oversight

Semiannual Report - October 1, 2003 - March 31, 2004

Published by the Department of Education, Office of Inspector General on 2004-03-31.

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. 48
    October 1, 2003 - March 31, 2004
                            UNITED STATES DEPARTMENT OF EDUCATION
                                                OFFICE OF INSPECTOR GENERAL

                                                                                                               THE INSPECTOR GENERAL




                                                                                           April 29, 2004
Dear Mr. Secretary:


I am pleased to submit to you, in accordance with the Inspector General Act of 1978 (Public Law 95-
452, as amended, section 5(b)), this semiannual report on the activities of the Department's Office of
Inspector General (OIG) for the six-month period ending March 31, 2004.


This report highlights our most significant work from the last six months. This work reflects our
strong commitment and valuable role in assisting the Department in improving its programs and
ensuring their integrity. We look forward to continuing to work with you toward these goals.


The Inspector General Act requires you to transmit this report within 30 days to the appropriate
congressional committees and subcommittees, together with a report containing any comments you
wish to make. Your report should also include the statistical tables specified in section 5(b)(2) and
(3), and 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(b)(4).


                                                                     Sincerely,




                                                                     John P. Higgins, Jr.

Enclosure



                          400 MARYLAND AVE., S.W. WASHINGTON, D.C. 20202-1510
            Our mission is to ensure equal access to education and to promote educational excellence throughout the nation.
                                                           Contents
MESSAGE TO CONGRESS
ACTIVITIES AND ACCOMPLISHMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
STUDENT AID PROGRAMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
   Identity theft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
   Cohort default rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
   Pell Grant administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
   Monitoring private collection agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
   Monitoring providers of collection services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
   Title IV eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
   Title IV eligibility fraud . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
   Fraud by school officials and program participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
BUDGET AND PERFORMANCE INTEGRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
   Data reliability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
   Management controls for scoring state assessments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ELEMENTARY AND SECONDARY EDUCATION PROGRAMS . . . . . . . . . . . . . . . . . . . 5
   Charter schools' access to and use of federal funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
   Puerto Rico Department of Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
   Administra-tion of 21st Century Community Learning Center grants . . . . . . . . . . . . . . . . . . 7
   Talent Search . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
   Eligibility for GEAR UP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
   Administra-tion of TRIO programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
   Controls over information on alternative teacher certification . . . . . . . . . . . . . . . . . . . . . . . . 9
   Fraud in other education programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
FINANCIAL MANAGEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
   Financial statement audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
   Internal control weaknesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
EXPANDED ELECTRONIC GOVERNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
   Electronic signature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
STRATEGIC MANAGEMENT OF HUMAN CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
   One-ED strategic investment process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
   Human capital action items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
OTHER ACTIVITIES AND ACCOMPLISHMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
   Nonfederal audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
   Intergovernmental single audit project. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Reporting Requirements of the Inspector General Act, as amended . . . . . . . . . . . . . . . . . . 13
Table 1: Recommendations Described in Previous Semiannual Reports on
            Which Corrective Action Has Not Been Completed . . . . . . . . . . . . . . . . . . . . . . . . 14
Table 2: ED/OIG Audit Services Reports on Education Department Programs and Activities
            (October 1, 2003 to March 31, 2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Table 3: Other ED/OIG Reports on Education Department Programs and Activities
            (October 1, 2003 to March 31, 2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Table 4: Inspector General Issued Audit Reports with Questioned Costs . . . . . . . . . . . . . . . . . 20
Table 5: Inspector General Issued Audit Reports with Recommendations For
           Better Use of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Table 6: Unresolved Reports Issued Prior to October 1, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Table 7: Investigation Services Cumulative Actions (October 1, 2003 to March 31, 2004) . . . 27
Table 8: Statistical Profile: October 1, 2003 to March 31, 2004 . . . . . . . . . . . . . . . . . . . . . . . . 32
                          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 October 1, 2003
through March 31, 2004. During this period, we issued 71 audit and inspection reports and
memoranda and closed 94 investigations. We provided Congress with an analysis of issues for
consideration in its reauthorization of the Higher Education Act and conducted several briefings
on our proposals for congressional staff.

Our March 2003 audit of Educational Credit Management Corporation identified the need for the
Department to recall $103 million of excess funds. At the time of our final audit, the Department
concurred with our recommendation. In February 2004, the Department recalled the funds,
resulting in the return of $103 million to the U.S. Treasury.

We continue our campaign to raise public awareness about the threat of identity theft among
students and other participants in the Department's student financial assistance programs. OIG
special agents gave identity theft presentations at major Federal Student Aid national conferences
and at regional conferences for financial aid administrators. We submitted articles about our
identity theft efforts that were published in a number of publications, including the Federal
Bureau of Investigation Bulletin and Fraud Busters, publications of the FBI and the Federal Trade
Commission, respectively. We provided identity theft prevention tips to many campus security
websites and in many publications and websites for student financial assistance participants. Our
special agents also continued to pursue cases in which identity thieves attempted to rob students
of their financial aid.

In response to the importance of maintaining the security and integrity of the Department's
information systems, we established a new unit that combines audit, investigative, and computer
evidence recovery resources. This unit will work to identify risks to the Department's systems, to
analyze computer data to determine fraud indicators, and to investigate and prevent computer
hacking.

Our independent oversight and recommendations are essential to the Department's mission and
goals and to helping ensure that education dollars reach the intended recipients. We look forward
to continuing to work with the Secretary and the Congress in improving the Department's
programs and operations.


                                                   John P. Higgins, Jr.
                                                   Inspector General
Activities and Accomplishments
                   The Office of Inspector General (OIG) for the period October 1, 2003 through March 31,
                   2004, continued its work to improve the programs and operations of the Department of
                   Education (Department) and to protect their integrity. Detailed information is available on
                   our website at http://www.ed.gov/about/offices/list/oig.

                   STUDENT AID PROGRAMS
                   The Department's student financial assistance programs award over $65 billion annually.
                   The Department also oversees a loan portfolio approaching $300 billion. Because they are
                   structurally risky and continue to be on the General Accounting Office's high risk list, we
                   direct a significant portion of our investigative and audit work to these programs. We
                   continue to find fraud and abuse by program participants as well as weaknesses in program
                   administration.

IDENTITY   THEFT   OIG special agents aggressively pursue individuals who attempt to steal federal education
                   dollars by robbing students of their identity. In cooperation with Federal Student Aid
                   (FSA), we have launched an intensive outreach campaign to alert college students and
                   graduates about how to prevent identity theft. At the forefront of this effort is a web
                   resource with information about preventing and reporting identity theft involving federal
                   education dollars, www.ed.gov/misused. The site recorded more than 50,000 hits between
                   October 2003 and March 2004.

                                                                                              In collaboration with FSA, we are
                                                                                              providing identity theft
                                                                                              prevention information in
                                                                                              monthly billing statements to
                                                                                              millions of direct loan borrowers,
                                                                                              in publications for schools and
                                                                                              students, and on many campus
                                                                                              security websites. Secretary of
                                                                                              Education Rod Paige announced
                                                                                              this effort at a press conference at
                                                                                              Howard University with Inspector
                                                                                              General John P. Higgins, Jr.,
                                                                                              University President H. Patrick
                                                                                              Swygert, and FSA Chief
                                                                                              Operating Officer Theresa S.
                   Howard University President H. Patrick Swygert, Secretary Rod Paige, FSA   Shaw.
                   Chief Operating Officer Theresa S. Shaw, Inspector General John P.
                   Higgins, Jr. and Howard University students.
                                                                             We recognized the need to alert
                   students and others about identity theft based on the increasing number of identity theft
                   cases in the nation. Our investigative work demonstrated that Department funds are also
                   targets of identity thieves. Some examples of our cases follow:




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                 Two individuals whose arrest we reported in our previous
                 semiannual report have pled guilty. One individual used
                 more than 50 different identities, typically those of inmates
                 serving long prison terms, to obtain more than $300,000 in
                 student aid. Another individual whose arrest we reported
                 previously, pled guilty after he received approximately
                 $160,000 in student loans by claiming that he and his brother
                 were graduate students. Under a plea agreement, this
                 individual has agreed to pay full restitution.

                 Our investigation of one individual resulted in his guilty plea
                 after he used his son's Social Security number to obtain more
                 than $90,000 in student aid. This joint investigation with the Fraudulent applications for student
                                                                                  aid seized by OIG special agents.
                 National Center for Missing and Exploited Children, the
                 Social Security Administration OIG, and the Federal Bureau
                 of Investigation developed evidence that this individual kidnapped his one-month old son
                 and used his son's identity to receive federal student aid. After nearly 21 years, the son
                 was reunited with his birth mother and siblings in November 2003.

                 An individual in Chicago received a six-month sentence and was ordered to pay more than
                 $40,000 restitution after she stole and used the identity of her son's father to obtain
                 financial aid for her son. Our joint investigation with the Social Security Administration
                 OIG resulted in a guilty plea by another individual who fraudulently used someone else's
                 Social Security number to obtain student loans after defaulting on loans she received using
                 her own name and Social Security number. In another case, an individual in Arizona was
                 indicted by a federal grand jury after allegedly using two different Social Security numbers
                 to obtain more than $40,000 in student aid.

COHORT DEFAULT   Although cohort default rates provide the information required under the Higher Education
RATES            Act (HEA), they do not appear to provide decision-makers with sufficient information on
                 defaults in the Title IV loan programs. We analyzed data for borrowers in the 1996
                 through 1999 cohorts and found that cohort default rates do not appear to reflect general
                 trends in defaults in the year following the two-year cohort period. The Higher Education
                 Amendments of 1998 changed the definition of default for loans from a 180-day
                 delinquency to a 270-day delinquency.

                 We found that the definition's change may have resulted in the 1998 and 1999 cohort
                 default rates being materially lower than they would have been. We also found that the
                 percentage of borrowers in deferment or forbearance more than doubled between the 1996
                 and 1999 cohorts. If these borrowers were excluded from the calculation because they
                 could not default, the effect would be a material increase in cohort default rates.

                 We recommended that the Department support amendments to the HEA to revise the
                 calculation of cohort default rates to address our findings, and that it calculate and publish
                 a life-of-cohort default rate for each cohort. We also recommended that defaults that were
                 excluded as a result of the definitional changes contained in the 1998 amendments be
                 included in the cohort default calculation. In addition, we recommended that borrowers
                 who are in forbearance or deferment status should be excluded from the calculation until
                 they are subject to a risk of default on their loans. Implementing these recommendations


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                 would help ensure that cohort default rates provide more comprehensive, complete,
                 accurate information to reflect general trends in defaults. The Department did not disagree
                 with our findings, but noted concerns with our recommendations. ("Audit to Determine if
                 Cohort Default Rates Provide Sufficient Information on Defaults in the Title IV Loan
                 Programs," ED-OIG/A03-C0017; December 22, 2003)

PELL GRANT       At the Alexander Institute in Minnesota, we identified serious deficiencies in the school’s
ADMINISTRATION   administration of the Pell Grant program. We found that the school lacked an adequate
                 system to account for its Pell funds or to document students' eligibility to receive them,
                 and lacked written polices and procedures for administering the program. Although the
                 school asserted that these deficiencies had been corrected, our audit disclosed that they had
                 not been.

                 We recommended that the Department instruct Alexander Institute to document each
                 disbursement made during the audit period or refund approximately $1.7 million, the
                 entire amount it received in Pell funds between September 28, 2000 and June 30, 2003, if it
                 is unable to document disbursements. The Department imposed an emergency action and
                 initiated a termination action against the school, based on the school's loss of accreditation
                 subsequent to our audit. ("Audit of the Administration of the Federal Pell Grant Program
                 by The Alexander Institute, St. Paul, Minnesota, during the period September 28, 2000,
                 through June 30, 2003," ED-OIG/A05-D0020; December 11, 2003)

MONITORING       Our audit of the Department's monitoring of private collection agencies (PCAs) it
PRIVATE          contracts with for collection and resolution of defaulted student loans found that the
COLLECTION       Department needs to improve monitoring of its PCA contractors. We found ineffective
AGENCIES         monitoring by the Department in five areas. Specifically, staff did not effectively track
                 complaints, perform desk audits, conduct site visits for technical assistance and training,
                 review deliverables, or maintain contract files. As a result of inadequate monitoring, the
                 Department may not be able to effectively support its position in contract disputes,
                 litigation, or Congressional inquiries. FSA generally agreed with our recommendations
                 and stated that it is implementing steps to improve monitoring and oversight of PCAs.
                 ("Audit of the Department of Education's (Department) Monitoring of Private Collection
                 Agency Contractors," ED-OIG/A19-D0002; December 23, 2003)

MONITORING       We audited the New Jersey Higher Education Student Assistance Authority's (HESAA)
PROVIDERS OF     monitoring of the ten special counsels providing collection services to it to determine if
COLLECTION       HESAA's procedures were adequate to monitor the special counsels. We noted several
SERVICES         areas needing improvement including inadequate monitoring to ensure compliance with
                 laws and regulations. We also found that all collections were not remitted to HESAA on a
                 timely basis. HESAA agreed with most of our findings and recommendations. ("Audit of
                 the New Jersey Higher Education Student Assistance Authority's (HESAA) Monitoring of
                 Law Firms (Special Counsels) Providing Collection Services to HESAA," ED-OIG/A07-
                 C0032; March 3, 2004)

TITLE IV         Our audit at the National Education Center - Spartan School of Aeronautics (NEC) found
ELIGIBILITY      that NEC disbursed approximately $312,000 in Title IV aid to students enrolled in
                 ineligible programs. We recommended that the Department require NEC to ensure that
                 funds are not disbursed to students until program eligibility is established. We also


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                                                                   Semiannual Report To Congress: #48

                recommended that it refund about $268,000 to lenders and approximately $45,000 to the
                Department. NEC did not concur with our finding or recommendations. ("National
                Education Center - Spartan School of Aeronautics' Compliance with Student Financial
                Assistance Program Eligibility Requirements," ED-OIG/A06-D0016; February 19, 2004)

TITLE IV        Our investigation involving seventeen defendants who fraudulently applied for
ELIGIBILITY     approximately $285,000 in Stafford loans resulted in a thirty-one count indictment. Two
FRAUD           of these individuals assisted fifteen people in preparing false documents misrepresenting
                themselves as graduate students to enable them to obtain loans they were not eligible to
                receive. Six defendants have pled guilty in this case as of March 31, 2004.

                A teacher who was president of the school board in a local district in Illinois was found
                guilty by a jury after submitting fraudulent financial aid applications enabling her son to
                receive more than $10,000 in grants he was not eligible to receive. Her son has pled guilty
                in this case.

FRAUD  BY       OIG special agents investigate fraud by school officials and other individuals who seek to
SCHOOL          obtain student aid illegally. Our investigation of the owner of a debt collection agency in
OFFICIALS AND   Arizona who allegedly conspired with his employees in submitting fraudulent applications
PROGRAM         for consolidated student loans resulted in a federal grand jury indictment. The indictment
PARTICIPANTS    states that this scheme illegally generated more than $1 million in commissions and caused
                a $1.4 million loss to the Department.

                A former accountant at LeMoyne Owen College in Tennessee was sentenced to 12 months
                incarceration and ordered to pay more than $227,000 as a result of our investigation
                revealing that she issued approximately $230,000 in checks to friends and relatives who
                then paid kickbacks to her. Eight other individuals in this case have pled guilty, received
                jail sentences, and been ordered to pay restitution for their roles in this scheme. A former
                college comptroller in the Marshall Islands was sentenced to 10 years incarceration and
                ordered to pay nearly $400,000 restitution after using his position to write and negotiate
                checks for cash.

                BUDGET AND PERFORMANCE INTEGRATION
                Accurate and reliable data are essential to the goal of linking program performance and
                budget decisions. Our audits of state educational agencies have found that some lack
                adequate controls to ensure that the performance data reported to the Department are
                accurate, reliable, and complete.

DATA            Our audit at the Kentucky Department of Technical Education found that Kentucky's
RELIABILITY     controls were inadequate to ensure that data submitted to the Department were complete,
                accurate, and reliable and that three sub-recipients we examined also had inadequate
                controls. We recommended that the Department require Kentucky to take appropriate
                corrective action. Kentucky generally agreed with our findings and recommendations.
                ("Kentucky Department of Technical Education's Management Controls Over Perkins III
                Performance Data Needs Strengthening," ED-OIG/A04-D0007; October 20, 2003)




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MANAGEMENT                    We conducted a study to provide information for the Department in helping
CONTROLS FOR                  states to ensure data quality and reliability. We determined that the
SCORING STATE                 Department should consider developing and issuing best practices for
ASSESSMENTS                   management controls over scoring of the state assessments required under the
                              No Child Left Behind Act of 2001. ("Best Practices for Management Controls
                              Over Scoring of the State Assessments Required Under the No Child Left
                              Behind Act of 2001," ED-OIG/X05-D0016; February 3, 2004)

                  ELEMENTARY, SECONDARY, AND HIGHER EDUCATION
                          PROGRAMS
                  Our work in elementary, secondary, and special education programs disclosed weaknesses
                  in program administration by state and local educational agencies and in schools'
                  adherence to program requirements, and a continuing need for careful monitoring by the
                  Department.

CHARTER           We conducted several audits to determine if charter schools received and expended federal
SCHOOLS' ACCESS   funds in three programs according to applicable statutes and regulations.
TO AND USE OF
FEDERAL FUNDS     Our audit of 20 Arizona charter schools' use of funds under Title I, Part A of the
                  Elementary and Secondary Education Act of 1965 (ESEA) and Part B of the Individuals
                  with Disabilities Education Act (IDEA) found that, contrary to the law and regulations, the
                  Arizona Department of Education (ADE) provided Title I and IDEA funds directly to
                  private, for-profit entities. We recommended that the Department instruct ADE to refund
                  approximately $1.1 million and cease providing Title I and IDEA funds directly to such
                  entities. We also recommended that ADE be instructed to return the funds it provided to
                  for-profit charter schools after our audit period.

                  ADE disagreed with our recommendations and asserted that federal law does not preclude
                  for-profit charter schools from receiving federal funds. We did not change our position.
                  The Department has not resolved this issue and has been working with Arizona officials to
                  gather more information before making a decision. We also found that two Arizona
                  charter schools expended Title I funds improperly. ("Audit of 20 Arizona Charter Schools'
                  Uses of U.S. Department of Education Funds for the Period October 1, 2000, through
                  September 30, 2001," ED-OIG/A05-D0008; November 6, 2003)

                  Our audits of Arizona charter schools receiving federal funds under the Charter Schools
                  Program (CSP) disclosed that Cesar Chavez Middle School and Aztlan Academy could
                  not support expenditures of about $184,000 and $148,000, respectively. In addition, we
                  reported that Cesar Chavez Middle School used approximately $13,000 for unallowable
                  purposes. We also reported that Sonoran Desert School and Sonoran Science Academy
                  used approximately $37,000 and $19,000, respectively, for unallowable purposes.




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                                                         We recommended that the Department require
                                                         Cesar Chavez and Aztlan Academy to refund
                                                         approximately $197,000 and $148,000,
                                                         respectively, and regularly reconcile the amount
                                                         of CSP funds received with the amount spent.
                                                         Officials from both schools did not comment on
                                                         our report. ("The Cesar Chavez Middle School's
                                                         Use of U.S. Department of Education Federal
                                                         Funds for the period July 1, 2001, through June
                                                         30, 2002," ED-OIG/A05-D0018; October 30,
                2003. "The Aztlan Academy's Use of U.S. Department of Education Funds for the Period
                July 1, 2001, through June 30, 2002," ED-OIG/A05-D0023; October 14, 2003. "The
                Sonoran Desert School's Use of U.S. Department of Education Funds for the Period
                September 1, 2001, through August 31, 2002," ED-OIG/A05-D0029; October 31, 2003.
                "The Sonoran Science Academy's Use of U.S. Department of Education Funds for the
                Period August 1, 2001, through July 31, 2002," ED-OIG/A05-D0028; November 19,
                2003)

                At the California Department of Education (CDE), we found that CDE and three of the
                four local educational agencies (LEAs) we reviewed did not provide sufficient information
                to existing charter schools on requirements pertaining to expansion dates and on the
                definition of "significant expansion of enrollment." CDE also did not have adequate
                procedures to ensure that Title I allocations to charter school LEAs were timely and
                proportionate. CDE concurred with these findings and our recommendations.

                We also found that CDE could not document that 65 charter school LEAs had approved
                LEA plans. CDE stated that it is assessing this finding and our recommendation.
                ("Charter Schools' Access to Title I and IDEA, Part B Funds in the State of California,"
                ED-OIG/A09-D0018; March 29, 2004)

                At the New York State Education Department (NYSED), we found that NYSED needed to
                take steps to ensure that LEAs comply with applicable federal laws and regulations.
                Specifically, NYSED should ensure that LEAs provide charter schools with meaningful
                information about timely access to funds. NYSED concurred with the finding and
                generally agreed with our recommendations. ("Charter Schools Access to IDEA, Part B
                Funds in the State of New York," ED-OIG/A09-D0014; November 19, 2003)

PUERTO RICO     Our audits of expenditures by the Puerto Rico Department of Education (PRDE) disclosed
DEPARTMENT OF   that PRDE had allowed approximately $148 million in Title I and Special Education funds
EDUCATION       to lapse for the grant award years 1997 through 2001. We also reported $82.8 million in
                lapsed grant funds for other programs at PRDE. In addition, we found that PRDE could
                not provide supporting documentation for nearly $123,000 in transportation expenditures
                in Special Education funds and had improperly expended almost $50,000 in Title I
                funding.

                The Department designated PRDE as a "high-risk" grantee two years ago because of
                problems in PRDE's fiscal and program accountability, including late submission of Single
                Audits, failure to adhere to procurement regulations and procedures, lack of proper



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                 internal controls, and actions leading to the indictments of the former Puerto Rico
                 Secretary of Education and other associated individuals.

                 We recommended that PRDE provide evidence to the Department of any valid obligations
                 associated with the lapsed funds and implement procedures to better track grant funding
                 from the Department. We also recommended that PRDE refund to the Department the
                 improperly expended funds we identified. PRDE stated that it is working with the
                 Department on these issues. ("Puerto Rico Department of Education's Title I Expenditures
                 for the period July 1, 2002 to December 31, 2002," ED-OIG/A02-D0014; March 30, 2004
                 and "Puerto Rico Department of Education's Special Education Expenditures for the
                 period July 1, 2002 to December 31, 2002," ED-OIG/A02-D0020; March 30, 2004)

ADMINISTRA-      Our audits of four grantees' administration of the 21st Century Community Learning
TION OF 21
           ST    Centers (CCLC) grants found that all four grantees did not properly account for and use
CENTURY          21st Century grant funds. All four 21st CCLC grantee audits were suggested by the
COMMUNITY        Department because of concerns about the administration of these particular programs.
LEARNING         Our review of Alum Rock Union Elementary School District's charges to the CCLC grant
CENTERS GRANTS   found that it improperly used grant funds totaling approximately $65,000. We found that
                 Project ASCEND (Drew, Mississippi) charged the grant for approximately $100,000 in
                 unallowable costs and about $147,000 in unsupported costs. We identified more than
                 $55,000 in questioned costs and over $400,000 in unsupported costs in Gonzales,
                 California, as well as approximately $62,000 in unsupported costs in New York.

                 We recommended that the Department require Alum Rock to submit student attendance
                 documentation for the grant extension period, assess whether it provided services to a
                 sufficient number of students, and return more than $17,000. The school district concurred
                 with some of our findings and recommendations and disagreed with others. ("Alum Rock
                 Union Elementary School District's Administration of the 21st Century Community
                 Learning Centers Grant," ED-OIG/A09-D0012; March 17, 2004)

                 For Project ASCEND, we recommended that
                 the Department require the consortium to
                 refund the identified unallowable costs, not
                 claim nearly $69,000 for unallowable costs
                 for contracted professional services, and
                 provide sufficient documentation to support
                 approximately $147,000 or refund that
                 amount to the Department. Project
                 ASCEND officials generally agreed with our
                 findings and recommendations and stated
                 that they have started corrective action.
                 ("Project ASCEND (After School and Community Enrichment for a New Direction,") ED-
                 OIG/A06-D0017; February 11, 2004)

                 We recommended that the Department require Gonzales to return approximately $55,000
                 that was charged improperly to its grant. We recommended that New York either provide
                 sufficient documentation supporting approximately $61,000 or return that amount to the
                 Department. ("Gonzales Unified School District's Administration of the 21st Century


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                                                                       Semiannual Report To Congress: #48

                    Community Learning Centers Grant No. S287A000704," ED-OIG/A09-D0015; December
                    19, 2003. "Audit of the New York City Department of Education (NYCDOE), Manhattan
                    High Schools Superintendent's District's (District) Administration of the 21st Century
                    Community Learning Centers (21st CCLC) Program," ED-OIG/A02-D0007; November
                    24, 2003)

TALENT SEARCH       Our audits of Talent Search programs at three entities found that in each case, the program
                    may have served fewer participants than it was funded to serve or provided services to
                    ineligible participants. At the Communities in Schools of San Antonio, San Antonio,
                    Texas, we recommended that the Department require the organization to refund more than
                    $298,000, the entire amount expended during the 2001-2002 budget period, and follow
                    procedures to ensure that only those participants receiving eligible services are counted as
                    Talent Search participants, and that those services are properly documented. Communities
                    in Schools of San Antonio did not concur with our finding or refund recommendation.
                    ("Talent Search Program at Communities in Schools of San Antonio," ED-OIG/A07-
                    D0015; January 29, 2004)

                    At Wahupa Educational Services, California, we recommended that the Department
                    require Wahupa to refund $122,900, a portion of the amount expended for its Talent
                    Search program during the 2001-2002 budget period, and follow established procedures to
                    ensure that only those participants receiving eligible services are counted as Talent Search
                    participants. Wahupa did not concur with our findings or refund recommendation.
                    ("Talent Search Program at Wahupa Educational Services," ED-OIG/A07-D0009;
                    November 25, 2003) Our findings at the University of New Hampshire were similar, but
                    did not involve monetary recommendations. The university stated that it recognized that
                    more complete documentation is required. ("Talent Search Program at University of New
                    Hampshire," ED-OIG/A07-D0001; January 15, 2004)

ELIGIBILITY   FOR   Our audit of GEAR UP at the University of Illinois at Chicago (UIC) determined that the
GEAR UP             program did not serve the number of participants it was funded to serve and that its
                    partnership did not provide the required matching funds. We recommended that the
                    Department require UIC to refund all the funds, more than $1 million, received during the
                    first three years of the grant. UIC agreed with some of our findings but disagreed with the
                    refund recommendation. ("The University of Illinois at Chicago's (UIC) Gaining Early
                    Awareness and Readiness for Undergraduate Programs Project," ED-OIG/A05-D0017;
                    January 14, 2004)

                    We also audited the administration of GEAR UP at Magdalena Municipal Schools in New
                    Mexico. We found several problems in Magdelena's administration of this program
                    including improper use of grant funds and scholarship awards to ineligible students.
                    Magdalena agreed to refund $16,500 in scholarships to ineligible students based on our
                    finding. ("Audit of Magdalena Municipal Schools' Administration of the Gaining Early
                    Awareness and Readiness for Undergraduate Programs Grant for the period September 15,
                    2000, through September 30, 2003," ED-OIG/A06-D0027; March 30, 2004)

ADMINISTRA-         Our audits of administration of TRIO programs by a non-profit corporation and by a
TION OF TRIO        university disclosed problems in both. The North Alabama Center for Educational
PROGRAMS            Excellence (NACEE) used TRIO funds improperly. For example, NACEE used TRIO


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                                                                     Semiannual Report To Congress: #48

                 funds to pay for employee performance awards and for supplies and failed to maintain
                 documentation to support certain expenditures. It also violated the conflict of interest
                 regulations regarding payment for rental space at its central office. We recommended that
                 the Department require NACEE to return improper payments and submit documentation
                 for certain costs. We also recommended that the Department take appropriate action to
                 protect future grant funds. NACEE disagreed with some of our findings and
                 recommendations. ("North Alabama Center for Educational Excellence's Administration
                 of the TRIO Programs Needs Improvement," ED-OIG/A04-D0001; November 24, 2003)

                 At Stillman College, we found that the school used more than $300,000 in TRIO funds that
                 it documented as program expenditures. We also found that the college lacked adequate
                 controls over the expenditure of TRIO funds and did not have adequate accounting
                 controls for reporting program expenditures. We recommended that the Department
                 require Stillman to return excess funds and establish effective controls for TRIO
                 expenditures. Stillman disagreed with the amount of undocumented program
                 expenditures, but stated that it was implementing a new accounting system to correct
                 issues our audit noted. ("Stillman College's Administration of the Federal TRIO Programs
                 Needs Improvement," ED-OIG/A04-C0019; December 30, 2003)

CONTROLS  OVER   We audited the Education Resources Information Center (ERIC) Clearinghouse on
INFORMATION ON   Teaching and Teacher Education (CTTE) at the American Association of Colleges for
ALTERNATIVE      Teacher Education at the request of the Chairman of the House Education and Workforce
TEACHER          Committee. Our objective was to determine if ERIC CTTE had adequate management
CERTIFICATION    controls to ensure that it had disseminated a range of information on alternative teacher
                 certification from January 1, 2002 through June 30, 2003. We concluded that ERIC CTTE
                 had adequate management controls during the period, and had provided unbiased
                 information on alternative teacher certification. ("Audit of the American Association of
                 Colleges for Teacher Education's Administration of the ERIC Clearinghouse on Teaching
                 and Teacher Education," ED-OIG/A03-D0021; March 8, 2004)

FRAUD IN OTHER   Our ongoing investigation of fraud and misuse of vocational rehabilitation funds resulted
EDUCATION        in Abilities of Florida (AFI), a provider of vocational rehabilitation services, repaying the
PROGRAMS         Department more than $500,000 in vocational rehabilitation program funds. Two former
                 State of Florida employees have pled guilty; these employees created false payment
                 vouchers to obtain vocational rehabilitation benefits and property for themselves and
                 family members. Their supervisor has resigned her position.

                 Our investigation of the illegal diversion of $1.9 million in Impact Aid funds to private
                 bank accounts resulted in a federal jury finding two individuals who participated in this
                 scheme guilty. Five other individuals have pled guilty in the case. These individuals
                 changed the bank information used for depositing the Impact Aid funds to the school
                 districts that should have received these funds, to accounts some of them controlled.

                 The former Perkins Vocational Education Grant administrator at a community college in
                 Wisconsin was sentenced to 30 months in federal prison and ordered to pay more than
                 $900,000 in restitution after he submitted false claims inflating the number of students he
                 counseled and the services that were provided to increase the amount of grant funds paid to
                 the college.



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                                                                  Semiannual Report To Congress: #48

             FINANCIAL MANAGEMENT
             Financial accountability is inextricably linked to program integrity and effectiveness.
             Without accurate and timely financial information, the Department cannot reliably assess
             how, and how well, the billions of dollars in education program and operational funds it
             disburses and spends are used.

FINANCIAL    We transmitted this year's final audit reports covering the Department's and Federal
STATEMENT    Student Aid's FY 2003 comparative financial statements eleven weeks ahead of the
AUDIT        statutory due date. Ernst & Young, LLP, Certified Public Accountants, conducted the
             audits, and we monitored them to ensure their compliance with Government Auditing
             Standards and their timely completion.

             Both the Department and FSA earned an unqualified opinion on their comparative
             financial statements. The Report on Internal Control for both entities noted reportable
             conditions covering credit reform estimation and financial reporting and controls
             surrounding information systems. The Report on Compliance with Laws and Regulations
             in both cases noted that neither the Department's nor FSA's financial management system
             substantially complied with the Federal Financial Management Improvement Act due to
             control weaknesses surrounding information systems.

INTERNAL     Two former Department employees were sentenced
CONTROL      following our investigation of their scheme to steal
WEAKNESSES   approximately $163,000 by charging goods and
             services for personal use to their government credit
             cards. These employees also asked Department vendors or contractors to create false
             invoices for services not rendered. One of these employees received a sentence of 33
             months incarceration and was ordered to pay more than $146,000 restitution. The other
             employee received six months incarceration and was ordered to pay more than $13,000
             restitution. Two employees of one of the vendors involved pled guilty and were sentenced
             to three years probation. A contractor also pled guilty and was sentenced to five years
             probation and ordered to pay over $34,000 restitution.

             EXPANDED ELECTRONIC GOVERNMENT
             As the Department offers increasingly expanded electronic access to its student aid
             programs, in response to legislation enacted over the last five years to guide federal efforts
             toward electronic government, it must also address the risks inherent in such access.

ELECTRONIC   Our audit of the Department's implementation of electronic authentication signature
SIGNATURE    procedures for select direct loan and Pell grant transactions found that the Department
             needs additional measures to reduce the risk of program fraud, waste, and abuse that could
             arise from the possible misuse of its computer systems that use a Personal Identification
             Number (PIN) for authentication and electronic signatures. We made several
             recommendations, including improvements in periodic risk evaluations, enhancement to
             technical controls, and enhancements to user warnings and notices to keep PINs
             confidential. ("Implementation of Electronic Signatures for Select FSA Transactions,"
             ED-OIG/A11-D0002; March 31, 2004)



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                                                                    Semiannual Report To Congress: #48

                 STRATEGIC MANAGEMENT OF HUMAN CAPITAL
                 In response to the President's Management Agenda, the Department developed the One-
                 ED Report and the strategic investment process that was intended to examine all work
                 functions in the Department within a three-year period. It also issued the Blueprint for
                 Management Excellence that identified numerous action steps intended to improve the
                 strategic management of human capital within the Department.

ONE-ED           Our inspection of the Phase I implementation of the One-ED strategic investment process
STRATEGIC        identified several concerns, including a lack of data to support activity-based costing
INVESTMENT       models; a lack of customer input into proposed re-engineering solutions; and a lack of
PROCESS          information on how quality will be improved, and how optimum staffing levels and cost of
                 competitive sourcing were determined.

                 Most critically, the strategic investment process has not served its anticipated purpose of
                 informing the Department's human capital planning process. The process has taken much
                 longer than originally envisioned and relatively few business functions have been covered
                 to date. In addition, the information produced has been extremely limited, in part because
                 the re-engineering efforts have tended to focus on very small segments of the business
                 functions performed by an individual component.

                 The Department has stated that it has made some improvements in the process and is
                 continuing to examine the need for further modifications.

HUMAN  CAPITAL   We initiated 20 inspections of human capital action items identified by the Department as
ACTION ITEMS     "completed." Our inspections focused on whether the action item was completed as stated,
                 and whether the action as completed helped the Department accomplish the underlying
                 objective in the Secretary's Blueprint for Management Excellence.

                 Our inspections of seven action items determined that in each instance, the action item was
                 either only partially completed or not completed at all. Specifically, we concluded that the
                 Department has not completed Blueprint action items for: a workforce plan; a restructuring
                 analysis; an estimate of the impact of workforce restructuring on improving program
                 performance; and an analysis of how to improve citizen access.

                 The Management Improvement Team responsible for the implementation of the Blueprint
                 acknowledged that "all of the activities outlined in One-ED have not been accomplished as
                 originally envisioned and therefore it has not had the intended effect on the organization."
                 The Department recently announced plans to initiate a comprehensive human capital
                 planning process.

                 OTHER ACTIVITIES AND ACCOMPLISHMENTS

NONFEDERAL       Participants in Department programs are required to submit annual audits performed by
AUDITS           independent public accountants (IPAs). We perform quality control reviews (QCRs) of
                 these audits to assess their quality. We completed 54 QCRs of audits conducted by 53
                 different IPAs, or offices of firms with multiple offices. We concluded that 30 (56%) were
                 acceptable, 19 (35%) were technically deficient, and 5 (9%) were substandard.



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                                                                  Semiannual Report To Congress: #48

               We also referred three IPAs to appropriate State Boards of Accountancy and/or the
               American Institute of Certified Public Accountants for possible disciplinary action. Two of
               the referrals were made for substandard work, in one case because the IPA was practicing
               without the required Certified Public Accountant certificate. The referrals for substandard
               work were based on QCRs reported in a prior semiannual report.

INTERGOV-      We are leading the National Project to Statistically Measure the Quality of Single Audits, a
ERNMENTAL      multi-year interagency project, under the auspices of the President's Council on Integrity
SINGLE AUDIT   and Efficiency. The purpose of the project is to assess the quality of single audits
PROJECT        submitted to the federal government by grant recipients. We are working with the Office
               of Management and Budget, six other federal agencies, and three State Auditors and have
               begun substantive planning for the project which will be conducted beginning in late 2004.




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                                                                               Semiannual Report To Congress: #48

Reporting Requirements of the Inspector General Act, as amended
                                                                                               Table     Page
  Section                                       Requirement                                   Number    Number
5(a)(1) and
              Significant Problems, Abuses, and Deficiencies
5(a)(2)
              Activities and Accomplishments                                                               1

5(a)(3)       Uncompleted Corrective Actions
              Recommendations Described in Previous Semiannual Reports on Which Corrective
                                                                                                1          14
              Action Has Not Been Completed
5(a)(4)       Matters Referred to Prosecutive Authorities
              Investigation Services Cumulative Actions (October 1, 2003 to March 31, 2004)     7          27
              Statistical Profile                                                               8          32
5(a)(5) and
              Summary of Instances Where Information Was Refused or Not Provided
6(b)(2)
5(a)(6)       Listing of Audit Reports
              ED/OIG Audit Services Reports on Education Department Programs and Activities     2          15
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          20
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 October 1, 2003                                6          21
5(a)(11)      Significant Revised Management Decisions
5(a)(12)      Significant Management Decisions with Which OIG Disagreed
              Unmet Intermediate Target Dates Established by the Department Under
5(a)(13)
              the Federal Financial Management Improvement Act of 1996




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                                                                                      Semiannual Report To Congress: #48



Table 1: Recommendations Described in Previous Semiannual
Reports on Which Corrective Action Has Not Been Completed
                                                                                    Total             Number of            Latest
  Report           Report Title (Prior Semiannual           Date        Date     Monetary         Recommendations         Target
  Number          Report [SAR] Number and Page)            Issued Resolved Findings               Open          Closed     Date
Section 5(a)(3) of the Inspector General Act as amended 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 AUDITS SINCE LAST REPORTING PERIOD
Office of the Chief Financial Officer (OCFO)
A07-B0016 The Department's Management Controls        9/26/02         1/31/03                     3              2         9/30/04
          Over Discretionary Grants Need to be
          Strengthened to Ensure Grant Accountability
          (SAR 45, pg. 17)
A19-B0009 Audit to Evaluate the U.S. Department of    9/20/02         2/28/03                     6             14         4/16/04
          Education's Process for Identifying and
          Monitoring High-Risk Contracts that
          Support Office of Educational Research and
          Improvement (OERI) Programs (SAR 45,
          pg. 2)
Office of the Chief Information Officer (OCIO)
A07-C0001 Audit of Enterprise Architecture (SAR 45,        9/30/02    1/31/03                     2              2         6/30/04
          pg. 3)
Office of Federal Student Aid (FSA)
A03-B0001 Audit Procedures at Federal Student Aid     8/22/02         3/7/03                      1              3         10/31/04
          (FSA) for 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) (SAR 45, pg. 9)
AUDITS REPORTED IN PREVIOUS SEMIANNUAL REPORTS
Office of the Chief Financial Officer (OCFO)
A03-B0018 Audit of the U.S. Department of Education's 10/24/01 3/26/02                            2              0         9/30/04
          Discretionary Grants Monitoring Process
          (SAR 44, pg. 3)
Office of Federal Student Aid (FSA)
A05-A0025 Great Lakes Higher Education Guaranty           3/30/01 1/31/02                        4              3          12/31/04
             Corporation's (Great Lakes Guaranty)
             Administration of the Federal Family
             Education Loan (FFEL) Program Federal
             and Operating Funds (SAR 42, pg. 22)
A06-A0020 Audit of the Effectiveness of the               3/28/02 6/30/02                        *              4              *
             Department's Student Financial Aid
             Application Verification Process (SAR 44,
             pg. 7)
* Documentation supporting closure of corrective actions were unavailable for the Department to close audit prior to end of reporting
period (3/31/2004).




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                                                                                     Semiannual Report To Congress: #48



Table 2: ED/OIG Audit Services Reports on Education Department
Programs and Activities (October 1, 2003 to March 31, 2004)
  Report                                                               Date      Questioned Unsupported              No. of
  Number                           Report Title                       Issued       Costs*          Costs       Recommendations
Section 5(a)(6) of the Inspector General Act of 1978 as amended requires a listing of each report completed by OIG during the
reporting period. During this period, ED/OIG Audit Services issued 58 products. These include 41 audit reports and 17 alternative
products1, which include 3 attestation reports, 4 interim audit memoranda, 2 alert memoranda, 1 management information report, 6
audit closeout memoranda/letters, and 1 memorandum relating to results of preaward audit services performed. The audit reports and
alternative products2 are listed below.
AUDIT REPORTS
Institute of Education Sciences (IES)
A03-D0021 Audit of the Education Resources Information Center         3/8/04                                         0
          (ERIC) Clearinghouse on Teaching and Teacher
          Education (CTTE) at the American Association of
          Colleges for Teacher Education (AACTE)
Office of the Chief Financial Officer (OCFO)
A02-D0007 Audit of the New York City Department of Education         11/24/03                 $61,776                7
          (NYCDOE) Manhattan High Schools Superintendent's
          District's (District) Administration of the 21st Century
          Community Learning Centers (21st CCLC) Program
A03-D0011 Audit of Raytheon's Administration of the National         12/3/03                  $78,905                4
          Student Loan Data System Contract
A04-C0019 Stillman College's Administration of the Federal TRIO      10/15/03   $313,545                            10
          Programs Needs Improvement
A04-D0001 North Alabama Center for Educational Excellence's          11/24/03   $553,220     $324,164               14
          Administration of the TRIO Programs Needs
          Improvement (Office of Postsecondary Education
          (OPE) also designated as action official)
A04-D0013 Stillman College's Administration of the Title III, Part   12/30/03    $76,151                             4
          B, Strengthening Historically Black Colleges and
          Universities Program (OPE also designated as action
          official)
A05-D0017 Audit of the University of Illinois at Chicago's (UIC)     1/14/04    $1,018,212                           4
          Gaining Early Awareness and Readiness for
          Undergraduate Programs (GEAR UP) project (OPE
          also designated as action official)
A05-D0018 Audit of the Cesar Chavez Middle School's (School)         10/30/03    $13,099     $183,706                3
          use of U.S. Department of Education (ED) funds for the
          period July 1, 2001, through June 30, 2002 (2001-2002
          fiscal year) (Office of Innovation and Improvement
          (OII) also designated as action official)
A05-D0023 Audit of the Aztlan Academy's (Academy) use of U.S.        10/14/03                $148,440                2
          Department of Education (ED) funds for the period July
          1, 2001, through June 30, 2002 (2002 fiscal year) (OII
          also designated as action official)
A05-D0026 Audit of the Country Gardens Charter School's              10/10/03                                        2
          (School) use of U.S. Department of Education (ED)
          funds for the period October 1, 2001, through
          September 30, 2002 (project period) (OII also
          designated as action official)



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                                                                                     Semiannual Report To Congress: #48

Table 2: ED/OIG Audit Services Reports on Education Department
Programs and Activities (October 1, 2003 to March 31, 2004) (Cont.)
 Report                                                                 Date   Questioned Unsupported        No. of
 Number                         Report Title                           Issued   Costs*       Costs      Recommendations
A05-D0027 Audit of the James Madison Preparatory School's             11/21/03  $5,540                         2
          (School) use of U.S. Department of Education (ED)
          funds for the period July 1, 2001, through June 30, 2002
          (2001-2002 fiscal year) (OII also designated as action
          official)
A05-D0028 Audit of the Sonoran Science Academy's (Academy)            11/19/03   $19,534                       2
          use of U.S. Department of Education (ED) funds for the
          period August 1, 2001, through July 31, 2002 (project
          period) (OII also designated as action official)
A05-D0029 Audit of the Sonoran Desert School's (School) use of        10/31/03   $37,452                       4
          U.S. Department of Education (ED) funds for the
          period September 1, 2001, through August 31, 2002
          (project period) (OII also designated as action official)
A05-D0037 Audit of the Future Teachers of Chicago/Illinois'           3/23/04    $365,296                      3
          (Future Teachers) Teacher Recruitment Grant No.
          P336C020025 (Grant) for the period October 1, 2002,
          through June 30, 2003 (OPE also designated as action
          official)
A06-D0017 Audit of the 21st Century Community Learning Centers        2/11/04    $169,247   $147,386           3
          (21st Century) grant to Project ASCEND (After School
          and Community Enrichment for a New Direction) for
          the period June 1, 2001, through March 31, 2003
          (Office of Elementary and Secondary Education
          (OESE) also designated as action official)
A06-D0027 Audit of Magdalena Municipal Schools' (Magdalena)           3/30/04    $17,430     $4,333            5
          administration of the Gaining Early Awareness and
          Readiness for Undergraduate Programs (GEAR UP)
          grant for the period September 15, 2000, through
          September 30, 2003 (OPE also designated as action
          official)
A07-D0001 Audit of the Talent Search Program at the University of     1/15/04                                  1
          New Hampshire
A07-D0009 Audit of the Talent Search Program at Wahupa                11/25/03   $122,900                      4
          Educational Services (Wahupa)
A07-D0015 Audit of the Talent Search (TS) program at                  1/29/04    $298,349                      4
          Communities in Schools of San Antonio (CIS)
A09-D0012 Alum Rock Union Elementary School District's                3/17/04    $65,523    $139,741          11
          Administration of the 21st Century Community
          Learning Centers Grant No. S287A000487 (OESE also
          designated as action official)
A09-D0015 Gonzales Unified School District's Administration of        12/19/03   $55,682    $418,323           4
          the 21st Century Community Learning Centers Grant
          No. S287A000704 (OESE also designated as action
          official)
A17-D0001 United States Department of Education: Office of the        10/6/03      $28                         9
          Chief Financial Officer Contracting and Purchasing
          Operations Compliance with Appropriation Law




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                                                                                      Semiannual Report To Congress: #48

Table 2: ED/OIG Audit Services Reports on Education Department
Programs and Activities (October 1, 2003 to March 31, 2004) (Cont.)
 Report                                                              Date   Questioned Unsupported              No. of
 Number                         Report Title                        Issued   Costs*       Costs            Recommendations
A17-D0007 Audits of the U.S. Department of Education's financial 11/14/03                                         8
          statements for fiscal years 2003 and 2002 (Included in
          ED FY 2003 Performance and Accountability Report -
          Office of Management/Office of the Chief Information
          Officer (OM/OCIO) also designated as action official)
A17-E0002 MANAGEMENT LETTER Fiscal Years 2003 and                  12/22/03                                       9
          2002 Financial Statement Audits U.S. Department of
          Education and Federal Student Aid (OM/OCIO and
          Office of Federal Student Aid (FSA) also designated as
          action officials)
A19-C0004 Audit of Funds Not Recovered Due to the Statute of        1/6/04                                       14
          Limitations (Office of General Counsel (OGC) also
          designated as action official)(See note at end of table)
Office of Elementary and Secondary Education (OESE)
A02-D0014 Puerto Rico Department of Education's (PRDE) Title I        3/30/04     $49,536                         9
          Expenditures for the period, July 1, 2002 to December
          31, 2002 (See note at end of table)
A02-D0016 New York City Department of Education's Use of              3/30/04                                     1
          Computer Equipment to Support the E-Rate Program
A05-D0008 Audit of 20 Arizona charter schools' uses of U.S.           11/6/03    $1,218,839    $46,104           10
          Department of Education (ED) funds for the period
          October 1, 2000, through September 30, 2001 (Office of
          Special Education and Rehabilitative Services (OSERS)
          also designated as action official)
A05-D0021 Audit of the Detroit City School District's (District)      11/21/03   $278,414                        10
          administration of Title I, Part A (Title I) of the
          Elementary and Secondary Education Act of 1965, as
          amended (the Act), Set-Aside programs for the period
          July 1, 2002, through May 31, 2003
Office of Federal Student Aid (FSA)
A05-D0020 Audit of the Administration of the Federal Pell Grant       12/11/03                $1,718,869          1
          (Pell) program by The Alexander Institute (Institute)
          during the period September 28, 2000, through June 30,
          2003
A06-D0016 Audit of National Education Center-Spartan School of        2/19/04    $312,149                         4
          Aeronautics' compliance with Student Financial
          Assistance program eligibility requirements, under
          Title IV of the Higher Education Act of 1965, as
          amended (HEA)
A07-C0032 Audit of the New Jersey Higher Education Student             3/3/04     $11,059                        10
          Assistance Authority's (HESAA) monitoring of law
          firms (special counsels) providing collection services to
          HESAA
A11-D0002 Audit of the Implementation of Electronic Signatures        3/31/04                                     8
          for Select Federal Student Aid (FSA) Transactions
          (OM/OCIO also designated as action official)
A17-D0008 AUDITED FINANCIAL STATEMENTS U.S.                           11/14/03                                    8
          Department of Education Federal Student Aid Years
          Ended September 30, 2003 and 2002



                                                                 17
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Table 2: ED/OIG Audit Services Reports on Education Department
Programs and Activities (October 1, 2003 to March 31, 2004) (Cont.)
 Report                                                                Date   Questioned Unsupported        No. of
 Number                        Report Title                           Issued   Costs*       Costs      Recommendations
A19-D0002 Audit of the Department of Education's (Department)        12/23/03                                 6
          monitoring of private collection agency contractors
          (OCFO also designated as action official)
Office of Innovation and Improvement (OII)
A09-D0018 Charter Schools' Access to Title I and IDEA, Part B    3/29/04                                     12
          Funds in the State of California (OESE also designated
          as action official)(See note at end of table)
Office of Management (OM)
A19-C0005 Audit of the Accuracy and Completeness of Personnel 11/12/03                                        9
          Data
Office of Postsecondary Education (OPE)
A03-C0017 Audit to Determine if Cohort Default Rates Provide      12/22/03                                    4
          Sufficient Information on Defaults in the Title IV Loan
          Programs (FSA also designated as action official)
Office of Special Education and Rehabilitative Services (OSERS)
A02-D0020 Puerto Rico Department of Education's (PRDE) Special 3/30/04                    $122,901            9
          Education Expenditures for the period, July 1, 2002 to
          December 31, 2002 (See note at end of table)
A09-C0025 Charter Schools Access to IDEA, Part B Funds in the 11/19/03                                        5
          State of New York
Office of Vocational and Adult Education (OVAE)
A04-D0007 Kentucky Department of Technical Education's               10/20/03                                 8
          Management Controls Over Perkins III Performance
          Data Needs Strengthening
ALTERNATIVE PRODUCTS
Office of the Chief Financial Officer (OCFO)
A05-D0042 Survey of the Illinois State Board of Education's (ISBE) 11/24/03
          monitoring and resolution of Local Education Agency
          (LEA) single audits for the period July 1, 2001, through
          June 30, 2002 (Audit Closeout Letter)
A17-E0003 AGREED-UPON PROCEDURES REPORT Fiscal                     12/22/03
          Year 2003 Federal Agencies' Centralized Trial-Balance
          System (Attestation Report)
A17-E0004 FEDERAL INTRAGOVERNMENTAL ACTIVITY                        1/23/04
          AND BALANCES AGREED-UPON PROCEDURES
          REPORT (Attestation Report)
Office of the Deputy Secretary (ODS)
S03-E0005 Office of Inspector General's Independent Report on        1/27/04
          the U.S. Department of Education's Detailed
          Accounting of Fiscal Year 2003 Drug Control Funds,
          dated January 21, 2004 (Attestation Report)
Office of English Language Acquisition (OELA)
A19-E0010 Audit of Audit Followup Process - External Audits       3/16/04
          (Audit Closeout Letter)




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                                                                                       Semiannual Report To Congress: #48

Table 2: ED/OIG Audit Services Reports on Education Department
Programs and Activities (October 1, 2003 to March 31, 2004) (Cont.)
 Report                                                                 Date     Questioned Unsupported              No. of
 Number                          Report Title                          Issued     Costs*       Costs            Recommendations
Office of Elementary and Secondary Education (OESE)
X05-D0016 Best Practices for Management Controls Over Scoring          2/3/04                                           1**
          of the State Assessments Required Under the No Child
          Left Behind Act of 2001 (Management Information
          Report State and Local No. 04-01)
Office of Federal Student Aid (FSA)
A04-D0016 Comparison of FFEL and FAFSA Data (Audit Closeout 3/5/04
          Memorandum)
A05-E0010 Audit Survey of Cincinnati State Technical and    1/27/04
          Community College's (College) Title IV, Higher
          Education Act of 1965, as amended, (HEA) programs
          (Audit Closeout Letter)
Office of Postsecondary Education (OPE)
A04-D0022 Review of Greenville Technical College's Title III           12/8/03
          Program (Audit Closeout Letter)
A19-E0011 Audit of Audit Followup Process - External Audits            3/16/04
          (Audit Closeout Letter)
  * For purposes of this schedule, questioned costs would also include other recommended recoveries.
  ** These are suggestions and not recommendations and will not be tracked or follow the audit resolution process.
  Note - We identified $7,383,859 in better use of funds in audit A19-C0004; $151,205,677 in better use of funds in audit A02-
  D0014; $5,600,000 in better use of funds in audit A09-D0018; $79,515,522 in better use of funds in audit A02-D0020; and
  $629,328 in better use of funds in an alert memorandum that was not identified individually.
  1DESCRIPTION OF ALTERNATIVE PRODUCTS


  Interim audit memoranda/letters are used to notify ED management or the audited entity of a serious and urgent condition or
  issue identified during an on-going audit assignment when there is a strong likelihood that waiting until the audit report’s issuance
  would result in the loss of an opportunity to prevent or curtail significant harm to the ED interest.
  Alert memoranda are prepared when auditors identify a serious condition requiring immediate ED management action that is
  either outside the agreed-upon objectives of an on-going audit assignment or is identified while engaged in work not related to an
  on-going assignment when an audit report will not be issued.
  Management information reports provide ED management with information derived from audits (when the issuance of an audit
  report is not appropriate) or special projects that may be useful in its program administration or conduct of program activities.
  Audit closeout memoranda/letters are issued to provide written notification to auditees of audit closure when the decision is
  made to close an assignment without issuing an audit report.
  Preaward audit services are provided by OIG in response to requests by ED contracting or program office staffs. These
  normally include making as assessment of an offeror’s accounting system and performing field pricing support.
  Attestation reports convey the results of attestation engagements performed within the context of their stated scope and
  objective(s). Attestation engagements can cover a broad range of financial or non-financial subjects and can be part of a financial
  audit or performance audit. They include the examination, review, or performance of agreed-upon procedures on a subject matter
  or an assertion about a subject matter and reporting on the results.
  2The 4 interim audit memoranda, the 2 alert memoranda, and the 1 preaward audit services memorandum are not identified
  individually as they are not publicly distributed and are not posted on the OIG Internet website.

Table 3: Other ED/OIG Reports on Education Department Programs
and Activities (October 1, 2003 to March 31, 2004)
    Report Number                                         Title of Report                                            Date Issued
      I13C0017            Emergency Evacuation of People with Disabilities in Department of Education                          12/8/03
                          Facilities
       I13D0014           Guard Quality Assurance Issues at the Mary E. Switzer Building                                       2/27/04
       I13D0019           One ED Report                                                                                        2/13/04



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Table 3: Other ED/OIG Reports on Education Department Programs
and Activities (October 1, 2003 to March 31, 2004) (Cont.)
         Report Number                                        Title of Report                                          Date Issued
           I13D0026          Completion of Blueprint for Management Excellence Action Items 63 & 71:                            3/9/04
                             Develop an Overarching Vision of Human Capital and Estimate the Impact of
                             Restructuring on Improving Performance
           I13E0007          Completion of Blueprint for Management Excellence Action Item 181: Establish a                     3/9/04
                             New Strategic Investment Office
           I13E0005          Completion of Blueprint for Management Excellence Blueprint Action Item 171:                      3/11/04
                             Policy on Probationary Employees
           I13D0021          Completion of Blueprint for Management Excellence Action Items 65 & 66:                           3/15/04
                             Workforce Planning, Restructuring and Implementation
           I13E0013          Completion of Blueprint for Management Excellence Action Items 153, 154 & 155:                    3/15/04
                             Organizational Layers, Supervisory Ratio and Improved Citizen Access
           I13E0008          Completion of Blueprint for Management Excellence Action Item 172: Annual                         3/22/04
                             Review of Position Descriptions
           I13E0004          Completion of Blueprint for Management Excellence Action Item 126: Revision and                   3/24/04
                             Completion of New Disciplinary Standards
           I13D0022          Completion of Blueprint for Management Excellence Action Item 179:                                3/26/04
                             Implementation of New Employee Survey Process
           I13E0009          Completion of Blueprint for Management Excellence Action Item 218:                                3/30/04
                             Communication of the Department's Values, Desired Outcomes of One ED and
                             Desired Behaviors of Managers and Employees
           I13E0003          Completion of Blueprint for Management Excellence Action Item 169: Publication                    3/31/04
                             of Special Hiring Authorities

Table 4: Inspector General Issued Audit Reports with Questioned
Costs
                                                                                                       Questioned1      Unsupported2
                                                                                          Number         Costs             Costs
A.          For which no management decision has been made before the                        65       $309,322,2163       $40,877,270
            commencement of the reporting period (as adjusted)3
B.          Which were issued during the reporting period                                    26           $8,395,853       $3,394,648
                Subtotals (A + B)                                                            91        $317,718,069       $44,271,918
C.          For which a management decision was made during the reporting period             12        $144,616,636          $859,929
            (i) Dollar value of disallowed costs                                                       $144,588,386          $859,929
            (ii) Dollar value of costs not disallowed                                                        $28,250                 $0
D.          For which no management decision has been made by the end of the                 79        $173,101,433       $43,411,989
            reporting period
E.          For which no management decision was made within six months of issuance          53        $164,705,580       $40,017,341
     1
      Costs are questioned because of either an alleged violation of a provision of a law, regulation, contract, grant, cooperative
     agreement, or other agreement or document governing the expenditure of funds, or a finding that the expenditure of funds for the
     intended purpose is unnessary or unreasonable. Other recommended recoveries, included in questioned costs, are funds
     recommended for reasons other than being questioned or unsupported. The category is usually used for findings involving
     recovery of outstanding funds, revenue earned on federal funds, or any interest due ED resulting from the auditee’s use of funds.
     Amounts reported for this category are combined with questioned costs for reporting in the Semiannual Report to Congress.
     2
      Unsupported costs are costs that, at the time of the audit, were not supported by adequate documentation. Unsupported costs
     are combined with Questioned Costs for reporting in the Semiannual Report to Congress.
     3Beginning   Balance for Questioned Costs was increased by $40,000 (A05-C0014) to coincide with database.




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Table 5: Inspector General Issued Audit Reports with
Recommendations For Better Use of Funds
                                                                                                 Number             Dollar Value
A.      For which no management decision has been made before the commencement of the              1                      $690,232
        reporting period (as adjusted)
B.      Which were issued during the reporting period                                                5                $244,334,386
             Subtotals (A + B)                                                                       6                $245,024,618
C.      For which a management decision was made during the reporting period                         1                   $7,383,859
        (i) Dollar value of recommendations that were agreed to by management                                            $7,383,859
        (ii) Dollar value of recommendations that were not agreed to by management                                                 $0
D.      For which no management decision has been made by the end of the reporting                   5                $237,640,759
        period
E.      For which no management decision was made within six months of issuance                      4                $236,950,527

Table 6: Unresolved Reports Issued Prior to October 1, 2003
                                                                                                             Total       No. of
 Report                                     Report Title                                         Date      Monetary    Recommen-
 Number                  (Prior Semiannual Report [SAR] Number and Page)                        Issued     Findings      dations
Section 5(a)(10) of the Inspector General Act as amended requires a listing of each report issued before the commencement of the
reporting period for which no management decision had been made by the end of the reporting period.
New Since Last Reporting Period
Office of the Chief Financial Officer (OCFO)
A04-C0020 Contract Closeout Audit of Office of Educational Research and Improvement             7/28/03    $344,530          2
          Contract No. RJ96006001 at Appalachia Educational Laboratory (SAR 47, pg. 14)
          Status: OCFO has informed us that a modification and a letter requesting return
          payment of $85,547 has been prepared. OCFO is in the process of preparing a
          program determination letter and audit clearance document to complete the audit.
A05-D0019 Audit of the C.I. Wilson Academy I's (Academy) use of U.S. Department of              9/22/03     $33,827          3
          Education (ED) funds for the period July 1, 2001, through June 30, 2002 (2001-
          2002 school year) (Office of Innovation and Improvement (OII) also designated as
          action official for this report) (SAR 47, pg. 14)
          Status: OCFO has informed us that a draft program determination letter is with
          the Office of the General Counsel (OGC) for review and comment. OCFO expects
          to resolve the audit by June 30, 2004.
A05-D0030 Audit of the C. I. Wilson Academy II's (Academy) use of U.S. Department of            9/26/03     $63,189          3
          Education (ED) funds for the period July 1, 2001, through June 30, 2002 (project
          period) (OII also designated as action official for this report) (SAR 47, pg. 14)
          Status: OCFO informed us that a draft program determination letter is with OGC
          for review and comment. OCFO expects to resolve the audit by June 30, 2004.
A06-C0034 Audit of the Texas Education Agency's (TEA) Treatment of the Costs of Unused          7/8/03                       2
          Accrued Vacation Leave of Retiring or Separating Employees (terminal leave) for
          the period September 1, 1999, through August 31, 2002 (SAR 47, pg. 14)
          Status: OCFO informed us that they are working to resolve the audit.
A06-D0014 Audit of the 21st Century Community Learning Centers (21st Century) grant to Mt.      9/29/03    $397,500          2
          Judea Public School (Mt. Judea) for the period June 1, 2000, through January 31,
          2003 (SAR 47, pg. 14)
          Status: OCFO informed us that OCFO/Post Audit Group (OCFO/PAG) has several
          boxes of documentation recently received from the auditee. OCFO expects to
          resolve the audit by September 30, 2004.




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                                                                                   Semiannual Report To Congress: #48

Table 6: Unresolved Reports Issued Prior to October 1, 2003 (Cont.)
                                                                                                           Total        No. of
 Report                                       Report Title                                      Date     Monetary     Recommen-
 Number                 (Prior Semiannual Report [SAR] Number and Page)                        Issued    Findings       dations
A07-D0002 Audit of the Talent Search Program at Case Western Reserve University (CWRU)         7/11/03   $212,428          5
          (SAR 47, pg. 14)
          Status: OCFO informed that they are currently discussing with OPE the issue
          involving the number of students served by this project grant. OCFO expects to
          resolve the audit by June 30, 2004.
A09-C0026 Northwest Indian College Administration of the U.S. Department of Education,         9/30/03   $632,241         6
          Office of Vocational and Adult Education Grant No. V101A990026 (SAR 47, pg.
          14)
          Status: Office of Vocational and Adult Education (OVAE) informed us that the
          audit was placed on administrative stay on March 8, 2004, and staff is reviewing
          auditor's working papers and drafting a program determination letter.
Office of Elementary and Secondary Education (OESE)
A02-C0011 The Virgin Islands Department of Education - St. Thomas/St. John School District's   6/5/03    $1,451,218       6
          Control of Equipment Inventory (Office of Special Education and Rehabilitative
          Services (OSERS) and OVAE also designated action officials for this report) (SAR
          47, pg. 15)
          Status: Staff from OESE, OCFO, OSERS, and OVAE are involved in a team effort
          to resolve the audit.
A02-C0012 The Virgin Islands Department of Education Did Not Manage Its Federal Education      9/30/03   $1,542,928      18
          Funds (SAR 47, pg. 15)
          Status: Staff from OESE, OCFO, OSERS, and OVAE are involved in a team effort
          to resolve the audit.
A02-C0017 Puerto Rico Department of Education's Administration of Contracts with the           6/10/03   $115,390         5
          League of United Latin American Citizens National Educational Service Center
          (OVAE also designated as action official for this report) (SAR 47, pg. 15)
          Status: The audit is in Cooperative Audit Resolution and Oversight Initiative
          (CAROI).
A05-C0029 Audit of Minnesota's local educational agencies' (LEA) allocations of Elementary     9/30/03       *            2
          and Secondary Education Act, as amended, Title I, Part A, funds to schools for the
          period July 1, 2001, through June 30, 2002 (2001-2002 school year) (SAR 47, pg.
          15)
          Status: The audit was placed on administrative stay on March 31, 2004. OESE is
          working to resolve the audit.
A05-D0009 Audit of Cleveland Municipal School District's Set-Aside Funds for District-Wide     8/6/03     $43,067         7
          Activities (SAR 47, pg. 15)
          Status: The audit was placed on administrative stay on March 31, 2004. OESE is
          working to resolve the audit.
A06-C0031 Audit of the Migrant Education Program at the Florida Department of Education        5/2/03                     3
          (SAR 47, pg. 15)
          Status: OESE informed us that a program determination letter was issued March
          31, 2004. The audit will be removed in the next Semiannual Report.
A06-C0032 Kansas Department of Education's Compliance with the Priority for Services           5/15/03                    3
          Requirements of the Migrant Education Program (SAR 47, pg. 15)
          Status: OESE informed us that a program determination letter was issued March
          31, 2004. The audit will be removed in the next Semiannual Report.
A06-C0033 California Department of Education's Compliance with the Priority for Services       5/30/03                    3
          Requirements of the Migrant Education Program (SAR 47, pg. 15)
          Status: OESE informed us that a program determination letter was issued March
          31, 2004. The audit will be removed in the next Semiannual Report.




                                                               22
                                                                                   Semiannual Report To Congress: #48

Table 6: Unresolved Reports Issued Prior to October 1, 2003 (Cont.)
                                                                                                          Total        No. of
 Report                                        Report Title                               Date          Monetary     Recommen-
 Number                (Prior Semiannual Report [SAR] Number and Page)                   Issued         Findings       dations
A09-D0014 Charter Schools' Access to Title I Funds in the State of New York (OII is also 7/28/03                          6
          designated as action official for this report) (SAR 47, pg. 15)
          Status: The audit was placed on administrative stay on March 31, 2004. OESE is
          working to resolve the audit.
Office of Federal Student Aid (FSA)
A02-B0026 Audit of Taylor Business Institute's Administration of Title IV Student Financial   7/8/03     $2,089          5
          Assistance Programs (SAR 47, pg. 13)
          Status: Audit is being reviewed by FSA New York Case Team.
A04-B0018 Alcorn State University's Administration of Title IV Student Financial Assistance   8/15/03   $342,505        24
          Programs Needs Strengthening (SAR 47, pg. 13)
          Status: FSA informed us that the audit was resolved on January 30, 2004. The
          audit will be removed in the next Semiannual Report.
A04-B0019 Advanced Career Training Institute's Administration of the Title IV Higher          9/25/03   $7,469,328      14
          Education Act Programs (SAR 47, pg. 13)
          Status: Audit is being reviewed by FSA Atlanta Case Team.
A06-C0035 Audit of Flight Safety Academy's compliance with Student Financial Assistance       9/29/03   $5,666,525       3
          Citizenship and Program Eligibility Requirements, under Title IV of the Higher
          Education Act of 1965, as amended (HEA) (SAR 47, pg. 13)
          Status: FSA informed us that the audit was resolved on March 5, 2004. The audit
          will be removed in the next Semiannual Report.
A07-C0030 Address Match using the Department's Student Financial Assistance (SFA)             8/25/03                    2
          Application Processing and Disbursement Systems - the Federal Student Aid's
          (FSA) Central Processing System (CPS) and the National Student Loan Data
          System (NSLDS) (SAR 47, pg. 13)
          Status: FSA staff are working with the Office of Inspector General (OIG) on
          resolving one final outstanding issue.
Office of Postsecondary Education (OPE)
A07-B0011 Audit of Valencia Community College's Gaining Early Awareness and Readiness         5/8/03    $1,822,864       5
          for Undergraduate Programs Matching Requirement (SAR 47, pg. 15)
          Status: OPE informed us that they are working on resolving this audit.
Reported in Previous Semiannual Report
Office of the Chief Financial Officer (OCFO)
A03-C0001 Contract closeout audit of costs claimed for Temple University's (TU) Laboratory 10/25/02                      1
          for Student Success (LSS), Contract Number RJ96006201, for the period December
          11, 1995, through December 16, 2000 (SAR 46, pg. 13)
          Status: OCFO informed us that the contract has been reconciled. OCFO is in the
          process of preparing a program determination letter and audit clearance document
          to complete the audit.
A04-C0014 Audit of Kentucky State University's (KSU) compliance with the administration of 3/12/03       $28,083         4
          the Title III, Part B, Strengthening Historically Black Colleges and Universities
          Program (SAR 46, pg. 14)
          Status: OCFO informed us that a program determination letter was issued on
          March 30, 2004. The audit will be removed in the next Semiannual Report.
A05-C0026 Audit of Northeastern Illinois University's (NEIU) Administration of the           2/25/03    $478,261         2
          Developing Institutions - Hispanic-Serving Institutions (HSI) grant for the period
          October 1, 2000, through October 31, 2002 (SAR 46, pg. 14)
          Status: OCFO informed us that this audit was transferred to OPE for resolution.




                                                               23
                                                                                  Semiannual Report To Congress: #48

Table 6: Unresolved Reports Issued Prior to October 1, 2003 (Cont.)
                                                                                                           Total        No. of
 Report                                     Report Title                                       Date      Monetary     Recommen-
 Number                 (Prior Semiannual Report [SAR] Number and Page)                       Issued     Findings       dations
A07-C0031 Audit of the Talent Search Program at Luther College (SAR 46, pg. 14)               3/28/03    $219,567          4
          Status: OCFO informed us that OCFO/PAG is revising the draft program
          determination letter. OCFO expects to resolve the audit by June 30, 2004.
Office of Elementary and Secondary Education (OESE)
A01-90006 Puerto Rico Department of Education Needs Major Improvements in Its                 9/27/00    $181,305        18
          Administration of the Even Start Program (SAR 41, pg. 22)
          Status: CAROI team effort working on resolution.
A01-A0004 Puerto Rico Department of Education Did Not Administer Properly a $9,700,000        3/28/01    $7,841,493      14
          Contract with National School Services of Puerto Rico (SAR 42, pg. 21)
          Status: CAROI team effort working on resolution.
A02-50200 The Puerto Rico Department of Education Must Institute a Time Distribution          11/14/97                    1
          System (SAR 36, pg. 13)
          Status: CAROI team effort working on resolution.
A02-B0012 Puerto Rico Department of Education Did Not Administer Properly Title I             9/28/01    $8,412,280      10
          Contracts with National School Services of Puerto Rico for the 1999/2000 and
          2000/2001 School Years (SAR 43, pg. 11)
          Status: CAROI team effort working on resolution.
A02-B0025 Puerto Rico Department of Education Did Not Administer Properly Three               9/12/02    $2,146,023      10
          Contracts with R.V. Research and Management Group, Inc. (SAR 45, pg. 18)
          Status: CAROI team effort working on resolution.
A02-C0019 The Virgin Islands Department of Education-St. Croix School District's Control of   3/31/03    $1,017,416       7
          Equipment Inventory (OSERS also designated as action official for this report)
          (SAR 46, pg. 13)
          Status: Staff from OESE, OCFO, OSERS, and OVAE are involved in a team effort
          to resolve the audit.
A03-B0023 Audit of Caroline Wilder Harris (C.W. Harris) Elementary School's Federal Grant     9/17/02     $43,159         2
          Expenditures for the period July 1, 1999, through June 30, 2001 (SAR 45, pg. 18)
          Status: OESE informed us that a program determination letter was issued on
          September 30, 2003. The audit will be removed in the next Semiannual Report.
A05-B0011 Audit of the Title I, Part A, Targeted Assistance Schools Grant (Grant)              8/2/02    $338,571         4
          Administered by the Mount Clemens Community Schools District (District) for the
          July 1, 1997, through June 30, 1998, Award Year (SAR 45, pg. 18)
          Status: OESE informed us that they are currently developing a program
          determination letter.
A05-C0012 Audit of East Cleveland City Schools' (ECCS) Administration of the 21st Century     9/18/02    $349,637         9
                                            st
          Community Learning Centers (21 Century) Grant at Kirk Middle School (Kirk)
          for the period June 1, 1998, through December 31, 2001 (SAR 45, pg. 18)
          Status: The audit was placed on administrative stay on March 29, 2004. OESE is
          working to resolve the audit.
A05-C0022 Audit of Community Consolidated School District 62's (District) administration of 2/24/03      $126,709         3
          the 21st Century Community Learning Centers (21st Century) Grant for the period
          June 1, 2000, through May 31, 2002 (Office of the Under Secretary (OUS) also
          designated as action official for this report) (SAR 46, pg. 13)
          Status: The audit was placed on administrative stay on March 29, 2004. OESE is
          working to resolve the audit.




                                                              24
                                                                                    Semiannual Report To Congress: #48

Table 6: Unresolved Reports Issued Prior to October 1, 2003 (Cont.)
                                                                                                             Total        No. of
 Report                                     Report Title                                         Date      Monetary     Recommen-
 Number                  (Prior Semiannual Report [SAR] Number and Page)                        Issued     Findings       dations
Office of Federal Student Aid (FSA)
A03-A0022 Audit of Commissioned Sales and Course Length at Wesley College (SAR 44, pg.          1/15/02    $1,431,560       5
          14)
          Status: FSA and OGC are working on a settlement agreement with this school now
          that regulatory changes have been made about commissioned sales and course
          length.
A03-B0013 Audit of the Ability-to-Benefit (ATB) Testing Process at Lincoln Technical            5/10/02    $256,946         9
          Institute, Inc. (LTI), Philadelphia, PA (SAR 45, pg. 16)
          Status: FSA informed us that the audit was resolved on October 31, 2003. The
          audit will be removed in the next Semiannual Report.
A04-B0015 Review of Cash Management and Student Financial Assistance Refund Procedures          9/26/02    $997,313         7
          at Bennett College (OPE designated as collateral action office for this report)
          (SAR 45, pg. 16)
          Status: FSA informed us that the audit was resolved on March 14, 2003. The audit
          will be removed in the next Semiannual Report.
A05-A0030 Audit of Commissioned Sales at Olivet Nazarene University (SAR 43, pg. 11)            5/21/01    $3,299,891       4
          Status: FSA and OGC are working on a settlement agreement with this school now
          that regulatory changes have been made about commissioned sales.
A05-B0003 Audit of Commissioned Sales and Course Length at Benedictine University (SAR          12/31/01   $221,988         5
          44, pg. 14)
          Status: FSA and OGC are working on a settlement agreement with this school now
          that regulatory changes have been made about commissioned sales and course
          length.
A05-B0004 Indiana Wesleyan University, Adult and Professional Studies Administration of         9/28/01 $31,682,782         5
          Title IV Programs, Marion, Indiana (SAR 43, pg. 11)
          Status: FSA and OGC are working on a settlement agreement with this school now
          that regulatory changes have been made about commissioned sales and course
          length.
A05-B0014 Audit of Course Length at Olivet Nazarene University (SAR 43, pg. 12)                 9/28/01                     4
          Status: FSA and OGC are working on a settlement agreement with this school now
          that regulatory changes have been made about course length.
A05-B0019 Audit of Course Length at Trinity Christian College (Trinity) (SAR 45, pg. 16)        9/17/02    $111,061         3
          Status: FSA and OGC are working on a settlement agreement with this school now
          that regulatory changes have been made about course length.
A05-C0015 Audit of American School of Technology's Administration of the Title IV, HEA          3/21/03    $1,311,249      13
          Programs, Columbus, Ohio (SAR 46, pg. 12)
          Status: Audit is still being reviewed by FSA Chicago Case Team.
A06-70005 Professional Judgment at Yale University (SAR 36, pg. 18)                             3/13/98     $5,469          3
          Status: Awaiting a policy decision to address and resolve this finding in the final
          audit determination letter.
A06-70009 Professional Judgment at University of Colorado (SAR 37, pg. 17)                      7/17/98     $15,082         4
          Status: Awaiting a policy decision to address and resolve this finding in the final
          audit determination letter.
A06-A0001 Interactive Learning Systems' Administration of the Title IV Student Financial        7/20/01    $990,828         7
          Assistance Programs (SAR 43, pg. 12)
          Status: FSA informed us that the audit was resolved on March 23, 2003. The audit
          will be removed in the next Semiannual Report.
A06-A0003 International Business College's Administration of Title IV Student Financial         3/28/01    $461,035         4
          Assistance Programs (SAR 42, pg. 22)
          Status: FSA informed us that they are working to resolve this audit.


                                                                25
                                                                                     Semiannual Report To Congress: #48

Table 6: Unresolved Reports Issued Prior to October 1, 2003 (Cont.)
                                                                                                               Total    No. of
 Report                                       Report Title                                        Date       Monetary Recommen-
 Number                 (Prior Semiannual Report [SAR] Number and Page)                          Issued      Findings   dations
A06-A0024 Audit of Commissioned Sales and Course Length at Southern Wesleyan University          9/4/02     $19,451,123    5
          (SAR 45, pg. 16)
          Status: FSA informed us that they are working to resolve this audit.
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 (SAR 44, pg. 15)
          Status: FSA informed us that the Final Audit Determination letter was mailed on
          January 27, 2003. However when the Audit Accountability and Resolution
          Tracking System (AARTS) was implemented, the audit was inadvertently closed at
          the direction of the OCFO, and FSA could not enter the necessary closure
          information into AARTS by September 30, 2003. The audit will be removed in the
          next Semiannual Report.
A06-B0014 Audit of United Education Institute's Compliance with the Title IV, Student             9/6/01      $7,285      1
          Financial Assistance, Verification Requirements (SAR 43, pg. 12)
          Status: FSA informed us that the Final Audit Determination letter was mailed on
          February 27, 2003. However when AARTS was implemented, the audit was
          inadvertently closed at the direction of the OCFO, and FSA could not enter the
          necessary closure information into AARTS by September 30, 2003. The audit will
          be removed in the next Semiannual Report.
A06-C0018 Gretna Career College's Administration of the Title IV Student Financial Assistance    12/19/02 $1,383,470      6
          Programs (SAR 46, pg. 12)
          Status: FSA informed us that the audit was resolved on October 28, 2003. The
          audit will be removed in the next Semiannual Report.
A07-23545 State of Missouri, Single Audit Two Years Ended June 30, 1991                           4/1/93    $1,048,768   18
          Status: FSA Chief Financial Officer (CFO) met with FSA Chief Operating
          Officer(COO) and other officials in OPE to decide how to resolve this audit.
A07-33123 State of Missouri, Single Audit Year Ended June 30, 1992                                3/7/94     $187,530    18
          Status: FSA/CFO met with senior officials in FSA/COO and OPE to decide how to
          resolve this audit.
A07-90035 Audit of Commissioned Sales at William Penn University (SAR 43, pg. 12)                5/15/01    $5,023,447    4
          Status: FSA and OGC are working on a settlement agreement with this school now
          that regulatory changes have been made about commissioned sales.
A07-A0030 Baker University School of Professional and Graduate Study's Administration of         9/19/02 $15,716,275      7
          Title IV Federal Student Aid Programs (SAR 45, pg. 17)
          Status: FSA and OGC are working on a settlement agreement with this school now
          that regulatory changes have been made about commissioned sales.
A07-A0031 Fontbonne University Options Program's Administration of Title IV Federal              9/30/02 $12,441,490      7
          Student Aid Programs (SAR 45, pg. 17)
          Status: FSA and OGC are working on a settlement agreement with this school now
          that regulatory changes have been made about commissioned sales.
A07-B0001 Audit of Course Length at William Penn University (SAR 43, pg. 12)                     9/28/01                  4
          Status: FSA and OGC are working on a settlement agreement with this school now
          that regulatory changes have been made about course length.
A07-B0002 Audit of the National Student Loan Program's Establishment of the Federal Family       9/27/02    $2,672,941   10
          Education Loan Program Federal and Operating Funds (SAR 45, pg. 17)
          Status: FSA issued a program determination letter on March 31, 2004, and the
          audit is going through the resolution process. The audit will be removed in the next
          Semiannual Report.




                                                                26
                                                                                        Semiannual Report To Congress: #48

Table 6: Unresolved Reports Issued Prior to October 1, 2003 (Cont.)
                                                                                                              Total   No. of
 Report                                      Report Title                                         Date     Monetary Recommen-
 Number                 (Prior Semiannual Report [SAR] Number and Page)                          Issued     Findings  dations
A09-70015 Associated Technical College (ATC) Eligibility of Institutions to Participate in Title 9/9/98    $8,600,000    7
          IV Programs & Other Issues (SAR 37, pg. 16)
          Status: FSA/SEC/CMO senior managers are thoroughly reviewing the 90/10
          calculations before approving the final audit determination letter.
N06-90010 Inspection of Parks College's Compliance with Student Financial Assistance             2/9/00     $169,390        1
          Requirements (SAR 40, pg. 18)
          Status: FSA Dallas Case Team denied school's recertification on December 31,
          1999. School closed February 5, 2000.
Office of Safe and Drug-Free Schools (OSDFS)
A01-90007 Puerto Rico Department of Education Needs Major Improvements in its           9/27/00             $82,452        17
          Administration of the Governor's Safe and Drug-Free Schools Program (SAR 41,
          pg. 22)
          Status: OSDFS informed us that CAROI team is working on resolving all OIG and
          single audits from Puerto Rico at this time.
Office of Special Education and Rehabilitative Services (OSERS)
A02-B0014 Audit of the Puerto Rico Vocational Rehabilitation Administration (PRVRA) (SAR 6/26/02 $15,800,000                5
          45, pg. 18)
          Status: OSERS informed us that they are currently developing a program
          determination letter to resolve the findings.
   * Audit identified better use of funds for $690,232 for A05-C0029.
   Note - Status comments reflect either documents received, comments agreed to, or comments provided by the Department.

Table 7: Investigation Services Cumulative Actions
(October 1, 2003 to March 31, 2004)
                                                                                                             Fines/       Civil
                  Summary of Investigation                         Subject Name      Action This Period*   Restitutions Recoveries
INSTITUTIONAL FRAUD
Failure to Make Refunds/Refund Fraud
Former owners of training center and technical school            Patricia Bedford    Convicted: 10/21/03
fraudulently obtained more than $54,000 in Pell Grant and        Melissa Blalock     Convicted: 10/21/03
Direct Loan funds
Instructing Students How to Falsify FAFSAs
Minister acting as financial aid consultant assisted students and Ozel Clifford      Sentenced: 10/20/03    $717,579
parents in preparing fraudulent applications for student aid      Brazil
School Employee Theft
Individuals participated in scheme to illegally receive more than Monica Hopson      Sentenced: 2/25/04       $200
$200,000 in student aid refunds                                   Roger Williams     Sentenced: 2/26/04       $200
                                                                  Joe Lee Williams   Sentenced: 2/26/04      $35,823
                                                                  Leigh Stingley     Convicted: 3/29/04
                                                                  Webb
Former college accountant issued checks to family members         Vanessa Neal       Sentenced: 3/2/04      $227,341
and friends who paid kickbacks to her
Former financial aid officer at nursing school submitted and Amy Schachter           Sentenced: 10/20/03    $221,625
processed 46 fraudulent FFEL applications. Aid officer’s          Lisa Herrmann      Sentenced: 11/6/03     $105,250
associate participated in the scheme which resulted in more
than $248,000 in fraudulent FFEL disbursements




                                                                   27
                                                                                       Semiannual Report To Congress: #48

Table 7: Investigation Services Cumulative Actions
(October 1, 2003 to March 31, 2004) (Cont.)
                                                                                                              Fines/       Civil
                  Summary of Investigation                          Subject Name Action This Period*        Restitutions Recoveries
Former college comptroller embezzled approximately $641,000 Louiston Louis         Sentenced: 10/1/03        $403,373
by using his position to write and negotiate checks
Individual participated in scheme to illegally receive more than Dianne Taylor     Sentenced: 1/22/04         $31,685
$200,000 in student aid refunds
Former financial aid director at photography school submitted Keith Magee          Sentenced: 10/21/03        $19,251
fraudulent FFEL applications and received $14,000
Individual participated in scheme to illegally receive more than Antonio Burton Sentenced: 1/28/04            $25,662
$200,000 in student aid refunds
Individual participated in scheme to illegally receive student aid Denozanna Moore Sentenced: 1/7/04          $20,386
refunds and obtained $20,000
Former beauty school employee allegedly stole Pell Grant funds Gertie Boswell      Arrested: 12/18/03
Former Perkins Grant administrator at community college            Thomas          Sentenced: 3/30/04        $901,777
submitted false claims enabling school to illegally receive        Flaschberger
approximately $189,000
Fraudulent Work-Study
Former student, with assistance of financial aid employees, was Sandra Perry        Indicted: 12/18/03
allegedly involved in a scheme to embezzle work-study funds
Former financial aid counselor at community college created Celious Barner          Convicted: 2/19/04
false time sheets and coerced students to pay him kickbacks
Former student employed in work-study office involved in        Robert Jones        Convicted: 12/10/03
scheme to embezzle work-study funds
Collusion Between Officials and Students
Individual conspired with school financial aid director and     Milow LeBlanc       Sentenced: 11/24/03      $175,950
received kickbacks from student loan checks from nine
individuals he recruited to illegally receive student aid
Individual conspired with school financial aid director and     David Carlton       Sentenced: 11/3/03        $74,100
received kickbacks from student loan checks from six            Edwards
individuals he recruited to illegally receive student aid
RECIPIENT FRAUD
Falsification of Income
Individual falsified income to receive student aid                 Kayce N. Ofodile Sentenced: 12/4/03        $8,750
Father and daughter falsified income to receive approximately Lizete Villasenor Civil Complaint:
$5,800 in Pell Grants                                                               11/12/03
                                                                   Miguel           Civil Complaint:
                                                                   Villasensor      11/12/03
Former student falsified marital status to obtain loans and grants Nicole Osborne Sentenced: 1/5/04           $9,813
Former student falsely claimed disability to cancel more than Tonya D. Ryans Sentenced: 12/16/03            $25,569.34
$21,000 in student loans
Family falsified parent's marital status and other information to Charles Keefer    Civil Filing: 2/13/04
obtain student aid                                                 Bonnie Keefer    Civil Filing: 2/13/04
                                                                   Anne Keefer      Civil Filing: 2/13/04
                                                                   Beth Keefer      Civil Filing: 2/13/04
Falsification of Identity/Identity Theft
Former student used another person's name and Social Security Toccaro Bates         Sentenced: 11/24/03       $14,100
number to obtain direct and PLUS loans




                                                                  28
                                                                                          Semiannual Report To Congress: #48

Table 7: Investigation Services Cumulative Actions
(October 1, 2003 to March 31, 2004) (Cont.)
                                                                                                                 Fines/       Civil
                   Summary of Investigation                           Subject Name      Action This Period*    Restitutions Recoveries
Individual used two different identities to obtain approximately     Victor Byrd       Indicted: 3/16/04
$42,000 in student aid
Individual used his brother's identity to obtain approximately       Luis              Indicted: 2/27/04
$12,000 student loan and home mortgage of more than                  Scaccabarrozzi
$141,000
Individual stole identity of son's father to obtain more than        Clara Abbas       Sentenced: 2/23/04        $43,726
$28,000 in loans and grants for her son
Illegal immigrant bought identity papers and used new identity       Berg Hyacinthe    Sentenced: 11/7/03        $13,224
to obtain approximately $92,000 in student aid
Individual allegedly kidnapped his son and used son's identity       Brent Austin      Convicted: 1/5/04
to obtain approximately $94,000 in student aid
Former inmate used more than 50 different identities to obtain       John Edward       Convicted: 1/20/04
more than $300,000 in student loans and grants                       Christensen
Individual used alias to cash student aid refund checks              Tasha Gordon      Sentenced: 10/9/03        $78,355
Individual allegedly allowed illegal alien to use his identity to    John McCahon      Indicted: 1/8/04
obtain more than $40,000 in student aid
Career criminal known to have at least 16 aliases, allegedly         Kenneth Wayne     Indicted: 12/29/03
used another person's identity to obtain more than $3,000 in         Jordan
student aid
Individual allegedly used a false name and Social Security           Michelle Lee      Civil Filing: 1/9/04
number to obtain more than $12,000 in Pell Grants and student        Massion
aid after previously defaulting on student loans
Illegal alien allegedly used another person's identity to obtain     Wilfried Ibach    Indicted: 1/8/04
more than $40,000 in student aid
Former student allegedly used false identity and Social Security     Ludlow Dawes      Civil Filing: 1/15/04
number and falsely claimed U.S. citizenship to obtain more than
$28,000 in student aid
Former inmate stole identities to obtain student aid for himself     Avangia Jones     Convicted: 1/27/04
and four other inmates for online community college program
Individual used two Social Security numbers to obtain more           James DeLoach     Convicted: 3/18/04
than $90,000 in student aid and used fraudulent Social Security
numbers in bankruptcy court to illegally discharge
approximately $47,000 in consumer debt
Individual used false Social Security number to obtain more          Christina         Convicted: 3/18/04
than $40,000 in student grants and loans after previously            Coleman
defaulting on student loans
Student used a false Social Security number to receive more          Sherron Dixon     Sentenced: 11/17/03       $9,325
than $9,000 in student aid
Individual part of scheme using aliases to cash student aid          Grady McCrary     Sentenced: 12/8/03       $155,748
refund checks
Falsification of Citizenship
Illegal alien allegedly falsely claimed U.S. citizenship to obtain   Karen Fuller      Indicted: 3/3/04
more than $22,000 in student aid
Illegal alien falsely claimed U.S. citizenship to obtain more than   Thelma Gener      Sentenced: 10/10/03       $11,533
$10,000 in student loans and grants
Former student falsely claimed U.S. citizenship by submitting        Claude-Nathalie   Convicted: 3/12/04
fraudulent birth certificate to obtain more than $15,000 in          Eyamba
student loans and grants



                                                                      29
                                                                                      Semiannual Report To Congress: #48

Table 7: Investigation Services Cumulative Actions
(October 1, 2003 to March 31, 2004) (Cont.)
                                                                                                           Fines/       Civil
                 Summary of Investigation                        Subject Name      Action This Period*   Restitutions Recoveries
Falsification of Eligibility
Former student submitted false GED certificate to illegally    Sophia Morris                                           $11,300
obtain more than $8,000 in student aid
Former student misrepresented graduate school eligibility to   Brian Cantwell      Sentenced: 12/1/03      $5,727
obtain more than $12,000 in student aid
Two individuals allegedly recruited fifteen persons to         Anthony Hervey      Arrested: 10/31/03
misrepresent eligibility by posing as graduate students, to    Gloria Hervey       Arrested: 11/17/03
obtain more than $285,000 in student loans                     Stacey Adams        Indicted: 10/9/03
                                                               Donald Braboy       Indicted: 10/9/03
                                                               Sean Loggin         Arrested: 11/18/03
                                                               Corey Stuckey       Arrested: 10/17/03
                                                               Khalil Harper       Convicted: 4/12/04
                                                               Ronald Jackson      Indicted: 10/9/03
                                                               Tommie Jordan       Convicted: 3/31/04
                                                               Jackie Lawless      Indicted: 10/9/03
                                                               Isiah Miller        Indicted: 10/9/03
                                                               Twana Moss          Convicted: 4/7/04
Individual recruited to falsely claim graduate student status to
                                                               Gregory Hall        Convicted: 2/11/04
illegally receive student aid
Individual recruited to falsely claim graduate student status to Robert Miller     Convicted: 3/12/04
illegally receive student aid
Son of School Board Vice-President submitted false financial Derrick Fomby         Convicted: 3/5/04
aid records to illegally receive more than $10,000 in student aid
School board member and teacher submitted false financial aid Janet Thomas         Convicted: 3/10/04
records enabling son to illegally receive more than $10,000 in
student aid
Individual recruited to falsely claim graduate student status to Renee Harris      Convicted: 2/23/04
illegally receive student aid                                     Elkin Wells      Convicted: 2/27/04
                                                                  Andre Norris     Convicted: 3/8/04
Illegal alien falsely claimed "eligible non-citizen" status to    Jorge Jimenez    Convicted: 1/5/04
illegally obtain more than $6,000 in student aid
Former school owner created false documentation to illegally Mary Hendrick         Convicted: 3/17/04
receive more than $564,000 in student loans and grants
Fraudulent Loan Discharges/Deferments
Individual falsely claimed disability to have loans totaling more Robin Cannon     Sentenced: 11/25/03     $17,996
than $16,000 discharged
Individual allegedly falsified death certificate and other        Jeffory Brown    Arrested: 11/6/03
documents to illegally discharge more than $150,000 in student
loans and allegedly used false Social Security numbers to
illegally collect benefits
Individual fraudulently received more than $31,000 in             Adriese Thomas   Convicted: 12/19/03
unclaimed property and used false documents to discharge
approximately $1,700 in student loans




                                                                 30
                                                                                          Semiannual Report To Congress: #48

Table 7: Investigation Services Cumulative Actions
(October 1, 2003 to March 31, 2004) (Cont.)
                                                                                                               Fines/       Civil
                  Summary of Investigation                            Subject Name     Action This Period*   Restitutions Recoveries
Foreign School Recipient Fraud
Doctors forged school certifications, exceeded loan limits, and Max Noel              Sentenced: 3/1/04
conspired with a foreign fraud ring to fraudulently obtain more Herold Pierre-        Sentenced: 3/1/04
than $147,000 in FFEL funds                                      Louis
Individual obtained more than $160,000 in FFEL proceeds          Shane Bybee          Convicted: 2/10/04
falsely claiming he and his brother were enrolled at a school in
the United Kingdom. He also prepared or submitted more than
2,300 additional fraudulent FFEL applications requesting
approximately $43.8 million under multiple fictitious identities
falsely claiming enrollment at United Kingdom schools
FINANCIAL AID PREPARER FRAUD
Financial aid consultant provided fraudulent student aid             Richard         Civil Filing: 1/14/04
assistance; wife falsified income to obtain approximately            Bukowsky
$35,000 in student aid for children                                  Myrtle Bukowsky Civil Filing: 1/14/04
Clients Prosecuted
Consent judgments entered for three individuals that obtained Jill Collins            Civil Settlement:                    $21,279
federal student aid for their children after using the assistance of                  2/23/04
a fraudulent financial aid consultant                                Rhonda Kellner   Civil Settlement:                    $55,000
                                                                                      12/16/03
                                                                     Phyllis          Civil Settlement:                    $39,862
                                                                     Lewkowicz        10/28/03
Other
Individual used stolen bank information to post online student       Tamela Nunn      Sentenced: 3/10/04       $8,750
loan payments to student loan account and used loan money to         Daresse Leigh    Sentenced: 1/30/04       $8,750
make payments on personal account causing loss of
approximately $120,000
Provider of vocational rehabilitation services repaid $545,124
                                                             Abilities of FL                                              $545,124
in Title I funds after receiving unallowable payments        Incorporated
Individuals associated with a career development institute   Gerald Phillips          Indicted: 1/22/04
charged in a superseding indictment with conspiracy to obstruct
                                                             Giuseppe                 Indicted: 1/22/04
justice, theft of honest services, aiding and abetting, and making
                                                             Polimeni
false statements to a federal agent in connection with no-show
                                                             Jamie Dwyer              Indicted: 1/22/04
jobs
                                                             Luisa Cardaropoli        Indicted: 1/22/04
School employee made false statements to federal agents when Thomas Reilly            Sentenced: 12/5/03
questioned regarding his son's illegal receipt of more than
$19,000 in salary funded in part with Title I funds
Former state employees created false payment vouchers to     Twanda Ross              Sentenced: 2/9/04        $20,252
illegally obtain Title I funds                               Michelle                 Convicted: 11/6/03
                                                             Abrajano
Former Puerto Rico Department of Education official and      Jose Omar Cruz           Sentenced: 2/11/04
contractor in scheme to steal more than $4.3 million in      Ruperto Vazquez          Sentenced: 2/11/04
education funds                                              Lopez
Former Department employee stole more than $160,000          Jean Williams            Sentenced: 12/18/03      $13,800
through illegal use of government credit card                Stancell




                                                                      31
                                                                                         Semiannual Report To Congress: #48

Table 7: Investigation Services Cumulative Actions
(October 1, 2003 to March 31, 2004) (Cont.)
                                                                                                                 Fines/       Civil
                  Summary of Investigation                          Subject Name      Action This Period*      Restitutions Recoveries
Individuals part of a scheme to illegally divert $1.9 in Impact   Stateson Clarence   Convicted: 1/5/04
Aid funds to personal use                                         Francois
                                                                  Diallo Cobham       Convicted: 1/30/04
                                                                  John Holmes         Convicted: 2/2/04
                                                                  Daniel Dorcely      Convicted: 1/30/04
Department contractor conspired with Department employees         James Barksdale     Sentenced: 1/30/04         $34,733
to received more than $121,000 for work he did not perform
Owner and employees of debt collection agency allegedly           Robert Hazlett      Indicted: 3/17/04
submitted fraudulent consolidated loan applications illegally     Suzanne Prather     Indicted: 3/17/04
creating more than $1 million in commissions for themselves       James Stevens       Indicted: 3/17/04
                                                                  David Honderd       Indicted: 3/17/04
                                                                  Greg Evans          Indicted: 3/17/04
   * Arrest refers to filing of criminal complaint, indictments include informations, and convictions include pretrial diversions and nolo
   pleas.

Table 8: Statistical Profile : October 1, 2003 to March 31, 2004
                                                                                                                     Six-month Period
                                                                                                                      Ending 3/31/04
OIG AUDIT REPORTS ISSUED                                                                                                               41
Questioned Costs                                                                                                              $5,001,205
Unsupported Costs                                                                                                             $3,394,648
Recommendations for Better Use of Funds                                                                                    $244,334,386
OTHER OIG PRODUCTS                                                                                                                     30
(Inspections, Attestations, Interim Audit Memoranda, Alert Memoranda, Closeout Memoranda/Letters,
Management Information Reports, and Preaward Audit Services)
OIG AUDIT REPORTS RESOLVED BY PROGRAM MANAGERS                                                                                         28
Questioned Costs Sustained                                                                                                 $143,728,457
Unsupported Costs Sustained                                                                                                     $859,929
Additional Disallowances Identified by Program Managers                                                                           $6,676
Management Commitment to the Better Use of Funds                                                                              $7,383,859
INVESTIGATIVE CASE ACTIVITY
Cases Opened                                                                                                                           91
Cases Closed                                                                                                                           94
Cases Active at End of Period                                                                                                         334
Prosecutorial Decisions                                                                                                                88
 -Accepted                                                                                                                             58
 -Declined                                                                                                                             30
INVESTIGATION RESULTS
Indictments/Informations                                                                                                               38
Convictions/Pleas                                                                                                                      52
Fines Ordered                                                                                                                     $7,823



                                                                    32
                                                Semiannual Report To Congress: #48

Table 8: Statistical Profile : October 1, 2003 to March 31, 2004
                                                                   Six-month Period
                                                                    Ending 3/31/04
Restitution Payments Ordered                                              $4,183,594
Civil Settlements/Judgments (#)                                                   5
Civil Settlements/Judgments ($)                                             $135,676
Recoveries                                                                  $545,124
Forfeitures/Seizures                                                         $44,230




                                     33
U.S. Department of Education
Rod Paige
Secretary


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


Counsel to the Inspector General
Mary Mitchelson


May 2004


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                                      Inspector General’s Hotline

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                                   U.S. DEPARTMENT OF EDUCATION
                                   OFFICE OF INSPECTOR GENERAL
                                 SEMIANNUAL REPORT TO CONGRESS