Appeal Procedures for Audit Determinations and Program Review Determinations

34 C.F.R. Part ..., Subpart H
in effectEffective: 2024-07-01

34 C.F.R. § 668.111 Scope and purpose.

(a) This subpart establishes rules governing the issuance by the Department of and appeal by an institution or third-party servicer from a final audit determination or a final program review determination arising from an audit or program review of the institution's participation in any Title IV, HEA program or of the servicer's administration of any aspect of an institution's participation in any Title IV, HEA program. (b) This subpart applies to any participating institution or third-party servicer that appeals a final audit determination or final program review determination. (c) This subpart does not apply to proceedings governed by subpart G of this part or to a determination that— (1) An institution fails to meet the applicable statutory definition set forth in sections 435, 481, or 1201 of the HEA, except to the extent that such a determination forms the basis of a final audit determination or a final program review determination; or (2) An institution fails to qualify for certification to participate in the title IV, HEA programs because it does not meet the fiscal and administrative standards set forth in subpart B of this part, except to the extent that such a determination forms the basis of a final audit determination or a program review determination.

34 C.F.R. § 668.112 Definitions.

The following definitions apply to this subpart: (a) Final audit determination means the written notice of a determination issued by a designated department official based on an audit of— (1) An institution's participation in any or all of the Title IV, HEA programs; or (2) A third-party servicer's administration of any aspect of an institution's participation in any or all of the Title IV, HEA programs. (b) Final program review determination means the written notice of a determination issued by a designated department official and resulting from a program compliance review of— (1) An institution's participation in any or all of the Title IV, HEA programs; or (2) A third-party servicer's administration of any aspect of an institution's participation in any Title IV, HEA program.

34 C.F.R. § 668.113 Request for review.

(a) An institution or third-party servicer seeking the Secretary's review of a final audit determination or a final program review determination shall file a written request for review with the designated department official. (b) The institution or servicer must file its request for review no later than 45 days from the date that the institution or servicer receives the final audit determination or final program review determination. (c) The institution or servicer must attach to the request for review a copy of the final audit determination or final program review determination, and must— (1) Identify the issues and facts in dispute; and (2) State the institution's or servicer's position, as applicable, together with the pertinent facts and reasons supporting that position. (d)(1) If the final audit determination or final program review determination in paragraph (a) of this section results from the institution's classification of a course or program as distance education, or the institution's assignment of credit hours, the Secretary relies upon the requirements of the institution's accrediting agency or State approval agency regarding qualifications for instruction and whether the amount of work associated with the institution's credit hours is consistent with commonly accepted practice in postsecondary education, in applying the definitions of “distance education” and “credit hour” in 34 CFR 600.2. (2) If an institution's violation that resulted in the final audit determination or final program review determination in paragraph (a) of this section results from an administrative, accounting, or recordkeeping error, and that error was not part of a pattern of error, and there is no evidence of fraud or misconduct related to the error, the Secretary permits the institution to correct or cure the error. (3) If the institution is charged with a liability as a result of an error described in paragraph (d)(1) of this section, the institution cures or corrects that error with regard to that liability if the cure or correction eliminates the basis for the liability.

34 C.F.R. § 668.114 Notification of hearing.

(a) Upon receipt of an institution's or third-party servicer's request for review, the designated department official arranges for a hearing before a hearing official. (b) Within 30 days of the designated department official's receipt of an institution's or third-party servicer's request for review, the hearing official notifies the designated department official and the parties to the proceeding of the schedule for the submission of briefs by both the designated department official and, as applicable, the institution or servicer. (c) The hearing official schedules the submission of briefs and of accompanying evidence admissible under the terms of § 668.116 (e) and (f) to occur no later than 120 days from the date that the hearing official notifies the institution or servicer.

34 C.F.R. § 668.115 Prehearing conference.

(a) In the event that the hearing official considers a prehearing conference necessary, he may convene a prehearing conference. (b) The purpose of a prehearing conference is to allow the parties to settle or narrow the dispute. A prehearing conference consists of— (1) A telephone conference call; (2) An informal meeting of the parties with the hearing official; or (3) The submission and exchange of written materials by the parties. (c) All prehearing conferences requiring appearances by the parties shall take place in the Washington, D.C. metropolitan area.

34 C.F.R. § 668.116 Hearing.

(a) A hearing is a process conducted by the hearing official whereby an orderly presentation of arguments and evidence is made by the parties. (b) The hearing process consists of the submission of written briefs to the hearing official by the institution or third-party servicer, as applicable, and by the designated department official, unless the hearing official determines, under paragraph (g) of this section, that an oral hearing is also necessary. (c) Each party shall provide a copy of its brief and any accompanying materials to the opposing party simultaneously with the filing of its brief and materials with the hearing official. (d) An institution or third-party servicer requesting review of the final audit determination or final program review determination issued by the designated department official shall have the burden of proving the following matters, as applicable: (1) That expenditures questioned or disallowed were proper. (2) That the institution or servicer complied with program requirements. (e)(1) A party may submit as evidence to the hearing official only materials within one or more of the following categories: (i) Department of Education audit reports and audit work papers for audits performed by the department's Office of Inspector General. (ii) In the case of an institution, institutional audit work papers, records, and other materials. (iii) In the case of a third-party servicer, the servicer's audit work papers and the records and other materials of the servicer or any institution that contracts with the servicer. (iv) Department of Education program review reports and work papers for program reviews. (v) Institutional or servicer records and other materials (including records and other materials of any institution that contracts with the servicer) provided to the Department of Education in response to a program review. (vi) Other Department of Education records and materials. (f) The hearing official accepts only evidence that is both admissible and timely under the terms of paragraph (e) of this section, and relevant and material to the appeal. Examples of evidence that shall be deemed irrelevant and immaterial except upon a clear showing of probative value respecting the matters described in paragraph (d) of this section include— (1) Evidence relating to a period of time other than the period of time covered by the audit or program review; (2) Evidence relating to an audit or program review of an institution or third-party servicer other than the institution or servicer bringing the appeal, or the resolution thereof; and (3) Evidence relating to the current practice of the institution or servicer bringing the appeal in the program areas at issue in the appeal. (g)(1) The hearing official may schedule an oral argument if he or she determines that an oral argument is necessary to clarify the issues and the positions of the parties as presented in the parties' written submissions. (2) In the event that an oral argument is conducted, the designated department official makes a transcribed record of the proceedings and makes one copy of that record available to each of the parties to the proceeding. (h) Any oral argument shall take place in the Washington, DC metropolitan area. (i) Either party may be represented by counsel.

34 C.F.R. § 668.117 Authority and responsibilities of the hearing official.

(a) The hearing official regulates the course of the proceedings and the conduct of the parties following a request for review and takes all steps necessary to conduct fair and impartial proceedings. (b) The hearing official is not authorized to issue subpoenas or compel discovery as provided for in the Federal Rules of Civil Procedure. (c) The hearing official shall take whatever measures are appropriate to expedite the proceedings. These measures may include, but are not limited to, one or more of the following: (1) Scheduling of conferences. (2) Setting time limits for oral arguments and the submission of briefs. (3) Terminating the hearing process and issuing a decision against a party if that party does not meet time limits established by the hearing official. (d) The hearing official is bound by all applicable statutes and regulations. The hearing official may not— (1) Waive applicable statutes and regulations; or (2) Rule them invalid.

34 C.F.R. § 668.118 Decision of the hearing official.

(a) Upon review of the parties' written submissions and termination of the oral argument if one is held, the hearing official issues a written decision. (b) The hearing official's decision states and explains whether the final audit determination or final program review determination issued by the designated ED official was supportable, in whole or in part. (c) The hearing official bases any findings of fact only on evidence properly presented before him, on matters given official notice, or on facts stipulated to by the parties.

34 C.F.R. § 668.119 Appeal to the Secretary.

(a) Within 30 days of its receipt of the initial decision of the hearing official, a party wishing to appeal the decision shall submit a brief or other written material to the Secretary explaining why the decision of the hearing official should be overturned or modified. (b) The party appealing the initial decision shall, simultaneously with its filing of the appeal, provide the opposing party with a copy of its brief or other written material. (c) In its brief to the Secretary, the party appealing the initial decision may submit proposed findings of fact or conclusions of law. However, the proposed findings of fact must be supported by— (1) The admissible evidence already in the record; (2) Matters that may be given official notice; or (3) Stipulations of the parties (d) The opposing party shall file its response to the appeal, if any, with the Secretary within 30 days of that party's receipt of the appeal to the Secretary. (e) The opposing party shall, simultaneously with the filing of any response, provide a copy of its response to the appeal to the party appealing the initial decision. (f) Neither party may introduce new evidence on appeal.

34 C.F.R. § 668.120 Decision of the Secretary.

(a)(1) The Secretary issues a final decision. The Secretary may affirm, modify, or reverse the decision of the hearing official, or may remand the case to the hearing official for further proceedings consistent with the Secretary's decision. (2) The Secretary may delegate the performance of functions under this section to a designated department official. (b) If the Secretary modifies, remands, or overturns the initial decision of the hearing official, the Secretary issues a decision that— (1) Includes a statement of the reasons for this action; (2) Is provided to both parties; and (3) Unless the decision is remanded to the hearing official for further review or determination of fact, becomes final upon its issuance.

34 C.F.R. § 668.121 Final decision of the Department.

(a) In the event that the initial decision of the hearing official is appealed, the decision of the Secretary is the final decision of the Department, unless the hearing official's decision is remanded by the Secretary. (b) In the event that the initial decision of the hearing official is not appealed within the time limit specified in § 668.119(a), the initial decision automatically becomes the final decision of the Department.

34 C.F.R. § 668.122 Determination of filing, receipt, and submission dates.

(a)(1) Appeals and written submissions to a hearing official referred to in this subpart may be hand-delivered, mailed, or filed electronically by use of the Office of Hearings and Appeals Electronic Filing System (OES). (2)(i) Service on the other party of a document required to be served on another party may be made by mail or by hand delivery, or, if agreed upon by the parties, by use of the OES or by any other means agreed to by the parties. A party who agrees to receive a document filed by another party by any means other than service by mail or hand-delivery may limit that agreement to one or more particular documents. (ii) A party who agrees to service of a document through the OES thereby agrees that the notice of such filing provided to the party by the OES suffices to meet any obligation of the filing party under these regulations to provide a copy of that document. (b) All mailed written submissions referred to in this subpart shall be mailed by certified mail, return receipt requested. (c) Determination of filing, receipt, or submission dates is based on the date of hand-delivery, the date of receipt recorded by the U.S. Postal Service, the date a document sent electronically by using the OES is recorded as received as indicated in the confirmation of receipt email for E-filing, or for other means, the date on which the delivery is recorded in the medium used for delivery.

34 C.F.R. § 668.123 Collection.

To the extent that the decision of the Secretary sustains the final audit determination or program review determination, subject to the provisions of § 668.24(c)(3), the Department of Education will take steps to collect the debt at issue or otherwise effect the determination that was subject to the request for review.

34 C.F.R. § 668.124 Interlocutory appeals to the Secretary from rulings of a hearing official.

(a) A ruling by a hearing official may not be appealed to the Secretary until the issuance of an initial decision, except that the Secretary may, at any time prior to the issuance of the initial decision, grant a review of a ruling upon either a certification by a hearing official of the ruling to the Secretary for review or the filing of a petition for review of a ruling by one or both of the parties, if— (1) That ruling involves a controlling question of substantive or procedural law; and (2) The immediate resolution of the question will materially advance the final disposition of the proceeding or subsequent review will be an inadequate remedy. (b)(1) A petition for interlocutory review of an interim ruling must include the following: (i) A brief statement of the facts necessary to an understanding of the issue on which review is sought. (ii) A statement of the issue. (iii) A statement of the reasons showing that the ruling complained of involves a controlling question of substantive or procedural law and why immediate review of the ruling will materially advance the disposition of the case, or why subsequent review will be an inadequate remedy. (2) A petition may not exceed ten pages, double-spaced, and must be filed with a copy of the ruling and any findings and opinions relating to the ruling. (c) A copy of the petition must be provided to the hearing official at the time of filing with the Secretary, and a copy of a petition or any certification must be served upon the parties as provided in § 668.122(a)(2). The petition or certification must reflect this service. (d) If a party files a petition under this section, the hearing official may state to the Secretary a view as to whether review is appropriate or inappropriate by submitting a brief statement addressing the party's petition within 10 days of the receipt of that petition by the hearing official. A copy of the statement must be served on all parties in the manner provided in § 668.122(a)(2). (e) A party's response to a petition or certification for interlocutory review must be filed within 7 days after service of the petition or statement, as applicable, and may not exceed 10 pages, double-spaced, in length. A copy of the response must be served on the parties and the hearing official as provided in § 668.122(a)(2). (f) The filing of a petition for interlocutory review does not automatically stay the proceedings. A stay during consideration of a petition for review may be granted by the hearing official if that official has certified or stated to the Secretary that review of the ruling is appropriate. The Secretary may order a stay of proceedings at any time after the filing of a request for interlocutory review. (g) The Secretary notifies the parties if a petition or certification for interlocutory review is accepted, and may provide the parties a reasonable time within which to submit written argument with regard to the merit of the petition or certification. (h) If the Secretary takes no action on a petition or certification for review within 15 days of receipt of it, the request is deemed to be denied. (i) The Secretary may affirm, modify, set aside, or remand the interim ruling of the hearing official. (j) The Secretary may delegate to a designated department official the functions described in paragraphs (f) through (i) of this section.

34 C.F.R. § 668.125 Proceedings to recover liabilities owed relating to approved borrower defense claims.

(a) If the Department determines that the institution is liable for any amounts discharged or reimbursed to borrowers under the discharge process described in § 685.408, it will provide the institution with written notice of the determination and the amount and basis of the liability. (b) An institution may request review of the determination that it is liable for the amounts discharged or reimbursed by filing a written request for review with the designated department official no later than 45 days from the date that the institution receives the written notice. (c) Upon receipt of an institution's request for review, the designated official arranges for a hearing before a hearing official. (d) Except as provided in this section, the proceedings will be conducted in accordance with §§ 668.115 to 668.124 of this subpart. For purposes of this section references in §§ 668.115 to 668.124 to a final audit determination or a final program review determination will be read to refer to the written notice provided under paragraph (a) of this section. (e) In place of the provisions in § 668.116(d), the following requirements shall apply: (1) The Department has the burden of production to demonstrate that loans made to students to attend the institution were discharged on the basis of a borrower defense to repayment claim. (2) The institution has the burden of proof to demonstrate that the decision to discharge the loans was incorrect or inconsistent with law and that the institution is not liable for the loan amounts discharged or reimbursed. (3) A party may submit as evidence to the hearing official only materials within one or more of the following categories: (i) Materials submitted to the Department during the process of adjudicating claims by borrowers relating to alleged acts or omissions of the institution, including materials submitted by the borrowers, the institution or any third parties; (ii) Any material on which the Department relied in adjudicating claims by borrowers relating to alleged acts or omissions of the institution and provided by the Department to the institution; and (iii) The institution may submit any other relevant documentary evidence that relates to the bases cited by the Department in approving the borrower defense claims and pursuing recoupment from the institution.

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