CCD faces fraud investigation

Feds probe claims of financial aid to ineligible students

Katie Kerwin McCrimmon, Rocky Mountain News

Published October 27, 2007 at midnight

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The U.S. Department of Education is investigating allegations of financial aid fraud at the Community College of Denver, including charges that administrators deliberately gave thousands of dollars in aid to ineligible students.

In an August letter that the Rocky Mountain News obtained, Colorado Community College System executives notified the U.S. Department of Education's Office of Inspector General about possible fraud.

"In some cases, it would appear that staff knowingly circumvented processes or guidelines in order to change a student's status to 'eligible.' Nothing has been uncovered that would suggest staff personally benefited from these errors," CCCS officials wrote in the Aug. 22 letter.

Rhonda Bentz, spokeswoman for CCCS, said Friday that system administrators have met once with federal officials, but she said it's not clear how the investigation will proceed or what kind of penalties CCD could suffer if federal officials find proof of fraud.

Criminal or civil?

"At this point, we don't know what the next steps will be. We don't know whether it would be criminal or civil. That is their determination," Bentz said of the U.S. Education Department.

She said community college officials were required by federal law to notify the U.S. Department of Education once an external audit uncovered problems with CCD's financial aid grants. And she said officials had to refer to the financial aid irregularities as possible "fraud" because of the way the federal statutes read.

"We think these are errors, not fraud at this point," Bentz said.

Jim Bradshaw, a spokesman for the U.S. Department of Education said the Office of Inspector General "has a policy of neither confirming nor denying investigations or commenting about the details of an inquiry." He declined to comment further.

Former CCD President Christine Johnson is not named in the letter to federal investigators. And Johnson's lawyer, Laura Schwartz, said that Education Department investigators have not contacted her. She said she has no information indicating that Johnson is the target of a federal investigation.

"It's hard to comment because I haven't seen any of the underlying documents," Schwartz said Friday. "It's fair to say that this whole thing has distressed her (Johnson). It has distressed me. She gave 30 years to the system. How would anybody feel?" Schwartz remains confident that Johnson will be fully exonerated.

Tipster triggered audit

Colorado's community colleges have been under scrutiny for months since Johnson's highly public ouster. After Johnson's departure, community college officials continued probing finances, accounting practices and hiring at CCD.

The final audit, which cost the system $320,000, was released this week. It found numerous problems with CCD's federal financial aid program and pointed the finger at Johnson and other administrators for creating an atmosphere where the "ends justified the means."

Johnson had a passion for bringing first generation and immigrant students into Colorado's gateway institutions for higher learning. When auditors randomly looked at student records, they found several cases where students were receiving financial aid when they didn't qualify. Some had never graduated from high school. Some were not performing academically and were supposed to have their financial aid suspended. But auditors found that officials were allowed to override policies and keep giving financial aid to ineligible students.

Auditors said that failure to comply with regulations for federal financial aid programs could result in an institution having to reimburse the federal government.

"Noncompliance with federal awards can lead to repayment of unauthorized disbursements," auditors wrote.

In this case, auditors estimated that financial aid errors could have cost the federal government about $315,000.

Because the auditors analyzed only a small percentage of CCD's students, the range of fraudulent financial aid distributions could be as low as $3,500 and as high as $1.4 million.

A tipster at CCD triggered the audit after reporting concerns about an adjunct professor who was operating without supervision. The audit then grew in scope.

"During our investigation, the number and seriousness of the allegations increased. Some of the allegations indicated intentional overrides or evasion of controls," auditors wrote.

Schwartz said her client is eager to tell her side of the story, but that she must get all the facts and that their responses will be "measured."

Examples of possible financial aid fraud at Community College of Denver

Snapshot of $320,000 audit at CCD:

• Auditors found that CCD may have handed out up to $1.4 million in fraudulent financial aid. Auditors estimated that the likely dollar amount may be closer to $315,000.

• Of 50 students randomly sampled, 12 were not eligible for financial aid resulting in a monetary error of $53,000.

• After analyzing the 50 students, three received financial aid even though they had no proof of high school diplomas or equivalency degrees.

• CCD has established guidelines for satisfactory academic progress but failed to follow them.

• Among the initial 50 students analyzed, one failed to meet academic requirements for nine semesters in a row but continued to receive financial aid for eight of those semesters.

• When students failed to meet the satisfactory academic progress guidelines, the dean of Enrollment Services overturned denials, which is a violation of policy.

McCrimmonK@RockyMountainNews.com or 303-954-2502

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