Publication Date: October 27, 2009

Posted Date: October 27, 2009

Subject: Final Rule; Institutional Eligibility Under the Higher Education Act of 1965, as Amended, and the Secretary's Recognition of Accrediting Agencies

FR Part: IV

FR Type: Final

[Federal Register: October 27, 2009 (Volume 74, Number 206)]
[Rules and Regulations]               
[Page 55413-55435]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27oc09-26]                         

[[Page 55413]]

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Part IV

Department of Education

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34 CFR Parts 600 and 602

Institutional Eligibility Under the Higher Education Act of 1965, as 
Amended, and the Secretary's Recognition of Accrediting Agencies; Final 
Rule
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DEPARTMENT OF EDUCATION

34 CFR Parts 600 and 602

RIN 1840-AD00
[Docket ID ED-2009-OPE-0009]

 
Institutional Eligibility Under the Higher Education Act of 1965, 
as Amended, and the Secretary's Recognition of Accrediting Agencies

AGENCY: Office of Postsecondary Education, Department of Education.

ACTION: Final rule.
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SUMMARY: The Secretary amends its regulations governing institutional 
eligibility and the Secretary's recognition of accrediting agencies. 
The Secretary is amending these regulations to implement changes to the 
Higher Education Act of 1965, as amended (HEA), resulting from 
enactment of the Higher Education Reconciliation Act of 2005 (HERA), 
and the Higher Education Opportunity Act (HEOA), and to clarify, 
improve, and update the current regulations.

DATES: These regulations are effective July 1, 2010.

FOR FURTHER INFORMATION CONTACT: Ann Clough, U.S. Department of 
Education, 1990 K Street, NW., Room 8043, Washington, DC 20006-8542. 
Telephone: (202) 502-7484 or via the Internet at: ann.clough@ed.gov.
    If you use a telecommunications device for the deaf (TDD), call the 
Federal Relay Service (FRS), toll free, at 1-800-877-8339.
    Individuals with disabilities can obtain this document in an 
accessible format (e.g., braille, large print, audiotape, or computer 
diskette) on request to the contact person listed in this section.

SUPPLEMENTARY INFORMATION: On August 6, 2009, the Secretary published a 
notice of proposed rulemaking (NPRM) for the regulations governing 
institutional eligibility and the Secretary's recognition of 
accrediting agencies in the Federal Register (74 FR 39498).
    In the preamble to the NPRM, the Secretary discussed on page 39499 
the major regulations proposed in that document to implement the 
changes made to the HEA by the HERA and the HEOA, including the 
following:
     Amending Sec. Sec.  600.2 and 602.3 to include the 
statutory definition of ``distance education'', and adding a definition 
of ``correspondence education'' to Sec.  600.3.
     Amending Sec.  602.3 to include a definition of a ``direct 
assessment program'', an instructional program that uses or recognizes 
direct assessment of a student's learning in lieu of credit or clock 
hours.
     Amending Sec.  602.3 to include a definition of a ``teach-
out plan'' and Sec.  602.24 to require agencies to require the 
institutions they accredit to submit a teach-out plan to the agency 
under certain circumstances.
     Amending Sec. Sec.  602.16, 602.17, 602.18 and 602.27 to 
implement several new requirements pertaining to distance education and 
correspondence education.
     Amending Sec. Sec.  602.18, 602.23 and 602.25 to expand 
due process requirements for agencies.
     Amending Sec.  602.24 to require agencies to confirm that 
institutions they accredit have transfer of credit policies.
     Amending Sec.  602.15 to require that accreditation team 
members be well-trained and knowledgeable about their responsibilities 
regarding distance education.
     Amending Sec.  602.19 to require that agencies monitor 
enrollment growth at institutions they accredit.
     Amending Sec.  602.26 to expand agency disclosure 
requirements. (See section 496(c)(7) of the HEA).
    In addition, on pages 39499 through 39500 of the preamble to the 
NPRM, the Secretary discussed proposed changes to existing regulations 
governing institutional eligibility by amending the definition of 
``correspondence course'' to be compatible with the new definition of 
``correspondence education'' in the accrediting agency recognition 
regulations.
    Further, the Secretary discussed the following proposed changes to 
existing regulations governing the process for recognizing accrediting 
agencies:
     Amending Sec.  602.3 to include a definition of 
``recognition''.
     Amending Sec. Sec.  602.15 and 602.27 to modify record-
keeping and confidentiality requirements.
     Amending subpart C by combining current subparts C and D 
into one subpart in order to streamline procedures for agency review; 
establishing the senior Department official as the deciding official, 
with appeal to the Secretary; and providing a list of various laws 
regarding public requests for information with which the Secretary must 
comply.
     Amending Sec.  602.22 to clarify existing requirements 
related to substantive change and add flexibility to accrediting 
agencies in granting prior approval of additional locations under 
specified circumstances.
    As the result of public comment, the final regulations contain a 
significant change in the due process provisions regarding appeals 
panels. In addition to these changes, these final regulations make a 
number of minor technical corrections and conforming changes. Changes 
that are statutory or that involve only minor technical corrections are 
generally not discussed in the Analysis of Comments and Changes 
section.

Analysis of Comments and Changes

    The regulations in this document were developed through the use of 
negotiated rulemaking. Section 492 of the HEA requires that, before 
publishing any proposed regulations to implement programs under title 
IV of the HEA, the Secretary must obtain public involvement in the 
development of the proposed regulations. After obtaining advice and 
recommendations, the Secretary must conduct a negotiated rulemaking 
process to develop the proposed regulations. All proposed regulations 
must conform to agreements resulting from the negotiated rulemaking 
process unless the Secretary reopens that process or explains any 
departure from the agreements to the negotiated rulemaking 
participants.
    These regulations were published in proposed form on August 6, 
2009, in conformance with the consensus of the negotiated rulemaking 
committee. Under the committee's protocols, consensus meant that no 
member of the committee dissented from the agreed-upon language. The 
Secretary invited comments on the proposed regulations by September 8, 
2009. Twenty-one parties submitted comments. An analysis of the 
comments and the changes in the regulations since publication of the 
NPRM follows.
    We group major issues according to subject, with appropriate 
sections of the regulations referenced in parentheses. We discuss other 
substantive issues under the sections of the regulations to which they 
pertain. Generally, we do not address technical and other minor changes 
and suggested changes the law does not authorize the Secretary to make. 
We also do not address comments pertaining to issues that were not 
within the scope of the NPRM.

Definitions

Correspondence Course (Sec.  600.2)

    Comment: Several commenters expressed their support for the revised 
definition of ``correspondence course'' in 34 CFR 600.2, noting that it 
draws a useful distinction between this mode of educational delivery 
and distance education.

[[Page 55415]]

    Discussion: We appreciate the commenters' support.
    Changes: None.

Compliance Report (Sec.  602.3)

    Comment: One commenter questioned the meaning of the phrase 
``demonstrate that the agency has addressed deficiencies specified'' in 
the definition of ``compliance report'' in Sec.  602.3. The commenter 
noted that ``deficiencies'' could range from an agency's complaint 
procedure not including contact information to an agency's finances 
being in precarious shape and questioned whether in all cases an agency 
would be expected to submit a compliance report.
    Discussion: The definition provides that a compliance report must 
address deficiencies that are specified in a decision letter from the 
senior Department official or the Secretary. The senior Department 
official or Secretary will make a judgment, based on the record and the 
recommendations of the Advisory Committee and staff, about what must be 
addressed in the compliance report.
    Changes: None.

Recognition (Sec.  602.3)

    Comment: One commenter asked for further information about what the 
term ``effective'' means in the phrase ``is effective in its 
application of those criteria.''
    Discussion: The phrase ``apply effectively'' is taken directly from 
section 496(l) of the HEA and pertains to the Secretary's recognition 
decision. ``Effective application'' requires a demonstration on the 
part of the agency that it has followed through on its written policies 
and standards to provide, through its accrediting activities and each 
accrediting decision, a reliable judgment about the quality of 
postsecondary education. Under the statute, the Secretary is required 
to determine whether an agency is in compliance with the criteria for 
recognition. Compliance is determined based on a review of an agency's 
policies and its effective application of those policies. The 
discussion regarding subpart C later in this preamble explains this 
concept more thoroughly.
    Changes: None.

Other Major Issues

Administrative and Fiscal Responsibilities (Sec.  602.15)

    Comment: Two commenters raised concerns about the potential for an 
increase in the volume of information an agency will have to maintain 
under Sec.  602.15(b)(2). This provision requires an agency to maintain 
records of all decisions made throughout an institution's or program's 
affiliation with the agency regarding the accreditation and 
preaccreditation of any institution or program and substantive changes, 
including all correspondence that is significantly related to those 
decisions. One of the commenters, while generally supporting the 
changes made to this section, requested that the Department strike the 
phrase ``including all correspondence that is significantly related to 
those decisions;'' and apply the requirement only to final agency 
determinations. The second commenter made a similar request. Another 
commenter, while supportive of the reduction in the amount of material 
an agency will have to retain over the long term, indicated that the 
description of which records must be retained was ambiguous.
    Another commenter raised a concern about the language in Sec.  
602.15(a)(2), regarding the requirement for an agency to ensure that 
those individuals conducting on-site reviews are adequately trained. 
The commenter stated that use of the word ``trained'' may lead to the 
Department establishing minimum standards for an acceptable training 
program.
    Discussion: An important change to this section of the regulations 
includes the change in timeframe (one full accreditation cycle) for 
which an agency must maintain records. Under current regulations, an 
agency must maintain complete and accurate records for the last two 
full accreditation or preaccreditation reviews of each institution or 
program it accredits. The amended Sec.  602.15(b) requires the 
maintenance of records for only the last full accreditation or 
preaccreditation review. Additionally, the requirement that an agency 
maintain all decisions regarding the accreditation and preaccreditation 
of any institution or program, including all correspondence that is 
significantly related to those decisions, is not new; it has been in 
the regulations for a number of years. Similarly, although the current 
regulations do not explicitly mention documents relating to substantive 
change decisions, the requirement for agencies to maintain these 
documents exists under the regulatory requirement that agencies 
maintain all documents related to accrediting decisions and special 
reports. While the amended regulations now explicitly include a 
retention requirement for decisions relating to substantive changes, 
they create no additional burden, and the reduction in the number of 
cycles for which information must be maintained should significantly 
reduce the overall burden for agencies.
    Agencies must retain key records pertaining to each decision in 
order to fulfill their role as gatekeepers for Federal programs. 
Agencies have not always been able to provide the Department with 
information related to substantive changes. Given the significant 
increase in substantive changes over time, this documentation is 
critical. The Department does not agree that the description of the 
required documents is ambiguous, as an agency is fully aware of its 
requirements for accreditation, preaccreditation, and substantive 
change decisions and will be expected to retain those and the other 
required documents.
    Finally, the use of the word ``trained'' in Sec.  602.15(a)(2) is 
not new. Current regulations contain the same requirement. The language 
in the new regulations makes clear that the training provided by the 
agency should be appropriate for the individual's role.
    Changes: None.

Accreditation and Preaccreditation Standards (Sec.  602.16)

    Comment: One commenter raised concerns about the effects of the 
statutory change on Sec.  602.16(a)(1)(i). The statute allows an agency 
to apply different standards for different institutions and programs, 
established by the institution. The commenter expressed confusion about 
how this provision relates to existing regulatory language that an 
agency's standards assess an institution's or program's success with 
respect to student achievement in relation to the institution's mission 
and to the new statutory provision reflected in Sec.  602.16(f)(2). The 
commenter inquired whether an accrediting agency would be required to 
permit an institution to set its own standards for student achievement 
in light of a self-defined mission. For example, the commenter asked, 
would an agency have to permit an institution to set its own standards 
for job placement for an institution whose self-defined mission 
involves serving an economically challenged city or region? Further, 
the commenter asked whether an agency would be required to accept an 
institution's demand that it apply different standards to one or more 
of an institution's approved additional locations. A second commenter 
expressed ``ardent support'' of the revisions to Sec. Sec.  
602.16(a)(1)(i) and 602.16(f).
    Discussion: As provided in Sec.  602.16(f)(1), an accrediting 
agency has the authority to set, with the involvement of its members, 
and to apply accreditation standards for or to institutions or programs that 
seek review by the agency. This accrediting agency authority remains 
even if, as provided in Sec.  602.16(f)(2), an institution develops and 
uses its own standards to demonstrate its success with respect to 
student achievement, which may be considered as part of any 
accreditation review. In that case, the accrediting agency would need 
to make a judgment about whether an institution developed and used 
reasonable standards to demonstrate its success with respect to student 
achievement. Likewise, an accrediting agency would not be required to 
accept an institution's demand that it apply different standards to one 
or more of an institution's approved locations. We appreciate the 
second commenter's support.
    Changes: None.

Distance Education and Correspondence Education (Sec.  602.17)

    Comment: None.
    Discussion: The Department determined that there was an error in 
Sec.  602.17(g)(1)(iii) with the use of the word ``identification'' in 
the phrase ``that are effective in verifying student identification.'' 
The appropriate word to use in the phrase is ``identity'', not 
``identification.'' Verifying student identification is making certain 
that an ID card is not a fake. Verifying student identity is making 
certain that the student is who he or she is purporting to be. Under 
the statute, agencies are required to do the latter.
    Changes: Section 602.17(g)(1)(iii) has been amended by replacing 
the word ``identification'' with the word ``identity''.
    Comment: One commenter questioned whether the requirements proposed 
in Sec.  602.17 for verifying the identity of distance education and 
correspondence education students go far enough. The commenter noted a 
distinction between systems that verify the identity of an individual 
through the use of measures such as personal identification numbers 
(PINs), passwords, and knowledge-based questions, and those that 
authenticate an individual's identity by means of anatomical or 
behavioral characteristics unique to the individual, such as 
fingerprints or unique patterns of movement. The commenter suggested 
that continued use of secure logins and passwords as the sole means of 
identification is inconsistent with the intent of the statutory change, 
and claimed that only biometric-based authentication can provide 
positive identification. The commenter described software that can be 
used to capture a student's movements and create a unique biometric 
student identity that can be used to ensure that the person who 
registers for an online course is the person who does the work and 
receives the credit. A second commenter supported the proposed language 
and called the provision a common-sense rule.
    Discussion: The regulations governing verification of student 
identity were developed using information provided during the 
negotiated rulemaking discussions and the explanation of the new 
requirement that was included in the conference report accompanying the 
HEOA (H. Rep. 110-803, p. 567). In explaining the intent of the new 
statutory provision that agencies require institutions that offer 
distance education or correspondence education to have processes for 
establishing that the students who register for courses are the same 
students who complete the program and receive the credit, the 
conference report stated that institutions are expected to have 
security mechanisms, such as identification numbers or other pass code 
information, in place and to use them each time a student participates 
online. Therefore, the continued use of PINs and passwords is 
consistent with both the statutory language and the intent of the 
Congress.
    In the conference report, it is clear that Congress anticipated 
that as new identification technologies are developed and become more 
mainstream and less expensive, agencies and institutions would consider 
using them. For this reason, the regulations provide for the use of new 
technologies and practices that are effective in verifying the identity 
of students, in addition to methods such as secure logins, pass codes, 
and proctored examinations. There are at least two reasons for not 
mandating specific types of identity verification procedures in the 
regulations: Cost and availability. Different types of institutions 
have different levels of risk, and a technology that one institution 
considers necessary and affordable may be neither needed nor cost-
effective at another institution. It would also be inappropriate for 
the Department to include specific institutional requirements in its 
regulations that govern the recognition of accrediting agencies.
    Changes: None.

Due Process (Sec. Sec.  602.18; 602.25)

    Comment: One commenter noted the addition to Sec.  602.18, Ensuring 
consistency of decision making, of new paragraphs (a) and (e), which 
require agencies to have written specification of the requirements for 
accreditation that include clear standards for an institution or 
program to be accredited and to provide an institution or program with 
a detailed written report that clearly identifies any deficiencies in 
the institution's or program's compliance with the agency's standards. 
This commenter asked about the standards and the reporting requirements 
for non-compliance that are envisioned under these paragraphs. The 
commenter asked whether consistency was expected among classrooms, 
programs, or campuses.
    Regarding the due process provisions set forth in Sec.  602.25, 
several commenters recommended changes to the regulations governing 
appeals panels, specifically Sec.  602.25(f)(1)(iii). A number of 
commenters provided alternate language. Many of the commenters 
recommended permitting the appeals panel to remand cases to the 
original decision-making body. Most of the commenters who made this 
suggestion wanted to delete the authority of the appeals panel to amend 
or reverse the adverse action of the original decision-making body; 
other commenters wanted the appeals panel to also have the authority to 
remand cases as a fourth option. In addition, most of the commenters 
who provided alternate language wanted to amend the language that 
requires the original decision-making body to act in a manner 
consistent with the appeals panel's findings or decision, by requiring 
instead that the original decision-making body give deference or due 
consideration to the appeals panel's decision. One commenter wanted to 
delete this language.
    The rationale provided to support the recommended changes varied, 
but there were several major points. Many commenters questioned the 
authority of the appeals panel to render a final decision. Several 
commenters suggested that the reading of the statute to imply that 
appeals panels have the authority to make final accreditation decisions 
rested solely on the lack of a comma in the language of the final bill. 
They claimed that the appeals panel was not intended to render a final 
adverse decision; rather, they claimed, the panel was to conduct a 
hearing prior to the final decision of the accrediting body. One 
commenter specifically stated that the new provisions for findings of 
appeals panels are not in the statute and expressed the view that the 
findings of the appeals panels would compete with the independent, 
decision-making role of agencies.
    One commenter opined that the new appeals panel provisions would 
create a problem because final accreditation

[[Page 55417]]

decisions may be made by an entity, an appeals panel, that is not 
recognized by the Secretary. Other commenters claimed that the new 
provision conflicts with regulatory provisions for recognition of 
accrediting agencies and said that neither the law nor the regulations 
provide for the Secretary to recognize appeals panels. A few commenters 
stated that requiring appeals panels to make decisions is inconsistent 
with the Department's prior position that accreditation decisions may 
be made only by properly composed decision-making bodies recognized by 
the Department. Another commenter opined that the new provisions 
undermine the traditional purpose served by accrediting appeals and 
violate the independence of the accrediting body.
    Some commenters said the new requirements for appeals panels would 
impair the normal function of the accreditation process because even 
though accreditation decisions are based on a number of factors, an 
institution or program may appeal only one or two factors; thus, they 
claimed, even if those one or two findings are overturned, an adverse 
action may still be warranted. Other commenters said that an action to 
amend or reverse a decision can occur only if an appeals panel conducts 
a new substantive review, rather than a review of the decision-making 
process, and that appeals panels typically lack the expertise to assess 
content-specific compliance with accreditation standards. One commenter 
said that accrediting bodies do not produce a record that allows for 
reconsideration of matters of substance. Another commenter noted that 
because the original body conducts a significant amount of research and 
spends time making decisions, that body has an intimate and 
comprehensive understanding of the factual situation at hand and it 
would not be appropriate for an appeals panel to make a final decision.
    Commenters also expressed concern that decisions will be made by 
smaller and less diverse bodies, ones that typically meet infrequently 
and do not have the experience of the original decision-making body; 
that the new provision will create situations in which decisions of 
appeals panels may be inconsistent with other agency decisions; that 
the change to the regulations will lead to many unwarranted appeals; 
and that the change will require training of appeals panels.
    Several commenters supported allowing an appeals panel to remand a 
case to the original decision-making body.
    Several commenters referenced appellate court processes and 
suggested that some accrediting agencies might prefer that appeals 
panels remand cases back to the original decision-making body with 
instructions either for implementation of a decision or for the 
consideration of factors to be used to render a decision consistent 
with the appeals panel decision.
    One commenter said that providing the option to remand cases would 
provide more flexibility to agencies in developing their appeal 
process. This commenter suggested a change to provide agencies with the 
option of either giving appeals panels final decision-making authority 
or requiring that the appeals panel either affirm the original decision 
or remand the case. The commenter suggested that a remand could include 
a modification of the original decision.
    One commenter questioned whether reversal of a denial of 
recognition means that an appeals panel would be empowered to determine 
the period of accreditation. Another commenter appreciated the 
Department's attempt to provide for implementation of the appeals 
panel's decision by the original decision-making body, but said it was 
not clear what was meant by requiring that the original decision-making 
body's action must be consistent with the appeals panel decision. One 
other commenter asked about the scope of authority retained by an 
accrediting agency that reserves the right to implement appeals panel 
decisions.
    One commenter requested that Sec.  602.25(h)(1)(iii), regarding 
reconsideration of adverse actions based solely on financial criteria, 
be deleted from the regulations, but cited no authority for the 
request.
    Discussion: It is important to note that the HEOA, in amending 
section 496(a)(6) of the HEA, included the requirement for clear and 
consistent accreditation standards and specification of any 
deficiencies, in addition to providing additional requirements 
regarding the appeal process. Clear and consistent standards, which let 
institutions and programs know what they are being measured against, 
and detailed written descriptions of any deficiencies identified by the 
accrediting agency, are critical to providing an effective due process 
procedure. An agency is expected to apply its standards consistently 
across either the programs or the institutions it accredits, as 
applicable.
    The Department acknowledges that there are situations, such as 
reversal of a decision to withdraw accreditation, in which it is 
appropriate, and may be necessary, to involve the original decision-
making body in a revised decision. Because of these situations, the 
Department agreed that agencies would have the option of giving the 
original decision-making bodies the responsibility to implement 
decisions, as long as the implementation was consistent with the 
appeals panel's decision. However, several commenters made a persuasive 
argument that appeals panels should also have the option of remanding a 
case to the original decision-making body. Therefore, the language in 
the proposed regulations has been changed to give appeals panels the 
option of remanding cases.
    However, the Department is concerned that without making additional 
changes, the regulations would be ambiguous and subject to an 
interpretation that would allow agencies to write their procedures to 
provide that their appeals panels are authorized only to affirm a 
decision or order a remand. This reading would not be consistent with 
Congressional intent, as the appeal would then be simply an additional 
procedural step involving a body that has no ultimate authority to 
effect a change in the accrediting decision. Therefore, the language in 
the proposed regulations has been changed to specify that an appeals 
panel has and uses the authority to affirm, amend, or reverse adverse 
actions of the original decision-making body, and does not serve only 
an advisory or procedural role. The language regarding affirmation, 
reversal, or amendment reflects a straightforward reading of Congress's 
directives to agencies to provide for appeals in front of a different 
decision-maker.
    The Department agrees with those commenters who note that the new 
regulations may necessitate changes in agency procedures and the 
structure of the appeals panels. To implement the HEOA, some agencies 
may need to seek recognition of their appeals panels. Appeals panels 
will need to meet the requirements for agency recognition, such as 
having a public member, as provided in Sec. Sec.  602.14(b)(2) and 
602.15(a)(3).
    Under the HEOA, appeals panels are subject to a conflict of 
interest policy and may not include any current members of the 
underlying decision-making body that made the adverse decision. The 
Department reads these new provisions as reflecting Congressional 
intent that appeals panels be decision-making bodies that address
substantive matters, as necessary, not just matters relating to
process. Therefore, the entire accreditation process, including 
accreditation decisions, must be well-documented. The Department 
recognizes that agencies may need to adopt new procedures for 
documenting decisions and to ensure that appeals panel members have 
knowledge of prior agency decisions so the panel's actions and 
decisions are consistent with agency policies and requirements. Under 
Sec.  602.15(a)(2), agencies also must provide sufficient training to 
appeals panel members to ensure that these members have the requisite 
background to make sound decisions.
    We disagree with the commenter who suggested that we remove Sec.  
602.25(h)(1)(iii). This section is needed to implement the new 
statutory provision that an institution or program otherwise subject to 
a final adverse action may seek agency review of significant new 
financial information if it meets certain conditions, including that 
the review take place before a final adverse action that is based 
solely upon failure to meet financial criteria.
    Changes: Section 602.25(f)(1) has been amended by adding a new 
section 602.25(f)(1)(iii) that requires appeals panels to have and use 
the authority to make decisions to affirm, amend, or reverse actions of 
the original decision-making body, and specifies that an appeals panel 
does not serve only an advisory or procedural role. Section 
602.25(f)(1)(iii) in the proposed regulations has been renumbered and 
amended to allow appeals panels the option of remanding the accrediting 
action to the original decision-making body. The amendments to this 
provision require that a decision to remand identify the specific 
issues to be addressed and that the original decision-making body must 
act in a manner consistent with the appeals panel's decision or 
instructions.

Monitoring and Reevaluation of Accredited Institutions and Programs 
(Sec.  602.19)

    Comment: Several commenters raised concerns about the monitoring 
provisions in Sec.  602.19 and the impact the regulations would have on 
smaller accrediting agencies. These commenters requested that the 
regulations reflect the differences in size and scope of accreditors. 
One commenter noted that, although these regulations may have no real 
impact on agencies that recognize hundreds or thousands of 
institutions, an agency that recognizes 50 institutions may find them 
impossible to implement. Another commenter raised a different concern 
related to the scale of the monitoring required of accrediting 
agencies, stating that monitoring will not capture all non-compliance, 
and asked the Department to clarify its intent with these regulations.
    Still another commenter contended that the Department is exceeding 
its authority by requiring agencies to collect and analyze measures of 
student achievement, because the Department is not permitted to 
regulate student achievement. Another commenter asked for clarification 
about the implementation of the growth monitoring provisions contained 
in Sec.  602.19(e) of the regulations. Additionally, two commenters 
expressed support for the monitoring provisions contained in these 
regulations with one citing the ability of institutions to establish 
their own standards of student achievement and the other stating that 
these monitoring regulations will serve as a possible safeguard against 
waste, fraud, and abuse in the title IV student aid programs.
    Finally, one commenter raised a concern with the reporting 
requirement that applies to accrediting agencies that have added 
distance education or correspondence education to their scope of 
recognition by means of notification to the Department. The commenter 
asked if an institution that experiences an enrollment increase of 
distance education students from ten students to fifteen students must 
go through what the commenter described as an elaborate process.
    Discussion: These regulations recognize the need for flexibility 
raised by the commenters and provide this flexibility. The preamble to 
the NPRM addressed the Department's desire to ensure flexibility for 
accrediting agencies in their monitoring of institutions and programs 
while meeting the intent of the law. These regulations reflect 
statutory requirements and provide for greater consistency in 
identifying noncompliant institutions and programs while also 
accommodating the differences that exist across institutions and 
programs.
    The Department recognizes that accrediting agencies and the 
institutions and programs they accredit are diverse. Therefore, in 
addition to providing a framework for monitoring, the Department 
requires each agency to demonstrate why the approaches it takes to 
monitoring and evaluating its accredited institutions or programs are 
effective given the particular circumstances. Moreover, we expect 
reasonable and prudent implementation of the statute and regulations by 
the agencies. For each institution or program accredited, an agency 
should consider factors such as the size of the institution or program, 
the number of students, the nature of the programs offered, past 
history, and other knowledge the agency has about that institution or 
program, including previous reviews. The regulatory language provides 
accrediting agencies with flexibility regarding their monitoring of 
institutions and programs and at the same time ensures they review and 
analyze key data and indicators.
    The Department does not agree that it is exceeding its authority by 
requiring an agency to monitor measures of student achievement. The 
Department is not specifying, defining, or prescribing the standards 
that accrediting agencies use to assess an institution's success with 
respect to student achievement. Rather, student achievement is one of 
several areas that an agency must review when monitoring the 
institutions or programs it accredits. Further, under these regulations 
the approaches taken by the agency must be consistent with Sec.  
602.16(f). This section provides that an agency is not restricted from 
setting and applying accreditation standards for or to institutions or 
programs seeking review and that an institution is not restricted from 
developing and using institutional standards to show its success with 
respect to student achievement, which achievement may be considered as 
part of any accreditation review.
    Finally, the growth monitoring provision in Sec.  602.19(e) 
requires certain agencies to report to the Secretary information about 
any institution they accredit that experiences an increase in 
institutional headcount enrollment of 50 percent or more within one 
institutional fiscal year, not a 50 percent increase in headcount 
enrollment in a particular program or particular educational delivery 
modality. It is important to note that Sec.  602.19(e) only affects 
institutional accrediting agencies and predominantly programmatic 
accrediting agencies that accredit freestanding institutions that 
notify the Secretary of a change in scope of recognition to include 
distance education or correspondence education in accordance with Sec.  
602.27(a)(5).
    Changes: None.

Operating Procedures All Agencies Must Have (Sec.  602.23)

    Comment: One commenter did not understand the rationale for the 
removal of the phrase ``upon request'' from Sec.  602.23(a), regarding 
making certain written materials and information

[[Page 55419]]

available to the public. The same commenter expressed support for the 
additional language added to the end of Sec.  602.23(c)(1), which seeks 
to ensure that institutions have sufficient opportunity to provide a 
response to a third-party complaint before an accrediting agency 
completes the review of the complaint and makes a decision.
    Discussion: The phrase ``upon request'' was removed in response to 
a statutory change. Section 496(a)(8) of the HEA requires agencies to 
make available to the public, upon request, a summary of any review 
resulting in a final accrediting decision involving denial, 
termination, or suspension of accreditation, together with the comments 
of the affected institution. Section 496(c)(7) of the HEA, which was 
added in the 2008 reauthorization, requires agencies to make available 
to the public a summary of agency or association actions, which 
includes a final denial, withdrawal, suspension, or termination of 
accreditation, and any findings made in connection with the action 
taken, together with the official comments of the affected institution. 
We consider the most recent language to reflect Congressional intent 
and, accordingly, made the provision of information to the public 
without a specific request for the information a regulatory 
requirement. We appreciate the support for the change to Sec.  
602.23(c)(1).

Teach-Out Plans and Agreements (Sec.  602.24)

    Comment: Two commenters noted that agencies must require the 
institutions they accredit to submit a ``teach-out plan'' to the agency 
under the circumstances specified in Sec.  602.24(c)(1) and expressed 
concern that agencies may have little or no ability to enforce such a 
requirement. One of these commenters stated that the requirement is 
unrealistic. The other commenter concluded that an agency must have a 
written policy to require plans from all institutions that meet the 
regulatory provisions, even institutions that do not participate in the 
title IV, HEA programs. Regarding ``teach-out agreements,'' one 
commenter asserted that the regulations specify that an agency may not 
approve an agreement unless it is with a qualified teach-out 
institution and characterized that requirement as a matter over which 
the accrediting agency may have no control.
    Two commenters supported the new teach-out provisions. The 
commenters noted that the regulations regarding ``teach-out plans'' and 
``teach-out agreements'' will benefit the affected students and the 
institutions serving those students, as well as protect both their 
interests and the interests of agencies and the Department.
    Discussion: The teach-out regulations reflect statutory provisions 
in section 496(c)(3) of the HEA. The statute does not distinguish 
between participating and non-participating institutions with regard to 
teach-out plan policies. Therefore, agencies must have a policy to 
require ``teach-out plans'' from all institutions that meet one of the 
circumstances described, even if the institution at issue does not have 
a program participation agreement with the Department. The Department 
does not agree with the assertion that an agency may lack control over 
the approval of a ``teach-out agreement.'' The regulations specify that 
agencies must require the institutions they accredit and that enter 
into ``teach-out agreements'' to submit those agreements for approval. 
The agency has control over whether it approves a ``teach-out 
agreement,'' and the agency may approve a ``teach-out agreement'' only 
if the agreement complies with the requirements of Sec.  602.24(c)(5).
    Changes: None.

Transfer of Credit (Sec.  602.24)

    Comment: One commenter recommended deleting Sec.  602.24(e)(2), 
which requires that agencies confirm that institutions have transfer of 
credit policies that include a statement of the criteria established by 
the institution regarding the transfer of credit earned at another 
institution of higher education. The commenter stated that conforming 
transfer of credit policies is impossible due to the variety of 
situations in which transfers of credit may arise. The commenter also 
said that requiring institutions to specify detailed transfer of credit 
criteria could inadvertently reduce student mobility. Another commenter 
supported the wording in the proposed regulations regarding public 
disclosure of transfer of credit policies.
    Discussion: Section 496(c)(7) of the HEA requires accrediting 
agencies to confirm that an institution has transfer of credit policies 
that include a statement of the criteria established by the institution 
regarding the transfer of credit earned at another institution. The 
regulations reflect this requirement, and we do not have the authority 
to modify the requirement.
    Changes: None.

Other Information an Agency Must Provide the Department (Sec.  602.27)

    Comment: Several commenters expressed concern about Sec.  
602.27(b). This provision requires any agency that has a policy 
regarding notification to an institution or program of contact with the 
Department, as it pertains to information provided to the Secretary 
about an institution it accredits failing to meet its title IV program 
responsibilities or possibly engaging in fraud or abuse, to review on a 
case-by-case basis the need for confidentiality of the contact with the 
Department. This section also requires that, in the event the 
Department specifically requests the contact remain confidential, the 
agency consider that contact confidential. The commenters stated that 
failing to inform an institution of a contact or inquiry made by the 
Department adversely affects the relationship between the institution 
or program and the agency by undermining the trust relationship between 
the two. Another commenter raised a concern that the changes to Sec.  
602.27(b), taken together with the authority provided the Department in 
Sec.  602.27(a)(7) to request information that may bear upon an 
institution's compliance with its title IV program responsibilities, is 
inconsistent with the obligation of an agency to allow its institutions 
to respond to allegations made against them. Two commenters requested 
that Sec.  602.27(b) be removed and another commenter requested that 
all of Sec.  602.27 be removed.
    Discussion: The Department understands and respects the need for an 
honest and open exchange between an institution or program and its 
accreditor. During negotiated rulemaking the Department agreed to 
change its initial approach to this regulation, which would have 
prohibited an agency from having a policy providing notice to an 
institution when the agency was contacted by the Department. We do not 
agree that these regulations, as amended, undermine the relationship 
between the accreditor and its institutions or programs or that the 
language is inconsistent with an agency's obligation to afford its 
institutions or programs an opportunity to respond to allegations. 
Rather, they honor that relationship by ensuring that, absent a 
specific request for confidentiality from the Department, an agency may 
notify an institution of inquiries it receives from the Department as 
long as the agency has concluded, based on a careful consideration of 
the circumstances, that disclosure is appropriate. Moreover, the 
Department also has a fiduciary responsibility to protect the Federal 
fiscal interest as well as the interest of students. These regulations 
ensure that the Federal fiscal interest is not put at risk by
compromising the Department's investigations of potential fraud or
abuse in the title IV programs. As a condition of participating in the title IV
programs, each institution acknowledges the authority of the Department,
accrediting agencies, and other gatekeepers to share information about the institution.
Changes: None. Subpart C--The Recognition Process Comment: Several commenters asked for clarification about how Department staff will evaluate an agency's effective application of its standards. One commenter expressed concern about the subjectivity of the evaluation and the lack of bright-line standards for Department staff to enforce. Another commenter asked for clarification about what constituted the submission of ``evidence, including documentation'' under Sec. 602.31(a)(2) and expressed concern that the requirement to provide evidence to Department staff could evolve into an unreasonable requirement for agencies. Discussion: The concept of ``effective application'' comes from section 496(l) of the HEA and is not new. It is discussed here alongside the provision of evidence because the two concepts are related. The phrase ``effective application'' in these new regulations replaces the phrase ``performance with respect to the criteria'' in the current regulations. The Department selected the phrase ``effective application'' based on its origin in the statute and its greater specificity in describing the standard for an agency's compliance. The Department's evaluation of an agency is based on a review of the evidence provided by the agency that it has compliant policies and standards and that it effectively applies those standards. Evidence is submitted primarily in the form of documentation that substantiates the agency's claim that it effectively applies its standards. For example, agencies provide sample self-studies and team reports to substantiate that they apply their policies for requiring an in-depth self-study and an on-site review of their institutions or programs. Evidence may also be in the form of direct observation by Department staff during its on-site reviews of an agency's decision meeting or training session. Although testimony, written or oral, may accompany an agency's application for initial or continued recognition, a description of processes alone does not meet the Department's standard for evidence. This is illustrated in the example of an agency seeking initial recognition that provides evidence of policies and standards that appear to be compliant but that, upon further examination, are not effectively applied. Accordingly, review of whether agency standards are effectively applied is critical to ensure the quality of training and education offered by institutions and programs accredited by agencies that are recognized by the Secretary. The concept of ``effective application'' also allows for a reasonable degree of judgment in cases where a particular policy involves circumstances that do not occur with any regularity. For example, an agency may have compliant ``teach-out'' policies, but its accredited institutions may never have had to submit a teach-out plan or agreement for approval by the agency. In this example, no evidence of application of standards would be necessary. The standard for evaluating an agency's ``effective application of standards'' on the basis of ``evidence, including documentation,'' strikes a balance between the commenters' concerns about the absence of bright-line standards and the potential for unreasonable standards of evidence. Changes: None. Comment: One commenter objected to the entirety of subpart C and suggested that no changes be made to the current regulations. Discussion: Changes to subpart C were necessary to incorporate the new provisions of the HEA, including the procedures for review of agencies that have expanded their scope of recognition by notice, following receipt by the Department of information of an increase in headcount enrollment, and the authority of the National Advisory Committee on Institutional Quality and Integrity (``NACIQI'') in establishing the agenda. Other changes were necessary because the current regulations do not include procedures for review of applications for expansion of scope, procedures for review of agencies during the period of recognition, appeal procedures, and procedures for review of compliance reports defined under Sec. 602.3. Subpart C outlines and clarifies these procedures, making the Department's review process more transparent and increasing due process for agencies. Changes: None. Comment: Several commenters raised concerns about Sec. 602.31(f), which clarifies the limits on the Department's ability to keep confidential records submitted to the Department for the purposes of agency recognition by the Secretary. Some commenters stated their belief that all information institutions provide to their accreditors is subject to public disclosure. Other commenters stated their belief that the regulations require all documents submitted to the Department to be available for public disclosure via the Freedom of Information Act (FOIA). Some commenters want the Department to change the regulations to permit Department review of necessary documents to occur at agency offices, instead of requiring submission of the documents to the Department. Another commenter suggested that documents be submitted to the Department and later returned to the agency without copies being made or maintained by the Department. Discussion: The commenters misunderstand the requirements of Sec. 602.31(f). The regulation applies to records the Department obtains during an agency's recognition proceedings, not to all documents an institution submits to its accrediting agency. The Department must comply with the HEA, the FOIA, the Federal Advisory Committee Act (FACA), and other applicable laws. These regulations reference the most commonly invoked of public disclosure laws and state that an agency may designate or identify information that the agency believes in good faith is exempt from disclosure in the event of a FOIA request. The regulations also make clear that agencies should submit only those documents required for Department review or specifically requested by Department officials. The Department understands the need for confidentiality between institutions and accrediting agencies. However, it is necessary for the Department both to maintain a complete and accurate record of documents to substantiate its review, and to comply with FOIA and other disclosure laws. The regulations provide several methods an agency can use to make it less likely that sensitive information it provides in recognition proceedings about the institutions or programs it accredits will be publicly disclosed, including redacting information that would identify individuals or institutions that is not essential to the Department's review of the agency. Changes: None. Executive Order 12866 Regulatory Impact Analysis Under Executive Order 12866, the Secretary must determine whether the regulatory action is ``significant'' and therefore subject to the requirements of the Executive Order and subject to review by the Office of Management and Budget (OMB). Section 3(f) of Executive Order 12866 defines a ``significant regulatory action'' as an action likely to result in a rule that may (1) have an annual effect on the economy of $100 million or more, or adversely affect a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local or Tribal governments or communities in a material way (also referred to as an ``economically significant'' rule); (2) create serious inconsistency or otherwise interfere with an action taken or planned by another agency; (3) materially alter the budgetary impacts of entitlement grants, user fees, or loan programs or the rights and obligations of recipients thereof; or (4) raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in the Executive Order. Pursuant to the terms of the Executive Order, it has been determined that this final regulatory action will not have an annual effect on the economy of more than $100 million. Therefore, this action is not ``economically significant'' and not subject to OMB review under section 3(f)(1) of Executive Order 12866. Notwithstanding this determination, the Secretary has assessed the potential costs and benefits of this regulatory action and has determined that the benefits justify the costs. Need for Federal Regulatory Action As discussed in the proposed regulations, these regulations are needed to implement the provisions of the HEA, as amended. In particular, these regulations address the provisions related to the recognition of accrediting agencies by the Secretary. In addition, these regulations are needed to ensure that the Department fulfills its fiduciary responsibility regarding the appropriate use of Federal funds made available by the Department to institutions of higher education under title IV of the HEA. The Secretary grants recognition to accrediting agencies that are considered by the Department to be reliable authorities regarding the quality of education or training offered by the institutions or programs they accredit. Congress requires that an institution of higher education be accredited by an agency recognized by the Secretary in order to receive Federal funds authorized under title IV, HEA programs. Regulatory Alternatives Considered Alternatives to the regulations were considered as part of the rulemaking process. These alternatives were reviewed in detail in the preamble to the proposed regulations under both the Regulatory Impact Analysis and the Reasons sections accompanying the discussion of each proposed regulatory provision. To the extent that they were addressed in response to comments received on the proposed regulations, alternatives are also considered elsewhere in the preamble to these final regulations under the Discussion sections related to each provision. No comments were received related to the Regulatory Impact Analysis discussion of these alternatives. As discussed above in the Analysis of Comments and Changes section, the final regulations reflect statutory amendments included in the HEOA and one substantive revision made in response to public comments. The change did not result in revisions to cost estimates prepared for and discussed in the Regulatory Impact Analysis of the proposed regulations. Benefit-Cost Analysis Benefits The benefits of these final regulations include: ensuring that accrediting agencies are reliable authorities as to the quality of education or training offered by an institution or program they accredit; ensuring that the Department fulfills its fiduciary responsibility for institutional funding under title IV, HEA programs; and establishing consistency between statutory language and regulatory language. An additional benefit of the final regulations is providing accrediting agencies with greater clarity on regulations regarding the following: distance and correspondence education; accreditation team members; transfer of credit; teach-out plan approval; definition of recognition; demonstration of compliance; recognition procedures, including procedures for NACIQI; direct assessment programs; monitoring; substantive change; record keeping and confidentiality; and due process and appeals. Costs These final regulations do not require accrediting agencies and institutions to develop new disclosures, materials, or accompanying dissemination processes. Other regulations generally require discrete changes in specific parameters associated with existing guidance rather than wholly new requirements. Overall, the Department believes that accrediting agencies wishing to continue to be recognized by the Secretary and institutions wishing to continue to participate in title IV, HEA programs have already absorbed most of the administrative costs related to implementing these final regulations. Marginal costs over this baseline are primarily related to one-time changes that are not expected to be significant. Elsewhere in this SUPPLEMENTARY INFORMATION section we identify and explain burdens specifically associated with information collection requirements. See the heading Paperwork Reduction Act of 1995. Accounting Statement In Table 1, we have prepared an accounting statement showing the classification of the expenditures associated with the provisions of these final regulations. As shown in the table, the Department estimates that these final regulations will increase expenditure by accrediting agencies, institutions of higher education, and the Department by a total of $114,850. **NOTE: CHART OMITTED - SEE PDF FILE FOR Table 1--Estimated Expenditures Associated With the Provisions of Final ------------------------------------------------------------------------ Regulatory Flexibility Act Certification The Secretary certifies that these final regulations will not have a significant economic impact on a substantial number of small entities. These final regulations affect accrediting agencies and institutions of higher education that participate in title IV, HEA programs. The U.S. Small Business Administration (SBA) Size Standards define organizations as ``small entities'' if they are for-profit or nonprofit organizations with total annual revenue below $5,000,000 or if they are organizations controlled by governmental entities with populations below 50,000. A significant percentage of the accrediting agencies and institutions participating in title IV, HEA programs meet the definition of ``small entities''. The Department estimates that approximately 40 accrediting agencies and 2,310 postsecondary institutions meet the definition of ``small entity''. While these accrediting agencies and institutions fall within the SBA size guidelines, these final regulations do not impose significant new costs on these entities. Specific burden concerns are discussed in more detail elsewhere in this preamble, primarily in the Paperwork Reduction Act of 1995 section. [[Page 55422]] Paperwork Reduction Act of 1995 Sections 602.15, 602.19, 602.24, 602.25, 602.26, 602.27, 602.31, and 602.32 contain information collection requirements. Under the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)), the Department has submitted a copy of these sections to OMB for its review. Section 602.15--Administrative and Fiscal Responsibilities The final regulations require accrediting agencies to demonstrate certain administrative responsibilities, including maintenance of all accrediting documentation for each institution or program the agency accredits from the last full accreditation or preaccreditation review and all documents regarding substantive change decisions. The Department has determined that this modification to the current document retention requirements reduces the administrative burden to maintenance of only one full accreditation or preaccreditation review. Although this represents a reduction of the burden on agencies under OMB Control Number 1840-0788, the reduced hours for maintaining only one complete review cycle are negligible because the agencies already collect the information. Section 602.19--Monitoring and Reevaluation of Accredited Institutions and Programs The final regulations require agencies to collect data to ensure that the institutions they accredit remain in compliance with their accrediting standards. Agencies must periodically collect and analyze key data and indicators, identified by the agency, including, but not limited to, fiscal information and measures of student achievement. In addition, the final regulations require agencies to annually monitor the enrollment growth of institutions or programs they accredit. The final regulations also require accrediting agencies that expanded their scope to include distance education or correspondence education by notice to the Secretary to monitor enrollment growth of the institutions they accredit that offer distance education or correspondence education. These agencies must report to the Department, within 30 days, any institution that experiences enrollment growth of 50 percent or more during a fiscal year. The regulation only affects institutional accrediting agencies and programmatic accrediting agencies that accredit freestanding institutions that currently do not have distance education in their scope of recognition. The Department estimates that the final monitoring regulations will increase burden on accrediting agencies by a total of 182 hours under OMB Control Number 1840-0788. Section 602.24--Additional Procedures Certain Institutional Accreditors Must Have The final regulations mandate that an accrediting agency require an institution it accredits to submit a teach-out plan for approval by the accrediting agency if any of following events occurs: The Department initiates an emergency action against an institution, or an action by the Secretary to limit, suspend, or terminate an institution participating in any title IV, HEA program; the accrediting agency acts to withdraw, terminate, or suspend the accreditation or preaccreditation of the institution; the institution notifies the agency that it intends to cease operations entirely or close a location that provides one hundred percent of at least one program; or a State licensing or authorizing agency notifies the agency that an institution's license or legal authorization to provide an educational program has been or will be revoked. If the teach-out plan requires a teach-out agreement, the regulations identify the components of the teach-out agreement. The Department estimates that the requirements related to submission of teach-out plans in the final regulations will place an additional burden on 70 institutions each year for a total of 280 hours under OMB Control Number 1840-0788. Section 602.25--Due Process The final regulations provide for an institution's or program's right to appeal any adverse accrediting agency action before an appeals panel that is subject to a conflict of interest policy and does not contain members of the underlying decision-making body. An institution or program is provided a right for the review of new financial information, if it meets certain conditions, before the accrediting agency takes a final adverse action. The Department estimates that the appeals process in the final regulations will increase the burden on accrediting agencies by 3,050 hours under OMB Control Number 1840-0788. Section 602.26--Notification of Accrediting Decisions The final regulations require agencies to provide a written notice to the Secretary of any final decision that is considered by the agency to be an adverse action and of final decisions withdrawing, suspending, revoking, or terminating an institution's or program's accreditation or preaccreditation. Agencies are also required to make available to the Secretary and the public a statement regarding the reasons for withdrawing, suspending, revoking, or terminating an institution's or program's accreditation or preaccreditation. The statement must include either the official comments from the affected institution or program regarding that decision or evidence that the affected institution or program was offered the opportunity to provide comments. The Department has determined that the notification requirements in the final regulations do not represent any additional burden on accrediting agencies under OMB Control Number 1840-0788. Section 602.27--Other Information an Agency Must Provide the Department The final regulations require an accrediting agency to provide to the Secretary a copy of any annual report it prepares, an updated directory of its accredited institutions and programs, any proposed changes to its policies, procedures, or accreditation standards that might alter its scope of recognition or compliance with the Criteria for Recognition, and a notification if it is changing its scope of recognition to include distance education or correspondence education. Further, if requested by the Secretary, an agency must provide a summary of the major accrediting activities conducted during the year. The final regulations also require an accrediting agency to provide to the Department, if the Secretary requests, any information regarding an institution's compliance with its title IV, HEA program responsibilities. The final regulations remove the requirement for institutional accrediting agencies, and programmatic accrediting agencies that accredit freestanding institutions, to submit an application to the Department if an agency wishes to add distance education or correspondence education to its scope of recognition; the final regulations only require agencies to notify the Department that its scope has been changed to include distance education or correspondence education. The Department estimates the reporting burden on accrediting agencies will be reduced by 300 hours under OMB Control Number 1840- 0788. [[Page 55423]] Section 602.31--Agency Submissions to the Department The final regulations require accrediting agencies to submit an application for recognition or renewal of recognition at the end of the period of recognition granted by the Secretary, generally every five years, and clarify what documents should be provided with an agency's application for recognition. The application must demonstrate that the agency complies with the Department's Criteria for Recognition as defined in CFR 34 part 602. The final regulations also specify that accrediting agencies that wish to expand their scope of recognition must submit an application to the Secretary and describe the contents of the application. They further require agencies to provide a compliance report when it has been determined that they do not fully comply with the criteria for recognition or are ineffective in applying those criteria. In order for the Secretary to determine that agencies are reliable authorities regarding the quality of education or training offered by their accredited institutions or programs, agencies must demonstrate that they fully comply with 34 part 602, subpart B. Therefore, although no requirement to submit a compliance report exists in the current regulations, the language reflects the existing practice of the Department. The final regulations also require agencies that notify the Department that they are changing their scope of recognition to include distance education or correspondence education to annually monitor enrollment growth of the institutions they accredit that offer distance education. Agencies must submit a report to the Department for each institution that reports a 50 percent or higher increase of headcount enrollment during a fiscal year. The report must address the capacity of each institution to accommodate significant growth in enrollment and to maintain educational quality; the circumstances that led to the growth; and any other applicable information affecting compliance with the regulation. This provision of the final regulations will only affect the 15 institutional accrediting agencies and programmatic accrediting agencies that accredit freestanding institutions that currently do not have distance education in their scope of recognition. The Department estimates that the requirements for submitting information to the Department in the final regulations will increase the burden on accrediting agencies by 60 hours under OMB Control Number 1840-0788. Section 602.32--Procedures for Department Review of Applications for Recognition or for Change in Scope, Compliance Reports, and Increases in Enrollment The final regulations require the Department to forward to the agency a draft analysis of an agency's application for recognition that includes any identified areas of non-compliance, the proposed recognition recommendation, and a copy of all third-party comments that the Department received. The agency will then provide a written response to the draft staff analysis and the third-party comments. The current regulations also require that the Department invite accrediting agencies to provide a written response to all draft analyses developed by Department staff as well as all third-party comments received by the Department. The procedures for the review of applications in the final regulations will not impose a new reporting burden on agencies under OMB Control Number 1840-0788. Collection of Information Consistent with the discussion in this Paperwork Reduction Act of 1995 section, the following chart describes the sections of the final regulations involving information collections, the information being collected, and the collections that the Department has submitted or will submit to the Office of Management and Budget for approval and public comment under the Paperwork Reduction Act of 1995. **NOTE: CHART OMITTED - SEE PDF FILE FOR TABLE
Assessment of Educational Impact

    In the NPRM, we requested comments on whether the proposed 
regulations would require transmission of information that any other 
agency or authority of the United States gathers or makes available.
    Based on the response to the NPRM and on our review, we have 
determined that these final regulations do not require transmission of 
information that any other agency or authority of the United States 
gathers or makes available.

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List of Subjects in 34 CFR Parts 600 and 602

    Colleges and universities, Education, Reporting and recordkeeping 
requirements.

    Dated: October 15, 2009.
Arne Duncan,
Secretary of Education.

0
For the reasons discussed in the preamble, the Secretary amends parts 
600 and 602 of title 34 of the Code of Federal Regulations as follows:

PART 600--INSTITUTIONAL ELIGIBILITY UNDER THE HIGHER EDUCATION ACT 
OF 1965, AS AMENDED

0
1. The authority citation for part 600 continues to read as follows:

    Authority:  20 U.S.C. 1001, 1002, 1003, 1088, 1091, 1094, 1099b, 
and 1099c, unless otherwise noted.

0
2. Section 600.2 is amended by:

0
A. Revising the definition of Correspondence course.
0
B. Adding in alphabetical order a new definition of Distance education.
0
C. Removing the definition of Telecommunications course.
    The addition and revision read as follows:

Sec.  600.2  Definitions.

* * * * *
    Correspondence course: (1) A course provided by an institution 
under which the institution provides instructional materials, by mail 
or electronic transmission, including examinations on the materials, to 
students who are separated from the instructor. Interaction between the 
instructor and student is limited, is not regular and substantive, and 
is primarily initiated by the student. Correspondence courses are 
typically self-paced.
    (2) If a course is part correspondence and part residential 
training, the Secretary considers the course to be a correspondence 
course.

[[Page 55426]]

    (3) A correspondence course is not distance education.
* * * * *
    Distance education means education that uses one or more of the 
technologies listed in paragraphs (1) through (4) of this definition to 
deliver instruction to students who are separated from the instructor 
and to support regular and substantive interaction between the students 
and the instructor, either synchronously or asynchronously. The 
technologies may include--
    (1) The internet;
    (2) One-way and two-way transmissions through open broadcast, 
closed circuit, cable, microwave, broadband lines, fiber optics, 
satellite, or wireless communications devices;
    (3) Audio conferencing; or
    (4) Video cassettes, DVDs, and CD-ROMs, if the cassettes, DVDs, or 
CD-ROMs are used in a course in conjunction with any of the 
technologies listed in paragraphs (1) through (3) of this definition.
* * * * *

PART 602--THE SECRETARY'S RECOGNITION OF ACCREDITING AGENCIES

0
3. The authority citation for part 602 continues to read as follows:

    Authority:  20 U.S.C. 1099b, unless otherwise noted.

0
4. Section 602.3 is amended by:
0
A. Adding in alphabetical order a new definition of Compliance report.
0
B. Adding in alphabetical order a new definition of Correspondence 
education.
0
C. Adding in alphabetical order a new definition of Designated Federal 
Official.
0
D. Adding in alphabetical order a new definition of Direct assessment 
program.
0
E. Revising the definition of Distance education.
0
F. Adding in alphabetical order a new definition of Recognition.
0
G. Revising paragraph (5) of the definition of Scope of recognition.
0
H. Revising the definition of Teach-out agreement.
0
I. Adding in alphabetical order a new definition of Teach-out plan.
    The additions and revisions read as follows:


Sec.  602.3  What definitions apply to this part?

* * * * *
    Compliance report means a written report that the Department 
requires an agency to file to demonstrate that the agency has addressed 
deficiencies specified in a decision letter from the senior Department 
official or the Secretary.
    Correspondence education means:
    (1) Education provided through one or more courses by an 
institution under which the institution provides instructional 
materials, by mail or electronic transmission, including examinations 
on the materials, to students who are separated from the instructor.
    (2) Interaction between the instructor and the student is limited, 
is not regular and substantive, and is primarily initiated by the 
student.
    (3) Correspondence courses are typically self-paced.
    (4) Correspondence education is not distance education.
    Designated Federal Official means the Federal officer designated 
under section 10(f) of the Federal Advisory Committee Act, 5 U.S.C. 
Appdx. 1.
    Direct assessment program means an instructional program that, in 
lieu of credit hours or clock hours as a measure of student learning, 
utilizes direct assessment of student learning, or recognizes the 
direct assessment of student learning by others, and meets the 
conditions of 34 CFR 668.10. For title IV, HEA purposes, the 
institution must obtain approval for the direct assessment program from 
the Secretary under 34 CFR 668.10(g) or (h) as applicable. As part of 
that approval, the accrediting agency must--
    (1) Evaluate the program(s) and include them in the institution's 
grant of accreditation or preaccreditation; and
    (2) Review and approve the institution's claim of each direct 
assessment program's equivalence in terms of credit or clock hours.
    Distance education means education that uses one or more of the 
technologies listed in paragraphs (1) through (4) of this definition to 
deliver instruction to students who are separated from the instructor 
and to support regular and substantive interaction between the students 
and the instructor, either synchronously or asynchronously. The 
technologies may include--
    (1) The internet;
    (2) One-way and two-way transmissions through open broadcast, 
closed circuit, cable, microwave, broadband lines, fiber optics, 
satellite, or wireless communications devices;
    (3) Audio conferencing; or
    (4) Video cassettes, DVDs, and CD-ROMs, if the cassettes, DVDs, or 
CD-ROMs are used in a course in conjunction with any of the 
technologies listed in paragraphs (1) through (3) of this definition.
* * * * *
    Recognition means an unappealed determination by the senior 
Department official under Sec.  602.36, or a determination by the 
Secretary on appeal under Sec.  602.37, that an accrediting agency 
complies with the criteria for recognition listed in subpart B of this 
part and that the agency is effective in its application of those 
criteria. A grant of recognition to an agency as a reliable authority 
regarding the quality of education or training offered by institutions 
or programs it accredits remains in effect for the term granted except 
upon a determination made in accordance with subpart C of this part 
that the agency no longer complies with the subpart B criteria or that 
it has become ineffective in its application of those criteria.
* * * * *
    Scope of recognition or scope * * *
    (5) Coverage of accrediting activities related to distance 
education or correspondence education.
* * * * *
    Teach-out agreement means a written agreement between institutions 
that provides for the equitable treatment of students and a reasonable 
opportunity for students to complete their program of study if an 
institution, or an institutional location that provides one hundred 
percent of at least one program offered, ceases to operate before all 
enrolled students have completed their program of study.
    Teach-out plan means a written plan developed by an institution 
that provides for the equitable treatment of students if an 
institution, or an institutional location that provides one hundred 
percent of at least one program, ceases to operate before all students 
have completed their program of study, and may include, if required by 
the institution's accrediting agency, a teach-out agreement between 
institutions.
* * * * *

0
5. Section 602.15 is amended by:
0
A. Revising paragraph (a)(2).
0
B. In paragraph (b)(1), removing the word ``two'' and removing the 
letter ``s'' from the word ``reviews'' the first time it appears.
0
C. Revising paragraph (b)(2).
    The revisions read as follows:


Sec.  602.15  Administrative and fiscal responsibilities.

* * * * *
    (a) * * *
    (2) Competent and knowledgeable individuals, qualified by education 
and experience in their own right and trained by the agency on their 
responsibilities, as appropriate for their roles, regarding the 
agency's standards, policies, and procedures, to conduct its on-site 
evaluations, apply or establish

[[Page 55427]]

its policies, and make its accrediting and preaccrediting decisions, 
including, if applicable to the agency's scope, their responsibilities 
regarding distance education and correspondence education;
* * * * *
    (b) * * *
    (2) All decisions made throughout an institution's or program's 
affiliation with the agency regarding the accreditation and 
preaccreditation of any institution or program and substantive changes, 
including all correspondence that is significantly related to those 
decisions.
* * * * *

0
6. Section 602.16 by amended by:
0
A. Revising paragraph (a)(1)(i).
0
B. Redesignating paragraphs (c) and (d) as paragraphs (d) and (e), 
respectively.
0
C. Adding new paragraphs (c) and (f).
    The additions and revision read as follows:


Sec.  602.16  Accreditation and preaccreditation standards.

    (a) * * *
    (1) * * *
    (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 State licensing 
examinations, course completion, and job placement rates.
* * * * *
    (c) If the agency has or seeks to include within its scope of 
recognition the evaluation of the quality of institutions or programs 
offering distance education or correspondence education, the agency's 
standards must effectively address the quality of an institution's 
distance education or correspondence education in the areas identified 
in paragraph (a)(1) of this section. The agency is not required to have 
separate standards, procedures, or policies for the evaluation of 
distance education or correspondence education.
* * * * *
    (f) Nothing in paragraph (a) of this section restricts--
    (1) An accrediting agency from setting, with the involvement of its 
members, and applying accreditation standards for or to institutions or 
programs that seek review by the agency; or
    (2) An institution from developing and using institutional 
standards to show its success with respect to student achievement, 
which achievement may be considered as part of any accreditation 
review.
* * * * *

0
7. Section 602.17 is amended:
0
A. In paragraph (e), by removing the word ``and'' at the end of the 
paragraph.
0
B. In paragraph (f)(2), by removing the punctuation ``.'' and adding, 
in its place, the words ``; and''.
0
C. By adding a new paragraph (g).
    The addition reads as follows:


Sec.  602.17  Application of standards in reaching an accrediting 
decision.

* * * * *
    (g) Requires institutions that offer distance education or 
correspondence education to have processes in place through which the 
institution establishes that the student who registers in a distance 
education or correspondence education course or program is the same 
student who participates in and completes the course or program and 
receives the academic credit. The agency meets this requirement if it--
    (1) Requires institutions to verify the identity of a student who 
participates in class or coursework by using, at the option of the 
institution, methods such as--
    (i) A secure login and pass code;
    (ii) Proctored examinations; and
    (iii) New or other technologies and practices that are effective in 
verifying student identity; and
    (2) Makes clear in writing that institutions must use processes 
that protect student privacy and notify students of any projected 
additional student charges associated with the verification of student 
identity at the time of registration or enrollment.
* * * * *

0
8. Section 602.18 is amended by:
0
A. Revising the introductory text.
0
B. Redesignating paragraphs (a), (b), and (c) as paragraphs (b), (c), 
and (d), respectively.
0
C. In newly redesignated paragraph (c), removing the word ``and'' at 
the end of the paragraph.
0
D. In newly redesignated paragraph (d), removing the punctuation ``.'' 
and adding, in its place, the words ``; and''.
0
E. Adding new paragraphs (a) and (e).
    The additions and revision read as follows:


Sec.  602.18  Ensuring consistency in decision-making.

    The agency must consistently apply and enforce standards that 
respect the stated mission of the institution, including religious 
mission, and that ensure that the education or training offered by an 
institution or program, including any offered through distance 
education or correspondence education, is of sufficient quality to 
achieve its stated objective for the duration of any accreditation or 
preaccreditation period granted by the agency. The agency meets this 
requirement if the agency--
    (a) Has written specification of the requirements for accreditation 
and preaccreditation that include clear standards for an institution or 
program to be accredited;
* * * * *
    (e) Provides the institution or program with a detailed written 
report that clearly identifies any deficiencies in the institution's or 
program's compliance with the agency's standards.
* * * * *

0
9. Section 602.19 is amended by:
0
A. Revising paragraph (b).
0
B. Adding new paragraphs (c), (d), and (e).
    The revision and additions read as follows:


Sec.  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 Sec.  602.16(f). This provision does not require 
institutions or programs to provide annual reports on each specific 
accreditation criterion.
    (c) Each agency must monitor overall growth of the institutions or 
programs it accredits and, at least annually, collect headcount 
enrollment data from those institutions or programs.
    (d) Institutional accrediting agencies must monitor the growth of 
programs at institutions experiencing significant enrollment growth, as 
reasonably defined by the agency.
    (e) Any agency that has notified the Secretary of a change in its 
scope in accordance with Sec.  602.27(a)(5) must monitor the headcount 
enrollment of each institution it has accredited that offers distance 
education or correspondence education. If any such institution has 
experienced an increase in headcount enrollment of 50 percent or more 
within one institutional fiscal year, the agency must report that

[[Page 55428]]

information to the Secretary within 30 days of acquiring such data.
* * * * *

0
10. Section 602.22 is amended by:
0
A. In paragraph (a)(2)(iii), removing the words ``, in either content'' 
and adding, in their place, the words ``from the existing offerings of 
educational programs,''.
0
B. In paragraph (a)(2)(iv), removing the words ``courses or'', adding 
the words ``of study'' after the word ``programs'' the first time it 
appears, and removing the word ``above'' and adding, in its place, the 
words ``different from''.
0
C. Revising paragraph (a)(2)(vii).
0
D. Adding new paragraphs (a)(2)(viii), (a)(2)(ix), and (a)(2)(x).
0
E. Adding a new paragraph (a)(3).
0
F. Revising paragraph (b).
0
G. Revising paragraph (c), introductory text.
0
H. In paragraph (c)(2), adding the words ``a representative sample of'' 
immediately after the words ``visits to''.
    The additions and revisions read as follows:


Sec.  602.22  Substantive change.

    (a) * * *
    (2) * * *
    (vii) If the agency's accreditation of an institution enables the 
institution to seek eligibility to participate in title IV, HEA 
programs, the entering into a contract under which an institution or 
organization not certified to participate in the title IV, HEA programs 
offers more than 25 percent of one or more of the accredited 
institution's educational programs.
    (viii)(A) If the agency's accreditation of an institution enables 
it to seek eligibility to participate in title IV, HEA programs, the 
establishment of an additional location at which the institution offers 
at least 50 percent of an educational program. The addition of such a 
location must be approved by the agency in accordance with paragraph 
(c) of this section unless the accrediting agency determines, and 
issues a written determination stating that the institution has--
    (1) Successfully completed at least one cycle of accreditation of 
maximum length offered by the agency and one renewal, or has been 
accredited for at least ten years;
    (2) At least three additional locations that the agency has 
approved; and
    (3) Met criteria established by the agency indicating sufficient 
capacity to add additional locations without individual prior 
approvals, including at a minimum satisfactory evidence of a system to 
ensure quality across a distributed enterprise that includes--
    (i) Clearly identified academic control;
    (ii) Regular evaluation of the locations;
    (iii) Adequate faculty, facilities, resources, and academic and 
student support systems;
    (iv) Financial stability; and
    (v) Long-range planning for expansion.
    (B) The agency's procedures for approval of an additional location, 
pursuant to paragraph (a)(2)(viii)(A) of this section, must require 
timely reporting to the agency of every additional location established 
under this approval.
    (C) Each agency determination or redetermination to preapprove an 
institution's addition of locations under paragraph (a)(2)(viii)(A) of 
this section may not exceed five years.
    (D) The agency may not preapprove an institution's addition of 
locations under paragraph (a)(2)(viii)(A) of this section after the 
institution undergoes a change in ownership resulting in a change in 
control as defined in 34 CFR 600.31 until the institution demonstrates 
that it meets the conditions for the agency to preapprove additional 
locations described in this paragraph.
    (E) The agency must have an effective mechanism for conducting, at 
reasonable intervals, visits to a representative sample of additional 
locations approved under paragraph (a)(2)(viii)(A) of this section.
    (ix) The acquisition of any other institution or any program or 
location of another institution.
    (x) The addition of a permanent location at a site at which the 
institution is conducting a teach-out for students of another 
institution that has ceased operating before all students have 
completed their program of study.
    (3) The agency's substantive change policy must define when the 
changes made or proposed by an institution are or would be sufficiently 
extensive to require the agency to conduct a new comprehensive 
evaluation of that institution.
    (b) The agency may determine the procedures it uses to grant prior 
approval of the substantive change. However, these procedures must 
specify an effective date, which is not retroactive, on which the 
change is included in the program's or institution's accreditation. An 
agency may designate the date of a change in ownership as the effective 
date of its approval of that substantive change if the accreditation 
decision is made within 30 days of the change in ownership. Except as 
provided in paragraph (c) of this section, these procedures may, but 
need not, require a visit by the agency.
    (c) Except as provided in paragraph (a)(2)(viii)(A) of this 
section, if the agency's accreditation of an institution enables the 
institution to seek eligibility to participate in title IV, HEA 
programs, the agency's procedures for the approval of an additional 
location where at least 50 percent of an educational program is offered 
must provide for a determination of the institution's fiscal and 
administrative capacity to operate the additional location. In 
addition, the agency's procedures must include--
* * * * *

0
11. Section 602.23 is amended by:
0
A. Revising paragraph (a) introductory text.
0
B. Revising paragraph (c)(1).
    The revisions read as follows:

Sec.  602.23  Operating procedures all agencies must have.

    (a) The agency must maintain and make available to the public 
written materials describing--
* * * * *
    (c) * * *
    (1) Review in a timely, fair, and equitable manner any complaint it 
receives against an accredited institution or program that is related 
to the agency's standards or procedures. The agency may not complete 
its review and make a decision regarding a complaint unless, in 
accordance with published procedures, it ensures that the institution 
or program has sufficient opportunity to provide a response to the 
complaint;
* * * * *

0
12. Section 602.24 is amended by:
0
A. Revising paragraph (c).
0
B. Adding new paragraphs (d) and (e).
    The addition and revision read as follows:


Sec.  602.24  Additional procedures certain institutional accreditors 
must have.

* * * * *
    (c) Teach-out plans and agreements. (1) The agency must require an 
institution it accredits or preaccredits to submit a teach-out plan to 
the agency for approval upon the occurrence of any of the following 
events:
    (i) The Secretary notifies the agency that the Secretary has 
initiated an emergency action against an institution, in accordance 
with section 487(c)(1)(G) of the HEA, or an action to limit, suspend, 
or terminate an institution participating in any title IV, HEA program, 
in accordance with section 487(c)(1)(F) of the HEA, and that a teach-
out plan is required.

[[Page 55429]]

    (ii) The agency acts to withdraw, terminate, or suspend the 
accreditation or preaccreditation of the institution.
    (iii) The institution notifies the agency that it intends to cease 
operations entirely or close a location that provides one hundred 
percent of at least one program.
    (iv) A State licensing or authorizing agency notifies the agency 
that an institution's license or legal authorization to provide an 
educational program has been or will be revoked.
    (2) The agency must evaluate the teach-out plan to ensure it 
provides for the equitable treatment of students under criteria 
established by the agency, specifies additional charges, if any, and 
provides for notification to the students of any additional charges.
    (3) If the agency approves a teach-out plan that includes a program 
that is accredited by another recognized accrediting agency, it must 
notify that accrediting agency of its approval.
    (4) The agency may require an institution it accredits or 
preaccredits to enter into a teach-out agreement as part of its teach-
out plan.
    (5) The agency must require an institution it accredits or 
preaccredits that enters into a teach-out agreement, either on its own 
or at the request of the agency, to submit that teach-out agreement for 
approval. The agency may approve the teach-out agreement only if the 
agreement is between institutions that are accredited or preaccredited 
by a nationally recognized accrediting agency, is consistent with 
applicable standards and regulations, and provides for the equitable 
treatment of students by ensuring that--
    (i) The teach-out institution has the necessary experience, 
resources, and support services to--
    (A) Provide an educational program that is of acceptable quality 
and reasonably similar in content, structure, and scheduling to that 
provided by the institution that is ceasing operations either entirely 
or at one of its locations; and
    (B) Remain stable, carry out its mission, and meet all obligations 
to existing students; and
    (ii) The teach-out institution demonstrates that it can provide 
students access to the program and services without requiring them to 
move or travel substantial distances and that it will provide students 
with information about additional charges, if any.
    (d) Closed institution. If an institution the agency accredits or 
preaccredits closes without a teach-out plan or agreement, the agency 
must work with the Department and the appropriate State agency, to the 
extent feasible, to assist students in finding reasonable opportunities 
to complete their education without additional charges.
    (e) Transfer of credit policies. The accrediting agency must 
confirm, as part of its review for initial accreditation or 
preaccreditation, or renewal of accreditation, that the institution has 
transfer of credit policies that--
    (1) Are publicly disclosed in accordance with Sec.  668.43(a)(11); 
and
    (2) Include a statement of the criteria established by the 
institution regarding the transfer of credit earned at another 
institution of higher education.
* * * * *

0
13. Section 602.25 is revised to read as follows:

Sec.  602.25  Due process.

    The agency must demonstrate that the procedures it uses throughout 
the accrediting process satisfy due process. The agency meets this 
requirement if the agency does the following:
    (a) Provides adequate written specification of its requirements, 
including clear standards, for an institution or program to be 
accredited or preaccredited.
    (b) Uses procedures that afford an institution or program a 
reasonable period of time to comply with the agency's requests for 
information and documents.
    (c) Provides written specification of any deficiencies identified 
at the institution or program examined.
    (d) Provides sufficient opportunity for a written response by an 
institution or program regarding any deficiencies identified by the 
agency, to be considered by the agency within a timeframe determined by 
the agency, and before any adverse action is taken.
    (e) Notifies the institution or program in writing of any adverse 
accrediting action or an action to place the institution or program on 
probation or show cause. The notice describes the basis for the action.
    (f) Provides an opportunity, upon written request of an institution 
or program, for the institution or program to appeal any adverse action 
prior to the action becoming final.
    (1) The appeal must take place at a hearing before an appeals panel 
that--
    (i) May not include current members of the agency's decision-making 
body that took the initial adverse action;
    (ii) Is subject to a conflict of interest policy;
    (iii) Does not serve only an advisory or procedural role, and has 
and uses the authority to make the following decisions: to affirm, 
amend, or reverse adverse actions of the original decision-making body; 
and
    (iv) Affirms, amends, reverses, or remands the adverse action. A 
decision to affirm, amend, or reverse the adverse action is implemented 
by the appeals panel or by the original decision-making body, at the 
agency's option. In a decision to remand the adverse action to the 
original decision-making body for further consideration, the appeals 
panel must identify specific issues that the original decision-making 
body must address. In a decision that is implemented by or remanded to 
the original decision-making body, that body must act in a manner 
consistent with the appeals panel's decisions or instructions.
    (2) The agency must recognize the right of the institution or 
program to employ counsel to represent the institution or program 
during its appeal, including to make any presentation that the agency 
permits the institution or program to make on its own during the 
appeal.
    (g) The agency notifies the institution or program in writing of 
the result of its appeal and the basis for that result.
    (h)(1) The agency must provide for a process, in accordance with 
written procedures, through which an institution or program may, before 
the agency reaches a final adverse action decision, seek review of new 
financial information if all of the following conditions are met:
    (i) The financial information was unavailable to the institution or 
program until after the decision subject to appeal was made.
    (ii) The financial information is significant and bears materially 
on the financial deficiencies identified by the agency. The criteria of 
significance and materiality are determined by the agency.
    (iii) The only remaining deficiency cited by the agency in support 
of a final adverse action decision is the institution's or program's 
failure to meet an agency standard pertaining to finances.
    (2) An institution or program may seek the review of new financial 
information described in paragraph (h)(1) of this section only once and 
any determination by the agency made with respect to that review does 
not provide a basis for an appeal.

(Authority: 20 U.S.C. 1099b)

0
14. Section 602.26 is amended:
0
A. In paragraph (b)(2), by removing the punctuation ``;'' and adding, 
in its place, the punctuation ``.''.
0
B. By adding a new paragraph (b)(3).
0
C. In paragraph (c), by removing the words ``(b)(1) and (b)(2)'' and 
adding, in

[[Page 55430]]

their place, the words ``(b)(1), (b)(2), and (b)(3)''.
0
D. Revising paragraph (d).
    The addition and revision read as follows:


Sec.  602.26  Notification of accrediting decisions.

* * * * *
    (b) * * *
    (3) A final decision to take any other adverse action, as defined 
by the agency, not listed in paragraph (b)(2) of this section;
* * * * *
    (d) For any decision listed in paragraph (b)(2) of this section, 
makes available to the Secretary, the appropriate State licensing or 
authorizing agency, and the public, no later than 60 days after the 
decision, a brief statement summarizing the reasons for the agency's 
decision and the official comments that the affected institution or 
program may wish to make with regard to that decision, or evidence that 
the affected institution has been offered the opportunity to provide 
official comment;
* * * * *


0
15. Section 602.27 is revised to read as follows:

Sec.  602.27  Other information an agency must provide the Department.

    (a) The agency must submit to the Department--
    (1) A copy of any annual report it prepares;
    (2) A copy, updated annually, of its directory of accredited and 
preaccredited institutions and programs;
    (3) A summary of the agency's major accrediting activities during 
the previous year (an annual data summary), if requested by the 
Secretary to carry out the Secretary's responsibilities related to this 
part;
    (4) Any proposed change in the agency's policies, procedures, or 
accreditation or preaccreditation standards that might alter its--
    (i) Scope of recognition, except as provided in paragraph (a)(5) of 
this section; or
    (ii) Compliance with the criteria for recognition;
    (5) Notification that the agency has expanded its scope of 
recognition to include distance education or correspondence education 
as provided in section 496(a)(4)(B)(i)(I) of the HEA. Such an expansion 
of scope is effective on the date the Department receives the 
notification;
    (6) The name of any institution or program it accredits that the 
agency has reason to believe is failing to meet its title IV, HEA 
program responsibilities or is engaged in fraud or abuse, along with 
the agency's reasons for concern about the institution or program; and
    (7) If the Secretary requests, information that may bear upon an 
accredited or preaccredited institution's compliance with its title IV, 
HEA program responsibilities, including the eligibility of the 
institution or program to participate in title IV, HEA programs.
    (b) If an agency has a policy regarding notification to an 
institution or program of contact with the Department in accordance 
with paragraph (a)(6) or (a)(7) of this section, it must provide for a 
case-by-case review of the circumstances surrounding the contact, and 
the need for the confidentiality of that contact. Upon a specific 
request by the Department, the agency must consider that contact 
confidential.

(Authority: 20 U.S.C. 1099b)

0
16. Subpart C is revised to read as follows:
Subpart C--The Recognition Process

Application and Review by Department Staff

Sec.
602.30 Activities covered by recognition procedures.
602.31 Agency submissions to the Department.
602.32 Procedures for Department review of applications for 
recognition or for change in scope, compliance reports, and 
increases in enrollment.
602.33 Procedures for review of agencies during the period of 
recognition.

Review by the National Advisory Committee on Institutional Quality and 
Integrity

602.34 Advisory Committee meetings.
602.35 Responding to the Advisory Committee's recommendation.

Review and Decision by the Senior Department Official

602.36 Senior Department official's decision.

Appeal Rights and Procedures

602.37 Appealing the senior Department official's decision to the 
Secretary.
602.38 Contesting the Secretary's final decision to deny, limit, 
suspend, or terminate an agency's recognition.

Subpart C--The Recognition Process

Application and Review by Department Staff


Sec.  602.30  Activities covered by recognition procedures.

    Recognition proceedings are administrative actions taken on any of 
the following matters:
    (a) Applications for initial or continued recognition submitted 
under Sec.  602.31(a).
    (b) Applications for an expansion of scope submitted under Sec.  
602.31(b).
    (c) Compliance reports submitted under Sec.  602.31(c).
    (d) Reviews of agencies that have expanded their scope of 
recognition by notice, following receipt by the Department of 
information of an increase in headcount enrollment described in Sec.  
602.19(e).
    (e) Staff analyses identifying areas of non-compliance based on a 
review conducted under Sec.  602.33.

(Authority: 20 U.S.C. 1099b)

Sec.  602.31  Agency submissions to the Department.

    (a) Applications for recognition or renewal of recognition. An 
accrediting agency seeking initial or continued recognition must submit 
a written application to the Secretary. Each accrediting agency must 
submit an application for continued recognition at least once every 
five years, or within a shorter time period specified in the final 
recognition decision. The application must consist of--
    (1) A statement of the agency's requested scope of recognition;
    (2) Evidence, including documentation, that the agency complies 
with the criteria for recognition listed in subpart B of this part and 
effectively applies those criteria; and
    (3) Evidence, including documentation, of how an agency that 
includes or seeks to include distance education or correspondence 
education in its scope of recognition applies its standards in 
evaluating programs and institutions it accredits that offer distance 
education or correspondence education.
    (b) Applications for expansions of scope. An agency seeking an 
expansion of scope by application must submit a written application to 
the Secretary. The application must--
    (1) Specify the scope requested;
    (2) Include documentation of experience in accordance with Sec.  
602.12(b); and
    (3) Provide copies of any relevant standards, policies, or 
procedures developed and applied by the agency and documentation of the 
application of these standards, policies, or procedures.
    (c) Compliance reports. If an agency is required to submit a 
compliance report, it must do so within 30 days following the end of 
the period for achieving compliance as specified in the decision of the 
senior Department official or Secretary, as applicable.
    (d) Review following an increase in headcount enrollment. If an 
agency that

[[Page 55431]]

has notified the Secretary in writing of its change in scope to include 
distance education or correspondence education in accordance with Sec.  
602.27(a)(5) reports an increase in headcount enrollment in accordance 
with Sec.  602.19(e) for an institution it accredits, or if the 
Department notifies the agency of such an increase at one of the 
agency's accredited institutions, the agency must, within 45 days of 
reporting the increase or receiving notice of the increase from the 
Department, as applicable, submit a report explaining--
    (1) How the agency evaluates the capacity of the institutions or 
programs it accredits to accommodate significant growth in enrollment 
and to maintain educational quality;
    (2) The specific circumstances regarding the growth at the 
institution(s) or programs(s) that triggered the review and the results 
of any evaluation conducted by the agency; and
    (3) Any other information that the agency deems appropriate to 
demonstrate the effective application of the criteria for recognition 
or that the Department may require.
    (e) Consent to sharing of information. By submitting an application 
for recognition, the agency authorizes Department staff throughout the 
application process and during any period of recognition--
    (1) To observe its site visits to one or more of the institutions 
or programs it accredits or preaccredits, on an announced or 
unannounced basis;
    (2) To visit locations where agency activities such as training, 
review and evaluation panel meetings, and decision meetings take place, 
on an announced or unannounced basis;
    (3) To obtain copies of all documents the staff deems necessary to 
complete its review of the agency; and
    (4) To gain access to agency records, personnel, and facilities.
    (f) Public availability of agency records obtained by the 
Department. (1) The Secretary's processing and decision making on 
requests for public disclosure of agency materials reviewed under this 
part are governed by the Freedom of Information Act, 5 U.S.C. 552; the 
Trade Secrets Act, 18 U.S.C. 1905; the Privacy Act of 1974, as amended, 
5 U.S.C 552a; the Federal Advisory Committee Act, 5 U.S.C. Appdx. 1; 
and all other applicable laws. In recognition proceedings, agencies 
may--
    (i) Redact information that would identify individuals or 
institutions that is not essential to the Department's review of the 
agency;
    (ii) Make a good faith effort to designate all business information 
within agency submissions that the agency believes would be exempt from 
disclosure under exemption 4 of the Freedom of Information Act (FOIA), 
5 U.S.C. 552(b)(4). A blanket designation of all information contained 
within a submission, or of a category of documents, as meeting this 
exemption will not be considered a good faith effort and will be 
disregarded;
    (iii) Identify any other material the agency believes would be 
exempt from public disclosure under FOIA, the factual basis for the 
request, and any legal basis the agency has identified for withholding 
the document from disclosure; and
    (iv) Ensure documents submitted are only those required for 
Department review or as requested by Department officials.
    (2) The Secretary processes FOIA requests in accordance with 34 CFR 
part 5 and makes all documents provided to the Advisory Committee 
available to the public.

(Authority: 20 U.S.C. 1099b)

Sec.  602.32  Procedures for Department review of applications for 
recognition or for change in scope, compliance reports, and increases 
in enrollment.

    (a) After receipt of an agency's application for initial or 
continued recognition, or change in scope, or an agency's compliance 
report, or an agency's report submitted under Sec.  602.31(d), 
Department staff publishes a notice of the agency's application or 
report in the Federal Register inviting the public to comment on the 
agency's compliance with the criteria for recognition and establishing 
a deadline for receipt of public comment.
    (b) The Department staff analyzes the agency's application for 
initial or renewal of recognition, compliance report, or report 
submitted under Sec.  602.31(d) to determine whether the agency 
satisfies the criteria for recognition, taking into account all 
available relevant information concerning the compliance of the agency 
with those criteria and in the agency's effectiveness in applying the 
criteria. The analysis of an application for recognition and, as 
appropriate, of a compliance report, or of a report required under 
Sec.  602.31(d), includes--
    (1) Observations from site visit(s), on an announced or unannounced 
basis, to the agency or to a location where agency activities such as 
training, review and evaluation panel meetings, and decision meetings 
take place and to one or more of the institutions or programs it 
accredits or preaccredits;
    (2) Review of the public comments and other third-party information 
the Department staff receives by the established deadline, and the 
agency's responses to the third-party comments, as appropriate, as well 
as any other information Department staff assembles for purposes of 
evaluating the agency under this part; and
    (3) Review of complaints or legal actions involving the agency.
    (c) The Department staff analyzes the materials submitted in 
support of an application for expansion of scope to ensure that the 
agency has the requisite experience, policies that comply with subpart 
B of this part, capacity, and performance record to support the 
request.
    (d) Department staff's evaluation of an agency may also include a 
review of information directly related to institutions or programs 
accredited or preaccredited by the agency relative to their compliance 
with the agency's standards, the effectiveness of the standards, and 
the agency's application of those standards.
    (e) If, at any point in its evaluation of an agency seeking initial 
recognition, Department staff determines that the agency fails to 
demonstrate compliance with the basic eligibility requirements in 
Sec. Sec.  602.10 through 602.13, the staff--
    (1) Returns the agency's application and provides the agency with 
an explanation of the deficiencies that caused staff to take that 
action; and
    (2) Recommends that the agency withdraw its application and reapply 
when the agency can demonstrate compliance.
    (f) Except with respect to an application that has been returned or 
is withdrawn under paragraph (e) of this section, when Department staff 
completes its evaluation of the agency, the staff--
    (1) Prepares a written draft analysis of the agency;
    (2) Sends the draft analysis including any identified areas of non-
compliance and a proposed recognition recommendation, and all 
supporting documentation, including all third-party comments the 
Department received by the established deadline, to the agency;
    (3) Invites the agency to provide a written response to the draft 
analysis and proposed recognition recommendation and third-party 
comments, specifying a deadline that provides at least 30 days for the 
agency's response;
    (4) Reviews the response to the draft analysis the agency submits, 
if any, and prepares the written final analysis. The final analysis 
includes a recognition

[[Page 55432]]

recommendation to the senior Department official, as the Department 
staff deems appropriate, including, but not limited to, a 
recommendation to approve, deny, limit, suspend, or terminate 
recognition, require the submission of a compliance report and continue 
recognition pending a final decision on compliance, approve or deny a 
request for expansion of scope, or revise or affirm the scope of the 
agency; and
    (5) Provides to the agency, no later than seven days before the 
Advisory Committee meeting, the final staff analysis and any other 
available information provided to the Advisory Committee under Sec.  
602.34(c).
    (g) The agency may request that the Advisory Committee defer acting 
on an application at that Advisory Committee meeting if Department 
staff fails to provide the agency with the materials described, and 
within the timeframes provided, in paragraphs (f)(3) and (f)(5) of this 
section. If the Department staff's failure to send the materials in 
accordance with the timeframe described in paragraph (f)(3) or (f)(5) 
of this section is due to the failure of the agency to submit reports 
to the Department, other information the Secretary requested, or its 
response to the draft analysis, by the deadline established by the 
Secretary, the agency forfeits its right to request a deferral of its 
application.

(Authority: 20 U.S.C. 1099b)

Sec.  602.33  Procedures for review of agencies during the period of 
recognition.

    (a) Department staff may review the compliance of a recognized 
agency with the criteria for recognition at any time--
    (1) At the request of the Advisory Committee; or
    (2) Based on any information that, as determined by Department 
staff, appears credible and raises issues relevant to recognition.
    (b) The review may include, but need not be limited to, any of the 
activities described in Sec.  602.32(b) and (d).
    (c) If, in the course of the review, and after provision to the 
agency of the documentation concerning the inquiry and consultation 
with the agency, Department staff notes that one or more deficiencies 
may exist in the agency's compliance with the criteria for recognition 
or in the agency's effective application of those criteria, it--
    (1) Prepares a written draft analysis of the agency's compliance 
with the criteria of concern. The draft analysis reflects the results 
of the review, and includes a recommendation regarding what action to 
take with respect to recognition. Possible recommendations include, but 
are not limited to, a recommendation to limit, suspend, or terminate 
recognition, or require the submission of a compliance report and to 
continue recognition pending a final decision on compliance;
    (2) Sends the draft analysis including any identified areas of non-
compliance, and a proposed recognition recommendation, and all 
supporting documentation to the agency; and
    (3) Invites the agency to provide a written response to the draft 
analysis and proposed recognition recommendation, specifying a deadline 
that provides at least 30 days for the agency's response.
    (d) If, after review of the agency's response to the draft 
analysis, Department staff concludes that the agency has demonstrated 
compliance with the criteria for recognition, the staff notifies the 
agency in writing of the results of the review. If the review was 
requested by the Advisory Committee, staff also provides the Advisory 
Committee with the results of the review.
    (e) If, after review of the agency's response to the draft 
analysis, Department staff concludes that the agency has not 
demonstrated compliance, the staff--
    (1) Notifies the agency that the draft analysis will be finalized 
for presentation to the Advisory Committee;
    (2) Publishes a notice in the Federal Register including, if 
practicable, an invitation to the public to comment on the agency's 
compliance with the criteria in question and establishing a deadline 
for receipt of public comment;
    (3) Provides the agency with a copy of all public comments received 
and, if practicable, invites a written response from the agency;
    (4) Finalizes the staff analysis as necessary to reflect its review 
of any agency response and any public comment received; and
    (5) Provides to the agency, no later than seven days before the 
Advisory Committee meeting, the final staff analysis and a recognition 
recommendation and any other information provided to the Advisory 
Committee under Sec.  602.34(c).
    (f) The Advisory Committee reviews the matter in accordance with 
Sec.  602.34.

(Authority: 20 U.S.C. 1099b)

Review by the National Advisory Committee on Institutional Quality and 
Integrity

Sec.  602.34  Advisory Committee meetings.

    (a) Department staff submits a proposed schedule to the Chairperson 
of the Advisory Committee based on anticipated completion of staff 
analyses.
    (b) The Chairperson of the Advisory Committee establishes an agenda 
for the next meeting and, in accordance with the Federal Advisory 
Committee Act, presents it to the Designated Federal Official for 
approval.
    (c) Before the Advisory Committee meeting, Department staff 
provides the Advisory Committee with--
    (1) The agency's application for recognition or for expansion of 
scope, the agency's compliance report, or the agency's report submitted 
under Sec.  602.31(d), and supporting documentation;
    (2) The final Department staff analysis of the agency developed in 
accordance with Sec.  602.32 or Sec.  602.33, and any supporting 
documentation;
    (3) At the request of the agency, the agency's response to the 
draft analysis;
    (4) Any written third-party comments the Department received about 
the agency on or before the established deadline;
    (5) Any agency response to third-party comments; and
    (6) Any other information Department staff relied upon in 
developing its analysis.
    (d) At least 30 days before the Advisory Committee meeting, the 
Department publishes a notice of the meeting in the Federal Register 
inviting interested parties, including those who submitted third-party 
comments concerning the agency's compliance with the criteria for 
recognition, to make oral presentations before the Advisory Committee.
    (e) The Advisory Committee considers the materials provided under 
paragraph (c) of this section in a public meeting and invites 
Department staff, the agency, and other interested parties to make oral 
presentations during the meeting. A transcript is made of all Advisory 
Committee meetings.
    (f) The written motion adopted by the Advisory Committee regarding 
each agency's recognition will be made available during the Advisory 
Committee meeting. The Department will provide each agency, upon 
request, with a copy of the motion on recognition at the meeting. Each 
agency that was reviewed will be sent an electronic copy of the motion 
relative to that agency as soon as practicable after the meeting.
    (g) After each meeting of the Advisory Committee at which a review 
of agencies occurs, the Advisory Committee forwards to the senior 
Department official its recommendation with respect to each agency, 
which may include, but is not limited to, a

[[Page 55433]]

recommendation to approve, deny, limit, suspend, or terminate 
recognition, to grant or deny a request for expansion of scope, to 
revise or affirm the scope of the agency, or to require the agency to 
submit a compliance report and to continue recognition pending a final 
decision on compliance.

(Authority: 20 U.S.C. 1099b)

Sec.  602.35  Responding to the Advisory Committee's recommendation.

    (a) Within ten days following the Advisory Committee meeting, the 
agency and Department staff may submit written comments to the senior 
Department official on the Advisory Committee's recommendation. The 
agency must simultaneously submit a copy of its written comments, if 
any, to Department staff. Department staff must simultaneously submit a 
copy of its written comments, if any, to the agency.
    (b) Comments must be limited to--
    (1) Any Advisory Committee recommendation that the agency or 
Department staff believes is not supported by the record;
    (2) Any incomplete Advisory Committee recommendation based on the 
agency's application; and
    (3) The inclusion of any recommendation or draft proposed decision 
for the senior Department official's consideration.
    (c)(1) Neither the Department staff nor the agency may submit 
additional documentary evidence with its comments unless the Advisory 
Committee's recognition recommendation proposes finding the agency 
noncompliant with, or ineffective in its application of, a criterion or 
criteria for recognition not identified in the final Department staff 
analysis provided to the Advisory Committee.
    (2) Within ten days of receipt by the Department staff of an 
agency's comments or new evidence, if applicable, or of receipt by the 
agency of the Department staff's comments, Department staff, the 
agency, or both, as applicable, may submit a response to the senior 
Department official. Simultaneously with submission, the agency must 
provide a copy of any response to the Department staff. Simultaneously 
with submission, Department staff must provide a copy of any response 
to the agency.

(Authority: 20 U.S.C. 1099b)

Review and Decision by the Senior Department Official

Sec.  602.36  Senior Department official's decision.

    (a) The senior Department official makes a decision regarding 
recognition of an agency based on the record compiled under Sec. Sec.  
602.32, 602.33, 602.34, and 602.35 including, as applicable, the 
following:
    (1) The materials provided to the Advisory Committee under Sec.  
602.34(c).
    (2) The transcript of the Advisory Committee meeting.
    (3) The recommendation of the Advisory Committee.
    (4) Written comments and responses submitted under Sec.  602.35.
    (5) New evidence submitted in accordance with Sec.  602.35(c)(1).
    (6) A communication from the Secretary referring an issue to the 
senior Department official's consideration under Sec.  602.37(e).
    (b) In the event that statutory authority or appropriations for the 
Advisory Committee ends, or there are fewer duly appointed Advisory 
Committee members than needed to constitute a quorum, and under 
extraordinary circumstances when there are serious concerns about an 
agency's compliance with subpart B of this part that require prompt 
attention, the senior Department official may make a decision in a 
recognition proceeding based on the record compiled under Sec.  602.32 
or Sec.  602.33 after providing the agency with an opportunity to 
respond to the final staff analysis. Any decision made by the senior 
Department official absent a recommendation from the Advisory Committee 
may be appealed to the Secretary as provided in Sec.  602.37.
    (c) Following consideration of an agency's recognition under this 
section, the senior Department official issues a recognition decision.
    (d) Except with respect to decisions made under paragraph (f) or 
(g) of this section and matters referred to the senior Department 
official under Sec.  602.37(e) or (f), the senior Department official 
notifies the agency in writing of the senior Department official's 
decision regarding the agency's recognition within 90 days of the 
Advisory Committee meeting or conclusion of the review under paragraph 
(b) of this section.
    (e) The senior Department official's decision may include, but is 
not limited to, approving, denying, limiting, suspending, or 
terminating recognition, granting or denying an application for an 
expansion of scope, revising or affirming the scope of the agency, or 
continuing recognition pending submission and review of a compliance 
report under Sec. Sec.  602.32 and 602.34 and review of the report by 
the senior Department official under this section.
    (1)(i) The senior Department official approves recognition if the 
agency complies with the criteria for recognition listed in subpart B 
of this part and if the agency effectively applies those criteria.
    (ii) If the senior Department official approves recognition, the 
recognition decision defines the scope of recognition and the 
recognition period. The recognition period does not exceed five years, 
including any time during which recognition was continued to permit 
submission and review of a compliance report.
    (iii) If the scope or period of recognition is less than that 
requested by the agency, the senior Department official explains the 
reasons for approving a lesser scope or recognition period.
    (2)(i) Except as provided in paragraph (e)(3) of this section, if 
the agency either fails to comply with the criteria for recognition 
listed in subpart B of this part, or to apply those criteria 
effectively, the senior Department official denies, limits, suspends, 
or terminates recognition.
    (ii) If the senior Department official denies, limits, suspends, or 
terminates recognition, the senior Department official specifies the 
reasons for this decision, including all criteria the agency fails to 
meet and all criteria the agency has failed to apply effectively.
    (3)(i) Except as provided in paragraph (e)(3)(ii) of this section, 
if a recognized agency fails to demonstrate compliance with or 
effective application of a criterion or criteria, but the senior 
Department official concludes that the agency will demonstrate or 
achieve compliance with the criteria for recognition and effective 
application of those criteria within 12 months or less, the senior 
Department official may continue the agency's recognition, pending 
submission by the agency of a compliance report, review of the report 
under Sec. Sec.  602.32 and 602.34, and review of the report by the 
senior Department official under this section. In such a case, the 
senior Department official specifies the criteria the compliance report 
must address, and a time period, not longer than 12 months, during 
which the agency must achieve compliance and effectively apply the 
criteria. The compliance report documenting compliance and effective 
application of criteria is due not later than 30 days after the end of 
the period specified in the senior Department official's decision.

    (ii) If the record includes a compliance report, and the senior 
Department official determines that an agency has not complied with the 
criteria for recognition, or has not effectively applied those 
criteria, during the time period specified by the senior Department 
official in accordance with paragraph (e)(3)(i) of this section, the 
senior Department official denies, limits, suspends, or terminates 
recognition, except, in extraordinary circumstances, upon a showing of 
good cause for an extension of time as determined by the senior 
Department official and detailed in the senior Department official's 
decision. If the senior Department official determines good cause for 
an extension has been shown, the senior Department official specifies 
the length of the extension and what the agency must do during it to 
merit a renewal of recognition.
    (f) If the senior Department official determines, based on the 
record, that a decision to deny, limit, suspend, or terminate an 
agency's recognition may be warranted based on a finding that the 
agency is noncompliant with, or ineffective in its application of, a 
criterion or criteria of recognition not identified earlier in the 
proceedings as an area of noncompliance, the senior Department official 
provides--
    (1) The agency with an opportunity to submit a written response and 
documentary evidence addressing the finding; and
    (2) The staff with an opportunity to present its analysis in 
writing.
    (g) If relevant and material information pertaining to an agency's 
compliance with recognition criteria, but not contained in the record, 
comes to the senior Department official's attention while a decision 
regarding the agency's recognition is pending before the senior 
Department official, and if the senior Department official concludes 
the recognition decision should not be made without consideration of 
the information, the senior Department official either--
    (1)(i) Does not make a decision regarding recognition of the 
agency; and
    (ii) Refers the matter to Department staff for review and analysis 
under Sec.  602.32 or Sec.  602.33, as appropriate, and consideration 
by the Advisory Committee under Sec.  602.34; or
    (2)(i) Provides the information to the agency and Department staff;
    (ii) Permits the agency to respond to the senior Department 
official and the Department staff in writing, and to include additional 
evidence relevant to the issue, and specifies a deadline;
    (iii) Provides Department staff with an opportunity to respond in 
writing to the agency's submission under paragraph (g)(2)(ii) of this 
section, specifying a deadline; and
    (iv) Issues a recognition decision based on the record described in 
paragraph (a) of this section, as supplemented by the information 
provided under this paragraph.
    (h) No agency may submit information to the senior Department 
official, or ask others to submit information on its behalf, for 
purposes of invoking paragraph (g) of this section. Before invoking 
paragraph (g) of this section, the senior Department official will take 
into account whether the information, if submitted by a third party, 
could have been submitted in accordance with Sec.  602.32(a) or Sec.  
602.33(e)(2).
    (i) If the senior Department official does not reach a final 
decision to approve, deny, limit, suspend, or terminate an agency's 
recognition before the expiration of its recognition period, the senior 
Department official automatically extends the recognition period until 
a final decision is reached.
    (j) Unless appealed in accordance with Sec.  602.37, the senior 
Department official's decision is the final decision of the Secretary.

(Authority: 20 U.S.C. 1099b)

Appeal Rights and Procedures

Sec.  602.37  Appealing the senior Department official's decision to 
the Secretary.

    (a) The agency may appeal the senior Department official's decision 
to the Secretary. Such appeal stays the decision of the senior 
Department official until final disposition of the appeal. If an agency 
wishes to appeal, the agency must--
    (1) Notify the Secretary and the senior Department official in 
writing of its intent to appeal the decision of the senior Department 
official, no later than ten days after receipt of the decision;
    (2) Submit its appeal to the Secretary in writing no later than 30 
days after receipt of the decision; and
    (3) Provide the senior Department official with a copy of the 
appeal at the same time it submits the appeal to the Secretary.
    (b) The senior Department official may file a written response to 
the appeal. To do so, the senior Department official must--
    (1) Submit a response to the Secretary no later than 30 days after 
receipt of a copy of the appeal; and
    (2) Provide the agency with a copy of the senior Department 
official's response at the same time it is submitted to the Secretary.
    (c) Neither the agency nor the senior Department official may 
include in its submission any new evidence it did not submit previously 
in the proceeding.
    (d) On appeal, the Secretary makes a recognition decision, as 
described in Sec.  602.36(e). If the decision requires a compliance 
report, the report is due within 30 days after the end of the period 
specified in the Secretary's decision. The Secretary renders a final 
decision after taking into account the senior Department official's 
decision, the agency's written submissions on appeal, the senior 
Department official's response to the appeal, if any, and the entire 
record before the senior Department official. The Secretary notifies 
the agency in writing of the Secretary's decision regarding the 
agency's recognition.
    (e) The Secretary may determine, based on the record, that a 
decision to deny, limit, suspend, or terminate an agency's recognition 
may be warranted based on a finding that the agency is noncompliant 
with, or ineffective in its application with respect to, a criterion or 
criteria for recognition not identified as an area of noncompliance 
earlier in the proceedings. In that case, the Secretary, without 
further consideration of the appeal, refers the matter to the senior 
Department official for consideration of the issue under Sec.  
602.36(f). After the senior Department official makes a decision, the 
agency may, if desired, appeal that decision to the Secretary.
    (f) If relevant and material information pertaining to an agency's 
compliance with recognition criteria, but not contained in the record, 
comes to the Secretary's attention while a decision regarding the 
agency's recognition is pending before the Secretary, and if the 
Secretary concludes the recognition decision should not be made without 
consideration of the information, the Secretary either--
    (1)(i) Does not make a decision regarding recognition of the 
agency; and
    (ii) Refers the matter to Department staff for review and analysis 
under Sec.  602.32 or Sec.  602.33, as appropriate, and review by the 
Advisory Committee under Sec.  602.34; and consideration by the senior 
Department official under Sec.  602.36; or
    (2)(i) Provides the information to the agency and the senior 
Department official;
    (ii) Permits the agency to respond to the Secretary and the senior 
Department official in writing, and to include additional evidence 
relevant to the issue, and specifies a deadline;
    (iii) Provides the senior Department official with an opportunity 
to respond in writing to the agency's submission

[[Page 55435]]

under paragraph (f)(2)(ii) of this section, specifying a deadline; and
    (iv) Issues a recognition decision based on all the materials 
described in paragraphs (d) and (f) of this section.
    (g) No agency may submit information to the Secretary, or ask 
others to submit information on its behalf, for purposes of invoking 
paragraph (f) of this section. Before invoking paragraph (f) of this 
section, the Secretary will take into account whether the information, 
if submitted by a third party, could have been submitted in accordance 
with Sec.  602.32(a) or Sec.  602.33(e)(2).
    (h) If the Secretary does not reach a final decision on appeal to 
approve, deny, limit, suspend, or terminate an agency's recognition 
before the expiration of its recognition period, the Secretary 
automatically extends the recognition period until a final decision is 
reached.

(Authority: 20 U.S.C. 1099b)

Sec.  602.38  Contesting the Secretary's final decision to deny, limit, 
suspend, or terminate an agency's recognition.

    An agency may contest the Secretary's decision under this part in 
the Federal courts as a final decision in accordance with applicable 
Federal law. Unless otherwise directed by the court, a decision of the 
Secretary to deny, limit, suspend, or terminate the agency's 
recognition is not stayed during an appeal in the Federal courts.

(Authority: 20 U.S.C. 1099b)

Subpart D--[Removed]

0
17. Subpart D, consisting of Sec. Sec.  602.40 through 602.45, is 
removed.

Subpart E--[Redesignated as Subpart D]

0
18. Subpart E, consisting of Sec.  602.50, is redesignated as subpart 
D.

[FR Doc. E9-25186 Filed 10-26-09; 8:45 am]

BILLING CODE 4000-01-P

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