Note 9 - Regulatory Matters

6 Months Ended

Sep. 30, 2013

Regulatory Matters [Abstract]

Regulatory Matters [Text Block]

9.            Regulatory Matters

The Company is subject to extensive regulatory oversight by federal and state governmental agencies, as well as accrediting body oversight. To continue participation in Title IV programs, an institution must demonstrate compliance with extensive academic, administrative and financial regulations regarding institutional eligibility. For our fiscal year ended March 31, 2013, the Company derived from Title IV funds 82% of its revenues, as calculated for the purposes of the U.S. Department of Education’s (“USDE”) “90/10 Rule”. 

Management performs periodic reviews of the Company’s compliance with the various applicable regulatory requirements. As of the date of this Report, management identified the following regulatory matters for disclosure in the notes to these consolidated financial statements:

Composite Score

To participate in Title IV programs, an institution must satisfy specific measures of financial responsibility as prescribed by the USDE. One such measure is the USDE’s composite score, which may range from -1.0 to 3.0, based on a combination of financial measures designed to establish the adequacy of an institution’s capital resources, its financial viability and its ability to support current operations. The Company’s composite score as of and for the year ended March 31, 2013 was 1.7. However, the composite score for the year ended March 31, 2012 was 1.3. When an institution’s composite score is less than 1.5, but greater than 1.0, the USDE may still consider the institution to be financially responsible if the institution qualifies for an alternative standard. Such alternative standards relevant to the Company include:

● posting an irrevocable letter of credit to the USDE equal to at least 50% of the Title IV program funds received during the most recently completed fiscal year, or;

● agreeing to increased monitoring of operations, including the administration of the Title IV programs, for up to three consecutive fiscal years while maintaining a composite score equal to 1.0 to 1.4 for each of those years (the “Zone Alternative”).

On December 13, 2012, the Company received a letter from the USDE presenting the above options to allow our continued participation in Title IV programs. On the same date, the Company notified the USDE of its election to participate under the Zone Alternative. This election gave the Company an opportunity to improve its financial condition over time without requiring a letter of credit posting or participation in Title IV programs under provisional certification.

Under the Zone Alternative, a participating institution:

● must request and receive funds under the cash monitoring or reimbursement payment methods, as specified by the USDE (see “Heightened Cash Management” section below);

● must provide timely information regarding certain oversight and financial events (see “Information to be Provided under the Zone Alternative” section below);

● may be required to submit its financial statement and compliance audit earlier than normally required; and

● may be required to provide information about its current operations and future plans.

Heightened Cash Management

The USDE places an institution on one of three cash management programs if the USDE determines there is a need to strictly monitor the institution’s participation in Title IV programs. In the Company’s December 2012 response to the USDE, management elected the Heightened Cash Monitoring 1 program (“HCM1). Under this program, the USDE releases funds to the institution after the institution has made the disbursement to the student or parent borrower.

The HCM1 program contains more relaxed documentation requirements than the other programs for each recipient of a Title IV disbursement. Under HCM1, after an institution makes disbursements to eligible borrowers, it draws down Title IV funds to cover those disbursements in the same way as an institution on the advance payment method. The USDE may tailor the documentation requirements for institutions on a case-by-case basis. Under HCM1, an institution’s administration of the payment method must be audited every year. The institution’s independent external auditor is required to express an opinion, as part of the institution’s USDE compliance audit, on the institution’s compliance with the requirements of the Zone Alternative, including its administration of the payment method under which the institution received and disbursed Title IV program funds.

The Company’s management implemented changes to our procedures for processing federal aid to comply with this requirement. Such changes did not have a material impact on the Company’s operations, liquidity, results of operations or cash flows. As the Company’s composite score as of and for the year ended March 31, 2013 exceeded 1.5, management anticipates filing a request with the USDE to remove Broadview from the restrictions and requirements of HCM1 as soon as administratively possible. 

Information to be provided under the Zone Alternative

An institution under the Zone Alternative must provide timely information to the USDE regarding any of the following oversight and financial events:

● any adverse action, including a probation or similar action, taken against the institution by its accrediting agency;

● any event that causes the institution, or related entity as defined by the USDE, to realize any liability that was noted as a contingent liability in the institution’s or related entity’s most recent audited financial statement;

● any violation by the institution of any loan agreement;

● any failure of the institution to make a payment in accordance with its debt obligations that results in a creditor filing suit to recover funds under those obligations;

● any withdrawal of owner’s equity from the institution by any means, including by declaring a dividend; or

● any extraordinary losses, as defined by the USDE.

As of the date of this Report, management has identified no such events for communication to the USDE.