The school has not only survived, but profited as a direct result of the Pell Grant program. Over 97 percent of those enrolled obtained Pell Grants. And there is little or no relation between tuition charged and the cost of the school's operation. Rather than fund quality education, the school has used its Pell-generated profits to make large investments. Last year it transferred over $800,000 to an affiliate, paid off its mortgage, and maintained over $1.2 million in mutual funds. These transactions would have been impossible were it not for the Pell Grant program. Courses offered do not confer a degree nor lead to employment in a recognized field, but instead result in a nonvocational certificate in Judaic culture and religious heritage.

We seriously question whether the Pell Grant program was intended to subsidize these kinds of programs. The quality of the education received is doubtful. Several students that were interviewed could not even recall attending the school's classes. Many students attended classes because they were paid to do so. Classes were held in community centers or synagogue basements and some instructors are part time and also teach at a competitor's school. Books are loaned by the school and despite an enrollment of over 1,500 students in 1991, the school spent only $21,000 on education materials and supplies that year.

We found incomplete, erroneous or questionable student files and documents. Some data in student files is clearly an error, as it is inconsistent with the information contained in the files and other schools the students supposedly attended for which they also received Pell Grants. Some students interviewed said that they had not attended the school, nor received a Pell Grant in contrast to school records. Department of Education data reflects some students received Pell Grants at several other schools, yet none of the students transferred credits.

The Staff's inquiry into the operation of Sara Schenirer Teachers Seminary has been difficult and time-consuming. While we have uncovered evidence of what the Staff considers to be abuse of the Federal Pell Grant program at Sara Schenirer, we have to date been unable to determine all of the facts concerning the school's participation in the Federal program. This is largely due to the fact that no one at the school will consent to be interviewed by the Subcommittee Staff. As a result, the Subcommittee issued deposition notices and appearance subpoenas to Mr. Michoel J. Meisels, the president and dean and to Mrs. Toby Broyde, the director of student financial aid.

Counsel for both Meisels and Broyde advised the witnesses would decline to testify citing their Fifth Amendment privilege, protecting them from self-incrimination.1 Counsel for the school also advised the Staff that his recommendation to any other employees of the school which the Subcommittee may subpoena for testimony would be that the employee not answer any of the Subcommittee's questions and invoke the constitutional privilege. So the Staff had to rely almost exclusively on document review and interviews of students to learn anything about the operations of the school.

1 Exhibit No. 24 retained in Committee files.

Attempts to obtain information from the school's board of directors resulted in the same response. Mr. Yitzchak Eichenthal, a CPA and member of the board; Mr. Elyasaf Slanger, the current chairman of the board; and Mr. Samuel B. Tress, the former chairman of the board, all advised through counsel that they too would assert their right not to incriminate themselves if called to testify in deposition.

No one at this school will cooperate with the Congress in its examination of their receipt of over $11 million in Federal funds. Last year Sara Schenirer enrolled over 2,000 persons in certificate programs which are not vocational in nature and are not designed to lead to employment of any kind.

Chairman NUNN. Is this school still receiving Federal money as we speak?

Mr. BUCKLEY. It was cut off last week by the Department of Education.

Chairman NUNN. Is that a cut off or is that just raising questions? What has the Department actually done?

Mr. BUCKLEY. The Department has put them on notice that they are being reviewed because the Department now understands that they are not a vocational school. It also put them on a reimbursement plan. In effect, they are not allowed to disburse any Federal funds whatsoever. If they elect to disburse their own funds and later on it is reversed and they are determined to be eligible, the Department will reimburse them for those monies.

Chairman NUNN. But they were receiving money until last week from the Federal Government?

Mr. BUCKLEY. That is correct.

Chairman NUNN. When did you first try to question these officials in this particular school?

Mr. BUCKLEY. We served the Subcommittee's document request subpoena in February. I think it was February 25 of this year and since that time have raised a variety of questions with counsel and have asked repeatedly to be permitted to interview employees at the school, financial aid officer, the dean, and others and we were denied.

Chairman NUNN. How much Federal money, taxpayer money, has this school received since you first tried to interview them and were refused cooperation?

Mr. BUCKLEY. Well, Senator it was probably right at the end of the spring/summer. They did not receive any over the summer because school was out. I have no idea how much they drew down in September. I do not know the answer to that.

Chairman NUNN. How much in the previous year, 1992?
Mr. BUCKLEY. In 1992, they pulled down almost $5 million.

Chairman NUNN. So you have got a school where it is getting taxpayer money-$4, $5, $6 million a year, in that range-that absolutely refuses to cooperate in any inquiry relating to how they are spending that money or how they are receiving that money or their students?

Mr. BUCKLEY. Any inquiry by this Subcommittee. That is not to say that they have not allowed the Department of Education in the door, but we have not been welcome.

Chairman NUNN. Do you know whether the Department has been given access?

Mr. BUCKLEY. I know that the Department of Education conducted a program review of this institution late last year and early this year. I assume they were given access to files. In their report, they do not say anything about being prohibited of access.

Chairman NUNN. But that review by the Department did not result in any action taken against the school, did it?

Mr. BUCKLEY. It was basically a clean report. They did not find anything.

Chairman NUNN. And that was when?

Mr. BUCKLEY. That was the end of last year. I think that report was finalized in January of this year.

Chairman NUNN. Did you share the information from this Subcommittee with the Department of Education?

Mr. BUCKLEY. I have, yes, sir.

Chairman NUNN. Is it your belief that that is the basis on which they have cut off the funds?

Mr. BUCKLEY. I believe that when we advised the Department that we, the Staff, were unable to determine how these schools met the statutory definition of an institution of higher education to participate in the programs, that they went back and reviewed these schools and their participation. And based on this subsequent review, under the current management of the Department, they decided to terminate or at least call into question their continued participation.

Chairman NUNN. Can you tell me again when the Department reviewed this school and when it was given a clean review?

Mr. BUCKLEY. Yes, the review was conducted at the end of last year, December of 1992.

Chairman NUNN. The end of 1992?

Mr. BUCKLEY. Yes, and then the report was prepared, I believe, in January. We subpoenaed the school in February.

Senator COHEN. Mr. Chairman, could I just inquire? Could you explain to me how a review can be conducted in a period of roughly a month of December and a report issued in January, and yet no action has been taken since you called it to the attention of the Department in as early-I assume it was February when you issued the statement? So we have gone from February until October before any action is taken? So they can give a clean bill of health in 1 month, but cannot cut off payments for a period of 10 months? Mr. BUCKLEY. Senator, I am sorry I gave you that impression. We served a subpoena on them in February. It took until May before they started producing any documents whatsoever. And it was after sitting down and reviewing those documents and reading what the school had provided to us and then comparing it to what we know about the law. It was already early summer before we approached the Department with our concerns.

Senator COHEN. So you did not approach them until August, July-August?

Mr. BUCKLEY. It was July, yes, sir.

Senator COHEN. Is it fair to say that but for the activities of the Subcommittee that there would be no action taken against this particular school?

Mr. BUCKLEY. I think that is very fair to say.
Senator COHEN. Thank you, Mr. Chairman.

Mr. BUCKLEY. The school's student body is mostly comprised of elderly, Russian immigrants who are paid to attend classes in basic English and Jewish culture and religious studies. 99 percent of those enrolled in the school's immigrant culture program received Pell Grants. In just the last 2 years, the Federal Government has spent $8 million so that 3,600 immigrants could attend Sara Schenirer classes in Jewish history in the basements of synagogues and community centers in Brooklyn and the Bronx. All of the immigrants are poor; many are elderly; some in their 70s and 80s. Many of the students that we were able to locate and interview admitted that they attended the classes because they are financial dependent on the several hundred dollars they receive from the school each semester to attend classes.

Last year this nonprofit, tax exempt school reported a net worth in excess of $2 million. It had investments totaling $1.2 million and spun off at a cost of over $800,000, a new tax exempt organization. Sara Schenirer's revenue for the fiscal year ending June 1992 was $3.2 million, almost all of which was Federal Pell Grant funds. Its administrators, a husband and wife team, took over $112,200 in cash compensation for the 1991-1992 school year. We discovered that while its enrollment of Pell Grants received mushroomed, expenses for educational materials and supplies decreased dramatically.

In 1989, the school spent $127,177 on education materials and supplies, but in 1992, when gross revenue reached $3.2 million, the school spent a paltry $60,188 on educational materials.1 According to the data of the Department of Education, the school's enrollment skyrocketed in the last couple of years from 51 students receiving Pell Grants in 1988-1989 to 2,102 in the 1992-1993 school year.

Like too many schools operating in the Federal student aid programs, Sara Schenirer Teachers Seminary is not successful because of its ability to thrive in a free market, instead it is profitable because of the Federal Pell Grant program. Would 5,000 students have attended this institution if they had to pay the tuition charged by Sara Schenirer? The answer is evident after reviewing the facts. The vast majority of the student body paid nothing, but instead were paid $200 a semester to attend classes.

Many people in New York's Russian community told the Staff that the people enrolled in these programs, do so because of the payments they receive to attend classes. None of the students we interviewed would be willing to pay to attend the classes and several said they would not bother enrolling if they were not paid to attend.

In 1992, aside from its $3.2 million in tuition revenue, the school reported income from only three other sources. They received about $43,000 in contributions. It received $33,000 from investment income. And it received $5,732 from the Department of Education which paid it to properly administer the Pell Grant programs. After all expenses, Sara Schenirer Teachers Seminary reported $1.3 million in excess revenue for the 1991-1992 school year.

1 See Appendix H to Staff statement on page 192.

Chairman NUNN. The Department of Education pays schools to administer the Pell Grant program?

Mr. BUCKLEY. Yes, Senator.

Chairman NUNN. Is that a normal fee?

Mr. BUCKLEY. To provide them with administrative costs because we wire the money into their accounts and they are to properly disburse it into their tuition accounts and to the students. And we reimburse, as far as I know, all schools that participate in Title IV program.

Tuition charged is $1,175 per semester, $25 less than the $1,200 maximum Pell Grant award per semester. The tuition fee to attend this federally-tax exempt school has very little to do with what it cost to educate, but has everything to do with the Federal student grant programs that its students are qualified to participate in. Sara Schenirer Teachers Seminary is truly a Government-sponsored enterprise with its profitable existence due to the funds made available by the Federal taxpayer for programs of dubious worth. The Staff reviewed the school's participation in the Federal student aid programs and the school initially applied for participation in 1974. We have already gone over the Federal criteria the school must meet, so I will not go over that again. But I will say that in our 1990 investigation of the Federal student aid programs, we found this gatekeeping function by the Department of Education to be ineffective and almost meaningless.

During this review, we found this to be true in the case of Sara Schenirer Teachers Seminary.1 Based on our review of this school's participation of the program, we made the following observations. First, the requirement for State licensing. There was recognition by the State and oversight provided by such a process was waived by the Department of Education. Sara Schenirer is a religious institution not regulated by the State of New York's Department of Education because the school is not recognized by the State as a degree-granting institution and because its wholly religious status, the State refused to license it.

Chairman NUNN. So you got the State of New York that would not license it and you have got the Federal Government pouring money into it?

Mr. BUCKLEY. That is correct. In May 1985, the New York State Education Department solely for the purpose of the school's application to continue participation in Federal student aid programs, authorized Sara Schenirer to provide programs beyond a secondary education. The State Department of Education did so at the U.S. Department of Education's request. It is not something they wanted to do. As a matter of fact, the correspondence files indicate that they were dragging their feet; they did not want to confer any recognition at all; but they issued a letter saying solely for Federal purposes, we will recognize you as an institution of post-secondary education.

Chairman NUNN. That was in 1985?

Mr. BUCKLEY. Yes, sir. When it applied for recognition in 1974, Sara Schenirer was not accredited, instead it certified that at least three accredited institutions accepted its students and academic

1 Exhibit No. 14 retained in Committee files.