The Kentucky State Board for Proprietary Education, which oversees for-profit colleges, lacks a clear understanding of its job and exercises “inadequate” oversight.

That’s one conclusion of a review by state Auditor of Public Accounts Crit Luallen of the 11-member board that oversees 122 institutions offering programs ranging from nursing to barbering and which enroll about 19,000 students.

Many of those students are non-traditional, lured by commercial advertising and the promise of easy federal financial aid. But in the past year, lawmakers have criticized some of the institutions for encouraging students to pile up student loans while not receiving training or education sufficient to satisfy prospective employers. Such for-profit institutions have also been under fire nationally.

Attorney General Jack Conway in December issued subpoenas from six of the colleges and continues to investigate.

Luallen’s audit produced nine findings, including five material weaknesses, and 30 recommendations. Two material weaknesses involve the state office that oversees the for-profit schools and monitors their budgets, the Office of Occupations and Professions. The audit found O&P sometimes fails to retain documentation or properly monitor expenditures and revenues. Board members’ travel vouchers, about 53 of them totaling about $6,800, were paid without proper approval by O&P between July 2009 and May 2010.

In one instance, supporting documentation for reimbursement was a handwritten note which said the board member stayed at a hotel for “I think $65. The food was around $7 total.” The note was notarized by an O&P employee.

Six of the 11 board members represent institutions monitored by the board whose members are appointed by the governor. The audit concluded that training for board members and minutes of meetings are inadequate. It also found a Student Protection Fund, established in 1990 to help students pay off debts incurred at a school which subsequently closes, awarded 24 claims but recorded those payments as negative receipts rather than as claims expenses. Some claims involving Decker College — which closed in 2005 — still have not been resolved. The audit says the board’s approach to almost 100 claims, 70 of which are still pending, was ‘sluggish” and said the failure to handle the claims “in a timely manner compounded the problems.” Auditors also discovered a $78,000 error in the fund’s financial statements.

“When (board) leadership is lax and inconsistent,” Luallen said, “then the quality of the board’s oversight is diminished. It’s essential for the board to carry out its statutory duty to monitor these schools.”

The review disclosed that at least one school operated for about two years without a license and was not disciplined, although it was licensed last year. And once a school receives its license, the board does not conduct subsequent reviews unless it learns the school changes its programs or location.

O&P, which is housed in the Public Protection Cabinet, said in its response it has a new executive director and will establish written policies and procedures in reaction to the audit’s findings.

Luallen also recommended the board produce an annual report to document the impact of proprietary schools and assure the public their investment in such schools is reliable.

RONNIE ELLIS writes for CNHI News Service and is based in Frankfort. Reach him at rellis@cnhi.com. Follow CNHI News Service stories on Twitter at www.twitter.com/cnhifrankfort.

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