oversight

Semiannual Report - April 1, 2008 - September 30, 2008

Published by the Department of Education, Office of Inspector General on 2008-09-30.

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

                                                                    CONTENTS
INSPECTOR GENERAL’S MESSAGE TO CONGRESS
OVERVIEW ....................................................................................................................................................1
STUDENT FINANCIAL ASSISTANCE PROGRAMS .............................................................................2
  Federal Student Aid Operations .................................................................................................................3
     OIG Efforts on Ensuring Continued Access to Student Loans Act of 2008 Programs and Operations ..3
     Department's Process for Granting Access to the National Student Loan Data System ........................3
     Estimation of Improper Payments in the Federal Family Education Loan Program ..............................4
     Department's Process for Disbursing Academic Competitiveness Grants and National Science
         and Mathematics Access to Retain Talent Grants .............................................................................5
  Title IV Program Participants ....................................................................................................................5
     New York - Technical Career Institutes, Inc. .........................................................................................5
     Pennsylvania - Star Technical Institute's Upper Darby School ..............................................................6
  Investigations ..............................................................................................................................................7
     School Officials ......................................................................................................................................7
     Individuals ..............................................................................................................................................8
ELEMENTARY, SECONDARY, AND POSTSECONDARY EDUCATION PROGRAMS .................8
  Elementary and Secondary Education .......................................................................................................9
     Department Oversight of Consolidated State Performance Reports .......................................................9
  Grantee Accountability ...............................................................................................................................9
     Michigan - School District of the City of Detroit ...................................................................................9
     Minnesota - Saint Paul Public Schools .................................................................................................10
     Missouri - St. Louis Public School District ..........................................................................................11
     Puerto Rico - University of Puerto Rico Cayey Campus ......................................................................11
  Postsecondary Education ..........................................................................................................................12
     Department's Process for Awarding Prior Experience Points in the 2006 Educational Opportunity
         Centers and Talent Search Grant Competitions ...............................................................................12
     Grantee Accountability .........................................................................................................................13
         Project GRAD USA .........................................................................................................................13
         Teach for America ...........................................................................................................................13
         Indiana State University ...................................................................................................................14
  Investigations ............................................................................................................................................15
     School Officials ....................................................................................................................................15
     Grantees ................................................................................................................................................17
INFORMATION SECURITY AND OTHER INTERNAL OPERATIONS ..........................................17
  Information Security .................................................................................................................................18
     Federal Information Security Management Act Reviews .....................................................................18
  Other Internal Operations ........................................................................................................................19
     Department Controls over Travel Expenditures ...................................................................................19
     Department's Financial Disclosure Procedures .....................................................................................20
OTHER NOTEWORTHY EFFORTS ........................................................................................................20
  Nonfederal Audits .....................................................................................................................................20
  President's Council on Integrity and Efficiency ......................................................................................21
     Former Inspector General to Receive Prestigious Award .....................................................................21
     Financial Audit Manual ........................................................................................................................21
     Deputy Assistant Inspector General Appointed to Federal Accounting Committee ............................21
REPORTING REQUIREMENTS OF THE INSPECTOR GENERAL ..................................................22
Table 1: Recommendations Described in Previous Semiannual Reports
           on Which Corrective Action Has Not Been Completed ..............................................................23
Table 2: OIG Audit Reports on Department Programs and Activities
           (April 1, 2008, to September 30, 2008) .......................................................................................25
Table 3: Other (OIG Reports on Department Programs and Activities
           (April 1, 2008, to September 30, 2008) .......................................................................................27
Table 4: OIG Issued Audit Reports with Questioned Costs ..........................................................................28
Table 5: OIG Issued Audit Reports with Recommendations for Better Use of Funds..................................29
Table 6: Unresolved Reports Issued Prior to March 31, 2008.......................................................................30
Table 7: Statistical Profile FY 2008...............................................................................................................37
                  MESSAGE TO CONGRESS
As the Acting Inspector General of the U.S. Department of Education (Department) Office of
Inspector General (OIG), I am pleased to provide this semiannual report on the activities and
accomplishments of this office from April 1, 2008, through September 30, 2008. The audits,
inspections, and investigations highlighted in this report illustrate our ongoing commitment to
promoting accountability, efficiency, and effectiveness in federal education operations and
programs.

Over the last six months, OIG issued 22 audit, inspection, and related reports. We identified over
$13.3 million in questioned costs and over $88.1 million in unsupported costs. We closed 45
investigations, with over $10.9 million in recoveries, restitutions, fines, and settlements.

As you will read in the pages of this report, our work continues to identify a need for the
Department and its grantees to improve monitoring and oversight of the programs we reviewed.
At the Department level, perhaps nowhere was this need more evident than in the work we
conducted in support of the Federal Information Security Management Act requirements, where
our audits revealed weaknesses in contractor oversight, as well as management, operations, and
technical security controls in the data system review. Similarly, work conducted over the last
six months found that ineffective monitoring and oversight by grantees put millions of federal
education dollars at risk. We also identified a need for the Department to improve its guidance in
key areas to help ensure that its grantees adhere to statutory and regulatory requirements, and to
ensure that the Department offices responsible for administering these programs are doing so
appropriately and consistently.

In this Semiannual Report, we highlight some of the more significant investigative cases we
conducted during this reporting period. These include several civil settlement agreements totaling
over $3 million, as well as a number of sentences and indictments of high-ranking school officials
who sought to enrich themselves at the expense of America's students and taxpayers.

With the FY 2008-2009 school year under way, the Department faces a number of new
challenges, particularly in the area of student financial assistance. With the turmoil in the credit
market, new challenges have emerged in providing effective oversight of the federal student aid
programs and in implementing the student loan purchase authorities granted by Congress in the
Ensuring Continued Access to Student Loans Act of 2008. These challenges will impact almost
every operational aspect of the agency, including information technology, systems operations,
financial reporting, staffing, customer service, and monitoring and oversight. The challenge in
managing existing programs will likely grow as the lenders and guaranty agencies involved in
these programs turn to the Department for guidance and increased financial assistance. OIG will
continue to work to ensure that the Department effectively carries out its responsibilities so that
America's students can make their dreams of a higher education a reality.
In closing, I am honored to have been asked to take the helm of this organization with its proven
record of accomplishment and exemplary work in improving federal education programs and
operations. I have every intention of maintaining the high level of integrity and service you have
come to expect from this office and that America's taxpayers and students deserve.

I look forward to working with you and meeting the challenges and opportunities that lay ahead.




                                                                          Jerry G. Bridges
                         OVERVIEW
We are pleased to provide this Semiannual Report on the activities and accomplishments
of the U.S. Department of Education (Department) Office of Inspector General (OIG) from
April 1, 2008, through September 30, 2008. The audits, inspections, investigations, and
other activities highlighted in this report illustrate our ongoing commitment to promoting
accountability, efficiency, and effectiveness in federal education programs and operations.

In our last Semiannual Report to Congress, we noted that the Department needs to improve
the monitoring and oversight of its programs and operations. Work concluded over the last
six months shows this to be an ongoing challenge for the Department in the programs we
reviewed, as well as with Department grantees and program participants that we examined
over the last six months. Without effective monitoring and oversight, the Department can-
not ensure that its data and data systems are safe from intrusion, or that grantees and partic-
ipants are adhering to statutory and regulatory requirements and provisions specific to the
grants they were awarded. You will find examples of this throughout the pages of this
report.

In the first section of our report you will find information on work we conducted in the
area of student financial assistance. With $82 billion awarded in fiscal year (FY) 2007
through the student financial assistance programs and an outstanding loan portfolio of
close to $500 billion, the Department's Federal Student Aid office (FSA) must provide
adequate monitoring and oversight of its programs, operations, and participants to help
protect these taxpayer dollars from waste, fraud, and abuse. Work concluded over the last
six months shows this to be an area that still challenges the Department. For example, our
inspection of the Department's process for granting outside entities access to the National
Student Loan Data System--a system that holds critical information on borrowers, loans,
and grants--found weaknesses in the system that increase the risk of inappropriate disclo-
sure or unauthorized use of or access to valuable data. Further, our review of the Depart-
ment's process for disbursing new grants to college students showed a need for improved
monitoring to ensure that funds are made available to students who are eligible to receive
these grants. Again, you will find more specifics on these and other reports in this section,
including the assistance OIG provided to FSA in response to the student loan purchase
authorities granted by Congress in the Ensuring Continued Access to Student Loans Act of
2008. You will also find in this section summaries of our more significant investigations
involving theft or misuse of student financial assistance funds by officials of higher educa-
tional institutions and by other individuals.

In the second section of this report we provide a summary of our recent work in the area of
elementary, secondary, and postsecondary education programs. In recent years we have
focused more of our resources on these programs and program participants. Over the last
six months, we released reports with significant findings of potentially misused federal
education dollars--including our audit of the School District of the City of Detroit that
identified more than $52.2 million in unallowable or unsupported expenditures. Findings
from our work in the postsecondary education area included a lack of effective internal
controls in documenting expenditures, such as our audit of Project GRAD USA where we
found more than $16 million in unsupported costs. Federal grantees are required to docu-
ment that the federal funds they received were expended appropriately. Failure to keep
such records places federal educational dollars at risk of waste, fraud, and abuse. You will
find more information on these and other audit and inspection work we conducted in the
postsecondary arena in this section of our report, as well as summaries of our more signif-
icant investigations involving a number of individuals placed in a position of trust to edu-
cate America's children.




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   In the third section of this report, we highlight reviews we completed on the Department's
   information security and management efforts and internal operations, specifically the
   results of our annual Federal Information Security Management Act review--areas where
   accountability is vital to protecting the Department's valuable assets and confidential infor-
   mation. Our work concluded that there are weaknesses in the Department's information
   security systems we examined, which leave the systems and the data they contain vulnera-
   ble to intrusion and, ultimately, theft. We also examined the Department's controls over
   travel expenditures and found room for improvement, which you will find discussed in
   more detail in this section of the report. With regard to Section 845 of the National
   Defense Authorization Act for Fiscal Year 2008, which requires each OIG to include infor-
   mation in its Semiannual Reports to Congress on final contract-related audit reports that
   contain significant findings, OIG did not issue any such report over the last six months.

   OIG constantly strives to improve its operations through our work with the Inspector Gen-
   eral community. In the fourth section of this report, we highlight those efforts conducted
   during this reporting period. We also share information on former Inspector General John
   Higgins, Jr.'s much-deserved career achievement award presented to him by the President's
   Council on Integrity and Efficiency.

   In the fifth and final section of this report, we provide a compilation of tables of the audits,
   inspections, and investigations we concluded during this reporting period, as required by
   the Inspector General Act of 1978, as amended. Copies of the reports discussed in this
   Semiannual Report may be found on the OIG Website at http://www.ed.gov/about/offices/
   list/oig/index.html. Interested individuals may sign up to receive email notification when a
   new report is issued by providing the information requested at: http://www.ed.gov/about/
   offices/list/oig/areports.html.

   For more information on the work or activities discussed in this report, please contact the
   OIG Congressional Liaison at (202) 245-7023, or visit our Website at http://www.ed.gov/
   about/offices/list/oig/index.html.


STUDENT FINANCIAL ASSISTANCE PROGRAMS
   With over 6,000 postsecondary institutions, more than 3,000 lenders, 35 guaranty agen-
   cies, $82 billion in awards, and an outstanding loan portfolio of close to $500 billion in FY
   2007, the Department must ensure that all entities involved in the programs are adhering to
   statutory and regulatory requirements. As the office responsible for administering the stu-
   dent aid programs, FSA must provide adequate oversight and demand accountability from
   its staff, program participants, and contractors to help protect these dollars from waste,
   fraud, and abuse. Compounding the challenges of administering these already complex
   and resource-intensive operations is the turmoil in the credit market, which spurred Con-
   gress to pass the Ensuring Continued Access to Student Loans Act of 2008 (ECASLA)--a
   statute that provides the Department with authority to purchase loans from lenders and
   strengthening the Lender-of-Last Resort program. Errors, failure to plan effectively, or
   other problems with the design or implementation of these programs and initiatives would
   not only put a substantial amount of federal funds--potentially billions of dollars--at risk,
   but also may hinder a student's ability to acquire a federal loan, which is the goal of the
   law.

   During this reporting period, OIG worked closely with FSA, providing audit guidance,
   assistance, and advice in matters to ensure that mechanisms are in place to ensure that
   ECASLA programs run as effectively as possible at all levels. This includes mechanisms
   for improved oversight activities, as other work concluded over the last six months shows
   a continued need for improved monitoring and oversight by FSA and participants in the
   student loan programs to ensure funds are provided only to eligible recipients.


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                  In addition, OIG investigative staff continues to identify and pursue cases of fraud in stu-
                  dent financial assistance programs. Summaries of these reports and examples of our work
                  in this area are highlighted below.

                  Federal Student Aid Operations
OIG EFFORTS ON    Utilizing the ECASLA authority, the Department designed two programs to provide
ENSURING          liquidity to lenders to ensure that borrowers have access to student loans for the 2008-2009
CONTINUED         academic year: the Loan Participation Purchase Program; and the Loan Purchase Commit-
                  ment Program. Under these programs, the Department purchases participation interests in
ACCESS TO         eligible loans held by lenders and purchases eligible loans from lenders. OIG participated
STUDENT LOANS     in a non-audit advisory capacity on an inter-Departmental working group established to
ACT OF 2008       identify compliance activities for programmatic oversight.
PROGRAMS AND
OPERATIONS        A critical up-front compliance requirement for the programs is for the lender to have an
                  Agreed-Upon Procedures Attestation Engagement performed and submitted to the Depart-
                  ment within 60 days after the Department purchases participation interests in loans, or pur-
                  chases the loans. The OIG is responsible for providing audit guidance to the independent
                  accountants conducting these engagements. Thus far, we have completed the procedures
                  for the Loan Participation Purchase Program that began in August, and the procedures for
                  the Loan Purchase Commitment program that began in September will be completed in
                  November 2008.

DEPARTMENT'S      During this reporting period, we concluded an inspection to evaluate FSA's process for
PROCESS FOR       granting identification numbers and passwords to external users (except for schools and
GRANTING ACCESS   borrowers) of the National Student Loan Data System (NSLDS) and to determine whether
                  the level of access that FSA provides these external users was appropriate. Authorized
TO THE NATIONAL
                  under the Higher Education Act of 1965, as amended (HEA), NSLDS contains information
STUDENT LOAN      about the federal financial aid history of HEA, Title IV loans and Pell Grants. NSLDS
DATA SYSTEM       stores information about loans, grants, students, borrowers, lenders, guaranty agencies,
                  schools, and servicers. This data is accessed and used by Department staff and contractors,
                  as well as students, guaranty agencies, schools, student loan servicers and lenders, and
                  entities in an eligible lender trustee arrangement.

                  Before applying for access to NSLDS, an external entity must first obtain an entity ID
                  number assigned by FSA, such as a lender identification number. OIG investigations iden-
                  tified what appear to be unauthorized activities by external NSLDS users. In 2007, FSA
                  temporarily suspended access to NSLDS by all external entities except schools and bor-
                  rowers. After review of the access rules, FSA restored access to some users.

                  While our inspection found that the access given to guaranty agencies and state grant agen-
                  cies is appropriate, this was not the case with other external entities. Specifically, FSA had
                  not developed adequate procedures to oversee guaranty agencies' role in the lender identi-
                  fication number assignment process, had not developed effective controls for assigning
                  lender identification numbers, and did not verify the required agreements between guar-
                  anty agencies and lenders. We also found that FSA did not provide adequate oversight of
                  external users and did not establish equivalent security requirements for external users
                  such as those that apply to internal users. In addition, we found that FSA does not ensure
                  that external users accessing NSLDS have a business relationship with the borrower.
                  FSA's weaknesses in granting access to external users increase the risk for inappropriate
                  disclosure or unauthorized use of sensitive and personally identifiable information.

                  Based on our findings, we made a number of specific recommendations, including that
                  FSA develop written procedures for assigning lender identification numbers and that it
                  require lenders, lender servicers, and eligible lender trustees to confirm and identify the


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                                                                      Semiannual Report To Congress: #57

                  nature of the business relationship with the borrower before the borrower's record is
                  accessed. FSA did not disagree with our inspection results and concurred with some of our
                  recommendations. Click here for a copy of our report.

ESTIMATION OF     The Improper Payments Information Act of 2002 requires agencies to review annually and
IMPROPER          report on improper payments made in the programs and activities they administer. This is
PAYMENTS IN THE   a three-step process: first, agencies must identify programs most susceptible to risk; sec-
FEDERAL FAMILY    ond, they must estimate the annual amount of improper payments for those programs; and
                  third, they must report on actions the agency is taking to reduce those improper payments
EDUCATION LOAN    in the agency's annual Performance and Accountability Report (PAR). The Office of Man-
PROGRAM           agement and Budget (OMB) provides agencies with guidance on implementing the law's
                  requirements, including directions on identifying at-risk programs and what would consti-
                  tute a significant improper payment.

                  The Department identified the Federal Family Education Loan (FFEL) program as one of
                  its programs most susceptible to risk. In September, we concluded an audit to assess FSA's
                  methodology for estimating improper payments in the FFEL program in FY 2006 and FY
                  2007. We found that while FSA put forth a good effort and expended significant staff
                  resources to identify the required estimates, the methodologies used for FY 2006 and FY
                  2007 were not reliable.

                  FSA used different methodologies for estimating the improper payment rates for the FFEL
                  program that were reported for FY 2006 and FY 2007, and plans to use another methodol-
                  ogy for FY 2008. FSA consulted with OMB during the design and execution of the meth-
                  odologies used for its FY 2006 and FY 2007 estimates and generally followed the
                  appropriate definitions and OMB guidance. In FY 2006, it relied on monetary findings in
                  single audits, program audits, OIG audits, and FSA program reviews of guaranty agencies,
                  lenders, and lender servicers to compile its estimate. This methodology was incomplete
                  because it did not include monetary findings from audits and reviews of institutions of
                  higher education, guaranty agency reviews of lenders, or OIG investigations, nor did it
                  include improper payments self-identified by lenders or lender servicers. In FY 2007,
                  FSA reviewed statistically selected samples of two types of payments--payments to lend-
                  ers and payments to guaranty agencies--but its review process was incomplete: it did not
                  verify all components of payments; and the estimated improper payments reported in the
                  PAR were based on an interim calculation that did not include all improper payments. We
                  understand that for FY 2008, FSA will be using a different methodology and has enlisted
                  the support of the U.S. Department of Energy's Oak Ridge Laboratory to develop a more
                  accurate estimate.

                  Based on our review and to improve the reliability of the improper payment rates for the
                  FFEL program, we made a number of recommendations, including that FSA ensure that
                  factors related to the use of previously conducted audits and reviews are taken into account
                  or their effects mitigated in future estimations beginning with FY 2008, as well as ensuring
                  that all methods of payment are taken into account when producing the estimate. FSA did
                  not explicitly express concurrence with our findings and recommendations, but did state it
                  would implement a methodology for estimating FFEL improper payments that meets
                  OMB requirements. FSA also stated that it would finalize and report the estimated
                  improper payment rate for FY 2007, disclose in future PARs when an interim calculation is
                  used or there are other limitations in reported information, and update its policy and proce-
                  dures to ensure consistency in information reported in future PARs. Click here for a copy
                  of the report.




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                                                                         Semiannual Report To Congress: #57

DEPARTMENT'S       During this reporting period we concluded an audit that sought to identify and assess the
PROCESS FOR        adequacy of processes and controls established by FSA to ensure that students potentially
DISBURSING         eligible for an Academic Competitiveness Grant (ACG) or National Science and Mathe-
                   matics Access to Retain Talent (SMART) Grant were appropriately identified and notified,
ACADEMIC           that only eligible students have received grants under these programs, and that schools
COMPETITIVENESS    required to participate in the ACG and/or National SMART Grant program are doing so.
GRANTS AND
NATIONAL           Passed as a part of the Deficit Reduction Act of 2005, the ACG and SMART Grant pro-
SCIENCE AND        grams encourage students to take more challenging courses in high school and to pursue
MATHEMATICS        college majors in high demand in the global economy, such as science, mathematics, tech-
                   nology, engineering, and critical foreign languages. During the first completed year of the
ACCESS TO          program, approximately $242 million in ACG funds were disbursed to 310,000 students,
RETAIN TALENT      and approximately $206 million in SMART Grant funds were disbursed to 64,000 stu-
GRANTS             dents.

                   While FSA had relatively little time to implement the programs on both the regulatory and
                   operational levels, we found that it generally established adequate processes and controls
                   over the ACG and SMART Grant programs. Certain processes related to compliance mon-
                   itoring, however, were not formalized. FSA did not conduct sufficient follow-up to its out-
                   reach efforts with schools that did not participate in the programs, including verifying
                   statements from schools regarding their eligibility; thus, funds may not have been made
                   available to students who were eligible for an ACG or SMART Grant. As an example, we
                   found that more than half of the non-participating, potentially ACG-eligible schools never
                   responded to FSA's outreach efforts, and of the 23 percent of schools that responded to
                   FSA's efforts by stating they were not eligible to participate in the program, over 70 per-
                   cent of these schools appeared to be eligible to participate. We found similar results with
                   the SMART Grant program, where more than half of the potentially eligible schools did
                   not respond to FSA's outreach efforts, and of the schools that claimed they were ineligible
                   to participate in the program, over 20 percent appeared to be eligible.

                   Based on our findings, we recommended that FSA establish and implement procedures for
                   a formal, rigorous outreach and assessment process, and establish a program of administra-
                   tive action to include fines and suspensions or termination from the Pell Grant program for
                   schools that are required to but do not participate in the ACG and/or National SMART
                   Grant programs. FSA concurred with our findings and recommendations. Click here for a
                   copy of the report.

                   Title IV Program Participants
NEW YORK:          In May, we completed an audit of Technical Career Institutes, Inc.'s (TCI) administration
TECHNICAL          of the federal Pell Grant and FFEL programs. The audit sought to determine whether TCI
CAREER             administered the programs in accordance with the HEA and applicable regulations, includ-
                   ing institutional and program eligibility (excluding the 90 Percent Rule), student eligibil-
INSTITUTES, INC.   ity, award calculations and disbursements, and return of Title IV funds. During the time
                   period reviewed, TCI received over $20.5 million in Title IV funding, which included over
                   $10.5 million in Pell Grants and over $8.8 million in FFEL funds.

                   The audit found that while TCI met requirements for institutional, program, and student
                   eligibility and for award calculations, it improperly paid over $440,400 to FFEL lenders to
                   pay off its students' loans and prevent default, and it had internal control deficiencies in its
                   administration of the Title IV programs. According to its officials, after it had problems
                   with excessive cohort default rates, TCI implemented a default prevention policy intended
                   to reduce those rates and maintain its eligibility to participate in the Title IV programs.
                   Under its policy, TCI paid off some students' FFEL program loans, to prevent their default,
                   and then attempted to collect the amounts of the loans, separately, from the students. Sec-


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                 tion 435(m)(2)(B) of the HEA specifically addresses this practice: "A loan on which a
                 payment is made by the school . . . in order to avoid default by the borrower, is considered
                 as in default for purposes of [calculating a cohort default rate]." In addition, TCI lacked
                 adequate written policies and procedures in several key areas, including the calculation
                 and timely return of Title IV funds, the proper disbursement of Pell Grant funds, and the
                 accurate and timely updating of the Common Origination and Disbursement System. TCI
                 officials stated that its personnel had sufficient institutional knowledge and did not need
                 formal written policies and procedures. As a result of its lack of internal controls, TCI
                 placed over $20.5 million in Title IV funds at risk of being misused.

                 Our report included recommendations that FSA consider limiting, suspending, or terminat-
                 ing TCI's participation in the Title IV programs, based on its practice of making payments
                 on its students' loans; calculate or recalculate TCI's affected cohort default rates; and
                 require TCI to develop, implement, and ensure that its personnel adhere to written policies
                 and procedures for the administration of Title IV programs. TCI did not concur with most
                 of our findings or recommendations. Click here for a copy of the report.

PENNSYLVANIA:    In August, we issued a report of our audit in which we sought to determine whether Star
STAR TECHNICAL   Technical Institute's Upper Darby (STI Upper Darby) school complied with the 90 Percent
INSTITUTE'S      Rule of the HEA, and if it had sufficient, reliable accounting records to support its 90 Per-
                 cent Rule calculations for FY 2003, 2004, and 2005. The 90 Percent Rule requires that
UPPER DARBY      proprietary institutions derive at least 10 percent of their revenues from non-Title IV
SCHOOL           sources and may include only revenue from sources independent of the institution. Institu-
                 tions that fail to satisfy the 90 Percent Rule lose their eligibility to participate in Title IV
                 programs. STI's Upper Darby school is one of seven STI locations in Delaware, New Jer-
                 sey, and Pennsylvania. During the time period reviewed, STI's Upper Darby school
                 received over $9.6 million in Title IV funds.

                 While its financial statements noted that STI's Upper Darby school met the 90 Percent
                 Rule for the three years we examined, our review found that for the time period reviewed,
                 the school did not comply with the 90 Percent Rule and did not have sufficient, reliable
                 accounting records to support its 90 Percent Rule calculation, thus was ineligible to partic-
                 ipate in Title IV programs. Specifically, we found that the school received more than 90
                 percent of its revenue from Title IV programs in the years reviewed (96.16 percent for FY
                 2003; 94.67 for FY 2004; and 92.67 for FY 2005), and that it improperly calculated and
                 reported non-Title IV revenue in its financial statement reports. This included revenue
                 from selling its accounts receivable to a collection agency used by STI, as a way to gener-
                 ate needed cash receipts and manage the 90-10 ratio. The President of STI also owned 100
                 percent of the collection agency, and the one and only employee was paid from STI's pay-
                 roll account resulting in the collection agency and STI being related parties, thus making
                 the revenue from the sale ineligible for inclusion in the school's 90-10 calculation.

                 Based on our findings, we made a number of recommendations including that FSA termi-
                 nate STI's Upper Darby school from participation in the Title IV programs, and that it
                 require STI's Upper Darby school to return over $9.8 million in Title IV monies it received
                 after its FY 2003 failure to comply with the 90-10 Rule. STI did not concur with most of
                 our findings and did not concur with our recommendations. Click here for a copy of the
                 report.

                 Investigations
                 Identifying and investigating fraud and abuse in the student financial assistance programs
                 has always been a top OIG priority. The following are summaries of some of our more sig-
                 nificant cases of student financial assistance fraud conducted over the last six months
                 involving school officials and individuals.


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                                                                   Semiannual Report To Congress: #57

SCHOOL        Alabama - Gaither and Company Beauty College. The owner of the Gaither and
OFFICIALS     Company Beauty College was sentenced in U.S. District Court, Birmingham, Alabama, to
              30 months in prison, three years of supervised release, and was ordered to pay over
              $107,500 in restitution for fraud. Our investigation found that between 2004 and 2006, the
              owner operated a scheme to fraudulently obtain Pell Grant funds to pay tuition for students
              who would not otherwise have been eligible. The owner encouraged and directed her
              employees to encourage current and prospective students to apply for financial aid for
              which they were not qualified and falsified Free Application for Federal Student Aid
              (FAFSA) forms and submitted them to the Department for payment. The owner received
              these funds in the form of tuition payments which she used for her own use and benefit.

              California - University of West Los Angeles Law School. The former financial aid
              director at the University of West Los Angeles law school was sentenced in U.S. District
              Court, Central District of California, to 21 months of incarceration, three years of proba-
              tion, and was ordered to pay over $1.3 million in restitution for orchestrating a student
              financial aid fraud scam at the school. Our investigation disclosed that the former finan-
              cial aid director entered into an agreement with middlemen to recruit individuals to partic-
              ipate in the scheme. The participants, who were not enrolled in the school and did not plan
              to enroll in the school, were given applications to apply for student aid, which they com-
              pleted and returned to a middleman, which were then returned to the former financial aid
              director. The former financial aid director required most of the loan recipients to kick-
              back approximately 50 percent of the loan amount. Also during this reporting period, one
              of the middlemen was sentenced to four months in prison, followed by three years of
              supervised release, and was ordered to pay over $157,000 in restitution. In addition to
              these sentences, 17 others have been charged for their roles in the scheme.

              Puerto Rico - John Dewey College. The U.S. Department of Justice signed an agree-
              ment with John Dewey College wherein the school agreed to pay $300,000 to settle civil
              claims under the False Claims Act. The settlement is a result of our investigation that
              found that the school misled students into enrolling in a program that was not authorized
              by the Commonwealth of Puerto Rico Council on Higher Education; therefore the program
              was ineligible for federal funding. The school's staff falsely represented to students that
              the courses would lead to a Bachelor and/or Associate Degree knowing that the program
              was not authorized. School officials also submitted false claims to the Department in order
              to receive Pell Grant funds for the students enrolled in the ineligible program.

              Puerto Rico - Instituto Irma Valentin. The former director of the Instituto Irma Val-
              entin Arecibo Campus, a cosmetology school, pled guilty to charges of conspiracy to com-
              mit student financial aid fraud. Our investigation, conducted jointly with the Federal
              Bureau of Investigation (FBI), revealed that from January 2005 to August 2006, the school
              official, along with other school employees, falsified student records to avoid making Pell
              Grant refunds to the Department, as well as to allow the school to request, receive, and
              retain federal funds on behalf of ineligible students. As a result of these efforts, the school
              received over $102,000, which these individuals converted to their own use.

INDIVIDUALS   Connecticut - Yale Student Sentenced. A former student at Yale University was sen-
              tenced in Superior Court of the Judicial District of New Haven, Connecticut, to five years
              of probation and ordered to pay over $41,000 in restitution for student financial aid fraud.
              Our investigation revealed that the former student provided false information about his
              prior college attendance, forged a recommendation letter from a former Columbia Univer-
              sity professor, and lied about his age on his application to Yale.

              New York - Escaped Murderer Sentenced. An escaped murderer was sentenced in
              U.S. District Court, Southern District of New York, to 46 months in prison, and was
              ordered to pay $4,000 in restitution for identity theft and student financial aid fraud. Our
              investigation revealed that the man utilized the identity of another individual to obtain fed-


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                                                         Semiannual Report To Congress: #57

     eral and state financial aid for attendance at the State University of New York. Our finger-
     print analysis determined that from 1995-2005 the man had been arrested in New York 12
     times. Further analysis proved the man to be an escaped convict who was serving a 27
     year prison sentence for murder in Puerto Rico.

     Ohio - Father Sentenced. A father was sentenced in U.S. District Court, Southern Dis-
     trict of Ohio, to 12 months in prison, three years of supervised release, 200 hours of com-
     munity service, and was ordered to pay over $123,000 in restitution for social security and
     student financial aid fraud. Our investigation revealed that the man applied for and
     received federal financial aid for his daughter without her knowledge and fraudulently
     received disability insurance benefit payments.

     Ohio - Former Corrections Officer Sentenced. A former corrections officer was
     sentenced in Warren County, Ohio court, to serve 12 months in prison, and was ordered to
     pay over $67,000 in restitution for her role in a student financial aid fraud scheme. Our
     joint investigation with the Warren County Sheriff's Office and the Pennsylvania Higher
     Education Assistance Agency determined that the former official and two co-conspirators
     falsified documents in order to obtain student loans for purported attendance at Sinclair
     Community College. They then used the funds for their personal benefit. As a result of
     their fraudulent efforts, they received over $100,000 in student financial aid to which they
     were not entitled.

     South Carolina - Woman Featured on America's Most Wanted Pled Guilty. A
     woman pled guilty in U.S. District Court, Greenville, South Carolina, to charges related to
     student financial aid fraud. The woman received notoriety after she assumed the identity
     of a South Carolina girl who has been missing since 1999. This matter was featured in
     numerous national news programs including America's Most Wanted. Our investigation
     revealed that from 2004 to 2006, the woman applied for and received over $100,000 in stu-
     dent loans in the name of the missing girl. Authorities do not believe that the woman had
     anything to do with the missing girl's disappearance, but they are interested in talking to
     her for possible information.


ELEMENTARY, SECONDARY, AND POSTSECONDARY
          EDUCATION PROGRAMS
     In recent years we have increased the resources allocated to reviewing state educational
     agencies' (SEAs) and local educational agencies' (LEAs) compliance with specific provi-
     sions of the Elementary and Secondary Education Act of 1965, as amended by the No
     Child Left Behind Act of 2001 (ESEA/NCLB) to help ensure that vital education funds are
     used as intended so they reach the needed recipients--America's school children. We have
     also increased our efforts in the area of postsecondary education to ensure that federally
     funded programs aimed at increasing high school graduates' access to and success in col-
     lege are operating as intended. Work concluded during this reporting period shows that
     oversight and monitoring of the programs reviewed in the elementary, secondary, and post-
     secondary education areas continue to challenge the Department as well as the SEAs,
     LEAs, and other grantee organizations we reviewed--placing millions of taxpayer dollars
     at risk of waste, fraud, and mismanagement. You will find more on our reports and find-
     ings below, as well as summaries of our more significant investigations involving individ-
     uals in a position of trust to educate our children.




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                 Elementary and Secondary Education
DEPARTMENT       We issued an audit that sought to determine whether the Department provided sufficient
OVERSIGHT OF     oversight of graduation and dropout rates submitted by states in their Consolidated State
CONSOLIDATED     Performance Reports to ensure that the rates were supported by reliable data. The audit
                 came about as a result of four previously issued audits that assessed the reliability of grad-
STATE            uation and dropout rates included in the Consolidated State Performance Reports from
PERFORMANCE      Oklahoma, South Dakota, Texas, and Washington. In each of these reports, we found that
REPORTS          the data used to compute graduation and dropout rates were not always sufficiently reli-
                 able. We followed those audits with a review of pertinent accountability materials from all
                 50 states, the District of Columbia, and Puerto Rico, policy letters issued by the Depart-
                 ment and 52 Title I monitoring reports prepared by the Department. As a result of our
                 analysis, we determined that the Department could have provided better oversight to
                 ensure that graduation and dropout rates submitted by states were supported by reliable
                 data. Specifically, the Department did not put enough emphasis on data reliability and
                 comparability across states. In addition, we could not find any steps designed to check the
                 accuracy of graduation rate formulas or the accuracy of the underlying supporting data in
                 the Department's guide for SEAs entitled, Student Achievement and School Accountability
                 Programs Monitoring Plan for Formula Grant Programs. As a result, states used different
                 formulas that did not provide a graduation rate that was consistent with requirements in the
                 ESEA/NCLB.

                 Allowing states to use varying formulas not only results in graduation rates that are inaccu-
                 rate, but also results in graduation rates that are not comparable among states. Data must
                 be reliable as states and the public use graduation and dropout rates to evaluate school per-
                 formance. The information can also be used to assess school, district, and state account-
                 ability. Finally, as one of the indicators in the ESEA/NCLB's requirement for adequate
                 yearly progress, inaccurate graduation rates could result in schools being misidentified as
                 not making adequate yearly progress.

                 Based on our findings we made several recommendations, including that the Department
                 stress to the SEAs the importance of data quality and the need to provide regular guidance,
                 training, and monitoring of their LEAs. The Department generally agreed with our finding
                 and most of our recommendations. Click here for a copy of the report.

GRANTEE          Michigan - School District of the City of Detroit
ACCOUNTABILITY   Title I, Part A of the ESEA/NCLB provides program funding aimed at helping LEAs and
                 schools improve the teaching and learning of children who are failing, or most at-risk of
                 failing, to meet challenging state academic standards. The Department provides funds to
                 the SEAs for disbursement to LEAs and schools. During this reporting period, we con-
                 cluded our examination of selected Title I, Part A expenditures by the School District of
                 the City of Detroit (Detroit), the largest public school system in Michigan. During the
                 2004-2005 and 2005-2006 school years, Detroit spent over $257 million in Title I, Part A
                 funds. The Michigan Department of Education was required to monitor Detroit's compli-
                 ance with related rules and regulations. An audit submitted by Detroit for the year ending
                 in June 30, 2006 noted a problem with Detroit's compliance with Title I, Part A program
                 requirements. Also, a Detroit internal investigative report identified unallowable contracts
                 that were paid with Title I funds. It also identified other contracts that should be reviewed
                 for the same purpose. The internal report did not include expenditure amounts for the
                 unallowable contracts.

                 Our audit sought to determine whether Detroit returned the Title I, Part A funds it received
                 related to contracts for the 2004-2005 school year that a Detroit internal investigative
                 report identified as unallowable; if expenditures related to selected Title I, Part A contracts
                 for the 2004-2005 school year were adequately documented, reasonable, and allowable;


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and if Title I, Part A personnel and non-personnel expenditures for the 2005-2006 school
year were adequately documented, reasonable, and allowable.

We determined that the funds associated with the unallowable contracts identified by
Detroit's internal investigation amounted to more than $1.7 million and that Detroit did not
return these funds. We also found that Detroit used Title I, Part A funds for expenditures
related to contracts for the 2004-2005 school year that were not adequately documented,
reasonable, and allowable, and used Title I, Part A funds for personnel and non-personnel
expenditures for the 2005-2006 school year that were not adequately documented, reason-
able, and allowable. Specifically, we found that Detroit: charged over $1 million in unal-
lowable personnel expenditures to the Title 1, Part A program; did not always support
compensation charges with adequate and timely certifications, personnel activity reports,
or employee insurance costs for a projected $49.5 million; and expended more than $3.2
million in Title I, Part A funds for non-personnel costs that were unallowable or inade-
quately documented.

Detroit's noncompliance occurred in part because the Michigan Department of Education
did not provide adequate oversight of federal grant funds it distributed to Detroit. Also,
Detroit did not have adequate policies and procedures in place to review Title I, Part A
contracts, invoices, or employee insurance benefit costs to ensure they were adequately
documented, reasonable, and allowable.

Based on our findings, we made 21 recommendations, including that the Department
instruct the Michigan Department of Education to require Detroit to either provide ade-
quate documentation to support over $52.2 million in expenditures or return that amount to
the Department. Shortly after our report was issued, the Michigan Department of Educa-
tion designated Detroit as a "high risk" grantee and placed it on a reimbursement method
of payment for Department funds. Click here for a copy of our report.

Minnesota - Saint Paul Public Schools
During this reporting period, we concluded an audit to determine whether the Saint Paul
Public Schools (Saint Paul), Minnesota's second largest school district, provided the
required share of matching funds for its Teacher Quality Enhancement (TQE) grant and if
it used TQE grant funds only for expenses that were allowable and in compliance with the
plan set forth in the grant application. Our audit covered the period October 1, 2005,
through May 31, 2007. In January 2007, the Department froze Saint Paul's TQE grant
funds due to concerns over its program administration, resulting in Saint Paul using its
own funds to continue the program over the last four months of our review period.

Our audit found that for the 2005-2006 grant year Saint Paul did not provide its required
share of matching funds. As an example, Saint Paul had a matching requirement of
approximately $323,000 for the grant year; however, it provided just over $163,000--more
than $159,800 less than required. Because it did not meet the matching requirement, Saint
Paul provided a diminished program which might not fully accomplish the goals intended
for the program. In addition, we found that Saint Paul did not always use TQE grant funds
for expenses that were allowable and in compliance with the plan set forth in its grant
application.

Based on our findings, we made a number of recommendations, including that the Depart-
ment require Saint Paul to provide adequate documentation for its matching funds or
return over $100,600 to the Department and provide adequate documentation of its match-
ing data to ensure any future match requirements are met. We also recommended that the
Department require Saint Paul to provide evidence to the Department that it has enhanced
its fiscal control and accounting procedures. Saint Paul concurred with our findings and
recommendations and stated it has already implemented some of our recommendations.
Click here for a copy of the report.


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                                                     Semiannual Report To Congress: #57

Missouri - St. Louis Public School District
In September, we concluded an audit to determine whether the St. Louis Public School
District (St. Louis), the largest public school district in Missouri, used certain federal edu-
cation program funds for costs that were allowable and in accordance with applicable laws,
regulations, and grant provisions. The programs we examined were the ESEA/NCLB Title
I, Part A Improving Basic Programs Operated by Local Educational Agencies funds,
Reading First program funds, Improving Teacher Quality program funds, and funds associ-
ated with Part B of the Individuals with Disabilities Education Act (IDEA). Our audit cov-
ered the period July 1, 2005, through June 30, 2006, during which time St. Louis expended
over $47 million for the four programs.

We found that while St. Louis generally used the Reading First funds appropriately, it did
not always do so with funds for the other three programs. Contrary to the ESEA/NCLB
and selected guidance and regulations governing the allowability of costs, St. Louis did not
maintain effective control and accountability for all personal property purchased with
grant funds and charged unallowable costs to the grants. Specifically, due to ineffective
controls and a lack of accountability for its property, St. Louis could not account for 125
laptop computers at a cost of over $178,000. It also charged over $34,600 in Title I, Part A
funds to two ineligible schools to cover personnel costs; did not provide adequate docu-
mentation to support over $57,600 in transportation costs for students participating in sup-
plemental education services during the months of March and April of 2006; did not
maintain time and effort certifications for employees whose salaries and benefits were
charged to the programs totaling more than $491,000; and used over $2,000 in federal
funds to purchase a laptop computer that was not necessary for the operation of its IDEA,
Part B program.

As a result of our findings, we made several recommendations, including that the Depart-
ment require the Missouri State Board of Education to require St. Louis to provide evi-
dence that it has located or recovered the 125 laptop computers or return over $178,000,
and provide adequate support or return to the Department more than $586,000 for the unal-
lowable personnel costs, transportation costs, and extra laptop paid with Title I, Part A;
Title II, Part A; and IDEA, Part B, funds. The Missouri Department of Elementary and
Secondary Education concurred with our findings and generally concurred with our rec-
ommendations. Click here for a copy of the report.

Puerto Rico - University of Puerto Rico Cayey Campus
In May, we released an audit that sought to determine whether the Puerto Rico Department
of Education (PRDE) followed federal and state laws in procuring services and awarding
contracts to Excellence in Education, Inc. (EIE) and the University of Puerto Rico's Cayey
campus (UPR-Cayey), and if it ensured that contract requirements were met prior to pay-
ing the contractors' invoices. EIE is a private corporation whose owner was a UPR-Cayey
faculty member and the mother of a former PRDE official.

For the time period reviewed, PRDE awarded six contracts to EIE and UPR-Cayey totaling
nearly $1.5 million. We examined two of these contracts: an award received by EIE for
$542,800 in ESEA/NCLB Title V Innovative Program funds; and an award to UPR-Cayey
for $154,000 in Title I Teacher and Principal Training and Recruiting funds. We found that
PRDE did not comply with federal and state laws in awarding these contracts due to the
existence of a conflict of interest. This occurred because PRDE did not have an effective
recusal process in place for employee and contractor participation in the procurement and
administration of contracts. We also found that PRDE did not ensure that contract require-
ments were met prior to paying EIE and UPR-Cayey's invoices, thus PRDE paid over
$189,000 in excessive and unsupported charges: approximately $166,600 to EIE; and over
$22,400 to UPR-Cayey.




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                                                                    Semiannual Report To Congress: #57

                 Based on our findings, we made a number of recommendations, including that the Depart-
                 ment require PRDE to establish an effective method for employees and contractors to
                 ensure their independence prior to participating in the procurement and administration of
                 contracts and determine whether a conflict of interest existed in the procurement and
                 administration of the remaining contracts with EIE and UPR-Cayey. We also recom-
                 mended that PRDE return to the Department more than $175,500 in excessive charges
                 paid, and return or provide supporting documentation for more than $13,400 in unsup-
                 ported charges. PRDE did not agree with our findings. Click here for a copy of the report.

                 Postsecondary Education
DEPARTMENT'S     During this reporting period, OIG released a report that sought to evaluate the appropriate-
PROCESS FOR      ness of the Department's awarding of points for prior experience in the 2006 Educational
AWARDING PRIOR   Opportunity Centers (EOC) and Talent Search grant competitions. The assignment was
                 conducted at the request of 15 Members of Congress. Part of the federal TRIO programs
EXPERIENCE       authorized by the HEA, EOC and Talent Search are outreach programs designed to support
POINTS IN THE    students from disadvantaged backgrounds. The EOC program provides counseling and
2006             information on college admissions to qualified adults who want to enter or continue a pro-
EDUCATIONAL      gram of postsecondary education. The Talent Search program provides academic, career,
OPPORTUNITY      and financial counseling to its participants and encourages them to graduate from high
CENTERS AND      school and continue on to a postsecondary institution. Each EOC grantee is required to
                 serve a minimum of 1,000 participants each year, while each Talent Search grantee is
TALENT SEARCH    required to serve a minimum of 600 participants each year.
GRANT
COMPETITIONS     The EOC and Talent Search programs hold grant competitions every four years. Appli-
                 cants for grant awards include schools, non-profits, and other organizations. The Depart-
                 ment evaluates and scores grant applications based on the project's need, objectives, plan
                 of operation, applicant and community support, quality of personnel, budget, and evalua-
                 tion plan. The maximum application score for these criteria is 100 points. The Depart-
                 ment can also award a maximum of 15 additional points for prior grant experience as a
                 means to encourage providers to continue in the programs.

                 Our inspection covered the 2006 award year, during which the Department received 335
                 EOC grant applications, 137 of which were assessed for prior experience points, and 125
                 of these were awarded grants. The threshold for the 2006 EOC grant awards was 100.33
                 out of a maximum of 115 points. For the 2006 Talent Search awards, the Department
                 received 772 grant applications, 468 of which were awarded grants, and 400 of those were
                 eligible for and received prior experience points. The threshold for these awards was
                 98.33 points out of a maximum of 115 points.

                 Our inspection found that the Department inappropriately awarded prior experience points
                 for EOC and Talent Search applicants. Thus, some grantees that were near the funding
                 threshold may have been wrongly denied awards, while other grantees may have been
                 inappropriately awarded funds. Specifically, we found that the Department's awarding of
                 prior experience points was not in compliance with regulations as it improperly awarded
                 partial points, and did not evaluate an objective in the Talent Search competition. The
                 Department also awarded points to grantees that did not meet minimum program require-
                 ments, made errors in the execution of its prior experience points assessment, and changed
                 its process for awarding prior experience points without having the appropriate data to
                 evaluate grantees.

                 As a result of our findings, we made a number of recommendations, including that the
                 Department cease awarding partial prior experience points for future EOC and Talent
                 Search grant competitions, cease awarding prior experience points to grantees that have
                 not met minimum program requirements in the past, and ensure that the data used to assess


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                                                                     Semiannual Report To Congress: #57

                 prior experience is clearly identified and sufficiently documented to support the calcula-
                 tion for future awards. The Department concurred with some of our findings and recom-
                 mendations and disagreed with others. Click here for a copy of our report.

GRANTEE          Project GRAD USA
ACCOUNTABILITY   Title V, Part D of the ESEA authorizes the Fund for the Improvement of Education--a grant
                 program to support nationally significant programs to improve the quality of elementary
                 and secondary education at the state and local levels. During this reporting period, we con-
                 cluded an audit at Project GRAD USA (PG-USA), a private, not-for-profit organization
                 with operations at 12 sites across the country, which received funds from the Fund for the
                 Improvement of Education. Our audit sought to determine whether PG-USA properly
                 accounted for and used these grant funds in accordance with relevant laws and regulations,
                 and if it carried out the objectives specified in its 2005-2006 grant application.

                 We found that PG-USA did not account for and use grant funds in accordance with rele-
                 vant laws and regulations. PG-USA charged over $13.8 million as pre-award costs to the
                 grants without evidence that the costs benefited the upcoming grant period; it paid and
                 reimbursed its program sites for over $17.5 million in unallowable and inadequately docu-
                 mented costs; and it did not adequately administer its contracts with sites or various ven-
                 dors. As a result, PG-USA and its sites expended $3.3 to $5.4 million per year from its
                 future grant to pay for current operations in each grant period, thus risking the availability
                 of funds for operating expenses during that future grant period. PG-USA did not have rea-
                 sonable assurance that grant funds were used only for allowable purposes, and could not
                 provide reasonable assurance that it obtained fair and reasonable contract prices. We also
                 found that while PG-USA generally carried out the objectives specified in its 2005-2006
                 grant application, it did not perform adequate monitoring of its sites. Specifically, PG
                 USA did not complete the formal monitoring process outlined in the approved application,
                 and it did not review required audits from all applicable sites. As a result, PG-USA and
                 the Department did not have reasonable assurance that the funds allocated to these sites
                 were used in compliance with the law, regulations, and the provisions of contracts, thus
                 leaving federal dollars at risk for potential misuse without detection.

                 As a result of our findings, we made several recommendations, including that the Depart-
                 ment require PG-USA to review $13.8 million charged as pre-award costs, identify and
                 provide support for these costs that meet the criteria of a pre-award cost or return those
                 funds to the Department; return over $1.4 in unallowable costs paid and reimbursed to
                 sites; and provide documentation for over $16 million in inadequately documented costs or
                 return that amount to the Department. PG-USA did not concur with our findings or recom-
                 mendations. Click here for a copy of our report.

                 Teach for America
                 During this reporting period, we concluded an audit to determine whether Teach for Amer-
                 ica, Inc.'s discretionary grant expenditures were allowable and spent in accordance with
                 federal laws and regulations. The time period examined was October 1, 2003, through
                 September 30, 2005. Teach for America is a New York-based company focused on
                 recruiting recent college graduates of all academic majors to commit two years to teach in
                 urban and rural public schools. For the time period reviewed, Teach for America received
                 six grants from the Department. Our audit examined three of these grants totaling some $6
                 million.

                 As required by federal law and regulations, recipients of federal funds must keep records
                 which fully disclose the amount and disposition of those funds, along with the total cost of
                 the activity for which the funds are used, the share of that cost provided from other
                 sources, and any other records to help facilitate an effective financial or programmatic
                 audit. Federal laws and regulations also require recipients to maintain these records for


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                                                    Semiannual Report To Congress: #57

three years after the completion of the activity for which the funds are used. We randomly
and judgmentally sampled over $1.5 million out of the total $6 million expended for the
three discretionary grants and found that Teach for America could not adequately support
about 50 percent of these expenditures, thus we could not determine whether these funds
were spent for the intended grant purposes. Our sample consisted of 26 expenditures for
salary and non-salary expenditures, where Teach for America was not able to provide ade-
quate support for 17 of these expenditures, totaling nearly $775,000. Teach for America
could not provide adequate supporting documentation for its charges to these grants
because of significant deficiencies in its fiscal accountability controls. We also found that
Teach for America did not use a professional accounting software package, and instead
made use of manual input forms with hand-written notes to account for and support its
charges to the grant. In addition, Teach for America lacked project identification numbers
to track expenditures for two of the three discretionary grants. Without project numbers,
the expenditures could not be properly identified and monitored.

Based on our findings, we recommended that the Department require Teach for America to
provide support for the nearly $775,000 we identified or return the funds to the Depart-
ment, as well as provide support for the remaining $4.4 million-plus in salary and non-sal-
ary discretionary grant expenditures or return the funds to the Department. We also
recommended that Teach for America provide evidence that it has implemented a profes-
sional accounting system that would enable it to support, properly document, and monitor
its grant expenditures as required by federal laws and regulations. Teach for America did
not specifically concur or disagree with the finding and recommendations. Click here for a
copy of the report.

Indiana State University
In July, we completed an audit to determine whether Indiana State University complied
with selected provisions of law and regulations governing the administration of its Upward
Bound and Upward Bound-Math Science (Math-Science) projects during the 2006-2007
grant year. These programs are authorized through the HEA to provide high school stu-
dents from low income families, high school students from families in which neither par-
ent holds a bachelor's degree, and low-income, first-generation military veterans who are
preparing to enter college with opportunities to succeed in their pre-college performance
and ultimately in their higher education pursuits. Indiana State was awarded over
$370,000 for its Upward Bound project and over $222,900 for its Math-Science project.
Both programs are required to serve a minimum number of 50 participants. The 2006-
2007 grant year was the last year that the Department funded the school's Math-Science
project.

Our audit found that while Indiana State met the minimum number of Math-Science partic-
ipants, it did not serve the minimum number of Upward Bound participants. This was
a repeat finding for the Upward Bound project, as the State Board of Accounts, in its
2005-2006 OMB Circular A-133 Single Audit report, found that both the Upward Bound and
Math-Science programs did not serve the minimum number of students. We also found that
the school did not always maintain effective control over its Upward Bound and Math-Science
grant funds, did not always follow its established procedures for payroll, and did not always
follow its established procedures for transportation expenditures, which resulted in employees
using school vehicles for periods other than those that were initially requested and/or approved.

Based on our findings, we made several recommendations, including that the Department
require Indiana State to return over $337,000 in Upward Bound funds expended during the
2006-2007 grant year, and ensure that Upward Bound staff members receive training on
grant requirements for participant eligibility verification and document retention. Indiana
State officials concurred with our findings, but did not agree with all of our recommenda-
tions. Click here for a copy of the report.



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                                                                Semiannual Report To Congress: #57


            Investigations
            Our investigations into suspected fraudulent activity by SEAs, LEAs, postsecondary edu-
            cational institutions, and other federal education grantees have led to the arrest and convic-
            tion of a number of individuals for theft or misuse of federal education funds. Here are a
            few examples of our work in this area over the last six months.

SCHOOL      New Jersey - Stevens Institute of Technology. The former associate vice president at
OFFICIALS   the Stevens Institute of Technology pled guilty in U.S. District Court, District of New Jer-
            sey, to conspiracy to embezzling approximately $264,000 in Upward Bound and other fed-
            eral education funds designed to assist disadvantaged inner city New Jersey youth by
            preparing them for college admission. Our investigation revealed that the former official
            conspired with an alleged school consultant, who is currently a fugitive, to steal education
            funds by paying the consultant to create a computer database to track former students of
            the Upward Bound program. The former official submitted vendor invoices and purchase
            requisitions to improperly authorize $264,000 to the consultant for the database, causing
            the school to issue approximately 45 separate checks to the consultant over a 17-month
            period. No database was created or delivered to the school.

            New York - William Floyd School District. The former treasurer of the William
            Floyd School District, Long Island, New York pled guilty to tax evasion in U.S. District
            Court, Eastern District of New York. The former official admitted that he failed to pay
            taxes on over $500,000 of income he received from 2000 to 2002 by writing checks to
            himself from the District's checking account and depositing them into his personal bank
            accounts. The plea is a result of our investigation, conducted jointly with the Internal Rev-
            enue Service Criminal Investigation Division, the FBI, the U.S. Attorney's Office for the
            Eastern District of New York, and the Suffolk County District Attorney's Office.

            Pennsylvania - Community College of Philadelphia. The former director of the
            Adult Basic Education Program at the Community College of Philadelphia was convicted
            by a federal trial jury in U.S. District Court, Eastern District of Pennsylvania, on charges
            related to theft of federal funds. Our investigation, conducted jointly with the FBI and
            Internal Revenue Service Criminal Investigation Division, with assistance from the Phila-
            delphia District Attorney's Office, found that the former director and five other individuals
            participated in a scheme to obtain federal funds for adult basic education courses that were
            not held, and for which teachers were paid without teaching courses. As a result of their
            efforts, the conspirators fraudulently received $224,000.

            Puerto Rico - Puerto Rico Department of Education. The former administrative
            auxiliary of the PRDE's Community Integrated Services Program pled guilty in U.S. Dis-
            trict Court, District of Puerto Rico, for his role in a program fraud scheme at PRDE's Com-
            munity Integrated Services Program. The plea came about as a result of our investigation,
            conducted jointly with the FBI and the Puerto Rico Comptroller's Office that revealed that
            the former official, along with several colleagues and others, participated in a scheme
            whereby the staffers awarded personal service contracts to themselves, their family mem-
            bers, and fictitious employees for services that were never provided. As a result of the
            scheme, the individuals fraudulently received approximately $450,000 in funds that were
            to be directed to programs offering educational and vocational trainings and opportunities
            in special communities and public housing projects in Puerto Rico.

            Texas - Brazosport Independent School District. Five former employees of the
            Brazosport Independent School District were sentenced in Brazoria County District Court
            for their roles in an embezzlement scheme. Orchestrated by the special programs director,
            who oversaw $1 million in federal education program funds each year, the scheme
            involved paying the employees for hours they did not work and for additional jobs that


                                                                                                15
                                                    Semiannual Report To Congress: #57

were never performed. In exchange for the unearned pay, participants agreed to kickback a
portion of the funds to the special programs director, who was sentenced to serve six years
in prison and was ordered to pay over $42,000 in restitution. Other participants received
sentencing ranging from community service to probation and restitution ordered ranging
from $1,380 to $30,900.

Texas - Dallas Independent School District. The former Chief Technology Officer at
the Dallas Independent School District and the former co-owner and president of a district
contractor, Micro Systems Engineering, Inc. were convicted by a federal jury in U.S. Dis-
trict Court, Northern District of Texas, for their roles in a bribery and money laundering
scheme. A second former school official, the school district's former Deputy Superinten-
dent and Chief Operating Officer who later became the Detroit School District Superinten-
dent, was sentenced to one year probation, 80 hours of community service, and was
ordered to pay a $5,000 fine for his role in the scheme. Our joint investigation with the
FBI and the Anti-Trust Division of the Department of Justice found that the three partici-
pated in a scheme designed to unjustly enrich themselves through district technology con-
tracts. The former Chief Technology Officer was in charge of procuring technology
contracts for the district and provided Micro Systems with inside information enabling the
company to obtain two lucrative contracts with the district worth approximately $120 mil-
lion. In return, the former officer received access to a yacht owned by the contractor, along
with other gratuities, including a position at Micro Systems for his son-in-law. The son-in-
law received a second paycheck for no additional work and paid a portion of those funds to
the former technology officer. The former Chief Operating Officer, who was a consultant
for Micro Systems at the time, facilitated discussions between the company and the officer
and received over $200,000 from the company in consulting fees. The former official sub-
mitted bogus invoices to Micro Systems reflecting work that was never performed to sup-
port the payment amounts.

Texas - Garland Independent School District. A bookkeeper with the Garland Inde-
pendent School District for more than 22 years pled guilty in U.S. District Court, Northern
District of Texas, to theft and embezzlement from a program receiving federal funds. Our
investigation found that from 2006-2007, the bookkeeper created a fraudulent vendor con-
tract purportedly to perform translation and interpretation services to the school district.
She also submitted false invoices reflecting services the vendor provided. As a result of
these fraudulent efforts, the bookkeeper received approximately $84,000 in federal educa-
tion funds.

Washington, D.C. - $1.75 Million Settlement Reached with District of Colum-
bia Public Schools. The U.S. Attorney's Office for the District of Columbia, in collabo-
ration with the Civil Division of the U.S. Department of Justice, reached a $1.75 million
settlement resolving allegations that the District of Columbia Public Schools system mis-
used Migrant Education Program funds. The settlement is a result of our investigation that
revealed that from 2001 to 2003, the school district falsely certified that it had eligible
migratory children residing in the District and, as a result, obtained Migrant Education
Program funding. In June 2005, a District of Columbia internal audit mandated by the
Department revealed that none of the children included in its child count for 2003 were eli-
gible to participate in the Migrant Education Program.

Washington, D.C. - District of Columbia Public Schools. The former Internal
Audit Director for the District of Columbia Public Schools was sentenced in U.S. District
Court, District of Columbia, to six months in prison, four months of home detention, and
24 months of probation, and was ordered to pay over $46,000 in restitution for theft of fed-
eral funds. Our investigation, conducted jointly with the District of Columbia-OIG and the




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                                                                   Semiannual Report To Congress: #57

           FBI, found that the former official liquidated approximately $500,000 from the financial
           accounts for New Vistas Public Charter School after the school's charter was revoked. He
           then diverted funds into an account he controlled and expended over $46,000 through
           ATM cash withdrawals.

           Wisconsin - New Hope Institute of Science and Technology Charter School.
           The former director of the New Hope Institute of Science and Technology was sentenced
           in U.S. District Court, Eastern District of Wisconsin, to 20 months in prison, three years of
           supervised release, and was ordered to pay $200,000 in restitution for theft from a program
           receiving federal funds. The former director controlled the New Hope Child Development
           Corp., an umbrella corporation for the charter school, and a Wisconsin voucher school.
           Our joint investigation with the FBI found that the former director embezzled over
           $300,000 of the charter school's funds and used the funds for personal purchases, including
           luxury automobiles, furniture, funeral expenses, homes, vacations, clothing, and extensive
           cash withdrawals.

GRANTEES   Louisiana - Family Members Indicted. Three family members were indicted in U.S.
           District Court, Eastern District of Louisiana, on charges related to a fraud scheme involv-
           ing federal funds. Our investigation, conducted jointly with the FBI, IRS, and the U.S.
           Department of Housing and Urban Development-OIG, alleges that the three controlled
           several non-profit and for-profit companies that obtained federal and state charitable and
           educational grants designed to assist needy, at-risk, and disadvantaged youth and other
           individuals in need of assistance. The three allegedly funneled grant funds in excess of
           $600,000 into bank accounts they controlled and used the funds for their personal benefit.
           A fourth family member, who performed clerical duties at various non-profit corporations
           controlled by her relatives and received approximately $90,000 in payments from the non-
           profits, pled guilty for her role in the scheme in June.

           Puerto Rico - Contractor, Archdiocese Agree to Settlements. The U.S. Attorney's
           Office for the District of Puerto Rico reached a $930,000 agreement with PRDE contractor
           Servicios Educativos Docentes, Inc., and its owner, to resolve allegations of false claims
           involving federal education funds. The settlement is a result of our investigation that
           found that the company and its owner made false statements to receive PRDE contracts to
           provide training opportunities to teachers and principals of private schools in Puerto Rico
           totaling some $1.5 million. The U.S. Attorney's Office also reached a $175,000 settlement
           with the Superintendency of Catholic Schools of the San Juan Archdiocese for awarding
           similar contracts to Servicios Educativos Docentes.


INFORMATION SECURITY AND OTHER INTERNAL OPERATIONS
           Given the billions of dollars that the Department distributes each year, Department manag-
           ers must give top priority to conducting effective oversight and monitoring of programs,
           operations, and systems that maintain critical data in order to minimize vulnerability to
           waste, fraud, and abuse. OIG's reviews of the Department's internal operations and infor-
           mation systems security are designed to help improve the overall operation of this mission-
           focused agency. Our reviews seek to help the Department accomplish its objectives by
           ensuring the reliability and integrity of its data, its compliance with applicable policies and
           regulations, its ability to safeguard its assets, and that it is effectively and efficiently utiliz-
           ing the taxpayer dollars with which it has been entrusted. Work concluded during this
           reporting period identified weaknesses in information security and information manage-
           ment, as well as a need for improved oversight of its travel program. Below you will find
           more information on our work in these areas.




                                                                                                     17
                                                                       Semiannual Report To Congress: #57


                 Information Security
FEDERAL          The E-Government Act of 2002 recognized the importance of information security to the
INFORMATION      economic and national security interests of the United States. Title III of the E-Govern-
SECURITY         ment Act, entitled the Federal Information Security Management Act of 2002 (FISMA),
                 requires each federal agency to develop, document, and implement an agency-wide pro-
MANAGEMENT ACT   gram to provide information security for the information and information systems that sup-
REVIEWS          port the operations and assets of the agency, including those provided or managed by
                 another agency, contractor, or other source. It also requires the Inspectors General to per-
                 form independent evaluations of the effectiveness of information security control tech-
                 niques and to provide assessments of the agency's compliance with FISMA.

                 In support of our FY 2008 FISMA requirement, OIG performed three reviews of the secu-
                 rity controls over the Department's Debt Management Collection Process, as administered
                 by FSA. Below is a general presentation of our findings. We presented the Department
                 with a series of recommendations for improvements and corrective actions. The Depart-
                 ment concurred with the majority of our recommendations, and stated that our work pro-
                 vides the details for it to formulate a comprehensive action plan. As our FISMA audits fall
                 under exemption (b)(2) of the Freedom of Information Act, we discuss only the general/
                 public aspects of our working and findings. For security purposes and to maintain the
                 integrity of the Department's critical data, these audits are not posted on our website or
                 shared outside of officials channels.

                 In the first of our audits, or Phase I, we evaluated operational and technical security con-
                 trols over the Debt Management Collection Process to determine whether those controls
                 adequately protect the system and the information within, and if they reduced the likeli-
                 hood of unauthorized access. Based on our review, we determined that FSA and the
                 Department must improve operations and technical security controls in a number of areas,
                 including: security awareness and training; contingency planning; incident response and
                 handling; identification and authentication; access controls; and personnel security to ade-
                 quately protect the confidentiality, integrity, and availability of the data residing in the sys-
                 tem.

                 In our second audit, Phase II, we assessed whether IT security controls (management,
                 operations, and technical) were in place to protect Department resources and whether FSA
                 had effective controls in place, including the safeguarding of personal identifying informa-
                 tion. During our audit, we identified a serious deficiency in FSA's monitoring and over-
                 sight of the outside contractor that hosts the system: system security controls were
                 deficient and did not adequately protect the processing of financial student loan informa-
                 tion. Based on our findings, we stressed that FSA must improve certain management,
                 operational, and technical security controls to adequately protect its data.

                 In the third and final phase of the audit we evaluated the system security controls over
                 FSA's invoices and payments to private collection agencies for the Debt Management Col-
                 lection Process, including performance bonuses. We identified that FSA did not inventory,
                 provide information security, or assess the internal controls for a major application. As a
                 result, the Department's 2007 FISMA inventory report to OMB was understated. Addi-
                 tionally, based on our review, FSA must improve internal controls over information sys-
                 tems and operational security controls for contingency planning, media protection, and
                 physical and environmental protection over the Debt Management Collection Process to
                 adequately protect its data. Based on our findings, we made recommendations focused on
                 improving internal controls over information systems and operational security.




                                                                                                        18
                                                                    Semiannual Report To Congress: #57


                Other Internal Operations
DEPARTMENT      In July, we issued an audit report that sought to evaluate the effectiveness of Department
CONTROLS OVER   controls over the appropriateness of travel expenditures. The Department requires that
TRAVEL          travel be authorized only when necessary, to accomplish the purpose of the Department's
                mission in the most effective and economical manner. Two types of travel charge cards are
EXPENDITURES    used under the Department's program: individually billed accounts that are held and paid
                by the individual cardholders; and centrally billed accounts that are held and paid for by
                the Department's Principal Offices.

                Overall, our audit found that Department controls over travel expenditures could be
                improved. First, we found that the individually billed accounts were not always used
                appropriately. Specifically, we found inappropriate purchases on the accounts both during
                and not during periods of official travel, Automated Teller Machine (ATM) withdrawals
                during official travel that exceeded allowances for the trip, ATM withdrawals that were not
                associated with official travel, and instances where the accounts was not used for all
                required official travel expenses. Inappropriate use of the travel card violates the terms of
                the contract with the travel card provider, represents abuse of a government-provided
                resource, and compromises the integrity of the Department. Second, we found that indi-
                vidually billed account oversight activities need improvement. We found Department offi-
                cials did not always ensure that costs claimed on individual travel vouchers were accurate,
                allowable, and actually incurred by the traveler, and noted instances where travel expendi-
                tures claimed were not supported by proper documentation or adequate explanation. We
                also found that Department officials' oversight of the centrally billed accounts was not
                always effective: they did not always ensure these accounts were used as intended or
                effectively monitor account activity, and that these account charges were not always appro-
                priately supported or reconciled. As a result, improper reimbursements were made to the
                cardholders and payments were made for services not received.

                In addition, we found that individually billed account management practices should be
                enhanced. Specifically we found that: the accounts were not always cancelled for separat-
                ing cardholders; infrequently used accounts were not always deactivated timely; individu-
                ally billed accounts were issued to employees without a bona fide need; and credit
                worthiness checks for new individually billed account applicants had not been imple-
                mented timely. Our audit also revealed that corrective actions in response to prior audit
                recommendations were not properly implemented, appropriate disciplinary actions were
                not always taken for known misuse of the travel charge card, procedures for performing
                quarterly travel voucher audits were not documented and were not completed in accor-
                dance with stated requirements, and inappropriate Merchant Category Codes were not
                blocked. As a result, the Department is at increased risk for inappropriate charges, and it
                may have set an unwanted precedent that travel card misuse is not deemed serious. The
                Department agreed with our 21 recommendations and provided a corrective action plan to
                address each one of them. Click here for a copy of the report.

DEPARTMENT'S    During this reporting period, we concluded an inspection to evaluate the adequacy of the
FINANCIAL       Department's procedures to comply with the requirements of Section 306 of the FY 2008
DISCLOSURE      Appropriations law. Section 306 required the Department to implement procedures to
                assess and disclose whether an individual or entity has a potential financial interest in, or
PROCEDURES      impaired objectivity towards, a product or service involving Department funds. These
                procedures apply to Department officers and professional employees; contractors, subcon-
                tractors, and their employees; consultants and advisors; and peer reviewers. Section 306
                required the OIG to evaluate the Department's procedures and report on their adequacy
                along with any recommendations for modifications within 60 days of implementation.
                Our work was limited to reviewing the written procedures; we did not review the
                implementation of the procedures. As required, we will review the implementation


                                                                                                   19
                                                                   Semiannual Report To Congress: #57

              of the procedures in the coming months and will report our findings in the Semiannual
              Report to Congress.

              Our inspection found that that the Department's procedures, if fully implemented as
              planned, are adequate to comply with the requirements of Section 306; however, we did
              find that one aspect of the Department's procedures for peer reviewers could be misinter-
              preted. As a result, we recommend that the Department modify its peer reviewer certifica-
              tion procedure to clarify the issue. The Department agreed with our finding. Click here
              for a copy of our report.


                    OTHER NOTEWORTHY EFFORTS
              Nonfederal Audits
              The Single Audit Act of 1984, as amended, requires entities, such as state and local govern-
              ments, universities, and not-for-profit organizations that receive and expend $500,000 or
              more in federal funds in one year to conduct an annual audit. These audits provide the fed-
              eral government with assurance that recipients of federal funds comply with laws and reg-
              ulations, as well as any particular provisions that are tied with the specific funding. This
              audit provides the federal government with assurance that these recipients comply with
              such directives by having an independent external source (e.g., a Certified Public Accoun-
              tant) report on such compliance.

              With thousands of grantees participating in federal education programs, single audits are a
              critically vital tool in ensuring these grantees are fulfilling their obligations with the fed-
              eral education funds they receive. The OIG Nonfederal Audit Team provides timely and
              valuable guidance to the numerous auditors who conduct single audits. We produce and
              update audit guides based on new laws and regulations. To help assess the quality of the
              thousands of single audits that the Department receives each year, OIG's Nonfederal Audit
              Team conducts quality control reviews (QCRs) by reviewing a sampling of audits each
              year.

              Participants in Department programs are required to submit annual audits performed by
              independent public accountants. We perform QCRs of these audits to assess their quality.
              During this reporting period, we completed 43 QCRs of audits conducted by 40 different
              independent public accountants, or offices of firms with multiple offices. We concluded
              that 10 (23 percent) were acceptable or acceptable with minor issues, 24 (56 percent) were
              technically deficient, and 9 (21 percent) were substandard.

              President's Council on Integrity and Efficiency
FORMER        In August, the President's Council on Integrity and Efficiency (PCIE) announced that it
INSPECTOR     will present former Inspector General John P. "Jack" Higgins, Jr., with the June Gibbs
GENERAL TO    Brown Career Achievement Award for his 40 years of service on behalf of America's tax-
RECEIVE       payers. This prestigious award recognizes and commends those individuals who made a
              sustained and significant contribution to the mission of the Inspectors General.
PRESTIGIOUS
AWARD         Inspector General Higgins began his career in the IG office of the U.S. Department of
              Health, Education, and Welfare in 1968, and was among the first employees in the U.S.
              Department of Education OIG when it became an independent agency in 1980. Inspector
              General Higgins was involved in all aspects of OIG operations at all levels, culminating in




                                                                                                    20
                                                                     Semiannual Report To Congress: #57

                  his Senate confirmation as Inspector General in 2002. In 2004, he became the Chair of the
                  PCIE Audit Committee and led the Committee through numerous critical initiatives and
                  projects, most notably the 2007 National Single Audit Sampling Project.

FINANCIAL AUDIT   In July, the PCIE released the Financial Audit Manual--a joint project of the IG Commu-
MANUAL            nity and Government Accountability Office (GAO)--to provide a methodology, audit tools,
                  and checklists for IGs to utilize in performing their agencies' annual financial statement
                  audits. A working group, led by OIG Financial Statement Internal Audit Team Director
                  Greg Spencer, coordinated with GAO on a thorough and complete update of the manual to
                  reflect the significant changes that have occurred in government auditing since the last
                  major revisions to the manual in 2004. A copy of the revised manual was distributed to all
                  IG offices, and is available on the GAO website at: http://www.gao.gov/special.pubs/
                  gaopcie/

DEPUTY            During this reporting period, the PCIE Audit Committee named George Rippey, OIG Dep-
ASSISTANT         uty Assistant Inspector General for Audit, to the Accounting and Auditing Policy Commit-
INSPECTOR         tee of the Federal Accounting Standards Advisory Board. The Board promulgates federal
                  accounting standards which play a major role in fulfilling the government's duty to be pub-
GENERAL           licly accountable. The Committee identifies and resolves accounting and auditing issues
APPOINTED TO      as they relate to federal financial reporting.
FEDERAL
ACCOUNTING
COMMITTEE




                                                                                                   21
                                                   Semiannual Report to Congress: No. 57

Reporting Requirements of the Inspector General Act, as Amended

   Section                                  Requirement                                 Table Number
  5(a)(1) and              Significant Problems, Abuses, and Deficiencies
    5 (a)(2)                       Activities and Accomplishments                           NA
    5(a)(3)                     Uncompleted Corrective Actions
                Recommendations Described in Previous Semiannual Reports to Congress         1
                       on which Corrective Action Has Not Been Completed
    5(a)(4)               Matters Referred to Prosecutive Authorities
                                        Statistical Profile                                  7
  5(a)(5) and                Summary of Instances where Information
    6(b)(2)                      was Refused or Not Provided                                NA
    5(a)(6)                              Listing of Reports
                       OIG Audit Reports on Department Programs and Activities               2
                       Other OIG Reports on Department Programs and Activities               3
    5(a)(7)                       Summary of Significant Audits
                                  Activities and Accomplishments                            NA
    5(a)(8)               OIG Issued Audit Reports with Questioned Costs
                           OIG Issued Audit Reports with Questioned Costs                    4
    5(a)(9)             OIG Issued Audit Reports with Recommendations for
                                         Better Use of Funds                                 5
                OIG Issued Audit Reports with Recommendations for Better Use of Funds
   5(a)(10)          Summary of Unresolved Audit Reports Issued Prior to the
                                 Beginning of the Reporting Period
                           Unresolved Reports Issued Prior to April 1, 2008                  6
   5(a)(11)                 Significant Revised Management Decisions
                                                                                            NA
   5(a)(12)                    Significant Management Decisions with
                                        which OIG Disagreed                                 NA
   5(a)(13)      Unmet Intermediate Target Dates Established by the Department
                 Under the Federal Financial Management Improvement Act of 1996             NA




                                                                                           22
                                                                Semiannual Report To Congress: No. 57

 Table 1: Recommendations Described in Previous Semiannual Reports to Congress on
 which Corrective Action Has Not Been Completed
 Section 5(a)(3) of the IG 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.

  Report            Report Title          Date       Date          Total        Number of       Latest
  Number     (Prior Semiannual Report    Issued     Resolved      Monetary   Recommendations    Target
             (SAR) Number and Page)                               Findings   Open Completed      Date
                                                                                               (Per Corrective
                                                                                                 Action Plan)

Office of the Chief Financial Officer (OCFO)
 A19F0025    Controls Over Excessive     12/18/06   9/28/2007                  2       7       12/31/09
             Cash Drawdowns by
             Grantee (SAR 54, page 30)

Office of the Chief Information Officer (OCIO)
 A11F0002 Review of the                  10/6/05    11/16/05                   6       3        1/15/09
          Department’s Incident
          Handling Program and
          EDNet Security Controls
          (OCIO designated as lead
          action official and OCFO
          and Federal Student Aid
          (FSA) as other action
          officials) (SAR 52, page
          28)
 A11F0006 Audit of the Department’s      1/31/06     5/25/06                   4       0        1/15/09
          IT Contingency Planning
          Program – Asset
          Classification (SAR 52,
          page 28)
 A11G0001 Review of the                  9/28/06    11/17/06                   0       10            *
          Department’s Incident
          Handling Program and
          Intrusion Detection System
          (FSA and the Office of the
          Under Secretary(OUS)
          designated as action
          officials) (SAR 53, page
          24)
 A11G0002 System Security Review of      9/28/06     4/9/07                    5       9        1/15/09
          the Education Data Center
          FY 2006 (SAR 53, page
          25)




                                                                                                                 23
                                                                           Semiannual Report To Congress: No. 57


                       Report Title                Date         Date          Total             Number of             Latest
  Report         (Prior SAR Number and            Issued       Resolved      Monetary        Recommendations          Target
  Number                  Page)                                              Findings                                  Date
                                                                                             Open Completed          (Per Corrective
                                                                                                                      Action Plan)

 A11G0004       Department’s Online               9/29/06       11/17/06                        1           1         1/15/09
                Privacy Policy and
                Protection of Sensitive
                Information Review (OUS
                also designated as action
                official) (SAR 53, page 25)
 A19F0009       Telecommunications                 2/1/06       3/22/06                         4           3         1/15/09
                Billing Accuracy (SAR 52,
                page 28)
Office of the Deputy Secretary (ODS)
 A09E0014       Departmental Actions to          10/26/04       1/10/05                         1           5         9/30/08
                Ensure Charter Schools’
                Access to Title I and IDEA
                Part B Funds (OESE and
                OSERS also designated as
                action officials) (SAR 50,
                page 22)
Office of Elementary and Secondary Education (OESE)
 A07F0014       The U. S. Department of          12/29/05      7/10/2007                        4           0          7/1/08
                Education’s Activities
                Relating to Consolidating
                Funds in Schoolwide
                Program Provisions (SAR
                52, page 29)
Office of Management (OM)
  A19G0007 Audit of the Department’s             11/29/06        1/8/07                         1           7         2/18/09
           FY 2005 IT Equipment
           Inventory (OCFO also
           designated as action
           official) (SAR 54, page 32)

Office of Postsecondary Education (OPE)
 A19G0001 Audit of the Discretionary    4/16/07                  6/4/07                         1           0        12/29/08
               Grant Award Process in
               OPE (SAR 55, page 29)

 * Closure of audit was not completed in the Department’s audit tracking system, the Audit Accountability and Resolution Tracking
 System (AARTS) by the end of reporting period (9/30/2008).




                                                                                                                                       24
                                                                           Semiannual Report to Congress: No. 57

Table 2: OIG Audit Reports on Department Programs and Activities
(April 1, 2008, through September 30, 2008)
Section 5(a)(6) of the IG Act as amended, requires a listing of each report completed by OIG during the reporting period.

  Report                        Report Title                     Date        Questioned      Unsupported      Number of
  Number                                                         Issued       Costs 1         Costs           Recommen-
                                                                                                                dations
AUDIT REPORTS
FSA
A02H0007        Technical Career Institutes, Inc.'s             5/19/08        $6,458                              13
                Administration of the Federal Pell Grant
                and Federal Family Education Loan
                Programs
A03H0009        Star Technical Institute’s Upper Darby          8/15/08      $9,830,436                            3
                School’s Compliance with the 90 Percent
                Rule
A09H0015        FSA’s Estimation of Improper Payments in        9/25/08                                            7
                the Federal Family Education Loan
                Program
A11I0002        IT Security Controls Over the Debt              9/30/08                                            42
                Management Collection Process, Phase I,
                FY 2008 (OCIO also designated as action
                official)
A11I0003        IT Security Controls over the Debt              9/30/08                                            41
                Management Collection Process, Phase II,
                FY 2008 (OCIO also designated as action
                official)
A11I0009        IT Security Controls Over the Debt              9/30/08                                            14
                Management Collection Process, Phase III,
                FY 2008 (OCIO also designated as action
                official)
A19H0011        Audit of the Department's Process for            8/1/08                                            2
                Disbursing ACG and SMART Grants
OCFO
A02H0003        Teach for America, Inc., Review of the           6/5/08                       $5,240,654           5
                Department’s Discretionary Grant Awards
                (Although report designates OII as action
                official, OCFO resolves all discretionary
                grant audits)
A05H0016        Saint Paul Public School’s Teacher Quality      5/23/08       $124,6462                            7
                Enhancement Grant
                (OPE also designated as action official)
A05I0009        Indiana State University's Compliance with      7/03/08       $337,077                             3
                Selected Provisions of Law and Regulations
                for the Upward Bound and Upward Bound
                Math-Science Programs
                (OUS also designated as action official)

                                                                                                                            25
                                                                                  Semiannual Report to Congress: No. 57
    Report                                                              Date        Questioned       Unsupported        Number of
    Number                         Report Title                        Issued         Costs1            Costs           Recommen-
                                                                                                                          dations
A06H0002          Review of Project GRAD USA's                        7/21/08       $1,484,888        $29,899,715           11
                  Administration of Fund for the Improvement
                  of Education Grants (OII also designated as
                  action official)
A19H0009          Department Controls Over Travel                      7/1/08           $540             $5,109                 21
                  Expenditures
OESE
A04H0011          Puerto Rico Department of Education's               5/20/08        $175,536           $13,475                 10
                  Administration of Contracts Awarded to
                  Excellence in Education, Inc. and the
                  University of Puerto Rico's Cayey Campus
A05H0010          The School District of the City of Detroit's        7/18/08       $1,388,805        $52,230,054               21
                  Use of Title I, Part A Funds Under the
                  NCLB
A06H0001          Audit of Selected Portions of the                    4/4/08                                                    6
                  Department's Oversight of the Consolidated
                  State Performance Reports
A07H0017          St. Louis Public School District’s Use of           9/29/08          $2,408           $762,593                 7
                  Selected Department Grant Funds (OSERS
                  also designated as action official)
Totals                                                                              $13,350,794       $88,151,600               213
1
 For purposes of this schedule, questioned costs may include other recommended recoveries. Please see footnotes 2 and 3 under
Table 4 for additional information regarding questioned and unsupported costs.
2
  For Audit Report A05H0016, included in this $124,646 figure is $100,675 of questioned cost and $23,971of monetary recoveries made
during audit.




                                                                                                                                      26
                                                                                      Semiannual Report to Congress: No. 57
Table 3: Other OIG Reports on Department Programs and Activities
(April 1, 2008, through September 30, 2008)
Section 5(a)(6) of the IG Act as amended, requires a listing of each report completed by OIG during the reporting
period.

Report                                                           Report Title                                                    Date
Number                                                                                                                          Issued
FSA
I13H0006              Review of the Department’s Process for Granting Access to the National Student Loan Data System 1           7/24/08
                      (Inspection Report)
INSTITUTE OF EDUCATION SCIENCES
I13G0002              The Department Has No Assurance That Research Institutions Will Handle Allegations of Research              6/11/08
                      Misconduct in Accordance with the Requirements Established by the Office of Science and
                      Technology Policy1 (Inspection Alert Memorandum)
OFFICE OF GENERAL COUNSEL (OGC)
I13I0004              Inspection to Evaluate the Adequacy of the Department’s Procedures in Response to Section 306 of            4/21/08
                      the Fiscal year 2008 Appropriations Act – Maintenance of Integrity and Ethical Values Within the
                      Department1 (Inspection Report – Congressional Request with recommendations made to the
                      Department, OGC designated as action official by the Office of the Secretary)
OPE
I13I0001              Review of the OPE’s Awarding of Prior Experience Points in the 2006 Educational Opportunity                  9/8/08
                      Centers and Talent Search Grant Competitions1 (Inspection Report)
OFFICE OF THE SECRETARY
L04I0040       The Government of the Virgin Islands Has Not Fully Implemented a Credible Financial Management                      5/9/08
               System to Manage Department Funds2 (Alert Memorandum – State and Local No. 08-05)
L05I0010       The Department Should Designate the School District of the City of Detroit as a High-Risk Grantee2                 8/15/08
               (Alert Memorandum – State and Local No. 08-06)
DESCRIPTION OF TABLE 3 PRODUCTS
1
    I13H0006 made eleven non-monetary recommendations.
    I13G0002 made two non-monetary recommendations.
    I13I0004 made two non-monetary recommendations.
    I13I0001 made six non-monetary recommendations.
2
    L04I0040 made four non-monetary suggestions.
    L05I0010 made two non-monetary suggestions.

Alert memoranda are prepared when a serious condition is identified that requires immediate Department management action that is either
outside the agreed-upon objectives of an on-going audit or inspection assignment or is identified while engaged in work not related to an
on-going assignment when an audit or inspection report will not be issued. Alert memoranda are not on the OIG website and are not
publicly distributed. Audit alert memoranda are coded “L” in the OIG’s Audit Tracking System. Inspection alert memoranda are coded
“I” in the OIG’s Audit Tracking System.

Inspections are analyses, evaluations, reviews or studies of the Department’s programs. The purpose of an inspection is to provide
Department decision makers with factual and analytical information, which may include an assessment of the efficiency and effectiveness
of their operations, and vulnerabilities created by their existing policies or procedures. They are performed in accordance with the 2005
President’s Council on Integrity and Efficiency Quality Standards for Inspections appropriate to the scope of the inspection. Inspections
are coded “I” in the OIG’s Audit Tracking System.




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                                                                               Semiannual Report to Congress: No. 57


Table 4: OIG Issued Audit Reports with Questioned Costs1
Section 5(a)(8) of the IG Act as amended requires for each reporting period a statistical table showing the total
number of audit reports, the total dollar value of questioned and unsupported costs, and responding management
decision.

                                                                                                  Questioned2   Unsupported 3
                                                                               Number               Costs          Costs
A.       For which no management decision was made before the                    464              $720,884,1804 $213,144,784
         commencement of the reporting period (as adjusted)
B.       Which were issued during the reporting period                             10                $101,502,394      $88,151,600

              Subtotals (A + B)                                                    56                $822,386,574     $301,296,384

C.       For which a management decision was made during the                        7                  $4,299,052          $434,259
         reporting period
         (i) Dollar value of disallowed costs                                                          $4,293,403         $429,150

         (ii) Dollar value of costs not disallowed                                                         $5,649             $5,109


D.       For which no management decision was made by the end of                   49                $818,087,522     $300,862,125
         the reporting period
E.       For which no management decision was made within six                      40                $716,590,778     $212,715,634
         months of issuance
1
    None of the audits reported in this table were performed by the Defense Contract Audit Agency.
2
 Questioned costs are costs that 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, at the time of
the audit, such cost is not supported by adequate documentation or a finding that the expenditure of funds for the intended
purpose is unnecessary or unreasonable. Other recommended recoveries are funds recommended for reasons other than
questioned costs. Since the IG Act does not provide for this type of monetary finding, other recommended recoveries are
combined with the “questioned costs” category for reporting in the SAR. The category is usually used for findings involving
recovery of outstanding funds and/or revenue earned on Federal funds. The amount also includes any interest due the Department
resulting from auditees’ use of funds. In addition, amounts reported for these categories are combined with unsupported costs for
reporting in the SAR.
3
 Unsupported costs are costs that are questioned because, at the time of the audit, such costs were not supported by adequate
documentation.
4
    Adjustment necessary as A03-G0014, resolved 1/25/08, had been inadvertently included in beginning figures.




                                                                                                                                        28
                                                                              Semiannual Report to Congress: No. 57

Table 5: OIG Issued Audit Reports with Recommendations for Better Use of Funds1
Section 5(a)(9) of the IG Act as amended, requires for each reporting period a statistical table showing the total number of
audit reports and the total dollar value of recommendations that funds be put to better use by management.
                                                                                          Number           Dollar Value
A.            For which no management decision was made before the                            1                    $327,577
              commencement of the reporting period (as adjusted)
B.            Which were issued during the reporting period                                   0                           $0

                 Subtotals (A + B)                                                            1                    $327,577

C.            For which a management decision was made during the reporting period
               (i) Dollar value of recommendations that were agreed to by                                                $0
               management                                                                     0
               (ii) Dollar value of recommendations that were not agreed to by                                           $0
               management                                                                     0

D.             For which no management decision was made by the end of the                     1                   $327,577
               reporting period
E.             For which no management decision was made within six months of                 1                    $327,577
               issuance
1
  None of the audits reported in this table were performed by the Defense Contract Audit Agency.




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                                                                               Semiannual Report to Congress: No. 57

Table 6: Unresolved Reports Issued Prior to April 1, 2008
Section 5(a)(10) of the IG Act as amended, requires a listing of each report issued before the commencement of the reporting
period for which no management decisions had been made by the end of the reporting period. (Status below represents
comments provided by the Department, comments agreed to, or documents obtained from the Department’s tracking system,
AARTS.)
     Report                             Report Title                             Date      Total Monetary      Number of
     Number                    (Prior SAR Number and Page)                      Issued        Findings         Recommen-
                                                                                                                 dations
New Since Last Reporting Period
FSA
A05G0017            Capella University’s Compliance with Selected               3/7/08        $589,892               9
                    Provisions of the HEA and Corresponding Regulations
                    (SAR 56, pg. 25)
                    Current Status: AARTS shows FSA administrative stay
                    was approved on 7/9/2008.
A05G0029            Wilberforce University’s Administration of HEA, Title      3/21/08       $2,472,781             25
                    IV Programs (SAR 56, pg. 25)
                    Current Status: AARTS shows FSA administrative stay
                    was approved on 9/24/2008.
OCFO
A09H0014            San Diego Unified School District’s Use of Federal         12/18/07      $1,904,918              1
                    Funds for Costs of Its Supplemental Early Retirement
                    Plan
                    Current Status: OCFO informed us that it needs to
                    review and analyze information that it recently received
                    from the entity.
OESE
A02G0020            Elizabeth Public School District Allowability of ESEA      10/9/07       $1,946,925             14
                    Title I, Part A Expenditures (SAR 56, pg. 25)
                    Current Status: OESE informed us that additional
                    documentation was requested from the auditee.
A02H0006            Audit of the Virgin Islands Department of Education’s      1/29/08                               2
                    2003 Reopened Consolidated Grants (SAR 56, pg. 25)
                    Current Status: A draft Program Determination Letter
                    (PDL) was submitted in AARTS on 9/30/2008 and is
                    being reviewed by OIG.
A04G0015            Audit of Georgia Department of Education’s                 10/30/07      $9,977,242              9
                    Emergency Impact Aid Program Controls and
                    Compliance (SAR 56, pg. 26)
                    Current Status: OESE informed us that its program
                    team is working with the states to reconcile pupil data
                    submitted for reimbursement for displaced children due
                    to Hurricanes Katrina and Rita.
A05G0032            Ohio Department of Education’s Administration of its        1/8/08         $30,000               6
                    Migrant Education Program (SAR 56, pg. 26)
                    Current Status: OESE informed us this audit is in
                    legal review.




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                                                                            Semiannual Report to Congress: No. 57
    Report                          Report Title                             Date     Total Monetary   Number of
    Number                 (Prior SAR Number and Page)                      Issued       Findings      Recommen-
                                                                                                         dations
Reported in Previous SARs
FSA
A02H0005        EDUTEC’s Administration of the Federal Pell Grant           9/27/07      $83,000           5
                Program (SAR 55, pg. 27)
                Current Status: AARTS shows FSA administrative
                stay extension was approved on 9/24/2008.
A04B0015        Review of Cash Management and Student Financial             9/26/02      $997,313          7
                Assistance Refund Procedures at Bennett College (OPE
                designated as collateral action office for this report)
                (SAR 45, pg. 16)
                Current Status: FSA informed us that it will work on
                getting the audit closed in AARTS by 12/31/2008.
A04B0019        Advanced Career Training Institute’s Administration of      9/25/03     $7,472,583        14
                the Title IV HEA Programs (SAR 47, pg. 13)
                Current Status: FSA informed us the audit was
                previously closed in Department’s previous tracking
                system the Common Audit Resolution System, and that.
                FSA will work on getting this audit closed in AARTS by
                12/31/2008. The required documents for resolution are
                needed in AARTS before this audit is officially resolved.
A04E0001        Review of Student Enrollment and Professional               9/23/04     $2,458,347         7
                Judgment Actions at Tennessee Technology Center at
                Morristown (SAR 49, pg. 14)
                Current Status: FSA informed us that it is still waiting
                on policy decision to address and resolve this audit.
A05E0013        Audit of the Administration of the Student Financial        2/25/05     $1,645,160         3
                Assistance Programs at the Ivy Tech State College
                Campus in Gary, Indiana, During the Period July 1,
                2002, through June 30, 2003. (SAR 50, pg. 21)
                Current Status: FSA informed us that the audit was
                closed on 1/22/2007 and that it will work on getting
                this audit closed by 12/31/2008 in AARTS. The
                required documents for resolution are needed in
                AARTS before this audit is officially resolved.
A0670005        Professional Judgment at Yale University (SAR 36,           3/13/98       $5,469           3
                pg.18)
                Current Status: FSA informed us that it is still waiting
                on a policy decision to address and resolve this audit.
A0670009        Professional Judgment at University of Colorado (SAR        7/17/98      $15,082           4
                37, pg.17)
                Current Status: FSA informed us that it is still waiting
                on a policy decision to address and resolve this audit.




                                                                                                               31
                                                                       Semiannual Report to Congress: No. 57
   Report                       Report Title                            Date     Total Monetary   Number of
   Number              (Prior SAR Number and Page)                     Issued       Findings      Recommen-
                                                                                                    dations
A06D0018    Audit of Saint Louis University’s Use of Professional      2/10/05     $1,458,584         6
            Judgment for the Two-Year Period from July 2000
            through June 2002 (SAR 50, pg. 21)
            Current Status: FSA informed us that it is still waiting
            on a policy decision to address and resolve this audit.
A06F0018    Philander Smith College’s Administration of Title IV       11/2/06      $476,167         20
            Student Financial Assistance Programs Needs
            Improvement (SAR 54, pg. 29)
            Current Status: FSA informed us that it is working on
            this audit.
A06H0009    Career Point Institute’s Administration of Title IV HEA    9/28/07       $4,178           2
            Programs (SAR 55, pg. 27)
            Current Status: FSA informed us that the audit was
            closed on 2/14/2007 and it will work in getting this
            audit closed in AARTS by 12/31/2008.
A06H0010    Eagle Gate College’s Administration of Title IV HEA        9/28/07       $2,630           6
            Programs (SAR 55, pg 27)
            Current Status: FSA informed us that it is currently
            working on this audit.
A0723545    State of Missouri, Single Audit Two Years Ended June       4/1/93      $1,048,768        18
            30, 1991
            Current Status: FSA informed us it is currently
            researching options to resolve this issue.
A0733123    State of Missouri, Single Audit Year Ended June 30,        3/7/94       $187,530         18
            1992
            Current Status: FSA informed us it is currently
            researching options to resolve this issue.
A09D0024    American River College’s Compliance with Student           12/1/04     $3,024,665         3
            Eligibility Requirements for Title IV Student Financial
            Assistance Programs (SAR 50, pg. 21)
            Current Status: FSA informed us that it will work on
            getting this audit closed in AARTS by 12/31/2008.
N0690010    Inspection of Parks College's Compliance with Student      2/9/00       $169,390          1
            Financial Assistance Requirements (SAR 40, pg. 18)
            Current Status: Audit was previously not in AARTS
            when SAR 55 was completed, audit has been now been
            added into AARTS. FSA will work on getting this audit
            closed in AARTS by 12/31/2008. Required documents
            for resolution of this report are needed in AARTS.




                                                                                                          32
                                                                        Semiannual Report to Congress: No. 57
    Report                          Report Title                          Date     Total Monetary   Number of
    Number                 (Prior SAR Number and Page)                   Issued       Findings      Recommen-
                                                                                                      dations
OCFO
A03F0010     The Education Leaders Council’s Drawdown and               1/31/06       $760,570         12
             Expenditure of Federal Funds (OII also designated as
             action official) (SAR 52, pg. 8)
             Current Status: OCFO informed us that the resolution
             activities continue to be suspended.
A05D0041     University of Illinois at Chicago’s Upward Bound           12/20/04      $223,057          8
             Project (OPE also designated as action official ) (SAR
             50, pg. 22)
             Current Status: OCFO informed us that additional
             time is needed to continue to review and analyze data
             provided by the auditee.
A05E0002     Audit of the University of Illinois at Chicago’s Student   12/15/04      $260,050          6
             Support Services Program (OPE also designated as
             action official) (SAR 50, pg. 22)
             Current Status: OCFO informed us that additional
             time is needed to continue to review and analyze data
             provided by the auditee.
A05E0018     University of Illinois at Chicago’s Upward Bound Math      12/17/04      $274,493          7
             and Science Project (OPE also designated as action
             official) (SAR 50, pg. 22)
             Current Status: OCFO informed us that additional
             time is needed to continue to review and analyze data
             provided by the auditee.
A07D0002     Audit of the Talent Search Program at Case Western         7/11/03       $212,428          5
             Reserve University (SAR 47, pg. 14)
             Current Status: OCFO informed us that it is currently
             working with the entity to determine the amount of
             funds to be returned to the Department.
A09F0010     Pittsburg Pre-School and Community Council, Inc.’s         3/17/06       $910,217         21
             Use of Early Reading First and Migrant Education
             Even Start Grant Funds (OESE also designated as
             action official) (SAR 52, pg. 9)
             Current Status: OCFO informed us that additional
             time is needed to continue to review and analyze data
             provided by the auditee.
OESE
A02G0002     Audit of New York State Education Department’s             11/3/06     $215,832,254        8
             Reading First Program (SAR 54, pg. 31)
             Current Status: OESE informed us this audit is
             pending continued discussions with OIG on resolution.
A03G0006     The Department’s Administration of Selected Aspects        2/22/07                         3
             of the Reading First Program (OCFO also designated
             as an action official) (SAR 54, pg. 31)
             Current Status: OESE informed us that this audit has
             on-going corrective action.




                                                                                                            33
                                                                       Semiannual Report to Congress: No. 57
   Report                       Report Title                            Date     Total Monetary   Number of
   Number              (Prior SAR Number and Page)                     Issued       Findings      Recommen-
                                                                                                    dations
A04F0011    Audit of the Georgia Department of Education’s             1/12/06                        7
            Migrant Education Program (SAR 52, pg. 4)
            Current Status: OESE informed us the PDL was
            issued on 9/29/08. The required documents for
            resolution of this audit were not in AARTS by the end of
            report period (9/30/2008).
A04G0012    Audit of Mississippi Department of Education’s             8/8/07      $3,192,395         4
            Emergency Impact Aid Program Controls and
            Compliance (SAR 55, pg. 28)
            Current Status: OESE informed us that its program
            team is working with states to reconcile the pupil data
            submitted for reimbursement for displaced children due
            to Hurricanes Katrina and Rita.
A05G0020    Audit of the Alabama State Department of Education’s       9/27/07     $4,579,375         5
            and Two Selected LEAs’ Compliance with Temporary
            Emergency Impact Aid Program Requirements (SAR
            55, pg. 28)
            Current Status: OESE informed us that its program
            team is working with states to reconcile the pupil data
            submitted for reimbursement for displaced children due
            to Hurricanes Katrina and Rita.

A05G0031    Columbus City School District’s Compliance with            6/20/07      $48,158           8
            Financial Accountability Requirements for
            Expenditures Under Selected NCLB Programs (SAR
            55, pg. 29)
            Current Status: A draft PDL was submitted in AARTS
            on 9/30/2008 and is being reviewed by OIG.

A05G0033    Illinois State Board of Education’s Compliance with        6/7/07     $16,809,020         8
            the Title I, Part A, Comparability of Services
            Requirements (SAR 55, pg. 29)
            Current Status: A draft PDL was submitted in AARTS
            on 9/30/2008 and is being reviewed by OIG.
A06E0008    Audit of the Title I Funds Administered by the Orleans     2/16/05    $73,936,273         7
            Parish School Board for the Period July1, 2001,
            through December 31, 2003 (SAR 50, pg. 23)
            Current Status: OESE informed us this audit is
            currently pending review of additional workpapers.




                                                                                                          34
                                                                       Semiannual Report to Congress: No. 57


   Report                       Report Title                            Date     Total Monetary   Number of
   Number              (Prior SAR Number and Page)                     Issued       Findings      Recommen-
                                                                                                    dations
A06F0013    Oklahoma State Department of Education’s Migrant           3/21/06      $509,000          3
            Education Program (SAR 52, pg. 4)
            Current Status: OESE informed us the PDL was
            issued on 9/30/08. The required documents for
            resolution of this audit were not in AARTS by the end of
            report period (9/30/2008).
A06F0016    Arkansas Department of Education’s Migrant                 8/22/06      $877,000          2
            Education Program (SAR 53, pg. 25)
            Current Status: AARTS shows OESE administrative
            stay extension was approved on 8/22/2008.
A06G0009    Audit of the Temporary Emergency Impact Aid for            9/18/07    $10,270,000         4
            Displaced Students Requirements at the Texas
            Education Agency and Applicable LEAs (SAR 55, pg.
            29)
            Current Status: OESE informed us that its program
            team is working with the states to reconcile the pupil
            data submitted for reimbursement for displaced
            children due to Hurricanes Katrina and Rita.
A06G0010    Louisiana Department of Education’s Compliance with        9/21/07     $6,303,000         4
            Temporary Emergency Impact Aid for Displaced
            Students Requirements (SAR 55, pg. 29)
            Current Status: OESE informed us that its program
            team is working with the states to reconcile the pupil
            data submitted for reimbursement for displaced
            children due to Hurricanes Katrina and Rita.
A09F0024    California Department of Education’s Migrant               12/1/06     See Note 1         6
            Education Program (SAR 54, pg. 31)
            Current Status: AARTS shows OESE administrative
            stay extension was approved on 8/22/2008.
OPE
A07B0011    Audit of Valencia Community College’s Gaining Early        5/8/03      $1,822,864         5
            Awareness and Readiness for Undergraduate Programs
            Matching Requirement (SAR 47, pg. 15)
            Current Status: OPE informed us that OPE and OGC
            are revising the PDL based on additional
            documentation received.
OSERS
A02B0014    Audit of the Puerto Rico Vocational Rehabilitation         6/26/02    $15,800,000         5
            Administration (SAR 45, pg. 18)
            Current Status: OSERS informed us that the PDL
            “was uploaded 8/09/05 but could not open due to the
            incorrect naming convention of the file.” The PDL was
            uploaded again 10/7/08 which was after the close of
            this reporting period.




                                                                                                          35
                                                                                                Semiannual Report to Congress: No. 57
      Report                                   Report Title                                        Date        Total Monetary           Number of
      Number                          (Prior SAR Number and Page)                                 Issued          Findings              Recommen-
                                                                                                                                          dations
A02E0020                The Virgin Islands Department of Health’s                                9/28/05           See Note 2                 17
                        Administration of the Infants and Toddlers Program
                        (SAR 51, pg. 28)
                        Current Status: OSERS informed us the staff will meet
                        to discuss next steps toward resolution of the findings.
A06F0019                Results of five audits of the IDEA, Part B requirements                  3/28/07         $328,000,000                  6
                        at schools under the supervision of the Department of
                        Interior’s Bureau of Indian Affairs (BIE) (Report was
                        addressed to the Bureau of Indian Education,
                        Department of the Interior) (SAR 54, pg. 32)
                        Current Status: OSERS informed us that a
                        teleconference was held on October 1, 2008 with BIE
                        concerning the status of BIE's response to audit
                        findings. Staff will meet with OGC in early November
                        2008 to discuss next steps toward resolution of the
                        findings.
                        TOTAL                                                                                    $716,590,778                 344

Note 1 - We identified significant numbers of ineligible children in this report, but did not project estimated questioned costs. We recommended that more
thorough reviews be conducted to determine the total numbers of ineligible children and the return of funds expended for the ineligible children found.

Note 2 - We identified $327,577 in one-time better use of funds in audit number A02E0020.




                                                                                                                                                        36
                                                                                 Semiannual Report To Congress: No. 57

Table 7: Statistical Profile: FY 2008                                             Six-Month          Six-Month       FY 2008
                                                                                 Period Ending         Period         Total
                                                                                   3/31/2008           Ending
                                                                                                     9/30/2008
OIG Audit Reports Issued                                                                  18             16            34
Questioned Costs                                                                       $45,444,898   $13,350,794   $58,795,692
Unsupported Costs                                                                       $5,483,187   $88,151,600   $93,634,787
Recommendations for Better Use of Funds                                                         $0            $0            $0
Other OIG Products Issued
(Includes inspection reports, alert memoranda, audit closeout                            13              6              19
letter/memoranda, attestation reports, management information
reports, and special products.)
OIG Audit Reports Resolved By Program Managers
                                                                                        24               13             37
Questioned Costs Sustained                                                         $283,533,367       $3,864,253   $287,397,620
Unsupported Costs Sustained                                                         $23,056,577         $429,150    $23,485,727
Additional Disallowances Identified by Program Managers                              $6,230,017         $107,543     $6,337,560
Management Commitment to the Better Use of Funds                                   $892,000,000               $0   $892,000,000
Investigative Case Activity
Cases Opened                                                                              74             66             140
Cases Closed                                                                              56             45            116 1
Cases Active at the End of the Reporting Period                                          399            408             408
Prosecutorial Decisions                                                                  128            114            299 2
   - Accepted                                                                             53             54            129 3
   - Denied                                                                               75             60            170 4
Investigative Results
Indictments/Informations                                                                 38             68             109 5
Convictions/Pleas                                                                         37            58             96 6
Fines Ordered                                                                              $14,094       $22,800       $39,894 7
Restitution Payments Ordered                                                            $1,645,766    $3,229,468     $4,875,235
Civil Settlements/Judgments (number)                                                       9             13             22
Civil Settlements/Judgments (amount)                                                    $2,495,593    $4,844,573     $7,340,166
Recoveries                                                                              $2,053,474    $4,160,463    $6,285,836 8
Forfeitures/Seizures                                                                           $0             $0               $0
Estimated Savings                                                                      $10,684,068     $305,940    $15,216,282 9


            1
              Includes 15 closed cases that were not reflected in SAR 56
            2
              Includes 57 cases that were not reflected in SAR 56
            3
              Includes 22 cases that were not reflected in SAR 56
            4
              Includes 35 cases that were not reflected in SAR 56
            5
              Includes 3 cases that were not reflected in SAR 56
            6
              Includes 1 additional conviction/plea that was not reflected in SAR 56
            7
              Includes $3,000 that was not reflected in SAR 56
            8
              Includes $70,730 that was not reflected in SAR 56.
            9
              Includes $4,226,273 in savings not reflected in SAR 56



                                                                                                                               37
U.S. Department of Education
Margaret Spellings
Secretary

Office of Inspector General
Jerry Gayle Bridges
Acting Inspector General

November 2008

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                                 Or e-mail:
                             oig.hotline@ed.gov

        Your report may be made anonymously or in confidence.

                For information on identity theft prevention
                      for students and schools, visit the
           Office of Inspector General Identity Theft Web site at:
                             www.ed.gov/misused




         The Department of Education’s mission is to promote student
      achievement and preparation for global competitiveness by fostering
              educational excellence and ensuring equal access.

                                 www.ed.gov