Statement of Rationale for Judgment of Compliance

Palo Alto College (PAC) is in compliance with its program responsibilities under Title IV of the most recent Higher Education Act as amended. Palo Alto College audits financial aid programs as required by federal and state regulations.

The case for compliance is structured as follows:

1. The Institution is in compliance with its responsibilities under Title IV.
2. The Institution audits financial aid programs as required by Federal and State regulations.

Compliance with Program Responsibilites under Title IV

In compliance with program responsibilities under Title IV outlined in Federal Requirement 4.7, Palo Alto College — Office of Postsecondary Education Identification (OPE ID) number 02341300 — meets all audit requirements for Title IV administration in accordance with the 2013 U.S. Department of Education Program Participation Agreement[1] and the April 30, 2013 U.S. Department of Education Approval Notice[2]. The application for Re-Certification extends participation and eligibility to participate in Title IV programs until June 30, 2018.

The scope of coverage allowed by the Program Participation Agreement[1] and Approval to Participate in Federal Student Financial Aid Programs[2] is provided for in the U.S. Department of Education Eligibility and Certification Approval Report[3] and includes the Federal Pell Grant, Federal Supplemental Opportunity Grant, Federal Work Study, and the Federal Direct Loan Program.

In Fiscal Year 2014 (FY14), the Palo Alto College  Board of Trustees contracted with Ernst & Young to perform the annual compliance audits required by the A-133 Circular Section .510(a) and the State of Texas single audit.  In FY15 and FY16, the Palo Alto College Board of Trustees contracted with Grant Thornton to perform the annual compliance audits required by the A-133 Circular Section .510(a), the State of Texas single audit for FY15, and under the Uniform Guidance which replaced A-133 for FY16.  College Districts in the State of Texas have single taxation authority as described in Texas Constitution Article 8 – Taxation and Revenue[4] and report to Federal and State entities as one district; hence, Palo Alto College is part of the Alamo Colleges District annual compliance audits required by federal and state regulations.The Alamo Community College District, the official legal name of the district, was established as a public community college through a public election in 1945[5] and Gov. Code 130.162[6].  The Board of Trustees voted to establish Palo Alto College on February 21, 1983[7] and was chartered by the Texas Legislature on March 19, 1983, the official date of founding. 

Palo Alto College’s A-133 Single Audit/Uniform Guidance findings for FY14[8], FY15[9] and FY16[10] are provided as evidence and summarized in section 3.10.2. The A-133 Audit/Uniform Guidance findings have been annotated to clarify portions of the audit pertinent to Palo Alto College.  In FY14, the A-133 audit for Palo Alto College identified one finding[11] related to timely notification to students of direct loan disbursement details, which was considered to be a significant deficiency.  In response, Palo Alto College implemented more timely and stringent monitoring procedures and reports to strengthen controls over the notification process.  There were no findings identified during the State of Texas single audit for Palo Alto College in FY14.  For the most recent audits for the fiscal years ended August 31, 2016 and 2015, there were no material weaknesses or significant deficiencies identified related to Palo Alto College.  Palo Alto College had zero Student Financial Aid findings in FY16 and FY15.    

The 2014 cohort default rates for the Federal Family Education Loan Program at PAC is the data published for the payment history of the 2011 cohort loans.  The 3-Year School Cohort Default Rate[12] was 13.7% for FY13, 14.4% for FY12, and 18.5% for FY11.  To assist in default prevention, Palo Alto College acquired the services of a professional default aversion company that works with former students who have fallen behind on loan payments, informing them of options for preventing default.

Palo Alto College reached out to the Department of Education to secure confirmation that our current practices are in full compliance with the Title IV requirements.  Correspondence with a Department of Education Compliance Manager[13] attests to our compliance, along with the Satisfactory Academic Progress Policy[14] reviewed and approved by the Department of Education.  No issues exist with Title IV programs for the institution. The College is not on the reimbursement method for funding, has not been required to obtain a letter of credit in favor of the Department of Education or any other regulatory agency, and has not been informed of any unresolved complaints from the Department of Education.  No significant impending litigation exists with respect to financial aid activities, and no adverse communication has been received from the Department of Education.

Financial Program Audits

In accordance with Comprehensive Standard 3.2, Palo Alto College (PAC) audits financial aid programs as required by federal and state regulations, as part of the annual financial audit of the Alamo Colleges District.  The audit of federal financial aid programs is conducted by an independent accounting firm selected by the Board of Trustees and is performed in accordance with the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance).  The compliance requirements included in the Uniform Guidance replaced the requirements formerly required under OMB Circular A-133 Section .510(a).  The audit of state financial aid programs is conducted by the same accounting firm and is performed in accordance with the audit requirements of the State of Texas Uniform Grant Management Standards (UGMS - formerly State of Texas Single Audit Circular).  The financial audit is conducted in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States.

One of the requirements of the audits described above is to issue separate opinions covering controls over financial reporting, compliance requirements applicable to each major federal or state program and compliance with the Uniform Guidance or UGMS.  The opinions are supported by a Schedule of Findings and Questioned Costs.  A summary of the opinions over the last three years, as related and specifically identifiable to Palo Alto College, is presented in Table 4.7-1.[15] Palo Alto College’s findings under the Uniform Guidance requirements (for FY16[10]) and under the OMB Circular A-133 requirements (for FY14 [8]and FY15[9]) are provided as evidence and summarized in Table 4.7-2[16].

As articulated in Board Policy A.1.1[17], the College District is known by the assumed names of “Alamo Colleges” and “Alamo Colleges District” or the “Alamo Community College District.” References to these assumed names in the narrative and any supporting documentation are equivalent.