Grand Canyon Education Inc. (LOPE) will be the subject of a U.S. Department of Education program review investigating the for-profit college's administration of federal student aid, the school disclosed in a filing with the Securities and Exchange Commission late Thursday.

The school derived about 83% of its revenue from federal funds in 2009, according to an analysis by BMO Capital Markets.

According to the SEC filing, Grand Canyon was notified on July 6 of the Education Department's intent to conduct a review.

Bill Jenkins, executive director of the school's office of institutional advancement, said the program review was "a normal course of review" and "is related to our growth over the last five years." He said the government agency last visited the school more than five years ago.

The Department of Education said it doesn't discuss ongoing reviews, but if there is a final determination letter, it will be made available to the public.

Program reviews aren't uncommon and can be conducted at any school that receives Title IV federal aid, but being the subject of one can weigh heavily on a school no matter the outcome. Reviews often drag out for months or even years with little or no communication from the Department of Education, Grand Canyon warned in its filing.

Shares of Grand Canyon were at $22.41 in after-hours trade after closing at $22.39, up 1.5%. The company's stock is up nearly 18% so far this year.

"If the [Department of Education] were to make significant findings of non-compliance in the final program review determination, it could have a material adverse effect on the Company's business, results of operations, cash flows, and financial position," Grand Canyon said in the SEC filing.

Other for-profit schools have been subjects of program reviews, too, as the Department of Education comes under pressure to ensure its loans are being used properly.

Corinthian Colleges Inc. (COCO) in May disclosed that it had received a program review report on its Everest College Phoenix and was conducting an investigation into the findings, some of which it disputed. The report found the school breached its fiduciary duty and made misrepresentations to students regarding its financial aid administration, according to an SEC filing. It will respond to the report, and then a final determination letter will be issued by the Department of Education.

More recently, Apollo Group. (APOL) announced that its University of Phoenix received the final determination linked to its February 2009 program review. The school had to post a $125 million letter of credit after the report cited the untimely return of some unearned funds. Apollo also made $660,000 in reimbursements in its second fiscal quarter.

Grand Canyon said in its filing that its policies and procedures are planned to comply with federal regulations and it would work to resolve any compliance issues, were any to be found.

-By Melissa Korn, Dow Jones Newswires; 212-416-2271; melissa.korn@dowjones.com
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