Three Initial Takeaways from the GAO Report on OPMs

Author

Phil Hill
May 06, 2022

The long-awaited report from the Government Accountability Office (GAO) on the US Department of Education (ED) oversight over Online Program Management (OPM) contracts is out, and as most observers have stated, it is a fairly neutral report with no bombshells. You can access the full report here and Inside Higher Ed’s early coverage here. The two recommendations from GAO:

The Secretary of Education should provide additional instructions for inclusion in the Compliance Supplement to help auditors better identify and assess potential incentive compensation ban violations when a college contracts with an OPM. Additional instructions should prompt auditors to ask specifically about OPMs, direct auditors to obtain and assess compensation information for OPM staff who provide recruiting services, and reference relevant guidance including the 2011 Dear Colleague Letter. (Recommendation 1)

The Secretary of Education should provide additional instructions to colleges regarding the information they must provide about their OPM arrangements during compliance audits and program reviews. Additional instructions should explain that colleges are responsible for both identifying all OPM contracts that include recruiting, and then providing auditors and Education’s program review staff with copies of those contracts and information on how covered OPM staff are compensated. (Recommendation 2)

This sounds simple and obvious. Who can argue that ED should actually provide guidance to auditors and colleges on collecting information to ensure compliance with the well-established incentive compensation ban and the 2011 Dear Colleague Letter’s clarification? On the surface this is a matter of come on ED, do your job. But there are a few takeaways of significance that are worth considering.

Very Narrow Scope

This report was very narrow in scope in that it is not about OPM oversight in general. The entire report is based on the one issue of incentive compensation bans and OPM usage of tuition revenue sharing models.

This report examines (1) colleges’ use of OPMs and (2) the extent to which Education’s monitoring instructions ensure that it obtains the information needed to assess whether OPM arrangements comply with the incentive compensation ban.

There is nothing on oversight of student outcomes, separation of instruction from OPM services, methods of admission. Well, the enrollment decision issue is indirectly covered in the 2011 Dear Colleague letter that provides exceptions to the incentive compensation ban.

Details of the 2011 Dear Colleague Letter relating to colleges' tuition revenue-sharing arrangements with Online Program Managers (OPM)

Very Broad in Scope

At the same time, the report is very broad in scope in that it defines an academic program as anything with more than two courses.

For the purpose of our report, we consider an OPM to be a third party that works with a college to manage services necessary to develop and deliver an online education program. We consider an education program to be one that includes at least two courses. Therefore, our OPM definition excludes single courses, such as massive open online courses, but includes short term programs, such as microcredentials and bootcamps. Our definitionalso includes traditional degree programs, such as associates, bachelors, and graduate degrees. Colleges may work with OPMs to support programs that are eligible for federal student aid, as well as short-term programs that are not eligible.

In terms of programs, this report encompasses:

  • Degree-based programs

  • Certificate-based programs (including for non-matriculated students such as in continuing education programs)

  • Bootcamps

  • Microcredentials

In terms of vendor categories, or markets, it seems to encompass:

  • Traditional OPMs (think 2U / edX, Pearson, Wiley Academic Partnerships, Coursera)

  • Employee benefit management companies (think Guild, InStride)

  • Potentially Others . . .

ED Plans to Go Even Broader in Scope

And on that topic:

I’ll write more regarding my comment of both the Department of Education and the Federal Trade Commission (FTC), but I will note that I have had private disagreements sent to me on this point.

The most telling part of the report is in the response from ED in an appendix, where the department said that they are already working on changes that go beyond the scope of the GAO report. [emphasis added]

The draft GAO report provides important information for the Department as it reviews its guidance on incentive compensation. While the work of the GAO was limited to the incentive compensation ban as it applies to OPMs, the issues identified may have broader applicability to the other parties to the OPM contracts as well. The Department believes that institutions of higher education that contract with OPMs and auditors of those contracts should be aware of their responsibilities regarding the ban on incentive compensation for all third-party contracts.

ED agreed with both GAO recommendations and added more detail. [emphasis added]

Response 2: The Department concurs with this recommendation. We agree to reinforce for institutions of higher education that the ban on incentive compensation applies to all education programs that an institution offers and all contracts that an institution enters. This will help the institutions better understand what documentation must be maintained and provided to auditors and program reviewers. The Department will amend its procedures for program reviews and propose changes to the Compliance Supplement. These modifications will identify the types of information that institutions must provide about contracts with third parties during audits and program reviews to improve enforcement of the ban on incentive compensation. The information identified will address any third-party contracts that involve recruiting activities, such as OPMs.

As a start, it is quite clear that Education Benefit Providers like Guild Education and InStride will be impacted, and I have argued that they are a form of OPM. Online programs, recruiting students, tuition revenue share models. Online global course and program providers like Emeritus could also be impacted. And what about other EdTech contracts? Clearly Bootcamp providers and online continuing and executive education contracts could be in scope.

ED is unlikely to trigger changes to all third-party contracts with payment based on enrollment levels, but it is also unlikely that they will stick just to OPMs. There are a lot of questions, but the issue to watch is how broad and how deep the upcoming ED actions will be on the subject.