Fully disclosed to current or potential students statements from an accreditor that institutional or program accreditation may be in jeopardy? 5. Anticipated the most likely questions from students and faculty and prepared a written document answering those questions? 6. Considered options to minimize disruption to students who want to transfer such as finding other institutions that will accept the credits of those students? 4/8 EduRiskSolutions.org

5 C. MANAGING A POTENTIAL LOSS OF ACCREDITATION (continued) Have risk managers and/or business officers: Actions Needed 1. Identified the potential costs to the institution if accreditation is lost? 2. Determined which costs are or may not be covered by insurance, such as fraud (if proven), negative publicity, and return of tuition? 3. Developed contingency plans in case accreditation is lost? Has legal counsel: 1. Required that internal communications regarding potential accreditation litigation be routed through counsel so they can be kept confidential? 2. Prepared the college to preserve documents and records related to accreditation in the event of litigation? 3. Identified potential types of lawsuits from students and graduates if accreditation is lost? 4. Determined whether state consumer protection laws would apply to an accreditation-related lawsuit (which can multiply damages and also allow plaintiff attorneys to collect attorney fees)? D. MANAGING A LOSS OF PROGRAM ACCREDITATION Has the institution: 1. tified all students verbally and in writing of the loss of accreditation and the steps it will take? 2. Helped students gain acceptance into other programs? 3. Removed all references to accreditation of the program in written materials? 4. Offered a teach out of the program (if allowed by the accreditor)? 5. Assisted students who have already graduated in finding jobs? 5/8 EduRiskSolutions.org

6 Managing Loss of Program Accreditation: Case Studies CASE STUDY Accounting program on probation leads to lawsuits and closure A university business school faced declining enrollment. The dean decided to open a satellite campus 50 miles away to attract more students into its accounting program. Unfortunately, the satellite program did not meet enrollment and revenue projections. As a result, the school could not hire enough faculty to cover both programs. The school s accreditor became concerned and put the accounting program on probation. Under that accreditor s rules, the school did not have to disclose probation. The dean decided that administrators at the business school should keep the problems quiet to avoid alarming students. As negative publicity mounted, the accreditor re-examined the situation. It became concerned that the school was more interested in preserving its reputation than serving students and took initial steps to withdraw accreditation. Students at the business school filed a lawsuit alleging that the dean and other campus administrators misrepresented the accreditation problems and diminished the value of their degrees. As legal costs mounted and enrollment in the program declined, the university president decided to stop enrolling new students in the accounting program and do a teach out for existing students. Two weeks later, a newspaper article citing unnamed sources revealed the accreditor s action. Reporters descended on the campus. Campus administrators were unprepared and made contradictory statements about the probation status. The lack of accurate information sent students into a panic. Students learned that their failure to graduate from an accredited accounting program would result in significant additional state requirements to take the certified public accountant licensing exam. A number of students decided to transfer and many incoming students forfeited their deposits and enrolled at a rival college with an accredited accounting program. The associate dean filed a lawsuit alleging that the dean retaliated against him for insisting that the school disclose the probation. te: These hypothetical case studies and lessons learned are drawn from the collective experiences of several institutions. 6/8 EduRiskSolutions.org

7 CASE STUDY Nursing program receiving warning obtains provisional status with another national accreditor A college learned that its nursing program was being put on warning -the initial sanction toward loss of accreditation. In response, the college created a cross-departmental team including the CFO, risk manager, legal counsel, dean of nursing, and head of communications. It held a required meeting for all nursing students in which a designated spokesperson informed students of the probation warning and explained steps program leaders were taking to ensure continued accreditation. The college changed all written materials for prospective students to inform them that it was on warning status. Despite the college s best efforts, its relationship with the accreditor soured, and it learned that the nursing program would lose accreditation. The college informed all students in a second required meeting and followed up with a letter to each student in the program. It found another recognized national accreditor, and began its application process. In addition, the college established a relationship with another institution with nursing accreditation that would take its credits for students who wanted to transfer. The college followed up in writing with students on the status of its nursing school s accreditation and gave students the option to transfer if they wished. It held numerous follow-up meetings with students to give them status updates. The college engaged in extensive planning with legal counsel who informed the accreditor that the college planned to seek an injunction unless the accreditor held off withdrawal of accreditation until the end of the academic year. The accreditor eventually backed down, which allowed existing students to earn credits or graduate that year from an accredited program. The college was candid with prospective students about the situation and explained it to them in writing. The college is now provisionally accredited by the other national accreditor, and no current or former students have filed claims. te: These hypothetical case studies and lessons learned are drawn from the collective experiences of several institutions. 7/8 EduRiskSolutions.org

8 Lessons Learned TRANSPARENCY IS CRITICAL Most accreditation lawsuits allege that the institution did not disclose important information to current or prospective students. UE recommends that all institutions disclose adverse developments in accreditation. Transparency builds trust and allows the program to recover. Even though some students may leave, it prevents the snowball effect illustrated in the case study involving the accounting program. INSTITUTIONS NEED PROACTIVE CROSS-DEPARTMENTAL TEAMS At many institutions, the response to accreditation problems is handled only by academic administrators until it is too late. An effective team develops a communication plan that regularly informs students of their options and steps the institution is taking to remedy accreditation problems. INSTITUTIONS NEED TO SHOW THAT THEY CARE ABOUT THE STUDENTS When accreditation problems occur, students and accreditors look to whether the institution genuinely cares about students or is more concerned with protecting its reputation. Students who believe that the institution was candid, did its best to preserve accreditation, and gave them options are unlikely to file accreditation-related lawsuits. EduRisk TM provides education-specific risk management resources to colleges and schools and is a benefit of membership with United Educators (UE). As a memberowned company, UE is committed to helping educational institutions by offering stable pricing, targeted insurance coverage, extensive risk management resources, and exceptional claims handling. Copyright 2014 by United Educators Insurance, a Reciprocal Risk Retention Group. All rights reserved. Acknowledgment This Risk Research Bulletin, Loss of Program or Institutional Accreditation: A Compliance Guide, was written by D. Frank Vinik, an attorney and risk manager who specializes in education. Contents of this document are for members of United Educators only. Permission to post this document electronically or to reprint must be obtained from United Educators. UE /14 8/8 EduRiskSolutions.org