Description: Tags: Sar34
Description: Tags: Sar34
Description: Tags: Sar34
Department of Education
Office of Inspector General
Semiannual Report
to Congress
No. 34
I am pleased to submit this semiannual report on the activities of the Department's Office of Inspector General (OIG) for
the six-month period ending March 31, 1997. Submission of this report is in accordance with section 5 of the Inspector
General Act of 1978 (Public Law 95-452, as amended). The act requires that you transmit this report, along with any
comments you may wish to make, to the appropriate congressional committees and subcommittees.
This period, the OIG continued to fulfill its statutory mandate through a carefully designed program of audits and reviews
intended to help Education Department (ED) managers administer their programs and carry out their oversight
responsibilities more efficiently, nore effectively and more economically. Our efforts have produced reports and
prosecutive actions that have brought important issues to the attention of ED managers and recommended ways to resolve
them or to prevent their recurrence.
I look forward to continuing to work with you and Department managers as we seek to ensure the efficiency, effectiveness
and integrity of Education Department programs and operations.
Sincerely,
Thomas R. Bloom
Inspector General's
Message to Congress
The Office of Inspector General (OIG) has continued to meet the challenge to remain effective by finding more innovative
ways to deploy our resources and conduct our audit, investigation and management review efforts. One key shift in
emphasis and approach has been to focus our efforts on program and operations issues and systemic problems that are
larger in scope than the traditional single-entity focus. This front-end work will lead to more effective programs with built-
in controls and self-enforcing mechanisms to prevent fraud, waste and abuse by all participants, rather than rely on "after-
the-fact" detection at those few participants we have the opportunity to review.
These carefully focused, yet at the same time more broadly encompassing efforts have already begun to bear fruit. Audits
issued during the reporting period have, for example, identified problems in controls over the student eligibility process,
and recommended improvements which we believe could greatly reduce Pell Grant overawards; and found that accrediting
agencies could strengthen their role as gatekeepers of the student financial assistance programs if their on-site monitoring
of member institutions was improved. In the investigative arena, we are focusing about eighty-five percent of our efforts
on complex investigations of institutions, including postsecondary schools, lenders, guaranty agencies and servicers. Such
efforts are more complex and more high-profile than investigations of individual student recipients. They also tend to gen-
erate more publicity, which in turn helps deter fraud. Through management reviews, we are focusing on identifying
administrative operations' work processes in need of improvement and generating possible solutions.
In the continuing pursuit of programmatic and operational economy, efficiency and effectiveness, the OIG is but one link,
if a critical one, in a chain that includes Education Department (ED) managers, the Congress, and participants in ED
programs. We look forward to continuing to work with the Congress and the Department to foster ever greater financial
and systemic improvements in federally funded education programs.
Thomas R. Bloom
CONTENTS
This period, the Office of Inspector General (OIG) continued to meet its responsibilities by conducting
audits and reviews that add value by recommending improvements to Education Department (ED)
programs and operations. We also provided advice and assistance to ED managers which we believe will
help them in administering their programs and in carrying out their oversight responsibilities. Highlights
of our efforts follow.
POSTSECONDARY EDUCATION
We have continued our efforts to assess system controls to assure that only eligible students obtain student
financial assistance and to evaluate management controls. Among our audit efforts in the postsecondary
education arena were an audit that identified $109 million of overawarded Pell grants, a study of the impact
of "ability-to-benefit" students on student loan-default and graduation rates, and a series of audits of schools
participating in the Direct Loan program. Our investigative efforts have continued to identity individuals,
including institutional officials, who have perpetrated a variety of schemes enabling them to fraudulently
obtain student financial assistance (SFA) funds. Highlights of these efforts follow.
IRS/VA match identifies $109 million to be veterans, resulting in $1.9 million in Pell
in Pell overawards overawards (see Abstract 1, “Significant Audits
and Audit-Related Activities”).
This period we issued an audit report which
disclosed that approximately $109 million in Pell
Enrollment of ATB students
grants had been overawarded because students
failed to report or underreported their income. We completed a study on the impact which the
We recommended that the Department be enrollment of ability-to-benefit (ATB) students
permitted to verify with the Internal Revenue has on the student loan-default and graduation
Service (IRS) the income reported by students on rates for a sample of proprietary and vocational
the Free Application for Student Aid (FAFSA) schools. We found that the default rate for
and verify the reported veterans status with the students attending schools that admit ATB stu-
Veterans Administration. These two elements dents was twice that of students who attended
are critical in calculating the expected family schools that did not admit ATB students. In
contribution needed to compute and award addition, the student-loan default rate increased
student aid. significantly once the percentage of ATB students
exceeded 20 percent of enrollment. The
Based upon our match with IRS returns of graduation rate for ATB students, meanwhile,
FAFSAs for over two million students who were was only 53 percent, compared with 69 percent
awarded Pell grants, we found that for award for non-ATB students.
year 1995-96, at least 102,000 students were
overawarded approximately $109 million in Pell Based on the data obtained from our study, we
grants because they failed to report or concluded that schools that admit ATB stu-
underreported their income. In addition, we dents placed SFA funds at a higher risk than
found that 1,200 Pell recipients falsely claimed schools that did not admit ATB students. We
defined risk as the likelihood that a student will problems with accurate loan records and rec-
drop out before graduation and/or default on an onciliation problems. Our summary report will be
SFA loan. issued in the next reporting period.
We suggested that the Congress and the De-
partment consider statutory changes to further Other SFA-entity audits
reduce the percentage, or eliminate ATB students Our audits found that guaranty agencies im-
from a school's enrollment count for purposes of properly retained or had not refunded over $6
participation in SFA programs. We also million relating to overcharges to the Federal
suggested other alternatives to safe-guard the Family Education Loan program (FFELP) for
SFA funds if the ATB percentages remain operational costs of state programs, excess
constant, such as limiting the amount of SFA collection costs as a result of federal consoli-
funds given to schools that admit high dation loan payoffs, and unpaid advances due the
percentages of ATB students. (See Abstract 1, Department. In addition, auditors found over
“Significant Audits and Audit-Related Activi- $11 million in questioned and unsupported costs
ties”.) relating to lack of compliance with applicable
federal requirements for administering SFA
Direct Loan school audits program funds.
This period we completed 14 Direct Loan pro- We recommended that these amounts be re-
gram school reviews as part of our National covered or returned to the program for use in
Direct Loan Schools Audit. We issued individual furthering the Title IV programs. These audits
reports on each school identifying issues such as are being resolved by the Department (see
student status reporting deficiencies, Abstract 1, “Significant Audits and Audit-
Related Activities”).
Investigative efforts
We are now focusing about eighty-five percent of our investigative efforts on complex investigations,
mainly involving institutions, including postsecondary schools, lenders, guaranty agencies and servicers.
We are also continuing to devote some resources to investigating the most egregious allegations involving
individuals who have engaged in complex schemes to defraud the SFA programs.
Embezzlement of SFA funds by In another case, the accounting manager and vice
school officials president for business affairs at Ogalala Lakota
College, Rapid City, South Dakota, was charged,
OIG investigations have developed evidence that
along with four other individuals, in a 125-count
has led to the indictment of proprietary-school
indictment after investigators found evidence that
owners and officials who used their positions to
a total of $2.6 million dollars in federal funds had
defraud the Department's SFA programs. This
been embezzled from the school.
period, a federal grand jury returned a 15-count
indictment against the owner of Revell Training
False claims of medical-school
Center, Chicago and Melrose Park, Illinois, and
the center's operations manager, alleging a attendance
scheme to defraud the Department of Education In the last several years, OIG investigations have
and banks of approximately $936,000. resulted in the federal prosecution of individuals
Investigators found evidence that the two who defrauded the Federal Family Education
officials caused student loan checks to be issued Loan Program (FFELP) by claiming to have
for ineligible students, retained and negotiated attended foreign medical schools. In the Eastern
the checks, and used the money for improper District of New York, one individual was found
purposes. guilty of filing 27 falsified FFELP applications
using 14 identities for claimed attendance at
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medical schools in the Philippines (Semiannual cial Security numbers), prior student loan in-
Report No. 29, page 27; and No. 30, page 35). debtedness, and foreign-school enrollment status.
In another case, an individual pled guilty in the We are continuing our efforts to identify and
Southern District of New York to fraud in investigate FFELP borrowers who have received
connection with the submission of FFELP funds by falsely claiming foreign school
applications for claimed attendance at various enrollment, and we have initiated a number of
Caribbean medical schools. This individual investigations targeting suspected individuals.
applied for approximately $1 million in loan Our efforts are concentrated on FFELP activi-ty
funds and actually received about $450,000 at foreign medical schools, since we believe this
(Semiannual Report No. 30, pages 31-2; and No. is a high-risk area and there is a potential for
31, page 23). In these cases, the subjects used substantial loss in this area. More important, in
various guaranty agencies and made multiple the near future, we anticipate providing the
false statements regarding their identities (i.e., Department with our recommendations for
names and So corrective actions with respect to the abuses
identified by our investigations.
For a look at some of the most significant OIG investigative cases of the reporting period, see Appendix
3, "Significant Prosecutive Actions Resulting from OIG Investigations."
DEPARTMENTAL OPERATIONS
Our efforts during the period to assist ED managers in assuring the efficiency and effectiveness of
Department operations and programs were wide-ranging and significant in impact.
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Management’s goal is to have sufficient reliable 1997. The audit of the FY 1996 financial
data by May 1997 to support an opinion on the statements is in process, with an anticipated
FY 1996 financial statements in August reporting date of August 1997.
Management reviews
As noted in our previous semiannual report (Semiannual Report No. 33, page 4), we have begun working
in partnership with ED managers, conducting management reviews aimed at identifying opportunities to
improve work processes and to correct systemic problems. To date, our work with the Office of
Management and the Office of the Chief Information Officer has resulted in actions to improve
telecommunications services, motor-pool operations, computer-equipment acquisitions and inventories,
and property-pass procedures.
REAUTHORIZATION
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Reauthorization of the semiannual period, we plan to issue reports
Rehabilitation Act covering factors that contributed to one state’s
high rate of successful case closures, and the
This period, the OIG continued work on a series
reasonableness of the allocation formula. As part
of audits designed to assist the Department and
of our work on reauthorization, we will be
Congress in the upcoming reauthorization of the
issuing a composite report summarizing the
Rehabilitation Act. During the next
results of our work.
CONGRESSIONAL TESTIMONY
Our audit quality efforts this period were designed both to improve the quality of audits of ED programs
and to improve education programs and student performance through better use of audits, monitoring and
technical assistance. The results of our efforts are highlighted below and presented in greater detail in
Abstract 1, “Significant Audits and Audit-Related Activities.”
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Cooperative Audit Resolution and Oversight Initiative
As reported in previous Semiannual Reports, we have been working with an intradepartmental team on
a wide-ranging project known as the Cooperative Audit Resolution and Oversight Initiative, or CAROI.
Other offices participating in the CAROI initiative include the Office of Elementary and Secondary
Education, the Office of Vocational and Adult Education, the Office of the General Counsel, and the Office
of the Chief Financial Officer.
CAROI team accomplishments The CAROI team was also involved in the De-
partment's Data Coordination group. The Data
The CAROI team met with officials from state
Coordination group is considering more effective
and local education agencies to discuss admin-
and efficient approaches to data collection,
istrative issues and questions regarding federal
coordination and usage. For additional
funds and flexibility under IASA. The CAROI
information on the CAROI team's activities and
team and ED program officials are compiling the
accomplishments, see Abstract 1, “Significant
questions and answers from these discussions for
Audits and Audit-Related Activities”.
national distribution.
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P.L. 95-452 REPORTING REQUIREMENTS
SECTIONS 5(a)(5) and 6(b)(2) Summary of Instances Where Information Was Refused
or Not Provided*
SECTION 5(a)(10) Summary of Unresolved Audit Reports Issued Prior to the Beginning
of the Reporting Period
• Unresolved Reports Issued Prior to April 1, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
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Abstract 1
NOTE: The amounts reported by auditors for the reports described below
are subject to further review and final determination by Department officials.
Our review found that, for award year 1995-96, at least 102,000 students were overawarded approximately $109 million
in federal Pell grants because they either failed to report or underreported their income on their student aid applications.
Although ED requires institutions to verify key eligibility information reported by selected students, the process cannot detect
students who intentionally underreport their income and provide false documentation.
We also found that almost 1,200 students improved their Pell Grant eligibility by falsely claiming to be veterans, thereby
receiving over $1.9 million in Pell grants which they were not entitled to receive.
We recommended that the Office of Postsecondary Education (OPE) verify applicant-reported income against Internal
Revenue Service computer records and initiate a data matching agreement with the Department of Veterans Affairs to verify
the veteran status of individuals who claim to be veterans.
Q Q Q
We issued a memorandum to the Assistant Secretary for Postsecondary Education transmitting information derived from our
analysis of loan default rates and graduation rates for students who enrolled in selected proprietary schools under the ability-
to-benefit (ATB) provision. Our analysis showed that the loan default rate for students who attended ATB schools was twice
that of students who attended non-ATB schools, and that the rate jumped once schools began admitting ATB students. We
also found that students with high school credentials who attended ATB schools had a loan default rate that was 75% higher
than the rate for students with high school credentials who attended non-ATB schools.
We offered several suggestions for the Department's consideration to address the issues identified in our report.
Q Q Q
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SIGNIFICANT AUDIT ACTIVITIES
Q Q Q
Our review found that accrediting agencies could strengthen their role as gatekeepers of the student financial assistance
programs if their on-site monitoring of member institutions was improved. We found that on-site visits by some of the six
agencies reviewed were not always effective because they were infrequent, of short duration, and did not always disclose
existing problems at institutions.
We recommended that the Department provide additional guidance to accrediting agencies to improve the effectiveness of
their on-site visits, and that more frequent and extensive on-site visits be performed at high-risk institutions. We also
recommended that the Department develop procedures to ensure that accrediting agencies are notified of serious deficiencies
disclosed in program reviews, audits, and other oversight activities.
The Department concurred with our recommendations, although it did not always agree with our conclusions. The
Department's response identified actions already taken to address the recommendations, as well as additional actions planned.
Q Q Q
Our review found that the California Student Aid Commission (CSAC) had not corrected past overcharges to the FFEL
program that resulted in improper disbursements from the Guaranty Loan Reserve Fund. Information developed through
CSAC's 1995 workload study disclosed that CSAC had significantly overcharged the Guaranty Loan Reserve Fund for
operational costs that benefited the CAL-Grant and other state programs. We estimate that overcharges were about $2.7
million in fiscal year 1994-95 and about $2.3 million in fiscal year 1993-94.
We recommended that OPE require CSAC to reimburse the Guaranty Loan Reserve Fund for these funds. CSAC officials
concurred with our finding and agreed to reimburse the Guaranty Loan Reserve Fund for the overcharges.
Q Q Q
The audit disclosed that between June 1993 and October 1995, the Kentucky Higher Education Assistance Authority
(KHEAA) reported to ED payoffs from Federal Consolidated Loans (FCLs) as collections from borrowers. This reporting
method resulted in KHEAA receiving 30 or 27 percent of the payoffs, which is more than the maximum 18.5 percent allowed
for collection costs.
In November 1995, KHEAA started properly reporting the FCL payoffs. However, collection costs were not assessed on
all loans and KHEAA retained the full 18.5 percent on these loans. As a result, KHEAA received $1,263,251 in excess
post-default collection costs to which it was not entitled. We recommended that OPE instruct KHEAA to:
< refund $1,263,251 of excess collection costs retained as a result of FCL payoffs;
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SIGNIFICANT AUDIT ACTIVITIES
< assess collection costs of up to 18.5 percent of loan principal and accrued interest on all defaulted loan accounts prior
to certifying a consolidation payoff amount; and
< report all assessed collection costs on Attachment A of ED Form 1189, "Suggested Format for Reporting Defaulted
Consolidation Loan Payoffs."
KHEAA officials disagreed with the finding because they believe that the report is based on a misreading of the Higher
Education Act and regulations.
Q Q Q
Our review found that the Delaware Higher Education Commission/Delaware Higher Education Loan Program
(DHEC/DHELP) had not repaid $304,415 in federal advances that were to have been repaid in fiscal years 1988 and 1989.
We recommended that ED ensure that:
< all receivables and payables are properly recorded prior to the transfer of the reserve fund;
< arrangements have been made to repay the $304,415 in federal advances due to ED; and
< arrangements have been made to repay $139,273 which DHEC/DHELP has agreed to repay as a result of a prior audit.
We also recommended that ED ensure that :
< furniture and equipment purchased mostly with federal funds at a cost of $32,479 is accounted for, or disposed of in
a manner acceptable to ED; and
< a final accounting is made for the $200,000 which DHEC/DHELP is being allowed to retain for final closing costs.
Q Q Q
Our audit disclosed that Roxbury Community College, Roxbury Crossing, Massachusetts, improperly disbursed $2.2 million
in SFA funds to students attending an ineligible English as a second language (ESL) program during the period July 1, 1993
through June 30, 1995. Roxbury classified these students as ESL majors on school transcripts but contends the students were
liberal-arts majors. Evidence gathered clearly demonstrates that the majority of students enrolled for the sole purpose of
taking ESL courses.
We recommended that Roxbury repay the $2.2 million and identify all Title IV funds disbursed to ineligible students for the
1992/93, 1994/95 (because the audit scope does not include new students enrolled in 1994/95) and 1995/96 award years.
Q Q Q
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SIGNIFICANT AUDIT ACTIVITIES
Q Q Q
Our close-out audit of Chicago Institute of Technology (CIT), Chicago, Illinois, was initiated to determine whether CIT was
in compliance with applicable laws and regulations governing the operation of the SFA programs. Our purpose was also
to determine whether CIT was entitled to the advances and student loan proceeds it had received and the reimbursement for
claims it submitted for the period July 1, 1988 through June 30, 1991.
Our review determined that CIT did not administer the SFA programs according to applicable laws and regulations, and
identified about $10.1 million of unearned SFA funds. We found that CIT disbursed funds on behalf of students who did
not attend the school or were otherwise not eligible for assistance. Accordingly, CIT is not entitled to receive payment for
$1,320,054 in SFA reimbursement claims that it submitted to the Department of Education.
We recommended that ED seek to recover the unearned balance of $8,759,385 ($10,079,439 less $1,320,05) received by
CIT.
Q Q Q
Our audit at Houston Community College System, Houston, Texas, disclosed deficiencies in the college's administration of
Title IV funds for students enrolled in its aviation maintenance technology program. We found that the college awarded
subsidized Stafford loans based on an academic year of 900 clock hours although it had defined the program's academic year
as 1,680 hours. In addition, some students were disbursed second-year loan proceeds even though they had not successfully
completed their first academic year. As a result, about $210,000 in excess loan funds was disbursed to students enrolled
during the period audited.
We also found that the college did not always properly compute or make pro rata refunds for students who withdrew during
the period January 1, 1993 through June 30, 1995. As a result, the college improperly retained about $7,800 in SFA funds.
We recommended that the college:
< purchase from current loan holders the $210,000 in loan funds inappropriately disbursed to the students;
< reimburse ED for the interest and special allowances paid on the excess loan funds;
< consider a more centralized approach for the financial aid process whereby packaging and review are performed on
an overall college basis rather than at the individual campuses;
< refund the $7,800 in SFA funds owed for those students who withdrew from the program prior to completing the
course; and
< establish appropriate procedures to ensure that refunds are properly computed and paid in accordance with program
regulations.
Q Q Q
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SIGNIFICANT AUDIT ACTIVITIES
Q Q Q
Our audit of Radcliffe College, Cambridge, Massachusetts, identified the following weaknesses:
< Some promissory notes had the wrong loan identification numbers.
< Some students studying abroad were incorrectly identified as having withdrawn.
< Access to the student data bases needed further restrictions.
< Written policies and procedures needed to be developed for the Direct Loan program.
The school has taken actions or has planned actions that generally should correct the cited conditions. However, the report
recommends additional measures that Radcliffe should take to improve its administration of the Direct Loan program.
Q Q Q
Our audit found that Burdett School, a second-year Direct Loan program participant located in Boston, Massachusetts,
initially had some difficulties in complying with all program requirements. However, the school did demonstrate substantial
progress during 1996 and was addressing most shortcomings. The audit noted that the school:
< input incorrect school code data on 36 promissory notes;
< did not return excess cash within three days nor report the cash draws on EDExpress in a timely fashion;
< did not report the correct disbursement dates to the servicer;
< needed to strengthen computer system controls;
< needed to develop written policies and procedures for the Direct Loan program;
< did not have a quality assurance program in place;
< did not properly process adjustments and cancellations, thus causing its Direct Loan cash balance to be overstated and
the borrowers’ accounts at the servicer to be misstated;
< had credit balances on its student accounts for longer than the 21 days allowed; and
< needed to follow up on reconciliation problems more expeditiously.
The school has taken or planned actions that generally should correct the cited conditions. However, the report recommends
additional measures that Burdett should take to improve its administration of the program.
Q Q Q
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SIGNIFICANT AUDIT ACTIVITIES
Q Q Q
Our audit disclosed of Fitchburg State College (FSC)'s administration of the Direct Loan program identified some
weaknesses related to:
< incorrect reporting of student status changes disbursement dates and adjustment/cancellation dates to the servicer;
< timely submission of refunds;
< lack of restriction to software access;
< lack of written policies and procedures; and
< need for the computer system to provide pertinent data on student accounts
Based on our observations, FSC encountered difficulties because its computer system was outdated. FSC agreed with some
of our findings and has already taken action on many of our recommendations.
Q Q Q
Our audit of the Philadelphia College of Pharmacy and Science's (PCPS), Philadelphia, Pennsylvania, administration of the
Direct Loan program identified the following weaknesses.
< PCPS was not always correctly reporting student enrollment status. Of 12 students tested with a change in enrollment
status, 2 had an enrollment status that differed from that on the servicer system.
< PCPS's records were not always consistent or accurate and did not always provide for a clear audit trail.
< PCPS did not have written policies or procedures for administering the Direct Loan program.
We recommended that PCPS:
< review its records and its internal Student Status Confirmation Report (SSCR) program specifications for extracting
student data to ensure that correct enrollment status has been and will be reported for each student;
< review its records to determine whether any additional discrepancies exist among student loan balances and, if so,
make the appropriate corrections;
< reconcile student account, loan origination and general ledger disbursement data; and
< develop written policies and procedures for administering the Direct Loan program.
PCPS concurred with our findings and recommendations and has provided a corrective action plan addressing each issue.
Q Q Q
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SIGNIFICANT AUDIT ACTIVITIES
Q Q Q
Our audit of the administration of the Direct Loan program by CHI Institute (CHI), Southampton, Pennsylvania, identified
the following weaknesses.
< CHI did not always properly report student enrollment status changes. Of the 20 students tested with a change in
enrollment status, 4 had an enrollment status that differed from that on the servicer system.
< CHI did not establish a system of quality assurance with regard to its administration of the Direct Loan program.
< CHI did not have written policies or procedures for administering the Direct Loan pro
We recommended that CHI:
< review its records and ensure correct enrollment status data has been reported for each student;
< provide for a program of quality assurance; and
< develop written policies and procedures for administering the Direct Loan program.
CHI concurred with our findings and recommendations and has provided a corrective action plan addressing each issue.
Q Q Q
Our audit of Kean College’s (Kean) administration of the Direct Loan program identified the following weaknesses.
< Kean was not always correctly reporting student enrollment status changes.
< Subsequent to the audit period, Kean maintained an excess cash balance.
< Kean was not always maintaining and reporting accurate student loan information.
< Kean was not always transmitting and submitting for reconciliation, loan disbursements and adjustments in a timely
manner.
We recommended that Kean:
< review its records and ensure that correct enrollment status data has been reported for each student, and that staff
involved in the Student Status Confirmation Report process are properly trained;
< ensure that corrections are made for errors disclosed, and reimburse the Department for costs incurred in making
excess funds available to the school:
< review its records and immediately make any necessary corrections, and periodically reconcile its student account and
loan origination data;
< report and submit promptly for reconciliation, all transactions to the Department’s servicer; and
< improve its program for quality assurance to reduce inefficiencies in program administration.
Q Q Q
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SIGNIFICANT AUDIT ACTIVITIES
Q Q Q
The audit identified weaknesses related to the university's import of loan records from its mainframe system into EDExpress,
and EDExpress data security.
The auditors recommended that OPE instruct the institution to:
< perform quarterly reconciliations of disbursement data of its mainframe and EDExpress to ensure the accuracy and
completeness of loan data reported to the Loan Origination Center; and
< establish a new password for the EDExpress default user ID that would be known only to those individuals granted
appropriate security clearance to access all functions of the software.
In its response, the institution concurred with the audit results and stated that it has implemented the recommendations to
correct the weaknesses identified in the report.
Q Q Q
Our audit found that records in the Direct Loan data bases maintained by Earlham College do not always agree with the
records in the Direct Loan data base maintained by the Direct Loan servicer, Computer Data Systems, Inc., for students who
withdraw. Earlham College does not maintain records to support specific student status changes it reported to the servicer.
We also found that Earlham College cannot ensure that it properly records program transactions and protects the Direct Loan
data bases because administrative controls over the Direct Loan program are inadequate. As a result, Earlham College's
accounting records and Direct Loan data bases include inaccurate information. In addition, the lack of adequate security
controls could result in unauthorized access and/or tampering with the data bases.
We recommmended that OPE instruct Earlham College to:
< establish and implement notification procedures to ensure and document that it reports student status changes to the
servicer accurately and timely; and
< strengthen administrative controls.
Q Q Q
Our review found that Joliet Junior College, Joliet, Illinois, generally administered the Direct Loan program and accounted
for and expended Direct Loan funds in accordance with applicable program requirements. We did, however, identify
weaknesses related to:
< reporting of student status changes;
< reconciliation of data bases;
< internal controls; and
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SIGNIFICANT AUDIT ACTIVITIES
Q Q Q
We conducted an audit of the Court Reporting Institute of Dallas (CRID), Dallas, Texas, to determine whether it had
administered the Direct Loan program in accordance with applicable program requirements, including the proper accounting
for and expending of federal funds. We concluded that the school’s policies and procedures generally provided an adequate
level of assurance that it complied with program requirements.
We found three deficiencies which did not have a significant impact on the administration of the program.
Q Q Q
Our review disclosed that the University of Texas Medical Branch—Galveston (UTMB) generally complied with Direct
Loan program requirements. We identified three minor deficiencies, as follows:
< The account that maintains UTMB’s Direct Loan program funds did not include “Federal Funds” in its name, and
UTMB had not notified the bank that this account contained federal funds. When we made UTMB aware of this issue
during our visit, UTMB prepared a letter to the bank to make the bank aware that federal funds will be deposited into
this account.
< Our review of 50 student loan files disclosed that the actual disbursement dates per the Loan Origination Records
(LOR) and student accounts did not match for 48 of the 50 student loans tested. The disbursement dates provided to
the servicer were one to four days earlier than the actual dates the funds were delivered to the students.
< Three reconciliations were not timely during 1995-96, one due to software problems at the servicer and two due to
school delays. Because of problems with the Windows-based version of EDExpress and the installation by UTMB,
no reconciliations have been done for 1996-97.
We recommended procedural changes to address the identified deficiencies.
Q Q Q
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SIGNIFICANT AUDIT ACTIVITIES
Q Q Q
Our audit of the administration of the Direct Loan program by Topeka Technical College (TTC), Topeka, Kansas, identified
some weaknesses related to:
< the reconciliation process;
< discrepancies between EDExpress (the Department’s Direct Loan software) and student accounts;
< lack of electronic student status confirmation reports;
< system controls; and
< timely submissions of refunds.
TTC concurred with all of the findings and recommendations cited in the report and stated that it has taken appropriate action
to implement necessary changes to address the findings.
Q Q Q
We conducted an audit of the Academy of Art College, San Francisco, California, to determine whether it had administered
the Direct Loan program in accordance with applicable program requirements, including the proper accounting for and
expending of federal funds. Our substantive tests of the various areas reviewed did not identify any significant problems.
However, we noted a weakness in the internal controls relative to the school's general security measures with regard to
EDExpress software, data files and related equipment.
In its response to our draft report, the Academy detailed the specific actions the school has taken to correct the cited
weakness in its system. The specific actions, as presented in the school's response, should correct the problems noted in our
review.
Q Q Q
Our review at Marymount University, Arlington, Virginia, identified several audit issues related to Marymount's third-party
servicer, Datatel's mainframe system Colleague, which generates and tracks loan data; and EdTech's PC-based system
FEEDS, which transmits loan data and tracks status flags. We found that:
< communication between the two systems did not work as designed, resulting in the transmission of corrupted data to
the Department's servicer;
< attempts to correct the data and reconcile with the Department's servicer were hampered by reports from FEEDS that
contained insufficient information; and
< because of a change in procedure—from manual submittal of SSCR data to electronic submittal of the data— the
registrar's office did not always input a status change date into Colleague, resulting in inaccurate dates in the SSCR
and the disbursement of funds to students who were no longer in attendance. Fortunately, these disbursements were
subsequently corrected and accurate data was maintained, at times by manual intervention, in the student accounts
office.
< 17 =
SIGNIFICANT AUDIT ACTIVITIES
The Foundation for Children with AIDS, Inc. Had Few Controls
Over Allocating Costs to Federal Grants
ACN 01-60251 March 27, 1997
Our review found that the Foundation for Children with AIDS, Roxbury, Massachusetts, did not have an accounting system
that accurately allocated salaries and wages to ED’s grants. Because the Foundation inappropriately used budgeted figures
to charge individual grants, we could not determine whether $429,027 in salaries was charged to the correct grants.
Although the salary charged to grants equaled the total time worked, the Foundation’s timesheets did not support the time
worked on each individual grant.
Since the grants in question have been terminated, we determined that it would not be practical for us to establish harm and
concluded that no further action is required at this time. However, in the future, before making awards to the Foundation,
the Department should verify that the Foundation has in fact implemented an adequate accounting system to insure accurate
allocation of costs to individual grants.
Q Q Q
We performed an audit to assess the efforts of the Office of Special Education and Rehabilitative Services (OSERS) toward
coordination and collaboration among OSERS's three organizational components (the Office of Special Education Programs,
the Rehabilitation Services Administration, and the National Institute for Disability and Rehabilitation Research); OSERS's
organizational change initiatives; and OSERS's collection and use of data. We found that OSERS had made some
organizational changes, and undertaken actions to foster coordination and collaboration and improved collection and use of
data. However, we noted some remaining barriers to achieving coordination and collaboration, and actions that should be
taken to improve the collection and use of data.
To address the barriers and further enhance OSERS's ability to achieve its goals, we recommended that OSERS:
< assess coordination and collaboration efforts in the performance evaluation systems for managers and staff;
< review periodically the decision to maintain three distinct components within OSERS;
< develop a plan to address the loss of resources in the regional offices of the Rehabilitative Services Administration;
< develop a strategy for addressing duplicative planning and research functions within OSERS; and
< develop a strategic information plan.
Q Q Q
< 18 =
SIGNIFICANT AUDIT ACTIVITIES
Q Q Q
Q Q Q
Our review disclosed that the Community and Economic Development Association (CEDA) did not have adequate evidence
to support that it provided services to the required number of participants, based on the grant funds expended, in the 1993/94
and 1994/95 grant years. We also found that records were not maintained for each participant to document the services
provided, basis for eligibility and needs assessment, and that adequate staff were not available to ensure that approved grant
program objectives were met.
We recommended that ED instruct CEDA to refund $130,840 to the Department; develop and implement policies and
procedures to ensure that it maintains a file for each participant which adequately documents the services it provided, the
basis for its determination of eligibility, and its needs assessment; and ensure that adequate staff are available to meet the
program objectives.
’ Departmental Management ’
As part of our continuing work to assist ED in its development of the Education Department Central Automated Processing
System (EDCAPS), we conducted a security review of the UNIX operating system and Oracle database management system.
The objective of the review was to provide the EDCAPS development team with an independent assessment of security over
critical system processes. Detailed testing of system security tables identified a number of security exposures and limitations.
We recommended system enhancements for each exposure that the EDCAPS team can use to improve system controls.
Q Q Q
< 19 =
SIGNIFICANT AUDIT ACTIVITIES
#2: WORK WITH STATES TO RESOLVE OPEN AUDITS OR AUDITS UNDER APPEAL
During this period, CAROI finished the second Cooperative Audit Resolution pilot with the State of Washington. An
agreement between Washington and the Department was signed in early April. This agreement is unique because one
agreement resolves issues from two years of audits involving three entities within the State of Washington. Because the
Department has received a number of inquiries and requests from other states to be included in future cooperative
resolutions, during the next 12 months, CAROI will be concentrating on institutionalizing the processes within the
Department.
< 20 =
Abstract 2
Charles Roper, former executive director of the National Theater of the Deaf, was charged and pled guilty in federal court
to one count of misapplication of federal funds. The charge relates to Roper’s conversion in 1993 and 1994 of approximately
$105,000 in federal grant funds for his own personal use and the use of others.
The misuse of funds included improper expenditures in the form of cash advances and purchases of clothing, liquor,
vacations and restaurant meals. Roper executed the scheme through the fraudulent use of the Theater’s credit cards and bank
accounts. The National Theater of the Deaf is a non-profit organization receiving funds from ED’s Office of Special
Education and Rehabilitative Services (i.e., Media and Captioning Services for Individuals with Disabilities) for the purpose
of providing a theatrical experience for deaf audiences and for promoting an understanding of deafness.
Q Q Q
As part of the alleged scheme, IADE reportedly purchased millions of dollars in advertising through some of Los Angeles's
premier Spanish-speaking media outlets, encouraging Hispanics to attend IADE-sponsored orientation meetings or free
citizenship classes where attendees were then encouraged to complete applications for student financial aid. IADE processed
the applications and drew down a maximum first disbursement of Pell funds based on the applicants' anticipated enrollment.
IADE failed to refund Pell grants when applicants cancelled their enrollment or failed to attend any classes. In order to take
the second Pell Grant disbursement and preclude the appearance that a refund was due, Stofenmacher and Williams allegedly
< 21 =
SIGNIFICANT INVESTIGATIONS
caused IADE personnel to input false credit hours for the “phantom” students. In effect, this made it appear that the
“phantom” students graduated when in fact they had never attended a single class. Stofenmacher allegedly deposited the
Pell Grant checks for the “phantom” students into IADE’s operating account and then improperly converted the Pell Grant
funds to his own use and the use of his family. Stofenmacher fled to Argentina following the execution of a search warrant
at the IADE corporate office in March of 1995 by the OIG and the FBI, and remains a fugitive.
IADE operated six campuses and a corporate headquarters in the Los Angeles area, and one campus in Florida. From 1989,
until its failure in March of 1995, IADE received over $57,000,000 in Pell Grant funding.
Q Q Q
Q Q Q
A federal grand jury returned a 15-count indictment against George C. Tindall, owner of Revell Training Center, and
Carleton Lewis, the center's operations manager, alleging a scheme to defraud the Department of Education and banks of
approximately $936,000. As the result of a plea agreement reached with the United States Attorney's office, Tindall has
subsequently pled guilty to one count each of mail fraud and student financial aid fraud.
A joint investigation by ED/OIG and the Postal Inspection Service found evidence that from about July 1990 through April
1992, Tindall and Lewis participated in a scheme to defraud the U.S. Department of Education and two banks. According
to the indictment, Tindall and Lewis caused guaranteed student loan (GSL) and Supplemental Loans for Students (SLS)
checks to be issued for ineligible students, retained and negotiated the checks, and used the money for improper purposes.
Tindall and Lewis allegedly obtained GSL and SLS checks for students who never started the program or withdrew from
the school prior to the receipt and negotiation of the checks, then failed to return GSL and SLS funds for those students. In
< 22 =
SIGNIFICANT INVESTIGATIONS
addition, Tindall and Lewis allegedly instructed Revell employees not to complete GSL/SLS Notices of Guarantee and
Disclosure Statements, which would have included information about the students' enrollment status showing that the
students had never started classes or had dropped out of the program prior to the receipt of the checks.
Q Q Q
Q Q Q
Q Q Q
< 23 =
SIGNIFICANT INVESTIGATIONS
Q Q Q
Q Q Q
IKWAI F.O.R.C.E.
Oklahoma City, Oklahoma
SHIRLEY BROWN, director
Shirley Brown was sentenced in U.S. District Court for the Western District of Oklahoma, Oklahoma City, Oklahoma, to
4 months incarceration, 120 days home detention and 3 years probation, and was ordered to pay $34,718 in restitution to
ED after entering a plea of guilty to a one-count bill of information.
Brown was the director of IKWAI F.O.R.C.E., a Title VII and Indian Education project grantee in Oklahoma. Brown was
charged with making unlawful ATM withdrawals totaling $34,718 from IKWAI's Bank-One Oklahoma federal account.
A joint OIG/FBI investigation disclosed that in 1995, Brown had closed IKWAI F.O.R.C.E. without prior notice to its
employees or ED. Shortly thereafter, Brown allegedly removed all equipment and records to an unknown location. Our
investigation was initiated based on information from the Office of Bilingual Education and Minority Languages Affairs
advising OIG that IKWAI F.O.R.C.E. had closed its doors in December 1994. The grantee's projects were not scheduled
to be completed until June 30, 1995.
By January 9, 1995, IKWAI F.O.R.C.E. had withdrawn its entire allotment of funds for both projects. Of the funds
withdrawn, $187,000 is either unaccounted for and/or unearned. Brown admitted that she made more than $34,718 in ATM
cash withdrawals for her own personal use from IKWAI F.O.R.C.E.'s Bank-One Oklahoma City Federal account.
Q Q Q
< 24 =
SIGNIFICANT INVESTIGATIONS
Q Q Q
A dozen people were charged in Federal District Court, Central District of California, for their role in a massive tax-fraud
and student-loan-fraud scheme that allegedly operated out of a Los Angeles storefront and caused at least $1 million in losses.
Priscilla Ann Hamilton, the owner of Priscilla’s Professional Services, is accused of orchestrating the two major fraud
schemes.
An intensive multi-agency investigation uncovered evidence that Hamilton and others under her direction bribed a Social
Security Administration employee in order to obtain Social Security numbers (SSNs). The SSNs were then used to complete
tax returns and federal Parental Loans for Undergraduate Students (PLUS) applications. The scheme involved using the
fraudulently obtained SSN’s to complete and submit PLUS loan applications on behalf of individuals who were not attending
the college.
The ring used the school codes from the University of Southern California, Grambling State University, the University of
Houston, and many other well known universities, for the processing of student loans. Using the SSN’s and school codes,
the ring filed for about 29 PLUS loans. The loan proceeds were then mailed to Hamilton’s place of business and other “drop
boxes” throughout Los Angeles.
To date, six defendants have pled guilty to various charges for their role in the fraud scheme. Six others have been arrested
and are pending trial.
Q Q Q
< 25 =
SIGNIFICANT INVESTIGATIONS
Q Q Q
Q Q Q
Deborah Conrad
TREASURER AND FINANCIAL AID OFFICER
National Association of Veterans Programs Administrators
Clarkson College
Omaha, Nebraska
As the result of a joint FBI/OIG investigation, Deborah E. Conrad was indicted by a federal grand jury in the District of
Nebraska, on five counts of mail fraud, interstate transportation of falsely made and forged securities, student loan fraud and
wire fraud. According to the indictment, Conrad, while serving as treasurer of the National Association of Veterans Program
Administrators (NAVPA), improperly spent approximately $72,000 in NAVPA funds on personal purchases. The
indictment alleged that Conrad issued NAVPA checks bearing forged signatures and prepared falsified treasurer’s reports
that failed to disclose the improper expenditures. NAVPA receives its funding primarily from membership dues and revenue
generated by various NAVPA workshops. The dues and workshop fees are paid primarily out of Veterans Education
Outreach program funds provided to postsecondary institutions by ED.
The indictment also alleged that Conrad, while serving as the director of financial aid at Clarkson College in Omaha,
Nebraska, and Iowa Western Community College in Council Bluffs, Iowa, fraudulently received approximately $25,000 in
federally guaranteed student loan funds. The indictment alleged that, among other things, Conrad submitted falsified SFA
applications misrepresenting her enrollment status and eligibility to receive student loan funds. Conrad has pled not guilty
and is awaiting trial.
Q Q Q
Lamar S. Adams
Houston, Texas
Lamar S. Adams was indicted by the grand jury for the Southern District of Texas, Houston Division, Houston, Texas, on
five counts of mail fraud, five counts of student loan fraud, and one count of wire fraud. The total value of the violations
contained in the indictment is approximately $70,000. A joint OIG/FBI investigation developed evidence that, during the
period from August 1992 through May 1995, Adams submitted seven fraudulent PLUS loan applications totaling
approximately $120,000 to Texas Commerce Bank, Enterprise Bank (now Sterling Bank) and Houston National Bank, all
in Houston, Texas. The fraudulent applications contained Adams's deceased father's name and a false SSN in the spaces
reserved for borrower information, and variations of Adams's name and SSN in the student spaces, as well as a falsified name
of the school certifying official.
< 26 =
SIGNIFICANT INVESTIGATIONS
Q Q Q
Q Q Q
Q Q Q
Bettie Wesley
Little Rock, Arkansas
Bettie Wesley, a federal finance officer with the Arkansas State Department of Education, was sentenced to serve 12 months
in prison with 3 years supervised probation and ordered to make restitution of $20,808 and pay a $100 fine. Wesley had
earlier pled to an information in U.S. District Court, Eastern District of Arkansas, charging her with one count of
embezzlement and misuse of public funds.
A joint ED-OIG/FBI investigation was initiated on the basis on information provided by the Arkansas Legislative Joint
Auditors (ALJA). The ALJA did an audit which disclosed evidence that Wesley diverted, embezzled and/or misappropriated
federal funds totaling $76,000. The investigation found evidence that Wesley deposited various federal program funds into
at least eight different suspect bank accounts during the period from September 1992 through May 1995. It was discovered
that the suspect bank accounts belonged to the God’s House of Deliverance (GHOD) and World Wide Services, Inc. Wesley
is a member and past treasurer of GHOD.
< 27 =
SIGNIFICANT INVESTIGATIONS
To accomplish her scheme, Wesley submitted duplicate legitimate vendor invoices to the State of Arkansas Department of
Education disbursing officer. After the checks were disbursed by the state, Wesley intercepted the checks and deposited
those state checks, plus two federal treasury checks totaling more than $20,000, and various other misdirected checks into
the suspect accounts.
Q Q Q
Q Q Q
Q Q Q
< 28 =
SIGNIFICANT INVESTIGATIONS
An OIG investigation found evidence that Dickerson falsified her time-and-attendance records. Analysis of Dickerson’s
time-and-attendance records identified discrepancies between the amounts of leave recorded on the electronic time-and-
attendance reports submitted to the Denver payroll office, and the amounts of leave indicated on the forms filed at the
worksite. Dickerson altered the leave amounts submitted to Denver so that she would not be charged for 89 hours of leave
taken. Dickerson confessed to submitting fraudulent records for three pay periods during FY 1996 resulting in the payment
of federal monies for work not performed.
Q Q Q
< 29 =
SIGNIFICANT INVESTIGATIONS
These guilty pleas and plea agreements resulted from a three-count indictment that charged the defendants with engaging
in a scheme to defraud the Department of Education by concealing from PSI’s accrediting agency and other regulatory bodies
the high rate of student withdrawals at PSI schools. The indictment alleged that the defendants engaged in this scheme to
prevent the PSI schools from losing their accreditation and consequently, the schools’ eligibility to receive Pell grants and
federally insured loans. The scheme included the use of improper recruiting practices, ability-to-benefit testing irregularities,
concealment of documents from oversight bodies, and submission of false reports. During the time period charged in the
indictment, the schools received in excess of $140 million of Title IV funds. PSI was a publicly traded corporation that
owned and operated proprietary schools in Ohio, New York, Michigan, Indiana, Florida, North Carolina, Pennsylvania,
Maryland and Washington, D.C. (Semiannual Report No. 33, p. 17)
Q Q Q
California Institute
Long Beach, California
RONALD VAN AVERY, owner
Ronald Van Avery, owner and operator of California Institute (CI), was found guilty by a federal jury in Los Angeles,
California, of five counts of wire fraud and two counts of false statements arising from a scheme that defrauded the
Department of Education of at least $6.3 million. Avery retained guaranteed student loans that were required to be returned
to commercial lenders because the students had not completed their courses of study at CI. Avery misstated CI’s financial
status and performance by causing the preparation of false financial statements that either wholly omitted the refund liabilities
or drastically understated them. Avery fraudulently retained CI’s eligibility with the Department by making false statements
to accreditation commissions, guaranty agencies and CPAs.
According to evidence presented at the trial, Avery recruited students from such locations as homeless shelters, un-
employment offices and public housing projects, then retained the proceeds of the student aid for which they invariably
applied. When students dropped out, Avery kept the loan proceeds which he was required by law to refund. During trial,
nine former students testified that Avery’s actions denied them access to further student aid, tarnished their credit histories,
and caused extreme financial hardship. Avery used the millions of dollars to maintain an expensive and luxurious lifestyle,
purchasing and improving several parcels of real property, purchasing luxury cars, expensive jewelry, vacations, clothing,
and other personal items, and making significant investments. (Semiannual Report No. 30, page 27)
Q Q Q
< 30 =
SIGNIFICANT INVESTIGATIONS
Investigators determined that Walker never relinquished control of NIE, continuing to sign checks, approve refunds and
exercise substantial control over the fiscal and financial affairs of the school. As a result of the misrepresentations to the
Department, NIE continued to receive SFA funds from March 1994 until March 1996, and in fact received $574,000 of Title
IV funds during this period. Walker pled guilty to obtaining these SFA funds by fraud. The defendant also pled guilty to
misapplying refunds for students who had withdrawn or graduated from the school. Acknowledging Walker's inability to
pay full restitution, the sentencing judge ordered a $30,200 payment on the bank fraud count, and a $150 special assessment.
(Semiannual Report No. 33, page 17)
Q Q Q
Valerie Carr
SAWYER COLLEGE
Hammond, Indiana
Valerie Carr, an employee at Sawyer College, Hammond, Indiana, was sentenced to 18 months of incarceration and ordered
to pay restitution of $468,770 after being found guilty of one count of embezzlement of student financial aid funds. The
embezzled funds included guarantee student loans totaling $143,460, Pell grants totaling $115,116 and Perkins loans totaling
$34,119. The remaining funds included State of Indiana aid, personal checks, cash, private employer payments and private
scholarships.
Carr, an administrative assistant at Sawyer College, was responsible for processing incoming students, ordering books for
the college, receiving and depositing college funds (including student aid checks) into the school’s operation account, and
maintaining the books and records. Our investigation determined that for approximately two years Carr, without
authorization from the school, cashed checks payable to Sawyer College, including student aid checks, and kept the cash for
her own use. (Semiannual Report No. 33, page 19)
Q Q Q
Q Q Q
< 31 =
SIGNIFICANT INVESTIGATIONS
Q Q Q
Elissa R. Kurland
Fort Myers, Florida
Elissa R. Kurland, attorney and former treasurer of the Florida Future Business Leaders of America (FBLA)/Phi Beta Lamda
Association and Foundation, Inc., was sentenced in U.S. District Court for the Southern District of Florida to 18 months
incarceration, followed by a supervised probation period of 3 years. Kurland was also ordered to immediately start making
full restitution of the balance owed to FBLA for $69,176.
The OIG investigation disclosed that Kurland embezzled a total of $110,637 from FBLA through a scheme of altering payee
names on FBLA checks to pay for personal expenses (i.e, travel to a beauty parlor in New York and the purchase of jewelry).
In some instances, Kurland deposited the checks into her personal account. As the treasurer for FBLA, Kurland had access
to all the foundation’s bank accounts, and she performed monthly reconciliations. FBLA receives funding from ED through
the Carl D. Perkins Vocational Act.
As a result of her conviction, Kurland surrendered her license to practice law in the state of Florida. A referral for
disbarment will be made to the Florida Board of Accountancy. This was a joint investigation by ED/OIG, IRS and the
Florida Department of Law Enforcement.
Q Q Q
Q Q Q
< 32 =
Abstract 3
Q Q Q
<33=
RECOMMENDATIONS DESCRIBED IN PREVIOUS SEMIANNUAL REPORTS
ON WHICH CORRECTIVE ACTION HAS NOT BEEN COMPLETED
Section 5(a)(3) of the Inspector General Act requires a listing of each report resolved before the commencement of the reporting period for which management
has not completed corrective action. The reports listed below are OIG internal and nationwide audit reports and management improvement reports.
TOTAL SEMIANNUAL
REPORT DATE MONETARY REPORT
NUMBER AUDITEE/TITLE RESOLVED FINDINGS NO. PAGE
11-20202 CHANGES TO IMPACT AID PROGRAMS' SITE REVIEW PROCESS SHOULD IMPROVE EFFICIENCY AND 09/30/94 4,382,000 26 85
ASSURE BETTER USE OF PROGRAM FUNDS
11-90050 ACCREDITING AGENCY RECOGNITION PROCESS DOES NOT SERVE AS AN EFFECTIVE CONTROL IN 06/30/91 * 22 5
DETERMINING THE RELIABILITY OF AGENCIES THAT ACCREDIT NUMEROUS PROBLEM SCHOOLS
93-02** ED SHOULD PROHIBIT CONFLICTS OF INTEREST BETWEEN GUARANTY AGENCIES AND AFFILIATED 06/30/93 * 26 86
ORGANIZATIONS
11-00010 OFFICE OF STUDENT FINANCIAL ASSISTANCE DID NOT ASSURE THAT ALL INSTITUTIONS SUBMITTED 09/30/93 33,800,000 24 63
AUDIT REPORTS OR THAT IT RECOVERED ALL MISSPENT FUNDS
11-90040 THE INSTITUTIONAL ELIGIBILITY PROCESS DOES NOT PROVIDE ADEQUATE ASSURANCE THAT ONLY 09/30/93 482,000 22 6
ELIGIBLE SCHOOLS PARTICIPATE IN THE TITLE IV PROGRAMS
92-05** ED NEEDS TO STRENGTHEN STUDENT LOAN CURE PROCEDURES 09/30/93 154,000,000 24 12
92-10** STRICTER STANDARDS NEEDED FOR GRANTING OF FORBEARANCES 09/30/93 * 25 3
92-13** ED NEEDS TO CHANGE THE LEGISLATIVE DEFINITION OF LOANS IN REPAYMENT 01/31/94 * 25 5
93-07** THE SECRETARY'S DEFAULT REDUCTION INITIATIVE—AN ALTERNATIVE APPROACH TO IMPLEMENTING 03/31/94 * 27 18
SANCTIONS
05-20075 EFFECTIVENESS OF THE REGIONAL INSTITUTIONAL REVIEW BRANCHES' MONITORING OF INSTITUTIONS 08/31/94 * 28 19
PARTICIPATING IN THE STUDENT FINANCIAL ASSISTANCE PROGRAMS
17-30302 FINANCIAL AUDIT: FEDERAL FAMILY EDUCATION LOAN PROGRAM'S FINANCIAL STATEMENTS FOR 10/31/94 * 29 16
FISCAL YEARS 1993 AND 1992
11-30001 INCONSISTENT INSTITUTIONAL PELL GRANT REPORTING RESULTS IN SIGNIFICANT EXPENDITURE 07/31/95 * 29 15
DISCREPANCIES
04-40100 HELPING TO ASSURE EQUALIZED EDUCATIONAL OPPORTUNITIES WITH HEA, TITLE III INSTITUTIONAL 08/31/95 * 31 11
AID FUNDS—GLOBAL PERFORMANCE MEASURES NEEDED
17-30305 ANNUAL INTEREST GRANTS: IMPROVING THE PROCESS FOR PAYING THE REMAINING GRANTS 02/29/96 5,025,272 31 14
11-40001 FOLLOW-UP REVIEW ON SELECTED GATEKEEPING OPERATIONS 02/29/96 * 31 13
05-40005 ED NEEDS TO CONSIDER IMPLEMENTING CHANGES FOR MONITORING LENDERS AND SERVICERS 03/31/96 * 32 10
05-50008 EFFECTIVENESS AND EFFICIENCY OF DEBT COLLECTION SERVICE—AREAS RELATED TO INTERNAL 04/30/96 * 32 12
OPERATIONS
04-38000 LESSONS LEARNED FROM RTC’S HANDLING OF FEDERAL FAMILY EDUCATION LOANS ... 08/31/96 * 32 9
04-60001 PROCESS ENHANCEMENTS IN THE HEA, TITLE III, INSTITUTIONAL AID PROGRAM WOULD INCREASE
PROGRAM EFFICIENCY, DESPITE LIMITED RESOURCES 08/31/96 * 32 9
06-30004 MANAGING FOR RESULTS: REVIEW OF PERFORMANCE-BASED SYSTEMS AT SELECTED ACCREDITING 08/31/96 * 31 7
AGENCIES
07-48051 CLOSED SCHOOLS: $2.4 BILLION UNAUDITED 06/30/96 * 31 13
TOTAL SEMIANNUAL
REPORT DATE MONETARY REPORT
NUMBER AUDITEE/TITLE RESOLVED FINDINGS NO. PAGE
11-00333 GREATER EMPHASIS NEEDED TO DEOBLIGATE UNEXPENDED CONTRACT FUNDS AND CLOSE OUT 03/31/94 7,500,000 26 17
CONTRACTS ON TIME
11-48302 THE DEPARTMENT COULD REDUCE ITS AIR FARE TRAVEL COSTS IF MORE TRAVELERS TOOK ADVANTAGE 01/31/96 * 31 33
OF DISCOUNT AIR FARES
17-40302 FINANCIAL STATEMENT AUDIT: U.S. DEPARTMENT OF EDUCATION FEDERAL FAMILY EDUCATION LOAN 08/31/95 * 31 12
PROGRAM FOR THE YEARS ENDED SEPTEMBER 30, 1994 AND 1993
17-48320 FINANCIAL STATEMENT AUDIT OF THE U.S. DEPARTMENT OF EDUCATION WILLIAM D. FORD FEDERAL 09/30/95 * 30 20
DIRECT LOAN PROGRAM
Section 5(a)(6) of the Inspector General Act requires a listing of each report completed by OIG during the reporting period. A total of 28 reports
were completed by ED/OIG auditors. These reports are listed below.
QUESTIONED
COSTS
(excluding UNSUPPORTED BETTER USE
ACN AUDITEE/REPORT TITLE STATE ISSUED unsupported) COSTS OF FUNDS
01-50091 ROXBURY COMMUNITY COLLEGE DISBURSED $2.2 MILLION TO STUDENTS MA OCT-96 $2,253,564
ENROLLED IN AN INELIGIBLE ENGLISH AS A SECOND LANGUAGE PROGRAM
01-60005 RADCLIFFE COLLEGE’S ADMINISTRATION OF THE FEDERAL DIRECT LOAN MA NOV-96 *
PROGRAM NEEDS MINOR IMPROVEMENTS
01-60006 AUDIT OF THE DIRECT LOAN PROGRAM ADMINISTERED BY THE MA MAR-97
BURDETT SCHOOL
01-60007 AUDIT OF THE DIRECT LOAN PROGRAM ADMINISTERED BY FITCHBURG MA FEB-97 *
STATE COLLEGE
03-60008 AUDIT OF THE DIRECT LOAN PROGRAM ADMINISTERED BY THE PA OCT-96 *
PHILADELPHIA COLLEGE OF PHARMACY & SCIENCE
03-60010 AUDIT OF THE DIRECT LOAN PROGRAM ADMINISTERED BY CHI INSTITUTE PA NOV-96 *
03-60020 AUDIT OF THE DIRECT LOAN PROGRAM ADMINISTERED BY KEAN COLLEGE NJ MAR-97 *
03-60022 CLOSE-OUT AUDIT OF THE DELAWARE HIGHER EDUCATION LOAN PROGRAM DE FEB-97 304,415
04-60147 REVIEW OF SELECTED ASPECTS OF THE KENTUCKY HIGHER EDUCATION KY FEB-97 1,263,251
ASSISTANCE AUTHORITY’S ADMINISTRATION OF THE FEDERAL FAMILY
EDUCATION LOAN PROGRAM
04-60150 AUDIT OF THE DIRECT LOAN PROGRAM ADMINISTERED BY UNIVERSITY OF AL JAN-97 *
ALABAMA - BIRMINGHAM
05-40001 CLOSE-OUT AUDIT OF THE CHICAGO INSTITUTE OF TECHNOLOGY IL OCT-96 3,807,539 6,271,900
05-60013 AUDIT OF ADMINISTRATION OF THE WILLIAM D. FORD FEDERAL DIRECT IN OCT-96 *
LOAN PROGRAM FOR EARLHAM COLLEGE
05-60018 JOLIET JUNIOR COLLEGE’S ADMINISTRATION OF THE WILLIAM D. FORD IL JAN-97 *
FEDERAL DIRECT LOAN PROGRAM
06-50001 REVIEW OF ACCREDITING AGECNIES’ MONITORING OF MEMBER INSTITUTIONS DC FEB-97 *
06-50013 AUDIT OF SELECTED ASPECTS OF THE TITLE IV PROGRAMS ADMINISTERED TX NOV-96 218,153
BY THE HOUSTON COMMUNITY COLLEGE SYSTEM DURING JULY 1, 1992
THROUGH JUNE 30, 1995
06-60009 AUDIT OF THE DIRECT LOAN PROGRAM ADMINISTERED BY THE COURT TX JAN-97 *
REPORTING INSTITUTE OF DALLAS
06-60011 AUDIT OF THE DIRECT LOAN PROGRAM ADMINISTERED BY THE UNIVERSITY TX FEB-97 *
OF TEXAS MEDICAL BRANCH - GALVESTON
07-60008 TOPEKA TECHNICAL COLLEGE KS MAR-97 *
09-60003 THE CALIFORNIA STUDENT AID COMMISSION SHOULD RETURN ABOUT $5 CA DEC-96 4,965,913
MILLION THAT IT OVERCHARGED TO THE GUARANTY LOAN RESERVE FUND
09-60006 AUDIT OF THE DIRECT LOAN PROGRAM ADMINISTERED BY THE ACADEMY CA DEC-96 *
OF ART COLLEGE, SAN FRANCISCO, CALIFORNIA
QUESTIONED
COSTS
(excluding UNSUPPORTED BETTER USE
ACN AUDITEE/REPORT TITLE STATE ISSUED unsupported) COSTS OF FUNDS
11-50001 ACCURACY OF STUDENT AID AWARDS CAN BE IMPROVED BY OBTAINING DC JAN-97 109,000,000
INCOME DATA FROM THE INTERNAL REVENUE SERVICE
17-60004 AUDIT OF THE DIRECT LOAN PROGRAM ADMINISTERED BY MARYMOUNT DC DEC-96 *
UNIVERSITY
05-60005 AUDIT OF THE TALENT SEARCH PROGRAM AT THE COMMUNITY AND IL NOV-96 130,840
ECONOMIC DEVELOPMENT ASSOCIATION OF COOK COUNTY, INC.
IN CHICAGO, ILLINOIS
06-50005 RESULT OF CONTRACT CLOSE-OUT AUDIT, ARKANSAS AR FEB-97 17,301
DEPARTMENT OF EDUCATION
03-60006 REVIEW OF THE COOPERATIVE AGREEMENT FOR THE NATIONAL CENTER PA JAN-97 *
FOR ADULT LITERACY AWARDED TO THE UNIVERSITY OF PENNSYLVANIA
FOR THE PERIOD NOVEMBER 1, 1992 THROUGH MARCH 31, 1996
1
None of the audits reported in this table was performed by the Defense Contract Audit Agency.
2
Included in questioned costs.
38
INSPECTOR GENERAL ISSUED REPORTS WITH
RECOMMENDATIONS FOR BETTER USE OF FUNDS1
Subtotals (A + B) 12 $ 158,003,000
1
None of the audits reported in this table was performed by the Defense Contract Audit Agency.
39
UNRESOLVED REPORTS ISSUED PRIOR TO OCTOBER 1, 1996
Section 5(a)(10) of the Inspector General Act requires a listing of each report issued before the commencement of the reporting period for which no
management decision has been made by the end of the reporting period.
TOTAL PROJECTED SEMIANNUAL
DATE MONETARY REASONS MANAGEMENT REPORT PAGE
NUMBER AUDITEE/TITLE ST ISSUED FINDINGS OVERDUE DECISION NO. NO.
40
TOTAL PROJECTED SEMIANNUAL
REPORT DATE MONETARY REASONS MANAGEMENT REPORT PAGE
NUMBER AUDITEE/TITLE ST ISSUED FINDINGS OVERDUE DECISION NO. NO.
NOTES
* Non-monetary findings only
** Not individually written up
*** Information not provided by responsible ED component office
41
STATISTICAL SUMMARY
October 1, 1996 — March 31, 1997
INVESTIGATION RESULTS
– Indictments/Informations 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
– Convictions/Pleas 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
– Fines Ordered . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,800
– Restitutions Ordered 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,268,490
– Restitution Payments Collected4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,782,412
– Civil Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $166,587
– Seizures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $205,000
DEBARMENT/SUSPENSION ACTIVITIES
– OIG Requests for Departmental Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
– Individuals/Entities Debarred/Suspended . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1
Includes 3 actions that were not reported in our last Semiannual Report.
2
Includes 6 actions that were not reported in our last Semiannual Report.
3
Includes $521,127 not reported in our last Semiannual Report.
4
Collected by the Department of Justice.
< 42 =
GLOSSARY OF ABBREVIATIONS
ATB ability-to-benefit
FY fiscal year
< 43 =
GLOSSARY OF ABBREVIATIONS
(continued)
ST state
< 44 =