Audit criticizes
trade-school regulators

The state report finds numerous
deficiencies in the DOE's oversight

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By Lisa Asato
lasato@starbulletin.com

The state Department of Education has shown "numerous deficiencies and an overall lack of commitment" in licensing and regulating private trade, technical and vocational schools, a state auditor's report has found.

Released yesterday, the report said the department has backdated licenses, issued them before fees are paid and issued them to schools that do not meet minimum requirements.

For example, none of the 12 proprietary schools whose license applications were reviewed should have been licensed for the 2000-2001 school year; their applications did not include required documentation such as financial statements, bank references, instructor credentials and permits from the state Department of Health and county building and fire departments.

Hawaii's 51 licensed proprietary schools include travel industry and barber schools.

The department estimates that about 200 proprietary schools operate here, and staffers say penalties for operating a school without a license are $100, the same cost as the initial license.

Among other things, the report found:

>>	The department did not perform required inspections of licensed schools to ensure compliance with laws and rules.
>>	The department kept more than $1,200 in checks in an unsecured cardboard box on an office desk, losing interest on the funds and risking theft or fraud. Some checks were more than 6 months old.
>>	Students' financial interests are not adequately protected should their schools suddenly shut down. The department's rules require each school to obtain a $50,000 surety bond for those purposes, far short of the $1 million some schools collect in yearly tuition.

State auditor Marion Higa said state licensing is needed for accreditation and financial aid, and the state should continue its licensing and regulatory role to ensure schools meet minimum educational standards, are properly licensed and that students are given adequate financial protection.

But she recommended the duties be transferred to the state Department of Commerce and Consumer Affairs, which may be better equipped to handle the job and because a recent change in the licensing law emphasizes consumer protection.

In a letter to the auditor, the DCCA opposed the transfer as well as another recommendation asking the Legislature to establish a tuition recovery fund to replace the surety bond.

The DCCA estimated the cost for it to operate the licensing would increase to about $6,000 per school for each two-year period, based on two-full time positions, benefits, overhead and the number of licensed operators.

The Education Department, which has no full-time staff dedicated to the job, "strongly supported" the auditor's findings and recommendations, saying the regulatory role fell outside its primary mission to educate elementary through high school students.