lead advance empower Contents 3 Executive Leadership Letter 4 Centennial Celebration 10 Council for Higher Education Accreditation Recognition 12 U.S. Department of Education Compliance Report 12 Advancing Student Achievement Standards 16 Technology Enhancements 17 Interaction with States 18 Changes to Council Composition 20 Evaluators of the Year 21 Honor Roll Institutions 23 Financial Statements Dear Colleagues, Roger Swartzwelder, Chair (standing) Albert C. Gray, PhD, Executive Director and CEO In 2012, ACICS proudly marked its Centennial Anniversary, celebrating the passion, enthusiasm, and drive for excellence that’s been the hallmark of the organization. For 100 years, the organization has committed itself to advancing educational excellence at independent, career schools and colleges in the United States and abroad. Understanding that with historic leadership comes enormous responsibility, the Council advanced the agency and schools ACICS accredits to even higher achievements. ACICS understands that the current demands facing our nation underscore the need and timeliness of quality education and a skilled workforce. This is what inspired those who gathered and formed the organization in 1912 and is what continues to fuel the agency today. This annual report, and the year it reflects, is a testament to ACICS’ strong foundation and serves as a road map for its future. The need for ACICS is greater now than at its inception. While celebrating the past, ACICS continued to advance the quality of career education by elevating a new set of expectations for member institutions, specifically in the areas of student success outcomes. ACICS reviewed, revised, and ratified higher standards and we are planning to add additional verification protocols and requirements to ensure the veracity of self-reported data. ACICS enhanced its site-review accreditation program to ensure that every member institution receiving federal student financial aid is subject to a review of the elements of the education program that a school uses to assign academic credit to coursework. Other criteria changes included the monitoring of excessive substantive changes, the transfer of credit, federal credit hour definition and more as this agency strives to maintain its leadership role in educational quality asssurance. 2 Driving the conversation “ Career colleges and their accreditors continue to face increased scrutiny and expectations expressed by policy makers, regulatory authorities and the media. Last year we met and exceeded expectations by strengthening our commitment to continuous quality improvement and answered critics with well-informed and analytical narrative. “The Quality Assurance at Career Colleges and Schools” report, sent to Congressional offices and the Department of Education, responded to a report by the Senate HELP Committee that lacked a thorough review of the sector. As an industry leader, ACICS used it as an opportunity to provide a more complete record of how specific education quality issues are addressed by ACICS. Looking forward The challenges in 2013 will be defined by the forces and waves of changes that the organization confronted during 2012. Supported by a 100-year history of quality standards and results, thousands of volunteers, and education professionals, ACICS stands ready to address these seemingly difficult challenges with great purpose. To that end, we remain committed to providing the foundation of educational excellence to those seeking education as a path to success. This success is measured by the vast number of students empowered with greater skills to lead fulfilled lives and to help bolster our nation’s economy. We are inspired by and grateful to the thousands of faculty, staff, and volunteers who make it their career to help people live better lives. Your knowledge, skills, and time celebrate everything ACICS represents: leadership, advancement, and empowerment. Thank you. For 100 years, the organization has committed itself to advancing educational excellence at independent, career schools and colleges ” 3 For 100 years ACICS has advanced the quality of independent career colleges in the nation and abroad. Formed by 23 Midwestern business school owners in Chicago on December 12, 1912, ACICS today is the oldest and largest accreditor of degree-granting, independent career colleges and schools. Over the course of the year, we shared our story more clearly and more confidently than ever. The Centennial also served as an opportunity to recommit ACICS to the quality and integrity of workforce development and to initiate a research project targeting “underemployment” and the generation of Americans most affected by the phenomenon. Over the course of the year, our commitment was expressed with several notable events. (continued on page 6) 5 Thought Leadership Event 1912 The National Association of Accredited Commercial Schools (NAACS), comprised of 23 private career schools, NAACS Founder, founded to Benjamin Franklin Williams establish and advance quality of education and standards of excellence at private business schools and colleges. The NAACS code of ethics and educational policies developed in 1914 becomes mandatory in 1920. NAACS develops standards of practice, creates system of inspection for new members and schools with financial, managerial or educational hardship. Membership grows to 228. 1920s 6 ACICS launched the research project, “Workforce Skills Reality Check,” which revealed that many hiring decision-makers believe the post-secondary education system could do a better job preparing students for the workplace. Results of the survey were unveiled at the National Press Club on December 5, 2011 and were shared with audiences across the country throughout the year. In support of contemporary workforce development, ACICS is launching its second major research project. The study will survey the dimensions and expectations of the “underemployed” generation through a series of interviews and discussions. The research will inform ACICS’ development and modification of standards for independent career colleges and schools. Poster Contest To help set the tone of the year, ACICS invited students to submit designs for the agency’s commemorative Centennial poster competition. More than 80 entries were submitted from students across the nation. The First Place entry - 100 Years of Quality: Making the Transition Between Education and the Workforce – was designed by Clayton Stewart, a student from Westwood College, Houston South Campus. Stewart earned $1,000 cash prize plus and was recognized at the ACICS centennial gala in Las Vegas. Community Service Week During the week of May 21, roughly 3,100 ACICS students and faculty volunteered more than 14,000 hours in their communities during the We SERVE (Students Empowered to Respond and Volunteer Everywhere) Community Service Week. In San Antonio, Texas, students and faculty of Career Point College mobilized and organized a project to raise money, canned food, clothing, and daily necessities for the nearby city of Devine which was hit by a devastating tornado. Twenty homes were demolished leaving families without shelter. Career Point met and surpassed the challenge of the WeSERVE objectives. The volunteers from Career Point College expended a significant number of hours, achieved their stated goal, and demonstrated creativity and a lasting impact on their community. As the First Place Winner, the school was honored at the Centennial Gala in Las Vegas. Century of Excellence, A Future of Promise ACICS’ first 100 years is captured in a minidocumentary produced with original artwork and historic materials from the ACICS archives. The six-minute video covers the migration from farm to city, the Great Depression, post WWII, and the transformation of the workplace through technology. Setting Standards for Career Education: A 100-Year Perspective To celebrate the Centennial, ACICS published Setting Standards: 100 Years of Accredited Career Education, a newly illustrated volume by Virginia author Bob Cohen. Setting Standards illustrates the motivation behind self-governance and voluntary quality assurance of private, independent career colleges and schools. While the history describes many aspects of an evolving, national organization with many functions related to membership, the core enterprise was and is the assurance of educational quality and the preservation of institutional integrity. Gala The Centennial year culminated with more than 300 invited guests, including ACICS school representatives, current and former commissioners, evaluators, and friends gathered for an evening celebration at the Cosmopolitan of Las Vegas. It was a celebration truly worthy of an occasion that comes around only once every 100 years. 1949 NAACS merges with National Council of Business Schools (NCBS), renamed the National Association and Council of Business Schools (NACBS). Mid-Century Student 1950s NACBS becomes Accrediting Commission of Business Schools (ACBS). Commission adopts new policies, standards of practice, including general requirements for entrance to private career schools, catalogs and minimum degree requirements. Standards become the ACICS Accreditation Criteria. Commission is recognized by the Department of Health, Education and Welfare (now the U.S. Department of Education) only four years after recognition process is established. Agency is continuously recognized through present day. (continued on page 8) 7 1960s ACBS becomes United Business Schools Association (UBSA). Federal Higher Education Act signed into law. UBSA accredited institutions fulfill all requirements and regulations under Act. 150,000 students enrolled in accredited member institutions. 1972 ACBS changes name to the Association of Independent Colleges and Schools (AICS) to better reflect increased diversity of member institutions. 2012 ACICS scope: assuring the quality of institutions providing applied professional, technical and occupational education. ACICS’ standards among strongest in career education accreditation. Agency accredits more than 950 institutions, serving more than 880,000 students in 46 states and 10 countries. 1991 AICS is renamed the Accrediting Council for Independent Colleges and Schools (ACICS). The Council for Higher Education Accreditation (CHEA) is formed; ACICS is one of only two national accreditors recognized by both the U.S. Department of Education and CHEA. 8 ACICS celebrates its Centennial Anniversary. Career education at the dawn of the 20th Century: Students attending Ohio Valley Business College 9 ACICS Value Confirmed by Council for Higher Education Accreditation “ In 1991, the Association of Independent Colleges and Schools was renamed the Accrediting Council for Independent Colleges and Schools. That same year, another organization which subsequently became the Council for Higher Education Accreditation (CHEA) was founded in order to serve as a national advocate and institutional voice for academic quality through accreditation. ACICS became one of only two national institutional accrediting agencies to be recognized by CHEA. As part of CHEA’s on-going review, ACICS submitted an application for continued recognition and appeared before the Committee on Recognition to defend its compliance with CHEA standards. One focus was the degree to which ACICS member institutions were demonstrably and currently compliant with ACICS Standard 3-1-704, Performance Information. ACICS conducted an audit of member web sites in March 2012 and presented a summary of compliance data to the committee. At its meeting in September 2012, the CHEA Board of Directors reviewed the recom- ...recognition by CHEA is an important element of ACICS’ ongoing capacity in assuring the quality and integrity of career colleges... recognizes 60 institutional and programmatic accrediting organizations. CHEA recognition requires rigorous scrutiny and affirmation of the quality of accrediting organizations. It is the only nongovernmental higher education organization in the United States that applies such scrutiny. Continued recognition by CHEA is an important element of ACICS’ ongoing capacity in assuring the quality and integrity of career colleges and schools throughout the U.S. and internationally. ACICS member institutions derive great benefit from the re-recognition that has been afforded by CHEA. ” mendation of the Committee on Recognition regarding the ACICS recognition application and granted continuing recognition to ACICS through 2015. Today, CHEA is an association of 3,000 degree-granting colleges and universities and 11 Assuring the Quality of ACICS Quality Assurance “ ACICS’ effort to achieve rerecognition was in no small part supported by the diligence, hard work and good faith of its more than 970 member institutions. Every five years the standards and performance of each accreditor recognized by the U.S. Department of Education is subject to review and authorization. Achieving recognition means that an accrediting agency retains the Department’s endorsement as a reliable authority on institutional quality and integrity. In 2011, ACICS began the substantial process of re-recognition, submitting volumes of documents and other evidence to inform the Department’s review of its compliance with accrediting regulations and expectations. A result of that initial review was a finding by the Department’s advisory committee (The National Advisory Committee on Institutional Quality and Integrity or NACIQI) that ACICS was deficient in its program of accreditation in certain areas, including the application of student achievement standards at the institutional and program levels. ” The Council and executive leadership engaged member institutions and other key stakeholders in a series of discussions – through workshops, webinars, email blasts, responses to field memos and other devices – about the appropriate level of student achievement to expect as a minimum qualification for 12 accreditation. Those expectations were codified as new standards at the institutional and program levels, communicated to colleges and schools and applied beginning with 2012 performance data. The detail of that process of enhancing student achievement standards was the substance of a lengthy compliance report the Department received from ACICS in 2012. The Department’s analysis of that report, as well as a subsequent response from ACICS if appropriate, will go to NACIQI in mid-2013 for final disposition. ACICS’ effort to achieve rerecognition was in no small part supported by the diligence, hard work and good faith of its more than 970 member institutions. Likewise, the affirmation of ACICS’ standards and program of quality assurance will reflect favorably on the quality of the institutions bearing the ACICS imprimatur. Advancing Student Achievement Standards ACICS adopted and consolidated more than 50 changes to standards in 2012 after listening to and reflecting on expectations expressed by a wide array of stakeholders. The substantial enhancements to the agency’s program of quality assurance all directly target the priority of greater student success and achievement. They include higher standards for placement, retention and licensure, independent verification of metrics and greater transparency through disclosure of outcome measures. For the first time, ACICS set and applied these standards not only at the campus or institutional level, but also at the program level in 2012. The Council’s expectations now apply not only to an institution’s aggregate performance, as is the case of a multi-program institution, but as well to each and every program. (Continued on page 14) 13 Student Achievement Standards (continued from page 13) The Council established and implemented a stronger set of expectations for member institutions, manifest as benchmark standards to remain in good standing, and compliance standards to retain accreditation. ACICS also revisited the content and context for the application of qualitative and mitigating factors to institutions that may struggle to meet compliance standards for student achievement, recognizing that economic cycles and other factors are worthy of consideration in the accreditation process, such as the satisfaction of students, student learning outcomes, and the preparation of students for careers. The new standards were applied to the 2012 reporting year and an enhanced form of the standards will be applied to Campus Accountability Report (CAR) data beginning with the 2013 reporting year. Benchmark Standards Benchmarks are intended to encourage campuses and programs whose student achievement rates fall below average to improve their performance and to avoid falling out of compliance. A campus whose rates fall below the benchmark must 14 develop and implement a Campus Improvement Plan and fulfill certain reporting requirements. A program whose rates fall below the Benchmark standard must develop and implement a Program Improvement Plan. Compliance Standards Compliance standards are intended to ensure that a substantial majority of students at ACICS-accredited campuses are retained, pass licensure exams where applicable, and find employment related to their fields. A campus whose rates fall below compliance must come into compliance within established timeframes or face loss of accreditation. A program whose rates fall below compliance must come into compliance within established timeframes or face removal of the program from the campus’s grant of accreditation. Independent Verification Placement data reported by member institutions through the annual Campus Accountability Report helps inform the Council’s deliberations regarding compliance with standards and quality of education. ACICS has initiated a new program of independent verification of placement data to ensure the information reviewed by Council is verifiable and accurate. The program will be implemented in 2013. Public Disclosures ACICS’ aspirations to make accreditation outcomes completely transparent may aid students in making informed choices based on student-learning data. ACICS now requires institutions to disclose key indicators to the public such as retention, graduation and placement rates. The requirement was memorialized as a formal standard and all member institutions were audited for compliance in 2012. Secondly, ACICS posts on its website annual disclosures of key indicators of school performance and pushes out the information via social media to schools and students. Using Technology to Advance Accreditation Improvement of the accreditation process requires investment in and deployment of current information technology. ACICS-accredited institutions now have better ability to initiate an application on line, upload one document for multiple locations (cloning), track multiple applications, and access automatic invoicing when the purchase exceeds a certain threshold. The technology platform supporting the accreditation program was strengthened through an improved student survey, enhancements to the Campus Accountability and Annual Financial reporting systems, enhancements to the visit management module of our database management system, Personify, and a new module to manage and track complaints and adverse information. Like us on Facebook C Continuing to find new ways to connect and communicate with various stakeholders, ACICS established a presence on Facebook at the beginning of 2012. Our goal to keep member schools upto-date on ACICS news and events is done with status updates, photos, videos, and future events announcements. Join the 300 fans who like our page: www.facebook.com/ACICSaccredits. Follow us on Twitter: twitter.com/acicsaccredits. 16 State Relations Summary Interpretations of quality in post-secondary education are developed and applied by a variety of sources, including state governments, programmatic (specialized) accreditors and professional licensure and registry authorities. As member institutions expand the geographic footprint of their education enterprises, and diversify the professional, career and occupational programs offered, ACICS encounters more opportunities to explain and inform a broader quality assurance community about the rigor and appropriateness of the agency’s standards and operations. In 2012, the advocacy for and defense of ACICS quality standards encountered policy forums in Texas, Kentucky, New Jersey, Rhode Island and the professional registry board of the radiologic technologists. The discussion in Texas focused on state policy to encourage transfer of academic credit between institutions; a Senate higher education panel heard testimony from ACICS regarding the comparability and value of national accreditation in general, and ACICS accreditation in particular. Kentucky’s legislature passed and the governor signed into law a new structure for the oversight of career colleges and schools without denying nationally-accredited institutions access to degree granting authority. ACICS worked in collaboration with the state association and member institutions to accomplish reforms that omitted punitive provisions contained in reform legislation in 2011. In New Jersey, ACICS collaborated with other national accreditors, the state associa- tion and member institutions to gain clarity regarding the ability of graduates from ACICS-accredited colleges and schools to lawfully include their academic credentials on resumes and job applications when applying for employment in the state. A member institution seeking authority to offer degrees in Rhode Island enlisted assistance from ACICS to overcome regulatory obstacles at the state level based on source of accreditation. Information provided by the agency, along with other policy advocacy, enabled the institution to achieve authority to establish a degree-granting campus in Rhode Island. Member institutions with existing programs in radiologic technology (RT) or aspirations to offer such programs have been deemed eligible to participate in the national professional certification and registry program. ACICS gained clarification that graduates of member institutions offering RT programs that are programmatically accredited by an authority recognized by the national registry may sit for the certification exam and subsequently apply for admission to the registry. Previous policy had limited eligibility to only graduates of regionally accredited colleges and schools. 17 Faculty and Public Participation Strengthen 2013 Council The composition of the Council, ACICS’ policy and decision making-body, changed substantially due to term expirations of four members. The 15-member Council, which includes public members, representatives from member institutions, faculty and administrators, is responsible for developing accreditation standards, making accreditation decisions and associated actions. Members of the Council may be either elected or appointed. The new Council includes four members representing the public (not affiliated with ACICS member institutions) and five with relevant faculty experience. Commissioner Brian Stewart, President and CEO of Bryan College in Springfield, Missouri assumed the position of chair. He has served on the Council since 2009; his current term runs through 2013. Commissioner Jeanne Herrmann, Chief Operating Officer for Globe University/Minnesota School of Business in Woodbury, Minnesota was elected chair-elect; she will assume the chair in 2014. She has served on the Council since 2009; her term runs through 2015. Four new members are joining the Council in 2013: Dr. Thomas B. Duff No stranger to ACICS, Dr. Thomas B. Duff has previously served as Board Chair, Commissioner and Interim Executive Director, as well as evaluator and team chair. Dr. Duff has served as a public member on more than 100 site review teams on behalf of ACICS. He was honored with the ACICS Lifetime Achievement Award during the Centennial Gala. His experience in accreditation extends to the Higher Learning Commission of the North Central Association and the Association to Advance Collegiate Schools of Business. Dr. Duff earned both MA and PhD degrees in education, with management and economics collateral fields, from the University of Minnesota, Twin Cities campus. 18 Audrey B. Kaplan Ms. Kaplan is vice president of compliance for the Education Corporation of America (ECA). Ms. Kaplan has served in her current role with ECA since June 2012, with responsibility for company compliance in all major areas. Her prior experience in career education includes positions such as regulatory affairs officer with Florida Career Colleges and Kaplan Higher Education. Ms. Kaplan earned a Juris Doctorate from the Shepard Broad Law Center of Nova Southeastern University, and a baccalaureate degree from American University in Washington, D.C. She has also served on the board of the Florida Association of Private Schools and Colleges. “ Dr. Mary Anne Ramirez Dr. Mary Anne Ramirez is dean of Stratford University, Glenn Allen, Virginia. She has extensive experience with the quality assurance process involving national, regional, and programmatic accreditors. Dr. Ramirez has served in her current role at Stratford since 2010, providing leadership for colleges offering business administration, information technology, health sciences, and culinary arts. Simultaneously, she serves in an adjunct faculty role for Walden University and Excelsior University. She has experience teaching and developing on-line curriculum for Western Governors University, and has developed interactive, multimedia middle-school science curricula at the University of Massachusetts, Amherst. Dr. Ramirez earned her doctoral and master’s degrees in education from the University of Massachusetts, and her baccalaureate degree in nursing from the Medical College of Virginia, VCU. The Council... is responsible for developing accreditation standards, making accreditation decisions and associated actions. ” Dr. Tamara Rozhon Dr. Rozhon is president of Carrington College. Dr. Rozhon has served as Carrington President since August 2012. Previously she served as chief operating officer and senior vice president of administration of TCS Education System, which included The Chicago School of Professional Psychology, Pacific Oaks College and the Santa Barbara and Ventura Colleges of Law. She also served in executive capacities at Alta Colleges, Argosy University, American Schools of Professional Psychology. Dr. Rozhon earned her PhD in higher education management at the University of Pennsylvania, a master’s degree in adult education from National-Louis University, and a baccalaureate degree from Northern Illinois University. 19 Dedicated Evaluators Remain Essential to Accreditation Process The Council recognized three outstanding volunteer peer evaluators at the 2012 Annual Meeting. The Evaluators of the Year reflect the endorsements and accolades of their peer evaluators, site team chairs, and ACICS staff. Evaluator of the Year David Teneyuca David Teneyuca is an education, writer, and visionary leader with 21 years of experience instructing graduate and undergraduate students, securing resources, and implementing effective programs. He has twelve years of experience as a computer security specialist and is currently with DXT Consultants, LLC. He is a frequent presenter at management and information technology conferences and was awarded the 2012 Best Instructor at the University of Texas at San Antonio, Information Systems Department. He joined the pool of ACICS evaluators in 2009. Chair of the Year Rogena Kyles After finishing a degree in political science from The Ohio State University, Rogena Kyles moved to the Washington, DC area and spent 3½ years as a program coordinator at Northern Virginia Community College’s Extended Learning Institute. After NVCC she worked for the U.S. Department of Education (ED) as an educational program specialist. Rogena became CEO and president of Ramírez College in San Juan, Puerto Rico where she served for 14 years. To better understand the review process, she became an evaluator in 1997. Upon returning to Virginia, she opened a law office in 2007 where she practices immigration law. Student Relations Expert of the Year Pan Fuchs Pan Fuchs has spent her entire adult life working in postsecondary education helping adults achieve their career goals. For the first ten years she worked at New York City Adult Training Center as a basic education instructor. Subsequently, she was a director of education at a proprietary school in Los Angeles for fifteen years and, finally, has worked in accreditation and licensing for Corinthian Colleges, Inc. for the past seventeen years. Pan has been an ACICS evaluator since 2002. After so many years as a frontline educator, being able to support campuses in their understanding of the importance and the “why” of regulatory compliance is very satisfying to Pan. 20 Acknowledging Honor Roll Institutions Each year the Council recognizes institutions that have demonstrated an excellent understanding of accreditation standards and expectations. The following schools were recognized during the 2012 Leadership Conference and Annual Meeting. Butler Business School, Bridgeport, Connecticut Colegio Tecnologico y Comercial de Puerto Rico, Aguada, Puerto Rico Detroit Business Institute – Riverview, Michigan Dewey University- Arroyo Campus, Arroyo, Puerto Rico Dewey University- Bayamon Campus, Bayamon, Puerto Rico Dewey University- Farjardo Campus, Fajardo, Puerto Rico Dewey University- Hatillo Campus, Hatillo, Puerto Rico Dewey University- Hato Rey Campus, Hato Rey, Puerto Rico Dewey University- Yabucoa Campus, Yabucoa, Puerto Rico Gem City College, Quincy, Illinois Globe University-Eau Claire, Wisconsin Globe University-La Crosse, Wisconsin Globe University-Madison East, Wisconsin Globe University-Middleton, Wisconsin Globe University-Minneapolis, Minnesota Globe University-Sioux Falls, South Dakota Globe University-Woodbury, Minnesota Golden State College of Court Reporting & Captioning, Dublin, California Harrison College, Columbus, Ohio Harrison College, Grove City, Ohio Harrison College, Lafayette, Indiana Harrison College, Muncie, Indiana Harrison College, Northwest Indianapolis, Indiana Institute of Business and Medical Careers, Cheyenne, Wyoming Institute of Business and Medical Careers, Fort Collins, Colorado Institute of Business and Medical Careers, Greeley, Colorado Premiere Career College, Irwindale, California Sage College, Moreno Valley, California Sage College, San Diego, California Southern Technical College, Auburndale, Florida Southern Technical College, Orlando, Florida Southern Technical College, Sanford, Florida StenoTech Career Institute, Piscataway, New Jersey 21 -22 ACCREDITING COUNCIL FOR INDEPENDENT COLLEGES AND SCHOOLS Financial Statements and Independent Auditor?s Report June 30, 2012 In CE STOKES I201 IETH STREET. NW SUITE 3-40 WASHINGTON. 20005-2842 (202) 253-9000 FAX {202} 293-9565 LARRY F. STOKES. MATTHEW F. PENNIMAN. MEMBERS AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS PRIVATE COMPANIES PRACTICE SECTION GOVERNMENTAL AUDIT QUALITY CENTER EMPLOYEE BENEFIT PLAN AUDIT QUALITY CENTER RTIFIED PUBLIC ACCOUNTANTS slalom INDEPENDENT REPORT Board of Directors Accrediting Council for Independent Colleges and Schools We have audited the accompanying balance sheet of the Accrediting Council for Independent Colleges and Schools (ACICS) as of June 30, 2012, and the related statements of activities and changes in net assets and cash ?ows for the year then ended. These ?nancial statements are the responsibility of management. Our responsibility is to express an opinion on these ?nancial statements based on our audit. The prior year summarized comparative balance sheet has been derived from 2011 balance sheet and, in our report dated November 21, 201 1; we expressed an unquali?ed opinion on then?. ?nancial statements. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the ?nancial statements are ?'ee of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the ?nancial statements. An audit also includes assessing the accounting principles used and signi?cant estimates made by management, as well as evaluating the overall ?nancial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the June 30, 2012 ?nancial statements referred to above present fairly, in all material respects, the ?nancial position of the Accrediting Council for Independent Colleges and Schools as of June 30, 2012, and the change in its net assets and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. :90 . STOKES dc COMP .C. Washington, DC. November 26, 2012 COUNCIL FOR INDEPENDENT COLLEGES AND SCHOOLS Balance Sheet June 30, 2012 With comparative torals?ar Jane 30, 201' I 2012 2 1 1 ASSETS CURRENT ASSETS Cash and cash equivalents 1,760,584 3 1,572,389 Accounts receivable, net 1,855,421 989,605 Prepaid expenses 190,318 201,605 Total current assets 3,806,323 2,763,599 INVESTMENTS 1 1,015,609 10,698,372 PROPERTY AND EQUIPMENT, net 2,542,367 2,631,003 OTHER ASSETS Deposits 1 1,273 1 1,273 Total assets 8 17,375,572 16,104,252 LIABILITIES AND NET ASSETS CURRENT LIABILITIES Accounts payable 8 1,412,023 949,893 Accrued expenses Salaries 62,969 30,41 3 Vacation 225,836 176,455 Pension 289,657 246,942 Other accrued expenses 38,473 28,740 Deferred revenue 67,530 90,675 Total current liabilities 2,096,488 1,523,118 LONG TERM LIABILITIES Accrued rent, non-current portion 197,690 175,589 Total long term liabilities 197,690 175,589 Total liabilities 2,294,178 1,693,707 NET ASSETS Unrestricted 15,081,394 14,405,545 Total liabilities and net assets 8 17,375,572 8 16, [04,252 The accompanying notes are an integral part of this financial statement. COUNCIL FOR INDEPENDENT COLLEGES AND SCHOOLS Statement of Activities and Changes in Net Assets Year Ended June 30, 2012 SUPPORT AND REVENUE Sustaining fees Accreditation visits User fees Workshop registration fees Investment income Other revenue Total support and revenue EXPENSES Program services Accreditation expense Education Supporting services Management and general Total expenses Change in net assets NET ASSETS at beginning of year NET ASSETS at end of year The accompanying notes are an integral part of this ?nancial statement. 5 5 5,341 ,41 9 4,43 ,3 80 3,240,036 506,425 3 34,452 69,406 13,923,118 7,322,490 2,349,905 3,124,874 13,297,269 625,849 14,405,545 15,081,394 ACCREDITING COUNCIL FOR INDEPENDENT COLLEGES AND SCHOOLS Statement of Cash Flows Year Ended June 30, 21312 CASH FLOWS FROM OPERATING ACTIVITIES Fees received Other revenue received Investment income received Payments to vendors and suppliers NET CASH PROVIDED BY OPERATING ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES Purchases of preperty and equipth Proceeds from sale of and equipment Purchases of investments from sale of investments NET CASH USED BY INVESTING ACTIVITIES NET INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS at beginning cfyear CASH AND CASH EQUIVALENTS at end nfyear RECONCILIATION OF CHANGE IN NET ASSETS TO NET CASH PROVIDED BY OPERATING ACTIVITIES Change in net assets Adjushnents Net unrealized and realized gainsilcsses Net loss on disposal cffixed assets Depreciation (Increase) decrease in assets Accounts receivable Prepaid expenses Increase (decrease) in liabilities Accounts payable Accrued expenses Salaries Vacation Pension Other accrued expenses Deferred revenue Accrued rent NET CASH PROVIDED BY OPERATING ACTIVITIES The accompanying notes are an integral part 0f this ?nancial statement. 6 15 12,630,299 67,006 3 89,363 (11,701,252) 1,335,921 (377,473) 2,400 (3,474,702) 3,152,049 (1,197,726) 183,195 3,512,339 615,849 5,416 7,342 956,372 (865,316) 1 1,237 462,130 32,556 49,331 42,715 9,733 (23,145) 22,101 we; ACCREDITJNG COUNCIL FOR INDEPENDENT COLLEGES AND SCHOOLS Notes to Financial Statements June 30, 2012 SUMY 0F SIGNIFICANT ACCOUNTING POLICIES Basis of presentation Financial statement presentation follows accounting principles generally accepted in the United States of America in relation to net asset classi?cation. The organization is required to report information regarding its ?nancial position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. There are no temporarily or permanently restricted net assets at June 30, 2012. Cash and cash eguivalents ACICS considers all short?term, highly liquid investments with initial maturities of three months or less to be cash equivalents. Since all such cash equivalents are contained in its investment portfolio and are not used in current operations, they are reported as investments. Investments ACICS invests in a professionally managed portfolio. All investments are carried at fair value. Such investments are exposed to various risks such as market and credit. Due to the level of risk associated with such investments, and the level of uncertainty related to changes in the value of such investments, it is at least reasonably possible that changes in risk in the near term could materially affect investment balances and the amounts reported in the ?nancial statements. Realized and unrealized gains and losses are reported as investment income in the statement of activities and changes in net assets. Program and guipment Property and equipment are recorded at cost. All acquisitions in excess of $1,000 are capitalized. Depreciation is provided on a straight-line basis over the estimated useful lives of the assets. Artwork is not considered a collection and is a non- depreciable asset. Property and equipment are reviewed for impairment whenever changes in circumstances indicate that the can-ying amount of an asset may not be recoverable. The cost of property and equipment retired or disposed of is removed from the accounts along with the related accumulated depreciation, and any gain or loss is re?ected in income. Revenue reeggnition Sustaining fees are recognized in the year to which they apply. Sustaining fees received in advance are recorded as deferred revenue and are recognized in subsequent periods when they are earned. User fees are charged to cover the administrative costs of processing forms and are recognized when the forms have been precessed. ACICS utilises ?xed fee and geographical discount schedules to determine visit billings. ACCREDITNG COUNCIL FOR INDEPENDENT COLLEGES AND SCHOOLS Notes to Financial Statements (continued) June 30, 2012 SUMARY OF SIGNIFICANT ACCOUNTING POLICIES (con? cued) Revenue recuggitiun icontinued! Accounts receivable includes program related revenue that has not been received as of June 30, 2012. No interest is accrued on receivables. Accounts receivable are stated at unpaid balances, less an allowance for doubtful accounts. At June 30, 2612, the allowance for doubtful accounts amounted to $58389. ACICS provides for losses on accounts receivable using the allowance method. The allowance is based on experience. Receivables are considered impaired if full principal payments are not received in accordance with the contractual terms. It is policy to charge off uncollectible accounts receivable when management determines the receivable will not be collected. Substantially all receivables are derived from institutions that ACICS accredits. All receivables to these institutions are made on an unsecured basis. Historically, ACICS has not incurred signi?cant credit related losses. Functional allocation of cxpguses The costs of providing programs and other activities have been summarized on a functional basis in the statement of activities and changes in net assets. Accordingly, certain costs have been allocated among the programs and supporting services bene?ted. UAW The preparation of ?nancial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the ?nancial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Fair value meas uremth Accounting principles generally accepted in the United States of America provide a common de?nition of fair value, establish a framework for measure of fair value and expand disciosures about fair value measurements, but do not require any new fair value measurements. All assets and liabilities required to be measured at fair value by these accounting principles have been assessed with the following three-tier hierarchy of inputs: Level 1 quoted prices in active markets for identical instruments Level 2 other signi?cant observable inputs Level 3 signi?cant unobservable inputs All assets and liabilities are considered Level 1. Financial information as of June 30, 2011 The ?nancial information as of June 30, 201] is presented for balance sheet comparative purposes only and is not intended to represent complete ?nancial statement presentation. Certain accounts in the prior ?nancial statements have been reclassi?ed for comparative purposes to conform to the presentation in the current period. Advertising costs ACICS expenses advertising costs as they are incurred. COUNCIL FDR INDEPENDENT COLLEGES AND SCHOOLS Notes to Financial Statements (continued) June 30, 2012 ORGANIZATION AND TAX STATUS The Accrediting Council for Independent Colleges and Schools (ACIDS) was founded in l912 to establish and advanco the quality of education of independent, non-public career schools, career institutions, and colleges. ACICS accomplishes these objectives by performing the accreditation function for its members. ACICS is exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code as an organization that is not a private foundation. ACICS is, however, subject to income tax on any net pro?ts generated by unrelated business activities as de?ned under the tax laws. To date, ACICS has not engaged in such activities. Accounting principles generally accepted in the United States of America require that uncertain tax positions be evaluated and the potential impact of unfavorable outcome of a tax authority?s assessment of such uncertain tax position be re?ected in the ?nancial statements. From time to time, management must assess the need to accrue or disclose a possible loss contingency for proposed adjustments from various federal and state tax authorities who may audit the organization in the normal course of business. ACICS has evaluated its tax reporting and has not re?ected any contingent liability for any such potential assessment. In the event there were any proposed adjustments any associated penalties and interest would be separately reported. The organization is no longer subject to examinations by relevant tax authorities for years prior to ?scal year ended June 30, 2009. CONCENTRATION OF CREDIT RISK ACICS maintains its cash balances at one ?nancial institution in the Washington, DC. area. The balances are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. At June 30, 2012, the uninsured balance for all cash accounts was $1,736,646. The Association has never experienced a loss on its cash deposits. ACICS maintains its investments at one ?nancial institution in the Washington, D.C. area. The cash equivalents and certi?cates of deposit held at this institution are insured by the FDIC up to $250,000. At June 30, 2012, there was no uninsured balance for these cash equivalents and certi?cates of deposit. All other investments held in this institution are insured by the Securities Investor Protection Corporation for up to $500,000. At June 30, 2012, the uninsured balance for these investments was $10,413,?48. PROPERTY AND EQUIPMENT Property and equipment as of one 30, 2012 consists of the following: Furniture and ?xtures 5,029,920 Leasehold improvements 679,088 Artwork 4,006 5,713,014 Less accumulated depreciation and amortization 13,170,642) Depreciation and amortization expense was $892,504 for the year ended June 30, 2012. COUNCIL FOR. INDEPENDENT COLLEGES AND SCHOOLS Notes to Financial Statements (continued) June 30, 2012 INVESTMENTS The fair vaiue of investments as of June 30, 2012 is presented below, along with a summary of investment income earned on investments and cash and cash equivalents for the year then ended. Common stock $3,238,595 Cash equivalents 101,862 Bond funds 4,864,910 Mutual funds 2,393,123 Commodities 214,530 REITS 197,434 Investment income: Interest and dividends 389,863 Realized gainsf?osses) 202,369 Unrealized gainsi?osses) 1202,2851 CONIMITMENTS AND CDNTINGENCIES Operating leases ACIDS leases office space in Washington, D.C., which has a term that expires September 30, 201?. Minimum rent is currently $53,200. The total of all rental payments due under the [case are being recognized on a straight-line basis in the statement of activities and changes in net assets. Accordingly, there is a liability recorded for accrued rent equal to the difference between the rent expense and the actual cash payments required by the lease. ACICS also leases equipment under operating leases. The copiers have leases that expire in March and September of 2014. The lease payments are $3,268 and $1,411. The postage machine lease expired November 21, 2011 and an agreement was reached to continue on a quarterly payment plan equal to $2,100. A new agreement is being negotiated. The following is a schedule of future minimum lease payments as of June 30, 2012: 2013 23 3,689 2014 233,949 2015 205,616 2016 715,36? 2012 229,749 2018 and later 133 344 The total expense incurred under all operating leases during the year ended June 30, 2012 was $296,719. 10 ACCREDTTING COUNCIL FOR INDEPENDENT COLLEGES AND SCHOOLS Notes to Financial Statements (continued) June 30, 2012 COMTBIENTS AND CONTINGENCJES (continued) Contractual ACICS has contracted various consultants and insurance providers. ACICS is obligated to pay fees for these relationships. ACICS has an employment contract with its executive director. Should the executive director be dismissed, ACICS may be subject to severance payments. PENSION PLAN ACICS has a de?ned contribution pension plan, as regulated by the Internal Revenue Service Code 4'0be). Employees become eligible after one year of service, and become 25% vested for every year of employment. Contributions to the plan are discretionary and ACICS contributed 10% of eligible employees? salaries. $289,657 was contributed for the year ended June 30, 2012. ACCREDITATION AUTHORITY The Secretary of the United States Department of Education has extended the recognition of ACICS as an accrediting body through June 2013. ACICS must reaf?rm this authority every ?ve years. Management believes it is highly probably that ACICS will continue to be recognized as an accrediting body for an inde?nite period. SUBSEQUENT EVENTS In preparing these ?nancial statements, management of ACICS has evaluated events and transactions that occurred after June 30, 2012 for potential recognition or disclosure in the ?nancial statements. These events and transactions have been evaluated through November 26, 2012. This is the date that the ?nancial statements were available to be issued. 11 OTHER FIN AN CLAL 33- ERTIFIED PUBLIC ACCOUNTANTS STOKES COM PAHY. P.C.. 120! 15TH STREET. NW SUITE 340 WASHINGTON. D.C. 20005-2342 (202) 293-5000 FAX (202} 293-9666 WW F. STOKE-5. C.P.A. MATTHEW F. PENNIMAN. C.P.A. MEMBERS AMERICAN INSTITUTE OF CERTIFIED PUBLIC JICCDUNTANTS PRIVATE COMPANIES PRACTICE SECTION GOVERNMENTAL AUDIT QUALITY CENTER EMPLOYEE BENEFIT PLAN AUDIT CENTER INDEPENDENT REPORT ON OTHER FINANCIAL MOWTION Board of Directors Accrediting Council for Independent Colleges and Schools Our report on our audit of the basic financial statements of the Accrediting Council for Independent Colleges and Schools for year ended June 30, 2012 appears on page 3. We conducted our audit for the purpose of forming an opinion on the basic ?nancial statements taken as a whole. The schedule of functional expenses on page 14 is presented for purposes of additional analysis and is not a required part of the basic ?nancial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic ?nancial statements and, in our opinion, is fairly stated in all material respects to the basic ?nancial statements taken as a whole. (SSWQ ?lm . STOKES 8: COMPANY, Washington, DC. November 26, 2012 COUNCIL. FOR INDEPENDENT COLLEGES AND SCHOOLS Schedule of Functional Expenses Year Ended June 30, 2012 Program Services Supporting Services Accreditation Management Expense Education and General Total Salaries and bene?ts 3 1,334,113 5 1,305,025 5 1,265,479 3,954,622 Travel and meals 4,463,363 29,953 60,314 4,554,635 Advertising - - 1,762 1,762 Bad debt expense - - 15,729 15,729 Computers 190,940 130,029 174,574 545,543 Depreciation 314,126 296,176 287,202 397,504 Dues and subscriptions 2,058 1,941 1,382 5,831 Equipment rentals and maintenance 34,030 32,035 31,113 97,223 insurance 13,346 13,055 12,660 39,551 Interest and fees - - 282,392 232,392 Legal and accounting - - 150,579 150,579 Meetings 147,125 138,717 134,514 420,356 Miscellaneous 19,409 18,300 17,745 55,454 Occupancy 250,255 235,955 223,305 715,015 Of?ce Supplies 15,413 14,532 14,091 44,036 Payroll taxes 30,407 75,312 73,514 229.733 Printing and postage 14,063 13,259 12,353 40,130 Pruf?sicna] fees 331,579 312,631 303,153 947,363 Training 13,204 12,449 12,072 37,725 Utilities 43,049 45,304 43,931 135,234 Workshops - 124,632 - 124,632 3 7,322,490 5 2,349,905 5 3,1243 74 13,297,269 The accompmying auditor's repon on timer ?rmncial information should be read with this statement 14 2012 Council Mr. Roger Swartzwelder, Chair Executive Vice President, General Counsel and Chief Compliance Officer Education Corporation of America Mr. Brian Stewart, Chair-Elect Bryan University President/CEO Dr. John Kushner, Treasurer Vice President for Academic Affairs Detroit College of Business (Retired) Dr. Jane Legacy Associate Professor - Technology, Leadership Arizona State University Dr. Lawrence Leak Former Title: Interim Provost and Chief Academic Officer (Retired) Previous Affiliation: University of Maryland University College Mr. Luis LLerena Executive Director CBT College Ms. Linda Blair Dean and Chief Academic Officer Spencerian College Mr. David M. Luce Assistant Vice President, Accreditation and Licensing Corinthian Colleges, Inc. Mr. Edwin Colón Campus Director ITT Technical Institute Dr. Jamie Morley Education Consulting Solutions, LLC. Mr. John Euliano Senior Vice President of Institutional Development Southern Technical College Dr. Ruth Shafer Lindenwood University Adjunct Professor, Master of Education and Administration Programs Mr. Francis Giglio Vice President of Compliance and Regulatory Services Lincoln Educational Services Dr. Edward G. Thomas Cleveland State University Professor of Marketing, Emeritus Ms. Jeanne Herrmann Chief Operating Officer Globe University/Minnesota School of Business 36 Dr. Albert C. Gray, Executive Director & CEO, Secretary Ex officio Accrediting Council for Independent Colleges and Schools 750 First Street, NE, Suite 980 Washington, DC 20002-4223 phone 202.336.6780 fax 202.842.2593