U.S. Department of Education Office of Inspector General Semiannual Report to Congress No. 41 April 1 – September 30, 2000 INSPECTOR GENERAL'S HOTLINE Anyone knowing of fraud, waste, or abuse involving Department of Education funds or programs should call or write the Inspector General's Hotline. THE TOLL-FREE NUMBER IS: 1-800-MIS-USED (1-800-647-8733) THE MAILING ADDRESS IS: Inspector General's Hotline Office of Inspector General U.S. Department of Education 330 C Street, SW Washington, DC 20202-1510 Your report may be made anonymously or in confidence. YOUR ATTENTION, PLEASE! The ED/OIG Semiannual Report to Congress and reports listed in the appendices are also available on the ED/OIG Website, at http://www.ed.gov/offices/OIG October 30, 2000 Honorable Richard W. Riley Secretary of Education Washington, DC 20202 Dear Mr. Secretary: I am pleased to submit this semiannual report on the activities of the Department's Office of Inspector General for the six-month period ending September 30, 2000 in accordance with section 5 of the Inspector General Act of 1978 (Public Law 95-452, as amended). The Act requires you to transmit the semiannual report by November 30, 2000 to the appropriate congressional committees and subcommittees, together with: 1) a report containing any comments you wish to make; 2) statistical tables as specified in section 5(a)(13)(b)(2) and (3) of the Act; and 3) a statement with respect to audit reports on which management decisions have been made but final action has not been taken, as specified in section 5(a)(13)(b)(4). Our work this period focused upon both Departmental operations and Department programs, in accordance with our legislative mandate. At the request of the Department, we continued our review of the Department’s internal control over the use of purchase cards and third-party drafts. The review covers all of the principal offices; we have identified internal control weaknesses and have found the principal offices receptive to our identification of areas for improvement. Our investigations into fraud against the Department resulted in substantial monetary recoveries in one case and guilty pleas in the other. Management has cooperated fully with our investigations. Our review of the Department’s communication infrastructure, EDNet, identified a number of security exposures, which Department managers have planned corrective actions to address. In the programmatic area, we reviewed seven states’ compliance with the Gun-Free Schools Act. Most of the states concurred with our findings and recommendations for improving their compliance with the Act’s provisions. I look forward to continuing to work with you and Department managers in the coming months, as we seek to ensure that Education Department programs and operations serve the nation’s students and taxpayers with efficiency, effectiveness, and integrity. Sincerely Lorraine Lewis INSPECTOR GENERAL’S MESSAGE TO CONGRESS It is my pleasure to report on the accomplishments of the Office of Inspector General, Department of Education, for the period April 1, 2000 through September 30, 2000. This has been an especially busy reporting period, with much work conducted in both Department programs and operations. As I mentioned in our previous Semiannual Report, we are focusing additional attention on Department operations. Twice this period, I testified before the U.S. House of Representatives on financial management issues at the Department. In my testimony, I highlighted our recent information technology and computer security reviews, the Department’s progress on financial statement audit recommendations, and ongoing investigations. Through the cooperative efforts of the Department and this office, a total of 117 financial statement audit recommendations have been completed and 22 remain with corrective action pending. One of the investigations involves individuals who acquired, for personal use, over $300,000 in equipment purchased with federal funds, and charged the Department over $600,000 for hours not worked. At the end of the semiannual period, four of the individuals involved had pled guilty to their involvement. Another investigation involves $1.9 million in Impact Aid funds that were fraudulently wired into improper bank accounts. These funds should have been distributed to two school districts in South Dakota. The Department has recovered over $1.6 million of these funds, as well as the funds from the sale of the two cars seized during the investigation. We have received the full cooperation of Department management during these investigations. In the programmatic area, we issued a number of reports relating to both elementary and secondary education and higher education. We issued reports to seven states on their compliance with the Gun-Free Schools Act and suggested improvements as necessary. We found that all of the states we reviewed would be aided by a clearer understanding of the definition of firearms. In another audit, we found that the process for recertifying foreign schools' participation in Title IV of the Federal Family Education Loan program has been ineffective. We recommended that the Student Financial Assistance office implement controls to ensure that required documentation is obtained and reviewed before making recertification decisions. We also reviewed management controls over distance education and found that both states and accrediting agencies had several concerns and suggestions for federal action. Information on several other reviews we conducted this period on Departmental programs is also included in this report. There has also been an increased emphasis on improper payments in recent years, including at recent congressional hearings. I have recommended that the Department proactively develop its own approach or methodology for annually estimating improper payments. With a reasonable improper payment estimate, the Department will be in a better position to manage its financial resources and to make programmatic decisions. Given the breadth of the Department’s programs and the amount of federal funds involved, we support the General Accounting Office’s current involvement in identifying possible improper payments. Their review will supplement our work and provide additional resources in this important area. I am pleased to announce that we have selected two new Assistant Inspectors General. Ms. Mary Mitchelson joins us as the Assistant Inspector General for Analysis and Inspection Services and Mr. Donald R. Reid joins our staff as the Assistant Inspector General for Investigation Services. Their experience and knowledge will contribute to accomplishing the OIG’s mission. Our commitment to ensuring the proper, efficient, and effective use of federal education funds remains vigilant. I look forward to a continued partnership with the Secretary and the Congress as we pursue these important endeavors. Lorraine Lewis CONTENTS Letter to the Secretary Inspector General's Message to Congress Executive Summary............................................................................................................. 1 Significant Activities and Accomplishments ...................................................................... 4 P.L. 95-452 Reporting Requirements ................................................................................ 19 ! Appendix 1: Management Challenges Facing the Department of Education Reported to Congress by OIG........................................................................20 ! Appendix 2: Recommendations Described in Previous Semiannual Reports on Which Corrective Action Has Not Been Completed.................................21 ! Appendix 3: ED/OIG Audit Services Reports on Education Department Programs and Activities..................................................................................22 ! Appendix 4 Other ED/OIG Reports on Education Department Programs and Activities ..................................................................................................25 ! Appendix 5: Inspector General Issued Audit Reports with Questioned Costs....................26 ! Appendix 6: Inspector General Issued Audit Reports with Recommendations for Better Use of Funds ..................................................................................27 ! Appendix 7: Unresolved Reports Issued Prior to April 1, 2000..........................................28 ! Appendix 8: Investigation Services Cumulative Prosecutive Actions ................................31 ! Appendix 9: Collections from Audits and Investigations ...................................................34 ! Appendix 10: Statistical Profile.............................................................................................35 EXECUTIVE SUMMARY The Office of Inspector General (OIG) this period continued to focus on identifying specific and systemic weaknesses, as well as opportunities for improvement, in Department of Education (ED or the Department) operations and programs. We also continued to work with ED managers as they address these issues. Our reviews focused on areas we identified last period in our response to a joint House and Senate request, as management challenges facing the Department (Appendix 1). These areas continue to present significant challenges to ED managers. Finally, we continue to fight fraud, waste, and abuse in Department programs and operations. A summary of our work in these and related areas follows, with more detailed descriptions in the body of this report. DEPARTMENTAL OPERATIONS Ongoing Investigations We are conducting vigorous investigations involving internal Departmental operations. A money-laundering and wire-fraud scheme led to an investigation which resulted this period in the Department recovering $1,657,980 that had been fraudulently wired to improper bank accounts (page 4). In addition, our investigation of individuals who purchased government equipment with federal funds for non-business-related purposes and fraudulently charged hundreds of thousands of dollars in unworked overtime hours to the Department resulted in four guilty pleas by the end of the period (page 4). Financial Management One of the most critical challenges facing the Department is the ability to provide accurate financial information to make informed decisions, manage for results, and ensure operational integrity. In our last semiannual report (Semiannual Report No. 40, page 1) we reported that the Department for the first time was able to issue its audited financial statements to the Office of Management and Budget by the statutory deadline. We are committed to issuing the fiscal year 2000 reports for the Department and Student Financial Assistance (SFA) on time (page 4). Information Systems Another area that poses significant challenges for the Department is that of information systems and security controls (Semiannual Report No. 40, page 2). This period we completed an audit of ED’s communication infrastructure, the Department of Education Network (EDNet) that identified a number of security exposures that affect the overall security of the Department’s information systems (page 5). This work followed our first security audit, that of the Grants Administration and Payment System, done in September 1998 (Semiannual Report No. 38, page 1), and our second, a report on ED’s security posture, policies, and plans, issued in February 2000 (Semiannual Report No. 40, page 3). In addition, this period we conducted a follow-up review on corrective actions the Department had taken related to our audits of SFA information technology contracts. We found that ED has 1 taken corrective actions that would correct the problems identified in three of six issue areas. The other three issue areas are still outstanding (page 5). Internal Control At the request of the Department, our Analysis and Inspection Services continued a review of ED’s internal control over the use of purchase cards and third-party drafts. The review covered all of the principal offices within the Department, with each office receiving an individual report, followed by a summary report highlighting the most significant issues for the Department. We assessed ED’s internal control against the General Accounting Office Standards for Internal Control in the Federal Government (GAO Standards). From the work we have completed, we have found that ED does not fully satisfy the GAO Standards in all cases (page 5). DEPARTMENT PROGRAMS Gun-Free Schools Act The Gun-Free Schools Act of 1994 prescribes actions that states must take when students are determined to have brought a firearm to school. This period our office issued reports on seven states’ implementation of the Act for the 1997-98 school year. We found that five of the seven states and a majority of the local educational agencies (LEAs) were generally in compliance with the Act. We did, however, identify possible non-compliance at two states, weaknesses at LEAs, and weaknesses in the collection and reporting of data (page 6). Student Financial Assistance The OIG continues to work with Department managers and officials to help ensure the integrity of the SFA programs. Of the nine significant challenges we identified last period, three are SFA- related issues. PROGRAM OVERSIGHT We issued three audit reports on aspects of the SFA programs involving issues of oversight of institutions participating in the programs that could put at risk millions of dollars in Title IV, Higher Education Act program funds (page 7). The audits covered recertifying of foreign schools, Case Management and Oversight (CMO) program review, and CMO’s process for tracking and resolving audit recommendations (page 8). SCHOOLS AND R ECIPIENTS OIG audits and investigations this period identified recipients of ED funds who either misspent or otherwise misused the funds. Investigations continued to yield convictions of those who perpetrated fraud against the SFA programs, as well as sentences with substantial fines, restitutions, and terms of imprisonment (page 9). In addition, two significant civil settlements occurred this period: 1) a $7,775,000 civil settlement with CORUS Bankshares, Inc. and CORUS Bank, Inc. for their role in submitting fraudulent reinsurance claims for student loans (page 9), and 2) a settlement agreement with CSC Credit Services, Inc., the Department of Justice, qui tam relators, and the Department to resolve a federal civil false-claims suit. CSC Credit Services, Inc. paid the United States government the sum of $6,417,114 (page 10). 2 OTHER ACTIVITIES AND INITIATIVES Congressional Activities Inspector General Lorraine Lewis testified before Congress twice during the period. Both hearings were related to financial management at the Department (page 15). The OIG also responded to congressional requests regarding Departmental operations from the Senate Committee on Governmental Affairs and the House Subcommittee on Government Management, Information and Technology, Committee on Government Reform (page 16). Nonfederal Audit Activities The Inspector General Act directs the Inspector General to take appropriate steps to ensure that work performed by nonfederal auditors complies with federal government auditing standards. This period we performed 60 quality control reviews of audits performed by independent public accountants (page 16). President’s Council on Integrity and Efficiency Our office participated in initiatives of the President’s Council on Integrity and Efficiency (PCIE) and Executive Council on Integrity and Efficiency (ECIE) during the period. Among them was Phase I of a review of ED’s compliance with Presidential Decision Directive 63, which provides for a national effort to assure the security of the nation’s critical infrastructures (page 17). In addition, this period our office produced the PCIE/ECIE Fiscal Year 1999 Progress Report to the President (page 18). 3 SIGNIFICANT ACTIVITIES AND ACCOMPLISHMENTS DEPARTMENTAL OPERATIONS Ongoing Investigations FORFEITURE IN REM JUDGMENT IN EXCESS OF $1.6 MILLION AND RETURN OF FUNDS TO ED Based on the work of the OIG and the Federal Bureau of Investigation, and at the request of the Department, a federal complaint for forfeiture in rem was filed this period in U.S. District Court, District of Columbia. The complaint outlined evidence developed in an investigation into $1.9 million of Department of Education (ED or the Department) Impact Aid funds fraudulently wired in late March and early April from the Federal Reserve to improper bank accounts. These funds were intended for two school districts in South Dakota, which received their correct payments in mid-April. The court subsequently entered a judgment of forfeiture of all the assets covered by the complaint. The judgment covers eight assets related to a money-laundering and wire-fraud scheme, including a total of $1,657,980, a 2000 Lincoln Navigator, a 2000 Cadillac Escalade, and a piece of real estate in Maryland that was purchased with the diverted funds. On September 29, 2000, the Department of Justice Asset Forfeiture and Money Laundering Section granted ED’s Petition for Remission. ED received $1,657,980, which was placed in the Impact Aid account for distribution to appropriate grantees. The Department anticipates receiving additional funds as the remaining assets are sold. We are conducting a vigorous investigation of this diversion of funds. IMPROPER PURCHASES OF EQUIPMENT, CHARGES FOR UNWORKED HOURS We are also conducting a vigorous investigation of individuals who for a period of years purchased equipment with federal funds for non-business-related purposes, billed the Department for hours not worked, and received goods purchased with federal funds for personal use. These goods include computers, printers, computer software, scanners, cordless telephones, a 61-inch television, walkie-talkies, compact disc players, and other equipment. The total cost of these items to ED was over $300,000. In addition, it is estimated that between January 1, 1997, and November 30, 1999, individuals involved in the case fraudulently charged approximately $634,000 in unworked overtime hours to the Department. At the end of the reporting period, four individuals had pled guilty based on their involvement in the case. In October, two more individuals pled guilty. The three who were ED employees at the time of their pleas submitted written resignations from the Department as part of their plea agreements. Financial Management One of the most critical challenges facing the Department is the ability to provide accurate financial information to make informed decisions, manage for results, and ensure operational 4 integrity. This period, the Department provided us with a corrective action plan for the fiscal year 1999 financial statement audit and updated corrective action plans for the fiscal years 1995 through 1998 financial statement audits. Through the cooperative efforts of the Department and this office, a total of 117 recommendations have been completed and 22 remain with corrective action continuing. We also continue to work on the fiscal year 2000 financial statement audit and are committed to issuing the reports for the Department and Student Financial Assistance on time. Information Systems REVIEW DISCLOSES SECURITY EXPOSURES We issued a final report this period covering the results of our evaluation of the security posture of the Department’s information technology infrastructure, the Department of Education Network (EDNet). The audit identified a number of security exposures that affect the overall security of the Department’s infrastructure and information assets. The Department concurred with our findings and recommendations. We will continue to monitor the progress of their corrective actions. This is the third security audit for our office. The first, “Review of GAPS [Grants Administration and Payment System] Security,” was done in September 1998 (Semiannual Report No. 37, page 1); the second, “Review of Security Posture, Policies, and Plans,” was issued in February 2000 (Semiannual Report No. 40, page 3). CORRECTIVE ACTION ON SFA INFORMATION TECHNOLOGY CONTRACTS This period we conducted a follow-up review on corrective actions ED has taken related to our audits of Student Financial Assistance (SFA) information technology contracts (ED-OIG/A07- A0014, September 27, 2000). We found that the Department has taken corrective actions that would likely correct the problems identified in three of six issue areas. Specifically, ED has taken corrective actions to formalize contract changes, to ensure that key personnel changes were appropriately authorized, and to ensure that contract terms were appropriately defined in the identified contracts. The Department has not taken adequate, timely action to address the following issues: Ø key personnel who were specified as being 100 percent dedicated to the contract but who were charging hours to new work and other ED contracts; Ø weaknesses in procedures for monitoring reimbursements due ED for charges collected from non-ED users of the Title IV Wide Area Network, which resulted in missing reimbursement checks; and Ø incorrect billings for travel costs associated with the contracts. The Department concurred with our findings and recommendations and identified actions it intends to implement to address the issues raised by our audit. Internal Control At the Department’s request, our Analysis and Inspection Services continued a review of the Department’s internal control over the use of purchase (credit) cards and third-party drafts (checks). We assessed ED’s internal control against the General Accounting Office Standards for Internal Control in the Federal Government (GAO Standards). The five GAO Standards 5 include: 1) control environment; 2) risk assessment; 3) control activities; 4) information and communications; and 5) monitoring. Our review included an exa mination of the internal control for each ED principal office. During this reporting period, we completed reports on all but one (see Appendix 4). In October, we issued the report on the remaining principal office, and a summary report to the Department highlighting significant issues and providing recommendations for corrective action. We found that the Department’s established control activities for the purchase card and third- party draft programs are not always followed. Additionally, we found that the Department’s Office of the Chief Financial Officer (OCFO), which has responsibility for the operation of both programs, needs to improve its administration of the programs. Consequently, we found that the Department does not fully satisfy the GAO Standards in all cases. Some of the deficiencies we noted include a frequent lack of documented supervisory review of individual purchases made by purchase cardholders. This is combined with a lack of sufficient supporting documentation for some purchase card transactions. In addition, ED’s purchase card training and procedural manual need improvement. The OCFO also needs to complete an effective reconciliation of the monthly Department-wide purchase card statement. In the third-party draft program, we noted deficiencies in ED’s internal control over the printing, signing, and monitoring of drafts. We also noted a lack of sufficient supporting documentation for some third-party draft transactions. Controls Over Cellular Phones This period we conducted an audit of the Department’s controls over cellular phones (“Audit of the U.S. Department of Education’s Controls over Cellular Phones,” ED-OIG/A11-A0014, September 15, 2000). We found : 1) lack of Department-wide and principal office cell phone policies and procedures, 2) unreliable cell phone inventories, 3) inadequate separation of key cell phone responsibilities, 4) inconsistent vendor selection processes, 5) inadequate and inconsistent billing procedures, and 6) inadequate supporting documentation for cell phone purchases and billings. These weaknesses result in more than a relatively low risk that errors, irregularities, and other inefficiencies may occur. The Department concurred with our findings and recommendations, and has planned actions that should begin to address the cited conditions. DEPARTMENT PROGRAMS Gun-Free Schools Act The Gun-Free Schools Act of 1994 requires each state receiving federal funds under the Act to have in effect a law requiring local educational agencies (LEAs) to expel from school, for a period of not less than one year, a student who is determined to have brought a firearm to school. The Act allows the district’s chief administrative officer to modify its expulsion requirement on a case-by-case basis. The Act also requires states to report annually to ED information on firearm expulsions under the state law. 6 AUDITS GENERALLY FIND COMPLIANCE AND SOME REPORTING PROBLEMS This period we audited seven states’ compliance with the provisions of the Gun-Free Schools Act. West Virginia, Wisconsin, Texas, Maryland, Colorado, New Mexico, and California were selected to participate in this audit. (See Appendix 3 for individual audit listings.) We concluded that five of the states and a majority of the LEAs were generally in compliance with the Act for the 1997-1998 school year. We did, however, identify weaknesses in the following areas. Ø Possible non-compliance at two states. The Colorado state law may not require mandatory expulsions for a period of at least one year for students who bring a firearm to school, while in California, the state law may not require mandatory expulsions of students who bring explosives to school. Ø Weaknesses at LEAs. In New Mexico, Albuquerque Public Schools did not expel 14 of the 26 students who were involved with firearms. In California, LEAs’ decisions to modify the expulsion requirement were made at a lower organizational level than the Act requires. We also found that LEAs did not provide the California Department of Education with school-level data required by the Act. In two LEAs in Colorado, there were inadequate criminal justice or juvenile delinquency system referral policies in place. Ø Collection and reporting of data. In California, Maryland, Wisconsin, and New Mexico, we found weaknesses in the collection and reporting of data that resulted in errors reported by the state department of education. Most of the errors in reporting were due to confusion over what weapons qualify as a firearm. Most of the states concurred with our findings and recommendations, and many are taking action to address the weaknesses we identified. In addition, we have recommended that the Office of Elementary and Secondary Education (OESE) determine whether the Colorado and California state laws are in compliance with the Act. OESE plans to address our recommendation. Student Financial Assistance While the creation of a Performance-Based Organization for the SFA programs has resulted in improvements, successful management of the programs and their delivery systems remains among the most significant challenges for ED. PROGRAM OVERSIGHT Weaknesses in oversight mechanisms can make it more difficult for managers to address problems in the programs they manage. This period we issued three audit reports on aspects of the SFA programs involving weaknesses in oversight and management control. INEFFECTIVE PROCESS FOR RECERTIFYING FOREIGN SCHOOLS Our audit of SFA’s process for recertifying foreign schools’ participation in the Federal Family Education Loan (FFEL) program found that the process has been ineffective (“The Recertification Process for Foreign Schools Needs to Be Improved,” ED-OIG/A01-90005, September 29, 2000). We found that SFA has not performed recertifications in a timely manner, and has not based its recertification decisions on information required by the Higher Education Act (HEA). Specifically, SFA did not enforce statutory requirements for compliance audits and foreign medical school eligibility ratios. As a result, FFEL funds were potentially at risk at these 7 foreign schools because ineligible institutions or students may have received funds to which they were not entitled. We recommended that the Chief Operating Officer, SFA implement controls to ensure that required documentation is obtained and reviewed before making recertification decisions. While SFA officials generally concurred with our recommendations, they also documented the challenges they face in enforcing the HEA requirements for foreign schools. They assert that these challenges result from the lack of understanding by foreign schools concerning annual compliance audit requirements and the difficulty of SFA and schools in obtaining pass rates from the organization administering medical school examinations. WEAKNESSES IN PROGRAM REVIEW PROCESS This period we conducted a review of Case Management & Oversight’s (CMO) program review function (“Review of Case Management & Oversight’s Program Review Function,” ED- OIG/A04-90003, September 21, 2000). At the time of our review, CMO was one of six services within SFA that was responsible for administering the SFA programs. Its responsibilities included determining institutions’ eligibility to participate in the federal SFA programs and certifying institutions for participation. It was also responsible for developing and implementing policies and procedures for monitoring institutions participating in the programs to ensure compliance with the Higher Education Act, regulations, and policies, and conducting on-site reviews of participating postsecondary institutions. Our review found that CMO does have a process in place to conduct program reviews within the case management system. It does not, however, have proper controls to ensure the effective utilization of program reviews to monitor and improve institutional performance. We recommended that the Chief Operating Officer, SFA institute management controls within the case management process to ensure a consistent and appropriately balanced use of program reviews to monitor institutional compliance with Title IV requirements. SFA concurred with our recommendations; however, it did not agree with all of our assessments. SFA stated that as it develops program review measures and refines goals, it will clarify the importance of program reviews for the case teams, emphasize the need for a more balanced use of reviews in case management, and perform more program reviews at high-risk institutions. IMPROVEMENTS NEEDED IN TRACKING AND RESOLVING AUDIT RECOMMENDATIONS We issued a report on our review of CMO’s process for tracking and resolving audit recommendations (“Audit of Case Management & Oversight’s Audit Tracking and Resolution Process,” ED-OIG/A03-90003, September 29, 2000). We found that CMO does not ensure that all required SFA compliance audit reports are submitted when due or issued in a timely manner, or that the findings are coded correctly. We did find that CMO had an effective system in place to ensure the timely submission of financial audits of proprietary institutions, and generally resolved compliance reports in accordance with applicable requirements. SFA generally concurred with our procedural recommendations to improve CMO’s audit tracking and resolution process. DISTANCE EDUCATION The growth in schools offering educational programs and courses delivered through computer transmission (i.e., “distance education”) raises concerns about implementing management controls. This period we gathered information from 56 state agencies that license or approve 8 higher education institutions to operate in their states, and from accrediting agencies the Department recognizes to accredit institutions authorized to participate in the Title IV programs. Our study revealed concerns by both state and accrediting agencies in the areas of educational outcomes, student support services, curricula, availability of information about institutions, faculty, and satisfactory academic progress (“Management Controls for Distance Education at State Agencies and Accrediting Agencies,” ED-OIG/A09-90030, September 27, 2000). In addition, 50 percent of the state agencies indicated a high level of concern about out-of-state institutions that offer programs and courses delivered through computer transmission to state residents. Both state and accrediting agencies had several suggestions for federal action that would enhance their licensing/approval and accreditation procedures for protecting students and ensuring quality of programs and courses that are offered primarily through distance education. We provided our report to the Chief Operating Officer, SFA and the Assistant Secretary for Postsecondary Education for information purposes. NEGOTIATED RULEMAKING The Higher Education Act requires the Department to conduct negotiated rulemaking with the postsecondary education community. The Inspector General Act requires us “to review existing and proposed legislation and regulations relating to programs and operations” of the Department. In fulfilling our responsibility in this area, we were active participants this period in ED’s internal regulatory workgroups for negotiated rulemaking. We advised the Department of the potential consequences of proposed changes to the economy, efficiency, and integrity of SFA programs. Proposed regulations have been published for public comment. SCHOOLS AND R ECIPIENTS OIG audits and investigations of schools and other recipients of ED funds have identified both systemic and specific weaknesses. Our work this period, as in prior periods, resulted in significant programmatic and monetary findings as well as convictions, sentencings, and recoveries. Civil Actions BANK AGREES TO PAY $7,775,000 TO SETTLE FALSE CLAIMS ACT LAWSUIT Officials of CORUS Bankshares, Inc. and CORUS Bank, Inc. (CORUS) settled an action filed in the Northern District of Illinois under the federal False Claims Act. CORUS agreed to pay $7,775,000 to compensate the federal government for allegedly submitting fraudulent insurance and reinsurance claims of guaranteed student loans. The settlement also resolves the administrative treatment of unsubmitted insurance and reinsurance claims that will result in CORUS foregoing collection on approximately $3,500,000 in guaranty claims, thus resulting in an aggregate settlement of nearly $11,500,000. CORUS Bankshares, Inc. is a one-bank holding company based in Chicago, Illinois. CORUS Bankshares came into existence in June 1996, when its predecessor River Forest Bancorp, Inc. changed its name to CORUS Bankshares, Inc. The lawsuit alleged that River Forest Bancorp, Inc. submitted claims for insurance on defaulted guaranteed student loans after the loans had become ineligible for insurance and reinsurance because of servicing violations concerning due 9 diligence. To facilitate this scheme, bank employees, including those at the lower supervisory level of the student loan processing department, falsified default claim forms submitted for insurance and reinsurance. CONTRACTOR PAYS GOVERNMENT $6,417,114 TO RESOLVE FALSE CLAIMS SUIT Effective September 28, 2000, CSC Credit Services, Inc. (CSC Credit), a subsidiary of Computer Sciences Corporation, reached a settlement agreement with the Department of Justice, qui tam relators, and the Department of Education to resolve a federal civil false-claims suit. As a result of the settlement agreement, CSC Credit paid the United States government the sum of $6,417,114. This matter stems from a four-year investigation by OIG that began in late 1996. CSC Credit was an ED contractor engaged in collecting defaulted student loans. It submitted false claims to the Department for the payment of commissions and incentive bonuses, based on activity that did not meet the requirements for loan consolidation as set forth under applicable laws and regulations. The settlement will become final when the U.S. District Court for the District of Columbia approves it. Institutions SUCCESS INSTITUTE OF BUSINESS Our audit of Success Institute of Business, a proprietary school located in Houston, Texas disclosed that the school improperly retained and used $80,000 of William D. Ford Federal Direct Loan Program funds that were received in excess of what the school requested (“Review of Student Financial Aid Compliance at Success Institute of Business,” ED-OIG/06-90004, August 7, 2000). Success Institute also did not qualify as an eligible institution for participation in the Title IV SFA programs because it received more than 85 percent of its revenue from Title IV sources. The school also failed to pay required refunds, incorrectly calculated refunds, paid refunds late, provided Title IV aid to ineligible students, and did not maintain reliable and accurate accounting records. The report recommended that Success Institute be required to return to ED or lenders $2,245,416 of Title IV funds that were inappropriately disbursed. After audit fieldwork was completed, ED’s Southwest Case Management Division and the Texas Guaranteed Student Loan Corporation took action against the school. The school ceased providing educational services before we released our final audit report, and closed on March 27, 2000. CLEVELAND STATE UNIVERSITY We issued a report on our audit of Cleveland State University (“Audit of the Title IV Higher Education Act Programs Administered by Cleveland State University, Cleveland, Ohio,” ED- OIG/05-90054, September 28, 2000). Our audit identified deficiencies related to calculating accurate student refunds, making all refunds, and making refunds timely; determining satisfactory academic progress (SAP); and recording student account and general ledger transactions accurately. We recommended that the Chief Operating Officer, SFA instruct the university to refund to ED or return to lenders $86,189. We also recommended that the university be instructed to make SAP determinations and repay to ED or return to lenders any funds disbursed to ineligible 10 students, and establish and implement policies, procedures, and controls to correct the deficiencies we identified. The university did not concur with the refund findings and recommendations. The university did concur with our recommendation to return $75,235 for seven students specifically identified as failing to meet the SAP policy, but it did not concur that it should make further SAP determinations. The university did not concur with the finding and recommendations to complete the reconciliation of accounting records and claimed to have reconciled its records, but did not provide adequate documentation to support its claim. The university’s response indicated that it has implemented new policies and procedures to prevent some of the problems identified in this report. School Officials and Employees CONVICTION IN $2.3 MILLION ELIGIBILITY FRAUD A federal jury in Hammond, Indiana convicted the owners of Midland Career Institute of student financial aid fraud and conspiracy. Our investigation disclosed that they had fraudulently obtained approximately $2.3 million in Pell grants and federally guaranteed student loans. The subjects ordered employees to falsely report to the school’s Pell third-party servicer that ineligible students whom they had admitted to the school had earned the required number of credits necessary to obtain subsequent Pell disbursements. The subjects are awaiting sentencing. $281,000 RESTITUTION ORDERED IN PELL FRAUD A former financial aid officer at Florida A&M University was sentenced in the Northern District of Florida to 13 months in prison followed by three years probation, and was ordered to pay restitution in the amount of $281,302. Investigation disclosed that the subject participated in a kickback scheme in which she used her position to cause the university to make illegal Pell disbursements to students who had already received Pell grants. FINANCIAL AID DIRECTOR SENTENCED IN LOAN APPLICATION FRAUD The former financial aid director of Computer Learning Center, Los Angeles, California was sentenced in the Central District of California to 18 months in prison and was ordered to pay $170,326 in restitution. An OIG investigation developed evidence that the subject, working as a financial aid director under an alias, completed, falsely certified, and processed multiple Parent Loans for Undergraduate Students (PLUS) and Supplemental Loans for Students (SLS) loan applications for which he received over $155,000. The subject pled guilty to bank fraud and Immigration and Naturalization Service (INS) fraud. The INS will initiate deportation proceedings against him pending the completion of his imprisonment. FINANCIAL AID DIRECTOR SENTENCED IN ELIGIBILITY FRAUD The former financial aid director of Dongguk-Royal University located in Los Angeles, California was sentenced to an eight-month split sentence, requiring her to spend four months in federal prison followed by four months of electronically monitored home detention during her three years of supervised release. She was ordered to pay $8,240 in restitution, the unpaid balance of the loans she obtained for ineligible borrowers. Our investigation disclosed that within two weeks of her employment as the financial aid director, she began certifying and processing loan applications in excess of $60,000 for friends and family members who were not eligible borrowers because they were not students. 11 SCHOOL OFFICIAL PLEADS GUILTY TO CONSPIRACY A member of the board of directors and corporate administrative officer, Technical Education Center, Inc. (TEC), Rockville, Maryland pled guilty to conspiracy. Our investigation disclosed that the subject conspired with others in fraudulent practices, including falsifying student status reports and refund work sheets, forging student signatures on the exit interviews, and causing students who were not maintaining satisfactory academic progress and meeting attendance requirements to be placed on a leave of absence. More than 100 students’ records were falsified and manufactured at TEC. TEC received and did not refund more than $250,000 as a result of the conspiracy. TEC’s former financial aid director pled guilty to obstruction of a federal audit. She allegedly copied the backs of negotiated checks and attached them to copies of checks that had not been negotiated to make it appear that refunds had been paid. The copied checks were given to the independent auditors to conceal the fact that over $100,000 in refunds had not been paid. GRAND JURY RETURNS INDICTMENT AGAINST NINE INDIVIDUALS; FOUR PLEAD GUILTY Nine individuals were indicted in Miami, Florida on charges of conspiracy, wire fraud, false claims, and money laundering for their activities leading to Pell fraud at Garces Commercial College. The defendants were allegedly involved in a massive conspiracy that resulted in the loss of approximately $3.5 million in Pell Grant funds. The defendants allegedly recruited “college students” from a population of elderly persons living in a senior citizen home. The senior citizens participated in macrame and craft classes; however, Pell grants were awarded on their behalf for being allegedly enrolled in and attending Interior Decorating and Graphic Design classes at Garces. Further, the conspirators began reusing the student files for Pell funding, resulting in the school receiving numerous Pell awards for students who were deceased when they were supposedly attending Garces courses. In September 2000, four of the defendants pled guilty to conspiracy to steal approximately $3.5 million in Pell funds. Prosecutive action regarding the other five defendants was pending at the end of the period. SCHOOL OWNER AND DAUGHTER PLEAD GUILTY The owner and president of the Eastern Jackson County College of Allied Health located in Blue Springs, Missouri and her daughter, a former instructor at the school, pled guilty to conspiring to steal and misapply more than $1.4 million in Pell Grant funds. The investigation revealed that the Pell funds were obtained as a result of the co-conspirators’ forging and creating false documents and submitting fraudulent grant applications to ED for non-existent or ineligible students. The subjects are awaiting sentencing. Other Significant Case Results FRAUDULENT STUDENT LOAN APPLICATIONS An individual was sentenced in U.S. District Court, Boston, Massachusetts to 27 months in prison and five years probation and was ordered to pay restitution in the amount of $351,500 for his role in a foreign school loan-fraud scheme. The court also entered an order of forfeiture against him in the amount of $159,840. 12 The subject had earlier pleaded guilty to nine counts of mail fraud, two counts of bank fraud, and one count of Social Security Account fraud in connection with his submission of 19 fraudulent student loan applications at foreign schools. DOCTORS SENTENCED IN DISABILITY FRAUD Two physicians were sentenced after pleading guilty to submitting false disability claims to have over $50,000 in student loans discharged. The brothers claimed they were 100 percent disabled because they were house-confined or wheelchair-bound, but they were surveilled riding bicycles and swimming at the beach. The older brother, who accepted full responsibility for the fraud, was sentenced to 18 months in prison to be followed by three years of probation. He was ordered to pay $145,350 in restitution jointly and severally with his brother. The younger doctor received five years of probation, 300 hours of community service and was ordered to pay the restitution with his brother. Government Performance and Results Act The Government Performance and Results Act (GPRA) is the centerpiece of a statutory framework that Congress put in place to improve federal management and provide a greater focus on results. This period we issued two reports on GPRA-related issues. TITLE III PERFORMANCE MEASUREMENTS MAY NOT SATISFY GPRA Our review of the Higher Education Programs’ (HEP) compliance with GPRA requirements found that HEP may be unable to satisfy the GPRA requirement to report on the performance of the Title III program in fiscal year 2000 (“Review of Title III Program, HEA, Compliance with GPRA Requirements for Implementation of Performance Indicators,” ED-OIG/A04-90014, June 30, 2000). While HEP has developed performance indicators along with the proposed methods for measuring them, it did not use the suggested Departmental guidelines for developing performance indicators, and the system used to obtain and compile data for reporting on the indicators is not adequate. The Department concurred with our findings and recommendations. WEAKNESSES IN MANAGEMENT CONTROLS IN ARIZONA DEPARTMENT OF EDUCATION The Office of Special Education Programs (OSEP) within the Department’s Office of Special Education and Rehabilitative Services (OSERS) administers programs funded under the Individuals with Disabilities Education Act, Part B. The legislation outlines how states may use the funds that ED grants for the purpose of special education and related services to children with disabilities. OSEP uses performance data reported by state education agencies to prepare the Department’s GPRA report to Congress on the outcome of these programs. This period we issued a report on our review of the management controls over the Arizona Department of Education’s (ADE) collection and reporting of performance data (“Arizona Department of Education Management Controls over IDEA, Part B - Special Education Performance Data,” ED-OIG/A09-A0001, September 22, 2000). Our review of procedures and available documentation at ADE and three of its local educational agencies (LEAs) identified weaknesses in management controls. The findings covered performance data for exiting (i.e., whether students dropped out or graduated with a regular diploma), discipline, and personnel. Specifically, we found that: 1) the LEAs did not include all instances of occurrence for the performance indicators; 2) the ADE and the three LEAs did not conduct reviews of the reported data or the reviews were inadequate; and 3) neither the ADE nor 13 the three LEAs had documented their data collection processes. Due to these weaknesses in ADE’s and the LEAs’ management controls, we have no assurance that reliable performance data was provided to OSEP for the 1998-1999 school year. ADE generally concurred with the findings, and has taken or plans to take appropriate corrective action. Elementary, Secondary, and Other Education Programs SAN FRANCISCO: PROVIDING TITLE I FUNDS TO PRIVATE SCHOOL STUDENTS We conducted a review this period of the San Francisco Unified School District’s oversight of Title I funds for services to private school students (“San Francisco Unified School District’s Oversight of Title I Funds for Services to Private School Students,” ED-OIG/A09-90032, August 4, 2000). The purpose of our review was twofold. First, we sought to determine if the District provided funds for Title I services to private school students in proportion to the number of low- income private school students in participating school attendance areas. Second, we sought to determine whether the District provided adequate oversight to ensure that the funds were expended for intended purposes, and in compliance with federal laws and regulations, specifically, the Elementary and Secondary Education Act. Our review found that, during the school year ending June 30, 1999, the District complied, in general, with federal laws and regulations when administering Title I funds. The District, however, did not ensure that services were provided for eligible students who attend private schools located outside the District’s boundaries. We also noted weaknesses in the District’s financial management controls. The District concurred with our findings and recommendations and informed us that it is implementing actions to address the issues raised by our audit. PUERTO RICO DEPARTMENT OF EDUCATION We issued two reports on the Puerto Rico Department of Education’s (PRDE) administration of services provided to non-public school students, one on the Governor’s Safe and Drug- Free Schools Program and the second on the Even Start Program (“Puerto Rico Department of Education Needs Major Improvements in its Administration of the Governor’s Safe and Drug- Free School Program,” ED-OIG/A01-90007, September 27, 2000; “Puerto Rico Department of Education Needs Major Improvements in its Administration of the Even Start Program,” ED- OIG/A01-90006, September 27, 2000). Both audits revealed that PRDE lacked adequate cash management practices and effective internal controls to properly administer these programs. In both audits, we found that PRDE delayed the flow of federal funds to subrecipients because it did not ensure that contracts and budget assignments were signed prior to the beginning of the award period. As a result, PRDE prevented institutions from rendering services and/or hindered their ability to offer optimum services to program participants. PRDE’s lack of efficient cash management controls resulted in excess cash held for the Even Start Program and the Governor’s Program. Both programs lacked supporting documentation for cash draws, and for payments made to subrecipients in the Governor’s Program. For the Even Start program, PRDE failed to reconcile advance payments made to subrecipients, did not properly forecast payroll expenses, and failed to return excess funds from another ED program. PRDE agreed with most of our findings from both audits, and plans to implement our recommendations. 14 STUDENT SUPPORT SERVICES PROJECT Our audit of Mount Senario College of Ladysmith, Wisconsin found that Mount Senario did not always administer its Student Support Services Project according to the Higher Education Act of 1965 and Title 34, Code of Federal Regulations (“Audit of the Student Support Services Project Administered by Mount Senario College, Ladysmith, Wisconsin,” ED-OIG/A05-A0003, September 28, 2000). Our audit disclosed that Mount Senario lacked adequate management controls over the project, including written policies and procedures and an adequate system of financial management. We found that Mount Senario: Ø used federal funds to pay project staff for services provided to non-project participants; Ø could not account for all funds received; Ø could not support all achievements included in its performance report; and Ø enrolled students who did not meet requirements to participate in the project. Mount Senario did not concur with the first finding. Since completion of our field work, however, Mount Senario has developed written policies and procedures for its project and its financial management system. We revised the finding and made minor changes to the recommendations to accurately reflect this occurrence. Mount Senario generally concurred with the remaining findings. OTHER ACTIVITIES AND INITIATIVES Congressional Activities Inspector General Lorraine Lewis testified before congressional subcommittees twice during the period. Both hearings were related to financial management at ED. The OIG also responded to congressional requests this period. HOUSE BUDGET COMMITTEE TESTIMONY On May 24, 2000, Ms. Lewis testified before the Committee on the Budget, U.S. House of Representatives. Her testimony included our recent work in the areas of Pell Grant fraud, improper student loan forgiveness, and our ongoing investigation involving equipment purchased with federal funds for personal use and false work hours charged to the Department (see page 4). The need for an environment with strong internal controls, which are necessary to maintain the integrity of ED programs, was also a topic of discussion during the hearing. HOUSE OVERSIGHT AND INVESTIGATIONS SUBCOMMITTTEE TESTIMONY On September 19, 2000, Ms. Lewis testified before the Subcommittee on Oversight and Investigations, Committee on Education and the Workforce, U.S. House of Representatives. Her testimony addressed various issues related to financial management, including ED’s progress on fiscal year (FY) 1999 financial statement audit recommendations, the status of the FY 2000 financial statement audit and duplicate payments. She also discussed current investigations involving equipment purchased with federal funds for personal use and false work hours charged to the Department and diversion of Impact Aid funds (see page 4). Ms. Lewis also discussed recent OIG computer security reviews of the Department (see page 5). Improper payments was also a topic of discussion during the hearing. 15 With regard to financial management, Ms. Lewis reported that, since our March 1, 2000 testimony, the Department had provided us with a response to the FY 1999 financial statement audit, and updated corrective action plans for all of the financial statement audits. She also gave a progress report on the status of unresolved recommendations from the FYs 1995 through 1999 audits. Information Requests TRAVEL BY DEPARTMENT EMPLOYEES In response to a request from Senator Fred Thompson, Chairman, Committee on Governmental Affairs, United States Senate, we have provided periodic updates on political travel by Department employees or officials, and the amount of time ED officials who are appointed by the President and confirmed by the Senate spent campaigning. We initially replied on June 30, 2000, with information for the period March 1, 1998 through April 17, 2000. We provided subsequent updates for each two-month period thereafter. EXAMPLES OF FRAUD, WASTE, AND MISMANAGEMENT We also responded this period to a request from Representative Stephen Horn, Chairman, Subcommittee on Government Management, Information and Technology, Committee on Government Reform, U.S. House of Representatives. Chairman Horn requested, through the President’s Council on Integrity and Efficiency, three to five recent examples of fraud, waste, and mismanagement. The examples we provided included: Ø a $7.775 million settlement between the Department of Justice and CORUS Bankshares, Inc. and CORUS Bank, Inc. for alleged fraudulent activities involving the submission of fraudulent insurance and reinsurance claims for guaranteed student loans (see page 9); Ø the conviction of Midland Career Institute owners who fraudulently obtained approximately $2.3 million in Pell grants and federally guaranteed student loans (see page 11); Ø the guilty plea of a former school owner and her daughter for conspiring to steal and misapply more than $1.4 million in Pell funds (see page 12); and Ø an ongoing investigation involving equipment purchased with federal funds for personal use and false work hours charged to the Department (see page 4). Nonfederal Audit Activities Participants in ED programs are required to submit annual financial statements and compliance audits performed by independent public accountants. The various types of audits the Department receives include proprietary school/school servicer audits; lender/lender servicer audits; guaranty agency audits; and Office of Management and Budget Circular A-133 Single Audits. The Inspector General Act directs the Inspector General to take appropriate steps to assure that work performed by nonfederal auditors complies with federal government auditing standards. The OIG publishes audit guidance specific to ED programs to assist independent public accountants in performing independent audits. 16 Q UALITY R EVIEWS OF NONFEDERAL AUDITS This period we completed 60 quality control reviews (QCRs) of audits performed by 55 different independent public accountants (including 3 audits performed by different offices of a national certified public accounting firm). RESULTS OF QCRS Based on our reviews, we determined: Ø 39 (sixty-five percent) were acceptable or contained only minor audit deficiencies; Ø 17 (twenty-eight percent) were substandard, requiring corrective action by the auditor; and Ø 4 (seven percent) contained significant inadequacies preventing the Department from relying upon these audits. REFERRALS OF INDEPENDENT PUBLIC ACCOUNTANTS For audits containing significant inadequacies and for other serious violations of professional standards, we made six referrals to the American Institute of Certified Public Accountants and/or the appropriate State Board of Accountancy for possible disciplinary action during this period. President’s Council on Integrity and Efficiency The Inspector General is a member of the President’s Council on Integrity and Efficiency (PCIE) and the PCIE’s Audit Committee. Our office participated in several PCIE initiatives during this reporting period. PRESIDENTIAL DECISION DIRECTIVE 63 Presidential Decision Directive (PDD) 63 provides for a national effort to assure the security of the nation’s critical infrastructures. The directive, issued May 22, 1998, required each agency to develop a Critical Infrastructure Protection Plan within 180 days. By May 22, 2000, those plans were to have been implemented as an initial operating capability. By May 22, 2003, the United States is to achieve and maintain the ongoing ability to protect our nation’s critical infrastructures. This period, the PCIE Audit Committee initiated a phased review of the nation’s critical infrastructure assurance program in which at least 21 OIGs, including this office, are participating. Our audit objective in Phase I was to assess the adequacy of ED’s planning and assessment activities for protecting its critical cyber-based infrastructures. We concluded that the Department has not taken sufficient action to implement PDD 63 and needs to improve its planning and assessment activities for protecting its critical cyber-based infrastructures. Specifically, we recommended that the Department: Ø revise and implement its Critical Infrastructure Protection Plan; Ø identify its critical infrastructure assets; and Ø conduct vulnerability assessments. The CIO acknowledged that sufficient action has not been taken to implement the plan because the Department focused its information technology resources and leadership on other urgent 17 needs, such as Y2K readiness. ED has recently taken positive steps, including the establishment of a Chief Infrastructure Assurance Officer position and an Information Security Steering Committee. REPORT TO THE PRESIDENT This period, our office produced the President’s Council on Integrity and Efficiency/Executive Council on Integrity and Efficiency Fiscal Year 1999 Progress Report to the President. The report presented examples of government-wide OIG accomplishments and initiatives in the areas of preparing for Year 2000; systems security; GPRA; and integrity, accountability, and results. The report illustrated the many ways in which IG offices helped promote economy, efficiency, and integrity in government programs and operations during the year. 18 P.L. 95-452 REPORTING REQUIREMENTS Sections 5(a)(1) and 5(a)(2) Significant Problems, Abuses, and Deficiencies ....................................... 4 Section 5(a)(3) Recommendations Described in Previous Semiannual Reports on Which Corrective Action Has Not Been Completed............................................. 21 Section 5(a)(4) Matters Referred to Prosecutive Authorities Investigation Services Cumulative Prosecutive Actions ................................................................... 31 Statistical Profile.................................................................................................................................35 Sections 5(a)(5) and 6(b)(2) Summary of Instances Where Information Was Refused or Not Provided* Section 5(a)(6) Listing of Audit Reports ED/OIG Audit Services Reports on Education Department Programs and Activities ...................... 22 Section 5(a)(7) Summary of Significant Audits Significant Activities and Accomplishments....................................................................................... 4 Section 5(a)(8) Audit Reports Containing Questioned Costs Inspector General Issued Audit Reports with Questioned Costs ....................................................... 26 Section 5(a)(9) Audit Reports Containing Recommendations That Funds Be Put to Better Use Inspector General Issued Audit Reports with Recommendations for Better Use of Funds ........................................................................................................................... 27 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, 2000............................................................................. 28 Section 5(a)(11) Significant Revised Management Decisions* Section 5(a)(12) Significant Management Decisions with Which OIG Disagreed* *No instances to report. 19 Appendix 1 MANAGEMENT C HALLENGES F ACING THE D EPARTMENT OF EDUCATION R EPORTED TO C ONGRESS BY OIG Ø The Department must address long-standing problems with financial management. Ø The Department must improve its security posture, policy and plans for its systems. Ø The implementation of Student Financial Assistance's Modernization Blueprint and Performance Plan presents unique challenges. Ø The Department's goal of "paperless" systems for SFA fund delivery creates new opportunities for efficiency and requires effective controls to ensure accountability, security and legal enforcement. Ø The Department needs to fully implement the Clinger-Cohen Act. Ø Obtaining quality data to measure the performance of its programs and to meet the reporting requirements of the Results Act presents significant challenges. Ø Balancing compliance monitoring and technical assistance presents a management challenge for elementary and secondary education programs. Ø The Department must continue to work with the Internal Revenue Service to implement a data match to ensure that SFA recipients accurately report income to qualify for financial aid. 20 Appendix 2 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 Number of Report Number/ Auditee/Title Date Monetary Recommendations Latest Target/ Date Issued (Prior SAR Number and Page) Resolved Findings Open Closed Closure Date New Since Last Reporting Period None Reported in Previous Semiannual Report OFFICE OF POSTSECONDARY EDUCATION 04-60001 Process Enhancements in the HEA, Title III, Institutional Aid 8/31/96 * 2 2 August, 2001 March 27, 1996 Program would Increase Program Efficiency Despite Limited Resources (SAR 32, pg. 9) STUDENT FINANCIAL ASSISTANCE MIR 92-05** ED Needs to Strengthen Student Loan Cure Procedures 9/30/93 $154,000,000 1 0 FY-2001 09-18053 (SAR 24, pg. 12) March 13, 1992 17-48320 Financial Statement Audit: U.S. Department of Education 9/30/95 * 0 9 See Footnote 2 March 17, 1995 Federal Direct Student Loan Program for the Year Ended September 30, 1994 (SAR 30, pg. 20) 17-40302 Financial Statement Audit: U.S. Department of Education 8/31/95 * 3 2 See Footnote 3 May 31, 1995 Federal Family Education Loan Program for the Years Ended September 30, 1994 (SAR 31, pg. 12) 17-30302 Financial Audit: Federal Family Education Loan Program's 10/31/94 * 3 6 See Footnote1 June 30, 1994 Financial Statements for the Years Ended 1993 and 1992 (SAR 29, pg. 16) 05-80011 Institutional Participation and Oversight Service has 5/31/99 * 1 1 February, 2001 August 27, 1998 Opportunities to Improve the Recertification Process (SAR 37, pg. 16) OFFICE OF THE CHIEF FINANCIAL OFFICER 17-40303 Report of Independent Accountants on the US Department 3/31/97 * 2 24 December, 2000 August 16, 1996 of Education Fiscal Year 1995 Department-Wide Financial Statements (SAR 33, pg. 14) 17-60002 Report of Independent Accountants on the US Department 5/31/99 * 4 20 FY-2001 August 31, 1997 Of Education Fiscal Year 1996 Department-Wide Financial Statements (SAR 35, pg. 19) 17-70002 US Department of Education's Fiscal Year 1997 Financial 5/31/99 * 4 33 FY-2001 June 15, 1998 Statements and Accompanying Notes (SAR 37, pg. 13) OFFICE OF THE CHIEF INFORMATION OFFICER 11-70007 The Status of Education's Implementation of the Clinger- 8/31/99 * 7 1 FY-2002 March 31, 1998 Cohen Act (SAR 36, pg. 19) * Non-monetary findings only ** Management Improvement Report (MIR) SAR- Semiannual Report CAP- Corrective Action Plan 1 ACN 17-30302 - OIG returned the CAP to Program Office on 8/18/00 due to conflicting information. A revised CAP was not received by OIG before reporting period ended. 2 ACN 17-48320 - OIG returned the CAP to Program Office on 8/18/00 due to conflicting information. A revised CAP was received by OIG and accepted by OIG after the reporting period ended, thus updated information will not be reflected in current SAR. 3 ACN 17-40302 - OIG returned the CAP to Program Office on 8/18/00 due to conflicting information. A revised CAP was not received by OIG before reporting period ended. 21 Appendix 3 ED/OIG Audit Services Reports on Education Department Programs and Activities (April 1, 2000 - September 30, 2000) 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 34 audit reports were issued by ED/OIG auditors. In addition, we issued 14 alternative products, which includes management information reports, action memoranda, and special projects. The 48 reports are listed below by program office. Report Number / Questioned Unsupported Better Use Number of Date Issued Report Title Costs** Costs of Funds Recommendations AUDIT REPORTS OFFICE OF THE CHIEF FINANCIAL OFFICER A02-80002 Recipient Financial Management System Contract Computer Data $39,565 * * 2 September 22, 2000 Systems, Incorporated, Rockville, Md. A03-80010 Audit of Drawdown Controls in Grant Administration and Payment * * * 2 September 13, 2000 Systems A07-A0014 Follow-up Review on Corrective Actions the Department Had Taken * * * 9 September 27, 2000 in Response to Issues Reported during the Office of Inspector General's Contract Monitoring Audits of Student Financial Assistance Information Technology Contracts OFFICE OF THE CHIEF INFORMATION OFFICER A11-90018 Review of EDNet Security * * * (a) July 10, 2000 A11-A0005 Review of Planning and Assessment Activities for Presidential * * * 10 September 14, 2000 Decision Directive 63 on Critical Infrastructure Protection OFFICE OF THE DEPUTY SECRETARY A11-A0014 Audit of the U.S. Department of Education's Controls over Cellular * * * 7 September 15, 2000 Phones OFFICE OF ELEMENTARY AND SECONDARY EDUCATION A01-90006 Puerto Rico Department of Education Needs Major Improvements $29,204 $152,065 * 18 September 27, 2000 in its Administration of the Even Start Program A01-90007 Puerto Rico Department of Education Needs Major Improvement $28,464 $53,988 * 17 September 27, 2000 in its Administration of the Governor's Safe and Drug-Free School Program A03-90023 Maryland State and Local Education Agencies' Compliance with the * * * 3 July 26, 2000 Gun-Free Schools Act of 1994 A03-A0007 West Virginia State and Local Education Agencies' Compliance with * * * 0 August 7, 2000 the Gun-Free Schools Act of 1994 A03-A0008 Colorado State and Local Education Agencies' Compliance with the * * * 3 September 13, 2000 Gun-Free Schools Act of 1994 A05-A0011 Wisconsin State and Local Education Agencies' Compliance with the * * * 4 August 21, 2000 Gun-Free Schools Act of 1994 A05-A0021 Audit of Selected Aspects of Alliance City Schools' Administration * * * 0 June 28, 2000 of the 21st Century Community Center (Learning Center) Program A06-A0005 Texas State and Local Education Agencies' Compliance with the * * * 0 June 20, 2000 Gun-Free Schools Act of 1994 A06-A0006 New Mexico State and Local Education Agencies' Compliance with * * * 6 September 28, 2000 the Gun-Free Schools Act of 1994 A09-90032 Audit of San Francisco Unified School District's Oversight of Title I * * * 6 August 4, 2000 Funds for Services to Private School Students as Authorized by the Elementary and Secondary Education Act A09-A0008 California State and Local Educational Agencies' Compliance with the * * * 6 September 20, 2000 Gun-Free Schools Act of 1994 * - Non-monetary findings only. ** - Includes other recommended recoveries. (a) - Number not cited due to the sensitivity of the report. A - Audit 22 Appendix 3 ED/OIG Audit Services Reports on Education Department Programs and Activities (April 1, 2000 - September 30, 2000) (cont.) Report Number / Questioned Unsupported Better Use Number of Date Issued Report Title Costs** Costs of Funds Recommendations AUDIT REPORTS OFFICE OF POSTSECONDARY EDUCATION A04-90014 Review of Title III Program, HEA, Compliance with GPRA * * * 7 June 30, 2000 Requirements for Implementation of Performance Indicators A04-A0009 Audit of the Higher Education Act Title III, Part A Higher Grant at $64,707 * * 2 September 29, 2000 Mars Hill College A05-A0003 Audit of the Student Support Services Project Administered by $60,880 * * 9 September 28, 2000 Mount Senario College, Ladysmith, Wisconsin OFFICE OF SPECIAL EDUCATION AND REHABILITATIVE SERVICES A05-A0027 Audit of Terminal Leave Costs at the Ohio Rehabilitation Services * * * 0 September 15, 2000 Commission under the State Vocational Rehabilitation Services Program A09-A0001 Arizona Department of Education Management Controls over IDEA, * * * 7 September 22, 2000 Part B-Special Education Performance Data STUDENT FINANCIAL ASSISTANCE A01-90005 The Recertification Process for Foreign Schools Needs To Be Improved * * * 4 September 29, 2000 A02-70010 Drake Business Schools Corporation - Refunds of Unearned Tuition, $72,493 * * 11 June 6, 2000 Fees and Other Institutional Charges A03-90003 Audit of Case Management and Oversight's Audit Tracking and * * * 7 September 29, 2000 Resolution Process A03-90005 Computer Dynamics Institute Incorporated's Eligibility to Participate $6,410,913 * * 6 September 15, 2000 in the Title IV Programs A04-90003 Review of Case Management & Oversight's Program Review Function * * * 3 September 21, 2000 A05-90052 Mount Senario College's Administration of the Title IV, HEA $40,942 * * 12 September 14, 2000 Program for the Period July 1, 1998 through June 30, 1999 A05-90024 Consolidating Defaulted Loans in the Federal Consolidation Loan * * * 3 September 28, 2000 Program within the Federal Family Education Loan (FFEL) Program A05-90054 Audit of the Title IV, Higher Education Act Programs Administered $86,189 * * 9 September 28, 2000 by Cleveland State University, Cleveland, Ohio A06-90004 Review of Student Financial Aid Compliance at Success Institute of $2,245,416 * * 3 August 7, 2000 Business A06-90012 Review of Student Financial Aid Compliance at the International $66,034 * * 4 August 8, 2000 Institute of Chinese Medicine A06-A0011 The Academy of Health Care Professions' Compliance with Selected * * * 0 September 20, 2000 Requirements of the Higher Education Act, Student Financial Assistance Programs A07-A0003 Audit of the Access America For Students Program (AAFS); * * * 2 September 28, 2000 Student Account Manager (SAM) Data * - Non-monetary findings only. ** - Includes other recommended recoveries. A- Audit 23 Appendix 3 ED/OIG Audit Services Reports on Education Department Programs and Activities (April 1, 2000 - September 30, 2000) (cont.) Report Number / Questioned Unsupported Better Use Number of Date Issued Report Title Costs** Costs of Funds Recommendations ALTERNATIVE AUDIT SERVICES PRODUCTS OFFICE OF THE CHIEF FINANCIAL OFFICER E07-A0017 Planned Payment to Contractor for Unauthorized Work * * * 3 May 8, 2000 (SFA Action Memo No. 00-01) E07-A0022 Duplicate Payments Made to Policy Studies Associates, Inc. * * * 1 July 13, 2000 (State and Local Action Memo No. 00-05) E07-A0032 Possible Impact of Guidance on ED's Control Environment * * * 2 September 25, 2000 (State and Local Action Memo No. 00-07) F07-90041 Audit of National Computer Systems' Central Processing System (b) * * 1 May 8, 2000 Contract Repricing and Equitable Adjustment Proposal OFFICE OF ELEMENTARY AND SECONDARY EDUCATION E03-A0008 Colorado Department of Education's Compliance with the Gun-Free * * * 1 May 11, 2000 Schools Act of 1994 (State and Local Action Memo No. 00-01) E04-A0007 Review of Alabama Title I Program (State and Local Action * * * 5 July 17, 2000 Memo No. 00-04) E09-A0013 California Department of Education's Compliance with the Gun-Free * * * 1 May 18, 2000 Schools Act of 1994 (State and Local Action Memo No. 00-02) OFFICE OF POSTSECONDARY EDUCATION A09-90030 Management Controls for Distance Education at State Agencies and * * * 0 September 27, 2000 Accrediting Agencies (Mgmt. Info. Rpt.) E07-A0012 Extension of the Project Period for Colorado State University's FY May 23, 2000 1994 Educational Opportunity Center Grant (State and Local * * * 2 No. 00-03) E07-A0029 TRIO Projects at Independence Community College, Kansas * * * 1 September 29, 2000 Critical Financial and Administrative Deficiencies (State and Local Action Memo No. 00-06) STUDENT FINANCIAL ASSISTANCE S11-90008 Results of Review of Controls over NSLDS's SSN Only Query * * * 2 August 3, 2000 Option (System Action Memo No. 00-01) NOT RELATED TO ANY PROGRAM OFFICE A05-A0024 Review of Travel Activities * * * 0 June 30, 2000 A05-A0032 Review of Travel Activities - First Update * * * 0 July 28, 2000 A05-A0034 Review of Travel Activities - Second Update * * * 0 September 29, 2000 * - Non-monetary findings only. ** - Includes other recommended recoveries. (b) - Not available under the Freedom of Information Act A- Audit E- Action Memo F- Field Pricing Propsal S- Special Project 24 Appendix 4 Other ED/OIG Reports on Education Department Programs and Activities Report ACN Number Report Title Date Issued ANALYSIS AND INSPECTION REPORTS S13A003 2000-001 Results of the OIG Review of the Office of Vocational and Adult Education's Internal Controls Over the April 18, 2000 Procurement of Goods and Services Using Third Party Drafts and Purchase Cards S13A003 2000-002 Results of the OIG Review of the Office of Elementary and Secondary Education's Internal Controls Over May 22, 2000 the Procurement of Goods and Services Using Third Party Drafts and Purchase Cards S13A003 2000-003 Results of the OIG Review of the Office of Bilingual Education and Minority Languages Affairs' Internal May 23, 2000 Controls Over the Procurement of Goods and Services Using Third Party Drafts and Purchase Cards S13A003 2000-004 Results of the OIG Review of the Office of Management's Internal Controls Over the Procurement of Goods June 26, 2000 and Services Using Third Party Drafts and Purchase Cards S13A003 2000-005 Results of the OIG Review of the Office of Special Education and Rehabilitative Services' Internal July 19, 2000 Controls Over the Procurement of Goods and Services Using Third Party Drafts and Purchase Cards S13A003 2000-006 Results of the OIG Review of the Office of Chief Financial Officer/Office of Chief Information Officer's July 26, 2000 Internal Controls Over the Procurement of Goods and Services Using Third Party Drafts and Purchase Cards S13A003 2000-007 Results of the OIG Review of the Office of Civil Rights' Internal Controls Over the Procurement of Goods August 2, 2000 and Services Using Third Party Drafts and Purchase Cards S13A003 2000-008 Results of the OIG Review of the Office of Intergovernmental and Interagency Affairs' Internal Controls August 18, 2000 Over the Procurement of Goods and Services Using Third Party Drafts and Purchase Cards S13A003 2000-009 Results of the OIG Review of the Office of Educational Research and Improvement's Internal Controls August 28, 2000 Over the Procurement of Goods and Services Using Third Party Drafts and Purchase Cards S13A003 2000-010 Results of the OIG Review of the Office of the Secretary/Office of Legislation and Congressional Affairs' August 31, 2000 Internal Controls Over the Procurement of Goods and Services Using Third Party Drafts and Purchase Cards S13A003 2000-011 Results of the OIG Review of the Office of the Under Secretary's Internal Controls Over the Procurement September 19, 2000 of Goods and Services Using Third Party Drafts and Purchase Cards S13A003 2000-012 Results of the OIG Review of the Office of the General Counsel's Internal Controls Over the Procurement September 18, 2000 of Goods and Services Using Third Party Drafts and Purchase Cards S13A003 2000-013 Results of the OIG Review of the Office of Postsecondary Education's Internal Controls Over the September 19, 2000 Procurement of Goods and Services Using Third Party Drafts and Purchase Cards INVESTIGATIVE PROGRAM ADVISORY REPORT Awarding of SFA Contracts to Public Strategies Group August 31, 2000 25 Appendix 5 Inspector General Issued Audit Reports with Questioned Costs 1 NUMBER QUESTIONED UNSUPPORTED2 A. For which no management decision has been made before the commencement of the reporting period (as adjusted) 36 $184,791,770 $16,202,219 B. Which were issued during the reporting period 11 9,350,896 206,053 Subtotals (A + B) 47 $194,142,666 $16,408,272 C. For which a management decision was made during the reporting period 7 $75,406,457 $107,634 (i) Dollar value of disallowed costs 63,135,452 0 (ii) Dollar value of costs not disallowed $12,271,005 $107,634 D. For which no management decision has been made by the end of the reporting period 40 $118,736,209 $16,300,638 E. For which no management decision was made within six months of issuance 28 $73,712,171 $10,064,075 1 None of the audits reported in this table were performed by the Defense Contract Audit Agency. 2 Included in questioned costs. 26 Appendix 6 Inspector General Issued Audit Reports with Recommendations for Better Use of Funds1 Number Dollar Value A. For which no manager decision has been made before the commencement of the reporting period (as adjusted) 5 $53,510,180 B. Which were issued during the reporting period 0 0 Subtotals (A + B) 5 $53,510,180 C. For which a management decision was made during the reporting period 3 $43,100,000 (i) Dollar value of recommendations that were agreed to by management 1 $34,500,000 (ii) Dollar value of recommendations that were not agreed to by management 2 $8,600,000 D. For which no management decision has been made by the end of the reporting period 2 $10,410,180 E. For which no management decision was made within six months of issuance 2 $10,410,180 1 None of the audits reported in this table were performed by the Defense Contract Audit Agency. 27 Appendix 7 Unresolved Reports Issued Prior to April 1, 2000 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 decisions had been made by the end of the reporting period. Report Number/ Report Title Total Monetary Number of Date Issued (Prior SAR No. and Pg.) Findings Recommendations New Since Last Reporting Period OFFICE OF ELEMENTARY AND SECONDARY EDUCATION 04-90008 Combining Funds in Schoolwide Programs * 3 March 29, 2000 Status: Program staff is working to resolve this by November. STUDENT FINANCIAL ASSISTANCE 05-90002 Audit of the Illinois Student Assistance Commission's Administration of $17,084 3 December 29, 1999 the Federal Family Education Loan Program Status: SFA and OIG have agreed to resolve the audit. OIG is awaiting audit clearance document and program determination letter. 06-80008 Audit of Capital City Trade and Technical School Inc. Compliance with $2,032,581 3 February 15, 2000 the 85 Percent Rule Status: On departmental administrative stay - SFA is working with OIG to resolve this audit as it contains 85/15 issues. 06-80013 Hallmark Institute of Aeronautics' Compliance with the 85 Percent Rule $5,204,586 3 March 6, 2000 Status: On departmental administrative stay - SFA is working with OIG to resolve this audit as it contains 85/15 issues. 06-90008 Southern Careers Institute's Compliance with the 85 Percent Rule * 1 March 30, 2000 Status: This audit was not resolved by 9/30/00 as the audit contained an 85/15 issue. However, on 10/16/00 this audit was resolved. 06-90011 Review of Collections Activities at Unger and Associates $833,897 4 February 8, 2000 Status: On departmental administrative stay - SFA will work this once the Department's administrative stay is lifted. 09-90011 Platt College- San Francisco Administration of Title IV Programs $191,721 10 February 28, 2000 Status: School requested additional time to respond to the report because they claim they did not receive the report. N06-90010 Inspection of Park College's Compliance with Student Financial $169,390 1 February 9, 2000 Assistance Requirements Status: This is an inspection report. On departmental administrative stay - SFA is working with OIG and OGC to resolve this. OFFICE OF THE CHIEF FINANCIAL OFFICER 05-90045 Audit of the Student Support Services Project Administered by Marian $77,959 10 March 27, 2000 College, Fond Du Lac, Wisconsin Status: Post audit group in OCFO stated that this audit was resolved September 6, 2000. However, OIG is awaiting the audit clearance document and program determination letter. 07-90003 Audit of the Central Processing System Contract $90,600 5 March 15, 2000 Status: Contracts and Purchasing Office of OFCO is in communication with NCS whether a refund of key personnel charges is due to the Department. 07-90017 Audit of Compliance with Cost Accounting Standards for Travel National * 4 March 16, 2000 Computer Systems, Iowa City, IA Status: Contract and Purchasing Office of OCFO has requested copies of revised travel policies. from NCS. OFFICE OF POSTSECONDARY EDUCATION 07-80027 Audit of Creighton University's Administration of its Federal TRIO $372,399 3 March 31, 2000 Projects Status: In July of 2000, Creighton paid $253,307 to resolve the monetary finding, and SFA expects to resolve the balance of the findings by January 2001. * - Non-monetary findings only. Note: Status comments agreed to or provided by Department. 28 Appendix 7 Unresolved Reports Issued Prior to April 1, 2000 (cont.) Report Number/ Report Title Total Monetary Number of Date Issued (Prior SAR No. and Pg.) Findings Recommendations Reported in Previous Semiannual Report OFFICE OF ELEMENTARY AND SECONDARY EDUCATION 02-50200 The Puerto Rico Department of Education Must Institute a Time * 1 November 14, 1997 Distribution System (SAR 36, pg. 13) Status: Representatives from OESE, OGC and OCFO are in the process of finalizing a time distribution agreement. 02-56113 Virgin Islands Department of Education (SAR 30, pg. 17) $10,375,000 14 February 17, 1995 Status: This audit was conducted by the Dept. of Interior OIG, and covered contracts under the Capital Improvement Program, Government of Virgin Islands. Resolution is tied to a complex, multi-office effort coordinated by senior ED officials. A program determination letter is in OGC for review. STUDENT FINANCIAL ASSISTANCE 02-80005 Universidad Inter Americana de Puerto Rico Needs to Improve its $1,268,256 16 July 23, 1999 Administration of Title IV Programs (SAR 39, pg. 23) Status: On departmental administrative stay - SFA will decide upon completion of a total file review being performed by the school. 04-60147 Review of Selected Aspects of the Kentucky Higher Education Assistance $1,263,251 3 February 18, 1997 Authority's Administration of the Federal Family Education Loan Program (SAR 39, pg. 9) Status: According to OCFO, funds have been deposited to a Federal Reserve Bank. Financial Partners Channel in SFA is requesting closure. OIG has not received this request. 06-70005 Professional Judgment at Yale University (SAR 36, pg. 18) $5,469 3 March 13, 1998 Status: On departmental administrative stay - SFA and OIG are awaiting the outcome of another audit dealing with professional judgment that has been appealed to the Secretary of Education. 06-70009 Professional Judgment at University of Colorado (SAR 37, pg. 17) $15,082 4 July 17, 1998 Status: On departmental administrative stay - SFA and OIG are awaiting the outcome of another audit dealing with professional judgment that has been appealed to the Secretary of Education. 07-23545 State of Missouri, Single Audit Two Years Ended June 30, 1991 $1,048,768 18 April 1, 1993 Status: This report is a single audit report prepared by State Auditor of Missouri that covered two years ended June 30, 1991. This is on departmental administrative stay. SFA is working with OGC to resolve some issues. 07-33123 State of Missouri, Single Audit Year Ended June 30, 1992 $187,530 18 March 7, 1994 Status: This report is a single audit report prepared by State Auditor of Missouri that covered the year ended June 30, 1992. This is on departmental administrative stay. SFA is working with OGC to resolve some issues. 09-33114 State of California, Single Audit Report Fiscal Year 1990-1991 in $4,191,032 6 December 24, 1993 Accordance with Federal OMB Circular A-128 Status: This is a single audit report prepared by Office of Auditor General, State of California that covered the period 7/1/90 to 6/30/91. Financial Partners Channel in SFA is developing a consolidated plan to resolve this along with other overdue California single audits and OIG 09-10005 report. OIG is awaiting a consolidated program determination letter. 09-10005 California Student Aid Commission: The Commission's Loans in $41,100,000 5 September 10, 1993 Repayment Were Overstated by $1.5 Billion (SAR 27, pg. 17) Status:Financial Partners Channel is developing a consolidated plan to resolve this along with other overdue California single audits. OIG is awaiting consolidated program determination letter. 09-70015 Associated Technical College (ATC) Eligibility of Institutions to $8,600,000 7 September 9, 1998 Participate in Title IV Programs & Other Issues (SAR 37, pg.16) Status: On departmental administrative stay - SFA is in the process of reviewing additional school records to ensure consistent application of the 85/15 eligibility calculation. * - Non-monetary findings only. Note: Status comments agreed to or provided by Department. 29 Appendix 7 Unresolved Reports Issued Prior to April 1, 2000 (cont.) Report Number/ Report Title Total Monetary Number of Date Issued (Prior SAR No. and Pg.) Findings Recommendations Reported in Previous Semiannual Report (cont.) STUDENT FINANCIAL ASSISTANCE (cont.) 09-80023 Academy Pacific Business & Travel College Eligibility to Participate in $6,649,689 3 December 21, 1998 Title IV Programs (SAR 38, pg.20) Status: On departmental administrative stay - SFA is in the process of reviewing additional school records to ensure consistent application of the 85/15 eligibility calculation. N04-70011 Inspection of CTI's Federal Student Financial Aid Programs $67,977 17 December 30, 1998 (SAR 38, pg. 22) Status: This is an Inspection Report. OIG is awaiting an Audit Clearance Document and program determination letter. SFA was informed that only a corrective action plan was needed to close this and provided a CAP to OCFO. OFFICE OF THE CHIEF FINANCIAL OFFICER 07-80018 Audit of Title IV Wide Area Network Contract National Computer $249,900 6 May 6, 1999 Systems, Iowa City, IA (SAR 39, pg. 4) Status: Contract and Purchasing Office of OCFO is in communication with NCS whether a refund of key charges is due the Department. 11-90004 Review of the Grant Administrations and Payment System (GAPS) * 8 May 7, 1999 Configuration Management Process (SAR 39, pg. 4) Status: Post Audit Group in OCFO is performing a quality review of a corrective action plan to be submitted to the OIG. 04-80009 Assessment of Direct Loan Consolidation Program Administration and * 6 May 28, 1999 Operations by EDS, Inc. Since December 1, 1997 (SAR 39, pg. 24) Status: SFA and OCFO have agreed to resolve some of the recommendations in this report. There are three recommendations that are not being accepted and a request will be made to OIG. OCFO will explore other recommendations and provide a response. * - Non-monetary findings only. Note: Status comments agreed to or provided by Department. 30 Appendix 8 Investigation Services Cumulative Prosecutive Actions Defendant/ Indicted/ Convicted Sentenced Adjudicated Subject Information Value SCHOOL CASES Alvarez, Georgina X Alvarez, Haydee X Burruss, William X X Campell, Mary Lou n X X $1,101 Carrandy, Mirium X Case, Angela X X Cockrum, Helen n n X $82,420 Farah, Albert X X Fields-Ellingboe, Eva X X Frost, Alan n X Frost, Ann n X Hall, Linda Higgs X X Harmon, Kathryn X X House James X Huggins, Jackie n X X $281,302 Jackson, Pam X Kraus, James X Lally, Thomas n n X $630,894 Ortega, Adminia X Sam, Osmara X Santa, Donna X X Snumpert-Harris, Rochelle X Sumner, Toni X X Torres, Alina X Torres, Gabriel X Torres, Marcial X Strain, Daniel X Trimble, Donald n n X $150,503 Valle, Hiran X X Whetstone, Edward X Yun, Anna n n X $8,240 TOTAL VALUE SCHOOL CASES $1,154,460 LENDER CASES Kroeplin, William n n X $5,870 TOTAL VALUE LENDER CASES $5,870 n - Action reported in previous period. X - Action reported in current period. 31 Appendix 8 Investigation Services Cumulative Prosecutive Actions (cont.) Defendant/ Indicted/ Adjudicated Subject Information Convicted Sentenced Value SFA RECIPIENT CASES Akhtar, Jabir X Apple, Gail X X X $64,750 Bauldwin, Linda X X Baeza, Christine X X X $1,914 Holloway, Bobbie X Mova, Houman X X Nasoori, Mashallah n n X $20,000 Neal, Sherry X X X $5,000 Pelsang, Daniel n X X $145,450 Pelsang, James n X X $100 Perkins, Lisa X Randolph-Vaughn, Cynthia n X X $8,160 Salama, Badi X X Sanders, Barbara X Warner-Washington, Jennifer X TOTAL VALUE SFA CASES $245,374 FOREIGN STUDY FFEL PROJECT Baugh, Melvin n n X $18,500 Brown, Albert n n X $10,080 Cortez, Conrad n n X $509,840 Heidari, Alireza X Kenney, Juwan n n X $17,760 Mansour, Surray X Mova, Houman n n X $33,000 Vilegas, Stephan n n X $17,760 TOTAL VALUE FFEL CASES $606,940 NON-SFA CASES Archuleta, Debra X X Boulier, John X X X $10,000 Buckler, Marianne X X McKay, Jimmy n X Morgan, Dennis X X Morgan, Lewis X Morgan, Raymond Jr. X X Morgan, Susan X Smith, Roy n X Sweeney, Robert X X Wasquez, Christopher X X TOTAL VALUE NON-SFA CASES $10,000 n - Action reported in previous period. X - Action reported in current period. 32 Appendix 8 Investigation Services Cumulative Prosecutive Actions (cont.) Defendant/ Civil Adjudicated Subject Matters Value CONSULTANT AND CLIENT CASES Amos, Eddiel X $2,000 Anderson, Anton X $4,940 Brown, Lesley X $2,470 Johnson, Natoshia X $8,320 Johnson, Stephanie X $7,920 McRay, Rashon X $4,090 Paradise, Roalyn X $3,510 Rias, Tarlishia X $7,920 Sappington, Tennille X $3,540 Sims, Elnora X $7,920 Walls, Sharon X $7,298 Washington, Marcus X $5,300 Watkins, Tanya X $21,000 Watson, Arleseuia X $2,470 Watson, Courtney X $2,581 TOTAL VALUE CONSULTANT/CLIENT CASES $91,279 CIVIL CASES CORUS/River Forest Bank X $7,775,000 CSC Credit Services, Inc X $6,417,114 Goings, DeAngeles X $16,540 Qualy, Ellen X $98,778 TOTAL VALUE CIVIL CASES $14,307,432 ASSET FORFEITURE Impact Aid Program X $1,657,980 TOTAL VALUE ASSET FORFEITURE $1,657,980 n - Action reported previous period. X - Action reported in current period. 33 Appendix 9 Collections from Audits and Investigations The House Report (H.R. 105-635) to accompany H.R. 4274, directs the Inspector General of the Department of Education to submit reports detailing recoveries and savings generated by its work. The following tables reflect that information. AUDIT Reports Reports Recommended Issued With Quest/Unsupp Quest/UnsuppQuest/Unsupp Management Write-Offs Collected/ FY Quest/UnsuppRecommended Resolved Resolved Decision Adjustments Recovered Balance 1998 11 $17,011,401 8 $6,162,004 $1,671,959 $0 $1,671,959 $0 1999 11 $69,804,793 8 $61,761,748 $32,631,082 $0 $22,215 $32,608,867 2000 21 $73,056,107 2 $54,724,994 $60,633,994 $0 $1,600,000 $59,033,994 Total 43 $159,872,301 18 $122,648,746 $94,937,035 $0 $3,294,174 $91,642,861 INVESTIGATION Fines, Restitutions, Amount Collected Amount Collected Amount FY Cases* Settlements and Judgments Current Period Prior Period(s) Collected 1998 293 $48,208,055 $368,764 $30,805,609 $31,174,373 1999 133 $19,154,906 $55,095 $7,025,578 $7,080,673 2000 100 $37,311,157 $21,082 $6,565 $27,647 Total 526 $104,674,118 $444,941 $37,837,752 $38,282,693 * Number of cases for which collection was ordered during the fiscal year. 34 Appendix 10 Statistical Profile April 1 - September 30, 2000 Six-month Fiscal Period Ending Year Ending 9/30/00 9/30/00 OIG AUDIT REPORTS ISSUED 34 55 Questioned Costs $9,144,843 $71,846,767 Unsupported Costs $206,053 $206,053 Recommendations for Better Use of Funds $0 $4,600,000 OTHER OIG PRODUCTS (Inspections, Action Memoranda, Information Reports, Advisory Reports, Special Studies, and Field Pricing Reviews) 28 38 OIG AUDIT REPORTS RESOLVED BY PROGRAM MANAGERS 18 38 Questioned Costs Sustained $63,135,452 $63,252,725 Unsupported Costs Sustained $0 $23,572,341 Additional Disallowances Identified by Program Managers $585,235 $683,066 Management Commitment to the Better Use of Funds $34,500,000 $34,500,000 INVESTIGATIVE CASE ACTIVITY Cases Open 129 239 Cases Closed 108 195 Cases Active at End of Period 362 362 Prosecutorial Decisions 62 113 -Accepted 55 98 -Declined 7 15 INVESTIGATION RESULTS Indictments/Information 36 1 71 Convictions/Pleas 36 60 Fines Ordered $12,200 $13,500 Restitution Payments Ordered $1,699,988 $14,588,708 Civil Settlement/Judgments 50 2 74 3 Civil Settlement/Judgments $14,626,038 $14,933,949 Savings $3,859,473 $4,530,559 1 Includes 2 cases that were not reported in the last semiannual report. 2 Includes 28 cases that were not reported in the last semiannual report. 3 Includes $204,847 that was not reported in the last semiannual report. 35
Semiannual Report - April 1, 2000 - September 30, 2000
Published by the Department of Education, Office of Inspector General on 2000-09-30.
Below is a raw (and likely hideous) rendition of the original report. (PDF)