oversight

Semiannual Report - October 1, 2008 - March 31, 2009

Published by the Department of Education, Office of Inspector General on 2009-03-31.

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

U . S . D E PA R T M E N T O F E D U C AT I O N



Inspector General’s Semiannual
Report to Congress, No. 58
October 1, 2008 - March 31, 2009
   U.S. D EPARTMENT OF EDUCATION
   OFFICE OF I NSPECTOR G ENERAL




SEMIANNUAL REPORT
TO CONGRESS, NO. 58
(OCTOBER 1, 2008 – MARCH 31, 2009)




      U.S. DEPARTMENT OF EDUCATION
      OFFICE OF INSPECTOR G ENERAL
             550 12 TH S T . S.W.
         WASHINGTON,, DC 20024
                   MESSAGE FROM THE
                   INSPECTOR GENERAL

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 October 1, 2008, through
March 31, 2009. The audits, investigations, and related reports highlighted in this
report illustrate our ongoing commitment to promoting accountability, efficiency,
and effectiveness in Federal education operations and programs.

Over the last 6 months, OIG issued 21 audit and audit-related reports. We
identified more than $49 million in questioned costs, nearly $704,000 in
unsupported costs, and $13 million in funds that could have been put to better use.
We also completed a number of investigations involving individuals who abused
their positions of trust for personal gain. Over the last 6 months, we closed 64
investigations and secured more than $20 million in fines, restitutions, recoveries,
forfeitures/seizures, and savings.

As you will read in the pages of this report, our work identified a need for improved
accountability in the programs and operations we reviewed. As members of
Congress, you understand the value of accountability in Federal programs, as it is a
key component in our nation’s largest Federal education laws and in the American
Recovery and Reinvestment Act of 2009 (ARRA). The Administration, Congress, and
the public are looking to the Inspectors General to lead the way in preventing,
identifying, and fighting waste, fraud, and abuse of ARRA funds. With 55 state and
territorial educational agencies, more than 16,000 school districts, and countless
schools, colleges, and universities across the country potentially eligible to receive
ARRA funds, this indeed will be a challenge, but one I feel this office is well-
positioned to tackle. Since 2002, we have conducted more than 200 reviews of state
educational agencies, local educational agencies, and individual schools. This work
has given our staff invaluable insight into the operations and challenges of these
entities and the expertise needed to examine those operations thoroughly and
efficiently, as the ARRA demands.

We also remain focused on another critical area of concern: the Federal student
financial assistance programs. With passage of the Ensuring Continued Access to
Student Loans Act (ECASLA) last year, the Department was given authority to
purchase loans from lenders. During this reporting period, we continued to work
with the Department’s Federal Student Aid office on ECASLA-related issues,
providing audit guidance, assistance, and advice to help ensure compliance with the
law’s requirements so that America’s students can realize their dreams of a higher
education.
Because of the magnitude of our ARRA and ECASLA efforts, we have suspended a
number of non-statutory audits and reviews. While our plate is quite full, we
remain committed to our mission and to working with the Department to ensure
that its operations and programs provide the best service to the American public.

Thank you for your continued support of our efforts. We look forward to working
with the 111th Congress in furthering our goals and achieving our mission.

                                                                  Mary Mitchelson
                                                          Acting Inspector General
                                     TABLE OF CONTENTS
Overview .................................................................................................................................................... 1
American Recovery and Reinvestment Act Efforts .................................................................... 3
Elementary, Secondary, and Postsecondary Education Programs ...................................... 5
   Elementary and Secondary Education ........................................................................................ 5
     Cash Management .......................................................................................................................... 5
     Illinois: Harvey Public Schools District 152........................................................................ 8
     Puerto Rico: Puerto Rico Department of Education ........................................................ 8
     Postsecondary Education ............................................................................................................ 9
     National Technical Institute for the Deaf .............................................................................. 9
  Investigations........................................................................................................................................ 9
     School Officials ............................................................................................................................. 10
     Contractors .................................................................................................................................... 13
     Individuals ..................................................................................................................................... 13
Student Financial Assistance Programs ...................................................................................... 14
  Federal Student Aid Operations................................................................................................... 15
     Federal Student Aid’s Performance as a Performance-Based Organization ........ 15
  Title IV Program Participants ...................................................................................................... 16
     Program Reviews Conducted Following OIG Inspection Identify More Than $33
     Million in Potential Recoveries .............................................................................................. 16
     Fifth Third Bank........................................................................................................................... 17
     Touro College ................................................................................................................................ 18
     Walden University ...................................................................................................................... 19
  Investigations..................................................................................................................................... 20
     School Officials ............................................................................................................................. 20
     Contractors .................................................................................................................................... 22
     Service Providers ........................................................................................................................ 23
     Individuals ..................................................................................................................................... 23
     Settlements .................................................................................................................................... 24
Financial Management and Other Internal Operations ........................................................ 25
  Financial Management ................................................................................................................... 25
     Financial Statement Audits ..................................................................................................... 25
     Drug Control Funds .................................................................................................................... 26
  Other Internal Operations ............................................................................................................. 26
     Updated Report on OIG Recommendations Not Yet Implemented ......................... 26
Other Noteworthy Efforts ................................................................................................................. 27
  Non-Federal Audits .......................................................................................................................... 27
    Quality Control Reviews …………………………………………………………………..……….. 27
  Council of the Inspectors General on Integrity and Efficiency .......................................... 27
     Financial Statement Audit Conference ............................................................................... 27
Required Tables ….………………………………………………………………………………………… 28
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 October 1, 2008, through March 31, 2009. The audits,
investigations, and other activities highlighted in this report illustrate our ongoing
commitment to promoting accountability, efficiency, and effectiveness in Federal
education programs and operations.

                                                Accountability is essential to
                                                success, particularly when it comes
                                                to education. The U.S. Congress
                                                understands the value of
                                                accountability in Federal programs,
                                                as it has long been a key component
                                                in our nation’s largest Federal
                                                education laws, such as the
                                                Elementary and Secondary
                                                Education Act of 1965, as amended
                                                (ESEA), and the Higher Education
                                                Act of 1965, as amended (HEA), and
                                                most recently in the American
                                                Recovery and Reinvestment Act of
                                                2009 (ARRA). In the ARRA, the
                                                States, the Department, its
grantees, and its subgrantees will be held accountable for results by the American
public perhaps more vigilantly than ever before. Accountability is often a challenge
for the Department, its grantees, and its subgrantees, as evidenced by the OIG’s
audits over the last 6 months, which demonstrated a need for improved
accountability in the programs and operations we reviewed.

In the first section of our report, we discuss the work we conducted during this
reporting period related to the ARRA. The ARRA places a heavy emphasis not only
on accountability, but on transparency as well, and in doing so, increases the
responsibilities of those Inspector General offices whose agencies are impacted by
the ARRA. OIG will receive $14 million through Fiscal Year (FY) 2012 to monitor
ARRA funds distributed by the Department and expended by its grantees and
subgrantees. Our efforts are well underway, and we present an overview of our
activities in this section of the report.

Internal mechanisms to conduct effective oversight and monitoring of Federal funds,
and demanding accountability from every grantee, subgrantee, and others
participating in Federal elementary, secondary, and postsecondary education
programs help ensure compliance with Federal laws and regulations. Work
concluded during this reporting period showed a need for improved accountability by
the state educational agencies (SEA), the local educational agencies (LEA), and
other grantees we reviewed. This includes two audits involving cash management
by an SEA and an LEA, with the LEA returning more than $25 million to the


                                          1
Department from interest earned on unused Federal funds—funds that should have
been used or returned to the Federal government in a timely manner, as required by
Federal regulations. You will find more details on these two reports, as well as
other reports involving SEAs and LEAs issued over the last 6 months, in the second
section of our report. This section also includes summaries of our more significant
investigations involving theft or misuse of Federal education funds by individuals in
a position of trust to educate our children.

Last year, Congress passed the Ensuring Continued Access to Student Loans Act
(ECASLA)—a law aimed at helping students to obtain student loans in the volatile
credit market. It provided the Department with authority to purchase loans from
lenders. During this reporting period, OIG continued to work with Federal Student
Aid (FSA), the Department office responsible for administering the student financial
assistance programs, on ECASLA-related issues, including implementing
mechanisms for increased accountability, because
work concluded over the last 6 months showed a need
for improved accountability by FSA and participants
in the student loan programs. This includes our audit
of FSA as a Performance-Based Organization, where
we determined that FSA was not meeting all of the
statutory requirements associated with this
designation, and our audit of the Fifth Third Bank, a
lender in the Federal Family Education Loan program
(FFEL), where we found that the Bank, in several of
its agreements with other entities, violated the lender
inducement provision of the HEA. FSA must ensure
accountability in its own operations, as well as those
of the entities involved in its programs, to help protect
Federal student financial aid dollars from waste and
mismanagement. In the third section of our report
you will find more on these audits, as well as summaries of our more significant
cases of fraud in student financial assistance programs.

In the fourth section of this report are highlights of the audits and reviews we
completed on the Department’s financial management and internal operations. In
2008, the Department and FSA received a clean audit opinion on their financial
statements for the seventh year in a row. While this accomplishment is noteworthy,
our work revealed a need for improvements in areas related to financial reporting
and information technology (IT) security. In addition, we completed work on a
congressionally directed effort regarding OIG recommendations not yet implemented
by the Department. With regard to Section 845 of the National Defense
Authorization Act for Fiscal Year 2008, which requires each OIG to include
information in its Semiannual Reports to Congress on final contract-related audit
reports that contain significant findings, OIG did not issue such reports over the last
6 months.

OIG constantly strives to improve its operations through our work with the
Inspector General community and through our work with the independent auditors


                                           2
tasked with conducting single audits of entities that receive significant Federal
education funds each year. This information is in the fifth section of this report.

In the sixth and final section, we provide a compilation of tables of the audits, other
reports, 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 are on the OIG Website at
http://www.ed.gov/about/offices/list/oig/index.html?src=oc. Interested individuals
may receive email notification when a new report is issued by completing 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?src=oc.



AMERICAN RECOVERY AND
REINVESTMENT ACT EFFORTS
The ARRA was signed into law by President Barack Obama on February 17, 2009,
and includes approximately $100 billion for Federal education programs and
                     operations in an effort to help mitigate the effect of recent
                     reductions in local revenues and state support for education.
                     This includes programs within the ESEA; HEA; the Individuals
                     with Disabilities Education Act, as amended (IDEA); and the
                     Rehabilitation Act of 1973 (Rehabilitation Act). The ARRA
                     places a heavy emphasis on accountability and transparency,
                     and in doing so, increases the responsibilities of those Inspector
                     General offices whose agencies are impacted by the ARRA. OIG
                     will receive $14 million through FY 2012 to monitor education-
related ARRA funds. With 55 state and territorial educational agencies, more than
16,000 school districts, and countless schools, colleges, and universities potentially
eligible to receive ARRA education-related funds, OIG intends to manage its limited
resources judiciously to help prevent and identify waste, fraud, and abuse of ARRA
funds. Our efforts are well underway.

Since passage of the ARRA, we have been meeting with Department leaders and our
counterparts in Federal agencies to set in motion efforts to ensure that ARRA
dollars reach the intended recipients and achieve the intended results. In addition,
through the Council of the Inspectors General on Integrity and Efficiency, OIG
provided input to the Office of Management and Budget (OMB) for their
consideration in preparing the initial implementation guidance for ARRA fund
recipients (agencies, states, localities).

OIG staff is participating in an advisory role on a number of Department and OMB
ARRA work groups. We have provided the Department with an evaluation of prior
audit and inspection findings and unimplemented recommendations related to the
ARRA programs, as well as a compendium of applicable fraud investigation results

                                                3
to assist the Department in identifying risk. We have also forwarded tools for
subrecipient monitoring and grant fraud awareness developed by intergovernmental
teams and are developing training/outreach materials. These materials will assist
the Department and grantees in identifying risk and fraud and in implementing
controls and mechanisms for the timely reporting of misuse of ARRA-related funds
to OIG.

The Government Accountability Office (GAO) was given a range of responsibilities in
the ARRA to examine the use of ARRA funds
by states and grantees. OIG staff is working
very closely with our GAO counterparts in
developing audit plans and guidance, and in
creating a roadmap to ensure that we
coordinate and conduct all education-related
assignments effectively and efficiently and
avoid any duplication of effort.

The law also gives OIG an increased role in
overseeing all ARRA funds, as it assigns our
Inspector General to the Recovery Act
Accountability and Transparency Board.
The Board will coordinate and conduct
oversight of ARRA funds, produce quarterly
and annual reports on the use of funds for
public review, and hold public hearings regarding waste, fraud, and abuse of ARRA-
related funds. The Board will also create “flash reports” aimed at alerting the
President and Congress to immediate concerns regarding management and funding
problems. The Board is also tasked with managing the Recovery.gov website—a
means of keeping the general public informed of where ARRA funds are going, how
the funds are being spent, and whether the funds are achieving the intended results.

The ARRA expanded whistleblower protections to include state and local
government employees and contractors. As a result, OIG is ramping up its
investigative capabilities to prepare for this change. This includes enhancing our
hotline operations to accommodate an increase in calls, conducting outreach to
states and localities on how to report waste, fraud, and abuse, and increasing our
law enforcement activities to aggressively pursue those who defraud Federal
education programs. We also are working with the Department to develop processes
to ensure all whistleblower complaints are handled efficiently and properly. In
addition, we are working with our investigative colleagues in other Federal agencies
to share information on best practices and make recommendations to the Recovery
Act Accountability and Transparency Board in an effort to maximize the
effectiveness of investigative efforts and resources.

Capitalizing on lessons learned from the timely work we conducted in 2006-2008 as
required by the Hurricane Education Recovery Act, we will begin our on-the-ground
efforts in the third quarter of this fiscal year. We will report our findings in future
Semiannual Reports to Congress.


                                           4
ELEMENTARY, SECONDARY, AND
POSTSECONDARY EDUCATION
PROGRAMS
                                        The ARRA significantly increases funding for
                                        elementary, secondary, and special education
                                        programs through FY 2011. Over the last 9
                                        years, OIG has issued nearly 200 audit
                                        products assessing SEA, LEA, and school
                                        compliance with specific provisions of the
                                        Federal education laws. This work has
                                        provided OIG with insight into the
                                        operations and challenges of SEAs and LEAs
                                        and the expertise needed to immediately
                                        examine those operations efficiently and
                                        effectively, as the ARRA demands. Our work
                                        at the SEA and LEA levels continued over
                                        this reporting period, where we examined
                                        cash management issues at an SEA and an
LEA, as well as internal control issues involving contract management and
oversight, and use of Federal funds by another SEA, an LEA, and a postsecondary
education grantee. We present the findings of our work below, which, as you will
read, show a need for improved accountability by these fund recipients. The
Department must demand accountability from its grantees and subgrantees in order
to ensure that vital Federal education program dollars are used as required so they
reach the intended recipients and achieve the desired results. Also below are
summaries of our more significant investigations involving elementary, secondary,
and postsecondary education program funds.


Elementary and Secondary Education
Cash Management
The Cash Management Improvement Act of 1990 (CMIA) helps ensure efficiency,
effectiveness, and equity in the exchange of Federal funds between the Federal
government and the states. Among its provisions, CMIA requires Federal agencies
to make timely transfers to state agencies, which in turn must minimize the time
elapsing between the receipt and disbursement of Federal funds for program
purposes. Similarly, the Education Department General Administrative
Regulations (EDGAR) require states to conform advances of Federal grant funds to
subgrantees to the same timing standards that apply to cash advances received from
Federal agencies. EDGAR also requires subgrantees to remit interest earned on
Federal advances promptly, and at least quarterly. OIG examined the issue of
Federal interest earnings at the Los Angeles Unified School District, the second
largest school district in the nation. Over the 12-year period from FY 1995 to FY
2007, the District earned millions of dollars on Federal cash advances. The District
retained the interest earnings instead of remitting the earnings, as required by

                                         5
EDGAR. Shortly after OIG began its audit, the District began remitting about $25
million of earned interest to the California Department of Education (CDE) for
submission to the Department. OIG also reviewed the issue of cash management in
California statewide and found that CDE does not have an agency-wide cash
management system that minimizes the time elapsing between LEAs' receipt and
disbursement of Federal education funds. As a result, LEAs do not receive Federal
program funds when needed, and, for some programs, earn significant amounts of
interest on Federal advances received too early. With the significant increase in
funding that SEAs and LEAs will receive for Federal education programs through
the ARRA, cash management has been identified as a critical issue that OIG intends
to track closely across the nation over the next several years.

      California: California Department of Education
      In FY 2007-2008, CDE received Federal education grant awards totaling
      more than $4 billion, the bulk of which it disbursed to its LEAs. We
      conducted an audit to determine whether the CDE’s method for disbursing
      funds to LEAs complied with Federal cash management requirements. Our
      audit found that CDE had not implemented cash management procedures for
      the largest Federal education program it administers, including disbursing
      $1.6 billion to more than 1,100 LEAs for the ESEA Title I program. We also
      found that CDE routinely disbursed Title I funds to LEAs without
      determining whether the LEAs needed program cash at the time of
      disbursement. We determined that CDE’s process of reviewing expenditure
      data to assess LEA funding needs did not take into account LEA cash
      balances that were available to pay program costs, and it did not assess
      LEAs’ actual or projected cash disbursements for individual programs. In
                                          addition, CDE’s overall cash management
                                          procedures were inconsistent in design
                                          and application: individual CDE program
                                          offices developed their own procedures,
                                          funding thresholds, and reporting
                                          timeframes, with little coordination
                                          across programs. The lack of a systemic
                                          approach for CDE’s disbursement of
                                          Federal program funds caused confusion
                                          and increased the administrative burden
                                          for its subgrantees, including LEAs,
                                          because personnel had to track multiple
                                          reporting requirements across programs.
                                          We also found that LEAs had little or no
                                          information as to when CDE would
                                          disburse Federal cash for a particular
                                          program. Based on our findings, we
      recommended that the Department encourage CDE to consider centralizing
      its funding processes under the authority of a single organizational unit to
      ensure that cash management procedures are consistently and effectively
      implemented across all Federal programs. Additionally, we recommended
      that CDE strengthen its controls to ensure that LEAs accurately calculate


                                        6
and promptly remit interest earned on Federal cash advances. CDE
generally concurred with our findings and described the corrective actions
taken or planned to address each recommendation. Click here for a copy of
our report:
http://www.ed.gov/about/offices/list/oig/auditreports/fy2009/a09h0020.pdf

Los Angeles Unified School District
Our audit sought to determine whether the District used a methodology for
calculating the interest earned on Federal cash advances that complied with
all applicable requirements and whether it had policies and procedures in
place to ensure that future interest earned on Federal cash advances was
accurately computed and remitted on a quarterly basis. To evaluate the
District’s procedures, we reviewed its calculation and remittance of earned
interest on cash advances for FY 2004 through FY 2007. Our audit revealed
                                               that the District did not identify
                                               the actual amount of interest
                                               earned on cash balances.
                                               Although it developed a
                                               methodology for estimating the
                                               amount of interest earned, the
                                               reliability of the estimate was
                                               not readily determinable due to
                                               the design and application of the
                                               methodology. In addition, when
                                               determining the amount of
                                               earned interest to be remitted to
                                               CDE and other grantor
                                               agencies, the District
                                               improperly reduced the amount
                                               to compensate for the temporary
                                               use of other cash resources to
                                               operate Federal programs by
                                               more than $1.48 million. We
also found that the District’s current internal controls may not be adequate to
ensure that amounts identified as due to the Federal Government are
promptly remitted to CDE and other grantors. Our review identified more
than $817,700 of earned interest that the District’s accounting analysts
identified but was not included in remittance documentation. As a result of
our findings, we made a number of recommendations including that the
Department require the District to remit $1.48 million that was improperly
excluded from analysts’ calculations of earned interest due and identify and
remit all other earned interest improperly excluded for FY 1995 through FY
2007 and later, which we estimate to be about $2.58 million. The District
partially concurred with our findings and concurred or partially concurred
with our recommendations. Click here for a copy of the report:
http://www.ed.gov/about/offices/list/oig/auditreports/fy2009/a09h0019.pdf




                                    7
Illinois: Harvey Public Schools District 152
The Harvey Public Schools District 152 is located south of downtown Chicago and
operates 6 elementary schools, 1 middle school, 1 pre-kindergarten class, and 1
training center, with an enrollment of more than 3,500 students. We conducted an
audit to determine whether the District used a series of Federal funds in accordance
with applicable laws, regulations, and grant provisions. Programs reviewed were:
ESEA Title I, Part A–Improving Basic Programs; ESEA Title I, Part B–Reading
First; ESEA Title II–Preparing, Training, and Recruiting High Quality Teachers
and Principals; and IDEA Part B–Assistance for Education of All Children with
Disabilities. Our audit covered the 2005-2006 grant year during which time the
District received nearly $2.4 million for these programs, which it received from the
Illinois State Board of Education. Our audit found that the District did not always
use the funds for only costs that were allowable and in accordance with applicable
laws, regulations, and grant provisions. Specifically, it charged more than $277,000
in personnel and non-personnel costs to the Federal programs without adequate
documentation; charged the IDEA, Part B program more than $6,000 for costs that
were not allocable to the program; maintained ESEA Title I, Part A program funds
in excess of its program expenses; and did not perform timely physical inventories of
equipment purchased with Federal funds. As a result of these findings, we made a
number of recommendations including that the Department ask the Illinois State
Board of Education to direct the District to provide documentation to adequately
support the allowability of more than $277,000 in unsupported Federal expenditures
or return that amount to the Department. The State Board did not agree with all of
our findings and agreed in part with our recommendations. Click here for a copy of
the report: http://www.ed.gov/about/offices/list/oig/auditreports/fy2009/a05h0025.pdf

Puerto Rico: Puerto Rico Department of Education
We concluded an audit that sought to determine whether the Puerto Rico
Department of Education (PRDE) administered ESEA Title I services provided to
                                               private school students, teachers, and
                                               parents through contracts awarded to
                                               three vendors in compliance with Title
                                               I requirements. We reviewed a number
                                               of areas to see if the PRDE monitored
                                               the contractors for compliance; ensured
                                               that the costs claimed by the
                                               contractors were allowable and followed
                                               contract requirements; properly
                                               allocated Title I funds for services to
                                               eligible private school students;
                                               properly accounted for Title I funds
                                               used to purchase property and
equipment; and consulted with private school officials to determine the needs of
eligible children and the services to be provided. The time period reviewed was
2006-2007, during which PRDE awarded more than $27 million in professional
services contracts to the three vendors. Our audit found that PRDE did not
adequately administer these services because it did not properly monitor the
vendors for compliance before paying them nearly $18 million, and as a result, paid

                                          8
for costs that were excessive, unallowable, or not supported with adequate and
reliable documentation. The PRDE also allocated more than $430,800 in Title I
funds for services in excess of the entitlement and did not account for more than
$8,000 in Title I property and equipment purchased by the vendors. As a result of
our findings, we made a number of recommendations, including that the
Department require PRDE to review the vendors’ supporting documentation to
ensure compliance with Title I requirements for payments made without proper
contract monitoring and return to the Department any excessive charges or
allowable costs. PRDE did not concur with our findings or recommendations. Click
here for a copy of the report:
http://www.ed.gov/about/offices/list/oig/auditreports/fy2009/a04h0017.pdf


Postsecondary Education
National Technical Institute for the Deaf
During this reporting period, we issued an audit that sought to determine whether
the National Technical Institute for the Deaf had adequate controls in place to
account for Federal education funds (excluding HEA Title IV student financial
assistance funds) and whether related expenses were reasonable, allocable, and
allowable for FY 2007. During this time period, the school received more than $56
million for the programs we reviewed. Overall, we determined that the school had
adequate internal controls in place and that its related expenses were reasonable,
allocable, and allowable for the time period reviewed. We found, however, that it did
not maintain separate books, records, or documents for more than $55 million in
operating expenses that were charged to Federal funds. The Rochester Institute of
Technology (RIT), the school’s host institution, provided its general ledger records,
which listed more than $63 million in operating expenses charged to the National
Technical Institute for the Deaf. RIT established separate accounts for the school’s
operating expenditures with accounts for allowable Federal transactions in
accordance with applicable laws. According to RIT officials, the Institute’s Federal
funds were exhausted before the end of the fiscal year, but it continued to charge
Federal transactions prior to closing the accounts at the end of the fiscal year using
non-Federal funds totaling more than $8.4 million. Based on this finding, we
suggested that RIT establish appropriate accounting records for the funds
appropriated to the National Technical Institute for the Deaf and to close out the
records when all Federal funds are exhausted. Officials with the RIT and the
National Technical Institute for the Deaf agreed with our conclusion and
suggestions and agreed to change its process. Click here for a copy of the report:
http://www.ed.gov/about/offices/list/oig/auditreports/fy2009/a02i0040.pdf


Investigations
Our investigations into suspected fraudulent activity by or within SEAs, LEAs, post-
secondary educational institutions, and their contractors have led to the arrest and
conviction of a number of individuals for theft or misuse of Federal education funds.
Below are a number of examples of our more significant work in this area over the
last 6 months.




                                          9
School Officials
     Arkansas: Pine Bluff School District
     A former employee with the Pine Bluff School District was sentenced in
     Jefferson County Circuit Court to 80 years in prison and was ordered to pay
     more than $700,000 in restitution for theft of Federal funds. The plea is a
     result of our investigation, conducted jointly with the Pine Bluff Police
     Department and the Arkansas Division of Legislative Audit, which found
     that the former employee stole more than $700,000 from the District over 7
     years. The former employee created a fictitious company, submitted invoices
     and purchase orders, and then received checks on behalf of that company for
     services never rendered. She deposited the checks into a bank account she
     controlled for her personal use.

              Florida: Florida A&M University
              The former Director of the Institute on Urban Policy and
              Commerce at Florida A&M University was sentenced in U.S.
              District Court, Northern District of Florida, to 46 months in prison,
              3 years of supervised release, and was ordered to pay more than
              $212,000 in restitution for embezzlement. Our investigation with
              the Federal Bureau of Investigation (FBI) revealed that the former
              Director and another individual stole and converted to their own
              use monies from a 21st Century education grant. The conspirators
              used the funds to pay employees of the Institute for overtime,
              bonuses, and other compensation without those individuals having
              performed any work on the grants. The participating employees
              were required to kick-back a portion of the monies they received,
              which the former Director and her co-conspirator used for their
              personal benefit.

              New Jersey: Stevens Institute of Technology
                 A former Associate Vice President of the Stevens Institute of
                 Technology was sentenced in U.S. District Court, District of New
                 Jersey, to 24 months in prison, followed by 3 years of supervised
                 release, and was ordered to pay $264,000 in restitution for
                 conspiracy and theft. 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 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.

     Oklahoma: Marble City Schools
     The former Superintendent of the Marble City Schools was sentenced in U.S.
     District Court, Eastern District of Oklahoma, to 24 months in prison, 24
     months of supervised release, and was ordered to pay a $4,000 fine for


                                       10
embezzling government funds. Our investigation, conducted jointly with the
FBI, the Internal Revenue Service Criminal Investigations Division (IRS-
CID), and the Wagoner County District Attorney’s Office, revealed that over a
9-year period, the former Superintendent embezzled nearly $1 million from
the school district and used the funds for personal items. Through asset
forfeiture and liquidation of assets and loans, the former Superintendent
made a voluntary repayment of more than $1 million prior to his sentencing.

Pennsylvania: Raising Horizons Quest Charter School
The former Chief Executive Officer and Chief Financial Officer of the Raising
Horizons Quest Charter School pled guilty in U.S. District Court, Eastern
District of Pennsylvania, to charges of
conspiracy and alteration of records in a
Federal investigation. Our investigation
revealed that the two officials attempted
to conceal their misappropriation of funds
by altering credit card statements prior to
and in preparation of a Philadelphia
School District audit. The two officials
altered credit card statements by
removing or changing personal expenses
and inserting charges purported to be for
school-related expenses.

Pennsylvania: Community College of
Philadelphia
The former Director of the Adult Basic
Education Program at the Community College of Philadelphia was sentenced
in U.S. District Court, Eastern District of Pennsylvania, to 5 years of
probation and was ordered to pay $240,000 in restitution for charges related
to theft of Federal funds. The sentence was a result of our investigation with
the FBI and IRS that revealed that the former Director participated with six
other individuals, including officials from the Sister Clara Muhammad School
private school in Philadelphia, in a scheme to receive public funds for adult
basic education courses at the College that were not held, and to pay teachers
who had not taught the courses. This scheme was used as one of the
predicate offenses in a Racketeering Influenced Criminal Organization that
sought to obtain money and property by defrauding government entities,
financial institutions, businesses, and individuals through extortion and
bribery.

Puerto Rico: Puerto Rico Department of Education Community
Integrated Services Program
The former Director of the Puerto Rico Department of Education Community
Integrated Services Program (CISP), his wife, a family friend, a CISP
employee, the husband of another CISP employee, and the mother of yet
another CISP employee were sentenced in U.S. District Court, District of
Puerto Rico, for their roles in a $465,000 fraud scheme. Sentences ranged

                                  11
from 4 years in prison for the former Director to probation for the others, and
a total of nearly $500,000 ordered to be paid in restitution. The sentences are
a result of our investigation, conducted jointly with the FBI and the Puerto
Rico Comptroller’s Office, that unraveled the scheme whereby the CISP
staffers awarded personal service contracts to themselves, their family
members, and fictitious employees for services that were never provided. As
a result of their fraudulent efforts, the individuals received approximately
$465,000 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: Dallas Independent School District
The owner of Micro Systems, Inc., a Dallas Independent School District
contractor, and the former Chief Technology Officer for the District, were
sentenced in U.S. District Court, Northern District of Texas, for their roles in
a bribery and money laundering scheme. The owner of the company was
sentenced to 10 years in prison, 3 years of supervised release, and was
ordered to forfeit nearly $1 million, which represents the proceeds of the
conspiracy. The former Chief Technology Officer was sentenced to 11 years
in prison and 3 years of supervised release. The sentences are a result of our
joint investigation with the FBI and the Anti-Trust Division of the U.S.
Department of Justice which found that the two, along with the District’s
                                          former Chief Operating Officer who
                                          was previously sentenced for his role
                                          in the fraud, participated in a scheme
                                          designed to unjustly enrich
                                          themselves through District
                                          technology contracts. 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 million.


Texas: El Paso Independent School District
A former trustee with the El Paso Independent School District School Board
and a Michigan businessman pled guilty in U.S. District Court, Western
District of Texas, to conspiracy charges related to a contracting and bribery
scheme. Our joint investigation with the FBI revealed that the former
trustee received bribes in the form of cash and other benefits in exchange for
his influence and his vote in awarding a multimillion dollar contract to the
businessman. The bribes included $5,000 disguised as a campaign
contribution that the contractor paid to the former trustee.


                                   12
Contractors
     New Jersey: Circle Systems Group
     The former president of Circle Systems Group, an athletic equipment and
     reconditioning company that served scores of schools throughout New Jersey
     and other states, pled guilty to participating in fraudulent business practices,
     including overcharging schools for services. The plea is a result of our
     investigation, conducted jointly with the FBI, that found that from the 1980s
     through 2007, the former owner submitted fake price quotes from phony
     competitors to schools in order to increase sales for Circle Systems Group;
     submitted hundreds, if not thousands, of fraudulent invoices and other
     paperwork to schools with the knowledge of school purchasing officials;
     routinely submitted fraudulently inflated invoices to schools; and retained
     approximately $500,000 in overpayments made by Circle Systems Group
     clients—high schools, colleges, and youth sports programs. Additionally,
     Circle Systems Group allegedly did not properly test used helmets as
     required and falsified test results to reduce related costs and increase
     company profits.

Individuals
     New York: Man Agreed to Plead Guilty to Fraud Involving New York
     Department of Education Funds
     During this reporting period, a man agreed to plead guilty in U.S. District
     Court, Southern District of New York, to
     bank fraud involving New York Department
     of Education (NYDOE) funds. Our
     investigation revealed that the man used a
     New York City Department of Education
     bank account number that caused more than
     $600,000 in payments to be made to several
     of his credit card accounts and other vendors.
     The man, who was not an employee of the
     NYDOE, not only used the account to make payments on his own bills but
     shared the account number with friends who used the account number to
     make payments and withdraw funds from the account, as well.

     Puerto Rico: Eight Individuals Indicted in Identity Theft and Fraud
     Involving School Children
     Eight individuals were indicted in Puerto Rico on charges of identity theft,
     aggravated identity theft, and social security fraud. The indictments are a
     result of our investigation, conducted with a multi-agency state and Federal
     task force which alleges that the individuals burglarized approximately 50
     schools in Puerto Rico, stealing identity-related documents of the children
     attending those schools and teachers and administrators working at the
     schools. The indicted individuals had been involved in the unlawful transfer
     and possession of social security cards, birth certificates, passports, as well as
     fake Puerto Rico drivers’ licenses. In this scheme, they allegedly hoped to sell



                                         13
       the information stolen from the Puerto Rico schools to buyers, including
       individuals in Alaska, California, and Texas.


Student Financial Assistance Programs
Last year, Congress passed the ECASLA—legislation aimed at helping students to
obtain student loans in the volatile credit market. It provided the Department with
authority to purchase loans from lenders and was highlighted in our last
Semiannual Report to Congress. This remains a top priority for OIG in FY 2010, as
student financial assistance issues are of top concern to the President, Congress, and
most importantly, the American public. During this reporting period, OIG continued
                                         to work with FSA on ECASLA-related
                                         issues, providing audit guidance, assistance,
                                         and advice in matters to help ensure
                                         compliance with the law’s requirements. To
                                         provide accountability for the first three
                                         programs established under ECASLA, we
                                         issued two attestation engagement guides: a
                                         guide for the Loan Participation Program
                                         and Loan Purchase Commitment Program
                                         for 2008-2009 academic year loans; and
                                         another guide for the Short Term Purchase
                                         Program for 2007-2008 academic year loans.
                                         These attestation engagements are
                                         conducted by independent public
                                         accountants and lead to conclusions about
                                         the reliability of assertions made by FFEL
                                         Program lenders that student loans (or
                                         interests in such loans) they sell to the
                                         Department are eligible for sale under the
                                         ECASLA programs.

                                           Accountability in ECASLA programs is
                                           critical, as it is for all student financial
                                           assistance programs. It is also a challenge
                                           for FSA, as OIG work that was concluded
                                           over the last 6 months revealed a need for
                                           improved accountability by both FSA and
participants in the student loan programs. Summaries of this work are provided
below. With more than 6,000 postsecondary institutions, more than 3,000 lenders,
35 guaranty agencies, $82 billion in awards, and an outstanding loan portfolio of
more than $500 billion in FY 2008, FSA must ensure that it and all entities
involved in its programs are held accountable in adhering to statutory and
regulatory requirements. In addition, OIG investigative staff continued to identify
and pursue cases of fraud in student financial assistance programs. Summaries of
our higher-profile investigative cases involving student financial aid fraud by school
officials, contractors, service providers and students are highlighted below.



                                          14
Federal Student Aid Operations
Federal Student Aid’s Performance as a Performance-Based
Organization
In 1998, Congress amended the HEA to create a PBO to manage and administer the
student financial assistance programs authorized under Title IV of the HEA. FSA
was designated as the PBO, and with that designation came specific, measurable
goals and objectives: improve service to students and other participants in the
student financial assistance programs; reduce the cost of
administering the programs; increase the accountability of
responsible officials; provide greater flexibility in
management of operational functions; integrate information
systems; implement an open, common, integrated delivery
system; and develop and maintain a system that contains
complete, accurate, and timely data to insure program
integrity. FSA was also required to produce reports to inform
Congress and the public of its progress in achieving those
goals and objectives, including a 5-year performance plan
with specific goals and objectives, and an annual report that
describes the results in achieving those goals and objectives.
During this reporting period, we concluded an audit that
sought to determine whether FSA was meeting its
responsibilities as a PBO in three key areas: planning and reporting; systems
integration; and cost reduction. We found that FSA was not completely fulfilling its
responsibilities in these areas.

First, FSA’s planning and reporting processes were not always effective or efficient.
FSA did not issue its first 5-year performance plan until 2004—6 years after it
became a PBO, and none of the strategic objectives included in the plan were
measurable or quantifiable. Our review of its FY 2006-2010 plan noted some
improvements over its previous 5-year plan that would enable FSA to measure its
success in achieving identified goals. For its annual reports, we found that the
reports did not always meet the requirements of the law, specifically they did not
clearly indicate to what extent the PBO met the 5-year plan goals and objectives; did
not provide required performance results; did not include evaluation ratings of the
performance of the PBO’s senior management staff, including the amounts of the
bonus compensation awarded to these individuals; and did not include
recommendations for legislative and regulatory changes. We also noted that the
annual report format changed each year, making it difficult to assess progress from
one year to the next, and that the statements made in the reports tended to be broad
in nature, making it difficult to determine exactly where FSA was in achieving its
goals. Although not required by statute, FSA developed an annual performance plan
that provided a more detailed discussion of procedures it would take to complete the
goals identified in its 5-year plan, which feeds into the annual report and the 5-year
plan. We found, however, a weak correlation between the documents and
accomplishments mentioned in the reports did not always correlate to stated
quantitative success measures or goals. As a result, FSA has not clearly informed



                                         15
Congress, the Secretary, or the public about its progress toward achieving its
purposes as a PBO.

Second, in reviewing its systems integration—an important purpose for FSA’s
creation as a PBO—our audit revealed that FSA had not made significant progress
in completing activities designed to integrate its student financial assistance
systems. We found that the development of two out of three major systems
integration initiatives, which FSA planned to complete by 2008, were canceled for
reasons that included poor contractor performance and a lack of contractor
accountability, contractor difficulties in managing subcontractors which led to a lack
of coordinated effort and a failure to understand the complexities of the assignment,
and an overall failure of its integration efforts. As a result, FSA has been unable to
realize the expected benefits of systems integration.

                   Third, we found that FSA’s progress towards the reduction of
                   program administration costs is uncertain. FSA did not establish
                   measurable strategic goals in the area of cost reduction until its
                   first 5-year plan, with measures to be reported in FY 2008. We
                   also found that anticipated cost savings from three of four major
                   system initiatives identified in FY 2004-2006 Annual Reports
                   were not expected until FY 2008 and beyond. Those results were
                   not available during our audit. In addition, FSA does not plan to
                   report on individual progress toward anticipated cost reduction by
                   initiative, limiting the ability to determine whether planned
                   savings were actually achieved. Further, we found that the scope
                   of work for two of the four system initiatives was significantly
                   reduced, and separate acquisitions of unknown cost are planned to
                   complete these initiatives. The transition of the third initiative
                   has been delayed, causing FSA to incur unexpected costs. Because
                   of the limitations noted, it is difficult to determine FSA’s progress
                   in reducing its costs. As a result, Congress, the Secretary, and the
public cannot determine whether FSA has reduced its program costs since becoming
a PBO in 1998. Based on our findings, we made 14 recommendations aimed at
correcting the weaknesses identified. FSA agreed with many of our comments and
provided an action plan to address each of our recommendations. Click here for a
copy of the report, along with the Department’s comments and corrective action
plan: http://www.ed.gov/about/offices/list/oig/auditreports/fy2009/a19h0008.pdf


Title IV Program Participants
Program Reviews Conducted Following OIG Inspection Identify
More Than $33 Million in Potential Recoveries
In September 2007, we issued an inspection report titled, Review of Federal Student
Aid’s Monitoring of Guaranty Agency Compliance with the Establishment of the
Federal Fund and the Operating Fund that evaluated the adequacy of FSA’s support
for its conclusions concerning the establishment of the Federal Fund and the
Operating Fund at 27 guaranty agencies not audited by the OIG. The inspection
was a follow-up to a 2003 audit that recommended FSA perform additional work at

                                          16
guaranty agencies not audited by the OIG. The inspection found that the work
performed by FSA on the 27 guaranty agencies not audited by OIG provided no
assurance that the Federal and Operating Funds were established in compliance
with the HEA. As part of its corrective action for our 2007 inspection report, during
this reporting period, FSA completed program reviews at 22 guaranty agencies.
These program reviews identified more than $33 million in potential recoveries to
the Federal Fund.

Fifth Third Bank
Fifth Third Bank is an eligible lender in the FFEL program. As an eligible lender,
Fifth Third Bank was able into enter into trust arrangements with other entities in
order to allow those other entities to originate or purchase student loans. Under
these agreements, Fifth Third Bank is referred to as an Eligible Lender Trustee
(ELT). Under the HEA, a lender could be disqualified from participation in the
FFEL programs if it offers points, premiums, payments, or other inducements to any
educational institution or individual in order to secure applications for loans. In
January, we issued an audit to determine whether Fifth Third Bank, as the ELT in
agreements with other entities, adhered to the prohibitions on inducements specified
in the HEA. We also assessed Fifth Third Bank’s monitoring activities for ensuring
that entities with which it had ELT agreements, adhered to
applicable requirements of the FFEL program. Our audit
covered Fifth Third Bank’s ELT agreements with other
entities that originated or held FFELs under the associated
lender identification numbers from July 1, 2006, to
June 30, 2007. At that time, Fifth Third Bank had 15 ELT
agreements with other entities. Between July 1, 2004, and
August 30, 2007, more than $13 billion in FFEL loans were
originated under Fifth Third Bank’s ELT agreements.

The audit found that Fifth Third Bank, as the ELT in
agreements with other entities, violated the lender
inducement provision of the HEA. Specifically, Fifth Third
Bank and Student Loan Xpress, Inc. (SLX) had jointly
entered into separate ELT agreements with three entities:
MSA Solution, Inc. (MSA), Pacific Loan Processing, Inc.
(PLP), and Law School Financial (LSF). The ELT
agreements specified that SLX (a named party to the trust)
would pay a premium (inducement) to the other entity
named in the trust (i.e., MSA, PLP, LSF) for loans originated under the ELT
agreement based on the loan principal. In addition to this violation of HEA’s
prohibition, we also found that Fifth Third Bank needed to improve its policies and
procedures for monitoring its ELT agreements. Fifth Third Bank did not have
written policies and procedures for evaluating the entities and monitoring their
activities, nor did it maintain adequate documentation of its evaluation and
monitoring efforts.

Based on our findings, we recommended that FSA terminate Fifth Third Bank’s
participation in the FFEL program under the three ELT agreements and take other

                                          17
appropriate action to address Fifth Third Bank’s violation of the inducement
provision, which could range from assessing a fine to terminating the Federal
reinsurance on the more than $3 billion of FFELs originated under the agreements.
We also recommended that Fifth Third Bank be required to implement written
procedures or maintain other records on the initial evaluations and the continual
monitoring of entities with which it has ELT agreements, and maintain the records
in a central location. In addition, we recommended that FSA cease entering into
new FFEL participation agreements with Fifth Third Bank for ELT agreements
until Fifth Third Bank has implemented corrective action. Fifth Third Bank
disagreed with our findings and recommendations. FSA and Fifth Third Bank
entered into a settlement agreement to resolve the audit. Under the terms of the
agreement Fifth Third Bank repaid $5 million and an additional $82,500 in fines, as
well as other required corrective actions by Fifth Third Bank. Click here for a copy
of the report:
http://www.ed.gov/about/offices/list/oig/auditreports/fy2009/a09h0017.pdf

Touro College
We conducted an audit at Touro College to determine whether the school complied
with the HEA and regulations governing institutional and program eligibility.
Touro College is a private, not-for-profit institution of higher and professional
education located in New York, and operates 31 additional locations in New York, 4
locations in California and Nevada, 1 location in Florida, and 4 additional locations
in Israel, Germany, and Russia. Touro also operates an online distance education
program. In 1999, FSA granted a provisional Program Participation Agreement
(PPA) to Touro College after an FSA program review found several deficiencies.
When the provisional PPA expired
in 2001, FSA placed Touro in a
“month-to-month” extension of its
provisional certification status,
which was in effect until April 20,
2008. During our audit period,
while under a month-to-month
extension of its provisional
certification status, Touro received
nearly $336 million in Title IV
funds.

Our audit found that Touro College
did not fully comply with Title IV
institutional and program
eligibility requirements.
Specifically, it disbursed more than
$36 million in Title IV funds to
4,310 students who attended 9
ineligible additional locations that FSA had not approved as eligible to participate in
the Title IV programs; and disbursed more than $17 million to 1,927 students who
attended Touro University International (TUI), which the school reported to FSA as
an additional location. FSA, however, did not consider TUI an additional location


                                          18
because its students did not physically attend classes at the address listed for the
campus; and for award years 2002-2003 through 2004-2005, the school did not keep
adequate records to account for Title IV funds disbursements to only eligible
additional locations. Based on our findings, we made several recommendations,
including that Touro College determine the exact amount of Title IV funds disbursed
to students attending ineligible locations and return the amount improperly
awarded, which we estimated to be more than $36 million. Touro College did not
concur with all of our findings or recommendations. Click here for a copy of the
report: http://www.ed.gov/about/offices/list/oig/auditreports/fy2009/a02h0008.pdf

Walden University
The Department’s Central Processing System (CPS) receives and processes student
financial assistance applications and correction information and initiates the process
of determining the applicant's eligibility for aid. CPS generates and sends reports to
the student applicant and the postsecondary institutions that are listed on the
student's Free Application for Federal Student Aid (FAFSA). The reports contain
comment codes that point out possible missing or inconsistent data that could
indicate that a student is ineligible to receive student Federal assistance. For
example, data could indicate ineligibility based on student aid overpayments, non-
citizenship, and non-registration for Selective Service, drug convictions, or loan
                                             limits. Institutions are required to resolve
                                             these comment codes before disbursing
                                             Federal student financial assistance.
                                             Institutions must develop and apply an
                                             adequate system to identify and resolve
                                             discrepancies in the information that the
                                             institution receives from different sources
                                             with respect to a student’s application for
                                             financial aid. During this reporting
                                             period, we conducted an audit to
                                             determine whether Walden University
                                             resolved comment codes in compliance
                                             with regulations and Department
                                             guidance for the 2005-2006 award year.

Walden University is a private, for-profit, distance learning institution
headquartered in Minneapolis, Minnesota, that provides 100 percent of its courses
online to more than 24,000 students. During the 2005-2006 award year, Walden
disbursed more than $229 million in Title IV funds. Our audit found that Walden
University did not always resolve comment codes returned to the school during the
processing of student FAFSAs in compliance with regulations and the Department’s
guidance. Specifically, it did not adequately resolve all comment codes generated by
CPS after unsuccessful database matches with other Federal agencies and did not
adequately resolve comment codes generated after a match with the National
Student Loan Data System indicated that students were approaching or had
exceeded aggregate loan limits. As a result, the school disbursed nearly $1.2 million
in unallowable Title IV funds. These funds were unallowable because the



                                           19
University did not resolve all comment codes as required to document students’
eligibility.

Based on our findings, we made a number of recommendations, including that
Walden University return to lenders and the Department the outstanding amounts
it improperly paid to ineligible students and review its files for the 2004-2005 and
2006-2007 award years to determine whether other improper payments were made
and return any amount identified. The school agreed in part and disagreed in part
with our findings and recommendations. Click here for a copy of the report:
http://www.ed.gov/about/offices/list/oig/auditreports/fy2009/a05h0018.pdf


Investigations
Identifying and investigating fraud and abuse in the student financial assistance
programs have always been a top OIG priority. The following are summaries of
some of our more significant cases of student financial assistance fraud conducted
over the last 6 months involving school officials, contractors, service providers, and
individuals.

School Officials
       California: California Business Institute
       The former owner and a former financial aid officer of California Business
       Institute (CBI) and the former owner of the Mesa Institute were sentenced in
       U.S. District Court, Central District of California, for their roles in a
       multimillion dollar fraud scheme. The former owner of CBI was sentenced to
                                        3 years of probation; the former CBI financial
                                        aid officer was sentenced to 5 years of
                                        probation; and the former owner of the Mesa
                                        Institute was sentenced to 3 years of
                                        probation. All three were ordered to pay $2.9
                                        million in restitution, both jointly and
                                        severable. The sentences are a result of our
                                        investigation, which revealed that the
                                        officials entered into an agreement whereby
                                        CBI, a school eligible to participate in Title
                                        IV programs, allowed student financial
                                        assistance applications from the Mesa
                                        Institute, a school ineligible to participate in
                                        Title IV programs, to be processed through
                                        CBI. As a result, Mesa collected more than
                                        $700,000 for ineligible students. The scheme
                                        also involved a third school, United
                                        Education Computer College, which collected
       more than $2.1 million for ineligible students.

       New York: Empire Education Group
       A former New York City-based admissions representative of the Empire
       Education Group pled guilty in U.S. District Court, Southern District of New

                                           20
York, to charges of embezzlement. The plea is a result of our investigation
which found that the former employee assisted students in obtaining
fraudulent General Equivalency Diplomas and high school diplomas in order
to register for classes at Empire Beauty School in New York City, in exchange
for money. As a result of her fraudulent efforts, the students received
approximately $173,000 in Federal financial aid to which they were not
entitled.

New York: Touro College
The former Computer Center Director for Touro College pled guilty in the
Supreme Court of the State of New York to charges related to his role in a
fraudulent transcript scheme. The former official admitted to fraudulently
changing student grades, providing transcripts to students who never
attended the school, and forging a letter of recommendation for another
individual in exchange for money. Another individual pled guilty to falsifying
business records and commercial bribery relating to, among other things,
obtaining an academic transcript that falsely indicated he had a degree from
Touro College in physical therapy, which he used in an attempt to obtain a
state certificate as a licensed physical therapist. The man referred two other
individuals to a Touro official for college transcripts and later received a
portion of the bribe. A third individual was sentenced to 5 days of community
service for attempting to obtain a Touro transcript that would falsely reflect
that she participated in Touro’s Nursing program. To date, 15 individuals
have been indicted, of which 7 have been sentenced for their roles in this
scheme. These actions are a result of our investigation with the New York
Police Department and the Manhattan District Attorney’s Office.

Pennsylvania: CSC Institute
The former owner of the CSC Institute was sentenced in U.S. District Court,
Eastern District of Pennsylvania, to 21 months in prison, 3 years of
supervised release, and was
ordered to pay more than
$3.4 million in restitution for
student aid fraud. The
sentence is a result of our
investigation which revealed
that from 1998 through
February 2005, the former
owner and his wife (a former
co-owner of CSC who was
previously sentenced)
engaged in a scheme to
defraud the Department of
student financial assistance
funds through the use of
falsified attendance records,
student tests, and student ledger cards in order to receive Pell Grants. The
individual fraudulently submitted these documents to the Department and


                                  21
     CSC Institute’s independent financial/compliance auditor and accreditation
     agency in order to continue and cover up the scheme. As a result of the
     fraud, CSC Institute received approximately $13 million in Pell Grant funds
     to which it was not entitled, of which the former co-owner and her co-
     conspirator personally received approximately $3.4 million.

     Pennsylvania: Harrison Career Institute
     The former President, Director of Internal Audit, and Director of Financial
     Aid at the Harrison Career Institute pled guilty in U.S. District Court,
     Eastern District of Pennsylvania, to charges related to conspiracy to commit
     student financial aid fraud. From 2000 through 2003, the school’s
     independent auditor found instances of noncompliance by the school,
     specifically findings of late refunds for award years 2000, 2001, and 2002.
     The Department advised school officials that repeat findings of
     noncompliance could lead to adverse administrative actions, including fines,
     or a limit, suspension, or termination of the school’s eligibility to receive
     Federal student financial aid funds. Our investigation determined that from
                                           2001 to 2005, the officials fabricated false
                                           Department records and tax documents
                                           and falsified student records without the
                                           students’ knowledge and consent in order
                                           to make them appear eligible for Federal
                                           financial aid and to make the student files
                                           appear to be in compliance with Federal
                                           regulations when they were not. This was
                                           done to prevent the school’s independent
                                           auditor and the Department’s Program
                                           Review staff from detecting widespread
                                           deficiencies in the school’s student
                                           Federal financial aid processes.

                                          Tennessee: EZP’s College of
                                          Barbering
                                          The former operator of EZP’s College of
                                          Barbering (EZP) pled guilty in U.S.
     District Court, Eastern District of Tennessee, to charges of identity theft and
     student aid fraud. Our investigation found that from 2006-2007, the former
     operator falsely obtained loans in the names of EZP students without their
     permission. He submitted false applications for student loans using the
     names of EZP students and used the social security numbers of students to
     obtain loans in their names. As a result of his fraudulent efforts, the
     operator received more than $100,000, which he used for his own use and
     benefit.

Contractors
     Florida: H.W. Ketchum Collection Agency
     The former owner of the H.W. Ketchum Collection Agency was sentenced in
     U.S. District Court, Middle District of Florida, to 1 year and 1 day in prison,

                                         22
     3 years of supervised release, and was ordered to pay more than $115,300 in
     restitution for theft. The sentence is a result of our investigative efforts,
     conducted jointly with the FBI, after Mississippi State University officials
     reported that they suspected that the company was not reporting and
     remitting delinquent Perkins loan funds collected on behalf of the school.
     Our investigation revealed that the former owner collected more than
     $359,000 in defaulted loan funds between 2006 and 2007 but remitted only
     approximately $230,300 to the school after assessing approximately $14,000
     in fees and converting more than $115,300 for her personal use.

Service Providers
     Missouri: National College Funding
     The owner of National College Funding, which prepared tax returns and
     helped parents obtain college funding for their children, was sentenced in
     U.S. District Court, Western District of Missouri, to 5 years of probation, 6
     months in a halfway house, 6 months of home confinement and was ordered
     to pay $6,500 in restitution for charges related to student aid fraud. The
     sentence is a result of our investigation which found that the owner prepared
     and submitted fraudulent Federal income tax returns to the IRS on behalf of
     his clients. The returns contained false material items that resulted in the
     clients’ Adjusted Gross Income (AGI) being substantially reduced. In many
     cases, the lower AGI allowed the owner’s clients to receive Pell Grants for
     their children for which they would not have otherwise qualified. From 1999-
     2003 the former owner submitted approximately 622 FAFSAs for processing.
     His clients received more than $447,000 in Pell Grant funds during that time.

Individuals
     California Student Sentenced for Identity Theft and Fraud
     A former student was sentenced in U.S. District Court, Central District of
     California, to 12 months and 1 day in prison, 3 years of probation, and was
     ordered to pay more than $40,000 in restitution for fraud and student
     financial aid fraud. Our investigation revealed that the former student
                        applied for and received several different social security
                        numbers, which he used to apply for loans to attend several
                        colleges in the Southern California area. As a result of his
                        fraudulent efforts, he received more than $78,000 to which
                        he was not entitled.

                       Illinois Man Sentenced for Foreign School Fraud
                       A man was sentenced in U.S. District Court, Northern
                       District of Illinois, to 21 months in prison, 3 years of
                       supervised release, and was ordered to pay more than
                       $205,000 in restitution for devising and participating in a
                       scheme to obtain guaranteed Federal student loans for his
                       and another individual’s purported attendance at foreign
     schools in Canada and Sweden. Neither individual attended the schools.
     Our investigation found that the man created false financial aid documents


                                        23
     and fraudulent certification forms and submitted those forms in order to
     receive Federal financial aid funds to which the two were not entitled.

     Ohio Woman Sentenced for Fraud
     A woman was sentenced in U.S. District Court, Northern District of Ohio, to
     18 months in prison, 3 years of supervised released, and was ordered to pay
     nearly $109,000 in restitution for student financial aid fraud. The sentence
     is a result of our investigation that revealed that the woman applied for
     admission to Lakeland Community College on behalf of friends and family,
     then fraudulently applied for student financial assistance on behalf of these
     individuals, who for the most part, had no intention of attending the school.
     When these individuals did not show up for classes, the school refunded the
     unused loan amounts to them by check, which they in turn shared with the
     woman. As a result of her fraudulent efforts, the woman received
     approximately $109,000 in student financial assistance, most of which she
     used for her own personal use.

     South Carolina Woman Featured on America’s Most Wanted Sentenced
     for Fraud
     A woman was sentenced in U.S. District Court, District of South Carolina, to
     51 months in prison, 3 years of supervised release, and was ordered to pay
     nearly $126,000 in restitution for 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 more than
     $100,000 in student 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.

Settlements
     New Jersey: Merit Technical Institute
     The U.S. Attorney’s Office in New Jersey reached a $100,000 settlement with
     the former owner and operator of the Merit Technical Institute. The
     settlement is a result of our investigation which revealed that the former
     owner fraudulently received more than $209,000 in FFEL funds on behalf of
     students who were enrolled in courses that were ineligible for FFEL funding.
     To conceal the fraud, the owner submitted false documents, including
     transcripts and attendance reports to give the false impression that the
     students were enrolled in eligible programs. In 2006, the former owner was
     sentenced to prison for embezzling approximately $392,000 in Department
     and U.S. Department of Labor funds.

     Texas: Westwood Colleges
     The U.S. Attorney's Office for the Northern District of Texas reached a $7
     million settlement with Alta Colleges, Inc. d/b/a Westwood Colleges. The
     settlement is a result of our investigation which revealed that school officials
     made false representations regarding state licensure and placement reports,

                                        24
           because they marketed and sold educational programs that they knew did not
           meet state licensing requirements in order to operate in the state and
           participate in a number of student financial aid programs. The wrongdoing
           allowed three of the school’s campuses in Texas to continue to offer and
           receive Federal student assistance for ineligible programs.


FINANCIAL MANAGEMENT AND OTHER
INTERNAL OPERATIONS
OIG’s reviews of the Department’s financial management and other internal
operations are designed to help improve the overall operation of this mission-focused
agency. Over the last 6 months, OIG provided oversight of the performance of the
008 financial statement audits where the Department and FSA received clean audit
opinions. The audits, however, did reveal that a renewed focus is warranted
regarding credit reform estimates and financial reporting and noted repeated control
weaknesses within IT security and systems. In addition, OIG completed work on a
                                   congressional request related to internal
                                   operations. You will find more on these reviews
                                   below.


                                                Financial Management
                                                Financial Statement Audits
                                      In November, we transmitted the final audit
                                      reports covering the Department’s and FSA’s FY
                                      2008 comparative financial statements and the
                                      Department’s FY 2008 special-purpose financial
                                      statements. Ernst & Young, LLP, Certified
                                      Public Accountants (E&Y), conducted the audits,
and we performed oversight and monitoring procedures considered necessary to
provide negative assurance that E&Y conducted the audits in accordance with
standards. The Department and FSA each earned an unqualified or “clean” opinion
on their respective comparative financial statements. The audits covering the
Department’s and FSA’s comparative financial statements, however, identified two
significant deficiencies. First, the audits found that the controls over credit reform
estimation and financial reporting could be strengthened by continuing to improve
the analytical tools used for the loan program cost estimation process, ensuring that
the tools reconcile with one another, continuing efforts to more fully implement
cohort reporting 1 and analysis, and documenting, in detail, the consideration and
ultimate resolution of scenarios under which deviation from patterns of prior cash
flows may be appropriate in developing credit reform estimates. Second, the audits
found that controls surrounding information systems needed enhancement. The
audits found numerous control weaknesses within IT security and systems
indicating, among other things, the need to address the root causes of security or


1
    A grouping of individual loans by fiscal year of origination.

                                                        25
control weaknesses uniformly across the organization. Both of the significant
deficiencies were repeat findings from the FY 2007 audit.

The Department also earned an unqualified opinion on its special-purpose financial
statements, and the auditor's report disclosed no material weaknesses in internal
control over the financial reporting process for these statements and no instances of
noncompliance with Treasury Financial Manual Chapter 4700 requirements.

Drug Control Funds
As required by Section 1704(d) of Title 21, U.S. Code, and in accordance with the
Office of National Drug Control Policy Circular, Drug Control Accounting, we
authenticated the Department’s accounting of FY 2008 drug control funds and
related performance data by expressing a conclusion on the reliability of each
assertion made in the Department’s accounting and performance reports. Based
upon our review, nothing came to our attention that caused us to believe that
management’s assertions contained in the Department’s detailed accounting and
performance reports were not fairly stated in all material respects.


Other Internal Operations
Updated Report on OIG Recommendations Not Yet
Implemented
At the request of Chairman Waxman of the U.S. House of Representatives
Committee on Oversight and Government Reform, OIG completed a review of those
OIG audit/inspection recommendations made between FY 2001-2008 not yet
implemented by the Department. This was a follow-up to the Chairman’s 2007
request made to all IG offices seeking this information for FYs 2001-2007. The
Committee’s initial request asked for substantial information on each report’s
objectives, findings, and unimplemented recommendations, so OIG focused its
response on internal audits of the Department for which such detailed information
was available. Because the Committee’s follow-up request did not require such
detailed information, we included a summary of open recommendations from both
our internal and external audits.

For the time period requested, a total of 271 internal audits were issued. Of those,
34 audits were reported as resolved and 8 audits were reported as unresolved. The
42 resolved and open audits included a total of 379 recommendations, 190 of which
had not yet been implemented. As requested by the Committee, we estimated that
the potential monetary benefits the Department would save by implementing those
190 recommendations to be $799,500. A total of 298 external audits were issued
over the time period requested. Of those, 116 audits with 659 recommendations
were reported as resolved, and 59 audits with 449 recommendations were reported
as open. We estimated that the potential monetary benefits the Department would
save by implementing those 449 recommendations would be more than $882 million.
Click here for a copy of the report:
http://www.ed.gov/about/offices/list/oig/misc/notyetimplemented20012008.pdf




                                          26
OTHER NOTEWORTHY EFFORTS
Non-Federal Audits
Quality Control Reviews
The Single Audit Act of 1984, as amended, requires entities, such as state and local
governments, 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 Federal Government with assurance that recipients of Federal
funds comply with laws and regulations, as well as any particular provisions that
are tied with the specific funding. The recipients use an independent external
source (e.g., a Certified Public Accountant) to 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 Federal education funds they receive. The 0OIG Non-Federal
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. We provide input to OMB relating to the Education programs covered
in the annual Single Audit Compliance Supplement, used by auditors in performing
single audits. To help assess the quality of the thousands of single audits that the
Department receives each year, OIG’s Non-Federal Audit Team conducts quality
control reviews (QCRs) by reviewing a sampling of audits each year. During this
reporting period, we completed 42 QCRs of audits conducted by 37 different
independent public accountants, or offices of firms with multiple offices. We
concluded that 12 (29 percent) were acceptable or acceptable with minor issues, 27
(64 percent) were technically deficient, and 3 (7 percent) were substandard.


Council of the Inspectors General on
Integrity and Efficiency
Financial Statement Audit Conference
On March 24, the Council of the Inspectors General
on Integrity and Efficiency and GAO held the annual
Financial Statement Audit Conference—a free
training program for IG, GAO, and independent
public accountants (IPAs) tasked with conducting and
coordinating annual financial statement audits. The
training covered current issues related to the annual
financial statement audits and standards, as well as new issues, such as oversight of
ARRA program funding, revisions to the Federal Information Security Controls
Audit Manual, and updated information from the Federal Accounting Standards
Advisory Board. OIG Financial Statement Audit Director Greg Spencer chaired the
conference planning committee and OIG Non-Federal Audit Team Director Hugh
Monaghan was a featured speaker on the implications of the ARRA on audits of
Federal agencies, recipients, and subrecipients. More than 350 individuals from the
Federal and IPA auditing communities attended the conference.


                                         27
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 6(b)(2)                Summary of Instances where Information
                                        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 October 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




                                                    28
 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)

FSA
 A09G0012 Department’s Oversight of 8/23/2007 10/10/2007                       1         3      9/30/2009
          the FAFSA Verification
          Process (SAR 55, page 27)
 A11H0001 FY 2007 System Security     9/27/2007 11/20/2007                     1         67     12/31/2009
          Review of the COD System
          (Office of the Chief
          Information Officer also
          designated as an action
          official) (SAR 55, page 28)
 A17H0004 Final Audit Reports         11/15/2007 1/14/2008                     1         4      6/30/2009
          Financial Statement Audits
          for FY 2007 and FY 2006
          for FSA and the
          Department (Office of the
          Chief Financial Officer
          also designated as an
          action official) (SAR 56,
          page 25)
Office of the Chief Financial Officer (OCFO)
 A19F0025    Controls Over Excessive   12/18/2006   9/28/2007                  2         7      12/31/2009
             Cash Drawdowns by
             Grantee (SAR 54, page 30)
Office of the Chief Information Officer (OCIO)
 A11F0002 Review of the Department’s 10/6/2005      11/16/2005                 6         3      6/30/2009
          Incident Handling Program
          and EDNet Security Controls
          (OCIO designated as lead
          action official and OCFO
          and FSA as the other action
          officials). (SAR 52, page
          28)
 A11F0006 Audit of the Department’s   1/31/2006     5/25/2006                  4         0      9/15/2009
          IT Contingency Planning
          Program – Asset
          Classification (SAR 52,
          page 28)




                                                      29
  Report               Report Title               Date          Date           Total           Number of       Latest
  Number         (Prior SAR Number and           Issued       Resolved       Monetary       Recommendations    Target
                          Page)                                              Findings       Open Completed      Date
                                                                                                              (Per Corrective
                                                                                                               Action Plan)

 A11G0002 System Security Review of            9/28/2006      4/9/2007                       5        9       6/30/2009
          the Education Data Center
          FY 2006 (SAR 53, page
          25)
 A11G0004 Department’s Online                  9/29/2006     11/17/2006                      1        1       6/30/2009
          Privacy Policy and
          Protection of Sensitive
          Information Review
          (Office of the Under
          Secretary (OUS) also
          designated as an action
          official) (SAR 53, page 25)

A19F0009       Telecommunications               2/1/2006      3/22/2006                      0        7             *
               Billing Accuracy (SAR 52,
               page 28)
Office of the Deputy Secretary (ODS)
A09E0014       Departmental Actions to         10/26/2004 1/10/2005                          0        6             *
               Ensure Charter Schools’
               Access to Title I and IDEA
               Part B Funds (Office of
               Elementary and Secondary
               Education and Office of
               Special and Rehabilitative
               Services (OSERS) also
               designated as action
               officials) (SAR 50, page
               22)
Office of Elementary and Secondary Education (OESE)
A07F0014       Department’s Activities   12/29/2005 7/10/2007                                0        4             *
               Relating to Consolidating
               Funds in Schoolwide
               Programs Provisions (SAR
               52, page 29)

Office of Management (OM)
 A19G0007 Audit of the Department’s 11/29/2006                1/8/2007                        1       7       6/30/2009
          FY 2005 IT Equipment
          Inventory (OCFO also
          designated as an action
          official) (SAR 54, page 32)
* Closure of audit was not completed in AARTS by the end of reporting period (3/31/2009).



                                                                30
Table 2: OIG Audit, Inspection, and Evaluation Reports on Department Programs and
Activities (October 1, 2008, through March 31, 2009)
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           Recomm-
                                                                                                                   endations
AUDIT REPORTS
FSA
A02H0008         Touro College’s Title IV, HEA Programs,         10/30/08       $36,026,364                            5
                 Institutional and Program Eligibility
A05H0018         Walden University’s Compliance with             1/21/09         $1,129,9702         $55,5032         10
                 Selected Regulations and Department
                 Guidance

A09H0017         Fifth Third Bank’s Eligible Lender Trustee       1/5/09         $5,000,0003                           5
                 Agreements’ Compliance with Lender
                 Provisions of the HEA and Monitoring of
                 Entities with Which It Has Agreements
A17I0002         Financial Statement Audits FY 2008 and          11/17/08                                              6
                 FY 2007 - FSA
                 (OCFO also designated as an action
                 official)
A19H0008         FSA’s Performance as a PBO (Report              12/11/08                                             14
                 addressed to OUS)
OCFO
A09H0019         Los Angeles Unified School District’s            12/2/08        $6,302,4061                          15
                 Procedures for Calculating and Remitting
                 Interest Earned on Federal Cash Advances
A09H0020         California Department of Education               3/9/09          $728,6511,4                         10
                 Advances of Federal Funding to Local
                 Educational Agencies
A17I0001         Financial Statement Audits FY 2008 and FY       11/14/08                                             6
                 2007 – U.S. Department of Education
                 (FSA also designated as an action official)
A17I0003         Financial Statement Audits for FY 2008 and      11/17/08                                            None
                 FY 2007 – U.S. Department of Education
                 Special Purpose Financial Statements

OESE
A04H0017         Puerto Rico Department of Education's            10/9/08         $456,625           $365,089         15
                 Administration of Title I Services Provided
                 to Private School Students
A05H0025         Harvey Public Schools District’s Use of         11/25/08         $33,7261           $283,367          9
                 Selected Department Grant Funds
                 (OSERS and OCFO also designated as
                 action officials)

                                                                    31
     Report                           Report Title                          Date           Questioned           Unsupported        Number
     Number                                                                Issued            Costs                 Costs           of
                                                                                                                                   Recomm-
                                                                                                                                   endations
OSERS
A02I0040             National Technical Institute for the Deaf             12/31/08                                                  None
                     Federal Education Funds Expenditures
ALTERNATIVE PRODUCTS*
OCFO
B07I0015             Review of Proposed Final FY 2005 Indirect             2/11/09                                                   None
                     Cost Rates (Attestation Report)
Office of Planning, Evaluation, and Policy Development
B19J0001         OIG Independent Report on the                             1/30/09                                                   None
                 Department’s Detailed Accounting of FY
                 2008 Drug Control Funds (Attestation
                 Report)
Office of Safe and Drug Free Schools
B19J0001             OIG Independent Report on the                         1/30/09                                                   None
                     Department’s Performance Summary Report
                     for FY 2009 (Attestation Report)
Totals                                                                                  $49,677,742               $703,959             95

Special Note: No inspection reports were issued during this SAR period.
1
    For purposes of this schedule, questioned costs may include other recommended recoveries. Please see footnotes 2 and 3
     in Table 4 for additional information regarding questioned and unsupported costs.
2
    Audit Report A05H0018 identified a total of $1,185,473 ($1,129,970 questioned costs and $55,503 unsupported costs) being due to the
    Department. As $912,430 of the $1,185,473 was recovered from the auditee during the audit, $273,043 remains to be recovered
    $1,185,473- $912,430).
3
    The $5,000,000 reported for ACN A09H0017 represents the amount determined to be owing to the Department and collected during this
    period in response to the audit recommendations, which recommended a range of possible corrective action. The Department also
    recovered an additional fine assessment in the amount of $82,500.
4
    Audit Report A09H0020 identified $13,000,000 in better use of funds.
*DESCRIPTION OF ALTERNATIVE PRODUCTS
Attestation reports convey the results of attestation engagements performed within the context of their stated scope and objective(s).
Attestation engagements can cover a broad range of financial and non-financial subjects and can be part of a financial audit or a
performance audit. They include the examination, review, or performance of agreed-upon procedures on a subject matter, or an assertion
about a subject matter and reporting on the results.
Interim audit memoranda/letters are used to notify Department management or the audited entity of a serious and urgent condition or
issue identified during an on-going audit assignment when there is a strong likelihood that waiting until the audit report’s issuance would
result in the loss of an opportunity to prevent or curtail significant harm to the Department’s interest. It is OIG policy to include interim
audit memoranda in our product count but not individually identify them in SAR Table 2, nor post them on the OIG Internet/Intranet
website due to their pre-decisional and interim nature.




                                                                             32
Table 3: Other OIG Reports on Department Programs and Activities
(October 1, 2008, through March 31, 2009)
Section 5(a)(6) of the IG Act, as amended, requires a listing of each report completed by OIG during the
reporting period.

Report Number                                                      Report Title                                                    Date
                                                                                                                                  Issued
OCFO
S14J0001               Final Report on the Osage County Interlocal Cooperative1                                                 11/14/08
                       (Special Project Report – OELA also designated action official)
S14J0002               Final Report on the Greasy Public School Dependent District1                                             11/14/08
                       (Special Project Report – OELA also designated action official)
OCIO
S11I0010               U.S. Department of Education, Office of Inspector General 2008 FISMA Submission2                          10/1/08
                       (Special Project Report – Report was addressed to OS)
OESE
L02J0003               Protection of Personally Identifiable Information in the State Assessment Process1 (Alert                 2/11/09
                       Memorandum State and Local No. 09-02 – OPEPD also designated action official)
Office of the Secretary
L02I0037     Greater Oversight of Camden City Public School District is Needed3                                                  1/30/09
             (Alert Memorandum – State and Local No. 09-01)
DESCRIPTION OF TABLE 3 PRODUCTS
1
    S14J0001 made one non-monetary recommendation.
    S14J0002 made one non-monetary recommendation.
    L02J0003 made two non-monetary recommendations.
2
    S11I0010 contains sensitive computer security related information and will be withheld from public disclosure under FOIA
    Exemption (b)(2).
3
    L02I0037 made six recommendations—three non-monetary and three monetary—identifying $82,286 of questioned costs,
    $236,005 of unsupported costs, and unspecified other recommended recoveries.

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.

Special projects are work that result in the issuance of a product or report that may not follow audit, inspection, or investigation
standards.




                                                                                33
Table 4: OIG Issued Audit,1 Inspection, and Evaluation Reports with Questioned Costs

Section 5(a)(8) of the IG Act, as amended, requires for each reporting period a statistical table showing the total number
of audit and inspection reports, the total dollar value of questioned and unsupported costs, and responding management
decision.
                                                                                          Questioned2        Unsupported 3
                                                                            Number            Costs               Costs
                                                                                 4                        4
A. For which no management decision has been made before the                  48             $818,083,344      $300,857,9474
      commencement of the reporting period (as adjusted):
B.      Which were issued during the reporting period:                                7                $50,381,701              $703,959


        Subtotals (A + B):                                                           55              $868,465,045        $301,561,906


C.      For which a management decision was made during the reporting                 5                $16,268,685          $5,240,654
        period:

              (i)     Dollar value of disallowed costs:                                                $16,056,257          $5,240,654

              (ii)    Dollar value of costs not disallowed:                                               $212,428                       $0



D.      For which no management decision has been made by the end of                 50              $852,196,360        $296,321,252
        the reporting period:


Special Note: No inspection reports were issued during this SAR period.
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
 Audit Report A06H0009 technically was resolved in a prior SAR period. As a result, the audit was deducted from the number
column and $4,178 was deducted from the beginning figures in the Unsupported Costs column.




                                                                   34
Table 5: OIG Issued Audit, Inspection, and Evaluation 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 and inspection 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:                                              1        $13,000,000

               Subtotals (A + B):                                                                          2       $13,327,577

C.             For which a management decision was made during the reporting period:                       0                    $0

                 (i)       Dollar value of recommendations that were agreed to by                          0                    $0
                          management:
                                                                                                           0
                 (ii)      Dollar value of recommendations that were not agreed to by                                           $0
                          management:

D.             For which no management decision has been made by the end of the                            2       $13,327,577
               reporting period:

Special Note: No inspection reports were issued during this SAR period.
1
 None of the audits reported in this table were performed by the Defense Contract Audit Agency.




                                                                          35
Table 6: Unresolved Reports Issued Prior to October 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
A02H0007        Technical Career Institutes, Inc.’s Administration of the   5/19/08        $6,458            13
                Federal Pell Grant and FFEL Programs (SAR 57, page
                25)
                Current Status: FSA informed us that it is currently
                working on the audit. AARTS shows FSA
                administrative stay extension was approved on
                3/3/2009.
OCFO
A05H0016        Saint Paul Public School’s Teacher Quality                  5/23/08      $124,646             7
                Enhancement Grant (OPE also designated as an                             See note 1
                action official) (SAR 57 , page 25)
                Current Status: AARTS shows OCFO administrative
                stay was approved on 3/10/2009.
A05I0009        Indiana State University’s Compliance with Selected         7/03/08      $337,077             3
                Provisions of Law and Regulations for the Upward
                Bound and Upward Bound Math-Science Programs
                (OUS also designated as an action official) (SAR 57,
                page 25)
                Current Status: OCFO informed us that it is working
                with the Office of General Counsel (OGC) to develop
                the program determination letter (PDL).
A06H0002        Review of Project GRAD USA’s Administration of              7/21/08     $31,384,603          11
                Fund for the Improvement of Education Grants (Office
                of Innovation and Improvement (OII) also designated
                as an action official) (SAR 57, page 26)
                Current Status: AARTS shows OCFO administrative
                stay was approved on 3/31/2009.
OESE
A04H0011        Puerto Rico Department of Education’s Administration        5/20/08      $189,011            10
                of Contracts Awarded to Excellence in Education, Inc.
                and the University of Puerto Rico's Cayey Campus
                (SAR 57, page 26)
                Current Status: OESE informed us a PDL is currently
                with OGC for review.
A05H0010        The School District of the City of Detroit’s Use of         7/18/08     $53,618,859          21
                Title I, Part A Funds Under the ESEA (SAR 57, page
                26)
                Current Status: OESE informed us that the PDL is
                clearing the “Internal Review Process.”

                                                                 36
  Report                         Report Title                            Date Issued Total Monetary Number of
  Number                (Prior SAR Number and Page)                                     Findings    Recommen-
                                                                                                      dations
A07H0017     St. Louis Public School District’s Use of Selected            9/29/08     $765,001        7
             Department Grant Funds (OSERS also designated as
             an action official) (SAR 57, page 26)
             Current Status: Both OESE and OSERS informed us
             that the PDL is with OGC for review.
Reported in Previous SARs
FSA
A02H0005     EDUTEC’s Administration of the Federal Pell Grant             9/27/07     $83,000         5
             Program (SAR 55, page 27)

             Current Status: FSA informed us it is currently
             working on this audit. AARTS shows FSA
             administrative stay extension was approved on
             12/24/2008.
A04B0015     Review of Cash Management and Student Financial               9/26/02     $997,313        7
             Assistance Refund Procedures at Bennett College
             (Office of Postsecondary Education (OPE) designated
             as collateral action official) (SAR 45, page 16)
             Current Status: FSA informed us that it expects to
             have this audit closed by 6/30/2009. The required
             documents for resolution are needed in AARTS before
             this audit is officially resolved.
A04B0019     Advanced Career Training Institute’s Administration of        9/25/03    $7,472,583      14
             the Title IV HEA Programs (SAR 47, page 13)

             Current Status: FSA informed us the audit was
             previously closed in the Department’s previous
             tracking system, Common Audit Resolution System.
             FSA will work on getting this audit closed in AARTS by
             6/30/2009. 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, page 14)
             Current Status: FSA informed us that it is still waiting
             on a 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, page 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 6/30/2009 in AARTS. The required
             documents for resolution are needed in AARTS before
             this audit is officially resolved.

                                                             37
  Report                       Report Title                           Date Issued Total Monetary Number of
  Number              (Prior SAR Number and Page)                                    Findings    Recommen-
                                                                                                   dations
A05G0017   Capella University’s Compliance with Selected                3/7/08      $589,892        9
           Provisions of the HEA and Corresponding Regulations
           (SAR 56, page 25)
           Current Status: FSA informed us that it is currently
           working on this audit.
A05G0029   Wilberforce University’s Administration of HEA,              3/21/08    $2,472,781      25
           Title IV Programs (SAR 56, page 25)
           Current Status: FSA informed us that it is currently
           working on this audit. AARTS shows FSA
           administrative stay extension was approved on
           3/23/2009.
A0670005   Professional Judgment at Yale University (SAR 36,            3/13/98      $5,469         3
           page 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, page17)
           Current Status: FSA informed us that it is still waiting
           on a policy decision to address and resolve this audit.
A06D0018   Audit of Saint Louis University’s Use of Professional        2/10/05    $1,458,584       6
           Judgment from June 2000 – June 2002 (SAR 50, page
           21)
           Current Status: FSA informed us that it is still waiting
           on a policy decision to address and resolve this audit.
A06H0010   Eagle Gate College’s Administration of Title IV HEA          9/28/07      $2,630         6
           Programs (SAR 55, page 27)
           Current Status: FSA informed us that it is currently
           working on this audit.
A0723545   State of Missouri, Single Audit Two Years Ended              4/1/93     $1,048,768      18
           6/30/1991
           Current Status: OIG did not receive a response from
           FSA on this audit during this reporting period. FSA
           previously informed us that 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: OIG did not receive a response from
           FSA on this audit during this reporting period. FSA
           previously informed us that 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 HEA Programs
           (SAR 50, page 21)
           Current Status: FSA informed us that it will work on
           getting this audit closed in AARTS by 6/30/2009.


                                                           38
   Report                       Report Title                           Date Issued Total Monetary Number of
   Number              (Prior SAR Number and Page)                                    Findings    Recommen-
                                                                                                    dations
N0690010    Inspection of Parks College’s Compliance with Student        2/9/00      $169,390        1
            Financial Assistance Requirements (SAR 40, page 18)

            Current Status: FSA will work on getting this audit
            closed in AARTS by 6/30/2009.
OCFO
A03F0010    The Education Leaders Council’s Drawdown and                 1/31/06     $760,570       12
            Expenditure of Federal Funds (OII also designated as
            an action official) (SAR 52, page 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 an action official)
            (SAR 50, page 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 an
            action official) (SAR 50, page 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 an action
            official) (SAR 50, page 22)
            Current Status: OCFO informed us that additional
            time is needed to continue to review and analyze data
            provided by the auditee.
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 an
            action official) (SAR 52, page 9)
            Current Status: OCFO informed us that the PDL was
            issued on 3/19/2009. The required documents needed
            for resolution of this audit were not in AARTS by
            3/31/2009.
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 (SAR 50, page 22)
            Current Status: OCFO informed us that the PDL was
            issued on 2/23/2009. The required documents needed
            for resolution of this audit were not in AARTS by
            3/31/2009.



                                                            39
  Report                       Report Title                          Date Issued Total Monetary Number of
  Number              (Prior SAR Number and Page)                                   Findings    Recommen-
                                                                                                  dations
OESE
A02G0002   Audit of New York State Education Department’s              11/3/06   $215,832,254      8
           Reading First Program (SAR 54, page 31)
           Current Status: OESE informed us that this audit is
           pending discussions with OIG.

A02G0020   Elizabeth Public School District Allowability of ESEA       10/9/07    $1,946,925      14
           Title I, Part A Expenditures (SAR 56, page. 25)
           Current Status: OESE informed us the PDL is
           currently with OGC for review.
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, page 31)
           Current Status: OESE informed us that its program
           team is addressing the on-going corrective actions.

A04G0012   Audit of Mississippi Department of Education’s              8/8/07     $3,192,395       4
           Emergency Impact Aid Program Controls and
           Compliance (SAR 55, page 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.
A04G0015   Audit of Georgia Department of Education’s                 10/30/07    $9,977,242       9
           Emergency Impact Aid Program Controls and
           Compliance (SAR 56, page 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.
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, page 28)
           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.
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, page 29)
           Current Status: A PDL was issued on 3/31/2009. The
           required documents needed for resolution of this audit
           were not in AARTS by 3/31/2009.


                                                          40
  Report                      Report Title                          Date Issued Total Monetary Number of
  Number             (Prior SAR Number and Page)                                   Findings    Recommen-
                                                                                                 dations
A05G0032   Ohio Department of Education’s Administration of its       1/8/08      $30,000         6
           Migrant Education Program (SAR 56, page 26)
           Current Status: A PDL was issued on 3/31/2009. The
           required documents needed for resolution of this audit
           were not in AARTS by 3/31/2009.
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, page 29)
           Current Status: OESE informed us the PDL is
           currently with OGC for review.
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, page 23)
           Current Status: OESE informed us this audit is
           pending its program team and OGC review of OIG
           workpapers.
A06F0016   Arkansas Department of Education’s Migrant                 8/22/06     $877,000        2
           Education Program (SAR 53, page 25)

           Current Status: OESE informed us that its program
           team is revising its determinations.

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, page
           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, page 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.
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, page 15)
           Current Status: OPE informed us that OPE and OGC
           are exploring the statute of limitations and related
           issues.


                                                          41
    Report                                Report Title                                Date Issued Total Monetary Number of
    Number                       (Prior SAR Number and Page)                                         Findings    Recommen-
                                                                                                                   dations
OSERS
A02B0014            Audit of the Puerto Rico Vocational Rehabilitation                   6/26/02          $15,800,000               5
                    Administration (SAR 45, page 18)
                    Current Status: OSERS informed us its staff is
                    working to resolve this matter in the next six months.
A02E0020            The Virgin Islands Department of Health’s                            9/28/05           See Note 2              17
                    Administration of the Infants and Toddlers Program
                    (SAR 51, page 28)
                    Current Status: OSERS informed us its staff is
                    working to resolve this matter.
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 (Report was
                    addressed to the Bureau of Indian Education,
                    Department of the Interior) (SAR 54, page 32)
                    Current Status: OSERS informed us its staff is
                    drafting the PDL.
Office of the Secretary (OS)
I13F0012            Review of Department Identified Contracts and Grants                  9/1/05               $0                   6
                    for Public Relations Services (SAR 51, page 30)
                    Current Status: AARTS shows the recommendations
                    as unresolved.
I13H0004            Inspection of Active Congressional Earmarks in                       9/25/07               $0                   1
                    FY 2005 (SAR 55, page 31)
                    Current Status: AARTS shows the recommendation as
                    resolved; however, it does not show the date the audit
                    was resolved.
OGC
I13H0005            Review of the Department’s Public Financial                          3/12/08               $0                   2
                    Disclosure Reports for Employees Responsible for
                    Oversight of the FFEL Program (SAR 56, page 26)
                    Current Status: AARTS shows the recommendations
                    as unresolved.
I13I0004            Inspection to Evaluate the Adequacy of the                           4/21/08               $0                   2
                    Department’s Procedures in Response to Section 306 of
                    the FY 2008 Appropriations Act – Maintenance of
                    Integrity and Ethical Values Within the Department
                    (Congressional Request, OGC designated as the action
                    official by OS) (SAR 57, page 27)
                    Current Status: AARTS shows the recommendations
                    as unresolved.
                                            Total                                                        $801,814,660             382
Note 1 - For Audit Report A05H0016, included in this $124,646 figure is $100,675 of questioned cost and $23,971 of monetary recoveries made
during audit.
Note 2 - We identified $327,577 in one-time better use of funds in Audit Report A02E0020.




                                                                            42
    Table 7: Statistical Profile: October 1, 2008, to March 31, 2009                                              Six-Month Period
                                                                                                                  Ending 3/31/2009
    OIG Audit Reports Issued                                                                                                       12
    Questioned Costs                                                                                                      $49,677,742
    Unsupported Costs                                                                                                        $703,959
    Recommendations for Better Use of Funds                                                                               $13,000,000
    Other OIG Products Issued
    (2 Attestation Reports, 3 Special Projects, 2 Alert Memoranda, and 1 Interim Alert Memorandum)                                    9
    OIG Audit Reports Resolved By Program Managers                                                                                 14
    Questioned Costs Sustained                                                                                            $10,815,603
    Unsupported Costs Sustained                                                                                            $5,240,654
    Additional Disallowances Identified by Program Managers                                                                $2,985,443
    Management Commitment to the Better Use of Funds                                                                               $0
    Investigative Case Activity
    Cases Opened                                                                                                                     70
    Cases Closed                                                                                                                     64
    Cases Active at the End of the Reporting Period                                                                                403
    Prosecutorial Decisions                                                                                                        136
       - Accepted                                                                                                                   59
       - Declined                                                                                                                   77
    Investigative Results
    Indictments/Informations                                                                                                         61
    Convictions/Pleas                                                                                                              69
    Fines Ordered                                                                                                             $13,764
    Restitution Payments Ordered                                                                                           $8,035,356
    Civil Settlements/Judgments (number)                                                                                            5
    Civil Settlements/Judgments (amount)                                                                                   $7,162,227
    Recoveries                                                                                                               $175,360
    Forfeitures/Seizures                                                                                                   $1,928,024
    Savings                                                                                                               $2,762,2191


1
  This figure does not include $4,726,668 in savings that was not reported in SAR 57. Our investigative efforts in connection with a
student loan consolidation company resulted in the reduction of the Department's Federal student loan special allowance fees and interest
costs which we estimate could be as much as $1,512,596 through June 31, 2008. The investigation also resulted in a reduction of the
Department's National Student Loan Data System usage costs, which provided an additional cost savings in the amount of $3,214,072 as of
August 31, 2008. The request, review, and analysis of voluminous data prevented this savings amount from being reported in SAR 57.




                                                                           43
U.S. Department of Education
Arne Duncan
Secretary

Office of Inspector General
Mary Mitchelson
Acting Inspector General

May 2009

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