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University of Phoenix accreditation at risk

PHOENIX (AP) -- Apollo Group Inc. said Monday that its accrediting body was considering placing the company's University of Phoenix subsidiary on probation because of alleged deficiencies involving its administrative structure and governance.

Shares of the for-profit education company dropped 4 percent to the lowest level in 12 months.

Apollo Group said in a Securities and Exchange Commission filing that the Higher Learning Commission, its accrediting body, notified the company Friday that a draft report found that the university wasn't in compliance with certain accreditation criteria. A review team for the commission concluded that the university "has insufficient autonomy relative to its parent corporation," Apollo said in the filing.

Apollo said on Jan. 8 that the commission told the university that a draft review report would include a recommendation that the university be placed on "notice status," a lesser sanction than probation. Apollo said Monday that the recommendation had been changed to probation. If the commission approves that recommendation, the probationary period would last through the fall of 2014.

Accreditation is necessary for the company to continue to be eligible for student loans, which make up much of its revenue.

Apollo said it plans to appeal the probation recommendation. There will be no change in the accreditation status of the university until the review and appeals are complete. The commission expects the appeals process will be complete by the end of June, Apollo Group said.

The company said in its filing that it believes "that it is neither remarkable nor improper for a parent corporation to exercise appropriate influence over its wholly owned subsidiary."

The commission also notified Apollo Group that a smaller subsidiary, Western International University, was found out of compliance with certain criteria. The Higher Learning Commission's review team recommended that Western International also be placed on probation. The draft report cited issues including the university's autonomy relative to the parent company, as well institutional financial stability and student learning assessment. Apollo Group intends to appeal that probation recommendation as well.

Shares of Apollo Group fell 75 cents to close at $17.83, after sinking as low as $17.81, a new 52-week low. In after-hours trading, the stock lost 43 cents to $17.40. It has fallen more than 60 percent over the last 12 months.