Accreditor rejects sale of EDMC’s Art Institutes
Request to sell was denied due to ‘insufficient information and evidence’
A regional accreditation agency has rejected Education Management Corp.’s plan to sell the Art Institute of Pittsburgh and Art Institute of Philadelphia to a Californiabased nonprofit foundation, according to a decision posted on Thursday.
The Philadelphia-based Middle States Council on Higher Education cited “insufficient information and evidence” in denying EDMC’s requests at its June 22 meeting. EDMC is welcome to resubmit the request “after additional information needed to complete the review” is gathered, the accreditor’s statement read.
At the same time, Middle States took action on financial shortcomings at the Art Institute of Philadelphia.
The commission warned the school its accreditation may be in jeopardy because of failure to show “documented financial resources, funding base, and plans for financial development adequate to support its educational purposes.” The accreditation agency asked the institute to submit a report by Sept. 15 showing evidence it meets standards.
The decision is a setback for EDMC’s plans to sell all of its schools that are currently accepting new students to the Dream Center Foundation. The $60 million proposed deal, announced in March, would send 31 Art Institute schools, as well as the South University and Argosy University educational systems, to the Los Angeles-based philanthropic organization that funds programs across the country for underprivileged people.
EDMC has portrayed the deal as an effort to spare the schools — which enroll roughly 60,000 students and have about 15,000 employees — the scrutiny of for-profit colleges that has hampered enrollment. In 2015, EDMC settled a federal investigation into allegations that its recruitment practices were predatory.
Opponents have pointed out that the Dream Center, which has no experience in higher education, will rely heavily on funding and
management from longtime investors in for-profit education. In May, a group of consumer advocacy groups, student debt and veterans organizations petitioned the Education Department to block the sale.
The deal’s announcement set off a complex series of regulatory reviews that are playing out behind closed doors.
A sale requires the blessing of a number of regional accreditors, which are private groups that use broad a range of operational, financial and academic measures to ensure colleges and universities are on a sustainable path. Accreditation is important because it shows schools are meeting basic standards; few reputable schools can operate without it.
The sale is also under review by the U.S. Department of Education, as well as by Pennsylvania education officials.
The Middle States decision is one of the first to be made public. A representative with Middle States declined to elaborate on what ways the Art Institutes’ requests were incomplete. EDMC officials were not available for comment on Thursday.
Also this week, an accreditor announced the sale of California-based Argosy University, which owns more than two dozen campuses in 13 states, can move forward — but with significant questions remaining.
In a statement, the Western Association of Schools and Colleges, based in Alameda, Calif., commended Argosy officials for their “proactive efforts in seeking a change in ownership, finding a strategic partner, and successfully managing the vast number of tasks that are entailed by the proposed transition.”
But the agency set 13 recommendations for Argosy that will be checked during follow-up reviews in October and March 2018. The next meetings will “examine carefully the impact of moving from for-profit to nonprofit status on the institution’s educational quality and service to students” as well as “the possibility of conflicts of interest.”
The report noted the proposed chief executive of the schools, for example, may provide financing for the transaction. It also found that the Dream Center and EDMC have offered few plans for how the schools would operate after the sale closed, which is necessary when considering “the cultural and mission differences, size and complexity of the two organizations.”
Dream Center Foundation averaged $15 million in annual revenue over the last three years, the report found, compared with Argosy annual revenues of $400 million.
At the review in October, “If they are not fully meeting what is required, they would continue to be monitored according to the commission’s standards,” said Christopher Oberg, the agency’s vice president and chief operating officer. “Failure would result in appropriate sanctions.”
Accreditors for Savannah, Ga.-based South University will not make a final decision until at least December. At its June 15 meeting, the Southern Association of Colleges and Schools authorized a committee to begin reviewing the proposed sale.
Last December, the accreditor placed South University on one-year probation for failing to show enough financial stability.