Meeting of the Board of Regents | July 2007

Sunday, July 1, 2007 - 8:00am

sed seal

THE STATE EDUCATION DEPARTMENT / THE UNIVERSITY OF THE STATE OF NEW YORK / ALBANY, NY 12234

TO:	Higher Education and Professional Practice Committee
FROM:	Johanna Duncan-Poitier
SUBJECT:	Bryant & Stratton College: Authorization of Degree Powers Upon a Change of Ownership
DATE:	July 11, 2007
STRATEGIC GOAL:	Goals 2 and 4
AUTHORIZATION(S):

Summary

Issue for Decision

Should the Regents authorize Bryant & Stratton College to award degrees under a new ownership arrangement?

Reason(s) for Consideration

Required by State regulation.

Proposed Handling

This question will come before the Higher Education and Professional Practice Committee at its July 2007 meeting where it will be voted on and action taken. It then will come before the full Board at its July 2007 meeting for final action.

Procedural History

In December 2006, the Board of Regents adopted §3.58 of the Rules of the Board of Regents (Attachment A) requiring, among other provisions, that a prospective purchaser of a proprietary college secure the Board’s agreement to grant degree-conferring authority prior to a change in ownership or control of the institution. The new rule went into effect on December 28, 2006. On February 7, 2007, the President of Bryant & Stratton College notified the Department of a planned change of ownership. The Department met with the parties on several occasions, requested further information, and on May 30, 2007, made a site visit to Bryant & Stratton College in Albany.

Background Information

Bryant & Stratton College was founded in 1854. The present corporation dates from 1937. It is a closely held New York business corporation. The majority shareholder proposes to sell his share of the corporation. The proposed purchaser is Parthenon Investors II, LP, doing business as Parthenon Capital, a Delaware limited partnership with offices in Boston, MA and San Francisco, CA. (See Appendix for more information about the college).

The Board of Regents does not have the authority to approve the purchase or sale of a for-profit degree-granting institution. However, the purchase of a proprietary college does not include purchase of the power to award degrees. Pursuant to §224 of the Education Law, only the Board can authorize an institution to award degrees. The sole way in which the purchaser may acquire such power is a grant of authority from the Regents. Section 3.58 of the Rules of the Board of Regents includes the standards, requirements, and procedures the Department shall use in determining whether to recommend to the Board that it grant such authority to the new owner of a proprietary college.

Following promulgation of §3.58, the Department developed Interim Guidelines for the Grant of Authority to Confer Degrees Upon the Change of Ownership of a Proprietary College (Attachment B), in consultation with the field. Copies of §3.58 and the interim guidelines are attached. Bryant & Stratton College, the prospective purchaser, and the Department have followed the guidelines and the required regulatory procedures in this review.

Recommendation

Because the Department has found that the requirements of the Board of Regents more rigorous standards in §3.58 have been met, it is recommended that the Board of Regents grant Bryant & Stratton College, under its new principal owner, Parthenon Investors II, LP, authority to confer the Associate in Occupational Studies (A.O.S.) degree on duly qualified students successfully completing registered programs at Bryant & Stratton College, Albany; Bryant & Stratton College, Buffalo (main campus and Amherst and Southtowns branch campuses); Bryant and Stratton College, Greece (main campus and Henrietta branch campus); and Bryant & Stratton College, Syracuse (main campus and Liverpool branch campus); and to confer the Bachelor of Business Administration (B.B.A.) degree on duly qualified students successfully completing registered programs at Bryant & Stratton College, Buffalo (main campus and Amherst and Southtowns branch campuses).

Timetable for Implementation

If the Board of Regents approves the transfer of degree authority, it can take place immediately following this action.

Findings

Information that informed the staff recommendation came from meetings with the principles, responses to Department questions from Bryant and Stratton and Parthenon Capital and from public sources, and included reviews of Parthenon’s financial statements. During the review process Department staff met with representatives of Parthenon Capital twice and conducted multiple conference calls and other conversations with company representatives and representatives from Bryant and Stratton College. The findings below relate to (I) general and financial information about Parthenon Capital, the prospective purchaser of Bryant & Stratton College, and (II) its Plan for Operation of the College. A description of the present status of Bryant & Stratton College is appended.

General and Financial Information: Parthenon Capital.

Parthenon Investors II, LP is a Delaware limited liability company with over $1.5 billion in assets under management, doing business as Parthenon Capital. It was founded in 1998 by John C. Rutherford and Ernest Jacquet. Mr. Rutherford also was the founder of The Parthenon Group advisory firm. The findings concerning Parthenon are organized under the five standards set forth in §3.58(e)(6)(ii) of the Rules of the Board of Regents.

In the past ten years, Parthenon has invested in more than 50 companies. Its current portfolio includes ten companies (two of which are publicly traded). It states that its investments are principally made in companies with:

Strong management with a proven track record and the desire to reach the next level of success;
Specialized products or services based on brand strength or technological advantage;
Market or segment leadership and commensurate levels of profitability;
Growth potential through acquisitions or market expansion;
Potential for significant earnings enhancement;
Preference for recapitalizations that allow the existing owners to retain a meaningful ownership stake.

According to Parthenon, it has:

a proven formula to help build companies based on the following principles:

Preserve the company's independence and culture
Provide strategic guidance, not day-to-day control
Build companies for the long-term
Give management significant ownership

Parthenon states that it invests in mid-sized companies (generally with $100 million to $250 million in revenue) on behalf of its own investors, which include state and corporate pension funds and university endowments. It has 77 investors who are its limited partners. Three investors each own at least five percent of the firm: Chase Manhattan Bank as Trustee for First Plaza Group Trust, J.P. Morgan Chase Bank as Trustee of the Delta Master Trust, and the Oregon Employees’ Public Retirement Fund. Twenty-six investors each own between one and five percent, including pension funds for Michigan, Pennsylvania, and Rhode Island and university endowment funds, including Stanford, Duke, and the University of Texas. Forty-eight investors each own less than one percent of the firm.

Standard (a) in §3.58 (e)(6)(ii)

: Evidence confirming the prospective owner’s capacity to operate the institution in compliance with the Education Law, program registration standards set forth in Part 52 of this Title, other Rules of the Board of Regents and Regulations of the Commissioner of Education, other State statutes and regulations, and Federal statutes and regulations, relevant to the operation of degree-granting institutions.

This would be Parthenon’s first investment in an educational institution. However, Parthenon would not become the sole owner of Bryant & Stratton. Its principal owner now is Bryant Prentice (he now owns 73 percent of the corporation). He is of retirement age and seeks to reduce his investment. After the transaction, Mr. Prentice would continue to own 32.8 percent of the corporation. Both Parthenon and current management of Bryant & Stratton College emphasized their mutual understanding that there will be continuity in management. Both parties premised the proposed transfer of principal ownership to Parthenon on continuity of current management. Most of the current members of top management (about 20 people) own shares of the corporation. The ownership shares before and after the transaction are shown below:

Owners	Before Transaction	After Transaction
Parthenon	0.0%	53.5%
Bryant Prentice	73.0%	32.8%
Management	16.5%	12.3%
Other Investors	10.5%	1.4%
Total	100.0%	100.0%

Under the proposed governance structure, Bryant & Stratton College will have a six-member Board of Trustees, with three independent and three non-independent members. Parthenon will name the non-independent trustees; initially they would be Messrs. Rutherford, Ament, and Prentice (who would continue as board chair, at least initially). Of the independent trustees, one will be chosen by Mr. Prentice, one by Parthenon, and one mutually by Mr. Prentice, Parthenon, and the president of the College.

Standard (b) in §3.58(e)(6)(ii)

: Evidence confirming that the prospective owner has sufficient financial resources to ensure satisfactory conduct of degree programs and achievement of the institution’s stated educational goals.

Parthenon’s 2006 financial statements reported $455.6 million in net assets and very few liabilities. According to its auditors, the value of its non-publicly traded assets (73 percent of its assets) is based on the general partner’s calculation; the market value of those assets could be lower. Parthenon states that it has no debt and is not a creditor and therefore has no credit history.

As noted above, Parthenon would not be the sole owner of Bryant & Stratton. The College had a federal composite score of 2.6 for the year ending December 1, 2004, 2.8 for the year ending December 31, 2005, and 2.8 for the year ending December 31, 2006. All are interpreted as “financially responsible.” It reported a cash reserve of $9.6 million in 2006. It expects a before-tax profit of 6.1 percent and an after tax profit of 3.7 percent for 2007. These estimates are conservative and in line with recent actual fiscal performance in the judgment of the Department. The College has projected an increase in pre-tax profit to 8.2 percent and in post-tax profit to 4.9 percent in 2011. Return-on-investment estimates are 3.6 percent for 2007 and 5.8 percent for 2011, with an estimated cash flow of $3.76 million in 2007 rising to $7.54 million in 2011.

Standard (c) in §3.58(e)(6)(ii)

: Evidence of the prospective owner’s experience operating an educational institution or other business or enterprise in an effective manner which demonstrates the prospective owner’s capacity to operate a degree-granting institution.

This would be Parthenon’s first investment in an educational institution; however, Parthenon reports significant experience in regulated industries. It has focused on companies offering business, healthcare, and financial services. In addition, as noted above, both parties premised the proposed transfer of principal ownership to Parthenon on continuity of current management, most of whom own shares of the corporation.

Parthenon states that it:

builds successful partnerships through a commitment to fostering solid investments through honest and straightforward business practices. As former operating managers and strategic consultants, Parthenon's investment team has a strong track record of successfully working with middle-market companies through their growth and development stages.

We have a proven formula to help build companies based on the following principles:

Preserve the company's independence and culture
Provide strategic guidance, not day-to-day control
Build companies for the long-term
Give management significant ownership

Parthenon Capital believes that a strong partnership develops when both partners complement each other - we are both a strategic and a financial partner.

Traditional financial buyers and strategic buyers both have drawbacks as potential partners. A financial buyer often provides limited strategic and operational support and will apply financial engineering and a high degree of leverage to the companies in which they invest in. Parthenon Capital falls in the sweet spot between those two categories. Our investment enables you to retain your independence - and leaves you opportunity for more upside.

We achieve superior investment returns through growth, earnings enhancements, and improvements in organizational structure - not through "financial engineering." We provide strategic guidance, not day-to-day control. Our experienced CEO's and CFO's are sounding boards and advisors to management and owners.

Companies that partner with a strategic buyer will often lose control and their independent identity, as well as face risks to the organization from integration or the uncertainty created by the new parent.

Parthenon Capital's unique partnership approach to investing allows us to provide many of the benefits of financial and strategic buyers without the drawbacks. Our experience providing companies with strategic and financial assistance makes us a partner that adds value. We typically use a low degree of leverage to give management the flexibility to grow the company.

Companies that partner with us are able to maintain independence while gaining the substantial resources that we have to offer. Unlike transactions with a strategic buyer, a partnership with Parthenon Capital can be structured to allow owners to participate economically in the future success of the company.

Parthenon states, “After making an investment in a company, we participate in the stewardship of that company as members of the company’s board of directors and as shareholders. We do not take on executive management responsibilities and do not make day-to-day operating decisions.” It calls its approach to investment, “Full Potential” and states that it is unique in the private equity industry:

It is the framework through which we offer the benefits of both a strategic and financial partner to the companies in which we invest. It is how we can provide resources and expertise to supplement your existing team, if and when you ask. In short, it puts into practice our philosophy of being a true, value-added partner to management in order to help companies achieve their Full Potential.

Specifically, the tenets of Parthenon Capital’s Full Potential approach are the following:

It begins with management. The cornerstone of our investment approach is to invest in partnership with exceptional management teams that have great ambitions for their businesses. We seek to deeply understand, support, and complement those ambitions.

We are engaged. We believe your business deserves more from a private equity investor than an occasional phone call or semi-annual Board visit. Parthenon’s professionals limit their focus to a few companies so we can understand your business deeply and respond when you need us. For CEOs that may feel “lonely at the top”, we can provide you the value of an involved partner.

We provide complementary experience. Parthenon can provide companies with resources and expertise to which they might not normally have access. Senior members of our team have dedicated focus on and expertise in business strategy and operations, capital markets, executive recruitment, and finance and accounting. We are available to assist your team when you want us to.

We provide a wealth of resources and expertise. Parthenon can provide companies with resources and expertise to which they might not normally have access. Whether it is in debt financing, market strategy, accounting, executive search, add-on acquisitions, operations, or any other business area, we have the experts to assist your team when you want us.

We are not in the way. We understand the fine line between being supportive and being in the way. We offer resources and expertise to our portfolio companies on a supplemental basis if and when they request it, not in a prescribed or heavy-handed way.

Three senior Parthenon team members would manage the investment: John Rutherford, one of Parthenon Capital’s founders and managing partners; David Ament, a partner in the Boston office; and Andrew Dodson, a vice president in the San Francisco office. Information on each of them follows:

John C. Rutherford is a Founder and Managing Partner of Parthenon Capital. He is a member of the Executive Committee and Investment Committee. He represents Parthenon Capital on a number of boards, including MedAssets, American Wholesale Group, and Triad Isotopes. Prior to founding Parthenon Capital, Mr. Rutherford co-founded and served as Chairman of The Parthenon Group, a 150 person boutique strategic advisory firm with offices in Boston, San Francisco, and London. Prior to founding The Parthenon Group, Mr. Rutherford was a Director of Bain & Company. He opened Bain’s European practice and had management responsibility for the Boston office. A native of Wellington, New Zealand, Mr. Rutherford holds a B.E. (1st class honors) degree from the University of Canterbury (New Zealand), an M.S. in Computer Science from the University of Connecticut, and an M.B.A. from the Harvard Business School. He is a trustee of the Boston Museum of Science.

David J. Ament is a Partner in Parthenon Capital’s Boston office. He is a member of the Executive Committee and Investment Committee. Mr. Ament leads the firm’s activities in certain sectors of business services, including healthcare services and education. Prior to joining Parthenon Capital, he was an investment professional at Audax Group and Apollo Management, both private equity firms. Mr. Ament has worked closely with a number of middle-market companies from a strategic and operating perspective and serves or has served on a number of company boards of directors. Mr. Ament earned his B.A., cum laude, from Harvard College.

Andrew Dodson is a Vice President in Parthenon Capital’s San Francisco office. Prior to joining Parthenon Capital, Mr. Dodson was a Consultant with Bain & Co. Prior to Parthenon Capital, Mr. Dodson worked for Trilogy, Inc., an enterprise software company in Austin, Texas. At Trilogy, he focused primarily in business development, establishing partnerships to spur growth for one of Trilogy’s subsidiaries. Mr. Dodson earned his B.A. – Phi Beta Kappa, magna cum laude – from Duke University and his M.B.A. with High Distinction as a Baker Scholar from Harvard Business School.

According to Mr. Ament, “Parthenon has a longer term view of investing in the education sector than most.” “Overall, a three to seven year timeline with an average of around 5 years is typical for us. While I will say that it is difficult to predict in advance when a company will be ready for a sale transaction (and therefore hard to precisely predict our investment horizon), we do take a long term approach to investing and our average investment horizon falls in this range [i.e., three to seven years].” “I would note that the Merger Agreement we signed with Bryant & Stratton includes a severe financial penalty (referred to as the ‘Top-Up Payment’) if we did quickly sell the company.”

The Executive Secretary to the State Board for Public Accountancy made the following observations after reviewing Parthenon’s audited financial statements and other documents: “Parthenon has adopted a conservative investment philosophy that suggests that it will make investments in companies for a period of three to seven years. This philosophy is supported by their audited financial statements which indicate that Parthenon has held investments in some companies for more than four years. During this period, Parthenon has increased its investments in some of these companies.”

Standard (d) in §3.58(e)(6)(ii)

: Evidence that postsecondary education institutions that the prospective owner operates in New York State or elsewhere, if any, are in compliance with Federal and state statutes and regulations and accreditation requirements relevant to the operation of such institutions.

Not applicable. This would be Parthenon’s first investment in an educational institution.

Standard (e) in §3.58(e)(6)(ii)

: Evidence that the prospective owner has not engaged in fraudulent or deceptive practices.

The Department has no evidence that either Parthenon or its principals have engaged in fraudulent or deceptive practices.

II. Prospective Owner’s Plan for Operation.

Both Bryant & Stratton and Parthenon conducted comprehensive due diligence in seeking a partner. Bryant & Stratton engaged a nationally recognized investment broker to assist it in selecting and evaluating potential partners. About 20 possible partners were examined in this process and the list was narrowed to three. It chose Parthenon as the preferred partner “because of their culture; integrity; like-minded philosophy; commitment to Bryant and Stratton’s existing mission, vision and strategic plans; knowledge of the postsecondary education sector; commitment to current management; and ability to help us in the future as board members and shareholders.”

Parthenon principally conducted its due diligence reviews through a law firm that represents educational institutions in the United States and abroad and two certified accounting firms that specialize in postsecondary education. The reviews included close scrutiny of Title IV compliance and compliance with state, other regulatory, and accreditation requirements. Audit activities regarding the management of financial aid were particularly thorough. Parthenon’s general partner cited as specific factors in selecting this partnership: the capable and experienced management team; a transaction in which the prior principal shareholder and the College’s management will remain as significant shareholders; a clear institutional mission; a record of financial success driven by education success; a prudent growth strategy historically and going forward; operation under a single brand name; and absence of propensity for multiple acquisitions.

Bryant & Stratton anticipates raising its profit margins by opening additional campuses, principally outside New York State, and through the expansion of its baccalaureate degree program in business and its associate degree program in nursing at more campuses of the College. (In New York State, only the Buffalo institution is authorized to offer baccalaureate programs, at its main and two branch campuses. The College offers no nursing programs in New York.)

The principals of Bryant & Stratton and Parthenon have provided a jointly signed description of the strategic plan under the proposed change in ownership. While this plan envisages both campus and programmatic additions, it is not inconsistent with the College’s current strategic plan. Any programmatic additions are expected to be related to the College’s historical areas of operation. The structures and processes for academic governance and for quality assurance in student outcomes would remain in place. The management team and the Bylaws under which it operates also would be unchanged according to the jointly signed statement of intent.

Although not subject to the governance and accountability requirements of the Sarbanes-Oxley law affecting publicly traded corporations, Bryant & Stratton complies with a number of the practices embedded in this law. For example, there is an annual certified financial audit; an audit committee that elects and hires the corporation’s auditors; internal financial controls; attestation by management of certain financial and operating reports; a corporate ethics policy; a hotline for employees to report issues; independent board members; a board-level conflict of interest policy; approval of related party transactions by independent directors; and prudent management compensation.

Conclusion

The Department has no evidence that the principals of either Parthenon or Bryant & Stratton have engaged in fraudulent or deceptive practices. The record of each entity suggests continuing compliance with State and federal requirements.

Based on the Department’s review of this application for a substantive change in the ownership and control of Bryant & Stratton College, including examination of contracts and other supporting documentation and two meetings with principals of both the College and Parthenon, the Department finds that the provisions of §3.58(e)(6)(ii) of the Regents Rules have been met.

Appendix

Bryant & Stratton
College

A. Institutional Information. Bryant & Stratton College is a New York business corporation headquartered in Erie County. It operates education institutions in New York, Ohio, Virginia, and Wisconsin. According to its mission statement, “Bryant & Stratton is a career college delivering outcome-based education and training through a flexible, contemporary curriculum in a personalized environment.” In New York, the Board of Regents has authorized it to operate four degree-granting institutions:

Bryant & Stratton College, Albany
Bryant & Stratton College, Buffalo (with Amherst and Southtowns branch campuses)
Bryant & Stratton College, Greece (with a branch campus in Henrietta)
Bryant & Stratton College, Syracuse (with a branch campus in Liverpool)

The four institutions are authorized to offer Associate in Occupational Studies (A.O.S.) degree programs in the major mission areas of Business, Engineering, the Fine Arts, the Health Professions, the Physical Sciences, and the Social Sciences. The Buffalo institution also is authorized to offer Bachelor of Business Administration (B.B.A.) programs in Business at its main campus and both branch campuses. In the fall of 2006, the four institutions enrolled 4,056 full- and part-time students.

B. Academic Information. Bryant & Stratton’s New York institutions are in substantial compliance with the Commissioner’s Regulations. The College has made significant improvements in its academic quality assurance processes in the last five years. Significant additional investments not already in the College’s five-year strategic plan are not required to bring its New York institutions into compliance.

The Commission on Higher Education of the Middle States Association of Colleges and Schools accredits all of Bryant & Stratton’s institutions, including those in New York State. In the spring of 2007, Bryant & Stratton College was reviewed for renewal of its institutional accreditation by a Middle States team. It found the institution to be in substantial compliance with the accreditation standards of that accrediting body and its accreditation has been reaffirmed for ten years.

C. Financial Condition. Bryant & Stratton College has been under professional management for almost ten years and has matured from a technical institution into a college in its broadened educational goals and external processes. The College’s management is experienced and competent. It has been very successful in bringing the institution from financial vulnerability in 2002 to a solid financial condition in 2007.

Attachment A

EXCERPT FROM THE RULES OF THE BOARD OF REGENTS

§3.58 Proprietary college degree-conferring authority.

(a) Definitions. As used in this section:

(1) Change of ownership or control means merger or consolidation with any corporation; sale, lease, exchange or other disposition of all or substantially all of the assets of the institution; and the transfer of a controlling interest (at least 51 percent) of the stock of a corporation.

(2) Deputy Commissioner means the Deputy Commissioner for the Office of Higher Education.

(3) Proprietary college means an institution that is operated on a for-profit basis, offers postsecondary educational programs, and has be granted by the Board of Regents authority to confer degrees.

(4) Prospective owner means an individual or individuals seeking ownership or control of a proprietary college and requesting the consent of the Board of Regents for the transfer of degree-conferring authority of the institution upon the change of ownership or control.

(b) . . . .

(d) . . . .

(e) Transfer of degree-conferring authority.

(1) In accordance with Education Law section 224(1)(b), no proprietary college holding degree-conferring authority granted by the Board of Regents shall convey, assign or transfer such degree-conferring authority through a change of ownership or control of the institution, without the consent of the Board of Regents to transfer such degree-conferring authority prior to the change of ownership or control of the institution, except that consent to a temporary transfer of degree-conferring authority may be obtained after a change of ownership or control of the institution already has been made where the Board of Regents determine there is an adequate showing of good cause as prescribed in paragraph (7) of this subdivision. The determination concerning whether to consent to the transfer of degree-conferring authority shall be made in accordance with the requirements and procedures of this subdivision.

(2) The department shall determine if a proposed transaction is a change of ownership or control of a proprietary college, as defined in subdivision (a) of this section.

(3) The department may expedite in terms of time the department's review for the transfer of degree-conferring authority in instances where the change of ownership or control of the institution is between family members, upon an adequate showing of good cause by the institution. For purposes of this paragraph, good cause shall include but not be limited to, evidence satisfactory to the department that the change of ownership or control will not materially affect the management of the institution, provided that an expedited review is in the best interests of students at the institution.

(4) The Board of Regents may limit or condition the degree-conferring authority of the proprietary college under the prospective owner based upon a review of the prospective owner's capacity to meet the standards prescribed in paragraph (6) of this subdivision.

(5) (i) Where the Board of Regents did not consent to the transfer of degree-conferring authority prior to the change of ownership or control of a proprietary college, and where there is no temporary transfer of degree-conferring authority based upon good cause, as prescribed in paragraph (7) of this subdivision, the institution shall cease all instruction creditable towards a degree until such time as the Board of Regents shall have consented to the transfer of degree-conferring authority, except as provided in subparagraph (ii) of this paragraph. The new owner shall meet the responsibilities prescribed in subdivision (h) of this section applicable when there is a cessation of degree-conferring authority. The new owner shall apply under the procedures of paragraph (6) of this subdivision to request the consent of the Board of Regents for the transfer of degree-conferring authority.

(ii) Cessation of instruction as prescribed in subparagraph (i) of this paragraph shall be held in abeyance during the time period that the department and the Board of Regents are reviewing an institution's properly submitted application for a temporary transfer of degree-conferring authority in accordance with the requirements of paragraph (7) of this subdivision. During this period of review, the Board of Regents shall confer degrees upon students of the institution who, in the judgment of the Regents, have duly earned such degrees.

(6) Procedures for determining whether to consent to the transfer of degree-conferring authority.

(i) At least 180 days prior to the proposed date for consummation of the change of ownership or control of a proprietary college, the proprietary college holding degree-conferring authority shall inform the department in writing of the proposed change of ownership or control, and shall inform the prospective owner in writing that the Board of Regents must approve the transfer of degree-conferring authority of the proprietary college prior to the change of ownership or control of the institution, that such degree-conferring authority is not transferred when a proprietary college is purchased or other change of ownership or control takes place, and that the prospective owner must apply to the department for consent to the transfer of degree-conferring authority at least 150 days prior to the proposed date for the change of ownership or control of the proprietary college.

(ii) At least 150 days prior to the proposed date for the change of ownership or control of a proprietary college, the prospective owner shall apply to the department for the transfer of degree-conferring authority. The prospective owner shall submit to the department the following documentation which substantiates the prospective owner's capacity to operate the college:

(a) evidence confirming the prospective owner's capacity to operate the institution in compliance with the Education Law, program registration standards set forth in Part 52 of this Title, other Rules of the Board of Regents and Regulations of the Commissioner of Education, other State statutes and regulations, and Federal statutes and regulations, relevant to the operation of degree-granting institutions;

(b) evidence confirming that the prospective owner has sufficient financial resources to ensure satisfactory conduct of degree programs and achievement of the institution's stated educational goals;

(c) evidence of the prospective owner's experience operating an educational institution or other business or enterprise in an effective manner which demonstrates the prospective owner's capacity to operate a degree-granting institution;

(d) evidence that postsecondary education institutions that the prospective owner operates in New York State or elsewhere, if any, are in compliance with Federal and state statutes and regulations and accreditation requirements relevant to the operation of such institutions; and

(e) evidence that the prospective owner has not engaged in fraudulent or deceptive practices.

(iii) The department may make site visits to the proprietary college for which transfer of degree-conferring authority is being requested and institutions operated by the prospective owner, and require the prospective owner to provide additional reports and documentation in support of its application.

(iv) The Deputy Commissioner shall review the information submitted by the prospective owner and information obtained during the department's site visits, and other information obtained by the department during the department's review for transfer of degree-conferring authority, and make a recommendation on the matter within 60 days of receipt of a complete application, as determined by the department. This recommendation shall include the factual basis for the recommendation and shall be sent to the prospective owner and the proprietary college.

(v) Within 15 days of receipt of the Deputy Commissioner's recommendation, the prospective owner may request the Deputy Commissioner to reconsider that recommendation, and may submit with the application for reconsideration additional written information in support of its position. If the prospective owner does not request reconsideration during this time frame, the Deputy Commissioner's recommendation shall be the final recommendation on the transfer of degree-conferring authority, transmitted to the Board of Regents.

(vi) If the prospective owner timely requests reconsideration, the Deputy Commissioner shall consider the additional written information submitted by the prospective owner and make a final recommendation on the transfer of degree-conferring authority within 30 days of receipt of the request for reconsideration. Such final recommendation shall include the factual basis for the recommendation and shall be sent to the prospective owner and the proprietary college, and transmitted to the Board of Regents.

(vii) Regents decision. At a regularly scheduled public meeting, the Board of Regents shall consider the findings and recommendations of the Deputy Commissioner and make the final determination on the transfer of degree-conferring authority.

(7) Temporary transfer of degree-conferring authority.

(i) The Board of Regents may consent to a temporary transfer of degree-conferring authority after the change of ownership or control of the institution already has been made, upon an adequate showing of good cause by the institution. For purposes of this paragraph, good cause shall include but not be limited to, evidence satisfactory to the Board of Regents that conditions outside of the new owner's control caused the transfer of ownership or control of the institution prior to the institution obtaining the consent of the Board of Regents for the transfer of degree-conferring authority, provided that it is in the best interests of students at the institution to permit the institution to continue to offer degree programs.

(ii) The department shall review the institution's application for a temporary transfer of degree-conferring authority and may request other information from the institution during its review. The department shall make a recommendation to the Board of Regents concerning whether to grant consent to the temporary transfer of degree-conferring authority based upon good cause.

(iii) When the department determines that it is in the best interests of students of the institution, the department may require the institution to have a teach-out agreement with other institution(s) that is acceptable to the department, before making a positive recommendation to the Board of Regents that it grant consent to the temporary transfer of degree-conferring authority. The teach-out agreement shall be a written agreement between the institution requesting consent to the temporary transfer of degree-conferring authority and one or more degree-granting institutions. The agreement shall provide for the continuity of educational services to students enrolled in registered programs at the institution in the event that the Board of Regents does not consent to the transfer of degree-conferring authority after a review pursuant to paragraph (6) of this subdivision. To be acceptable to the department, the teach-out agreement shall ensure that the teach-out institution(s):

(a) has the necessary experience, resources, and support services to provide educational programs that are of acceptable quality and reasonably similar in content, structure, and scheduling to that provided by the institution requesting consent to the transfer of degree-conferring authority; and

(b) can provide students access to the programs and services without requiring them to move or travel substantial distances.

(iv) The Board of Regents consent to such temporary transfer may limit or condition the degree-conferring authority of the institution. Such temporary transfer shall be for an initial period not to exceed 180 days, but may be extended for such additional periods as determined by the Board of Regents.

(v) Before consent to a temporary transfer of degree-conferring authority may be granted, the new owner must also apply under the regular procedures of paragraph (6) of this subdivision for the review required for the transfer of degree-conferring authority.

(f) Revocation of or limitation on degree-conferring authority.

(1) The Board of Regents may revoke in whole or part or limit the degree-conferring authority of a proprietary college for sufficient cause. As a prerequisite for the revocation in whole or part of degree-conferring authority in accordance with the requirements of this subdivision, all registered programs at the institution leading to the degree(s) covered by the revocation must first be denied re-registration by the department pursuant to the requirements and procedures prescribed in Part 52 of this Title. Such prerequisite shall not apply when the proceeding under this subdivision does not concern revocation of an institution's authority to confer a degree or degrees and only concerns limitations on degree-conferring authority, such as enrollment caps.

(2) Procedures for determining whether to revoke or limit degree-conferring authority.

(i) The department may review the capacity of a proprietary college to continue to have degree-conferring authority and may cause the institution to undergo site visits and require the institution to provide reports and written information in support of the continuation of degree-conferring authority. The department's review shall determine whether the institution violated substantive requirements of Part 52 of this Title that demonstrate that the institution does not have the ability to offer quality programs leading to the degree(s) covered by the revocation or that demonstrate that the institution must have limitations on degree-conferring authority to ensure the quality of the degree programs offered by the institution.

(ii) The Deputy Commissioner shall review the record relating to the denial of re-registration of programs leading to the degree(s) covered by the revocation, information submitted by the institution and information obtained during the department's site visits, and other information obtained during the department's review of the institution for continuing degree-conferring authority. Based upon such review, the Deputy Commissioner may recommend that the Board of Regents revoke in whole or in part or otherwise limit the authority of a proprietary college to confer degrees upon sufficient cause, meaning the institution violated substantive requirements of Part 52 of this Title that demonstrate that the institution does not have the ability to offer quality programs leading to the degree(s) covered by the revocation or that demonstrate that the institution must have limitations on degree-conferring authority to ensure the quality of the degree programs. This recommendation shall include the factual basis for the recommendation and shall be sent to the institution.

(iii) Within 30 days of receipt of the Deputy Commissioner's recommendation to revoke or limit degree-conferring authority, the institution may request the Deputy Commissioner to reconsider that recommendation, and may submit with the application for reconsideration additional written information in support of its position. If the institution does not request reconsideration during this time frame, the Deputy Commissioner's recommendation shall be the final recommendation on whether the degree-conferring authority shall be revoked in whole or part or limited, and such recommendation shall be transmitted to the Board of Regents.

(iv) If the institution timely requests reconsideration, the Deputy Commissioner shall consider the additional written information submitted by the institution and make a final recommendation to the Board of Regents on whether to revoke in whole or part or limit degree-conferring authority of the institution. Such final recommendation shall include the factual basis for the recommendation and shall be sent to the institution and transmitted to the Board of Regents.

(v) Within 30 days of receiving the final recommendation of the Deputy Commissioner, the proprietary college may submit to the Board of Regents a written response to the Deputy Commissioner's final recommendation, which may include supporting affidavits, exhibits, and documentary evidence and may present legal argument. In such written response, the proprietary college may at its discretion request an opportunity for oral argument.

(vi) The matter shall be reviewed by a panel of the Board of Regents consisting of at least three Regents designated by the Chancellor of the Board of Regents. This panel shall hear oral argument, if requested by the proprietary college in its written response as prescribed in subparagraph (v) of this paragraph. At this oral argument, representatives of the proprietary college and the Deputy Commissioner may speak and present additional documentary evidence and written submissions. After its consideration of the Deputy Commissioner's recommendation, the written response of the proprietary college, if any, and oral argument and documentary evidence and written submissions taken at oral argument, if any, the designated Regents panel shall make a recommendation to the full Board of Regents as to whether the degree-conferring authority shall be revoked in whole or part or limited. Such recommendation shall include the factual basis for the recommendation.

(vii) Regents decision. At a regularly scheduled public meeting, the Board of Regents shall consider the findings and recommendations of the designated Regents panel and make the final determination on whether the degree-conferring authority of the institution shall be revoked in whole or part or limited.

(g) . . . .

(h) Institutional responsibilities upon cessation of degree-conferring authority. A proprietary college whose degree-conferring authority has expired or has been surrendered, denied, or revoked shall:

(1) cease recruitment for enrollment of new students in each program registered pursuant to Part 52 of this Title creditable towards the degree or degrees covered by the expiration, surrender, denial, or revocation of degree-conferring authority;

(2) cease operation of each program registered pursuant to Part 52 of this Title creditable towards the degree or degrees that are covered by the expiration, surrender, denial, or revocation of degree-conferring authority by the effective date of such expiration, surrender, denial or revocation; and

(3) cooperate with the department to ensure that students already enrolled in programs creditable towards the degree or degrees covered by the expiration, surrender, denial or revocation of degree-conferring authority are able to find avenues for completion of their studies with a minimum of disruption.

Attachment B

Introduction

New York State Education Law specifies that degree-granting authority cannot be transferred via the sale of a proprietary college. In addition, beginning December 28, 2006, a new section 3.58 was added to the Rules of the Board of Regents that includes provisions requiring that the grant to a prospective owner of the degree powers of a degree-granting proprietary college be made by the Board of Regents prior to the purchase and following demonstration to the State Education Department of the new owner’s capacity to meet the education and fiscal standards to operate the institution before ownership is established.

Cited below are pertinent sections of the Education Law and of the Rules of the Board of Regents and links to other pertinent documents.

Regulatory Context

Section 224(1)(b) of Education Law prohibits individuals, associations, partnerships, or corporations operating educational institutions on a for-profit basis and holding degree-granting powers conferred by the Regents from conveying, assigning, or transferring such degree powers through a change of ownership. Degree powers may be conveyed only by action of the Board of Regents.

Section 3.58(e)(6)(ii) of the Rules of the Board of Regents requires that the prospective owner must apply to the State Education Department for degree-conferring authority and submit documentation that substantiates the prospective owner’s capacity to operate the college. In instances where there is a change of ownership within a family, the Department will tailor the request for evidence to meet the circumstances of the change in ownership. The specific provisions of this section are as follows:

(b) evidence confirming that the prospective owner has sufficient financial resources to ensure satisfactory conduct of degree programs and achievement of the institution's stated educational goals;

(e) evidence that the prospective owner has not engaged in fraudulent or deceptive practices.

Section 3.58(e)(4) provides that the Board of Regents may limit or condition the degree-conferring authority of the proprietary college based upon the prospective owner’s capacity to meet the standards.

Section 3.58(e)(3) provides that the Department may expedite the review of the transfer of degree-conferring authority in instances where the change of ownership or control of the institution is between family members, upon adequate showing of good cause. Evidence of good cause will include but not be limited to evidence satisfactory to the Department that the change of ownership will not materially affect the management of the institution and that the change is in the best interest of students at the institution.

Section 3.58(e)(7)(i) provides that the Regents may consent to a temporary transfer of degree-conferring authority after the change of ownership or control of the institution has been made upon an adequate showing of good cause by the institution. The good cause shall include but not be limited to evidence that conditions outside the new owner’s control caused the transfer of ownership or control of the institution prior to the institution obtaining the consent of the Regents for the transfer of degree-granting authority and that it is in the best interest of students to permit the institution to continue to offer degree programs.

Pertinent Links

Excerpts from the Regulations of the Commissioner of Education. Parts 50, 52, and 53 of these Regulations set out the quality standards for colleges and college programs in New York State.

Law Pamphlet 9 – Education Corporations

Protocols

Change of Ownership of an Existing Proprietary College Between Family Members.

At least 180 days prior to the proposed date for the change of ownership or control of a proprietary college, the prospective owner should undertake the following activities relating to the grant of degree-granting authority:
- Send a signed letter of application to the Office of College and University Evaluation (OCUE).
- Submit an application that includes the following information:
- - A written statement that the change of ownership between family members will not materially affect the management of the institution or the registered programs offered by the institution, and that the expedited review is in the best interest of students at the institution. This evidence should include a letter indicating the basis of the transfer of ownership and where appropriate, a statement that the new owner has no plans to change the mission, programs of study, staff, or faculty of the institution. If the new owner intends to make substantive changes, evidence should be submitted, including a list of the registered programs that will be continued, and lists of current faculty and administrators that will be retained by the prospective owner. Any proposed changes in the mission, goals, or objectives of the college should be described.
  - A written statement of any felony convictions, or charges pending, in any court that could be related to the proposed owner(s), officers, directors of the institution, or of debarment from participation in federal programs, or a statement that they have no such convictions, pending charges, or debarments.
  - The credit rating of the prospective owner from Experian, Equifax, or Trans Union, or their successors.
  - In order to ensure the financial health of the institution under the prospective owner, OCUE may, in some circumstances, request the Federal income tax returns (1040 plus schedules) of the prospective owner for the most recent three years. The information need not be a part of the Initial application unless the prospective owner has been informed by OCUE that the returns should be submitted.

Schedule a meeting with OCUE.

Whether or not OCUE will conduct a site visit review of the institution and the scope of the visit following review of the application submitted will depend on such factors as whether there are ongoing or unresolved concerns about the institution or about the prospective owner. If a visit is determined to be necessary, it will take place within no more than six months of the receipt of a complete application.

The Department will present a recommendation to the Board of Regents concerning the grant of degree authority to the prospective owner.

The Regents may limit or condition the degree-conferring authority of the proprietary college under the prospective owner based upon the review of the owner’s capacity to meet standards.

During the first five years following receipt of degree–conferring authority, the institution must notify OCUE of any change in senior management of the institution.

Change of Ownership Not Between Family Members.

At least 180 days prior to the proposed date for consummation of a change of ownership, the proprietary college must notify the Assistant Commissioner for the Office of Quality Assurance in writing of the proposed change and inform the prospective owner in writing that the Regents must approve the transfer of degree-granting authority prior to the change of ownership and that degree-granting authority is not transferred upon purchase or other change of ownership or control.

Schedule a meeting with OCUE.

At least 150 days prior to the proposed date for the change of ownership or control of a proprietary college, the prospective owner must submit to OCUE the following materials in support of a grant of degree-granting authority :
- A letter of application signed by the prospective proprietor or senior partner or, if a corporation, chief executive officer (not an attorney or other representative) of the proprietary institution that would have a change of ownership or control.
- Part I of the “Application by a Prospective Purchaser of a Proprietary College for Authority to Award Degrees” and certification of Part II.

Within approximately three months of the receipt of a complete application, OCUE will conduct a site visit to the college. The visit will include one or more staff members from OCUE together with peer reviewers, as appropriate. The purpose of the visit is to verify the information provided by the prospective owner in the Application and to assess: the operation of programs as registered; compliance with all of the quality standards in Commissioner’s Regulations; and the administrative, fiscal, and academic competence of the prospective owner. Following the visit, the Department will provide a draft report of the findings and recommendations of the visit to the institution. The institution will then have an opportunity to respond to the findings and recommendations in the report and to request factual corrections in the draft report. The Deputy Commissioner for the Office of Higher Education will issue a final report that encompasses the draft report, the institution’s response, and provides the determination of the Department with respect to a recommendation to the Regents on a grant of authority to confer degrees.

Following the issuance of the final report, the Department will present a recommendation to the Board of Regents concerning the grant of degree authority to the prospective owner.

During the first five years following receipt of degree–conferring authority, the institution must notify OCUE of any change in senior management of the institution.

Temporary Grant of Degree Authority.

A temporary transfer of degree-conferring authority may be authorized by the Regents in cases where the change of ownership or control of the institution has already been made upon an adequate showing of good cause by the institution. The transfer of stock to an owner’s estate upon the owner’s death is not a change of ownership; the change of ownership occurs when title to the stock passes to the beneficiary or beneficiaries or is sold by the estate. Temporary transfers are granted for an initial period not to exceed 180 days.

Such an institution must apply for a temporary grant of degree-conferring authority as quickly as possible but in no case within more than two weeks following the change of ownership. The application to be submitted to OCUE should include:
- A letter of application signed by the proprietor or senior partner or, if a corporation, chief executive officer (not an attorney or other representative) of the proprietary institution.
- Evidence that conditions outside of the new owner’s control caused the transfer of ownership or control prior to obtaining the consent of the Regents to the transfer of degree authority and that the transfer is in the best interests of students.
- The information requested in Questions 1 though 11 of the “Application by a Prospective Owner of a Proprietary College for Authority to Award Degrees.”

OCUE may request other information about the institution during its review and before making a recommendation to the Board of Regents.

OCUE will notify the institution about its decision to present a recommendation to the Board of Regents concerning the temporary transfer of degree authority within 30 days of the receipt of a complete application.

When the Department determines that it is in the best interests of students of the institution, it may require the institution to have a teach-out agreement with other institution(s) before making a positive recommendation to the Regents. Such agreement provides for the continuity of educational services to students in the event that the Regents do not consent to the transfer of degree authority.

The Regents consent to a temporary transfer may limit or condition the degree granting authority of the institution. Temporary transfers are granted for an initial period not to exceed 180 days, but may be extended for additional periods by the Regents.

The prospective owner must send a letter of application to the Assistant Commissioner for the Office of Quality Assurance for a grant of degree-granting authority under the regular (non-temporary) procedures before a temporary transfer may be granted.

Within 30 days of authorization by the Board of Regents of a temporary transfer of degree authority, the prospective owner should respond fully to the request for information in Part I of the “Application by a Prospective Owner of a Proprietary College for Authority to Award Degrees” and complete the certification of Part II.

Within two months of the receipt of a complete application, OCUE will conduct a site visit to the college. The visit will include one or more staff members from OCUE together with peer reviewers, as appropriate. The purpose of the visit is to verify the information provided by the prospective owner in the Application and to assess: the operation of programs as registered; compliance with all of the quality standards in Commissioner’s Regulations; and administrative and fiscal capacity and academic competence. Following the visit, the Department will provide a draft report of the findings and recommendations of the visit to the institution. The institution will then have an opportunity to respond to the findings and recommendations in the report and to request factual corrections in the draft report. The Deputy Commissioner for the Office of Higher Education will issue a final report that encompasses the draft report, the institution’s response, and provides the determination of the Department with respect to a recommendation to the Regents on the non-temporary grant of degree authority.

Following the issuance of the final report, the Department will present a recommendation to the Board of Regents concerning the non-temporary grant of degree authority to the prospective owner.

During the first five years following receipt of degree–conferring authority, the institution must notify OCUE of any change in senior management of the institution.

Other Protocols for All Degree-Authority Requests.

Commissioner’s consent. Proprietary colleges that are New York business corporations have certificates of incorporation (C of I) on file with the Department of State. In the case of a sale, if the prospective owner wishes to change the corporate purposes of the college or the college’s name, the C of I would need to be amended and submitted for the consent of the Commissioner of Education. The sale of the college, in and of itself, does not require an amendment of the C of I. The “Frequently Asked Questions” of the Department’s Office of Counsel’s website describes the protocol for applying for Commissioner’s consent to a proposed amendment of a C of I.

Limitation on New Initiatives. No major initiatives may be undertaken within two years of the new owner’s receipt of degree authority unless the change of ownership was between family members and did not materially affect the management of the institution or its registered programs. The major initiatives are defined as expansion of degree programs to new discipline areas, new degree levels, or new extension centers or branch campuses.

APPLICATION BY A PROSPECTIVE OWNER OF A PROPRIETARY COLLEGE FOR AUTHORITY TO AWARD DEGREES-- INTERIM GUIDELINES

Pursuant to §3.58(e) of the Rules of the Board of Regents

PART I

Applicant Information

A. General Information

If the applicant is a corporation, list the officers, directors, and principal stockholders (holding ten percent or more of the voting stock), with the number of shares controlled by each or, if the applicant is a partnership, list the partners.
If the applicant is a corporation, provide the most recent annual report to stockholders.
Provide the names and locations of all other degree-granting institutions and nondegree schools operated by the prospective owner(s), or that were operated in the past, if any, and copies of all licenses to operate degree-granting or nondegree institutions granted by other states.
As appropriate, provide written statements that there are no outstanding concerns about the applicant or any institution operated by the applicant from:
- the Bureau of Proprietary School Supervision of the State Education Department, with respect to any non-degree schools operated by the prospective owner and licensed by that Bureau.
- New York State Higher Education Services Corporation,
- Office of the State Comptroller,
- U.S. Education Department,
- Securities and Exchange Commission,
- agencies accrediting the institution, and
- state education or higher education agencies in states in which the applicant operates educational institutions, as appropriate.
Provide the latest institutional accreditation review report by the accrediting agency or agencies used to establish eligibility of degree-granting or nondegree institutions owned by the prospective owner to participate in HEA Title IV programs.
Provide verified default rates on Title IV loans, as applicable, for present and formerly owned institutions.
Provide a written statement of any felony convictions, or charges pending, in any court that could be related to the prospective owner(s), partners, officers, directors, and/or principal stockholders operation of the institution, or of debarment from participation in federal programs, or a statement that they have no such convictions, pending charges, or debarments.
Provide a written statement disclosing all outstanding or pending litigation.
Provide a copy of any proposed sales agreement or contract.

Financial Information
Provide certified audited financial statements of the entity proposing the purchase for the past three years. If the prospective owner is an individual rather than an entity, federal income tax returns (1040 plus schedules) for the most recent three years.
Provide the credit rating of the prospective owner. If the prospective owner is a corporation, provide a credit rating from A.M. Best, Dun & Bradstreet, Moody’s, or Standard & Poor’s, or their successors. If the prospective owner is an individual person or a partnership, provide a credit rating or ratings from Experian, Equifax, or Trans Union, or their successors.
Provide current operating budgets and year-to-date figures for any colleges operated by the entity outside New York State and of any nondegree proprietary schools operated by the prospective owner.

C. Prospective Owner’s Plan for Operation of the Institution over Five Years

Provide a copy of the current catalog or bulletin of the institution to be purchased.
Provide a one-page abstract of the plan for operation.
Describe proposed changes to the mission, goals, or objectives of the institution during the first five years of operation by the prospective owner.

a. Resources [§52.2(a)]

Provide a five-year projection of revenues and expenditures of the college to be purchased, with operating assumptions regarding enrollments, including cash flow, return on investment, and annual gross profits.
List all locations at which instruction is offered away from the main campus, including extension and interinstitutional sites, extension and interinstitutional centers, and branch campuses and interinstitutional programs; include locations exempt from approval under Part 54 of the Commissioner’s Regulations.
Describe plans during the five-year period for new/additional space, with the proposed square footage and floor plans, layout and use of rooms, and date of occupancy; sources of capital; and include copies of new and existing leases and/or construction contracts.
List any new computers with date(s) of installation, copies of maintenance/repair contracts, type, location and use.
List the scientific, medical, and technical equipment needed to support any proposed programs, with the type, location and use.
Describe any new management software systems dealing with such operations as admissions, assessment of student outcomes, and management of student records.

b. Faculty [§52.2(b)]

Describe qualifications for all faculty, including degrees earned, major and minor fields of study, and courses to be taught.
Define full-time employment. Describe any plans to change, add to, and/or upgrade the full-time faculty, with degree expectations, teaching assignments, and anticipated semester of employment. State the maximum credit hour teaching load permitted in an academic term and the policy and control of teaching load for individuals also working outside the institution.
Describe the faculty's role in academic advising, including the number of advisees per faculty member and required office hours.
Describe the role of full-time faculty in the academic governance at the departmental and institutional level, including membership on committees.
Describe faculty development support that includes local workshops, support for graduate study, and support for professional research and publication.
List the names of proposed faculty who have prior experience teaching at degree-granting institutions, with the name of the institution, the courses taught, the dates, the full-time or part-time nature of the assignment, and the name and telephone number of the individual's supervisor. If no faculty changes have occurred or are planned, so state.
List institutions that have master's and doctoral programs that prepare faculty to teach in the type of programs that are proposed. If no new programs are proposed, so state.

c. Curricula [§52.2(c)]

Describe the system used to assess the success of faculty and students in achieving the stated objectives of each curriculum and all courses.
List proposed credit-bearing degree and certificate programs to be introduced in each of the first five years of operation under the proposed owner, with exact titles, degree designation, and total credits required, and the relation of each program to the mission, goals, and objectives of the institution.
Identify and provide details about any programs or courses to be offered in a format other than the traditional classroom model.
Provide details on any field work or internship offered, with credit values, whether the work is required or optional, placement information, supervision, and evaluation.
Describe the academic calendar that will be used and what constitutes a full-time schedule in a term.
Specify the number of hours of classroom instruction and amount of out-of-class work required for each credit of work in a term.
Provide syllabi for proposed courses, including learning objectives, topics covered, reading and writing assignments, grading methods and criteria, and the name(s) of the individuals preparing the syllabi.
Provide evidence of a need for graduates from any proposed programs with any employment data showing that salaries in the field justify the cost of the education.
Provide evidence that the demand for any proposed programs is not already being met by other institutions in the region.

d. Students [§52.2(d)]

Describe strategies for recruitment of students.
Describe the proposed admissions procedures and criteria, such as high school diploma, GED, or test scores with names of any tests that are used, the names and locations of the proposed test-scoring contractor, and the specific cut-off scores.
Specify diagnostic or placement tests to be used, with specific cut-off scores, the names and locations of the proposed test-score contractor, required or recommended remediation, credit value of remedial work, and the exit requirement. Include ESL work in this response if required by the institution.
Specify projected amounts of institutionally funded student scholarships, grants, and loans for the first five years of operation under the proposed owner, with detail on the planned financial aid programs.
Project full-time and part-time enrollment for each proposed program, and for the institution as a whole, for the next five years.

e. Administration [§52.2(e)]

Provide the organizational structure of the institution under the prospective owner.
List the major administrators (not support or clerical staff) supported by resumes of each that include the academic work and prior experience that has prepared them for their assignments, and their compensation, and provide any anticipated changes in administration over the first five years of operation under the proposed owner.

I declare, affirm, and certify that the statements made in this application, including accompanying documents, are true, complete and correct.

______________________________________________________________________

Signature of Applicant

______________________________________________________________________

Date

PART II

Certification of Continued Compliance of the Institution to be Acquired

The prospective owner must certify that the institution is now, and will continue to be, in compliance with all relevant requirements of the Education Law, the Rules of the Board of Regents (including but not limited to Sections 3.47 and 3.50), and the Regulations of the Commissioner of Education (including but not limited to Parts 50, 52, 53, and 54). In site visits to evaluate compliance, the Department expects to examine information that includes, but is not limited to, the following:

§52.2(a) Resources (Facilities, Equipment, and Library): The institution shall:

(1) possess the financial resources necessary to accomplish its mission and the purposes of each registered curriculum;

(2) provide classrooms, faculty offices, auditoria, laboratories, libraries, audiovisual and computer facilities, clinical facilities, studios, practice rooms, and other instructional resources sufficient in number, design, condition, and accessibility to support the curricular objectives dependent on their use;

(3) provide equipment sufficient in quantity and quality to support instruction, research, and student performance; and

(4) provide libraries that possess and maintain collections sufficient in depth and breadth to support the mission of the institution and each registered curriculum. Libraries shall be administered by professionally trained staff supported by sufficient personnel. Library services and resources shall be available for student and faculty use with sufficient regularity and at appropriate hours to support the mission of the institution and the curricula it offers.

Examples of Information Used in Evaluation

Financial Information

Certified audited financial statements for at least the past three years.
Current year institutional operating budget.
Analysis of monthly cash flow for the preceding fiscal year.
Documentation of expenditures supporting the institution’s mission, goals, and objectives, and its registered curricula.

Facilities and Equipment

Descriptions of existing space with the address of the location, the square footage, the layout, and use of rooms (e.g., classroom, laboratory, faculty and other offices, academic support and administrative services), including seating capacity as appropriate).
Certificates of occupancy, and of compliance with the New York State Uniform Fire Code and with safety, sanitary or health, and other codes.
Report of most recent fire inspection.
Accessibility of institutional programs and services by persons with disabilities.
Lists of existing computers, with, type, location, and use and copies of maintenance/repair contracts.
Scientific, medical, or technical equipment needed to support the programs, with the type, location and use.

Library

Evidence of support for the institution’s mission in the library’s holdings and services.
Summary of library holdings and resources, by major curricula program area, acquisitions in the last year by program area; collection development plan and budget.
Analysis of library holdings cited under the bibliographic resources in course syllabi.
Library materials placed on reserve for courses in the last regular term.
Descriptions of the library space, including square footage, shelf space, desk and workspace for librarians, and seating facilities for students.
Library hours and times a professional librarian is present.
Number and type of computers in the library and databases students can access.
Expenditures in each of the past three years on the acquisition of books, periodicals, software, or other materials such as technical manuals and slides.
The names and resumes of all professional librarians employed by the institution, with their assignment(s) and copies of any reports or recommendations they have submitted, and of all library consultants employed by the institution, with their assignment(s) and copies of any reports or recommendations they have submitted.
Copies of agreements with other institutions or libraries for the use of their collections, indicating what services will be provided to students and faculty, what material will be ordered that supports program offerings, what fiscal contributions the institution provides for these services, and the name and telephone number of the contact person at each cooperating library.
Documentation of training provided to students in information literacy.

§52.2(b) Faculty: (1) All members of the faculty shall have demonstrated by training, earned degrees, scholarship, experience, and by classroom performance or other evidence of teaching potential, their competence to offer the courses and discharge the other academic responsibilities which are assigned to them.

(2) To foster and maintain continuity and stability in academic programs and policies, there shall be in the institution a sufficient number of faculty members who serve full-time at the institution.

(3) For each curriculum the institution shall designate a body of faculty who, with the academic officers of the institution, shall be responsible for setting curricular objectives, for determining the means by which achievement of objectives is measured, for evaluating the achievement of curricular objectives and for providing academic advice to students. The faculty shall be sufficient in number to assure breadth and depth of instruction and the proper discharge of all other faculty responsibilities. The ratio of faculty to students in each course shall be sufficient to assure effective instruction.

(4) At least one faculty member teaching in each curriculum culminating in a bachelor’s degree shall hold an earned doctorate in an appropriate field, unless the commissioner determines that the curriculum is in a field of study in which other standards are appropriate.

(5) All faculty members who teach within a curriculum leading to a graduate degree shall possess earned doctorates or other terminal degrees in the field in which they are teaching or shall have demonstrated, in other widely recognized ways, their special competence in the field in which they direct graduate students.

(6) The teaching and research of each faculty member, in accordance with faculty member’s responsibilities, shall be evaluated periodically by the institution. The teaching of each inexperienced faculty member shall receive special supervision during the initial period of appointment.

(7) Each member of the faculty shall be allowed adequate time, in accordance with the faculty member's responsibilities, to broaden professional knowledge, prepare course materials, advise students, direct independent study and research, supervise teaching, participate in institutional governance and carry out other academic responsibilities, appropriate to his or her position, in addition to performing assigned teaching and administrative duties.

Examples of Information Used in Evaluation

General

Faculty handbook, employment agreement and contracts, and other documents for current full-time faculty and part-time faculty that indicate criteria for employment, retention, promotion, and tenure; teaching and other professional expectations; evaluation process and standards; professional development expectations and support; the term of the contract; and the compensation.
Advertisements for faculty positions.
Descriptions of the role of full-time faculty in the academic governance at the departmental and institutional level, including membership on committees and minutes of committee and general faculty meetings, for the last two years.

Faculty Competence and Credentials

Curricula vitae or resumes of current core full-time faculty and a list showing the courses they have taught in the past two years, and of part-time and adjunct faculty with a list showing the courses they have taught in the past two years.
Administrative, peer, and student evaluations of the first eight full-time and first ten part-time faculty (based on the alphabetical listing of their last names) for the previous academic year.
Names of faculty with prior experience teaching at degree-granting institutions, with the name of the institution, the courses taught, the dates, the full-time or part-time nature of the assignment, and the name and telephone number of the individual's supervisor.

Adequacy to Support Programs and Services

Number of full-time faculty and part-time faculty, and the change in the numbers over the past five years, by department or program.
Statements of the maximum credit hour teaching load permitted in an academic term and of policy and control of teaching load for individuals also working outside the institution.
List of courses offered in the last full term showing number of students in each class.
Self-studies of optimal class size for effective instruction, teaching effectiveness, and/or faculty workload in relation to student achievement.
Lists of individuals who have taught more than 15 semester hours in any term in the past two years, with course assignments and enrollment.
The faculty's role in academic advising, including the number of advisees per faculty member and required office hours.

Faculty Evaluation, Professional Development, and Professional Involvement

Descriptions of faculty development support that includes local workshops, support for graduate study, support for professional research and publication, and examples of specific individuals with dates and level of support.
Institutional self-study of the educational program and its components, and their effect on staffing.

§52.2(c) Curricula and Awards: (1) In addition to the requirements of section 53.3 of this Subchapter, the objectives of each curriculum and its courses shall be well defined in writing. Course descriptions shall clearly state the subject matter and requirements of each course.

(2) For each curriculum, the institution shall assure that courses will be offered with sufficient frequency to enable students to complete the program within the minimum time for completion, in accordance with paragraphs (6)-(10) of this subdivision.

(3) Credit toward an undergraduate degree shall be earned only for college level work. Credit toward a graduate degree shall be earned only through work designed expressly for graduate students. Enrollment of secondary school students in undergraduate courses, of undergraduates in graduate courses, and of graduate students in undergraduate courses shall be strictly controlled by the institution.

(4) A semester hour of credit may be granted by an institution for fewer hours of instruction and study than those specified in subdivision (o) of section 50.1 of this Subchapter only:

(i) when approved by the commissioner as part of a registered curriculum; or

(ii) when the commissioner has granted prior approval for the institution to maintain a statement of academic standards that defines the considerations which establish equivalency of instruction and study and such statement has been adopted by the institution.

(5) The institution shall assure that credit is granted only to students who have achieved the stated objectives of each credit-bearing learning activity.

(6) Associate degree programs shall normally be capable of completion in two academic years of full-time study, or its equivalent in part-time study, with an accumulation of not less than 60 semester hours.

(7) Baccalaureate degree programs shall normally be capable of completion in four academic years of full-time study, or, in the case of five-year programs, five academic years of full-time study, or their equivalent in part-time study, with an accumulation of not less than 120 semester hours.

(8) Master’s degree programs shall normally require a minimum of one academic year of full-time graduate level study, or its equivalent in part-time study, with an accumulation of not less than 30 semester hours. Research or a comparable occupational or professional experience shall be a component of each master’s degree program. The requirements for a master’s degree shall normally include at least one of the following: passing a comprehensive test, writing a thesis based on independent research or completing an appropriate special project.

(9) The master of philosophy degree shall require completion of all requirements for the degree of doctor of philosophy except the dissertation, and shall require that the student has been admitted to candidacy in a doctor of philosophy curriculum offered by the institution conferring the master of philosophy degree.

(10) Doctoral programs shall require a minimum of three academic years of full-time graduate level study after the baccalaureate degree, or their equivalent in part-time study. Doctoral studies shall include the production of a substantial report on original research, the independent investigation of a topic of significance to the field of study, the production of an appropriate creative work, or the verified development of advanced professional skills.

(11) In addition to the requirements of this section, a program desired to fulfill in part the requirements for licensure in a profession regulated by title VIII of the Education Law shall also meet such requirements as may be established by statute, by the rules of the Regents, or by any other section of this Part.

(12) All registered programs intended to satisfy the educational requirements for professional licensure as identified in paragraph a of subdivision 3 of section 6507 of the Education Law or intended to satisfy the educational requirements for certification or licensure as a teacher, pupil personnel services professional, school administrator and supervisor, or school district administrator shall include two hours of approved coursework or training regarding the identification and reporting of child abuse and maltreatment. Such coursework or training shall include information concerning the physical and behavioral indicators of child abuse and maltreatment and the statutory reporting requirements set out in Social Services Law, sections 413 through 420, including, but not limited to, when and how a report must be made, what other actions the reporter is mandated or authorized to take, the legal protections afforded reporters, and the consequences for failing to report.

Examples of Information Used in Evaluation

General

List of the college’s degree and credit-bearing certificate programs, with exact registered program titles, award, and total credits required for program completion.
Descriptions in catalogs, other printed materials and Web sites of current programs, including requirements and model schedules, and of courses, including frequency of offering and any prerequisites, and descriptions of institutional policies and procedures to control enrollment in courses.

Level of Study and Integrity of Credit

The number of hours of classroom instruction and amount of out-of-class work required for each credit of work in a term.
Schedule of courses offered in the last full term.
For graduate programs, records of institutional reviews of theses, dissertations, projects, and/or comprehensive examinations for sufficiency of depth, breadth, and quality to warrant award of graduate degrees.
Syllabi of courses, including topics covered, reading/writing assignments, grading criteria, and the name(s) of the individuals preparing the syllabi.
Details about any programs or courses offered in a format other than the traditional classroom model.

Coherence of Curricula

The number of credits of liberal arts and science work in each proposed program and list the courses that can fulfill this expectation.
Details on any field work or internship offered, with credit values, whether the work is required or optional, placement information, supervision, and evaluation.
Course evaluations by students and peers.
Recent self-studies or external assessments of programs, departments, and/or general education, with descriptions of the reviewing systems.

Length to Completion of Program

Description of the calendar term system that will be used and what constitutes a full-time schedule in a term.
Institutional self-study of frequency of offering of courses for the preceding two years confirming that courses are offered with sufficient frequency to enable full-time students to complete their programs within the minimum time required.
Institutional self-study of its use of substitute courses and/or independent study as an alternative to offering specific courses.

§52.2(d) Admissions: (1) The admission of students shall be determined through an orderly process using published criteria which shall be uniformly applied. Among other considerations, the admissions process shall encourage the increased participation in collegiate programs at all levels of persons from groups historically under-represented in such programs.

(2) Admissions shall take into account the capacity of the student to undertake a course of study and the capacity of the institution to provide the instructional and other support the student needs to complete the program.

Examples of Information Used in Evaluation

Admission and Placement Requirements and Procedures

Admissions procedures and criteria, such as high school diploma, GED, or test scores with names of any tests that are used, the specific cut-off scores, and the name and location of the test-scoring contractor.
Numbers of persons from historically underrepresented groups recruited by, applying to, and accepting and enrolling at the institution, with a discussion of policies and strategies used.
Diagnostic or placement tests used, with specific cut-off scores and the location of the test-scoring contractor, required or recommended remediation, credit value of remedial work, and the exit requirement. Include ESL work in this response if required by the institution.
Policies on opportunities for advanced placement and/or course challenge by students.
Forms for admissions and financial aid.

Admission Services and Staff

Number of full-time, part-time, and volunteer admission or recruitment representatives on staff in the last academic year.
Job descriptions and minimum qualifications of admission and recruitment staff, with copies of employment advertisements.

§52.2(e) Administration: (1) Responsibility for the administration of institutional policies and programs shall be clearly established.

(2) Within the authority of its governing board, the institution shall provide that overall educational policy and its implementation are the responsibility of the institution’s faculty and academic officers. Other appropriate segments of the institutional community may share in this responsibility in accordance with the norms developed by each institution.

(3) The institution shall establish, publish and enforce explicit policies with respect to:

(i) academic freedom;

(ii) the rights and privileges of full-time and part-time faculty and other staff members, working conditions, opportunity for professional development, workload, appointment and reappointment, affirmative action, evaluation of teaching and research, termination of appointment, redress of grievances and faculty responsibility to the institution; and

(iii) requirements for admission of students to the institution and to specific curricula, requirements for residence, graduation, awarding of credit, degrees or other credentials, grading, standards of progress, payment of fees of any nature, refunds, withdrawals, standards of conduct, disciplinary measures and redress of grievances.

(4) Academic policies applicable to each course, including learning objectives and methods of assessing student achievement, shall be made explicit by the instructor at the beginning of each term.

(5) The institution shall provide academic advice to students through faculty or appropriately qualified persons. The institution shall assure that students are informed at stated intervals of their progress and remaining obligations in the completion of the program.

(6) The institution shall maintain for each student a permanent, complete, accurate, and up-to-date transcript of student achievement at the institution. This document will be the official cumulative record of the student’s cumulative achievement. Copies shall be made available at the student’s request, in accordance with the institution’s stated policies, or to agencies or individuals authorized by law to review such records.

Examples of Information Used in Evaluation

Responsibilities

Organizational charts and descriptions of responsibilities of senior administrators.
Description of responsibilities of committees responsible for assuring institutional effectiveness.
Polices and procedures for allocation of resources.
Policies and procedures concerning curriculum development, evaluation, and revision.
Self-studies of academic and/or administrative services, and their outcomes.
Descriptions of any training or development provided for administrators in the past two years.

Student Polices and Services

Student handbook.
Policies relating to student records, including recording student progress and retention of records.
Copies of completed (names deleted) transcripts now used.
Record of degree audits for students in the preceding academic year.
Institutional standard(s) of academic progress.
For the five most recent years, the number of first-year students returning for the second year, with a description of the procedures used for making the calculations.
For the five most recent years, the number of full-time, first-time students completing their programs of study within 150 percent of the minimum time required for the program (e.g., three years from entry for an associate degree program, six years from entry for a baccalaureate program), with a description of the procedures used for making the calculations.
For the five most recent years, pass rates on professional licensure examinations (if any).
Description of placement services provided for graduates.
For the five most recent years, the record of placement of graduates in civilian and military occupations or of continued education; describe the procedures used for making this calculation.
Record of written student complaints in the last six academic years, with their resolutions.

§52.2(f) Other Requirements: The institution shall assure:

(1) that all educational activities offered as part of a registered curriculum meet the requirements established by statute, the rules of the Regents or this Part; and

(2) that whenever and wherever the institution offers courses as part of a registered curriculum it shall provide adequate academic support services.

Examples of Information Used in Evaluation

Policies on academic assistance for students needing remediation, with documentation of implementation.
Descriptions of special strategies and programs to strengthen student persistence, and their outcomes, including the number of tutors or mentors, if applicable
Evidence of the effectiveness of remedial and/or developmental programs and information on the success/failure of students completing remedial courses.

§53.1 Publications.

Examples of Information Used in Evaluation

Copies of catalogs, advertisements, Web site pages, and marketing material.

I declare, affirm, and certify that the institution will continue to comply with all relevant requirements of the Education Law, the Rules of the Board of Regents (including but not limited to Sections 3.47 and 3.50), and the Regulations of the Commissioner of Education (including but not limited to Parts 50, 52, 53, and 54).

______________________________________________________________________

Signature of Applicant

______________________________________________________________________

Date

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New York State Education Department

Meeting of the Board of Regents | July 2007

Summary

Background Information

Introduction

Regulatory Context

Pertinent Links

Protocols

PART I

Applicant Information

PART II

Certification of Continued Compliance of the Institution to be Acquired

Examples of Information Used in Evaluation

Examples of Information Used in Evaluation

Examples of Information Used in Evaluation

Examples of Information Used in Evaluation

Examples of Information Used in Evaluation

Examples of Information Used in Evaluation

Examples of Information Used in Evaluation

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