3 steps to reduce your Title IV false claims risk
Each year, the Department of Justice (DOJ) recovers billions of dollars through settlements and judgments under the False Claims Act (FCA), a statute passed during the Civil War to protect the Union Army against unscrupulous contractors. Its modern day use encompasses the day-to-day work of universities and colleges, from student recruitment and student aid, to research grants, to healthcare services.
This year already has seen two settlements by universities resolving alleged fraud in their Title IV programs, continuing a trend that has seen more than $100 million paid by universities and colleges for alleged Title IV violations over the past six years.
The DOJ carries a heavy hammer with the FCA as it provides for treble damages (three times actual damages) plus significant penalties.
Federal grants and loans provided under Title IV programs are especially susceptible to FCA violations because of the extensive requirements that attach to these funds, along with the plethora of certifications made by Title IV recipients.
You can reduce your institution’s Title IV FCA risk by adhering to these guidelines.
Address would-be whistleblowers
FCA cases are typically initiated through the filing of a qui tam complaint by a whistleblower. Indeed, every single Title IV FCA settlement over the past six years was initiated by a whistleblower filing suit.
While the FCA incentivizes would-be whistleblowers by providing them with 15% to 30% of any eventual recovery, many come forward only after their efforts to report internally have failed.
Providing employees of your institution with a meaningful way to report potential misconduct, and then a rigorous structure to investigate and remedy those reports, is critical to reducing your FCA exposure.
In addition, whistleblowers are not just insiders, but also come from those outside of your organization. The two FCA Title IV cases settled this year were filed by the co-owner of a student recruitment company that the schools contracted with.
Requiring outside companies to contractually report allegations of misconduct to you first, and to sign yearly certifications that they have not encountered any misconduct at your school, are helpful steps to reduce your third-party risk.
Improve your certification diligence
As a condition to participating in any Title IV program, an institution must enter into a program participation agreement with the Department of Education in which the institution certifies to current and continued compliance with dozens of requirements.
Additional certifications are required as part of annual compliance audits, and the student aid financial process, among others.
No single individual can possibly attest that his or her institution is in compliance with every statutory and regulatory provision applicable to Title IV, as required by the program participation agreement.
Thus, consider requiring sub-certifications whereby relevant personnel in charge of key functions relevant to Title IV compliance review applicable practices at the time of certification and attest to compliance within their respective areas of expertise.
This will help to identify and escalate potential noncompliance before it is too late, and will also help to establish good faith efforts to comply, should an FCA allegation arise in the future.
Require annual training on key Title IV issues
When billions of dollars in federal funds are disbursed each year to institutions under Title IV, training and awareness of FCA risk must follow.
- Do your certifiers know that reckless disregard is sufficient to establish the required intent to violate the FCA?
- Do they know that they are also individually liable under the FCA when they certify?
Knowledge and awareness of the risks is a key first step towards compliance. In addition, tailored training on issues that have been subject to FCA cases, for example the compensation of student recruiters, the accuracy of job placement statistics, and compliance with the 90-10 rule, can be helpful to addressing issues with a track record for FCA risk.
Derek Adams is a partner at Feldesman Tucker Leifer Fidell LLP in Washington, D.C., and a former trial attorney with the Department of Justice, Civil Fraud Section.