SALT LAKE CITY — Federal auditors say Western Governors University should repay more than $700 million in federal financial aid after finding the Utah-based nonprofit university's largest degree programs fall short of eligibility requirements.

A report by the U.S. Department of Education's Office of Inspector General released Thursday says WGU faculty did not have "regular and substantive" interaction with students. Moreover, the university did not comply with requirements that limit the percentage of regular students who may enroll in correspondence courses, the report says.

"Therefore, the department should require the school to return the $712,670,616 in Title IV funds it received from July 1, 2014, through June 30, 2016, and any additional funds it received after June 30, 2016," the audit states.

Western Governors University President Scott Pulsipher in an interview Thursday afternoon said the university "vehemently disagrees" with the audit findings.

"Our general reaction is that the (Office of Inspector General) is wrong. I would say (we) vehemently disagree with their opinion on this matter. I think it's important to note while they have their opinion, it doesn't mean their opinion is right," Pulsipher said.

"We think there's been a fairly narrow application of the statutory and regulatory language around 'regular and substantive interaction.' I think it's evident that we very much disagree around the design of our faculty model and the interactions our faculty provide our students is such that we believe WGU has always been compliant with legal and regulatory language," he said.

The 88-page audit report had three key findings:

• WGU was not eligible to participate in the Title IV programs;

• WGU disbursed Title IV funds to students before the students were eligible to receive the funds, and,

• WGU did not always comply with the requirements governing the return of Title IV funds.

Title IV is the section of Higher Education Act that regulates use of federal financial aid, which includes loans and grants. The audit focuses on loans and grants distributed from 2014 through 2016.

With respect to the first finding, the audit says Western Governors University became ineligible to participate in the Title IV programs as of June 30, 2014, because more than 50 percent of its regular students were enrolled in at least one correspondence course during award year 2013–2014.

"If a school loses its eligibility under this institutional eligibility provision, it loses its eligibility on the last day of the award year being evaluated under that provision," the audit says.

The second finding says WGU allocated financial aid funds to students based on the requirements for academic years and payment periods governing a term-based program.

"However, the school’s programs were not designed to provide students with 52 weeks of instructional time as required by the school’s definition of an academic year. Therefore, the school should have considered its programs to be nonterm programs," the audit said.

"By not disbursing funds in compliance with the regulations for a nonterm program, the school disbursed Title IV funds to students who were ineligible for such disbursements at the time the school made them and did not adjust students’ Pell awards."

The third finding said WGU "did not always follow its own policy and properly handle Title IV funds when students did not begin attendance or withdrew."

Auditors randomly selected 25 student terms among 9,534 in which a student received Title IV funds and withdrew, earned zero competency units, or both.

"One student never attended during the payment period but the school did not return any Title IV funds. One student unofficially withdrew after the payment period started (but before the midpoint of the payment period) but the school did not complete a calculation to determine the amount of Title IV funds that should have been returned," the audit states.

Western Governors University was founded 20 years ago by 19 governors, among them then-Utah Gov. Mike Leavitt. Based in Salt Lake City, the university has more than 85,000 students from around the country and 90,000 alumni, Pulsipher said. Utah Gov. Gary Herbert serves on its board of trustees.

WGU offers online instruction through a competency-based education model.

While WGU is two decades old and fully accredited, the model is still misunderstood, which may have contributed to some of the audit findings, Pulsipher said.

The audit cites concerns about an inadequate faculty role, which Pulsipher says is refuted by independent surveys of WGU students who say their engagement with faculty is higher than that reported by students who attend traditional universities.

"We recognized some time ago that the traditional faculty role as defined was not going to work for the adults who have some college but no degree. They need a different model," Pulsiper said. "We took all the activities and interactions of that single role and we split that up. The audit approach itself would like to measure those independently from each other, where the student really engages throughout their entire program with three different faculty types that provide much more individualized and highly regular and substantive interaction such that the one-to-one engagement between faculty and students is far greater than students typically experience."

The Office of the Inspector General has no enforcement authority so the audit is in the hands of the Department of Education, which will accept comment for the next 30 days.

"We would hope the department itself would make an expeditious determination on this but it's their responsibility now. Meanwhile for us, our accreditation is not effected whatsoever. Our Title IV eligibility with (the Office of Inspector General's) report is not affected whatsoever. For us, it's business as usual in serving our students," Pulsipher said.

Email: marjorie@deseretnews.com