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GRAHAM HOLDINGS CO filed this Form 10-K on 02/23/2018
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IV program funds received by the institution during its most recently completed fiscal year, although the ED could require a letter of credit based on a higher percentage of the institution’s annual Title IV program funds. The borrower defense to repayment regulations that were scheduled to take effect on July 1, 2017, but were subsequently delayed, expand the list of circumstances that could require an institution to provide the ED with a letter of credit or other form of acceptable financial protection. Moreover, the new borrower defense to repayment regulations may increase the required minimum letter of credit amount beyond 10% of annual Title IV funds to include additional amounts that the ED determines are needed to fully cover any estimated potential losses. If an institution is unable to submit a required letter of credit or to comply with ED imposed conditions, the institution could be subject to loss of Title IV eligibility, financial penalties and other conditions or sanctions. For the 2017 fiscal year, KU expects to have a composite score of 1.9, based on its own assessment using ED methodology. However, the ED will make its own determination once it receives and reviews KU’s audited financial statements for the 2017 fiscal year.
Administrative Capability. The Higher Education Act, as reauthorized, directs the ED to assess the administrative capability of each institution to participate in Title IV programs. The failure of an institution to satisfy any of the criteria used to assess administrative capability may cause the ED to determine that the institution lacks administrative capability and subject the institution to additional scrutiny, deny eligibility for Title IV programs or impose other sanctions. To meet the administrative capability standards, an institution must, among other things: 
Comply with all applicable Title IV program requirements;
Have an adequate number of qualified personnel to administer Title IV programs;
Have acceptable standards for measuring the satisfactory academic progress of its students;
Have procedures in place for awarding, disbursing and safeguarding Title IV funds and for maintaining required records;
Administer Title IV programs with adequate checks and balances in its system of internal control over financial reporting;
Not be, and not have any principal or affiliate who is, debarred or suspended from U.S. Federal contracting or engaging in activity that is cause for debarment or suspension;
Provide adequate financial aid counseling to its students;
Refer to the ED’s Office of the Inspector General any credible information indicating that any applicant, student, parent, employee, third-party servicer or other agent of the institution has engaged in any fraud or other illegal conduct involving Title IV programs;
Submit in a timely way all required reports and financial statements; and
Not otherwise appear to lack administrative capability.
Although Kaplan endeavors to comply with the administrative capability requirements, Kaplan cannot guarantee that it will continue to comply with the administrative capability requirements or that its interpretation or application of the relevant rules will be upheld by the ED or other agencies or upon judicial review.
State Authorization. Kaplan’s institutions and programs are subject to state-level regulation and oversight by state licensing agencies, whose approval is necessary to allow an institution to operate and grant degrees or diplomas in the state. State laws may establish standards for instruction, qualifications of faculty, location and nature of facilities, financial policies and responsibility and other operational matters. Institutions that participate in Title IV programs must be legally authorized to operate in the state in which the institution is physically located or is otherwise subject to state authorization requirements.
Some states have sought to assert jurisdiction over online educational institutions that offer education services to residents in the state or to institutions that advertise or recruit in the state, notwithstanding the lack of a physical location in the state. State regulatory requirements for online education vary among the states, are not well developed in many states, are imprecise or unclear in some states and are subject to change. If KU is found not to be in compliance with an applicable state regulation and a state seeks to restrict one or more of KU’s business activities within its boundaries, KU may not be able to recruit or enroll students in that state and may have to cease providing services in that state. If a state’s requirements are found not to be in compliance with ED regulations or if KU’s institutions do not receive state approvals where necessary, the institutions could be deemed to lack the state authorization necessary to participate in the Title IV programs and be subject to loss of Title IV eligibility, repayment obligations and other sanctions. Due to an exemption, KU’s home state of Iowa does not require KU to be registered in Iowa. However, to comply with the law, KU was granted affirmative registration in Iowa. Kaplan believes that all of KU’s campuses currently meet the ED requirements to be considered legally authorized to provide the programs they offer in the states in which the campuses are located. The ED has stated that it will not publish a list of states that meet, or fail to meet, the state authorization requirements, and it is uncertain how the ED will interpret these requirements in each state. On December 19, 2016, the ED issued final regulations regarding distance-education state authorization requirements that may require KU to be authorized in additional states, as well as regulations applicable to institutions with Title IV participating locations in a foreign country. These