The University of Phoenix, already grappling with declining enrollments and revenue, could be placed on probation by its accrediting agency.

That was the determination of a peer-review team from the Higher Learning Commission, which accredits more than 1,000 colleges and universities across 19 states, including Arizona State University and the University of Arizona. If placed on probation, University of Phoenix would still continue operations and maintain its accreditation. But analysts warned it could be a distraction for a company in transition while placing it at a competitive disadvantage.

The draft report recommends probation through the fall of 2014.

Why the University of Phoenix could be placed on probation is unclear. A Securities and Exchange Commission filing on Monday for Apollo Group, parent company for the University of Phoenix, said the Higher Learning Commission found there was not enough autonomy between the for-profit college and its parent company, but it did not provide any more detail.

Likewise, the Higher Learning Commission has issued a statement acknowledging the recommendation for probation, and outlining the next steps in the process: The University of Phoenix can respond to the draft report. A final decision about whether the university is placed on probation will be made in late June.

“While we plan to challenge and appeal the review team’s recommended sanctions, we also intend to work closely with HLC to achieve agreement and resolution,” Mark Brenner, Apollo Group’s chief of staff, said in a statement.

Apollo Group’s stock price fell about 4percent Monday to $17.83 a share.

The University of Phoenix is a wholly-owned subsidiary of Apollo Group, accounting for 90percent of its net revenue. In the SEC filing, Apollo Group maintained there was an appropriate relationship between the two entities.

“We believe that it is neither remarkable nor improper for a parent corporation to exercise appropriate influence over its wholly-owned subsidiary,” the filing says. “We note in this regard that the level of independence exercised by University of Phoenix relative to its parent, Apollo Group, has only increased since the prior reviews by HLC in 2000 and 2002 that specifically addressed and approved our governance structure.”

The possibility of probation comes as University of Phoenix, a behemoth in for-profit education, transitions its model more toward online learning. Year-over-year enrollment at University of Phoenix fell by 14.3percent to 319,700 in 2012, and revenue fell by about 10percent to $1.1billion, SEC filings show.

Apollo Group announced in October it would cut about 800 employees and shutter about 115 locations across the country. In December, the company’s founder, John G. Sperling, retired as executive chairman. His son, Peter V. Sperling, is chairman of the board.

During an earnings report in early January, Apollo Group CEO Gregory W. Cappelli warned that the Higher Learning Commission might put the University of Phoenix on notice.

This recommendation is much harsher, and will likely serve as a distraction and lead to more legal fees and administrative costs, said Peter Wahlstrom, an analyst for Morningstar.

“Long-term, it depends on if they get their act together to be brutally honest,” he said. “The way I think about it is now they have an additional set of hoops they need to jump through, and an additional set of questions they need to answer.”

The team visited 148 University of Phoenix campuses over three months, meeting with faculty, staff and students.

It also found areas of concern around graduation rates, sufficiency of doctorate programs, reliance on federal student financial aid, assessment of student learning, and documentation of credit-hour policies and practices in terms of learning outcomes. While these were areas of concern, they were not the basis for the probation recommendation, the SEC filing says.

Such probation recommendations happen occasionally, said Ronald Marx, dean of the University of Arizona’s College of Education. Marx noted that Princeton University once had to re-file an application for its accreditation.

“It might mean nothing depending on what the outcome of it is,” he said.

But being placed on probation would be a step toward potentially losing accreditation, he said. And the University of Phoenix needs accreditation in order for its students to receive federal grants and loans, which is the basis of its business model.

“Their business model is not based on people writing checks from their personal bank accounts,” he said.

The Higher Learning Commission also found another Apollo Group subsidiary, Western International University, is not in compliance with standards for governance, financial stability and student-learning assessment. It also recommended probation for Western International University.