oversight

Semiannual Report - April 1, 2002 - September 30, 2002

Published by the Department of Education, Office of Inspector General on 2002-09-30.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

  U.S. Department of Education
Office of Inspector General




   Semiannual Report
      to Congress
                No. 45


   April 1, 2002 – September 30, 2002
U.S. Department of Education
Rod Paige
Secretary


Office of Inspector General
John P. Higgins, Jr.
Acting Inspector General


Analysis & Inspection Services
Mary Mitchelson
Acting Assistant Inspector General


November 2002

This report is in the public domain. Authorization to reproduce it in whole or in part is granted. While
permission to reprint this publication is not necessary, the citation should be: U.S. Department of
Education, Office of Inspector General, Analysis & Inspection Services, Semiannual Report to Congress,
No. 45, Washington, DC 20202.

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This report is also available on the Department’s Web site, at: www.ed.gov/offfices/OIG.
On request, this publication is available in alternate formats, such as Braille, large print, audiotape, or
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 U.S. Department of Education

Office of Inspector General




    Semiannual Report

         to Congress

             No. 45

    April 1 - September 30, 2002
                      INSPECTOR GENERAL’S
                      MESSAGE TO CONGRESS
We are pleased to provide this semiannual report on the accomplishments of the Office of Inspector
General (OIG), U.S. Department of Education (Department), from April 1, 2002 to September 30, 2002.
During this time, we issued 60 audit and inspection reports and memoranda and closed 104
investigations.

Our work demonstrates OIG’s strong commitment and valuable role in assisting the Department in
ensuring the integrity of its operations and improving its programs to provide the best service to the
American public. We direct our resources to critical priorities that are central to the President’s
Management Agenda, the Department’s management challenges and strategic plan, and our strategic
plan.

We developed A Practical Guide for Reviewing Government Purchase Card Programs, edited by the
Department of Commerce OIG and published and distributed by the President’s Council on Integrity and
Efficiency. Abuse of these cards is unacceptable and compromises the public’s trust in government. Our
Guide is an effective resource for detecting and preventing this abuse. We conducted extensive work in
information technology (IT) security, a critical component of the Department’s operations, particularly in
light of the President’s mandate to expand electronic government. We continued our robust investigative
work in federal student aid programs which comprise more than half of the Department’s total budget.

We commented on final rulemaking pertaining to the Higher Education Act and, as we had with regard to
the proposed regulations, we nonconcurred with provisions on incentive compensation. We testified
before Congress on the status of the Department’s financial management and on the quality of audits
submitted by entities that receive federal funds.

The Secretary has made accountability of employees, operations, and programs the primary focus at the
Department, and our work fully supports this goal. We will continue our pursuit of improved
performance and meaningful results. In the next six months, we will focus audit, inspection, and
investigative attention on financial management, IT system security and continuity, federal student aid,
and No Child Left Behind. These areas are key priorities and essential to the Department’s mission and
goals.

We look forward to working with Congress and the Secretary in making a positive difference in the
Department’s programs and operations.




                                                                  John P. Higgins, Jr.
                                                                  Acting Inspector General
   ACTIVITIES AND ACCOMPLISHMENTS
 The Office of Inspector General (OIG), for the period April 1, 2002 – September 30, 2002, continued
 its work to improve the programs and operations of the Department of Education (Department or ED)
 and to protect their integrity.

 Our work assisted the Department in its efforts to meet the goals contained in The President’s
 Management Agenda, the Department’s Annual Plan, 2002-2003, OIG’s Strategic Plan, 2001-2005,
 the Secretary’s Blueprint for Management Excellence, and the Management Challenges of the
 Department of Education, February 2002. Our significant audits, investigations, and inspections are
 summarized below. Detailed information is available on our website at http://www.ed.gov/offices/
 OIG.


                           Improved Financial Performance
 Better financial management is vital to the Department’s ability to effectively and efficiently operate
 and deliver programs. We completed a number of audits, investigations, and inspections in the area of
 financial management, and testified before the House Subcommittee on Select Education, Committee
 on Education and the Workforce, on the status of financial management at the Department.

CONTROLS OVER        We conducted a follow-up audit on purchase cards to determine if the Department
PURCHASE CARDS       implemented our previous recommendations. We found that the Department had
                     made some progress, but recommended that it develop on-site guidelines, conduct
                     on-site internal control reviews, and reassess the number of cardholders assigned to
                     an approving official. The Department concurred with our recommendations.
                     (“Audit of Purchase Cards at the U.S. Department of Education,” ED-OIG/A17-
                     C0002, April 9, 2002.)

                     Purchase card review guide goes online

                     We developed A Practical Guide for Reviewing Government Purchase Card
                     Programs to assist OIGs and others in reviewing government purchase card
                     programs. Our guide, produced with the Commerce Department OIG and
                     published by the President’s Council on Integrity and Efficiency (PCIE), is a
                     valuable tool in detecting and preventing fraud, waste, and abuse. The PCIE
                     recognized the guide with an Award for Excellence. It is available online at http://
                     www.ignet.gov/pande/iande.html.




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                 Department employees charged in alleged scheme to misuse government-issued
                 credit cards

                 Our investigation led to the indictment and arrest of two former Department
                 employees who allegedly used their government credit cards to buy household
                 furniture and to pay contractors for work that was not performed. The Department
                 paid about $163,000 for claims as a result of this alleged scheme.

MONITORING       We evaluated the Department’s process for identifying and monitoring high-risk
HIGH-RISK        contracts that support educational research and improvement programs. We found
CONTRACTS        that the Department did not always ensure that the terms of these contracts were
                 followed, and therefore could not ensure that contract obligations were met. The
                 Department concurred with our recommendations and is taking corrective action.
                 (“Audit to Evaluate the Department of Education’s Process for Identifying and
                 Monitoring High-Risk Contracts that Support Office of Educational Research and
                 Improvement (OERI) Programs,” ED-OIG/A19-B0009, September 20, 2002.)

FINANCIAL        Our investigations resulted in a number of prosecutions for fraud against
INTEGRITY        Department programs. Seven individuals, including three Department employees,
INVESTIGATIONS   pled guilty for their roles in a wide-ranging conspiracy to defraud the Department
                 of over one million dollars in electronic equipment and false overtime charges.
                 (See Semiannual Report No. 44, page 5, “Telecommunications Case Pleas and
                 Conviction.”) The three Department employees no longer work for the
                 Department. Three indicted co-conspirators, one a Department employee on
                 indefinite suspension, elected to go to trial. The PCIE has recognized this
                 investigation with an Award for Excellence.

                 Our investigation of an assistant financial aid director in Knoxville, Tennessee led
                 to a guilty plea for mail fraud for submission of fraudulent Federal Family
                 Education Loan (FFEL) applications. This individual submitted loan applications
                 in another person’s name, used a false Social Security number, and falsely certified
                 loan checks through three guaranty agencies. We developed this case from
                 information received from an official at the Florida Office of Student Financial
                 Assistance during resolution of conflicts in the National Student Loan Data
                 System.

                 Another OIG investigation led to the indictment of two brothers on 29 counts of
                 student aid fraud, including the use of false Social Security numbers and birth
                 certificates to obtain federal financial aid. The brothers received approximately
                 $54,000 in aid.




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                       Assistant United States Attorney Barbara A. Grewe receiving an award from Secretary Rod Paige and
                       Acting Inspector General John Higgins, Jr. for her outstanding performance on the telecommunications
                       fraud investigation.


                        Information Technology Management
 Information technology (IT) is a critical component of the Department’s operations, particularly in
 light of the mandate to expand electronic government contained in The President’s Management
 Agenda. The Department’s more than 100 systems must be capable of ensuring the availability,
 confidentiality, and integrity of the data they contain.

GOVERNMENT           We issued our second evaluation of the Department’s information security plans,
INFORMATION          programs, and practices as required by GISRA. Our review identified a number of
SECURITY AND         material and significant weaknesses in technical security controls in four of the
REFORM ACT           Department’s mission-critical systems. We concluded that the Department was not
(GISRA)              in full compliance with GISRA. The Department agreed with most of our
                     recommendations. (“Department of Education’s Implementation of GISRA, Year
                     2,” ED-OIG/A11-C0008, September 16, 2002.)

GOVERNMENT           Our audit of the Department’s implementation of GPEA found that it has not
PAPERWORK            developed a Department-wide GPEA strategy or designated a manager to direct
ELIMINATION          GPEA activities. The Department agreed with some of our findings and
ACT (GPEA)           recommendations. (“Implementation of the Government Paperwork Elimination
                     Act,” ED-OIG/A11-C0009, September 30, 2002.)

ENTERPRISE           Our audit of the Department’s enterprise architecture found that the Department
ARCHITECTURE         and Federal Student Aid (FSA) have made progress toward completing an
                     architecture, but need to complete critical elements to use IT systems across the
                     Department in a cost-effective and efficient way. The Department and FSA
                     concurred with the report’s basic findings, but disagreed with some
                     recommendations. (“Audit of Enterprise Architecture,” ED-OIG/A07-C0001,
                     September 30, 2002.)

ADVICE AND           We shared our expertise by participating on several Department IT steering
ASSISTANCE           committees and working groups in an observer and advisory capacity. OIG


                                                                                                                        3
                    provided observations to the Deputy Secretary, Assistant Secretary for
                    Management, and Chief Information Officer, and identified opportunities for
                    improvement in the Investment Review Board’s IT investment management
                    process.

UNAUTHORIZED        OIG and the FBI continue to investigate the fraudulent diversion of $1.9 million in
TRANSFER OF         Impact Aid funds to improper bank accounts. The owner of one of the businesses
FUNDS               that fraudulently received funds pled guilty. Another individual was arrested for
                    allegedly conspiring to receive stolen government property.


                        Budget and Performance Integration
 Performance measures and reliable data are necessary to determine whether programs are
 accomplishing their purpose. The Department relies on program data from third parties for many of its
 programs, and our work continues to disclose inaccuracies in this information.

TITLE I             We issued a joint audit report with the U.S. General Accounting Office, the Texas
ACCOUNTABILITY      State Auditor’s Office, the Pennsylvania Office of the Auditor General, and the
DATA ISSUES         City of Philadelphia Office of the Controller, on Title I, Part A program
                    performance data. We found that many states are not complying with state
                    assessment requirements and that states are not ensuring that accountability data
                    are reliable. We recommended that the Department enhance its controls for
                    ensuring that states comply with statutory student assessment requirements and
                    that states implement reliable accountability systems. The Department generally
                    concurred with our findings. The PCIE has recognized this audit with an Award
                    for Excellence. (“A Joint Audit Report on the Status of State Student Assessment
                    Systems and the Quality of Title I School Accountability Data,” ED-OIG/S14-
                    C0001, August 31, 2002.)

INDIVIDUALS         We completed audits of compliance with the funding formula requirements for
WITH                IDEA in Texas, Missouri, Florida, Idaho, Rhode Island, and Tennessee. We found
DISABILITIES        that Florida, Tennessee, and Rhode Island incorrectly calculated the base that
EDUCATION ACT       determines how much funding they should receive. Florida and Tennessee
(IDEA) AUDITS       generally concurred with our findings. Rhode Island requested that we modify our
                    recommendation. (Texas: ED-OIG/A06-C0001, July 10, 2002; Missouri: ED-OIG/
                    A06-C0006, July 10, 2002; Florida: ED-OIG/A06-C0004, July 18, 2002; Idaho:
                    ED-OIG/A06-C0003, July 10, 2002; Rhode Island: ED-OIG/A06-C0002, June 27,
                    2002; Tennessee: ED-OIG/A06-C0005, June 25, 2002.)

FRAUD AGAINST       An OIG investigation led to a guilty plea by the former executive director of
ELEMENTARY          National School Services of Puerto Rico for conspiring to commit extortion. Our
AND SECONDARY       investigation disclosed that the individual paid over $150,000 in return for Puerto
PROGRAMS            Rico Department of Education (PRDE) contracts substantially funded with Title I
                    funds. The payments were made between late 1994 and April 2001, when National
                    School Services was awarded contracts valued at more than $26 million. Two OIG
                    audit reports previously cited PRDE for improper administration of Title I
                    contracts awarded to National School Services.

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                 Another OIG investigation led to the indictment of an Oakdale School District
                 (Oklahoma) employee for fraudulently obtaining over $120,000 in IDEA funds
                 provided by the Department to the State of Oklahoma. Our investigation found
                 that this individual used the Department’s money to buy vehicles and gifts for
                 acquaintances.

                 Our investigation of the former comptroller of the Douglas County, Georgia,
                 school system led to a sentence of 45 years in prison and a fine of $10,000. We
                 found that this person submitted fraudulent documents to obtain money for a
                 fictitious company.

                 A joint OIG/San Jose (California) Police Department investigation led to a guilty
                 plea by the accountant for the Alum Rock Union Elementary School District for
                 embezzling over $700,000 in Department funds. This individual deposited the
                 money in her personal bank account.

COMPLIANCE       We worked with the Department on a compliance agreement between the
ACTIVITY IN      Department and the Virgin Islands to address a number of problems in
VIRGIN ISLANDS   administration of elementary and secondary education programs. Our audits and
AND PUERTO       work by the Department and the Department of the Interior OIG had previously
RICO             identified these deficiencies. We also worked with the Department on an extensive
                 corrective action plan for the Puerto Rico Department of Education. The plan
                 addresses high-risk conditions and deficiencies identified in our PRDE Single
                 Audits and extensive OIG audit and investigative work.




GUARANTY         Our work involving guaranty agencies yielded significant audit and investigative
AGENCIES         results as discussed in the following summaries.




                                                                                              5
              Guaranty agencies’ failure to comply fully with federal and operating fund
              restrictions continues to result in improper exclusions

              Our audits of two guaranty agencies found that the agencies did not deposit FFEL
              funds into the appropriate reserve fund as required by the Higher Education Act.
              Departmental regulations provide that all earnings attributable to federal funds
              while held by the guaranty agency or its agent should follow those funds.

              Our audit at United Student Aid Funds, Inc. (USAF), found that USAF did not
              deposit about $6,626,000 into the Federal Fund. We recommended that the
              Department require USAF to transfer the $6,626,000 from its Operating Fund to
              the Federal Fund, and recover $6,288,000 of this amount to make the Operating
              Fund whole. USAF did not agree with our findings. (“United Student Aid Funds,
              Inc.’s Administration of the Federal Family Education Loan Program Federal and
              Operating Funds,” ED-OIG/A05-B0033, April 23, 2002.)

              At Oregon Student Assistance Commission (OSAC), we found that OSAC
              improperly excluded about $1.6 million from the fund balance when it established
              the Federal Fund, and improperly deposited about $160,000 of supplemental
              preclaims assistance payments into the Operating Fund instead of the Federal
              Fund. OSAC did not agree with our finding regarding improper exclusion of the
              $1.6 million. (“Oregon Student Assistance Commission’s Administration of the
              Federal Family Education Loan Program Federal and Operating Funds,” ED-OIG/
              A09-B0016, May 9, 2002.)

              Investigative initiatives add value to OIG efforts with guaranty agencies

              OIG investigations and presentations at guaranty agencies were important as we
              continue to work with these organizations to improve their integrity and
              accountability regarding Department funds and programs.

              Our investigation led to 23 months incarceration and the order to pay $163,670 in
              restitution for the financial aid director at Manhattan College. The official
              submitted fraudulent FFEL applications, in his name and others, to guaranty
              agencies from September 1998 through December 1999, claiming to be a student
              and requesting over $200,000 in loan proceeds.

              OIG agents presented four sessions on fraud and abuse to the financial aid
              community as part of a series of workshops offered by the Department on technical
              aspects of financial aid. We also participated in partnership meetings with
              representatives from California State licensing agencies, guaranty agencies, and
              other ED offices. We discussed closed schools, challenged schools, and
              coordinating student and citizen complaints among the various agencies.

PROGRAM       We provided assistance and information to the Office of Management and Budget
ASSESSMENT    (OMB) in connection with its review of Department programs under the Program
RATING TOOL   Assessment Rating Tool (PART) initiative. OMB is requiring agencies to have
ASSISTANCE    performance data that better describe programs funded in those agencies and
              requested that we review data collected from the Department for its PART

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                 assessments. Our recommendations to OMB resulted in modifications to the
                 Department assessments.

GRADUATION       We completed an inspection of graduation rates for less than two-year
RATES FOR LESS   postsecondary schools eligible to participate in FSA programs. We found that the
THAN TWO-YEAR    Department does not have formal procedures for enforcement against institutions
POSTSECONDARY    that do not submit mandatory graduation rate surveys. The Department concurred
INSTITUTIONS     with our recommendations to develop policies and procedures to ensure consistent
                 enforcement of Graduation Rate Survey reporting requirements, and to initiate
                 administrative action against non-compliant institutions. (“Graduation Rates for
                 Less than Two-Year Postsecondary Institutions,” ED-OIG/I13-C0001, August 19,
                 2002.)

STATE AGENCY     A joint OIG, FBI, and FEMA OIG investigation led to the California Department
AND              of Education (CDE) agreeing to pay up to $3.3 million to settle fraud allegations.
COMMUNITY-       CDE used Department grants to fund community-based organizations (CBOs) to
BASED            provide English as a Second Language and Citizenship training. CDE released
ORGANIZATION     funds to organizations that it knew lacked documentation to support the CBO
RETURN FUNDS     claims for funds, did not have proper not-for-profit status, and had falsified student
                 attendance records.

                 This investigation also led to a consent judgment of forfeiture between the United
                 States and Citizens in Action Community Development Corporation (CIACDC)
                 for $639,166. CIACDC was started and controlled by Hermandad Mexicana
                 Nacional Legal Center (HMNLC), to avoid the government’s seizure of the funds.
                 HMNLC is a non-profit CBO that received funds from CDE to provide adult
                 education courses.

NONFEDERAL       Participants in Department programs are required to submit annual audits
AUDIT            performed by independent public accountants (IPAs). In accordance with the
ACTIVITIES       Inspector General Act requirement to assure that work performed by nonfederal
                 auditors complies with government auditing standards, we publish audit guidance
                 specific to Department programs to assist IPAs in performing these audits.

                 We published a new Foreign School Audit Guide, for use by foreign schools
                 enrolling U.S. students receiving loans under the FFEL program. Our new guide
                 will facilitate compliance by foreign schools with the audit requirements of the
                 Higher Education Act and Department regulations.

                 We also performed quality control reviews (QCRs) of audits conducted by IPAs to
                 assess audit quality. We performed 51 QCRs of audits conducted by 48 different
                 IPA firms, or offices of firms with multiple offices. We found that 67 percent were
                 acceptable, 23 percent were technically deficient, and 10 percent were substandard.
                 We also referred four IPAs to the appropriate State Boards of Accountancy and
                 State Societies of Certified Public Accountants for possible disciplinary action for
                 substandard work. Three of these IPAs were referred for work reported in a prior
                 semiannual report.



                                                                                                  7
           Reduction of Fraud and Error in Student Aid Programs
                and Deficiencies in Financial Management
 Student financial aid programs are the Department’s largest dollar value programs. These programs are
 inherently risky since many recipients do not have a credit history. We made a number of
 recommendations to help the Department and FSA identify and address weaknesses.

INCENTIVE           We continue to find violations of the statutory prohibition against incentive
COMPENSATION        compensation, the practice of institutions paying individuals or organizations based
                    on their success in enrolling students or obtaining financial aid for the school.

                    University of La Verne

                    Our audit of University of La Verne in California found that the school violated the
                    statutory prohibition on incentive payments by implementing a marketing
                    incentive plan in academic year 1999-2000. This plan established a bonus pool
                    based on the revenue gained from enrollments in the university’s School of
                    Continuing Education exceeding a base enrollment quota. We recommended that
                    the university return to lenders $6,528,981 in FFEL funds, and repay the
                    Department interest and special allowance. We also recommended that the
                    university return $395,730 in Pell funds to the Department. The university agreed
                    with our findings, but disagreed with our recommendation to return Title IV funds.
                    (“University of La Verne’s Compliance with the Higher Education Act’s
                    Prohibition on Incentive Payments Based on Success in Securing Enrollments,”
                    ED-OIG/A09-C0004, June 21, 2002.)

                    Baker University

                    At Baker University in Kansas, we found that the university’s contract with the
                    Institute for Professional Development (IPD) to provide recruiting and accounting
                    services included a provision to pay IPD based on the number of students enrolled
                    in its School of Professional and Graduate Studies. IPD in turn paid its recruiters
                    based on the number of students they recruited for the programs. We
                    recommended that Baker return to lenders and the Department $13,935,295 in Title
                    IV funds disbursed to students who were improperly recruited. The university did
                    not agree with our findings and recommendations. (“Baker University School of
                    Professional and Graduate Study's Administration of Title IV Federal Student Aid
                    Programs,” ED-OIG/A07-A0030, September 19, 2002.)

                    Southern Wesleyan University

                    Our audit at Southern Wesleyan University in South Carolina found that the
                    university did not comply with the statutory prohibition on incentive compensation
                    and did not provide the number of instructional hours required to meet the statutory
                    definition of an academic year. We found that the university is liable for
                    $19,451,123 in Title IV funds. The university disagreed with our findings and



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                recommendations. (“Audit of Commissioned Sales and Course Length at Southern
                Wesleyan University,” ED-OIG/A06-A0024, September 4, 2002.)

NOTICE OF       We worked with the Department during negotiations on proposed rules regarding
PROPOSED        FSA programs and provided comments on several provisions. We nonconcurred
RULEMAKING      with one provision to change the incentive compensation regulations. This
(NPRM)          provision would allow institutions to pay third parties based on success in securing
                enrollment, without limitation on the incentive nature of those payments. We do
                not believe that the existing statutory ban on incentive compensation allows any
                incentive payments to entities involved in recruiting based on their success in
                enrolling students.

BONUSES FOR     Our investigation of a former employee at Miami Institute of Technology led to the
ENROLLMENTS     sentencing of a former admissions counselor who received a bonus or commission
                based on the students she enrolled. She was sentenced to two and one-half years
                probation and ordered to pay restitution of $48,825.

WEAKNESSES IN   The Higher Education Act requires that a student who does not have a high school
ABILITY-TO-     diploma or recognized equivalent must pass an independently administered ability-
BENEFIT         to-benefit (ATB) test to be eligible to receive federal student aid. We issued three
PROGRAM         audits on ATB issues.

                Federal Student Aid’s monitoring

                Our audit found that FSA does not effectively monitor Department-approved ATB
                test publishers to ensure compliance with applicable laws, regulations, and the
                terms of agreements with the Secretary. (“Audit of Procedures at Federal Student
                Aid for Monitoring the Ability-to-Benefit Test Publishers Approved by the U.S.
                Department of Education: American College Testing, The College Board, CTB/
                McGraw-Hill, and Wonderlic, Inc.,” ED-OIG/A03-B0001, August 22, 2002.)

                We recommended that FSA ensure that test publishers comply with requirements,
                and improve its processes for identifying and reporting retest errors so institutions
                have accurate and timely information when making eligibility determinations. We
                also recommended that FSA either withdraw the Department’s approval of
                American College Testing’s (ACT) Assessment Test or revise the agreement. FSA
                agreed with our recommendations and indicated that ACT has discontinued use of
                its assessment scores for ATB.

                We also recommended that the Department ensure that the regulations clearly
                define who is responsible for liabilities to ED regarding Title IV funds that students
                receive on the basis of an improper ATB test administration. The Department
                disagreed with this recommendation.

                American College Testing

                We found that ACT was not in compliance with its agreement with the Department
                for the approved use of its Career Programs Assessment Test. We recommended

                                                                                                 9
              that FSA require ACT to strengthen its management controls and ensure that
              institutions have accurate and timely information when making eligibility
              determinations. We also recommended that the Department reconsider its approval
              of ACT’s Assessment Test for ATB testing if ACT does not implement our
              recommendations. ACT concurred with most of our recommendations, and stated
              that it intends to address the issues we raised. (“Audit of American College
              Testing’s Ability-to-Benefit (ATB) Policies and Procedures for Its Career
              Programs Assessment Test (CPAt),” ED-OIG/A03-B0024, May 13, 2002.)

              Lincoln Technical Institute

              Our audit of Lincoln Technical Institute (LTI) in Pennsylvania found that between
              July 1, 1997 and November 7, 2000, LTI compromised the test security of ATB
              tests administered for its students. We recommended that FSA require LTI to
              repay the Department and the appropriate lenders $224,345 in Title IV funds. We
              also identified other weaknesses in the school’s ATB testing process. LTI
              disagreed with our findings and recommendations. (“Audit of the Ability-to-
              Benefit Testing Process at Lincoln Technical Institute, Inc.,” ED-OIG/A03-B001,
              May 10, 2002.)

              OIG investigates ATB scams

              An OIG investigation led to a guilty plea by a former Indiana beauty school owner
              for student aid fraud and money laundering. The resulting sentence included 15
              months incarceration, two years supervised release after incarceration, and an order
              to pay the Department $1,091,101. This individual enrolled students in an
              ineligible program and enrolled students without high school diplomas or GED
              certificates, or without taking an ability-to-benefit test. One other person was
              previously sentenced and another awaits sentencing.

FEDERAL       A significant portion of our investigative work is in federal student aid. Our cases
STUDENT AID   involved fraud by institution officials and by aid recipients. Institutional fraud can
FRAUD         be in the form of default and deferment fraud, refund fraud, and ineligible
              programs receiving funds. Because of OIG investigative efforts, this period six
              individuals were debarred and 17 suspended from participating in federal
              programs. Examples of significant prosecutions this period follow.

              Institutional fraud

              An OIG investigation led to a six-year prison term and restitution order of
              $11,659,499 for the leader of a fraud scheme. This person and six associates were
              charged in January 1997. The leader originally fled the country but was extradited
              to the United States in November 2001. The leader created a fictitious
              postsecondary institution, Toldos Yakov Yosef, Brooklyn, New York, for the
              purpose of collecting Pell Grants and other aid.

              Another of our investigations led to a guilty plea from a former chief financial aid
              officer at LeMoyne-Owen College, Memphis, Tennessee. The former aid officer


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issued approximately $72,000 in refund checks under the names of individuals who
were never students at the school.

An OIG investigation led to 27 months incarceration and an order to pay restitution
of $1,009,190 for the former owner of Unger and Associates (UAI) for misusing
client trust funds of over $1 million. This individual was also ordered to surrender
the net proceeds, amounting to approximately $300,000, from a recent sale of real
estate. UAI contracted with ED and over 200 colleges and universities to collect
on defaulted federal student loans and tuition. Between February 1998 and June
1999, UAI used over $1 million in client trust funds for personal and operating
expenses instead of remitting them to clients.

Recipient fraud

Recipient fraud includes falsification of income, identity theft, falsification of
eligibility status, and fraudulent loan discharges. We also had several significant
cases involving preparers assisting clients in obtaining aid for which they were not
eligible.

A former Chicago schoolteacher was sentenced to two years probation, fined
$2,000, and ordered to pay restitution of $26,150 for falsifying the Free
Application for Federal Student Aid (FAFSA). Our investigation disclosed that
this person provided false income information on the FAFSA and income tax
returns, allowing her son to receive Pell Grants and other aid for which he was
ineligible.

Our joint investigation with the Social Security Administration OIG and the FBI
resulted in an Illinois couple being found guilty of financial aid fraud and Social
Security fraud. For the last 18 years, the couple committed fraud that allowed them
to receive over $18,504 in federal and state financial aid and $426,000 in Social
Security benefits.

Our investigation of a financial aid consulting service owner led to his sentencing
to 51 months incarceration, and ordered restitution of $1,585,182 to the
Department and $1,057,580 to the Illinois Student Assistance Commission. This
person prepared more than 500 fraudulent student aid applications for clients who
underreported income to make them eligible for federal and state grant funds. He
was one of 27 individuals indicted in March 2001. To date, 26 have pled guilty and
over $3 million has been recovered through civil settlements and civil fraud filings.

Our investigation led to a guilty plea by a teacher’s assistant in Chicago for federal
student aid fraud. We found that this person paid a preparer to underreport parental
income in her children’s financial aid paperwork. The false income information,
submitted to three universities from 1989 through 1999, resulted in receipt of
$23,000 in federal student aid her children were ineligible to receive.




                                                                                 11
     OIG provides vital support for terrorist investigation

     OIG agents continue to support the investigation of the September 11, 2001,
     attacks on the World Trade Center and the Pentagon. Our agents are performing a
     number of key services, including analysis of electronic data and evaluation of
     terrorist internet data. We also initiated Project Strike Back to provide
     investigative and analytical support to the FBI in the nation’s terrorism
     investigation.




       These angels were presented to our office by an Oklahoma elementary school class to show their
       appreciation and support for the volunteers who helped in the various 9/11 recovery efforts.




12
                                Reporting Requirements (P.L. 95-452)
                                                                                                    Table    Page
  Section                                           Requirement                                    Number   Number

5(a)(1) and Significant Problems, Abuses, and Deficiencies
5(a)(2)
                   Activities and Accomplishments                                                    *        *

5(a)(3)            Uncompleted Corrective Actions
                   Recommendations Described in Previous Semiannual Reports on Which                 1        15
                   Corrective Action Has Not Been Completed

5(a)(4)            Matters Referred to Prosecutive Authorities
                   Investigation Services Cumulative Actions                                         7        24
                   Statistical Profile                                                               10       26

5(a)(5) and Summary of Instances Where Information Was Refused or Not
6(b)(2)     Provided**

5(a)(6)            Listing of Audit Reports
                   ED/OIG Audit Services Reports on Education Department Programs and                2        16
                   Activities

5(a)(7)            Summary of Significant Audits
                   Activities and Accomplishments                                                    *        *

5(a)(8)            Audit Reports Containing Questioned Costs
                   Inspector General Issued Audit Reports with Questioned Costs                      4        21

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     5        21
                   Funds

5(a)(10)           Summary of Unresolved Audit Reports Issued Prior to the
                   Beginning of the Reporting Period
                   Unresolved Reports Issued Prior to April 1, 2002                                  6        21

5(a)(11)           Significant Revised Management Decisions**

5(a)(12)           Significant Management Decisions with Which OIG
                   Disagreed**
* Information found on pages 1-12 of this report.

** No instances to report.




                                                                                                                   13
                              Management Challenges

     •   Correct long standing financial management problems


     •   Strengthen information technology security


     •   Improve internal controls


     •   Improve contract monitoring


     •   Balance compliance monitoring and technical assistance


     •   Meeting its goal of removing the federal student aid programs from the General
         Accounting Office “high risk” list


     •   Pursue appropriate electronic government initiatives


     •   Improve strategic management of human capital


     •   Improve and test continuity of operations plans


     •   Improve management of IT assets


     •   Obtain reliable performance data and improve performance measures




14
          Table 1: Recommendations Described in Previous Semiannual Reports on
                     Which Corrective Action Has Not Been Completed
   Report                                Report Title                                            Total     Number of    Latest
  Number/                      (Prior Semiannual Report [SAR]                          Date    Monetary Recommendations Target
(Date Issued)                         Number and Page)                                Resolved Findings  Open   Closed   Date
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.

New Since Last Reporting Period
Office of the Chief Financial Officer
A17-A0002       Fiscal Year 2000 Annual Financial Statements U.S. Department 09/30/01             *         2         19     02/03/03
(02/28/01)      of Education (SAR 42, pp. 1, 2)
Federal Student Aid
A17-A0003       Fiscal Year 2000 Annual Financial Statements Student Financial 06/30/01           *         2         16     02/03/03
(02/28/01)      Assistance (SAR 42, pp. 1, 2)

Audits Reported in Previous Semiannual Reports
Office of Postsecondary Education
A04-90014       Review of Title III Program, HEA, Compliance with GPRA                03/31/01    *         6          1     12/31/02
(06/30/00)      Requirements for Implementation of Performance Indicators
                (SAR 41, pg. 23)
Federal Student Aid
A01-90005       The Recertification Process for Foreign Schools Needs to Be           03/31/01    *         1          3     10/31/02
(09/29/00)      Improved (SAR 41, pg. 23)
A17-90018       Fiscal Year 1999 Annual Financial Statements Student Financial 09/30/00           *         1         22     12/31/02
(02/28/00)      Assistance (SAR 40, pg. 19)
Office of the Chief Financial Officer
A17-90019       Fiscal Year 1999 Annual Financial Statements U.S. Department 07/31/00             *         1         23     12/31/02
(02/28/00)      of Education (SAR 40, pg. 19)
Office of the Chief Information Officer
A11-90013       Review of Security Posture, Policies and Plans (SAR 40, pg. 3) 06/30/00           *         3         10     02/03/03
(02/25/00)
A11-90018       Review of EDNET Security (SAR 41, pg. 22)                             03/31/01    *         2         58     12/15/02
(07/10/00)
A11-A0005       Review of Planning and Assessment Activities for Presidential 03/31/01            *         2          8     02/03/03
(09/14/00)      Decision Directive 63 on Critical Infrastructure Protection
                (SAR 41, pg. 22)
Office of the Under Secretary
A17-70007       Moving Towards a Results-Oriented Organization: A Report on 01/31/00              *         **         8        **
(09/24/98)      the Status of ED’s Implementation of the Results Act (SAR 37,
                pg. 14)
* Non-monetary findings only.
** Closure request was not received by the Department before reporting period ended (09/30/02).




                                                                                                                               15
       Table 2: ED/OIG Audit Services Reports on Education Department Programs
                   and Activities (April 1, 2002 to September 30, 2002)
                                                                                                          Better
 Report                                                                   Date     Questioned Unsupported Use of Number of
 Number                            Report Title                          Issued     Costs**      Costs    Funds Recommend.
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
42 audit reports were issued by ED/OIG auditors. In addition, we issued 12 alternative products, which include 3 action memoranda,1
3 alert memoranda,2 1 information memorandum, and 5 special projects. The 42 reports, 5 special projects, and 1 information
memorandum are listed below by respective program office. The 6 action/alert memoranda, which have restricted distribution, are not
listed.

AUDIT REPORTS
Federal Student Aid (FSA)
A03-B0001 Audit of Procedures at Federal Student Aid (FSA) for      08/22/02            *             *            *           4
          Monitoring the Ability-to-Benefit (ATB) Test Publishers
          Approved by the U.S. Department of Education (ED):
          American College Testing (ACT), The College Board,
          CTB/McGraw-Hill, and Wonderlic, Inc. (Wonderlic)
          (OPE also designated as an action office for this report)
A03-B0013 Audit of the Ability-to-Benefit (ATB) Testing Process at      05/10/02    $256,946          *            *           9
          Lincoln Technical Institute, Inc. (LTI), Philadelphia, PA
A03-B0024 Audit of American College Testing’s Ability-to-Benefit        05/13/02        *             *            *          12
          (ATB) Policies and Procedures for its Career Programs
          Assessment Test (CPAt)
A04-B0015 Review of Cash Management and Student Financial               09/26/02    $997,313          *            *           7
          Assistance Refund Procedures at Bennett College (OPE
          designated as collateral action office for this report)
A05-B0019 Audit of Course Length at Trinity Christian College           09/17/02    $111,061          *            *           3
          (Trinity)
A05-B0033 United Student Aid Funds, Inc.’s Administration of the        04/23/02 $6,626,000           *            *           4
          Federal Family Education Loan Program Federal and
          Operating Funds
A05-B0037 Audit of the Administration of the Student Financial          07/23/02     $4,366           *            *           4
          Assistance Programs by Aakers Business College
          (College) during the period October 1, 1998, through
          September 30, 1999
A05-B0040 Audit of the Administration of Selected Aspects of the 08/07/02           $61,466           *            *           3
          Student Financial Assistance Programs by Globe College
          (College) during the period January 1, 1999, through
          December 31, 1999
A06-A0024 Audit of Commissioned Sales and Course Length at              09/04/02 $19,451,123          *            *           5
          Southern Wesleyan University
A06-B0007 University of San Francisco’s Administration of the           07/24/02    $201,655     $1,189,345        *           5
          William D. Ford Federal Direct Loan Program
A06-C0019 Audit of Wade College’s (Wade) Compliance with Title IV 06/19/02           $3,746           *            *           4
          of the Higher Education Act of 1965 (HEA), as amended,
          and selected regulations governing Federal Student
          Financial Assistance (SFA) Programs during the period
          July 1, 2000, through December 31, 2001



  16
      Table 2: ED/OIG Audit Services Reports on Education Department Programs
               and Activities (April 1, 2002 to September 30, 2002) (Cont.)
                                                                                                     Better
 Report                                                             Date      Questioned Unsupported Use of Number of
 Number                           Report Title                     Issued      Costs**      Costs    Funds Recommend.
A07-A0030 Baker University School of Professional and Graduate     09/19/02 $15,716,275       *        *       7
          Study’s Administration of Title IV Federal Student Aid
          Programs
A07-A0031 Fontbonne University Options Program’s Administration 09/30/02 $12,441,490          *        *       7
          of Title IV Federal Student Aid Programs
A07-B0002 Audit of the National Student Loan Program’s             09/27/02    $728,183   $1,944,758   *      10
          Establishment of the Federal Family Education Loan
          Program Federal and Operating Funds
A09-B0016 Oregon Student Assistance Commission’s Administration 05/09/02 $2,044,821       $1,985,628   *      10
          of the Federal Family Education Loan Program Federal
          and Operating Funds
A09-C0004 University of LaVerne’s Compliance with the Higher      06/21/02 $6,924,711         *        *       2
          Education Act’s Prohibition on Incentive Payments Based
          on Success in Securing Enrollments
A09-C0005 Silicon Valley College’s Administration of the Higher    09/20/02     $436          *        *       6
          Education Act, Title IV Programs
Office of the Chief Financial Officer (OCFO)
A07-B0016 The Department’s Management Controls over                09/26/02       *           *        *       5
          Discretionary Grants Need to be Strengthened to Ensure
          Grant Accountability
A07-C0008 Contract Closeout Audit of Office of Educational    09/12/02         $320,195       *        *       4
          Research and Improvement Contract No. RJ96006501 at
          Northwest Regional Educational Laboratory
A17-C0002 Audit of Purchase Cards at the U.S. Department of        04/09/02       *           *        *       4
          Education
A19-B0009 Audit to Evaluate the Department of Education’s Process 09/20/02      $4,853        *        *      20
          for Identifying and Monitoring High-Risk Contracts that
          Support Office of Educational Research and Improvement
          (OERI) Programs (OERI also designated as action office
          for this report)
Office of the Chief Information Officer (OCIO)
A07-C0001 Audit of Enterprise Architecture                         09/30/02       *           *        *       4
          (FSA also designated as action office for this report)
A11-C0008 The Department of Education’s Implementation of the      09/16/02       *           *        *      26
          Government Information Security Reform Act (GISRA)
          Year 23
A11-C0009 Implementation of the Government Paperwork               09/30/02       *           *        *       2
          Elimination Act




                                                                                                               17
       Table 2: ED/OIG Audit Services Reports on Education Department Programs
                and Activities (April 1, 2002 to September 30, 2002) (Cont.)
                                                                                                        Better
 Report                                                                Date      Questioned Unsupported Use of Number of
 Number                           Report Title                        Issued      Costs**      Costs    Funds Recommend.
Office of Educational Research and Improvement (OERI)
A05-C0011 Audit of the Public Broadcasting Service’s (PBS)         09/10/02        $1,974     $147,456     *      5
          Administration of the TeacherLine Grant No.
          R286A000003-01 (Grant) awarded under the
          Telecommunications Demonstration Project for
          Mathematics for the period June 1, 2000, through May 31,
          2001
A05-C0020 Audit of the Public Broadcasting Service’s (PBS)            09/10/02      $52       $140,664     *      4
          Administration of the Ready-To-Learn Cooperative
          Agreement No. R295A000002 (Agreement) awarded
          under the Department of Education’s Ready-To-Learn
          Television Program for the period September 1, 2000,
          through August 31, 2001
Office of Elementary and Secondary Education (OESE)
A02-B0025 Puerto Rico Department of Education Did Not Administer 09/12/02         $371,748   $1,774,275    *     10
          Properly Three Contracts with R.V. Research and
          Management Group, Inc.
A03-B0023 Audit of Caroline Wilder Harris (C.W. Harris) Elementary 09/17/02          *        $43,159      *      2
          School’s Federal Grant Expenditures for the period July 1,
          1999, through June 30, 2001
A05-B0011 Audit of the Title I, Part A, Targeted Assistance Schools   08/02/02    $120,760    $338,571     *      4
          Grant (Grant) Administered by the Mount Clemens
          Community Schools District (District) for the July 1,
          1997, through June 30, 1998, Award Year
A05-B0038 Audit of the Michigan Department of Education’s (MDE) 09/06/02             *           *         *      0
          Administration of Selected Federal Funds Provided to
          Charter Schools for the period October 1, 1999, through
          September 30, 2000
A05-C0012 Audit of East Cleveland City Schools’ (ECCS)              09/18/02      $38,678     $310,959     *      9
          Administration of the 21st Century Community Learning
          Centers (21st Century) Grant at Kirk Middle School (Kirk)
          for the period June 1, 1998, through December 31, 2001
Office of Postsecondary Education (OPE)
A03-B0026 Audit of Delaware State University’s Administration of      07/11/02       *           *         *      7
          the Title III Strengthening HBCU Program
A05-B0035 Audit of Robert Morris College’s Administration of the      09/27/02    $20,151        *         *     12
          Talent Search, Upward Bound, and Student Support
          Services Programs Chicago, Illinois
A07-A0033 Audit of Gaining Early Awareness and Readiness for          06/07/02       *           *         *      8
          Undergraduate Programs
Office of Special Education and Rehabilitative Services (OSERS)
A02-B0014 Audit of the Puerto Rico Vocational Rehabilitation          06/26/02       *       $15,800,000   *      5
          Administration (PRVRA)




  18
      Table 2: ED/OIG Audit Services Reports on Education Department Programs
               and Activities (April 1, 2002 to September 30, 2002) (Cont.)
                                                                                                       Better
 Report                                                               Date      Questioned Unsupported Use of Number of
 Number                          Report Title                        Issued      Costs**      Costs    Funds Recommend.
A06-B0028 Allowability of Office of Special Education and            05/23/02    $17,220    $45,500     *        5
          Rehabilitative Services’ Grant Charges by Partners
          Resource Network, Inc., Beaumont, Texas
A06-C0001 Audit of the Individuals with Disabilities Education Act   07/10/02       *         *         *        0
          (IDEA), Part B, Section 611, at the Texas Education
          Agency (Texas)
A06-C0002 Audit of the Individuals with Disabilities Education Act 06/27/02         *         *         *        1
          (IDEA), Part B, Section 611, at the State of Rhode Island’s
          Elementary and Secondary Education (Rhode Island)
A06-C0003 Audit of the Individuals with Disabilities Education Act   07/10/02       *         *         *        0
          (IDEA), Part B, Section 611, at the Idaho State
          Department of Education (Idaho)
A06-C0004 Audit of the Individuals with Disabilities Education Act 07/18/02         *         *         *        1
          (IDEA), Part B, Section 611, at the Florida Department of
          Education (Florida)
A06-C0005 Audit of the Individuals with Disabilities Education Act 06/25/02         *         *         *        1
          (IDEA), Part B, Section 611, at the Tennessee Department
          of Education (Tennessee)
A06-C0006 Audit of the Individuals with Disabilities Education Act 07/10/02         *         *         *        0
          (IDEA), Part B, Section 611, at the Missouri Department
          of Elementary and Secondary Education (Missouri)

ALTERNATE AUDIT SERVICES PRODUCTS
Office of the Chief Financial Officer (OCFO)
S17-C0010 Review of Third Party Drafts Questioned by the U.S.        09/27/02       *         *         *        0
          General Accounting Office
Office of Elementary and Secondary Education (OESE)
S14-C0001 A Joint Audit Report on the Status of State Student     08/31/02          *         *         *        6
          Assessment Systems and the Quality of Title I School
          Accountability Data (joint effort of GAO, ED/OIG, Texas
          State Auditor’s Office, Pennsylvania Department of the
          Auditor General, and the Office of the City Controller,
          Philadelphia)
Federal Student Aid (FSA)
E07-C0017 Colorado Student Loan Program’s Proposed Fiscal            07/09/02       *         *         *        0
          Separation of the Loan Servicing Unit and Proposed
          Buyout of Federal Non-liquid Assets (issued to FSA and
          OPE as Information Memorandum FSA No. 02-01)
S07-C0024 Results of the OIG Analysis of the Consistent Answers for 09/30/02        *         *         *       15
          Customers Share-In-Savings Proposals (special project to
          assist ED with on-going negotiation efforts)3




                                                                                                                 19
         Table 2: ED/OIG Audit Services Reports on Education Department Programs
                  and Activities (April 1, 2002 to September 30, 2002) (Cont.)
                                                                                                                 Better
    Report                                                                        Date    Questioned Unsupported Use of Number of
    Number                             Report Title                              Issued    Costs**      Costs    Funds Recommend.
Office of Postsecondary Education (OPE)
A09-C0016 North Central Association of Colleges and Schools’                  09/26/02         *               *            *           0
          (NCACS) Accreditation Standards for Student
          Achievement and Program Length (Management
          Information Report to assist ED with its oversight over
          accrediting agencies and to provide suggestions for
          enhancement to NCACS)
A09-C0017 Accrediting Commission of Career Schools and Colleges 09/27/02                       *               *            *           0
          of Technology’s (ACCSCT) Accreditation Standards for
          Student Achievement and Program Length (Management
          Information Report to assist ED with its oversight over
          accrediting agencies and to provide suggestions for
          enhancement to ACCSCT)

* Non-monetary finding only.         ** Includes other recommended recoveries.
A - Audit   S - Special Report        E - Action Memorandum
1
 Action Memoranda notify the Department’s management of issues and problems detected so that appropriate action is taken. Action Memoranda
are pre-decisional and will not appear on our website.
2 Alert Memoranda notify the Department’s management of issues and problems detected so that appropriate action is taken.
                                                                                                                         An Alert Memorandum
was used because issues and problems were identified that were outside our scope of review. Alert Memoranda are final and will appear on our
website unless information is restricted.
3 Restricted   distribution.




           Table 3: Other ED/OIG Reports on Education Department Programs and
                       Activities (April 1, 2002 to September 30, 2002)
     Report
     Number                                                   Title of Report                                                   Date Issued
I13-C0025             A Practical Guide for Reviewing Government Purchase Card Programs                                          06/11/02
I13-C0013             OIG Review of the Department’s Physical Security Assessment Report II                                      06/13/02
I13-C0020             OIG Review of the OMB PART Tool and Spring Assessments                                                     06/28/02
I13-C0012             Development of Core Competencies for OIG Analysis and Inspection Services                                  08/08/02
I13-C0001             Graduation Rates for Less Than Two-Year Postsecondary Institutions                                         08/19/02
I13-C0020             OIG Review of OMB Draft PART Assessments                                                                   09/13/02




    20
              Table 4: Inspector General Issued Audit Reports with Questioned Costs1
                                                                                                 Number        Questioned         Unsupported2
      A.      For which no management decision has been made before the                              44         $122,819,629         $23,941,455
              commencement of the reporting period (as adjusted)3
      B.      Which were issued during the reporting period                                          26          $90,064,778         $24,510,470
                   Subtotals (A + B)                                                                 70        $212,884,407          $48,451,925
      C.      For which a management decision was made during the reporting period                   17             $9,304,915        $3,337,836
              (i) Dollar value of disallowed costs                                                                  $9,240,307        $3,337,836
              (ii) Dollar value of costs not disallowed                                                               $64,608                   $0
      D.      For which no management decision has been made by the end of the                       53         $203,579,492         $45,114,089
              reporting period
      E.      For which no management decision was made within six months of                         27         $113,514,714         $20,603,619
              issuance

1
    None of the audits reported in this table were performed by the Defense Contract Audit Agency.
2   Included in questioned costs.
3
 Beginning balance for Unsupported Costs was decreased by $100,000 (adjustment made to our database for audit A07-A0006). Also, beginning
balance for Questioned Costs was increased by $2,214 (adjustment made to our database for audit A05-90054).



           Table 5: Inspector General Issued Audit Reports with Recommendations for
                                       Better Use of Funds
                                                                                                          Number                 Dollar Value

No activity to report


                          Table 6: Unresolved Reports Issued Prior to April 1, 2002
                                                                                                                        Total
    Report                                         Report Title                                             Date      Monetary Number of
    Number                          (Prior Semiannual [SAR] Number and Page)                               Issued     Findings Recommend.
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.

New Since Last Reporting Period
Federal Student Aid
A03-A0022 Audit of Commissioned Sales and Course Length at Wesley College                                  01/15/02 $1,431,560            5
    Status: Audit was placed on administrative stay on January 29, 2002.

A03-B0022 Audit of Wonderlic’s Ability-to-Benefit Program                                02/05/02          *                              4
    Status: Following discussions with FSA and OPE, OPE has been designated as the action office for this audit.
A04-10008 CSX Commercial Services, Inc. (SAR 27, pg. 34)                                      09/17/93 $19,900,000                        9
     Status: This audit came off administrative stay. Program office is researching payment history.




                                                                                                                                           21
                Table 6: Unresolved Reports Issued Prior to April 1, 2002 (Cont.)
                                                                                                            Total
 Report                                     Report Title                                        Date      Monetary Number of
 Number                      (Prior Semiannual [SAR] Number and Page)                          Issued     Findings Recommend.
A05-B0003 Audit of Commissioned Sales and Course Length at Benedictine University             12/13/01    $221,988        5
    Status: Audit was placed on administrative stay on March 19, 2002.

A06-B0012 Audit of Los Angeles City College’s Compliance with the Title IV, Student           11/14/01     $14,072        3
            Financial Assistance, Verification Requirements
    Status: Program office is working on final audit determination.

Office of the Chief Financial Officer
A19-B0010 Audit of Controls over Government Travel Cards                                      03/27/02     $52,963        7
    Status: Progress is being made in resolving and closing the audit.

Office of Elementary and Secondary Education
A03-B0025 Improving Title I Data Integrity for Schools Identified for Improvement             03/27/02        *           4
    Status: Action items submitted to OIG on October 1, 2002.

Office of Postsecondary Education
A07-90034 Department Controls over TRIO Grantee Monitoring                                    01/04/02        *           9
     Status: Waiting for a response from program office.

Reported in Previous Semiannual Reports
Federal Student Aid
A02-70010 Drake Business Schools Corporation - Refunds of Unearned Tuition, Fees and        06/06/00 $72,493              11
             Other Institutional Charges (SAR 41, pg. 23)
     Status: Audit was placed on administrative stay on March 29, 2001. Office of the General Counsel required additional audit
             work before the final audit determination can be issued.

A03-90005 Computer Dynamics Institute Incorporated’s Eligibility to Participate in the Title 09/15/00 $6,410,913          6
             IV Programs (SAR 41, pg. 23)
     Status: Program office informed us that the audit is resolved. It will be removed in the next Semiannual Report.

A05-A0030 Audit of Commissioned Sales at Olivet Nazarene University (SAR 43, pg. 11)          05/21/01 $3,299,891         4
    Status: Audit was placed on administrative stay on July 26, 2001.

A05-B0004 Indiana Wesleyan University, Adult and Professional Studies Administration of       09/28/01 $31,682,782        5
            Title IV Programs, Marion, Indiana (SAR 43, pg. 11)
    Status: Audit was placed on administrative stay on October 24, 2001.
A05-B0014 Audit of Course Length at Olivet Nazarene University (SAR 43, pg. 12)               09/28/01        *           4
    Status: Audit was placed on administrative stay on October 24, 2001.

A06-70005 Professional Judgment at Yale University (SAR 36, pg. 18)                           03/13/98      $5,469        3
     Status: Audit was placed on administrative stay on June 29, 2000.

A06-70009 Professional Judgment at University of Colorado (SAR 37, pg. 17)                    07/17/98     $15,082        4
     Status: Audit was placed on administrative stay on June 29, 2000.

A06-90010 International Aviation and Travel Academy’s Administration of Title IV Student 03/29/01 $6,637,634              7
             Financial Assistance Programs (SAR 42, pg. 22)
     Status: Audit was placed on administrative stay on September 24, 2001.



  22
                Table 6: Unresolved Reports Issued Prior to April 1, 2002 (Cont.)
                                                                                                            Total
 Report                                      Report Title                                        Date     Monetary Number of
 Number                       (Prior Semiannual [SAR] Number and Page)                          Issued    Findings Recommend.
A06-A0001 Interactive Learning Systems’ Administration of the Title IV Student Financial       07/20/01    $990,828           7
            Assistance Programs (SAR 43, pg. 12)
    Status: This audit is currently being reviewed by FSA staff - Dallas Case Team.

A06-A0003 International Business College’s Administration of Title IV Student Financial        03/28/01    $461,035           4
            Assistance Programs (SAR 42, pg. 22)
    Status: FSA is working on final audit determination.
A06-A0015 ESS College of Business’ Administration of the Title IV Student Financial            08/29/01 $4,439,651            4
            Assistance Programs (SAR 43, pg. 12)
    Status: FSA is working on final audit determination.

A06-B0014 Audit of United Education Institute’s Compliance with the Title IV, Student          09/28/01     $7,285            1
            Financial Assistance, Verification Requirements (SAR 43, pg. 12)
    Status: This audit is being reviewed by the case team.
A07-23545 State of Missouri, Single Audit Two Years Ended June 30, 1991                          04/01/93 $1,048,768         18
     Status: This is a single audit report prepared by the State Auditor of Missouri that covered two years ending June 30, 1991.
             Findings require further discussions with the General Manager, Chief Operating Officer, Office of Postsecondary
             Education, and Office of the Deputy Secretary.

A07-33123 State of Missouri, Single Audit Year Ended June 30, 1992                               03/07/94 $187,530            18
     Status: This is a single audit report prepared by the State Auditor of Missouri that covered the year ending June 30, 1992.
             Findings require further discussions with the General Manager, Chief Operating Officer, Office of Postsecondary
             Education, and Office of the Deputy Secretary.

A07-90035 Audit of Commissioned Sales at William Penn University (SAR 43, pg. 12)              05/15/01 $5,023,447            4
     Status: Audit was placed on administrative stay on August 1, 2001.
A07-B0001 Audit of Course Length at William Penn University (SAR 43, pg. 12)                   09/28/01        *              4
    Status: Audit was placed on administrative stay on October 24, 2001.

A09-70015 Associated Technical College (ATC) Eligibility of Institutions to Participate in     09/09/98 $8,600,000            7
             Title IV Programs & Other Issues (SAR 37, pg. 16)
     Status: FSA is working on final audit determination.

N06-90010 Inspection of Parks College’s Compliance with Student Financial Assistance           02/09/00    $169,390           1
             Requirements (SAR 40, pg. 18)
     Status: Discussions are in progress as to the responsible party to resolve this audit.

Office of Elementary and Secondary Education
A01-90006 Puerto Rico Department of Education Needs Major Improvements in its                  09/27/00    $181,305          18
             Administration of the Even Start Program (SAR 41, pg. 22)
     Status: A Department team is working on the resolution of this audit.
A01-90007 Puerto Rico Department of Education Needs Major Improvements in its            09/27/00           $82,452          17
             Administration of the Governor’s Safe and Drug-Free School Program (SAR 41,
             pg. 22)
     Status: A Department team is working on the resolution of this audit.

A01-A0004 Puerto Rico Department of Education Did Not Administer Properly a $9,700,000 03/28/01 $7,841,493                   14
            Contract with National School Services of Puerto Rico (SAR 42, pg. 21)
    Status: A Department team is working on the resolution of this audit.


                                                                                                                               23
                 Table 6: Unresolved Reports Issued Prior to April 1, 2002 (Cont.)
                                                                                                                     Total
 Report                                       Report Title                                              Date       Monetary Number of
 Number                        (Prior Semiannual [SAR] Number and Page)                                Issued      Findings Recommend.
A02-50200 The Puerto Rico Department of Education Must Institute a Time Distribution                11/14/97             *           1
             System (SAR 36, pg. 13)
     Status: A Department team is working on the resolution of this audit.

A02-B0012 Puerto Rico Department of Education Did Not Administer Properly Title I                   09/28/01       $8,412,28        10
            Contracts with National School Services of Puerto Rico for the 1999/2000 and
            2000/2001 School Years (SAR 43, pg. 11)
    Status: Audit was placed on administrative stay on February 7, 2002.

Office of Postsecondary Education
A05-A0026 Audit of Richard J. Daley College’s Administration of Selected Aspects of Its             03/30/01 $1,621,861              2
            Strengthening Institutions - Hispanic Serving Institution Program, Chicago,
            Illinois (SAR 42, pg. 21)
    Status: Waiting for a response from the program office.

Office of Special Education and Rehabilitative Services
A04-A0015 The Virgin Islands Government Lacks Adequate Management Controls Over the 07/25/01 $4,702,542                             15
            Administration of Its IDEA, Part B Grant Program Salary Costs (SAR 43, pg. 11)
    Status: Audit was placed on administrative stay on January 15, 2002.

A04-B0013 Audit of the Virgin Islands Department of Education, Special Education Payroll 07/17/01                        *           4
            (SAR 43, pg. 11)
    Status: Audit was placed on administrative stay on January 15, 2002.


* Non-monetary findings only.
Note - Status comments reflect documents received, comments agreed to, or comments provided by the Department.



                 Table 7: Investigation Services Cumulative Actions (April 1, 2002
                                      to September 30, 2002)
                                                                 Indicted/                                                      Adjudicated
                      Subject/Period                           Information      Convicted     Sentenced         Civil Matters     Value

School Cases
April 1, 2002 - September 30, 2002                                   13             17            16                 0           $1,760,811
Fiscal Year 2002 Total                                               30             30            38                 0          $16,302,910

Federal Student Aid Recipient Cases
April 1, 2002 - September 30, 2002                                   44             25            28                 67          $1,432,557
Fiscal Year 2002 Total                                               58             50            64                179          $2,847,060

Internal Employee Cases
April 1, 2002 - September 30, 2002                                   3               0             0                 0                   $0
Fiscal Year 2002 Total                                               3               4             1                 0                   $0




   24
                     Table 7: Investigation Services Cumulative Actions (April 1, 2002
                                      to September 30, 2002) (Cont.)
                                                                       Indicted/                                                       Adjudicated
                          Subject/Period                             Information      Convicted       Sentenced       Civil Matters      Value

Other Cases
April 1, 2002 - September 30, 2002                                          3               9              7                2            $4,051,050
Fiscal Year 2002 Total                                                     23              22             10                2            $4,075,503




                                                Table 8: Collections from Audits
                        Reports Issued with         Recommended
                           Questioned/ Questioned/ Questioned/
               Questioned/ Unsupported Unsupported Unsupported Management Write-Offs                                    Collected/
      FY       Unsupport. /Recomend.       Resolved   Resolved  Decisions Adjustments                                   Recovered        Balance
The House Report (H.R. 105-635) to accompany H.R. 4274, directs the Office of Inspector General of the Department of Education to
submit reports detailing recoveries and savings generated by its work. The following table reflects that information.
    1998             11          $17,011,401           8             $8,390,850       $5,350,168                 $0     $1,630,691       $3,719,477
    1999             11         $69,804,793           11            $69,804,793      $38,255,609          $95,0851     $1,556,9252      $36,603,599
    2000             21         $72,886,717           17            $66,142,528      $65,834,467     $48,600,0003      $2,034,6374      $15,199,830
    2001             23         $82,435,089           11             $7,314,508       $7,012,608                 $0        $97,375       $6,915,233
    2002             37          $93,115,338           7             $1,329,927       $1,271,983                 $0        $32,271       $1,239,712
    Total           103        $335,253,338           54           $152,982,606 $117,724,835          $48,695,085       $5,351,899      $63,677,851

1 Total   includes adjustment of $95,085 as a result of settlement agreement.
2
    Total includes offset of $249,900.
3 Total
          includes a settlement agreement dated March 27, 2000.
4
    Total includes two offsets totaling $130,165 ($90,600 + $39,565) and one deobligation for $77,959 for a total of $208,124.




                                         Table 9: Collections from Investigations
                         Number of             Fines, Restitutions,                                                            Total Amount
                     Investigations with        Settlements and      Amount Collected      Amount Collected                 Collected (10/01/01 -
        FY                Penalties                Judgments        (04/01/02 - 09/30/02) (10/01/01 - 03/31/02)                  09/30/02)
The House Report (H.R. 105-635) to accompany H.R. 4274, directs the Office of Inspector General of the Department of Education to
submit reports detailing recoveries and savings generated by its work. The following table reflects that information.
      1998                    180                  $48,208,055                    $9,461              $31,599,932                $31,609,393
      1999                    274                  $19,154,906                   $24,060               $7,140,166                 $7,164,226
      2000                    119                  $37,311,157                   $33,933                 $109,681                     $143,614
      2001                    130                    $9,808,716                  $92,937                   $88,539                    $181,476
      2002                    339                  $29,217,458                  $176,294                 $290,176                     $466,470
      Total                  1042                 $143,700,292                  $336,685              $39,228,494                $39,565,179




                                                                                                                                             25
                     Table 10: Statistical Profile (April 1, 2002 to September 30, 2002)
                                                                          Six-month Period Ending             Fiscal Year Ending
                                                                                  9/30/02                           9/30/02

OIG AUDIT REPORTS ISSUED                                                                        42                            79
Questioned Costs                                                                    $65,554,308                    $68,356,151
Unsupported Costs                                                                   $24,510,470                   $24,759,1871
Recommendations for Better Use of Funds                                                         $0                            $0

OTHER OIG PRODUCTS                                                                              18                            41
(Inspections, Action Memoranda, Alert Memoranda, Management Information
Reports, Advisory Reports, Special Projects, and Field Pricing Reviews)

OIG AUDIT REPORTS RESOLVED BY
PROGRAM MANAGERS                                                                                37                            66
Questioned Costs Sustained                                                            $5,902,471                   $16,365,914
Unsupported Costs Sustained                                                           $3,337,836                       $3,338,197
Additional Disallowances Identified by Program Managers                                 $194,530                        $215,060
Management Commitment to the Better Use of Funds                                                $0                            $0

INVESTIGATIVE CASE ACTIVITY
Cases Opened                                                                                  115                           2312
Cases Closed                                                                                  104                            313
Cases Active at End of Period                                                                 390                            390
Prosecutorial Decisions
  -Accepted                                                                                     51                          1093
  -Declined                                                                                     19                           394

INVESTIGATION RESULTS
Indictments/Informations                                                                        63                           117
Convictions/Pleas                                                                               51                           110
Fines Ordered                                                                            $30,025                        $54,7755
Restitution Payments Ordered                                                        $20,994,482                   $23,130,1326
Civil Settlements/Judgments (#)                                                                 67                          1817
Civil Settlements/Judgments ($)                                                       $4,656,496                   $6,207,7798
Savings/Recoveries                                                                    $3,009,231                       $3,131,335
Seized/Forfeited Property                                                                       $0                 $2,417,0009


1 A07-A0006                                                           6 Includes
                issued 10/15/01 was decreased by $100,000.                         $12,732 not reported last period.
2 Includes                                                            7 Includes
             3 cases not reported last period.                                     9 cases not reported last period.
3 Includes                                                            8 Includes
             1 case not reported last period.                                      $172,203 not reported last period.
4 Includes                                                            9 Includes
             3 cases not reported last period.                                     $2,304,896 not reported last period.
5 Includes   $3,025 not reported last period.



   26
U.S. Department of Education
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                                 U.S. DEPARTMENT OF EDUCATION
                                 OFFICE OF INSPECTOR GENERAL
                                SEMIANNUAL REPORT TO CONGRESS