oversight

Semiannual Report - October 1, 2009 - March 31, 2010

Published by the Department of Education, Office of Inspector General on 2010-03-31.

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

U.S. D E P A R T M E N T O F E D U C A T I O N




Inspector General’s Semiannual
Report to Congress, No. 60
October 1, 2009–March 31, 2010
Office of Inspector General
Kathleen S. Tighe
Inspector General


May 2010


This report is in the public domain. Authorization to reproduce it in whole or in part is granted.
While permission to reprint this publication is not necessary, the citation should be: U.S.
Department of Education, Office of Inspector General, Inspector General’s Semiannual Report
to Congress, No. 60, Washington, D.C., 2010



                 MISSION OF THE OFFICE OF INSPECTOR GENERAL

To promote the efficiency, effectiveness, and integrity of the Department's programs and
operations, we conduct independent and objective audits, investigations, inspections, and other
activities.


                                     VISION STATEMENT

   •   We are a continual learning and improving organization;
   •   We appreciate, challenge, respect, and honor our employees;
   •   We serve as a change agent to encourage fiscal integrity and continuous improvement in
       program delivery and program effectiveness; and
   •   We seek to achieve the highest level of customer satisfaction possible within our
       independent and objective role.



                                         PLEASE NOTE

The Inspector General’s Semiannual Report to Congress, No. 60 and reports discussed herein
are available on the ED/OIG Web site at http://www.ed.gov/about/offices/list/oig/index.html.
                       SEMIANNUAL REPORT TO CONGRESS, NO. 60



      MESSAGE FROM THE INSPECTOR GENERAL
On behalf 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, 2009, through March 31, 2010. The
audits, inspections, investigations, and related work highlighted in the report are
products of our continuing commitment to promoting accountability, efficiency, and
effectiveness in Federal education operations and programs.

Over the last 6 months, OIG issued 22 audits, 3 inspections, and 13 other reports. We
identified more than $167 million in financial recommendations. We also closed 58
investigations involving theft or other fraudulent use of Federal education funds,
securing more than $10.2 million in settlements, fines, restitutions, recoveries,
forfeitures/seizures, and savings.

Through our work, OIG helps the Department improve the management of its
programs and operations and ensure the protection of Department funds. Our
commitment to providing timely and effective oversight is particularly evidenced by
the initial results of our work related to the American Recovery and Reinvestment Act
of 2009 (Recovery Act). We have completed 10 reports under the first phase of our
work that assessed States’ and related agencies’ internal controls over Recovery Act
funds to ensure they provided reasonable assurance of compliance with applicable
laws, regulations, and guidance. The response to our efforts has been very positive,
with a number of State and local agencies taking immediate action to address our
findings and implement our recommendations. We have now initiated the second
phase of our Recovery Act efforts, which is examining use of funds by States and
subrecipients and the quality of the data reported. We expect to release the findings of
this work starting this summer. In addition, our criminal investigations relating to
Recovery Act fraud resulted in the referral of 18 cases for prosecution during the
reporting period.

We are continuing our focus on other key Federal education programs and operations,
including the student financial aid programs. In anticipation of legislative changes to
the Federal Family Education Loan Program, we concluded an audit of Federal
Student Aid’s (FSA) capacity for increasing the volume of loans made and serviced
under the William D. Ford Federal Direct Loan Program. We found that FSA had
estimated the impact of significant changes to the program, expanded its processing
systems, and awarded additional contracts to assist in servicing potential increases.
We did caution, however, that reliance on contractor support in key areas will require
effective monitoring practices and that FSA should test affected systems to ensure
they will perform adequately under increased processing requirements.

We made a number of recommendations related to education funds awarded to a State
educational agency (SEA), a local educational agency (LEA), and a grantee, and
brought to the Department’s attention our concerns regarding accrediting agency
requirements for evaluating credit hours and program length. We also had significant



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U.S. DEPARTMENT OF EDUCATION                              OFFICE OF INSPECTOR GENERAL
                      SEMIANNUAL REPORT TO CONGRESS, NO. 60



investigative results involving fraud in the student financial assistance program and
fraudulent activity within SEAs, LEAs, and their contractors.

In closing, I am honored to have been nominated and confirmed as the Inspector
General of this Department. I will draw on my experience in the Federal government
and the Inspector General community in leading this organization with its proven
record of accomplishment and exemplary work.

We greatly appreciate the interest and support of the Congress, Secretary Duncan, and
Deputy Secretary Miller. We look forward to working with you in meeting the
challenges and opportunities that lie ahead.




Kathleen S. Tighe
Inspector General




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U.S. DEPARTMENT OF EDUCATION                            OFFICE OF INSPECTOR GENERAL
                                                SEMIANNUAL REPORT TO CONGRESS, NO. 60



                                                   TABLE OF CONTENTS

EXECUTIVE SUMMARY ....................................................................................................................1

RECOVERY ACT EFFORTS ...............................................................................................................3
   Recovery Act Reports ............................................................................................................................... 3
        Internal Reports................................................................................................................................ 3
        External Reports .............................................................................................................................. 5
        Other External Reports .................................................................................................................. 12
   Other Activity ......................................................................................................................................... 13
   Investigation............................................................................................................................................ 13

ELEMENTARY AND SECONDARY EDUCATION PROGRAMS AND OPERATIONS ............................. 14
   Internal Operations.................................................................................................................................. 14
   Grantees and Subrecipients ..................................................................................................................... 15
         State Education Agency ................................................................................................................. 15
         Local Educational Agency ............................................................................................................. 15
         Other Grantee ................................................................................................................................. 16
   Investigations .......................................................................................................................................... 17
         School Officials ............................................................................................................................. 17
         Contractor ...................................................................................................................................... 20

FEDERAL STUDENT FINANCIAL ASSISTANCE PROGRAMS AND OPERATIONS ............................. 21
   Internal Operations.................................................................................................................................. 21
   Program Participants ............................................................................................................................... 22
      Accrediting Agencies .......................................................................................................................... 22
   OIG Testifies Before Congressional Subcommittee ............................................................................... 24
   Special Reports on ATB and High School Diploma Mills ..................................................................... 24
   Investigations .......................................................................................................................................... 26
         School Officials ............................................................................................................................. 26
         Fraud Ring ..................................................................................................................................... 27
         Contractors ..................................................................................................................................... 27
         Unauthorized Access to NSLDS .................................................................................................... 28
         Other Individuals ........................................................................................................................... 29

OTHER INTERNAL OPERATIONS ................................................................................................... 30
    Financial Management ........................................................................................................................... 30
    IT Security and Management ................................................................................................................. 31
    Other Reports ......................................................................................................................................... 31
    Non-Federal Audits ................................................................................................................................ 32
    Investigation........................................................................................................................................... 33

REQUIRED TABLES ........................................................................................................................ 35




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U.S. DEPARTMENT OF EDUCATION                                                                                       OFFICE OF INSPECTOR GENERAL
                       SEMIANNUAL REPORT TO CONGRESS, NO. 60



                       EXECUTIVE SUMMARY
We present the work OIG concluded during this reporting period in five sections: (1)
efforts associated with the American Recovery and Reinvestment Act of 2009
(Recovery Act); (2) elementary, secondary, and Indian education programs and
operations; (3) Federal student financial assistance programs and operations; (4) other
internal operations, including financial management and information technology (IT)
security and management; and (5) a compilation of tables of the audits, other reports,
and investigations we completed during this reporting period, as required by the
Inspector General Act of 1978, as amended (IG Act).

RECOVERY ACT EFFORTS
The Recovery Act’s increase in education funding requires 55 State and territorial
educational agencies (SEAs), more than 16,000 local educational agencies (LEAs),
and other entities to provide adequate oversight for those funds. During this reporting
period, we examined agencies’ internal controls i over Recovery Act funds in 7 States
and 1 territory. In almost all of our reviews, we found that the entities reviewed had
been proactive in their efforts to ensure the proper administration of Recovery Act
funds; however, we identified areas that could be improved. You will find more on
these reviews in the Recovery Act section of this report, along with summaries of four
additional reviews of other issues impacting the Department’s administration of the
Recovery Act.

ELEMENTARY, SECONDARY, AND INDIAN EDUCATION PROGRAMS AND
OPERATIONS
We concluded several reviews involving an SEA, LEA, and another grantee’s use of
Federal funds. This includes our audit of the Philadelphia School District, which
identified expenditures of more than $138 million in unallowable or inadequately
supported Federal education funds. We also examined the Department’s management
of the Indian Education Professional Development grant program, which identified
significant weaknesses, fostering an environment susceptible to fraud, waste, and
abuse. You will find more details on these reports, as well as summaries of
investigations involving theft or misuse of Federal education funds involving school
officials and contractors in this section of our report.

FEDERAL STUDENT FINANCIAL ASSISTANCE PROGRAMS AND OPERATIONS

The Federal student financial assistance programs have long been a major focus of our
audit, inspection, and investigative work. With more than 6,000 postsecondary
institutions, more than 2,900 lenders, and 35 guaranty agencies participating in the
program; $129.3 billion in student loans and other awards; and an outstanding loan
portfolio of more than $600 billion, accountability in these programs is critical.




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U.S. DEPARTMENT OF EDUCATION                             OFFICE OF INSPECTOR GENERAL
                      SEMIANNUAL REPORT TO CONGRESS, NO. 60



During this reporting period, we concluded an audit of the Federal Student Aid (FSA)
office’s capacity for increasing the volume of loans made and serviced under the
William D. Ford Federal Direct Loan (Direct Loan) Program, which found that FSA
had taken actions to prepare for the anticipated increase. We also examined several
issues that were recently discussed at the negotiated rulemaking session: (1)
reviewing whether accrediting agencies had appropriate standards for program length
and credit hours, standards we believe are critical to the proper awarding of Federal
student financial assistance; (2) improving certain provisions related to Ability-To-
Benefit test (ATB) processes to eliminate compromised or invalid ATB examinations;
and (3) the need for a clear definition of high school diploma as a condition for
awarding Federal student aid. You will find more on these efforts, as well as
summaries of our more significant investigative cases of fraud involving student
financial assistance program funds, in this section of this report.

FINANCIAL MANAGEMENT, IT SECURITY, AND OTHER INTERNAL
OPERATIONS

We have highlighted the audits and reviews we completed on the Department’s
financial management, IT security and management, and other internal operations.
For Fiscal Year (FY) 2009, the Department and FSA received an unqualified opinion
on their financial statements for the eighth year in a row. Although this
accomplishment is noteworthy, our work revealed a need for improvements in areas
related to financial reporting and IT security. We also provide summaries of the
results of our efforts to evaluate the Department’s implementation of its financial
disclosure procedures involving its contractors and subcontractors, an issue involving
the Department’s $500 million IT contract, and the results of our quality control
reviews of single audits of Department grantees.

REQUIRED TABLES

The final section of our report provides a compilation of tables of the audits,
inspections, other reports, and investigations we concluded over the last 6 months, as
required by the IG Act.

Copies of the reports discussed in this Semiannual Report to Congress are available on
the OIG Web site. For more information on our work and activities, please contact
the OIG Congressional Liaison at (202) 245-7023, or visit our Web site at
www.ed.gov/oig.




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U.S. DEPARTMENT OF EDUCATION                             OFFICE OF INSPECTOR GENERAL
                       SEMIANNUAL REPORT TO CONGRESS, NO. 60



                     RECOVERY ACT EFFORTS
The Recovery Act was signed into law on February 17, 2009, and provides
approximately $98.2 billion in new funding for Federal education programs and
operations, including programs authorized by the Elementary and Secondary
Education Act of 1965, as amended (ESEA), the Higher Education Act of 1965, as
amended (HEA), the Individuals with Disabilities Education Act of 2004, as amended
(IDEA), and the Rehabilitation Act of 1973.

As discussed in our last Semiannual Report to Congress, OIG staffs have been
working with Department leaders and our counterparts in the Government
Accountability Office (GAO) and other Federal agencies since the enactment of the
law to ensure that Recovery Act dollars reach the intended recipients and achieve the
intended results. During this reporting period, we continued to participate in an
advisory capacity on a number of Department and Office of Management and Budget
(OMB) Recovery Act work groups, maintained our seat on the Recovery
Accountability and Transparency Board (Recovery Board), participated in Recovery
Act work groups and projects organized by the Recovery Board, and continued to
provide the Department and its grantees with the training and tools to help identify
and fight waste, fraud, and abuse of Recovery Act funds. This included over 75
meetings with individual SEAs and LEAs, where we discussed issues such as fraud
awareness and prevention. We also provided our audit guide to State and local audit
organizations for their use and reference when performing similar Recovery Act work.

During the last 6 months, OIG issued several reports from the first phase of our
Recovery Act oversight work: audits of Governors’ offices, SEAs, LEAs, and other
agencies in seven States and one territory—California, Illinois, Indiana, New York,
Pennsylvania, Puerto Rico, Tennessee, and Texas—to determine whether entities
responsible for overseeing Recovery Act funds had designed systems of internal
controls that were sufficient to provide reasonable assurance of compliance with
applicable laws, regulations, and guidance. Summaries of these reports are below, and
full reports and related information are posted on our Web site at www.ed.gov/oig, as
well as on the Federal government’s Recovery Act Web site, www.recovery.gov.

RECOVERY ACT REPORTS
INTERNAL REPORTS
ACTIONS THE DEPARTMENT CAN TAKE TO HELP ENSURE SEA
IMPLEMENTATION OF FEDERAL CASH MANAGEMENT REQUIREMENTS
As one of the key principles of the Recovery Act is to distribute the funding quickly to
save and create jobs and promote economic activity, the issue of cash management—
minimizing the time elapsing between an SEA’s or LEA’s receipt of and its
disbursement of Federal funds—is a key component of our Recovery Act work.




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U.S. DEPARTMENT OF EDUCATION                              OFFICE OF INSPECTOR GENERAL
                        SEMIANNUAL REPORT TO CONGRESS, NO. 60



Previous OIG work had revealed that an SEA provided funding to an LEA long before
the LEA was prepared to use those funds. As a result, the LEA earned upwards of
$25 million in interest on those funds over 12 years and retained the interest earnings
instead of remitting them—funds that should have been used or returned to the
Federal government in a timely manner, as required by Federal law and regulations.
Our recently concluded Recovery Act audits found that this was not an isolated
incident. We brought these concerns to the Department’s attention and suggested that
it examine the most effective methods to address cash management issues and provide
technical assistance and guidance to the States and LEAs to ensure that Recovery Act
funds are expended effectively. The Department concurred with our recommendation.
Below is a chart summarizing our findings in five of the seven States and one territory
reviewed.

SEA IMPLEMENTATION OF FEDERAL CASH                               CA   IL IN    NY    PA
MANAGEMENT REQUIREMENTS
SEA was or would be advancing Recovery Act funds to LEAs         X    X   X    X     X
without adequate information on whether LEA was ready to
spend the funds.
SEA did not have a process in place for LEAs to remit interest   X    X   X    X     X
earned from Federal cash advances, had not instructed LEAs to
remit interest promptly and at least quarterly, and did not
sufficiently monitor LEAs’ compliance with this requirement.



CORRECTIONS NEEDED TO A NUMBER OF PROGRAMS LISTED IN THE CATALOG
OF FEDERAL DOMESTIC ASSISTANCE PROGRAMS

We notified the Department that it needed to correct information on a number of its
programs listed in the Catalog of Federal Domestic Assistance (CFDA). With the
dramatic increase in funding that the States, SEAs, and LEAs will receive through the
Recovery Act and its emphasis on accountability, it is important for the CFDA to
contain accurate, up-to-date information. State, local, and independent auditors
engaged to perform single audits required by the Single Audit Act Amendments of
1996 ii use the CFDA to obtain information about Department programs that is often
not available from other sources. For example, we found incorrect descriptions of the
applicable audit requirements for a number of programs, including the Federal Family
Education Loan Program (FFELP), Federal Perkins Loan program, Direct Loan
program, and the Academic Competitiveness Grant program. We made several
recommendations, including that knowledgeable Department officials review each
CFDA section to identify errors and any needed corrections. The Department
concurred with our recommendations.

DEPARTMENT’S PROCESS TO ENSURE DATA QUALITY UNDER
RECOVERY ACT REPORTING REQUIREMENTS
In this audit, we determined that the Department had established a process to perform
data quality reviews of recipient reporting under the Recovery Act and notified the


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U.S. DEPARTMENT OF EDUCATION                                 OFFICE OF INSPECTOR GENERAL
                       SEMIANNUAL REPORT TO CONGRESS, NO. 60



recipients of the need to make appropriate and timely corrections. Specifically, we
found that the Department: (1) developed draft policy and procedures for reviewing
quarterly Recovery Act data which emphasized the avoidance of material omissions
and significant reporting errors; (2) developed plans to ensure that all prime recipients
file the required quarterly reports; (3) planned a process to remediate systemic or
chronic reporting problems; and (4) planned to use the reported information as a
management tool.

CHARTER SCHOOL VULNERABILITIES TO WASTE, FRAUD, AND ABUSE
With the increase in funding that schools are receiving through the Recovery Act, we
issued a report that highlighted past OIG investigations involving fraud at charter
schools. The report brought to the Department’s attention our concern about
vulnerabilities in the oversight of charter schools. Since 2005, OIG has opened more
than 40 criminal investigations at charter schools, which have thus far resulted in 18
indictments and 15 convictions of charter school officials. Charter schools generally
operate as independent entities that are subject to oversight by an LEA or authorized
chartering agency. Our investigations have found, however, that LEAs or chartering
agencies often fail to provide adequate oversight needed to ensure that Federal funds
are properly used and accounted for. The type of fraud we identified generally
involves embezzlement. The schemes that are used to accomplish this are varied. For
example, we have found cases where charter school executives falsely increased their
schools’ child count, thus increasing the funding levels from which to embezzle. We
also identified an alleged grade changing scheme that allowed failing students to pass
in order to ensure that the school met Adequate Yearly Progress, which allowed the
school to continue operating, thus continuing a funding scheme from which to
embezzle. We have also unraveled schemes where owners or employees of the
charter schools created companies to which they diverted school funds and misused
school credit cards for personal expenditures. Our report provided examples of
investigative cases involving charter schools. The Department generally agreed with
our observations and expressed interest in working with OIG in determining how to
enhance, when appropriate, its policies and monitoring processes involving charter
schools.

EXTERNAL REPORTS
INTERNAL CONTROLS REVIEWS AT SELECTED SEAS
We concluded audits of seven States and one territory to determine whether agencies
charged with responsibility for overseeing Recovery Act funds had designed systems
of internal controls that could reasonably assure compliance with applicable laws,
regulations, and guidance. We assessed the design of internal controls over cash
management, subrecipient monitoring, use of funds, and data quality for ESEA Title I
programs, IDEA Part B, Vocational Rehabilitation Act funds, and the State Fiscal
Stabilization Fund (SFSF) programs.




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U.S. DEPARTMENT OF EDUCATION                               OFFICE OF INSPECTOR GENERAL
                                         SEMIANNUAL REPORT TO CONGRESS, NO. 60



In almost all of the States reviewed, we found that the SEAs had been proactive in
their efforts to ensure the proper administration of Recovery Act funds; however, we
identified areas that could be improved, as summarized in the following chart and
described in more detail by State.

                                       Summary of Recovery Act Audit Findings
                                                                       Cash                 Data          Sub-Recipient           Use/Accounting
                       Entity Reviewed
                                                                    Management             Quality         Monitoring                 of Funds

 California
State of California*                                                         X                                      X                     X

San Diego Unified School District                                            X                                                            X

Chico Unified School District

Tulelake Basin Joint Unified School District                                 X                                                            X

 Illinois
State of Illinois*                                                           X                  X                   X

Chicago Public Schools                                                       X                                                            X

Hinsdale Community Consolidated School District                              X                  X                                         X

East St. Louis Public Schools                                                X

 Indiana
State of Indiana*                                                            X                  X                   X

Indianapolis Public Schools                                                  X

Muncie Community Schools                                                     X

Wawasee Community Schools                                                    X

 New York
State of New York*                                                           X                  X                   X

New York City Department of Education                                        X                  X

Kiryas Joel Union Free School District                                                          X                                         X

Harborfields Central School District                                         X                  X                                         X

 Pennsylvania
Commonwealth of Pennsylvania*                                                X                  X                   X

 Puerto Rico
Commonwealth of Puerto Rico* (Voc. Rehab only)                               X                  X                   X                     X

 Tennessee
State of Tennessee*                                                                             X

Davidson County Public Schools

Jackson-Madison County Public Schools

Giles County Public Schools

 Texas
State of Texas*                                                                                 X                   X

Dallas Independent School District                                                                                  X                     X

Fort Bend Independent School District                                                                                                     X

Cleburne Independent School District

*Includes SEA, Governor's Office, and any other State entity administering ARRA funds. Details of which State entity a finding pertains
to are included in attached summaries.




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U.S. DEPARTMENT OF EDUCATION                                                                         OFFICE OF INSPECTOR GENERAL
                     SEMIANNUAL REPORT TO CONGRESS, NO. 60



      CALIFORNIA
      We assessed internal controls at the Governor’s Office, the California
      Department of Education (CDE), the California Department of
      Rehabilitation, the California Department of Corrections and Rehabilitation,
      and three LEAs: San Diego Unified School District (SD-USD), Tulelake
      Basin Joint Unified School District (TBJ-USD), and the Chico Unified
      School District. Our audit found that the State and local agencies reviewed
      had systems of internal controls in place or were designing control systems to
      provide for the proper administration and use of education-related Recovery
      Act funds. However, we found that (1) CDE needed to ensure that LEAs
      receive Title I and SFSF funds when needed to pay program costs and timely
      remit interest earned on cash advances; (2) CDE and the Governor’s Office
      of Planning and Research (OPR) needed to ensure that timely and adequate
      subrecipient monitoring procedures were implemented for Recovery Act
      subgrants to LEAs, as well as ensure that subrecipients (and its employees)
      are informed of Recovery Act whistleblower protection and OMB
      requirements for referrals to Inspectors General; (3) CDE delayed
      implementing its data collection system which created challenges for
      ensuring the quality of the data reported. CDE cited a lack of specific
      guidance on reporting requirements and the ongoing State budget crisis as
      reasons for the delay in developing its data collection system; and (4) CDE
      needed to ensure that LEAs implement adequate controls regarding the
      appropriate use of Recovery Act funds based on issues we identified at SD-
      USD involving use of Recovery Act funds for retirement plans without prior
      approval, and at SD-USD and TBJ-USD, related to undocumented personnel
      costs for multi-funded employees.

      Our recommendations included that the CDE implement planned
      enhancements to existing ESEA Title I and IDEA program monitoring
      practices to provide timely oversight of LEA compliance with fiscal
      requirements related to cash management and the appropriate use of and
      accounting for Recovery Act funds. CDE and OPR concurred with our
      findings and recommendations.

      ILLINOIS

      We assessed internal controls at the Governor’s Office, Illinois State Board of
      Education (ISBE), Illinois Department of Human Services, and three LEAs:
      Chicago Public Schools (CPS), Community Consolidated School District 181
      (Hinsdale), and East Saint Louis School District 189. Our audit found that the
      agencies reviewed had systems of internal controls in place or were designing
      control systems to provide for the proper administration and use of education-
      related Recovery Act funds; iii however, we identified that (1) ISBE’s system
      of internal controls was not adequate to ensure that LEAs were complying
      with Federal cash management requirements; it did not ensure that excess
      cash balances within a quarter were detected; and that it did not ensure that



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U.S. DEPARTMENT OF EDUCATION                           OFFICE OF INSPECTOR GENERAL
                    SEMIANNUAL REPORT TO CONGRESS, NO. 60



      excess cash balances were calculated correctly or that interest on excess cash
      balances was identified and remitted in a timely manner; and (2) ISBE could
      improve its subrecipient monitoring to ensure compliance with Recovery Act
      requirements, as our work at the CPS and Hinsdale showed that these LEAs
      were not tracking their SFSF expenditures. Hinsdale also had not established
      procedures to ensure that Recovery Act IDEA data would be complete,
      accurate, reliable, and in compliance with Recovery Act reporting
      requirements. We made a number of recommendations, including that the
      ISBE strengthen procedures for monitoring excess cash balances at LEAs
      before approving cash disbursements and that ISBE instruct LEAs to track
      SFSF expenditures so that all necessary information could be accurately
      reported, as required by the Recovery Act. ISBE did not agree or disagree
      with our findings and recommendations but did describe corrective actions it
      was taking to resolve the findings.

      INDIANA

      We assessed internal controls at the Indiana Department of Education (IDOE),
      the Indiana Family and Social Services Administration, Bureau of
      Rehabilitation Services (BRS), and the Indiana Office of Management and
      Budget (Indiana OMB). We also assessed the design of controls at three
      LEAs: Indianapolis Public Schools; Muncie Community Schools; and
      Wawasee Community School Corporation. We found that the State has been
      proactive in its efforts to ensure the proper administration of Recovery Act
      funds; however, we also found that (1) IDOE could improve its procedures to
      ensure compliance with Federal cash management requirements. It did not
      have adequate procedures in place to minimize the time elapsing between the
      transfer of SFSF and the disbursement by the LEAs or ensure that LEAs
      calculated and remitted interest earned on excess cash resulting from unspent
      Recovery Act funds; (2) IDOE had not finalized the revisions to its IDEA
      monitoring guide to cover Recovery Act IDEA funds, did not plan to monitor
      SFSF distributed to LEAs as extensively as it planned to monitor other funds,
      and did not adequately monitor LEAs’ support for personnel expenditures;
      and (3) BRS did not revise its current system or develop new systems for
      reporting data for funds received under the Recovery Act Vocational
      Rehabilitation program.

      We recommended that the Department require the IDOE to develop and
      implement monitoring procedures to ensure that LEAs are properly reporting
      complete and accurate SFSF information; LEAs are spending SFSF in
      accordance with Recovery Act requirements; and follow up with LEAs if they
      fail to spend SFSF in accordance with Recovery Act requirements. IDOE and
      Indiana OMB did not indicate disagreement with the findings and
      recommendations and stated their commitment to complying with all Federal
      recommendations and guidelines for the disbursement and reporting of
      Recovery Act funds.




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U.S. DEPARTMENT OF EDUCATION                           OFFICE OF INSPECTOR GENERAL
                     SEMIANNUAL REPORT TO CONGRESS, NO. 60



      NEW YORK
      We assessed internal controls at the Governor’s Office and the New York
      State Education Department (NYSED). Although we found that the NYSED
      and the Governor’s Office were making a proactive effort to ensure the proper
      administration of Recovery Act funds, we also found (1) NYSED needed to
      strengthen its controls over cash management at LEAs to ensure adequate
      oversight of Recovery Act and other Federal funds; (2) NYSED had not yet
      revised its existing monitoring programs or developed new monitoring
      programs to reflect Recovery Act requirements; (3) NYSED had not yet made
      sufficient progress in establishing controls to ensure compliance with
      Recovery Act reporting requirements; and (4) the Governor’s office had not
      yet defined the roles of State agencies administering SFSF.              Our
      recommendations included that the Department require the NYSED to
      develop and implement procedures to determine whether expenditures
      charged to the Recovery Act are allowable and properly supported prior to
      payment, and develop and implement monitoring procedures that address
      Recovery Act requirements, including those requirements specific to the
      SFSF program. The NYSED did not fully agree or disagree with our findings
      or recommendations.

      In addition to our work at the NYSED, we also conducted similar work at
      three    LEAs: the New York City Department of Education (NYCDOE);
      the Kiryas Joel Union Free School District (Kiryas Joel); and the Harborfields
      Central School District (Harborfields). Although we concluded that
      NYCDOE and Harborfields had designed systems of internal controls that
      were generally sufficient, we found the controls over data quality, cash
      management, and use of funds need to be strengthened. We recommended
      that both LEAs establish additional data quality processes and controls to
      ensure their readiness in collecting and reporting data in order to comply with
      all Recovery Act reporting requirements. We also noted that the two LEAs
      needed to incorporate in their written policies and procedures for internal
      controls guidance related to cash management and use of funds.

      At Kiryas Joel, however, we found that the LEA had insufficient controls in
      many areas related to data quality, cash management, and use of funds; it
      lacked adequate internal controls to ensure compliance with Recovery Act
      reporting requirements, lacked adequate controls to safeguard payroll checks
      and did not have sufficient controls to minimize the risk of funds being
      improperly disbursed. We also found that Kiryas Joel’s accounting software
      did not have adequate controls to prevent the use of duplicate check numbers
      for payroll and non-payroll expenses, which could result in discrepancies in
      books and bank records and in reconciling bank statements. Based on our
      findings, we made a number of recommendations for each specific LEA,
      which the NYSED did not specifically concur or disagree with. However,
      NYSED did state that it was prepared to implement all of our
      recommendations.



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U.S. DEPARTMENT OF EDUCATION                           OFFICE OF INSPECTOR GENERAL
                    SEMIANNUAL REPORT TO CONGRESS, NO. 60



      PENNSYLVANIA

      We assessed internal controls at the Pennsylvania Department of Education
      (PDE), the Governor’s Office, Comptroller’s Office, the Bureau of Labor and
      Industry’s Office of Vocational Rehabilitation, and the Commonwealth’s
      Department of Corrections. Although we found that PDE and the Governor’s
      Office were making a proactive effort to ensure the proper administration of
      Recovery Act funds, we determined that (1) the Comptroller’s Office could
      strengthen its controls over cash management at LEAs to ensure adequate
      oversight of Recovery Act and other Federal funds: it did not verify LEA
      expenditures prior to payment; and its procedures were not adequate to
      minimize excess cash balances at LEAs or to ensure that LEAs properly
      remitted interest earned on Federal cash advances; (2) PDE’s monitoring
      instruments needed to be strengthened in order to address Recovery Act
      requirements, and it needed to develop a plan to monitor SFSF funds; (3)
      although PDE had provided information and guidance to LEAs on Recovery
      Act reporting requirements, it did not have a policy to ensure that data
      deficiencies were disclosed to the Department; and (4) the Governor’s Office
      should define the roles and responsibilities of Commonwealth agencies
      administering SFSF. We did not identify any reportable issues with respect to
      education-related Recovery Act programs administered by the Office of
      Vocational Rehabilitation. Based on our findings, we recommended that the
      Department require PDE to develop and implement procedures to monitor
      subrecipients’ fiscal internal controls and use of funds for Recovery Act as
      well as non-Recovery Act grant programs. We also recommended that PDE
      develop and implement procedures to review LEA expenditures charged to
      Recovery Act as well as non-Recovery Act funds to determine whether the
      funds advanced were actually expended and whether the expenditures are
      reasonable, allowable, and properly supported prior to reimbursement. PDE
      did not agree with our findings and recommendations.

      PUERTO RICO

      We found that Puerto Rico’s Vocational Rehabilitation Administration’s
      (VRA) internal controls needed improvement to provide reasonable assurance
      of compliance with Recovery Act requirements, although VRA officials were
      working diligently and proactively to do so. Specifically, VRA did not
      withhold appropriate income taxes from payments; ensure that financial data
      were reliable for reporting purposes; develop and communicate reporting and
      job creation or retention guidance; update information system policies and
      procedures; ensure that time between receipt and payout of Federal funds was
      minimized; and develop a monitoring plan to ensure compliance with
      Recovery Act requirements. We recommended that each of these weaknesses
      be addressed, many of which the VRA concurred with or had taken action to
      address.




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U.S. DEPARTMENT OF EDUCATION                          OFFICE OF INSPECTOR GENERAL
                    SEMIANNUAL REPORT TO CONGRESS, NO. 60



      TENNESSEE

      Although we found that the internal controls at the State and local agencies
      reviewed, including the Tennessee Department of Education’s (TDOE),
      appeared adequate, TDOE needed to improve its communication with LEAs
      to ensure awareness of reporting requirements for suspected fraud and the
      reporting procedures for estimating the number of jobs created or retained,
      programmatic performance, and financial data. We recommended that the
      Department require the TDOE to formally communicate to the LEAs that they
      must report suspected fraud of Recovery Act funds to the OIG and ensure that
      the LEAs understand the Recovery Act reporting requirements. TDOE
      concurred with our finding and recommendations.

      We also assessed internal controls at three LEAs: Giles County Board of
      Education; Metropolitan Nashville Public Schools; and Jackson-Madison
      County School System (Jackson-Madison). Our review found nothing that
      would indicate that the LEAs did not have sufficient controls in place.
      However, we found that Jackson-Madison and the Madison County Finance
      Department (MCFD) had not resolved findings from its FY 2008 single audit
      and did not have formal procedures for granting access to its computer
      system. In response to these and related findings, the Tennessee Comptroller
      Office made several recommendations which, if implemented, should correct
      this weakness. We also found that MCFD did not have formal procedures for
      granting access to its accounting system and suggested that it implement
      formal policies and procedures. TDOE and the LEAs did not have any
      comments on our findings or suggestions.

      TEXAS

      We assessed internal controls at the Texas Education Agency (TEA), the
      Texas Department of Assistive and Rehabilitative Services, the Texas Higher
      Education Coordinating Board (THECB), and the Governor’s Office. We also
      reviewed the design of control at three LEAs: the Dallas Independent School
      District (DISD); the Fort Bend Independent School District (Fort Bend); and
      the Cleburne Independent School District. Although we found that the State
      had been proactive in its efforts to ensure the proper administration of
      Recovery Act funds, we found that (1) TEA could improve its oversight of
      LEAs to ensure compliance with Recovery Act requirements, as we identified
      issues at two of the three LEAs we visited; Fort Bend’s accounting system
      was vulnerable to unauthorized users; and DISD did not have adequate
      written procedures for monitoring its schools that receive Recovery Act funds,
      or for implementing supplement not supplant procedures; DISD took
      corrective action on these issues prior to conclusion of our work; (2) THECB
      could improve its monitoring of subrecipients and its collection and reporting
      systems to ensure compliance with Recovery Act reporting requirements; and
      (3) THECB needed to modify its policies and procedures to ensure adequate
      oversight of recipients of SFSF government services funds to ensure those



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U.S. DEPARTMENT OF EDUCATION                           OFFICE OF INSPECTOR GENERAL
                     SEMIANNUAL REPORT TO CONGRESS, NO. 60



      funds were safeguarded. Based on these findings, we made a number of
      recommendations, with which the Governor’s office did not fully agree.

      During our audit, we noted that the Texas State Legislature passed, and the
      Governor signed into law, legislation which included a pay raise for teachers
      contingent on receipt of SFSF funds. Departmental guidance on the SFSF
      program, issued in April 2009, states that neither the Governor nor the SEA
      can mandate how an LEA will or will not use the SFSF funds. The State was
      aware of this guidance and included a statement in its July 2009 SFSF
      application that LEAs had discretion as to which funds (State, local, or SFSF)
      to use to cover the pay raises. The LEAs, however, did not receive any
      additional State funds for the pay raises under the State law, and TEA
      estimated that $481 million in SFSF funds would be used to cover the raises
      for school year 2009-2010.

      It is unclear whether Texas’s mandatory pay raises were consistent with
      Recovery Act and Departmental requirements. The Department has
      communicated that the overall goals of the Recovery Act have been to save
      jobs and drive reforms. In Texas, the law provided for mandatory raises that
      were contingent on Recovery Act funding and were not designed to save jobs
      or retain particular teachers in particular schools.

      OTHER EXTERNAL REPORTS
      VIRGIN ISLANDS

      We presented the Department with a special report highlighting issues that
      could affect Recovery Act funds provided to the Virgin Islands Department of
      Education (VIDE).        We identified these issues through six audits of the
      VIDE issued between 2003 and 2008 and our 2009 audit of the VIDE’s
      actions to address the recommendations made in those reports. Our 2009
      report found that while VIDE had implemented some controls to address prior
      audit findings, it had not sufficiently addressed or taken the necessary actions
      to resolve prior recommendations in the areas of financial management,
      human capital, and property management and procurement. As a result,
      VIDE lacked sufficient internal controls to manage Departmental funds,
      programs, and activities, which could adversely impact its management of
      Recovery Act funds.

      With its history of unsatisfactory performance in the administration of the
      Department’s programs and its status as high-risk grantee, VIDE requires
      closer monitoring and oversight. To that end, we made a number of
      suggestions to all of which the Department agreed.




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U.S. DEPARTMENT OF EDUCATION                            OFFICE OF INSPECTOR GENERAL
                      SEMIANNUAL REPORT TO CONGRESS, NO. 60



OTHER ACTIVITY
OIG TRAINED OVER 1500 DEPARTMENT PERSONNEL AND GRANTEES

In 6 sessions held January through March 2010, the OIG provided fraud awareness
training to more than 500 Department employees who award and oversee grants, to
help ensure that Federal education dollars, particularly in view of the infusion of
Recovery Act funds, are protected from fraud and misuse. In March, OIG provided a
similar training to more than 1000 grantees who were attending the 2010 Institutional
Development and Undergraduate Education Service Project Directors' Meeting. OIG
staff also presented a session entitled, “A-133 Audits and Other Audits,” where
attendees were provided with information on the history and functions of an A-133
audit and other audits grantees might undergo.

INVESTIGATION
SPECIAL REPORT ON RECOVERY ACT EFFORTS

In response to a request from Senator Mark Pryor (D-Arkansas), OIG provided
information on its investigative efforts involving Recovery Act funds. The report
noted the number of allegations of waste, fraud, and abuse involving Recovery Act
funds it had received by respective funded program from passage of the Act through
February 4, 2010. As noted in the report, during this timeframe, OIG received 11
referrals from the Recovery Board and had received 180 allegations directly. We also
referred 18 cases to the appropriate prosecuting authority for further action. The
report also provided general information on OIG audit efforts, which included a
summary of work completed, and the objectives of ongoing assignments.




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U.S. DEPARTMENT OF EDUCATION                            OFFICE OF INSPECTOR GENERAL
                       SEMIANNUAL REPORT TO CONGRESS, NO. 60



        ELEMENTARY AND SECONDARY EDUCATION
             PROGRAMS AND OPERATIONS
With the significant increase in education funding that the States, SEAs, and LEAs are
receiving through the Recovery Act in addition to their annual allotments, effective
accountability and transparency is vital in how these entities expend all Federal
education funds they receive. Work conducted over the last 6 months proved that
accountability is still an issue for the Departmental office, SEA, LEA, and another
grantee we reviewed. Summaries of our findings are provided below, along with
information on our most significant investigations involving elementary and
secondary education program funds.

INTERNAL OPERATIONS
OFFICE OF INDIAN EDUCATION
In this audit, we determined that the Department’s Office of Indian Education needed
to undertake significant efforts to improve its management of the Indian Education
Professional Development (IEPD) grant program. Authorized under the ESEA,
program awards are made primarily to institutions of higher education to prepare and
train Indians to serve as teachers and school administrators. If individuals do not
obtain employment in a field that benefits Indian people, they have to repay all or a
prorated part of the assistance they received under the program, which is referred to as
“cash payback.” Between FY 1999 and FY 2009, approximately $104 million was
obligated under 139 IEPD grant awards. We found that the Office of Indian
Education:

    •    Failed to maintain adequate records on students receiving assistance under the
         program and subsequently ensure these students fulfill their payback
         obligation;

    •    Developed a database to track IEPD program participants without having
         published the requisite Federal Register notice to ensure Privacy Act of 1974
         (Privacy Act) protections for the records of hundreds of individuals who
         received funds through the program; and

    •    Awarded a number of grants to schools that proposed spending less than half
         of their budgets on student training costs.

The weaknesses noted have ultimately fostered an environment susceptible to fraud,
waste, and abuse. We made a number of recommendations, including that the
Department review the management and staff structure of the IEPD grant program
office and make changes, as appropriate, to ensure that the program is managed and
implemented consistent with statutory requirements, and that IEPD work with OMB
and Department officials to have approved its current system of records and/or any
future system(s) developed for the purpose of tracking recipients of funds under the
grant program. The Department concurred with our findings and recommendations.


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U.S. DEPARTMENT OF EDUCATION                              OFFICE OF INSPECTOR GENERAL
                      SEMIANNUAL REPORT TO CONGRESS, NO. 60



GRANTEES AND SUBRECIPIENTS
STATE EDUCATIONAL AGENCY

      COLORADO DEPARTMENT OF EDUCATION
      We determined that the Colorado Department of Education (CoDE) did not
      properly expend selected Federal education funds in accordance with
      applicable laws, regulations, and Department guidance. Our review covered
      the CoDE’s policies and procedures over personnel costs for the period July 1,
      2007, through June 30, 2009. We found that the CoDE inappropriately
      charged employee personnel costs to Federal education programs based on
      predetermined time and effort allocations instead of charging the programs
      based on the actual activity of each employee. Because CoDE could not
      provide documentation for employees’ actual activities on Federal programs,
      we were unable to determine the allowability of more than $23 million in
      personnel costs charged to Department grants for the time period reviewed.

      We made a number of recommendations to address these weaknesses,
      including that the CoDE provide documentation, based on actual work
      performed, supporting the personnel costs for CoDE employees that should
      have been charged to Federal education grants for the time period reviewed or
      return the more than $23 million to the Department. The CoDE generally
      concurred with our finding and our recommendations.

LOCAL EDUCATIONAL AGENCY

      PHILADELPHIA SCHOOL DISTRICT
      We found that the Philadelphia School District during the period July 1,
      2005, through June 30, 2006, did not have adequate fiscal controls in place,
      and expenditures from selected Federal education grant funds—totaling more
      than $138 million—were either unallowable or inadequately supported.
      Among our findings, we determined that the District:

                  •    Did not have written policies and procedures for certifying
                       personnel costs charged to Federal grants, resulting in
                       unsupported salary and fringe benefit costs of more than $123
                       million;

                  •    Supplanted State and local funds with Federal funds, as we
                       identified more than $6.9 million in unallowable costs, and
                       more than $1.2 million in inadequately supported costs;




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U.S. DEPARTMENT OF EDUCATION                           OFFICE OF INSPECTOR GENERAL
                      SEMIANNUAL REPORT TO CONGRESS, NO. 60



                  •    Did not adequately enforce its policies and procedures for a
                       number of its internal operations, such as travel
                       reimbursement and contract management, as we identified
                       more than $6.5 million in unallowable costs, and nearly $12
                       million in inadequately supported costs; and

                  •    Did not have written policies and procedures for various
                       fiscal processes, such as monitoring of budgets and charging
                       of transportation costs, as we identified more than $622,000
                       in unallowable costs, and more than $52,700 in inadequately
                       supported costs.

      We recommended that the District return more than $17 million in
      unallowable costs to the Department, and that it provide adequate
      documentation to support more than $121 million in inadequately supported
      expenditures or return that amount to the Department. The District did not
      concur with all of our findings.

OTHER GRANTEE

      CENTER FOR CIVIC EDUCATION
      Our audit found that the Center for Civic Education (CCE), a non-profit
      organization that specializes in civic and citizenship education programs, did
      not administer its Federal grant awards for its We the People Program and the
      Cooperative Civic Education and Economic Exchange Program (Cooperative
      Program) in compliance with applicable laws, regulations, and grant award
      provisions. For the time period reviewed, CCE charged about $23 million to
      the We the People and Cooperative Program grants. We determined that
      CCE:

                  •    Did not have a financial management system that met
                       required standards for administering the Federal education
                       grants;

                  •    Held cash beyond its immediate needs, charged unallowable
                       costs to the grants, and did not have adequate support for
                       other charges;

                  •    Of the $7.4 million in charges to the grants that we reviewed,
                       80 percent of the charges were unallowable ($1.2 million) or
                       unsupported ($4.7 million); and

                  •    CCE did not have adequate support for personnel costs that
                       were charged to grants using predetermined percentages or
                       for the allocation of other costs that benefited more than one
                       CCE program or activity.


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U.S. DEPARTMENT OF EDUCATION                           OFFICE OF INSPECTOR GENERAL
                        SEMIANNUAL REPORT TO CONGRESS, NO. 60




        We concluded that there was no assurance that costs charged to the We the
        People and Cooperative Program grants, and costs not reviewed as part of our
        audit, were allowable and documented in accordance with Federal
        requirements. We made 30 recommendations to address the weaknesses
        identified, including that the Department consider designating CCE as a
        high-risk grantee because CCE had not implemented a financial management
        system that meets the required standards. This designation would help
        provide reasonable assurance that the We the People and Cooperative
        Program grant funds are used during the grants’ authorized period of
        availability and expended prior to the end of the liquidation period, are used
        for the immediate needs of the grants, and used for costs that are reasonable,
        allocable, and allowable to the grants. CCE did not agree with all of our
        findings or recommendations.

INVESTIGATIONS
Our investigations into suspected fraudulent activity by or within SEAs, LEAs, and
their contractors have led to the arrest and conviction of individuals for theft or misuse
of Federal education funds. Below are some examples of our more significant
investigations in this area over the last 6 months.

SCHOOL OFFICIALS

        ILLINOIS – JURY FINDS FORMER CHARTER SCHOOL PRINCIPAL GUILTY OF
        THEFT: A jury found the former principal of the Triumphant Charter School
        in Chicago guilty of theft involving Federal funds. Our investigation found
        that the former principal used her school’s American Express card for
        personal use, including almost $30,000 in charges at major department stores
        such as Louis Vuitton and Coach, jewelry, diet pills, and hair care and
        cosmetics. She then paid the credit card bill with money received from the
        Department, the State, and Chicago Public Schools.

        LOUISIANA - FORMER CHARTER SCHOOL BUSINESS MANAGER PLED
        GUILTY: The former business manager of the Langston Hughes Academy
        Charter School in New Orleans pled guilty to charges of theft. Our
        investigation determined that over the course of a 14-month period, the
        former business manager embezzled approximately $660,000 from the school
        by making unauthorized cash withdrawals from the school’s bank account. In
        an effort to conceal the theft, the former business manager manipulated the
        school’s records by making the withdrawals appear to be payments to vendors
        for items such as textbooks.

        MISSOURI - FORMER TECHNICAL SCHOOL DIRECTOR SENTENCED: The
        former director of the Doniphan R-I School District Vocational Technical
        School was sentenced to serve 7 months in prison, 3 years of supervised
        release, and was ordered to pay more than $90,500 in restitution for fraud and


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U.S. DEPARTMENT OF EDUCATION                               OFFICE OF INSPECTOR GENERAL
                      SEMIANNUAL REPORT TO CONGRESS, NO. 60



      theft. Our investigation found that between 2001 and 2004, the former
      director prepared fraudulent purchase orders for computer equipment
      purportedly for use by the school, which he converted to his own use or sold
      through his personal business. He also purchased items with his personal
      credit card purportedly for use at the school, was reimbursed for the items by
      the school district, and then returned the items for in-store credit.

      PENNSYLVANIA - FORMER CHARTER SCHOOL BOARD PRESIDENT AND THE
      CEO SENTENCED: The former board president and the former chief
      executive officer (CEO) of the Philadelphia Academy Charter School, both
      former Philadelphia police officers, were sentenced to prison for their roles in
      a nearly $1 million fraud scheme. Our investigation uncovered extensive
      fraud perpetrated by the two school leaders and another conspirator who died
      prior to being charged. The conspirators misappropriated upwards of $1
      million in school funds by soliciting bribes and kickbacks from school
      vendors and submitting false invoices for reimbursement for personal items
      such as meals, entertainment, home improvement, and personal bills. The
      investigation also found that the former CEO received undisclosed loans and
      other payments from the co-conspirators and failed to disclose these payments
      on official forms. The former CEO was sentenced to serve more than 3 years
      in prison, 3 years of supervised release, and was ordered to pay more than
      $900,000 in restitution. The former board president was sentenced to more
      than 1 year in prison and 2 years of supervised release.

      PENNSYLVANIA - PUBLIC CORRUPTION INVESTIGATIVE EFFORT YIELDING
      RESULTS: OIG, the Federal Bureau of Investigation, the Internal Revenue
      Service, and a team of Federal prosecutors are working together to fight
      public corruption in northeastern Pennsylvania. During this reporting period,
      actions were taken against the following individuals for their roles in separate
      corruption schemes involving Federal education funds:

                  •    FORMER PITTSTON AREA SCHOOL DISTRICT BOARD
                       MEMBER SENTENCED: The investigation found that the
                       former board member accepted a $1,500 kickback for helping
                       a contractor win a lucrative award for the school district. The
                       former board member was sentenced to serve 1 year and 1
                       day in prison, 2 years of supervised release, and was order to
                       pay a $3,000 fine.

                  •    BOARD MEMBER OF THE HANOVER AREA SCHOOL DISTRICT
                       PLED GUILTY: The investigation found that the board
                       member accepted a cash gratuity of approximately $5,000
                       from a contractor as a reward for his support in the vendor
                       receiving a lucrative contract. As a part of the plea
                       agreement, the board member agreed to resign from his
                       position.




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U.S. DEPARTMENT OF EDUCATION                            OFFICE OF INSPECTOR GENERAL
                     SEMIANNUAL REPORT TO CONGRESS, NO. 60



                 •    WILKES-BARRE AREA SCHOOL DISTRICT BOARD MEMBER
                      PLED GUILTY: In February, a member of the Wilkes-Barre
                      Area School District Board pled guilty as a result of the
                      investigation which found that he accepted a $5,000 payment
                      from an individual seeking to be hired as a teacher in the
                      district.

                 •    WILKES-BARRE AREA SCHOOL DISTRICT CONTRACTOR
                      PLED GUILTY: The president of King Paint and Glass
                      Company pled guilty to providing and installing free carpet in
                      the home of a district board member as a reward for the board
                      member’s support in awarding the company a district
                      contract.

                 •    FORMER TECHNOLOGY COORDINATOR OF THE WILKES-
                      BARRE AREA CAREER AND TECHNICAL SCHOOL
                      SENTENCED: The former technology coordinator led district
                      purchasing officials to believe that the price of the
                      technology-related equipment provided by the vendor was
                      fair and reasonable when, in fact, the price of the equipment
                      had been artificially and materially inflated so the vendor
                      could pay more than $16,000 in kickbacks to the former
                      employee. The former employee was sentenced to serve six
                      months in prison.

                 •    FORMER DIRECTOR OF TECHNOLOGY OF VALLEY FORGE
                      CHRISTIAN COLLEGE CHARGED: In March, the former
                      director was charged with mail fraud for allegedly leading
                      school purchasing officials to believe that the price of the
                      technology-related equipment provided by the vendor was
                      fair and reasonable when, in fact, the price of the equipment
                      had been inflated so the vendor could pay kickbacks to the
                      director.

      UTAH – TWO FORMER SCHOOL EMPLOYEES SENTENCED IN SEPARATE
      EMBEZZLEMENT SCHEMES: Two former Davis County School District
      employees were sentenced for their roles in two separate yet similar
      embezzlement schemes involving school funds.

                 •    FORMER TITLE I DIRECTOR: The former director, along with
                      her husband, embezzled more than $4.2 million in Title I
                      funds by granting contracts to companies they controlled,
                      billing the District for books and materials at inflated prices.
                      She was sentenced to serve 36 months of probation, 3,000
                      hours of community service, and was ordered to pay more
                      than $350,000 in restitution.



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U.S. DEPARTMENT OF EDUCATION                            OFFICE OF INSPECTOR GENERAL
                     SEMIANNUAL REPORT TO CONGRESS, NO. 60



                 •    SCHOOL DISTRICT SECRETARY: The former secretary to the
                      Title I Director, who claimed to have been unaware of her
                      boss’ scheme, was sentenced to prison for embezzling school
                      funds in her own fraud scheme. The former secretary created
                      a fictitious company and submitted fraudulent purchase
                      orders and invoices to the district for books and services
                      never rendered. From 1999-2005, the secretary submitted
                      requests and received payments of more than $333,000. She
                      was sentenced to serve 12 months and 1 day in prison, 60
                      months of supervised released, and was ordered to pay more
                      than $324,000 in restitution.

CONTRACTOR

      LOUISIANA - FORMER CONGRESSMAN’S BROTHER AND FORMER SCHOOL
      BOARD MEMBER SENTENCED TO PRISON: A contractor with the educational
      curricula provider JRL Enterprises Inc., and a former member of the Orleans
      Parish School Board (OSPB) were sentenced to prison for their roles in a
      bribery, kickback, and money laundering scheme involving nearly $14 million
      in Federal education funds. Our investigation found that the contractor,
      whose brother is former U.S. Congressman William Jefferson, paid bribes to
      the former OSPB board member to promote and approve $14 million in
      contracts for JRL, who paid him more than $900,000 in sales commissions.
      The contractor paid the former board member $100,000 for her role in the
      contract approval process. The contractor was sentenced to serve 10 years in
      prison, 3 years of supervised release, and was ordered to pay $913,000 in
      restitution. The former OPSD board member was sentenced to 18 months in
      prison and 3 years of probation. Her daughter, who abetted the fraud by
      opening a bank account, which her mother used as a clearinghouse for bribe
      payments, was sentenced to serve 2 years of probation and 40 hours of
      community service.




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U.S. DEPARTMENT OF EDUCATION                         OFFICE OF INSPECTOR GENERAL
                       SEMIANNUAL REPORT TO CONGRESS, NO. 60



     FEDERAL STUDENT FINANCIAL ASSISTANCE
          PROGRAMS AND OPERATIONS
The Federal student financial assistance programs have long been a major focus of our
audit, inspection, and investigative work; the programs are large, complex, and
inherently risky due to their design, reliance on numerous entities, and the nature of
the borrower population. With more than 6,000 postsecondary institutions, more than
2,900 lenders, 35 guaranty agencies, $129.3 billion in awards, and an outstanding loan
portfolio of more than $600 billion in FY 2009, accountability in these programs is
critical. During this reporting period, we concluded an audit of FSA’s capacity for
increasing the volume of loans made and serviced under the Direct Loan Program, and
we reviewed accrediting agencies, examining those agencies’ definitions of program
length and credit hours. Below you will find summaries of the findings of these
efforts, as well as summaries of our higher-profile investigative cases involving
student financial assistance fraud by school officials, contractors, and individuals. In
addition, we also concluded the first of our Ensuring Continued Access to Student
Loans Act of 2008 audits, reviewing the Great Lakes Educational Loan Services’
compliance with program requirements for servicers under the Act. The audit did not
disclose any material instances of noncompliance.

INTERNAL OPERATIONS
CAPACITY FOR INCREASING DIRECT LOAN VOLUME
We evaluated the FSA’s capacity for increasing the volume of loans made and
serviced under the Direct Loan program to include plans and related actions and its
ability to monitor the resulting increased participation of postsecondary institutions to
ensure compliance with Direct Loan program requirements. The audit was limited to
the examination of student loan market conditions and FSA’s related actions between
June 2008 and September 2009. We found that FSA had monitored student loan
market conditions and estimated the impact of significant changes on Direct Loan
origination and servicing demands. In response to the potential volume increases,
FSA expanded existing Direct Loan processing systems and awarded four additional
contracts that could assist in servicing potential volume increases. We also noted FSA
appears to have access to sufficient resources to assist schools with the transition to
the Direct Loan Program and that the transition will not impact FSA’s ability to
sustain its current level of compliance monitoring activities.

We did note, however, that FSA will rely heavily on contractor support in key areas to
ensure the effective operation of the Direct Loan program if the demand increases,
which will be the case with all new Federal lending soon shifting to the Direct Loan
program. Reliance on contractor support will require effective contract monitoring
practices to reduce related performance risk and ensure that affected systems will
perform adequately under increased processing requirements.




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U.S. DEPARTMENT OF EDUCATION                               OFFICE OF INSPECTOR GENERAL
                       SEMIANNUAL REPORT TO CONGRESS, NO. 60



PROGRAM PARTICIPANTS
ACCREDITING AGENCIES
As a follow-up to work we conducted in 2002-2003, and in anticipation of the 2010
higher education negotiated rulemaking sessions,iv during this reporting period, OIG
examined an issue that would be discussed at the sessions—the definitions of program
length and credit hours. This is an important issue because the amount of Federal
student aid a student can receive is based on the number of credit hours that a student
takes, and because alternative methods of educational delivery, including online
education, have exploded in recent years. Credit hours are traditionally assigned
according to the classroom hours offered during a semester.                  Alternative
educational methods do not use classroom delivery, making credit hour assignment
and comparison a challenge. The Department does not determine the quality of
education funded by Federal education dollars. Instead, the Secretary of Education
recognizes accrediting agencies v as reliable authorities for the quality of education
funded by Federal dollars. As required by the HEA and regulations, an accrediting
agency must demonstrate its accreditation standards are “sufficiently rigorous to
ensure that the agency is a reliable authority regarding the quality of the education or
training provided by the institutions or programs it accredits.” The agency meets this
requirement if its accreditation standards effectively address the quality of the
institution or program in 10 areas, including measures of program length.

We examined three of the seven regional accrediting agencies to determine what
guidance regarding program length and credit hours they provided to institutions and
peer reviewers, and the documentation they maintained to demonstrate how they
evaluated institutions’ program length and credit hours. As of March 31, we had
issued final reports on two of the accrediting agencies, which identified serious issues.
Neither agency established minimum requirements for credit hours, which could result
in inflated credit hours, the improper designation of full-time student status, the over-
awarding of Federal student aid funds, and excessive borrowing by students,
especially with distance, accelerated, and other programs not delivered through the
traditional classroom format.

        MIDDLE STATES COMMISSION ON HIGHER EDUCATION
        The Middle States Commission on Higher Education (Middle States) is the
        accrediting agency for institutions of higher education in Delaware, the
        District of Columbia, Maryland, New Jersey, New York, Pennsylvania,
        Puerto Rico, and the U.S. Virgin Islands. Institutions accredited by Middle
        States received $14 billion in Federal student aid funding in 2008. Although
        we found that Middle States provided some guidance to institutions and peer
        reviewers on program length and credit hours, it had not established minimum
        requirements for either, nor did it maintain documentation to demonstrate how
        it evaluated institutions’ program length and credit hours.




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      SOUTHERN ASSOCIATION OF COLLEGES AND SCHOOLS
      The Southern Association of Colleges and Schools (SACS) is the accrediting
      agency for institutions of higher education in Alabama, Florida, Georgia,
      Kentucky, Louisiana, Mississippi, North Carolina, South Carolina, Tennessee,
      Texas, and Virginia. Institutions accredited by SACS received more than $19
      billion in Federal student aid funding in 2008. We found that SACS provided
      guidance to institutions and peer reviewers regarding program length and
      credit hours, but did not provide guidance regarding the minimum
      requirements for the assignment of credit hours. In addition, while SACS
      maintained documentation to demonstrate that it evaluated institutions’
      program length and credit hours and had a clearly defined minimum standard
      for program length, it did not define or have a minimum standard for credit
      hours.

      HIGHER LEARNING COMMISSION
      While conducting our inspection at North Central Association of Colleges and
      Schools (NCACS), we identified a serious issue that we brought to the
      Department’s attention: the Higher Learning Commission (HLC) of the
      NCACS had evaluated American InterContinental University (AIU)—a for-
      profit institution owned by Career Education Corporation (CEC)—for initial
      accreditation and had identified issues related to the school’s assignment of
      credit hours to certain undergraduate and graduate programs. HLC found the
      school to have an “egregious” credit policy. Despite these issues, HLC
      granted AIU full initial accreditation with no limitations—an action we found
      to be not in the best interest of students.

      Our report was heavily redacted at the request of HLC and AIU under the
      provisions of the Freedom of Information Act that protect confidential,
      commercial information, which prevented public review of the specific
      findings of our report. HLC's rules permit, but do not require, member
      institutions to withhold findings from faculty, students, and other interested
      parties.

      HLC’s accreditation of AIU calls into question whether it is a reliable
      authority regarding the quality of education or training provided by the
      institution. Since HLC determined that the practices at AIU meet its
      standards for quality, without limitation, the Department should be concerned
      about the quality of education or training at other entities accredited by HLC.
      Based on this finding, we recommended that the Department determine
      whether HLC is in compliance with requirements for accrediting agencies,
      and if not, to take appropriate action to limit, suspend, or terminate HLC’s
      recognition as an accrediting agency by the Secretary of Education.




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OIG TESTIFIES BEFORE CONGRESSIONAL SUBCOMMITTEE
On October 25, Deputy Inspector General Mary Mitchelson, who was Acting
Inspector General at the time, testified before the U.S. House of Representatives
Subcommittee on Higher Education, Lifelong Learning, and Competitiveness
regarding student eligibility requirements for Federal student aid programs.
Deputy Inspector General Mitchelson discussed OIG’s work in the area of student
eligibility for Federal student aid, focusing on two issues—ATB examinations vi and
online high school diploma mills. She provided the Subcommittee with information
on the OIG’s long history of work involving ATB and on improvements made as a
result of those efforts, and touched on our ongoing efforts.

Deputy Inspector General Mitchelson also testified that online high school diploma
mills have become a problem for consumers, employers, and educators, and that there
was a need for guidance to address the problem of students qualifying for Federal
student aid on the basis of diplomas from online high school diploma mills. Deputy
Inspector General Mitchelson also discussed a growing problem of student eligibility
in the distance education context, providing examples of our work in this area. The
challenge in this area is determining whether students in distance education are
actually in attendance for Federal student aid purposes, and determining what
constitutes a class and class attendance in the online environment.

SPECIAL REPORTS ON ATB AND HIGH SCHOOL DIPLOMA MILLS
Shortly after our October testimony, OIG concluded two efforts on issues discussed in
our testimony. The first related to Ability-to-Benefit and the need for improved
regulations to strengthen certain ATB processes and the second involved an analysis
of online high school diplomas and the need for a clear definition of a high school
diploma as a condition to receive Federal student aid. At the time we released these
reports, the two issues were under consideration in the negotiated rulemaking
sessions. As no final agreement was reached during the session, we look for the
Department to propose regulatory changes later this year.

        VULNERABILITIES IN REGULATIONS OVER ATB ANALYSES
        An OIG data analytics project identified potential vulnerabilities in the
        Department’s regulations concerning the test score analyses submitted by
        ATB publishers every 3 years. As a result of these vulnerabilities, Federal
        student aid may have been awarded to students that passed compromised or
        invalid ATB examinations.

        We examined Independent Test Administrators (ITAs) who were decertified
        by one publisher. Of the 106 ITAs decertified by the publisher, vii OIG
        identified 83 ITAs who provided tests for approximately 5,619 students after
        the ITAs had been decertified. These students received an estimated $51.4
        million in Federal student aid funds at 133 post-secondary institutions. Our
        work identified several areas of vulnerability:



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                  •    Untimely Triennial Test Score Analyses - Although
                       publishers are required to submit triennial test score analyses
                       to FSA, current regulations do not specify when they must
                       submit the analyses, and we learned that several publishers
                       are not timely in their submissions. We found that only one
                       approved publisher used its test score analysis to decertify
                       ITAs;

                  •    Lack of Review - Current regulations do not provide a
                       process for FSA’s review or evaluation of the triennial test
                       analyses, and in practice there has been little review or
                       evaluation; and

                  •    No Notice of Decertified ITAs - ATB publishers are not
                       required to notify an institution when an ITA is decertified,
                       nor do they provide FSA or the institutions with a list of
                       decertified ITAs or share information on their decertified
                       ITAs with other publishers.

      We suggested that the Department revise the current regulations to specify the
      requirements publishers must follow in completing and submitting a triennial
      test score analysis and require publishers to immediately report to FSA and
      the institution when an ITA is decertified, and have FSA disseminate this
      information as necessary.

      NEED FOR A DEFINITION OF HIGH SCHOOL DIPLOMA
      An OIG data analytics project identified post-secondary institutions that
      may be using online high school diploma mills to qualify students for Title IV
      aid. The effort identified at least 8,062 students who purchased a diploma
      from an online high school and 13 postsecondary institutions that appeared to
      accept a significant number of students from that school. Between January
      2005 and September 2008, these institutions disbursed an estimated $42.8
      million in Federal student aid. We identified deficiencies in current
      regulations that if corrected, can help reduce or eliminate this vulnerability.

      Although the HEA and current regulations provide a definition of diploma
      mill for post-secondary institutions, neither require that a student’s high
      school diploma be issued from a State-recognized or accredited high school or
      meet the State requirements for graduation in order to receive Federal student
      aid. If the HEA's definition of a diploma mill were extended to include
      secondary schools, the majority of the 13 online high schools we examined
      would constitute diploma mills:

                  •    12 of the schools sold high school diplomas for fees that
                       ranged from $85 to $400, and 1 school sold diplomas for
                       $1,200; and


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                    •    All of the schools allowed students to earn their diploma on
                         the basis of a single test or series of tests, most of which were
                         open-book and were administered online or could be taken at
                         home. In some instances, students also earned high school
                         credit for previous life experiences. None of the schools
                         were accredited by a recognized accrediting agency.

        Another vulnerability we found is that schools are not required to verify a
        student's answer to question 26 on the Free Application for Federal Student
        Aid, unless required by the post-secondary institution's accrediting or State
        licensing agency. The question asks, "When you begin college in the 2009-
        2010 school year, what will be your high school completion status?" Students
        are directed to fill in one of the following: (1) high school diploma; (2) GED
        certificate; (3) home schooled; or (4) none of the above. Based on our
        findings, we made a number of suggestions, including that the Department
        establish the definition of a high school diploma as a condition for receiving
        Federal student aid and that FSA develop and publish guidance, similar to the
        guidance for post-secondary diploma mills to aid Financial Aid
        Administrators, students, and families in identifying and avoiding high school
        diploma mills.

INVESTIGATIONS
Identifying and investigating fraud and abuse in the student financial assistance
programs have always been top OIG priorities. The following are summaries of some
of our more significant investigations of student financial assistance fraud conducted
over the last 6 months involving school officials, contractors, and other individuals.

SCHOOL OFFICIALS

        NEW YORK – CONVICTIONS OF OWNER AND THREE EMPLOYEES IN MILLION
        DOLLAR FRAUD SCHEME AT CENTURION PROFESSIONAL TRAINING: The
        former owner and three employees of Centurion Professional Training, a
        proprietary school in Brooklyn, pled guilty to defrauding the Department of
        more than $1 million in Federal student aid. Our investigation revealed that
        the owner and the employees fraudulently created documentation in order to
        obtain Federal and State grants for students that did not attend the school or
        that were enrolled in ineligible programs. The owner also directed his staff to
        falsify records in connection with an FSA program review. In March, one of
        the employees was sentenced to serve 4 years of probation, 400 hours of
        community service, and was ordered to pay more than $952,000 in restitution.

        NEW YORK - OWNER OF WILLSEY INSTITUTE PLED GUILTY IN MULTI-
        MILLION DOLLAR FRAUD SCHEME: The owner, director, and president of the
        Willsey Institute, a proprietary school located in Staten Island, pled guilty to
        theft involving more than $5 million in Federal funds. Our investigation



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      found that for over 7 years, the owner submitted and caused to be submitted
      fraudulently altered student aid documentation in order to obtain Pell Grants,
      which she used to make payments on personal debt, credit cards, and the
      mortgage on her home. She directed her staff to submit financial aid
      documents for individuals who did not attend the school, and created fictitious
      student files, attendance records and grades in order to receive the aid and
      grants to which the school was not entitled. In her plea agreement, the owner
      agreed to the forfeiture of her home, as well as the payment of restitution of
      more than $5.2 million.

      PENNSYLVANIA - FORMER FINANCIAL AID DIRECTOR AT WIDENER
      UNIVERSITY PLED GUILTY: The former financial aid director of Widener
      University pled guilty to charges related to filing false tax returns, specifically
      for failing to claim income he earned as an independent financial aid
      consultant. Our investigation found that for tax years 2004-2006, the former
      director provided materially false tax returns, resulting in his failure to pay
      more than $109,000 in Federal income taxes. His unreported income
      originated from his private business, hosting and providing loan seminars to
      lenders, while employed at Widener University.

FRAUD RING

      ARIZONA - 48 INDIVIDUALS SENTENCED FOR ROLES IN FRAUD SCHEME AT
      RIO SALADO COMMUNITY COLLEGE: In our last Semiannual Report to
      Congress, we reported that 65 individuals were indicted for their roles in a
      $538,000 student aid fraud scheme at Rio Salado Community College.
      During this reporting period, 48 of those individuals were sentenced, and 46
      individuals pled guilty for their roles in the scheme, including the ringleader.
      Our investigation found that the ringleader recruited individuals to act as
      “straw students” at the school in order to apply for and receive Federal
      financial aid. The ringleader completed and submitted admission forms,
      financial aid applications, and supporting documentation of those straw
      students containing forged documents and false statements. She then assumed
      the identity of those individuals to access Rio Salado’s online classes in order
      to generate records of the individuals’ participation in online classes, which
      caused Rio Salado school officials to authorize financial aid payments to
      those individuals. When the straw students received the financial aid checks,
      they kicked back a significant portion of the proceeds to the ringleader.

CONTRACTORS
      FALSE CLAIMS SETTLEMENTS TOTALED APPROXIMATELY $1 MILLION:
      Civil settlements were reached as a result of illegal actions taken by
      employees of a collection agency involved in the Federal student aid
      programs:




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                •   NCO FINANCIAL SYSTEMS, INC., a debt collection agency,
                    agreed to pay the Department $500,000 to settle claims that it
                    had violated provisions of the False Claims Act. Our
                    investigation found that NCO employees fraudulently
                    consolidated $3.8 million of Federal student loans in order to
                    receive bonuses from NCO.

                •   NEW YORK STATE HIGHER EDUCATION SERVICES
                    CORPORATION, a guaranty agency, agreed to pay the
                    Department $451,000 for monies it received from the
                    Department as a result of NCO’s unlawful consolidations.

      COLORADO - FORMER NCO DEBT COLLECTOR PLED GUILTY: One month
      after the settlement was reached with NCO, another individual pled guilty to
      fraudulently consolidating student loans while employed by NCO. Our
      investigation found that the former debt collector forged a number of student
      borrowers’ signatures on Direct Loan consolidation promissory notes without
      the borrowers' knowledge or permission. The company received a collection
      fee from the Department for the consolidations, and the former debt collector
      earned a bonus from NCO for working the accounts.

UNAUTHORIZED ACCESS TO NSLDS
      FLORIDA - SENTENCES IN THREE SEPARATE CASES INVOLVING
      UNAUTHORIZED ACCESS TO FSA’S NATIONAL STUDENT LOAN DATA
      SYSTEM (NSLDS): Three individuals at three separate and now-defunct loan
      consolidation companies were sentenced for unlawfully accessing NSLDS.
      All three were sentenced for fraud in connection with computers and violating
      provisions of the Privacy Act.

                •   MANAGER OF EDU DEBT SOLUTIONS: We found that the
                    manager caused the unauthorized access to NSLDS by
                    instructing his employees to share NSLDS account access
                    information and to fraudulently obtain NSLDS accounts. He
                    was sentenced to 2 years of probation and was ordered to pay
                    approximately $730 in restitution.

                •   FORMER MARKETING DIRECTOR OF UNIVERSITY FINANCIAL
                    LENDING SERVICES: We found that from 2006 to 2007, the
                    former director caused the unauthorized access to NSLDS by
                    assigning the user accounts of former employees to company
                    managers whose accounts were previously revoked because of
                    abuse of the NSLDS system. He was sentenced to one year of
                    probation and was ordered to pay approximately $980 in
                    restitution.




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                •   SENIOR FINANCIAL SPECIALIST OF STUDENT FUNDING
                    SERVICES: We found that the former employee, who was
                    allowed access to NSLDS only with the permission of and on
                    behalf of a borrower to assist in determining the eligibility of an
                    applicant for Federal student aid, abused this authority in order
                    to conduct data mining for marketing purposes. He also
                    admitted to improperly using other employees’ passwords to
                    gain access to the system. The former employee was sentenced
                    to one year of probation and was ordered to pay $385 in
                    restitution.

OTHER INDIVIDUALS

      DISTRICT OF COLUMBIA - COLLEGE PROFESSOR PLED GUILTY TO MULTIPLE
      FRAUD CHARGES: An assistant professor at Williams College, who was also
      a visiting researcher at Yale Law School and senior policy fellow for a
      member of the U.S. House of Representatives, pled guilty to student aid fraud,
      bank fraud, and social security fraud involving more than $800,000. Our
      investigation found that the professor used multiple false names and social
      security numbers to obtain both Federal and private student loans totaling
      more than $294,000, and obtained more than 90 credit cards using the same
      fraudulent identities to make purchases of more than $500,000.

      NEW YORK - LONGTIME FUGITIVE PLED GUILTY FOR ROLE IN MULTI-
      MILLION DOLLAR FRAUD SCHEME: A former town official, who had been a
      fugitive for 11 years, pled guilty to charges of fraud involving more than $11
      million in Federal education funds. The former official was arrested in
      London, then extradited, arraigned, and ordered to prison last year after being
      a fugitive from justice since 1997, when he and six others were charged with
      participating in a massive conspiracy to defraud the Department and other
      government agencies. The conspirators created entities to fraudulently
      receive Federal and State funds. One of their schemes involved the creation
      of a fictitious postsecondary institution called the Toldos Yakof Yosef for the
      purpose of collecting Pell Grants. Five of the conspirators were sentenced to
      prison and one last conspirator remains a fugitive.

      TEXAS - ID THIEF SENTENCED FOR FRAUD AT TEXAS COMMUNITY
      COLLEGES: A man was sentenced to serve 46 months in prison, followed by
      3 years of supervised release, and was ordered to pay more than $182,000 in
      restitution for stealing the identities of others to apply for and receive Federal
      student aid. Our investigation revealed that he obtained personal identifiers of
      31 individuals, used the stolen information to enroll in online programs at
      various campuses of the Dallas County Community College and the Houston
      Community College District, and attempted to register more than 200
      additional students under the guise of a large church group.




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                OTHER INTERNAL OPERATIONS
OIG conducts annual reviews of the Department’s financial management and IT
security and management. These efforts are designed to help improve the overall
operation of this agency. During the last 6 months, the Department and FSA both
received unqualified opinions on their financial statements.                While this
accomplishment is noteworthy, our work revealed a need for improvements in areas
related to financial reporting and IT security. We also evaluated the Department’s
implementation of its financial disclosure procedures involving its contractors and
subcontractors, and we examined an issue involving the Department’s $500 million IT
contract. Below you will find more information on these findings, as well as the
results of our quality control reviews of single audits of Department grantees. 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 any such reports over the last 6 months.

FINANCIAL MANAGEMENT
FINANCIAL STATEMENT AUDITS
In November 2009, OIG transmitted the final audit reports covering the Department’s
and FSA’s FY 2009 financial statements. Both the Department and FSA earned
unqualified (clean) opinions on their financial statements; however, both reports noted
modified repeat significant deficiencies relating to credit reform estimation and
financial reporting processes and controls surrounding information systems. The
Department’s internal controls report also noted a new significant deficiency with
controls and financial reporting processes related to the Recovery Act. Although
neither report disclosed instances of noncompliance with laws and regulations, both
reports noted that the Department’s financial management systems did not
substantially comply with certain systems requirements of the Federal Financial
Management Improvement Act because of the control weaknesses surrounding
information systems. FSA relies on the Department's systems to provide support for
its financial reporting needs, including using the Department's general ledger to
process transactions. The Department and FSA concurred with the findings and
recommendations in the reports.

SPECIAL-PURPOSE FINANCIAL STATEMENTS

OIG also transmitted the final audit report covering the Department’s FY 2009 and
FY 2008 special-purpose financial statements. The Department earned a clean
opinion on the statements. The audited statements provide the Department of the
Treasury with required fiscal year end data that will be used to prepare the financial
statements of the U.S. government.




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                       SEMIANNUAL REPORT TO CONGRESS, NO. 60



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 2009 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.

IT SECURITY AND MANAGEMENT
SECURITY OVER C&A FOR INFORMATION SYSTEMS
During this reporting period, we released the findings of our examination of the
Department’s security over certification and accreditation (C&A) viii for its information
systems. We evaluated five systems managed by FSA and determined that FSA must
improve security controls over the C&A process for information systems to
adequately protect the confidentiality, integrity, and availability of those systems and
the data residing in them. Specifically, FSA did not properly assess and review
system security plans prior to system C&A; needed to improve controls over privacy
impact assessments; and did not have controls in place to adequately manage
authorizations to operate nor to continuously monitor system documentation between
C&A. Based on our findings, we presented the Department with a series of
recommendations. The Department concurred with most of our recommendations.

OTHER REPORTS
DEPARTMENT’S DISCLOSURE PROCEDURES
During this reporting period, we concluded an inspection to evaluate the
implementation and effectiveness of the            Department’s financial disclosure
procedures regarding contractors, subcontractors, and individuals hired by the
contracted entity to uncover and disclose the existence of potential financial interests
or impaired objectivity. We determined that the Department’s procedures had not
been implemented properly, but if they had, we believe they would have been
effective. No information came to our attention during the course of our inspection
that would indicate the Department failed to identify an actual conflict of interest.

This was the second of two reviews OIG conducted on these procedures, as required
by Section 306 of the FY 2008 Appropriations law (Section 306). The first review
was conducted in 2008 and evaluated the adequacy of the Department’s financial
disclosure procedures and found that the procedures, if fully implemented, were
adequate to comply with requirements of Section 306.           During that review, it
appeared that the Department’s procedures applied to all contracts of every type.




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In our follow-up inspection, we determined that the Department has not adequately
addressed the application of Section 306 to either product or service contracts.
The Department also did not apply the Section 306 to any product contracts, nor did it
apply the procedures to service contracts valued at $100,000 or below, saying that
they were exempt because they were simplified acquisitions. Although the
Department applied Section 306 procedures to service contracts valued over
$100,000, contracting officials did not consistently include the required conflict of
interest clause, certification, and plan instructions in the contract solicitations, and the
contract files did not consistently contain conflict of interest plans or evidence to show
that the plans had been evaluated. The Department’s policy of applying the conflict of
interest procedures only to service contracts valued over $100,000, does not meet the
requirements of Section 306. The Department agreed with our finding that the
requirements of Section 306 should apply to all service contracts, including those
below the $100,000 simplified acquisition threshold. The Department did not,
however, agree with our recommendation that it request a formal legal opinion from
the Office of the General Counsel on whether its position that the requirements of
Section 306 do not apply to product contracts is supportable.

DEPARTMENT’S UNTIMELY RESOLUTION OF ISSUES IMPACTING IT CONTRACT
We issued an alert memorandum to the Department after determining it may have paid
the Education Department Utility for Communications, Applications, and Technology
Environment (EDUCATE) ix contractor money it was not entitled to receive under the
terms of the contract. The EDUCATE contractor submitted an invoice to the
Department of more than $3.5 million. The Department withheld more than $135,000
from payment, asserting that performance was not reported in accordance with a
previous contract modification. The EDUCATE contractor then submitted an invoice
to recoup more than $129,000. Another review was conducted, and it was
recommended that more than $71,000 be withheld from the payment; however, that
amount was later changed by another Department official and just over $2,100 was
withheld from the invoice payment. We determined that the administrators of the
EDUCATE contract had not effectively fulfilled their roles in the oversight and
monitoring of the contract. We recommended that the Department instruct its contract
administrators to review the payments and request appropriate reimbursement, and
ensure they understand their responsibilities in order to better protect the
Department’s interests.      The Department concurred with our finding and
recommendation.

NON-FEDERAL AUDITS
QUALITY CONTROL REVIEWS
Participants in Department programs are required to submit audits performed by
independent public accountants (IPA). The Single Audit Act of 1984, as amended,
requires entities, such as State and local governments, universities, and non-profit
organizations that expend $500,000 or more in Federal funds in one year to obtain an
audit, referred to as a “single audit.” Additionally, for-profit institutions and their


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servicers that participate in the Federal student financial assistance programs, and for-
profit lenders and their servicers that participate in the FFELP, are required to undergo
annual audits performed by IPAs in accordance with audit guides issued by the OIG.
These audits provide the Federal government with assurance that recipients of Federal
funds comply with laws and regulations, as well as with compliance requirements that
are material to Federal awards. To help assess the quality of the thousands of single
audits that the Department receives each year, OIG conducts quality control reviews
(QCRs) of a sampling of audits each year. During this reporting period, we completed
25 QCRs of audits conducted by 23 different IPAs, or offices of firms with multiple
offices. We concluded that 13 (52%) were acceptable or acceptable with minor
issues, 7 (28%) were technically deficient, and 5 (20%) were substandard. We made a
referral of 3 IPAs to the American Institute of Certified Public Accountants and to
their respective State Boards of Accountancy for possible disciplinary action. These
referrals were made for substandard work and were based on QCRs reported in prior
semiannual reports.

INVESTIGATION
FORMER SENIOR DEPARTMENT EMPLOYEE SENTENCED: The former general
manager of FSA Financial Partner Services was sentenced to 18 months of probation
and was fined $100,000 for violating Federal financial disclosure requirements. Our
investigation disclosed that between 2003 and 2006, the former general manager
submitted false information on his financial disclosure reports regarding the purchase
and ownership of stocks from Education Lending Group, Inc., a private student loan
company in the business of issuing federally guaranteed student loans. He also helped
to advance the company’s business interests by approving a request by Student Loan
Xpress, a wholly owned subsidiary of Education Lending Group, which resulted in
Student Loan Xpress originating hundreds of millions of dollars in new student loans.


End Notes
i
 Internal controls are the plans, methods, and procedures an entity employs to provide reasonable
assurance that it meets its goals and achieves its objectives while minimizing operational problems and
risks.
ii
 The Single Audit Act Amendments of 1996, as amended, require entities such as State and local
governments, universities, and non-profit organizations that receive and expend $500,000 or more in
Federal funds in one year to obtain an annual audit, referred to as a “single audit.”
iii
 We had intended to review controls over SFSF programs; however, at the time of our audit, the
Governor’s Office and the ISBE were still working on an agreement for monitoring expenditures, so we
were unable to do so.
iv
  Negotiated rulemaking sessions are meetings between Department officials and members of the higher
education community where participants work to reach consensus on proposed regulations impacting
Federal student financial aid programs. On September 9, 2009, the Department published a notice in the
Federal Register announcing its intent to establish two negotiated rulemaking sessions to prepare
proposed regulations under Title IV of the HEA. The sessions for both groups were concluded on
February 26, 2010.




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                                 SEMIANNUAL REPORT TO CONGRESS, NO. 60




v
  Accrediting agencies are private educational associations that develop evaluation criteria and conduct
peer evaluations of institutions of higher education to ensure that the education provided by those
institutions meets acceptable levels of quality. When a school is accredited, it is eligible to participate in
Federal student aid programs.
vi
 A student who has not earned a high school diploma or its recognized equivalent may qualify for
Federal student aid if they pass an approved publisher’s independently administered ATB test.
vii
       Decertification was a result of publishers’ internal examination of their data and not OIG efforts.
viii
   C&A is a process that ensures that systems and major applications adhere to formal and established
security requirements that are well documented and authorized.
ix
  Awarded in 2007, EDUCATE is a 10-year, $500 million contract that was awarded to a single vendor
to acquire IT network services.




                                                      PAGE 34
 U.S. DEPARTMENT OF EDUCATION                                               OFFICE OF INSPECTOR GENERAL
                               SEMIANNUAL REPORT TO CONGRESS, NO. 60



Reporting Requirements of the Inspector General Act, as amended

     Section                                Requirement                                 Table Number
                                            (Table Title)
   5(a)(1) and             Significant Problems, Abuses, and Deficiencies                    N/A
     5(a)(2)
     5(a)(3)                       Uncompleted Corrective Actions
                        Recommendations Described in Previous Semiannual                       1
                      Reports to Congress on which Corrective Action Has Not
                                             Been Completed
      5(a)(4)                Matters Referred to Prosecutive Authorities
                       Statistical Profile (October 1, 2009, through March 31,                 6
                                                  2010)
5(a)(5) and 6(b)(2)            Summary of Instances where Information
                                     was Refused or Not Provided                             N/A
      5(a)(6)                               Listing of Reports
                          Audit, Inspection, Evaluation, and Other Reports                     2
                                on Department Programs and Activities
                             (October 1, 2009, through March 31, 2010)
      5(a)(7)                      Summary of Significant Audits                             N/A
      5(a)(8)                             Questioned Costs
                             Audit, Inspection, and Evaluation Reports                         3
                              with Questioned or Unsupported Costs
      5(a)(9)                           Better Use of Funds
                           Audit, Inspection, and Evaluation Reports with                      4
                             Recommendations for Better Use of Funds
     5(a)(10)                            Unresolved Reports
                         Unresolved Reports Issued Prior to October 1, 2009                   5
     5(a)(11)               Significant Revised Management Decisions                         N/A
     5(a)(12)                 Significant Management Decisions with
                                       which OIG Disagreed                                   N/A
     5(a)(13)              Unmet Intermediate Target Dates Established
                          by the Department Under the Federal Financial                      N/A
                               Management Improvement Act of 1996




                                             PAGE 35
U.S. DEPARTMENT OF EDUCATION                                           OFFICE OF INSPECTOR GENERAL
                                SEMIANNUAL REPORT TO CONGRESS, NO. 60



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 identification of recommendations described in
previous Semiannual Reports on which management has not completed corrective action.

 Report            Report Title               Date        Date of           Number of          Projected
 Number     (Prior Semiannual Report         Issued     Management       Recommendations        Action
            (SAR) Number and Page)                       Decision        Open Completed          Date

AUDIT REPORTS
Federal Student Aid (FSA)
A11I0002    IT Security Controls Over the 9/30/2008      11/18/2008        6          36       9/30/2010
            Debt Management Collection
            Process, Phase I, FY 2008
            (Office of the Chief
            Information Officer (OCIO)
            also designated as an action
            official) (SAR 57, page 25)
A11I0003    IT Security Controls Over the 9/30/2008      11/26/2008       10          32       12/31/2010
            Debt Management Collection
            Process, Phase II, FY 2008
            (OCIO also designated as an
            action official) (SAR 57,
            page 25)
A11I0009    IT Security Controls Over the 9/30/2008      11/26/2008        5          9        10/1/2010
            Debt Management Collection
            Process, Phase III, FY 2008
            (OCIO also designated as an
            action official) (SAR 57,
            page 25)
A17I0002    Financial Statement Audits     11/17/2008     1/6/2009         1          5        6/30/2010
            FY 2008 and FY 2007 – FSA
            (Office of the Chief Financial
            Officer (OCFO) also
            designated as an action
            official) (SAR 58, page 31)
A19H0011 Audit of the Department’s          8/1/2008      8/12/2008        1          1        6/30/2010
         Process for Disbursing ACG
         and SMART Grants (SAR
         57, page 25)




                                              PAGE 36
 U.S. DEPARTMENT OF EDUCATION                                           OFFICE OF INSPECTOR GENERAL
                                  SEMIANNUAL REPORT TO CONGRESS, NO. 60




 Report              Report Title                  Date          Date of            Number of              Projected
 Number       (Prior Semiannual Report            Issued       Management        Recommendations            Action
              (SAR) Number and Page)                            Decision         Open Completed              Date

Office of the Chief Financial Officer (OCFO)
 A17H0003 Financial Statement Audits   11/15/2007                9/26/2008          2            3          10/4/2010
          FY 2007 and FY 2006 of the
          Department and FSA (FSA
          also designated as an action
          official) (SAR 56, page 25)
OCIO
 A11F0005     Effectiveness of the              6/26/2007        5/12/2008          1            8          4/30/2010
              Department’s Financial
              Management Support
              System Oracle 11i Re-
              Implementation (Report
              recommends Office of the
              Secretary (OS) direct the
              Investment Review Board
              Chair, CFO, and CIO to
              take recommended actions)
              (SAR 55, page 28)
 A19F0025     Controls Over Excessive           12/18/2006       9/28/2007          2            7         12/31/2010
              Cash Drawdowns by
              Grantees (SAR 54, page 30)
INSPECTION REPORTS
 FSA
I13H0006      Review of the Department’s        7/24/2008        9/17/2008          4            7         9/30/2010
              Process for Granting Access
              to the NSLDS (SAR 57,
              page 27)
Office of Postsecondary Education (OPE)
I13I0001      Review of OPE’s Awarding           9/8/2008        3/3/2009           5            1         12/31/2011
              of Prior Experience Points in
              the 2006 Educational
              Opportunity Centers and
              Talent Search Grant
              Competitions (SAR 57,
              page 27)

 OIG Product Web site Availability Policy
 OIG final issued products are generally considered to be public documents, accessible on OIG’s Web site unless
 sensitive in nature or otherwise subject to Freedom of Information Act (FOIA) exemption. Consistent with the
 FOIA, and to the extent practical, OIG redacts exempt information from the product so that non-exempt
 information contained in the product may be made available on the OIG websites.

                                                   PAGE 37
 U.S. DEPARTMENT OF EDUCATION                                                   OFFICE OF INSPECTOR GENERAL
                               SEMIANNUAL REPORT TO CONGRESS, NO. 60



Table 2: Audit, Inspection, Evaluation, and Other Reports and Products on
Department Programs and Activities (October 1, 2009, through March 31, 2010)

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       Costs1         Costs      Recomm-
                                                                                               endations
AUDIT REPORTS
FSA
A05I0026     Carnegie Student Loans’                    2/24/10                                       0
             Compliance with Lender Inducement
             Provisions
A05J0013     Great Lakes Educational Loan               12/15/09                                      0
             Services, Inc.’s Compliance with
             Selected Requirements of the
             Ensuring Continued Access to
             Student Loans Act of 2008
A11J0001     Security over Certification and            10/13/09                                      22
             Accreditation for Information
             Systems
             (Report is also addressed to the
             Office of the Deputy Secretary
             (ODS), and some recommendations
             are made jointly to FSA and the
             Office of the Chief Information
             Officer (OCIO)
A17J0002     FSA - Financial Statement Audits           11/16/09                                      6
             for FY 2009 and FY 2008
OCFO
A09I0010     Center for Civic Education’s               11/20/09    $1,130,872    $4,807,665          30
             Administration of the We the People
             Program and Cooperative Civic
             Education and Economic Education
             Exchange Program
             (Office of Safe and Drug Free
             Schools (OSDFS) also designated as
             an action official)
A17J0001     U.S. Department of Education –             11/16/09                                      8
             Financial Statement Audits for
             FY 2009 and FY 2008




                                              PAGE 38
U.S. DEPARTMENT OF EDUCATION                                            OFFICE OF INSPECTOR GENERAL
                               SEMIANNUAL REPORT TO CONGRESS, NO. 60


 Report                 Report Title                     Date     Questioned    Unsupported    Number of
 Number                                                 Issued      Costs1         Costs       Recomm-
                                                                                               endations

A17J0003    U.S. Department of Education               11/16/09                                      0
            Special Purpose Financial
            Statements Audits for FY 2009 and
            FY 2008
ODS
A04K0002    American Recovery and                      12/18/09                                      0
            Reinvestment Act of 2009 (Recovery
            Act) - Internal Control Reviews at
            Three Local Education Agencies
            (LEA) in Tennessee
OESE
A02J0006    New York State System of Internal          11/10/09                                      7
            Control Over Recovery Act Funds
A02J0009    New York State LEAs Systems of             2/17/10                                       16
            Internal Control Over Recovery Act
            Funds
A03H0010    Philadelphia School District’s             1/15/10    $17,678,079   $121,091,819         27
            Controls Over Federal Expenditures
            (Office of Special Education and
            Rehabilitative Service (OSERS),
            OSDFS, and Office of Postsecondary
            Education (OPE) also designated as
            action officials)
A03J0010    Commonwealth of Pennsylvania               3/15/10                                       8
            Recovery Act Audit of Internal
            Controls over Selected Funds
            (OSERS, Office of the Secretary
            (OS)/Risk Management Services
            (RMS), and OCFO also designated
            as action officials)
A04J0004    Virgin Islands Department of               11/13/09                                      3
            Education’s Current Efforts to
            Address Prior Audit Findings
A04J0010    Tennessee Recovery Act Audit               12/15/09                                      2
            Internal Controls over Selected
            Funds
            (Recommendations were made to
            OESE in conjunction with OSERS)




                                             PAGE 39
U.S. DEPARTMENT OF EDUCATION                                           OFFICE OF INSPECTOR GENERAL
                               SEMIANNUAL REPORT TO CONGRESS, NO. 60


 Report                 Report Title                     Date     Questioned   Unsupported    Number of
 Number                                                 Issued      Costs1        Costs       Recomm-
                                                                                              endations

A05J0011    Systems of Internal Control Over           1/14/10                                       7
            Selected Recovery Act Funds in the
            State of Indiana
            (OSERS also designated as an action
            official)
A05J0012    Systems of Internal Control Over           2/23/10                                       4
            Selected Recovery Act Funds in the
            State of Illinois
            (OSERS also designated as an action
            official)
A06J0013    Systems of Internal Control Over           1/27/10                                       5
            Selected Recovery Act Funds in the
            State of Texas
A09J0004    Colorado Department of Education’s         2/26/10                 $23,961,710           5
            Use of Federal Funds for State
            Employee Personnel Costs
            (OSERS, Office of Vocational and
            Adult Education, Office of English
            Language Acquisition, Office of
            Innovation and Improvement (OII),
            OSDFS, and National Center for
            Educational Statistics also
            designated as action offices)
A09J0006    State and Local Controls over              1/15/10                                       7
            Recovery Act Funds in California
            (OCFO and OSERS also designated
            as action officials)
A19I0002    Office of Indian Education’s                2/2/10                                       14
            Management of the Professional
            Development Grant Program
OS
A19J0004    The Department’s Process to Ensure         10/29/09                                      0
            Data Quality Under the Reporting
            Requirements of the Recovery Act
            (Report is also addressed to ODS)
OSERS

A04J0009    Puerto Rico Recovery Act Audit,            12/14/09                                      11
            Vocational Rehabilitation
            Administration




                                             PAGE 40
U.S. DEPARTMENT OF EDUCATION                                           OFFICE OF INSPECTOR GENERAL
                               SEMIANNUAL REPORT TO CONGRESS, NO. 60


 Report                 Report Title                    Date      Questioned   Unsupported    Number of
 Number                                                Issued       Costs1        Costs       Recomm-
                                                                                              endations

INSPECTION REPORTS
OCFO
I13J0001    Inspection to Evaluate the                 10/8/09                                       6
            Implementation and Effectiveness of
            the Department’s Procedures in
            Response to Section 306 of the
            FY 2008 Appropriations Act –
            Maintenance of Integrity and Ethical
            Values within the Department
OTHER REPORTS AND PRODUCTS
FSA
X11J0002    Weaknesses in the Regulations and          1/25/10                                       0
            Guidelines for Department’s
            Approved Publishers of the Ability-
            to-Benefit Test
            (Management Information Report.
            Report is also addressed to OPE)
X19I0006    Audit of the Department’s Oversight        11/24/09                                      0
            of the Direct Loan Program
            (Management Information Report)
OII
X42K0002    Charter School Vulnerabilities              3/9/10                                       0
            (Management Information Report)
OPE
I13J0004    Review of the Southern Association         11/24/09                                      0
            of Colleges and Schools –
            Commission on Colleges’ Standards
            for Program Length
            (Management Information Report)
I13J0005    Review of the Middle States                12/14/09                                      0
            Commission on Higher Education’s
            Standards for Program Length
            (Management Information Report)
X11K0001    Definition of a High School Diploma        1/25/10                                       0
            as a Condition for Receiving Federal
            Student Aid (Management
            Information Report. Report is
            also addressed to FSA)



                                             PAGE 41
U.S. DEPARTMENT OF EDUCATION                                           OFFICE OF INSPECTOR GENERAL
                               SEMIANNUAL REPORT TO CONGRESS, NO. 60


 Report                 Report Title                     Date     Questioned    Unsupported    Number of
 Number                                                 Issued      Costs1         Costs       Recomm-
                                                                                               endations
L13J0006    The Higher Learning Commission of          12/27/09                                      1
            the North Central Association of
            Colleges and Schools’ Decision to
            Accredit American InterContinental
            University (Alert Memorandum)
Office of Planning, Evaluation, and Policy Development (OPEPD)
B19K0003     OIG's Independent Report on the           1/29/10                                       0
             Department’s Detailed Accounting
             of FY 2009 Drug Control Funds
             (Attestation Report)
OSDFS
B19K0003A    OIG's Independent Report on the           2/25/10                                       0
             Department’s Performance Summary
             Report for FY 2009 (Attestation
             Report)
OCFO
L09J0007     SEAs’ Implementation of Federal           10/21/09                                      1
             Cash Management Requirements
             under the Recovery Act (Alert
             Memorandum – OS/RMS also
             designated as an action official)
OCIO
L19K0001     Untimely Resolution of Issues              3/9/10                                       5
             Impacting Performance Validation
             and Payment Calculations Under the
             EDUCATE Contract (Alert
             Memorandum – OCFO also
             designated as an action official)
S11J0008     2009 Annual Federal Information           11/7/09                                       0
             Security Management Act Report
             (Special Project Report)
OESE
L04J0015     Virgin Islands Department of              1/13/10                                       0
             Education’s Current Efforts to
             Address Prior Audit Findings
             (Alert Memorandum – OS/RMS also
             designated as an action official)
Office of Management (OM)
L42J0001     Department’s Transit Benefits             12/16/09                                      4
             Program and Parking Program
             (Investigative Program Advisory
             Report)



                                             PAGE 42
U.S. DEPARTMENT OF EDUCATION                                           OFFICE OF INSPECTOR GENERAL
                                       SEMIANNUAL REPORT TO CONGRESS, NO. 60


     Report                        Report Title                        Date         Questioned       Unsupported        Number of
     Number                                                           Issued          Costs1            Costs           Recomm-
                                                                                                                        endations
OS
L16J0075            Corrections Needed to Information               10/13/09                                                 4
                    About Department Programs
                    Included in the Catalog of Federal
                    Domestic Assistance
                    (Alert Memorandum)
TOTALS:                                                                            $18,808,951       $149,861,194           203

Description of 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. Attestation engagements shall be conducted in accordance with American
Institute of Certified Public Accountants (AICPA) attestation standards, as well as the related AICPA Statements on
Standards for Attestation Engagements.

Inspections are analyses, evaluations, reviews, or studies of the Department’s programs. The purpose of an inspection is
to provide Department decisionmakers with factual and analytical information, which may include an assessment of the
efficiency and effectiveness of their operations, and vulnerabilities created by their existing policies or procedures.
Inspections may be conducted on any Department program, policy, activity or operation. Typically, an inspection results
in a written report containing findings and related recommendations. Inspections are performed in accordance with
quality standards for inspections approved by Council of Inspectors General for Integrity and Efficiency (CIGIE).

Alert Memoranda are used to communicate to the Department significant matters identified during an ongoing
assignment that require the attention of the Department when the identified matters are not related to the assignment
objectives or are otherwise outside the scope of the ongoing assignment. The ongoing assignment may be an audit,
attestation, inspection, data analysis, or other activity.

Special Projects are work performed by OIG staff that is not classified as an audit, inspection, or any other type of OIG
product. Depending on the nature and work involved in the special project, the special project may result in a report
issued outside OIG. Information presented in the special project report varies based on the reason for the special project
(e.g., response to congressional inquiry, other evaluation and analysis, etc.) and the report may contain suggestions.

Management Information Reports are used to provide the Department with information and suggestions on issues that
require immediate attention. The work is conducted in accordance with CIGIE standards for inspections and OIG quality
standards.

Investigative Program Advisory Reports are used to report to the Department any systemic program or regulatory
weaknesses, abuses or deficiencies in the administration of Department programs or operations that are identified during
an investigation.

1
    For purposes of this table, questioned costs may include other recommended recoveries. Please see footnotes 2 and 3 under Table 3
    for additional information regarding questioned and unsupported costs. During this reporting period, no OIG report was issued
    identifying a better use of funds.




                                                          PAGE 43
U.S. DEPARTMENT OF EDUCATION                                                             OFFICE OF INSPECTOR GENERAL
                                       SEMIANNUAL REPORT TO CONGRESS, NO. 60



Table 3: Audit, Inspection, and Evaluation Reports with Questioned or
Unsupported Costs1

Section 5(a)(8) of the IG Act, as amended, requires for each reporting period a statistical table showing
the total number of audit and inspection reports, the total dollar value of questioned and unsupported
costs, and responding management decision.
                                                                            Questioned2       Unsupported3
                                                             Number            Costs               Costs
  A. For which no management decision has been made             53            $886,030,775       $297,477,541
       before the commencement of the reporting period
     B.   Which were issued during the reporting period                   3               $168,670,145        $149,861,194

          Subtotals (A + B)                                               56           $1,054,700,920         $447,338,735

     C.   For which a management decision was made during                 3                 $1,813,679           $1,188,806
          the reporting period
          (i) Dollar value of disallowed costs                                              $1,813,679           $1,188,806

          (ii) Dollar value of costs not disallowed                                                   $0                   $0
     D.   For which no management decision was made by                    53           $1,052,887,241         $446,149,929
          the end of the reporting period
1
    None of the products reported in this table were performed by the Defense Contract Audit Agency.
2
 Questioned costs are identified during an audit, inspection, or evaluation because of: (1) an alleged violation of a law,
 regulation, contract, grant, cooperative agreement, or other agreement or document governing the expenditure of
 funds; (2) such cost not being supported by adequate documentation; or (3) the expenditure of funds for the intended
 purpose being unnecessary or unreasonable. OIG considers that category (3) of this definition would include other
recommended recoveries of funds, i.e., recovery of outstanding funds and/or revenue earned on Federal funds, or
interest due the Department.
3
    Unsupported costs are costs that, at the time of the audit, inspection, or evaluation were not supported by adequate
    documentation.




                                                         PAGE 44
    U.S. DEPARTMENT OF EDUCATION                                                      OFFICE OF INSPECTOR GENERAL
                                   SEMIANNUAL REPORT TO CONGRESS, NO. 60



Table 4: 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, inspection, and evaluation 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
            commencement of the reporting period                                        2             $13,327,577

     B.     Which were issued during the reporting period                               0                       $0

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

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

     D.     For which no management decision has been made by the end of
            the reporting period                                                        2             $13,327,577
1
 None of the products reported in this table were performed by the Defense Contract Audit Agency and no inspection
or evaluation reports identifying better use of funds were issued during this reporting period.




                                                   PAGE 45
    U.S. DEPARTMENT OF EDUCATION                                               OFFICE OF INSPECTOR GENERAL
                               SEMIANNUAL REPORT TO CONGRESS, NO. 60



Table 5: Unresolved Reports Issued Prior to October 1, 2009
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 decision had been made by the end of
the reporting period.
  Report                        Report Title                      Date      Total Monetary Number of
  Number               (Prior SAR Number and Page)               Issued        Findings    Recommen-
                                                                                             dations
NEW SINCE LAST REPORTING PERIOD
AUDIT REPORTS
FSA
A03I0006     Special Allowance Payments to Sallie Mae’s         08/03/09      $22,378,905        3
             Subsidiary, Nellie Mae, for Loans Funded by
             Tax-Exempt Obligations (SAR 59, page 41)
             Current Status: FSA informed us that it and
             OGC reviewed the response submitted by the
             auditee and determined that additional
             information was needed. That information was
             received on 3/29/2010, and is under review.
A05I0011     Special Allowance Payments to the Kentucky         05/28/09      $9,018,400         4
             Higher Education Student Loan Corporation for
             Loans Made or Acquired with the Proceeds of
             Tax-Exempt Obligations (SAR 59, page 41)
             Current Status: FSA informed us that it and
             OGC reviewed the response submitted by the
             auditee and determined that additional
             information was necessary. That information
             was received on 3/4/2010, and is under review. .
A06H0016     Community Care College’s Administration of the     08/26/09        $47,084         14
             HEA Title IV Programs (SAR 59, page 41)
             Current Status: FSA informed us that it is
             currently working on this audit.
A09I0009     TUI University's Administration of the HEA,        08/05/09       $923,379         14
             Title IV Programs (SAR 59, page 41)
             Current Status: FSA informed us that it is
             currently working on this audit.
OCFO
A02I0024     Audit of NAEP Contract, ETS Incurred Costs         05/28/09       $104,519         10
             under Contract No. ED-02-CO-0023 (IES also
             designated as an action official) (SAR 59, page
             41)
             Current Status: We did not receive a response
             from OCFO on this audit during this reporting
             period. OCFO informed us that it received the
             funds identified in the finding and the audit is
             closed; however, this audit is not considered
             closed until it is certified through AARTS.

                                             PAGE 46
U.S. DEPARTMENT OF EDUCATION                                           OFFICE OF INSPECTOR GENERAL
                               SEMIANNUAL REPORT TO CONGRESS, NO. 60



  Report                        Report Title                       Date         Total       Number of
  Number               (Prior SAR Number and Page)                Issued       Monetary     Recommen-
                                                                               Findings       dations
A05I0013     Southern Illinois University-Edwardsville’s        04/30/09       $931,744         15
             Compliance with Selected Provisions of the Law
             and Regulations for the Upward Bound, Upward
             Bound Math-Science, and Talent Search
             Programs (OCFO and OPE also designated as
             action officials) (SAR 59, page 41)
             Current Status: OCFO informed us that
             resolution activities are in process.
A19H0010     Audit of the Department’s Process to Resolve       08/24/09                         3
             Lapsed Funds (SAR 59, page 42)
             Current Status: OCFO informed us that
             resolution activities are in process.
OESE
A02I0034     Tennessee Department of Education Controls         05/28/09                         9
             Over State Assessment Scoring (OPEPD also
             designated as an action official) (SAR 59, page
             42)
             Current Status: OESE informed us that the
             Program Determination Letter (PDL) is clearing
             the internal review process.
A04I0041     Puerto Rico Department of Education's              04/21/09        $16,092          8
             Compliance with Title I - Supplemental
             Educational Services (SAR 59, page 42)
             Current Status: OESE informed us that it is in
             the process of preparing the PDL.
A04I0042     Virgin Islands Department of Education’s           08/17/09        $4,304          10
             Administration of Property Purchased with
             Federal Funds (SAR 59, page 42)
             Current Status: OESE informed us that the PDL
             is clearing the internal review process.
A04I0043     Florida Department of Education Controls Over      09/30/09                         8
             State Assessment Scoring (SAR 59, page 42)
             Current Status: OESE informed us that the PDL
             is clearing the internal review process.
A05I0016     Illinois State Board of Education’s Oversight of   09/23/09       $667,876          9
             Subrecipients (OSERS also designated as an
             action official) (SAR 59, page 42)
             Current Status: OESE informed us that the PDL
             is clearing the internal review process.



                                             PAGE 47
U.S. DEPARTMENT OF EDUCATION                                           OFFICE OF INSPECTOR GENERAL
                               SEMIANNUAL REPORT TO CONGRESS, NO. 60



  Report                        Report Title                        Date        Total       Number of
  Number               (Prior SAR Number and Page)                 Issued      Monetary     Recommen-
                                                                               Findings       dations
A06H0011     Adequacy of Fiscal Controls Over the Use of          04/14/09    $3,524,636         6
             Title I, Part A Funds at Dallas Independent
             School District(SAR 59, page 42)
             Current Status: OESE informed us that the PDL
             is currently with OGC for review.
A06H0017     Adequacy of Houston Independent School               06/30/09     $152,280          9
             District’s Fiscal Controls over Accounting for
             and Using Federal Funds (Office of Vocational
             and Adult Education, Office of English Language
             Acquisition, Office of Special Education
             Programs, and Office of Safe and Drug Free
             Schools also designated as action officials)
             (SAR 59, page 42)
             Current Status: OESE informed us that the PDL
             is clearing the internal review process.
A09I0012     Wyoming Department of Education Controls             07/10/09                       2
             Over State Assessment Scoring (SAR 59, page
             42)
             Current Status: OESE informed us that the PDL
             is clearing the internal review process.
REPORTED IN PREVIOUS SARs
AUDIT REPORTS
FSA
A02H0005     EDUTEC’s Administration of the Federal Pell          9/27/07       $83,000          5
             Grant Program (SAR 55, page 27)
             Current Status: FSA informed us that it is
             currently working on this audit. AARTS shows
             that FSA’s administrative stay extension was
             approved by OCFO on 3/31/2010.
A02H0007     Technical Career Institutes, Inc.'s Administration   5/19/08       $6,458          13
             of the Federal Pell Grant and FFEL Programs
             (SAR 57, page 25)
             Current Status: FSA informed us that it is
             currently working on this audit. AARTS shows
             that FSA’s administrative stay extension was
             approved by OCFO 3/30/2010.
A02H0008     Touro College’s Title IV HEA Programs,               10/30/08    $36,026,364        5
             Institutional and Program Eligibility (SAR 58,
             page 31)
             Current Status: FSA informed us that it is
             currently working on this audit. AARTS shows
             that FSA’s administrative stay extension was
             approved by OCFO on 3/30/2010.

                                              PAGE 48
U.S. DEPARTMENT OF EDUCATION                                           OFFICE OF INSPECTOR GENERAL
                               SEMIANNUAL REPORT TO CONGRESS, NO. 60



  Report                        Report Title                       Date         Total       Number of
  Number               (Prior SAR Number and Page)                Issued       Monetary     Recommen-
                                                                               Findings       dations
A04B0019     Advanced Career Training Institute’s                9/25/03      $7,472,583        14
             Administration of the Title IV HEA Programs
             (SAR 47, page 13)
             Current Status: FSA informed us that the audit
             was closed in the Department’s previous tracking
             system. FSA will work on getting this audit
             closed in AARTS by 9/30/2010. The required
             documents for resolution are needed in AARTS
             before this audit can be 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          2/25/05      $1,645,160         3
             Financial 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 it
             uploaded closure documents into AARTS on
             9/23/2009, and still needs to locate additional
             document(s) to upload into AARTS in order for
             audit to be closed.
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          3/21/08      $2,472,781        25
             HEA, Title IV Programs (SAR 56, page 25)
             Current Status: FSA informed us that it is
             currently working on this audit. AARTS shows
             that FSA’s administrative stay extension was
             approved by OCFO on 3/21/2010.
A05H0018     Walden University’s Compliance with Selected        1/21/09      $1,185,4731       10
             Regulations and Dep’t Guidance (SAR 58, page
             31)
             Current Status: FSA informed us that it is
             currently working on this audit. AARTS shows
             that FSA’s administrative stay extension was
             approved by OCFO on 3/30/2010.

                                              PAGE 49
U.S. DEPARTMENT OF EDUCATION                                           OFFICE OF INSPECTOR GENERAL
                               SEMIANNUAL REPORT TO CONGRESS, NO. 60



  Report                        Report Title                       Date         Total       Number of
  Number               (Prior SAR Number and Page)                Issued       Monetary     Recommen-
                                                                               Findings       dations
A0670005     Professional Judgment at Yale University (SAR       3/13/98        $5,469           3
             36, page 18)
             Current Status: FSA informed us that it is
             waiting on a decision regarding a Professional
             Judgment finding for Saint Louis University
             before it can resolve this audit.
A0670009     Professional Judgment at University of Colorado     7/17/98        $15,082          4
             (SAR 37, page 17)
             Current Status: FSA informed us that it is
             waiting for a decision regarding a Professional
             Judgment finding for Saint Louis University
             before it can resolve this audit.
A06D0018     Audit of Saint Louis University’s Use of            2/10/05      $1,458,584         6
             Professional Judgment from July 2000 through
             June 2002 (SAR 50, page 21)
             Current Status: FSA informed us that it is
             waiting on the Secretary’s decision on the
             school’s appeal of this audit.
A0723545     State of Missouri, Single Audit Two Years Ended     4/1/93       $1,048,768        18
             June 30, 1991
             Current Status: FSA informed us that it
             continues to work on this audit.
A0733123     State of Missouri, Single Audit Year Ended June     3/7/94        $187,530         18
             30, 1992
             Current Status: FSA informed us that it
             continues to work on this audit.
A09D0024     American River College’s Compliance with            12/1/04      $3,024,665         3
             Student Eligibility Requirements for Title IV
             HEA Programs (SAR 50, page 21)
             Current Status: FSA informed us that it is
             working to get this audit resolved in AARTS and
             expects to have it closed by 9/30/2010.
A09H0017     Fifth Third Bank’s Eligible Lender Trustee          1/5/09       $5,000,0002        5
             Agreements’ Compliance with Lender Provisions
             of the HEA and Monitoring of Entities with
             Which It Has Agreements (SAR 58, page 31)
             Current Status: FSA informed us it certified and
             closed this audit in AARTS. PDL was issued on
             11/9/2009; however, the required documents
             needed for resolution were not in AARTS by
             3/31/2010.


                                             PAGE 50
U.S. DEPARTMENT OF EDUCATION                                           OFFICE OF INSPECTOR GENERAL
                               SEMIANNUAL REPORT TO CONGRESS, NO. 60



  Report                        Report Title                       Date         Total       Number of
  Number               (Prior SAR Number and Page)                Issued       Monetary     Recommen-
                                                                               Findings       dations
N0690010     Inspection of Parks College's Compliance with       2/9/00        $169,390          1
             Student Financial Assistance Requirements (SAR
             40, page 18)
             Current Status: FSA informed us that it is
             working to get this resolved in AARTS and
             expects to have it closed by 9/30/2010.
OCFO
A05H0016     Saint Paul Public School’s Teacher Quality          5/23/08       $124,6463         7
             Enhancement Grant (OPE also designated as an
             action official) (SAR 57, page 25)
             Current Status: OCFO informed us that
             resolution activities are in process.
A06H0002     Review of Project GRAD USA’s Administration         7/21/08      $31,384,603       11
             of Fund for the Improvement of Education
             Grants (OII also designated action office) (SAR
             57, page 26)
             Current Status: OCFO informed us that
             resolution activities are in process.
A09H0019     Los Angeles Unified School District’s               12/2/08      $6,302,4064       15
             Procedures for Calculating and Remitting Interest
             Earned on Federal Cash Advances (SAR 58, page
             31)
             Current Status: OCFO informed us that
             resolution activities are in process.
A09H0020     California Department of Education Advances of      3/9/09         $728,6515       10
             Federal Funding to Local Educational Agencies
             (SAR 58, page 31)
             Current Status: OCFO informed us that
             resolution activities are in process.
OESE
A02G0002     Audit of New York State Education                   11/3/06     $215,832,254        8
             Department’s Reading First Program (SAR 54,
             page 31)
             Current Status: OESE informed us that it is
             working with OGC to resolve this audit.
A02G0020     Elizabeth Public School District Allowability of    10/9/07      $1,946,925        14
             ESEA Title I, Part A Expenditures (SAR 56, page
             25)
             Current Status: The PDL was issued on
             3/24/2010, however the required documents
             needed for resolution were not in AARTS by
             3/31/2010.

                                             PAGE 51
U.S. DEPARTMENT OF EDUCATION                                           OFFICE OF INSPECTOR GENERAL
                               SEMIANNUAL REPORT TO CONGRESS, NO. 60



  Report                        Report Title                       Date         Total       Number of
  Number               (Prior SAR Number and Page)                Issued       Monetary     Recommen-
                                                                               Findings       dations
A03G0006     The Department’s Administration of Selected         2/22/07                         3
             Aspects of the Reading First Program (OCFO
             also designated as an action official) (SAR 54,
             page 31)
             Current Status: OESE informed us that it is
             working with OGC on this audit.
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 it is
             working with the States to reconcile the pupil
             data submitted for reimbursement for displaced
             children due to Hurricanes Katrina and Rita.
A04H0017     Puerto Rico Department of Education's               10/9/08       $821,714         15
             Administration of Title I Services Provided to
             Private School Students (SAR 58, page 31)
             Current Status: OESE informed us that the PDL
             is clearing the internal review process.
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 is
             working with the States to reconcile the pupil
             data submitted for reimbursement for displaced
             children due to Hurricanes Katrina and Rita.
A04H0011     Puerto Rico Department of Education’s               5/20/08       $189,011         10
             Administration 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 that the PDL
             is currently with OGC for review.
A05G0020     Audit of the Alabama State Department of            9/27/07      $4,579,375         5
             Education’s and Two Selected LEAs’
             Compliance with Temporary Emergency Impact
             Aid Program Requirements (SAR 55, page 28)
             Current Status: OESE informed us that it is
             working with the States to reconcile pupil data
             submitted for reimbursement for displaced
             children due to Hurricanes Katrina and Rita.



                                             PAGE 52
U.S. DEPARTMENT OF EDUCATION                                           OFFICE OF INSPECTOR GENERAL
                               SEMIANNUAL REPORT TO CONGRESS, NO. 60



  Report                        Report Title                        Date        Total       Number of
  Number               (Prior SAR Number and Page)                 Issued      Monetary     Recommen-
                                                                               Findings       dations
A05G0033     Illinois State Board of Education’s Compliance        6/7/07     $16,809,020        8
             with the Title I, Part A, Comparability of
             Services Requirements (SAR 55, page 29)
             Current Status: OESE informed us that the PDL
             is clearing the internal review process.
A05H0010     The School District of the City of Detroit’s Use     7/18/08     $53,618,859       21
             of 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.
A05H0025     Harvey Public Schools District’s Use of Selected     11/25/08     $317,0936         9
             Department Grant Funds (OSERS and OCFO
             also designated as action officials) (SAR 58, page
             31)
             Current Status: OESE informed us that the PDL
             is clearing the internal review process.
A06E0008     Audit of the Title I Funds Administered by the       2/16/05     $73,936,273        7
             Orleans Parish School Board (SAR 50, page 23)
             Current Status: OESE informed us that it is
             currently developing determinations.
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 it is
             working to resolve this audit.
A06G0009     Audit of the Temporary Emergency Impact Aid          9/18/07     $10,270,000        4
             for Displaced Students Requirements at the
             Texas Education Agency and Applicable LEAs
             (SAR 55, page 29)
             Current Status: OESE informed us that it 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                  9/21/07     $6,303,000         4
             Compliance with Temporary Emergency Impact
             Aid for Displaced Students Requirements (SAR
             55, page 29)
             Current Status: OESE informed us that it is
             working with the States to reconcile the pupil
             data submitted for reimbursement for displaced
             children due to Hurricanes Katrina and Rita.



                                             PAGE 53
U.S. DEPARTMENT OF EDUCATION                                           OFFICE OF INSPECTOR GENERAL
                               SEMIANNUAL REPORT TO CONGRESS, NO. 60



  Report                        Report Title                       Date         Total       Number of
  Number               (Prior SAR Number and Page)                Issued       Monetary     Recommen-
                                                                               Findings       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: OESE informed us that it is
             finalizing the PDL based on OGC comments.
OPE
A07B0011     Audit of Valencia Community College’s Gaining        5/8/03      $1,822,864         5
             Early Awareness and Readiness for
             Undergraduate Programs Matching Requirement
             (SAR 47, page 15)
             Current Status: OPE informed us that it is
             working with OGC to revise the PDL based on
             additional documentation received.
OSERS
A02B0014     Audit of the Puerto Rico Vocational                  6/26/02     $15,800,000        5
             Rehabilitation Administration (SAR 45, page 18)
             Current Status: OSERS informed us that more
             research is being conducted to resolve this audit.
A02E0020     The Virgin Islands Department of Health’s            9/28/05          *7           17
             Administration of the Infants and Toddlers
             Program (SAR 51, page 28)
             Current Status: OSERS informed us that it is
             drafting the PDL.
A06F0019     Results of five audits of the IDEA, Part B           3/28/07    $328,000,000        6
             requirements at schools under the supervision of
             the Department of Interior’s Bureau of Indian
             Affairs (Report was addressed to the
             Department of the Interior) (SAR 54, page 32)
             Current Status: OSERS informed us that it is
             working to clear the PDL and upload the data
             into AARTS.
INSPECTION REPORTS
NEW SINCE LAST REPORTING PERIOD
OPE
I13I0007 Review of OPE’s Actions to Address Talent                9/30/09                        9
             Search and Educational Opportunity Centers
             Grantees That Did Not Serve the Number of
             Participants They Were Funded to Serve in FY
             2003-2007 (SAR 59, page 43)
             Current Status: OPE informed us that it is
             working to resolve one last recommendation on
             the corrective action plan.

                                              PAGE 54
U.S. DEPARTMENT OF EDUCATION                                           OFFICE OF INSPECTOR GENERAL
                                SEMIANNUAL REPORT TO CONGRESS, NO. 60



    Report                         Report Title                            Date          Total         Number of
    Number                (Prior SAR Number and Page)                     Issued        Monetary       Recommen-
                                                                                        Findings         dations

REPORTED IN PREVIOUS SARs
OGC
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 (OGC was designated as
               the action official by OS) (SAR 57, page 27)
               Current Status: We did not receive a response
               from OGC on this inspection during this
               reporting period. OGC previously informed us
               that it has resolved this inspection; however, it is
               not considered resolved or closed until it is
               certified through AARTS.
                                      Total                                          $884,217,097          490
1
  Audit Report A05H0018 identified a total of $1,185,473 ($1,129,970 in questioned costs and $55,503 in unsupported
costs). As $912,430 of the $1,185,473 was recovered from the auditee during the audit, $273,043 remains to be
recovered.
2
  Audit Report A09H0017 identified $5,000,000 in other recommended recoveries and no questioned costs.
3
  For Audit Report A05H0016, the $124,646 includes $100,675 in questioned costs and $23,971in monetary
recoveries made during audit.
4
  Audit Report A09H0019 identified $6,302,406 in other recommended recoveries and no questioned costs.
5
  Audit Report A09H0020 identified $728,651 in other recommended recoveries, $13,000,000 in annual better use of
funds, and no questioned costs.
6
  Audit Report A05H0025 identified $33,726 in other recommended recoveries and no questioned costs.
7
  Audit report A02E0020 identified $327,577 in one-time better use of funds.




                                                  PAGE 55
U.S. DEPARTMENT OF EDUCATION                                                  OFFICE OF INSPECTOR GENERAL
                               SEMIANNUAL REPORT TO CONGRESS, NO. 60


 Table 6: Statistical Profile: October 1, 2009, through March 31, 2010

 AUDITS, INSPECTIONS, OTHER PRODUCTS
 Audit Reports Issued                                                                                 22
 Inspection Reports Issued                                                                             1
 Questioned Costs                                                                            $18,808,951
 Unsupported Costs                                                                          $149,861,194
 Recommendations for Better Use of Funds                                                               0
 Other Products Issued                                                                                15
 6 alert memoranda, 2 attestation reports, 6 management information reports,
 and 1 special project report
 Audit Reports Resolved By Program Managers                                                            6
 Questioned Costs Sustained                                                                     $624,873
 Unsupported Costs Sustained                                                                  $1,188,806
 Additional Disallowances Identified by Program Managers                                               0
 Management Commitment to the Better Use of Funds                                                      0
 INVESTIGATIVE ACTIVITY
 Cases Opened                                                                                         64
 Cases Closed                                                                                         58
 Cases Active at the End of the Reporting Period                                                     445
 Prosecutorial Decisions                                                                             103
    Accepted                                                                                          35
    Declined                                                                                          68
 Investigative Results
 Indictments/Informations                                                                             36
 Convictions/Pleas                                                                                   108
 Fines Ordered                                                                                 $315,250
 Restitution Payments Ordered                                                                $6,262,401
 Civil Settlements/Judgments (number)                                                                  2
 Civil Settlements/Judgments (amount)                                                          $951,000
 Recoveries                                                                                    $291,445
 Forfeitures/Seizures                                                                        $2,345,000
 Estimated Savings                                                                              $37,000
 Suspensions Referred to Department                                                                    2
 Debarments Referred to Department                                                                    21


                                              PAGE 56
U.S. DEPARTMENT OF EDUCATION                                           OFFICE OF INSPECTOR GENERAL
     Anyone knowing of fraud, waste or abuse involving
U.S. Department of Education funds or programs should call,
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