New Federal Audit Puts Spotlight On Competency-Based Education

By Katy Hopkins, Communications Staff, and Karen McCarthy, Policy & Federal Relations Staff 

The Department of Education’s (ED) current approach to approving direct assessment programs for Title IV aid eligibility threatens the future of innovative program funding, according to a new audit report from the Office of the Inspector General (OIG).


Direct assessment programs use a measure other than seat time—such as a paper, exam, or portfolio—to show what a student knows and can do and to provide evidence that a student has command of a specific subject, content area, or skill. The Higher Education Reconciliation Act of 2005 (HERA) established, for the first time,  that instructional programs that use direct assessment instead of credit- or clock-hours to measure student learning may qualify as a Title IV-eligible program if the assessment is consistent with the school’s or program’s accreditation. The law also states that ED must initially determine the Title IV eligibility of each program for which a school proposes to use direct assessment. 

Interim final rules implementing the change in statute defined a direct assessment program, identified the information a school must include in its application for the program to be approved as a Title IV-eligible program, and limited the use of Title IV funds to learning that results from instruction that the school provides or oversees. 

In 2013 ED issued a Dear Colleague Letter to schools about the direct assessment approval process. According to the letter, ED planned to collaborate with both accrediting agencies and the higher education community to encourage the use of direct assessment programs, to identify promising practices, and to gather information to inform future policy. 

Despite ED’s intent to encourage the use of direct assessment programs, as of January 2014 only five schools had submitted applications for approval. Of those, only two institutions, Capella University and Southern New Hampshire University, were successful in having their direct assessment programs approved for Title IV eligibility. But there is already confusion about the approval process, according to the OIG. 

OIG Audit Findings

The audit findings indicate that, as of January 2014, ED had not adequately addressed the risks of direct assessment programs to the Title IV programs and had not established sufficient processes to ensure that only programs meeting regulatory requirements are approved as Title IV eligible. Failure by ED to address all such risks increases the likelihood that schools might inadvertently create direct assessment programs that are not Title IV eligible. Without comprehensive internal processes for its review of applications, ED runs the risk of not obtaining enough information to sufficiently evaluate the merits of all direct assessment program applications, or may improperly approve or deny a program for Title IV eligibility. 

“[T]he program eligibility decisions the Department is making about these early-implementing schools could set a precedent for future direct assessment programs and have a lasting, negative impact on the Title IV programs,” the OIG report levied. “…Improperly or inadvertently denying a program that meets Title IV requirements restricts students’ access to Title IV funds and could keep the Department from achieving its goal of being a supporter of innovative education.”

The insufficiently addressed risks included in the audit center around confusion related to the calculation of equivalencies from the length of a direct assessment program to credit- or clock-hours to, according to the OIG. “Direct assessment programs with improperly calculated credit- or clock-hour equivalencies could result in students receiving more Title IV funds than allowed,” the OIG report cautioned.

The OIG is also concerned that ED does not currently block students from receiving Title IV funds for past experience not gained at the institution, and that some approved programs might actually be correspondence programs, which carry their own set of Title IV restrictions.

The OIG recommends that ED: 

  • Improve its recordkeeping to adequately document all of the functions, procedures, and decisions related to the program approval process;
  • Require employees involved in the review and approval of applications to obtain adequate evidence to support their decisions; 
  • Require employees to gain an understanding of the processes that each accrediting agency used to evaluate a school’s offering of direct assessment programs, including the level of student-faculty interaction and the methodology used to evaluate credit- or clock-hour equivalencies, and consult with the accrediting agency if appropriate; and
  • Develop guidance on how schools meet the regulatory requirement that direct assessment programs include regular and substantive interaction between students and faculty. 

Stay tuned for a forthcoming Dear Colleague Letter from ED, which will address the last recommendation above and will differentiate between direct assessment and credit- or clock-hour competency-based education. As always, NASFAA will include a link to the published letter in Today’s News.

If you have an interest and/or experience in competency-based education, read over the charter for NASFAA’s Task Force on Innovative Learning Models and consider volunteering to serve.


Publication Date: 10/6/2014

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